The company, partly owned by media titan AOL Time Warner Inc. (NYSE:AOL - news), said its net loss widened to $43.1 million, or 38 cents a share, from $28.7 million, or 26 cents a share, a year earlier.

The current quarter results included $150,000 in income tax expenses, compared with a tax benefit of $18.2 million in the year-ago quarter.

Revenues fell 3 percent to $168.7 million. Time Warner Telecom said customer disconnections and bankruptcies resulted in a loss of about $3 million in recurring monthly revenue during the quarter, which was an improvement from the previous three months.

However, the company said the improvement may be temporary, and customer disconnection could return to levels experienced in prior quarters.

"We are not yet seeing the impact of any improvement in the economy," said Time Warner Telecom Chairman Larissa Herda. "Given our large carrier customer base, it is understandable that we are feeling the pressure that is impacting their businesses."

Sales of dedicated transport services and switched services increased 2 percent, while data and Internet services revenue rose 34 percent.

Earnings before interest, taxes, depreciation and amortization jumped 14 percent to $38.6 million. The company said its gross margin rose to 57 percent from 55 percent a year earlier as it cut selling, general and administrative expenses by 6 percent.