Level 3 Communications (LVLT)

16.    Fair Value of Financial Instruments:

        The following table presents fair value information about certain financial instruments, whether or not recognized on the balance sheet. Fair values are determined as described below. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The fair value amounts presented do not purport to represent and should not be considered representative of the underlying "market" or franchise value of the Company. The methods and assumptions used to estimate the fair values of each class of financial instruments described below are as follows:

        Investments:    The fair values of fixed maturity securities are substantially based on quoted market prices, as disclosed in Note 4.

        Cash and cash equivalents:    For each cash equivalents, the carrying amount approximates fair value.

        Long-term debt and other indebtedness:    The fair values of non-variable rate debt are estimated using quoted market prices and estimated rates which would be available to the Company for debt with similar terms. The fair value of variable rate debt is estimated to be the carrying amount.

        The carrying amounts and estimated fair values of the Company's financial instruments at December 31, 2004 are as follows (in thousands):