Abovenet Inc – ‘424B5’ on 11/15/99

On:  Monday, 11/15/99   ·   Accession #:  912057-99-5616   ·   File #:  333-89087

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Prospectus   —   Rule 424(b)(5)
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Document/Exhibit                   Description                      Pages   Size 

 1: 424B5       Prospectus                                           223   1.18M 

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                                             As filed pursuant to Rule 424(b)(5)
                                                      Registration No. 333-89087

PROSPECTUS SUPPLEMENT                                                           

(TO PROSPECTUS DATED OCTOBER 28, 1999)                                          

[LOGO]

$1,010,900,000

METROMEDIA FIBER NETWORK, INC.

$750,000,000 10% SENIOR NOTES DUE 2009
[EURO]250,000,000 10% SENIOR NOTES DUE 2009 
--------- 

    The Dollar notes will accrue interest from the date of their issuance at the
rate of 10% per year and the Euro notes will accrue interest from the date of   
their issuance at the rate of 10% per year, in each case payable semi-annually  
in arrears on each June 15 and December 15 of each year, commencing on June 15, 
2000.                                                                           

 The notes will be unsecured, will rank equal in right of payment with all
our other existing and future senior unsecured indebtedness and will be         
effectively subordinated to all our existing and future secured indebtedness to 
the extent of the assets that secure that indebtedness and to all of our        
subsidiaries' existing or future indebtedness, whether or not secured.          

The notes will be redeemable, in whole or in part, at our option, at any
time on or after December 15, 2004 at the redemption prices described in this   
prospectus supplement, plus accrued and unpaid interest to the date of          
redemption.                                                                     

Application has been made to list the notes on the Luxembourg Stock     
Exchange.                                                                       
--------------

   INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE S-13 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 3 OF THE ACCOMPANYING       
PROSPECTUS.                                                                     

Neither the Securities and Exchange Commission nor any state securities 
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.   
Any representation to the contrary is a criminal offense.                       
--------------

                                                        [Enlarge/Download Table]

                                      PER         TOTAL         PER        TOTAL          COMBINED      
                                  DOLLAR NOTE  DOLLAR NOTES  EURO NOTE   EURO NOTES       TOTAL(1)      
                                  -----------  ------------  ---------  ------------   --------------   
                                                                                                        
Public Offering Price               99.201%    $744,007,500   99.201%   [EURO]248,002,500 $1,002,822,909
Underwriting Discount                2.625%    $ 19,687,500    2.625%   [EURO]  6,562,500 $   26,536,125
Proceeds to Us (before expenses)    96.576%    $724,320,000   96.576%   [EURO]241,440,000 $  976,286,784

------------------------                                                        

(1) Based on the conversion rate of $1.0436=[EURO]1.00, which is the noon buying
    rate as of November 10, 1999 in New York City for cable transfers in foreign
    currencies, as certified for customs purposes by the Federal Reserve Bank of
New York.                                                               
--------------

  The underwriters are offering the notes subject to various conditions. The
underwriters expect to deliver the notes to purchasers on or about November 17, 
1999, the issue date of the notes.                                              

--------------

SALOMON SMITH BARNEY                                                            
CHASE SECURITIES INC.                                                 
DEUTSCHE BANC ALEX. BROWN                                 
DONALDSON, LUFKIN & JENRETTE                  
GOLDMAN, SACHS & CO.              

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    MORGAN STANLEY DEAN WITTER

November 12, 1999                                                               

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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY 
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT     
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT         
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS          
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE 
OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS SUPPLEMENT.                 

TABLE OF CONTENTS 

                                                                [Download Table]

                                                                PAGE  
                                                              --------
                                                                      
                        PROSPECTUS SUPPLEMENT                         
About this Prospectus Supplement............................     S-3  
Summary.....................................................     S-4  
Risk Factors................................................    S-13  
Special Note Regarding Forward-Looking Statements...........    S-24  
Use of Proceeds.............................................    S-26  
Capitalization..............................................    S-27  
Selected Consolidated Financial Data........................    S-28  
Unaudited Pro Forma Condensed Combining Financial                     
  Information...............................................    S-30  
Management's Discussion and Analysis of Financial Condition           
  and Results of Operations.................................    S-34  
Business....................................................    S-42  
Management..................................................    S-61  
Certain Relationships and Related Transactions..............    S-70  
Security Ownership..........................................    S-72  
Description of Other Indebtedness...........................    S-74  
Recent and Proposed Transactions............................    S-75  
Description of the Notes....................................    S-77  
Certain United States Federal Income Tax Considerations.....   S-110  
Underwriting................................................   S-115  
Notice to Canadian Residents................................   S-117  
Validity of the Notes.......................................   S-120  
Experts.....................................................   S-120  
Where You Can Find More Information.........................   S-120  
Incorporation of Information We File with the SEC...........   S-121  
General Information.........................................   S-122  
Index to Consolidated Financial Statements..................     F-1  

PROSPECTUS

                                                                [Download Table]
                                                                   
Risk Factors................................................      3
Special Note Regarding Forward-Looking Statements...........     10
About This Prospectus.......................................     11
Business....................................................     11
Ratio of Earnings to Fixed Charges and Preferred Stock             
  Dividends.................................................     12
Use of Proceeds.............................................     12
Description of Debt Securities..............................     13
Description of Capital Stock................................     22
Description of Warrants.....................................     28
Selling Stockholders........................................     29
Plan of Distribution........................................     29
Validity of Securities......................................     30
Experts.....................................................     30
Where You Can Find More Information.........................     31
Incorporation of Information We File with the SEC...........     31

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------------------------

 Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the notes, including  
overallotment, stabilizing and short-covering transactions in the notes, and the
imposition of a penalty bid, during and after the offering of the notes. Such   
stabilization, if commenced, may be discontinued at any time. For a description 
of these activities, please refer to the section in this prospectus supplement  
entitled "Underwriting."                                                        

------------------------

 We accept responsibility for the information contained in this prospectus
supplement. To our best knowledge, the information contained in this prospectus 
supplement is accurate and complete in all material respects and does not omit  
to state any facts necessary in order to make the statements in this prospectus 
supplement not misleading in any material respect.                              

------------------------

ABOUT THIS PROSPECTUS SUPPLEMENT

This prospectus supplement contains the terms of this offering. This    
prospectus supplement, or the information incorporated by reference in this     
prospectus supplement, may add, update or change information in the attached    
prospectus. If information in this prospectus supplement, or the information    
incorporated by reference in this prospectus supplement, is inconsistent with   
the attached prospectus, this prospectus supplement, or the information         
incorporated by reference in this prospectus supplement, will apply and will    
supersede the information in the attached prospectus.                           

 It is important for you to read and consider all information contained in
this prospectus supplement and the attached prospectus in making your investment
decision. You should also read and consider the information in the documents we 
have referred you to in "Where You Can Find More Information."                  

   This prospectus supplement and the attached prospectus do not constitute an
offer or solicitation by anyone in any jurisdiction in which an offer or        
solicitation is not authorized or in which the person making an offer or        
solicitation is not qualified to do so, or to anyone to whom it is unlawful to  
make an offer or solicitation.                                                  

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SUMMARY 

  THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT. BECAUSE IT IS A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION 
THAT YOU SHOULD CONSIDER BEFORE INVESTING. YOU SHOULD READ THE ENTIRE PROSPECTUS
SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS INCORPORATED BY       
REFERENCE CAREFULLY, INCLUDING THE SECTION ENTITLED "RISK FACTORS" AND THE      
FINANCIAL STATEMENTS AND THE RELATED NOTES TO THOSE STATEMENTS INCLUDED IN THIS 
PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS            
INCORPORATED BY REFERENCE. EXCEPT AS OTHERWISE REQUIRED BY THE CONTEXT INCLUDING
WITH RESPECT TO THE DESCRIPTION OF THE NOTES, REFERENCES IN THIS PROSPECTUS     
SUPPLEMENT TO "WE" OR "US" REFER TO THE COMBINED BUSINESS OF METROMEDIA FIBER   
NETWORK, INC. AND ALL OF ITS SUBSIDIARIES. THE TERM "NOTES" REFERS TO THE       
$750 MILLION 10% SENIOR NOTES DUE 2009 (THE "DOLLAR NOTES") AND THE             
[EURO]250 MILLION 10% SENIOR NOTES DUE 2009 (THE "EURO NOTES") THAT WE ARE      
OFFERING BY THIS PROSPECTUS SUPPLEMENT. THE TERM "YOU" REFERS TO PROSPECTIVE    
INVESTORS IN THE NOTES.                                                         

THE COMPANY 

GENERAL                                                                         

   We provide dedicated fiber optic infrastructure and high-bandwidth Internet
connectivity for our communications intensive customers. We are a               
facilities-based provider of technologically advanced, high-bandwidth, fiber    
optic communications infrastructure to communications carriers and corporate and
government customers in the United States and Europe. Through our acquisition of
AboveNet Communications, Inc. (often referred to as "AboveNet"), we also provide
"one-hop" connectivity that enables mission critical Internet applications to   
thrive, as well as high-bandwidth infrastructure, including managed co-location 
services.                                                                       

We currently have operations in, or under construction in, eleven Tier I
cities throughout the United States and seven selected international markets. We
intend to expand our presence to include approximately 50 Tier I and Tier II    
markets in the United States and 17 major international markets.                

RECENT EVENTS                                                                   

    ACQUISITION OF ABOVENET.  On September 8, 1999, we completed the acquisition
of AboveNet for a total purchase price of approximately $1.9 billion. AboveNet  
is a leading provider of high performance Internet connectivity solutions for   
electronic commerce and other business critical Internet operations and         
facilities-based, managed services for customer-owned Web servers and related   
equipment, known as co-location services. AboveNet has developed a network      
architecture based upon strategically located, fault-tolerant facilities, known 
as Internet service exchanges. AboveNet's Internet service exchanges combine    
direct access to Internet service providers, (often referred to as "ISPs"), with
co-location services for Internet content providers. As of September 30, 1999,  
AboveNet had more than 270 direct public and private data exchange agreements,  
known as peering arrangements, including relationships with most major network  
providers. AboveNet's network architecture and extensive peering relationships  
are designed to reduce the number of network connections or "hops" for data     
traveling across the Internet. By having both Internet content providers and    
Internet service providers at its Internet service exchanges, AboveNet enables  
its Internet service provider customers to provide their users with "one-hop"   
connectivity, through AboveNet's local area network, to the Web sites of the    
Internet content providers that are co-located at the same facility. AboveNet's 
customers include a wide range of Internet service providers, Internet content  
providers and Web hosting companies.                                            

INVESTMENT BY BELL ATLANTIC.  On October 7, 1999, we entered into a     
securities purchase agreement with Bell Atlantic Investments, Inc. (referred to 
as "Bell Atlantic"), under which Bell Atlantic would purchase up to             
approximately 25.6 million newly issued shares of our class A common stock at a 
purchase price of $28.00 per share and a convertible subordinated note of       
approximately $975.3 million, which is convertible into shares of our class     
A common stock at a conversion price of $34.00 per share. We expect             

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this transaction, which is subject to customary closing conditions, to be       
completed by the end of the first quarter of 2000. Assuming the issuance of the 
25.6 million shares of class A common stock and conversion of the convertible   
subordinated note, this investment would represent 19.9% of our outstanding     
shares. Bell Atlantic has also agreed to pay us $550 million over the next three
years in exchange for delivery of fiber optic facilities over the next five     
years. The proceeds from these two transactions will be used to fund the        
expansion of our network.                                                       

NETWORK                                                                         

Our existing intra-city networks consist of approximately 425,000  fiber
miles covering in excess of 800 route miles in six of our announced markets. Our
inter-city network consists of approximately 120,000 fiber miles primarily      
covering our 255 route-mile network that we have built between New York City and
Washington, D.C. We have also built or contracted to acquire (primarily through 
fiber swaps) a nationwide dark fiber network linking our intra-city networks.   

In February 1999, we entered into an agreement with Viatel, Inc. and    
Carrier 1 Holdings, Ltd. to jointly build a dark fiber inter-city network among 
selected cities throughout Germany. Once completed, our German network will     
consist of approximately 291,000 fiber miles covering 1,350 route miles         
connecting 14 major cities. We have also swapped strands of fiber in the United 
States for strands of fiber on the Circe network, which connects a number of    
European markets. In addition to our inter-city networks, we are constructing 16
intra-city networks throughout Europe. Separately, we have also entered into a  
contract to acquire dark fiber network facilities in Toronto, Canada.           

We have designed our networks to provide high levels of reliability,    
security and flexibility by virtue of a self-healing synchronous optical network
(often referred to as "SONET") architecture that prevents interruption in       
service to our clients by instantaneously rerouting traffic in the event of a   
fiber cut. Our advanced network architecture is also capable of supporting      
state-of-the-art technologies, including dense wave division multiplexing (often
referred to as "DWDM") which significantly increases the transmission capacity  
of a strand of fiber optic cable. Because DWDM can boost transmission capacity  
significantly, it has greater relevance on our inter-city routes where we have, 
on average, fewer strands of fiber installed than in our intra-city markets. We 
install most of our fiber inside high-density polyethylene conduit to protect   
the cable and, where practicable, we install additional unused conduits to cost 
effectively accommodate future network expansion and eliminate the need for     
future construction.                                                            

   We believe that the market for our services in these areas is characterized
by significant and growing demand for, and limited supply of, fiber optic       
capacity. To meet our customers' demand, we tailor the amount of fiber capacity 
leased to the needs of our customers. Generally, customers lease fiber optic    
capacity from us and connect their own transmission equipment to the leased     
fiber, thereby obtaining a high-bandwidth, fixed-cost, secure communications    
alternative to the metered communications services offered by traditional       
providers. In addition, we believe that we have installation, operating and     
maintenance cost advantages per fiber mile relative to our competitors because  
we generally install 432 fibers, and have begun installing as many as 864 fibers
per route mile, as compared to the generally lower number of fibers per mile in 
existing competitive networks.                                                  

    We believe the market for our Internet service exchanges is characterized by
significant and growing demand for, and limited access to, highly reliable      
Internet connectivity and co-location services. To meet our customers' demands, 
we provide scalable connectivity and co-location services that drive our        
customers' electronic commerce and other mission critical Internet applications.
Our customers lease bandwidth and co-location space from us to gain highly      
reliable, secure and cost effective Internet connectivity. Through our existing 
and planned networks, we believe we have the low cost position relative to those
competitors who lease rather than own their networks.                           

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CUSTOMERS                                                                       

   We are focused on providing our broadband communications infrastructure and
Internet connectivity services to two main customer groups located in Tier I and
Tier II markets: communications carriers and corporate/government customers.    

Our targeted customers include a broad range of companies such as:      

- incumbent local exchange carriers (often referred to as "ILECs");     

- competitive local exchange carriers (often referred to as "CLECs");   

- long distance companies/interexchange carriers (often referred to as  
"IXCs");                                                            

- paging, cellular and PCS companies;                                   

- cable companies;                                                      

- ISPs; and                                                             

- Web hosting and e-commerce companies.                                 

    Our dark fiber customers typically lease our fiber optic capacity with which
they develop their own communications networks. Leasing our fiber optic capacity
is a low-cost alternative to building their own infrastructure or purchasing    
metered services from ILECs or CLECs. Our Internet connectivity and co-location 
customers typically lease bandwidth and co-location space which allow them to   
provide their Internet related services on a reliable and cost effective basis. 
We believe that we are well-positioned to penetrate our target customer base    
since we plan to install most of our dark fiber networks and Internet service   
exchanges in major markets where these customers are concentrated. We believe   
our target customers for our dark fiber and Internet connectivity services are  
complementary and will provide significant cross-selling opportunities.         

MARKET OPPORTUNITY                                                              

We intend to capitalize on the increasing demand for high-bandwidth     
dedicated communications services and the limited supply of such transmission   
capacity. Based on management experience and industry reports, we believe that  
demand for the broadband communications infrastructure afforded by our network  
will continue to increase as a result of the following factors:                 

 - the rapid growth of communications traffic, such as data traffic, which
industry research indicates is growing by 35% annually;             

- the large number of new carriers which will require significant       
    transmission capabilities in all sectors of the communications industry,
due in large part to industry deregulation facilitated by the       
  Telecommunications Act of 1996 (often referred to as the "1996 Telecom
Act");                                                              

   - the fact that the Regional Bell Operating Companies (often referred to as
   the "RBOCs") and other major ILECs will likely need to upgrade to fiber
optic networks with infrastructure similar to ours; and             

- the advent of new communications services requiring large amounts of  
 transmission capacity, such as Internet, intranet and video services.

Based on industry sources, we estimate that the total 1998 market for   
communications services in the United States was approximately $237 billion and 
will grow to approximately $341 billion by the year 2002. In addition, we       
believe that there will be increased demand for our infrastructure due to our   
ability to offer fixed-cost pricing which is generally more economical for high 
volume users than traditional usage-based pricing. Based on industry sources, we
estimate that worldwide Internet revenues for 1998 were approximately           
$20 billion, and will grow to approximately $83 billion by the year 2002. We    
expect continued rapid growth in Internet revenues as Internet use increases and
electronic commerce applications gain widespread acceptance.                    

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BUSINESS STRATEGY                                                               

Our objective is to become the preferred facilities-based provider of   
broadband communications infrastructure and Internet connectivity solutions to  
communications carriers, corporations and government agencies, in our target    
markets. The following are the key elements of our strategy to achieve this     
objective:                                                                      

ESTABLISH OUR COMPANY AS THE PREFERRED CARRIERS' CARRIER OF BROADBAND   
COMMUNICATIONS                                                          
INFRASTRUCTURE AND INTERNET CONNECTIVITY SOLUTIONS                      

 We lease broadband communications infrastructure on a fixed-cost basis to
various communications carriers, thus enabling them to compete in markets which 
were previously difficult to penetrate due to limited and/or costly access to   
high-bandwidth communications infrastructure. We lease bandwidth and            

co-location space to various Internet service providers enabling them to provide
reliable, high-quality Internet access services to their customers. We also     
believe that carrier customers may be more likely to lease services from us,    
rather than from a competitor, since we currently have no plans to offer        
competing metered communications or retail Internet connectivity services.      

  POSITION OUR COMPANY AS THE PREFERRED PROVIDER OF BROADBAND COMMUNICATIONS
INFRASTRUCTURE AND                                                      
INTERNET CONNECTIVITY SERVICES TO CORPORATE AND GOVERNMENT CUSTOMERS    

  Our target customers for broadband communications infrastructure are those
with significant transmission needs or who require a high degree of security.   
Our target customers for Internet connectivity services are those who require   
reliable, secure and cost effective connectivity to the Internet to drive       
electronic commerce and other mission critical business Internet applications.  
In many cases, we believe our communications infrastructure and Internet        
connectivity customer bases are complementary and will create significant cross 
selling opportunities.                                                          

REPLICATE SUCCESSFUL BUSINESS MODEL IN NEW MARKETS                      

    We seek to leverage the success we have demonstrated in our existing markets
by replicating our network architecture in a number of additional markets.      
Specifically, we intend to:                                                     

- complete the construction of a total of approximately 50 intra-city   
networks in Tier I and Tier II markets;                             

- replicate our successful domestic strategy in selected international  
markets; and                                                        

- deploy Internet service exchanges in selected U.S. and international  
markets.                                                            

CREATE A LOW COST POSITION                                              

 We believe that we have established a low cost position relative to other
communications carriers primarily because we install trunks with substantially  
more fibers per route mile as well as spare conduits, thereby reducing the cost 
per fiber mile to construct, upgrade and operate our networks. We believe that  
we have established the low cost position relative to other Internet            
connectivity providers who lease rather than own their networks. Our low cost   
position should allow us to remain price competitive with other providers of    
broadband communications infrastructure and Internet connectivity services and  
to provide customers a cost effective alternative to constructing their own     
networks or Internet connectivity facilities.                                   

  UTILIZE FIBER SWAPS AND STRATEGIC RELATIONSHIPS TO EXPAND THE REACH OF OUR
NETWORKS                                                              

We have completed a number of fiber swaps to date and will continue to  
explore strategic opportunities to expand the reach of our networks at little   
incremental cost. We also plan to enter into strategic                          

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relationships, such as our joint build arrangement with Viatel in Europe, to    
cost effectively expand our network footprint.                                  

   EXPAND PRODUCT AND SERVICE OFFERINGS TO UTILIZE DARK FIBER NETWORK CAPACITY

  We intend to identify additional uses for our dark fiber network that will
drive new revenue opportunities and cost synergies. We may develop these        
applications internally or by acquiring them through strategic acquisitions,    
although none are currently planned. As was the case with our acquisition of    
AboveNet, we intend to continue to serve carriers and large corporate and       
government customers with regard to their bandwidth intensive communications    
needs.                                                                          

INSTALL TECHNOLOGICALLY ADVANCED NETWORKS AND INTERNET SERVICE EXCHANGES

    We have installed a technologically advanced network based on a self-healing
SONET architecture that we believe provides the high levels of reliability,     
security, and flexibility that our target customers typically demand. Our       
Internet service exchanges provide fault tolerant facilities designed to enable 
the uninterrupted operations necessary for mission critical Internet business   
applications. Furthermore, our proprietary software monitors network connection 
for latency and packet loss, thereby allowing us to automatically reroute       
traffic to avoid Internet congestion points.                                    

BUILD ON MANAGEMENT EXPERIENCE AND METROMEDIA COMPANY RELATIONSHIP      

Our management team and board of directors include individuals with     
communications industry expertise and extensive experience in network design,   
construction, operations and sales. Our Chief Executive Officer and founder,    
Stephen A. Garofalo, has approximately 25 years of experience in the cable      
installation business. Howard Finkelstein, our President and Chief Operating    
Officer, served in various capacities in Metromedia Company over a period of    
16 years, including 9 years as president of Metromedia Company's long distance  
telephone company, until its merger with MCI/WorldCom, Inc. in 1993. We also    
benefit from the communications industry expertise and corporate governance     
experience of John W. Kluge, Stuart Subotnick and David Rockefeller. As the     
owner of all of our class B common stock, Metromedia Company and its general    
partners control our board of directors and all stockholder decisions and, in   
general, determine the outcome of any corporate transaction or other matters    
submitted to the stockholders for approval. Sherman Tuan and David Rand have    
joined our board of directors following the acquisition of AboveNet and have    
extensive experience with Internet related ventures. Please refer to the        
sections in this prospectus supplement entitled "Risk Factors--Metromedia       
Company Effectively Controls Our Company and Has the Power to Cause or Prevent a
Change of Control" and "Certain Relationships and Related Transactions."        

------------------------

We were founded in 1993 and are a Delaware corporation. Our principal   
executive offices are located at One North Lexington Avenue, White Plains, New  
York 10601. Our telephone number is (914) 421-6700.                             

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THE OFFERING

                                                        [Enlarge/Download Table]
                                                                                                   
Issuer.................................... Metromedia Fiber Network, Inc.                          
Notes Offered............................. We are offering $750 million aggregate principal amount 
                                           of 10% Senior Notes due 2009 (referred to as the "Dollar
                                           notes").                                                
                                           In addition, we are offering [EURO]250 million aggregate
                                           principal amount of 10% Senior Notes due 2009 (referred 
                                           to as the "Euro notes").                                
Maturity.................................. The notes will mature on December 15, 2009 at a price   
                                           equal to 100% of the principal amount of the notes.     
Interest.................................. The Dollar notes will accrue interest from the date of  
                                           their issuance at the rate of 10% per year. The Euro    
                                           notes will accrue interest from the date of their       
                                           issuance at the rate of 10% per year. In both cases, the
                                           interest on the notes will be payable semi-annually in  
                                           arrears on each June 15 and December 15, commencing on  
                                           June 15, 2000.                                          
Sinking Fund.............................. None.                                                   
Optional Redemption....................... Except as set forth below and under "Change of Control,"
                                           we may not redeem the notes prior to December 15, 2004. 
                                           After December 15, 2004, we may redeem the notes, in    
                                           whole or in part, at any time, at the redemption prices 
                                           set forth below under the section entitled "Description 
                                           of the Notes" together with accrued and unpaid interest,
                                           if any, to the redemption date. In addition, at any time
                                           and from time to time prior to December 15, 2002, we may
                                           redeem up to 35% of the aggregate principal amount of   
                                           each of the Dollar notes and the Euro notes, determined 
                                           separately, at a redemption price equal to 110% of the  
                                           principal amount, in the case of the Dollar notes       
                                           redeemed, and 110% of the principal amount, in the case 
                                           of the Euro notes redeemed, in each case plus accrued   
                                           and unpaid interest, if any, through the date of        
                                           redemption, if:                                         
                                           -  we use the net cash proceeds of any public equity    
                                           offerings resulting in gross proceeds of at least $100  
                                              million; and                                         
                                           -  at least 65% of the aggregate principal amount of the
                                           Dollar notes and the Euro notes, determined separately, 
                                              originally issued pursuant to the indenture remain   
                                              outstanding immediately after giving effect to such  
                                              redemption.                                          
Change of Control......................... Upon a "Change of Control," you as a holder of notes    
                                           will have the right to require us to repurchase all of  
                                           your notes at a repurchase price equal to 101% of the   
                                           aggregate principal amount, plus accrued and unpaid     
                                           interest, if any, through the date of repurchase.       
Ranking................................... The notes will be general unsecured obligations, will   
                                           rank equal in right of payment with all our other       
                                           existing and future senior unsecured indebtedness and   
                                           will be effectively subordinated to all our existing and
                                           future secured indebtedness to the extent of the assets 
                                           that secure such indebtedness and to all of our         
                                           subsidiaries existing or future indebtedness, whether or
                                           not secured.                                            

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                                                        [Enlarge/Download Table]
                                                                                                   
Restrictive Covenants..................... The indenture under which the notes will be issued may  
                                           limit:                                                  
                                           -  the incurrence of additional indebtedness or         
                                           preferred stock by us and our subsidiaries;             
                                           -  the payment of dividends on, and repurchase or       
                                           redemption of, our capital stock and our subsidiaries'  
                                              capital stock and the repurchase or redemption of our
                                              subordinated obligations;                            
                                           -  investments, sales of assets and subsidiary stock;   
                                           -  transactions with affiliates; and                    
                                           -  the incurrence of additional liens.                  
                                           In addition, the indenture will limit our ability to    
                                           engage in consolidations, mergers and transfers of      
                                           substantially all of our assets and also contain        
                                           restrictions on distributions from our subsidiaries. All
                                           of these limitations and prohibitions will be subject to
                                           a number of important qualifications and exceptions.    
                                           Please refer to the sections of this prospectus         
                                           supplement entitled "Description of the Notes" and "Risk
                                           Factors--Risk Factors Relating to the Notes."           
Absence of a Public Market                                                                         
  for the Notes........................... Application has been made to list the notes on the      
                                           Luxembourg Stock Exchange. However, the notes are a new 
                                           issue of securities and there is currently no           
                                           established market for them. Accordingly, there can be  
                                           no assurance as to the development or liquidity of any  
                                           market for the notes. The underwriters have advised us  
                                           that they currently intend to make a market in the notes
                                           as permitted by applicable laws and regulations.        
                                           However, they are not obligated to do so and may        
                                           discontinue any such market making activities at any    
                                           time without notice.                                    
Use of Proceeds........................... We estimate that the net proceeds after expenses from   
                                           the offering of the notes will be approximately         
                                           $975.3 million. We expect to use the net proceeds for   
                                           the build-out of our intra-city and inter-city networks 
                                           in the United States and Europe and for other capital   
                                           expenditures, including possible acquisitions of other  
                                           companies or assets. Please refer to the section of this
                                           prospectus supplement entitled "Use of Proceeds."       

RISK FACTORS

You should consider carefully the information set forth in the section  
entitled "Risk Factors" beginning on page S-13 of this prospectus supplement and
on page 3 of the accompanying prospectus and all the other information provided 
to you in this prospectus supplement, the accompanying prospectus and the       
documents incorporated by reference in deciding whether to invest in the notes. 

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SUMMARY CONSOLIDATED FINANCIAL DATA 

  The summary historical consolidated financial data presented below for the
years ended December 31, 1996, 1997 and 1998 have been derived from our         
consolidated financial statements and the related notes included in this        
prospectus supplement beginning on page F-1. Our consolidated financial         
statements for the years ended December 31, 1996, 1997 and 1998 have been       
audited by Ernst & Young LLP, independent auditors. The summary consolidated    
financial data for the nine months ended September 30, 1998 and 1999 and the    
summary historical balance sheet data as of September 30, 1999 have been derived
from our unaudited consolidated financial statements, which we believe include  
all adjustments necessary for a fair presentation of the financial condition and
results of operations for those periods. The results of operations for interim  
periods are not necessarily indicative of the results for a full year's         
operations.                                                                     

   The summary unaudited pro forma statements of operations for the year ended
December 31, 1998 and for the nine months ended September 30, 1999 give effect  
to our acquisition of AboveNet and AboveNet's acquisition of Palo Alto Internet 
Exchange as if they had been consummated on January 1, 1998. The summary        
unaudited pro forma balance sheet as of September 30, 1999 gives pro forma      
effect to the following transactions:                                           

   - the offering of the notes, as if it had been consummated on September 30,
1999; and                                                           

  - the offering of the notes and the purchase by Bell Atlantic of shares of
 our class A common stock and the convertible subordinated note, which
     purchase has not yet been consummated and is subject to customary closing
conditions, as if they had been consummated on September 30, 1999.  

The pro forma adjustments are based upon available information and      
assumptions that we believe are reasonable at the time made. The summary        
unaudited pro forma financial data  do not purport to present our financial     
position or results of operations had the transactions occurred on the dates    
specified, nor are they necessarily indicative of the financial position or     
results of operations that may be achieved in the future.                       

As you read the summary consolidated financial data, please refer to the
following: "Risk Factors--Failure to Consummate the Bell Atlantic Transactions  
May Cause Us to Seek Alternative Financing," "Unaudited Pro Forma Condensed     
Combining Financial Information," "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business," the     
consolidated financial statements and the related notes of our company, AboveNet
and Palo Alto Internet Exchange and the other financial data appearing in this  
prospectus supplement.                                                          

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                                                      YEAR ENDED                                NINE MONTHS            
                                                     DECEMBER 31,                           ENDED SEPTEMBER 30,        
                                                     ------------                           -------------------        
                                                                       PRO FORMA                            PRO FORMA  
                                                                      FOR ABOVENET                         FOR ABOVENET
                                                                       AQUISITION                          ACQUISITION 
                                       1996       1997       1998         1998         1998       1999         1999    
                                     --------   --------   --------   ------------   --------   --------   ------------
                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)                       
                                                                                                                       
STATEMENT OF OPERATIONS DATA:                                                                                          
Revenues............................ $    236   $  2,524   $36,436      $ 47,575     $20,840    $ 49,397    $  70,641  
Expenses:                                                                                                              
  Cost of sales.....................      699      3,572    13,937        24,071       9,499      24,414       50,353  
  Selling, general and                                                                                                 
    administrative..................    2,070      6,303    14,712        23,005       9,811      27,369       46,611  
  Depreciation and amortization.....      613        757     1,532        80,534         738      15,645       77,395  
  Consulting and employment                                                                                            
    incentives......................    3,652     19,218     3,648         6,044       3,648          --          654  
                                     --------   --------   -------      --------     -------    --------    ---------  
(Loss) income from operations.......   (6,798)   (27,326)    2,607       (86,079)     (2,856)    (18,031)    (104,372) 
Interest income (expense), net......   (3,561)     1,067     1,927         1,735       5,012     (25,784)     (22,885) 
(Loss) from joint venture...........       --         --      (146)         (146)       (264)       (475)        (872) 
Income taxes........................       --         --     3,402            --         825          --           --  
                                     --------   --------   -------      --------     -------    --------    ---------  
Net (loss) income................... $(10,359)  $(26,259)  $   986      $(84,490)    $ 1,067    $(44,290)   $(128,129) 
                                     ========   ========   =======      ========     =======    ========    =========  
Net (loss) income applicable to                                                                                        
  common stockholders per share..... $  (0.14)  $  (0.28)  $  0.01      $  (0.37)    $  0.01    $   0.23    $   (0.55) 
                                     ========   ========   =======      ========     =======    ========    =========  
Weighted average number of shares                                                                                      
  outstanding.......................   71,716     94,894   186,990       228,642     186,392     190,639      230,920  
                                     ========   ========   =======      ========     =======    ========    =========  
Ratio of earnings to fixed                                                                                             
  charges(1)........................       --         --      1.61            --        9.95          --           --  
EBITDA(2)........................... $ (6,185)  $(26,569)  $ 3,993      $ (5,691)    $(3,207)   $ (2,861)   $ (27,849) 
Adjusted EBITDA(2).................. $ (2,533)  $ (7,351)  $ 7,641      $    353     $   441    $ (2,861)   $ (27,195) 
Cash dividends per share............ $     --   $     --   $    --      $     --     $    --    $     --    $      --  

                                                        [Enlarge/Download Table]

                                                                       AS OF SEPTEMBER 30, 1999           
                                                             ---------------------------------------------
                                                                                             PRO FORMA FOR
                                                                             PRO FORMA       BELL ATLANTIC
                                                               ACTUAL     FOR THE OFFERING    INVESTMENT  
                                                             ----------   ----------------   -------------
                                                                            (IN THOUSANDS)                
                                                                                                          
BALANCE SHEET DATA:                                                                                       
Cash and cash equivalents................................... $  352,900      $1,328,187       $3,019,095  
Pledged securities(3).......................................     63,864          63,864           63,864  
Property and equipment, net.................................    564,798         564,798          564,798  
Total assets................................................  2,918,401       3,921,224        5,612,132  
Long-term debt..............................................    689,056       1,691,859        2,667,140  
Total liabilities...........................................    938,408       1,941,231        2,916,512  
Stockholders' equity........................................  1,979,993       1,979,993        2,695,620  

(1) Earnings were insufficient to cover fixed charges in the years ended        
    December 31, 1996 and 1997 and for the nine months ended September 30, 1999.
  The deficiency was $10,359,000, $26,259,000, and $44,290,000 for the years
ended December 31, 1996 and 1997 and for the nine months ended          
 September 30, 1999, respectively. Pro forma earnings were insufficient to
 cover the pro forma fixed charges in the year ended December 31, 1998 and
  for the nine months ended September 30, 1999. The pro forma deficiency was
$84,490 and $128,129 for the year ended December 31, 1998 and the nine  
months ended September 30, 1999, respectively.                          

(2) "EBITDA" consists of earnings (loss) before income taxes plus all net       
 interest expense and all depreciation and amortization expense. "Adjusted
EBITDA" consists of earnings (loss) before income taxes plus all net    
   interest expense, depreciation and amortization and non-cash employment and
 consulting incentives and settlements. You should not think of EBITDA and
  Adjusted EBITDA as alternative measures of operating results or cash flows
from operating activities (as determined in accordance with generally   
    accepted accounting principles). We have included EBITDA and Adjusted EBITDA
    because they are widely used financial measures of the potential capacity of
    a company to incur and service debt. Our reported EBITDA and Adjusted EBITDA
   may not be comparable to similarly titled measures used by other companies.

(3) Represents amounts deposited with the security agent pursuant to a security 
agreement to make payments of interest through May 15, 2000 on our 10%  
Senior Notes due 2008.                                                  

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RISK FACTORS

    YOU SHOULD CAREFULLY CONSIDER THE INFORMATION BELOW IN ADDITION TO ALL OTHER
INFORMATION PROVIDED TO YOU IN THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING     
PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE IN DECIDING WHETHER TO   
INVEST IN THE NOTES, INCLUDING INFORMATION IN THE SECTION ENTITLED "SPECIAL NOTE
REGARDING FORWARD LOOKING STATEMENTS."                                          

RISK FACTORS RELATING TO OUR BUSINESS                                           

WE HAVE A LIMITED HISTORY OF OPERATIONS                                         

 You will have limited historical financial information upon which to base
your evaluation of our performance. Our company was formed in April 1993 and has
a limited operating history. We currently have a limited number of customers and
are still in the process of building many of our networks. Accordingly, you must
consider our prospects in light of the risks, expenses and difficulties         
frequently encountered by companies in their early stage of development.        

WE EXPECT TO CONTINUE TO INCUR NET LOSSES                                       

In connection with the construction of our networks, we have incurred   
substantial net losses and have not generated positive cash flow from           
operations. There can be no assurance that we will generate net income or that  
we will sustain positive cash flow in the future.                               

We cannot assure you that we will succeed in establishing an adequate   
revenue base or that our services will generate profitability. In connection    
with the construction of our networks, we have incurred substantial losses. We  
expect to continue incurring losses while we concentrate on the development and 
construction of our networks and until our networks have established a          
sufficient revenue-generating customer base. We also expect to incur losses     
during the initial startup phases of any services that we may provide. We expect
to continue experiencing net operating losses for the foreseeable future.       
Continued losses may prevent us from pursuing our strategies for growth and     
could cause us to be unable to meet our debt service obligations, capital       
expenditure requirements or working capital needs.                              

WE HAVE SUBSTANTIAL DEBT WHICH MAY LIMIT OUR ABILITY TO BORROW, RESTRICT THE USE
 OF OUR CASH FLOWS AND CONSTRAIN OUR BUSINESS STRATEGY, AND WE MAY NOT BE ABLE
TO MEET OUR DEBT OBLIGATIONS                                                

LARGE AMOUNT OF DEBT                                                    

We have, and will continue to have after the offering of the notes,     
substantial debt and debt service requirements. Following the offering of the   
notes, we will have total debt of approximately $1.7 billion. In addition, the  
purchase by Bell Atlantic of a convertible subordinated note will increase our  
total debt to approximately $2.7 billion. As the indentures governing our debt  
allow us to borrow additional amounts in certain cases to finance the           
construction and improvement of our networks, we intend to explore market       
conditions in order to obtain additional financing, including additional        
long-term fixed-rate financing or senior revolving credit facilities.           

CONSEQUENCES OF DEBT                                                    

Our substantial debt has important consequences, including:             

- our ability to borrow additional amounts for working capital, capital 
expenditures or other purposes is limited;                          

    - a substantial portion of our cash flow from operations is required to make
debt service payments; and                                          

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    - our leverage could limit our ability to capitalize on significant business
     opportunities and our flexibility to react to changes in general economic
conditions, competitive pressures and adverse changes in government 
regulation.                                                         

You should be aware that our ability to repay or refinance our debt,    
including the notes, depends on our successful financial and operating          
performance and on our ability to successfully implement our business strategy. 
Unfortunately, we cannot assure you that we will be successful in implementing  
our strategy or in realizing our anticipated financial results. You should also 
be aware that our financial and operational performance depends upon a number of
factors, many of which are beyond our control. These factors include:           

   - the economic and competitive conditions in the telecommunications network
and Internet-related industries;                                    

    - any operating difficulties, increased operating costs or pricing pressures
we may experience;                                                  

- the passage of legislation or other regulatory developments that may  
adversely affect us;                                                

- any delays in implementing any strategic projects;                    

- our ability to complete our networks on time and in a cost-effective  
manner; and                                                         

- our ability to apply our business strategies in foreign cities.       

We cannot assure you that our cash flow and capital resources will be   
sufficient to repay our existing indebtedness, including the notes, and any     
indebtedness we may incur in the future, or that we will be successful in       
obtaining alternative financing. In the event that we are unable to repay our   
debts, we may be forced to reduce or delay the completion or expansion of our   
networks, sell some of our assets, obtain additional equity capital or refinance
or restructure our debt. If we are unable to meet our debt service obligations  
or comply with our covenants, a default under our existing debt agreements would
result. To avoid a default, we may need waivers from third parties, which might 
not be granted. You should also read the information we have included in this   
prospectus supplement in the sections entitled "--Risk Factors Relating to the  
Notes," "Description of Other Indebtedness," "Description of the Notes" and     
"Business--Business Strategy."                                                  

RESTRICTIVE DEBT COVENANTS                                              

   The indenture will contain a number of covenants. These covenants may limit
our ability to, among other things:                                             

- borrow additional money;                                              

- make capital expenditures and other investments;                      

- pay dividends;                                                        

- merge, consolidate, or dispose of our assets; and                     

- enter into transactions with our affiliates.                          

  Our failure to comply with these covenants would cause a default under the
indenture. A default, if not waived, could result in acceleration of our        
indebtedness, in which case the debt would become immediately due and payable.  
If this occurs, we may not be able to repay our debt or borrow sufficient funds 
to refinance it. Even if new financing is available, it may not be on terms that
are acceptable to us. Complying with these covenants may cause us to take       
actions that we otherwise would not take or not take actions that we otherwise  
would take. Please refer to the sections in this prospectus supplement entitled 
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations--Liquidity and Capital Resources" and "Description of Other          
Indebtedness."                                                                  

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WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS STRATEGY BECAUSE WE   
  DEPEND ON FACTORS BEYOND OUR CONTROL, WHICH COULD ADVERSELY AFFECT OUR RESULTS
OF OPERATIONS                                                               

    Our future largely depends on our ability to implement our business strategy
and proposed expansion in order to create the new business and revenue          
opportunities. Our results of operations will be adversely affected if we cannot
fully implement our business strategy. Successful implementation depends on     
numerous factors beyond our control, including economic, competitive and other  
conditions and uncertainties, the ability to obtain licenses, permits,          
franchises and rights-of-way on reasonable terms and conditions and the ability 
to hire and retain qualified management personnel.                              

A CHANGE IN ACCOUNTING STANDARDS HAS REQUIRED US TO CHANGE OUR TIMING OF        
RECOGNIZING REVENUES                                                            

Effective June 30, 1999, the Financial Accounting Standards Board issued
FASB Interpretation No. 43 "Real Estate Sales" ("FIN 43") which requires that   
sales of integral equipment be accounted for in accordance with real estate     
accounting rules. We believe that the SEC requires the classification of dark   
fiber cables in the ground as integral equipment as defined in FIN 43.          
Accounting for dark fiber contracts does not change any of the economics of the 
contracts. It requires us, however, to recognize the revenue from certain       
contracts as operating leases over the term of the contract as opposed to the   
current method of recognizing revenue during the period over which we deliver   
the fiber. As a result, this change in accounting treatment reduces the revenue 
and income that we recognize in the earlier years of the contract and spreads it
out over the life of the contract regardless of when the cash was received or   
the delivery of the fiber took place.                                           

  We implemented accounting for certain of our contracts, entered into after
June 30, 1999, under this method of accounting. As a result, although there was 
no change to the economics of the contracts or the timing of the cash to be     
received by us, the impact of the change in accounting resulted in our recording
$10.7 million in revenues for the quarter ended September 30, 1999 rather than  
$32.7 million that would have been recorded prior to this change. Please refer  
to "Management's Discussion and Analysis of Financial Condition and Results of  
Operations--General."                                                           

FAILURE TO CONSUMMATE THE BELL ATLANTIC TRANSACTIONS MAY CAUSE US TO SEEK       
ALTERNATIVE FINANCING                                                       

In connection with Bell Atlantic's investment, we expect to receive     
approximately $1.7 billion in net proceeds from Bell Atlantic for the purchase  
of shares of our class A common stock and a convertible subordinated note. In   
addition, Bell Atlantic has agreed to purchase a minimum of $550.0 million of   
fiber optic facilities payable over the next three years. We plan to use the net
proceeds from the Bell Atlantic transactions to accelerate the build out of our 
nationwide dark fiber infrastructure as well as to enter new markets in the     
United States and internationally. If Bell Atlantic's investment, which is      
subject to customary closing conditions, does not close, we would need to obtain
alternative sources of financing to complete the construction of our networks,  
which may not be available on comparable terms, if at all. Locating an          
alternative financing source could slow our growth and have a material adverse  
affect on us.                                                                   

WE CANNOT BE CERTAIN THAT WE WILL BE SUCCESSFUL IN INTEGRATING ABOVENET INTO OUR
BUSINESS                                                                    

  We believe that our acquisition of AboveNet will result in benefits to the
combined companies, including the expansion of our product and service offerings
and the combination of our fiber optic network with AboveNet's Internet         
connectivity solutions. If we are not able to effectively integrate our         
technology, operations and personnel in a timely and efficient manner, then the 
benefits of our acquisition will not be realized and, as a result, our operating
results may be adversely affected. In particular, if the integration is not     
successful:                                                                     

- we may lose key personnel; and                                        

- we may not be able to retain AboveNet's customers.                    

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   In addition, the attention and effort devoted to the integration of the two
companies will significantly divert management's attention from other important 
issues, and could significantly harm the combined companies' business and       
operating results.                                                              

WE CANNOT ASSURE YOU THAT WE WILL SUCCESSFULLY COMPLETE THE CONSTRUCTION OF OUR 
NETWORKS                                                                    

The construction of future networks and the addition of Internet service
exchange facilities entail significant risks, including management's ability to 
effectively control and manage these projects, shortages of materials or skilled
labor, unforeseen engineering, environmental or geological problems, work       
stoppages, weather interference, floods and unanticipated cost increases. The   
failure to obtain necessary licenses, permits and authorizations could prevent  
or delay the completion of construction of all or part of our networks or       
increase completion costs. In addition, AboveNet's establishment and maintenance
of interconnections with other network providers at various public and private  
points is necessary for AboveNet to provide cost efficient services. We cannot  
assure you that the budgeted costs of our current and future projects will not  
be exceeded or that these projects will commence operations within the          
contemplated schedules, if at all.                                              

WE CANNOT ASSURE YOU THAT A MARKET FOR OUR CURRENT OR FUTURE SERVICES WILL      
DEVELOP                                                                     

  The practice of leasing dark fiber, which is fiber optic cable without any
of the electronic or optronic equipment necessary to use the fiber for          
transmission, is not widespread and we cannot assure you that the market will   
develop or that we will be able to enter into contracts, comply with the terms  
of these contracts or maintain relationships with communications carriers and   
corporate and government customers. We also cannot assure you that these        
contracts or relationships will be on economically favorable terms or that      
communications carriers and corporate and government customers will not choose  
to compete against, rather than cooperate with us. If we are unable to enter    
into contracts, comply with the terms of the contracts or maintain relationships
with these constituencies, our operations would be materially and adversely     
affected. We cannot predict whether providing services to governments will      
evolve into a significant market because governments usually already control    
existing rights-of-way and often build their own communications infrastructure. 
We will need to strengthen our marketing efforts and increase our staff to      
handle future marketing and sales requirements. If we fail to obtain            
significant, widespread commercial and public acceptance of our networks and    
access to sufficient buildings our visibility in the telecommunications market  
could be jeopardized. We cannot assure you that we will be able to secure       
customers for the commercial use of our proposed networks or access to such     
buildings in each market. In addition, the market for co-location and Internet  
services, which are offered by AboveNet, is new and evolving. We cannot assure  
you that AboveNet's services will achieve widespread acceptance in this new     
market. Further, AboveNet's success depends in large part on growth in the use  
of the Internet. The growth of the Internet is highly uncertain and depends on a
variety of factors.                                                             

We may expand the range of services that we offer. These services may   
include assisting customers with the integration of their leased dark fiber with
appropriate electronic and optronic equipment by facilitating the involvement of
third party suppliers, vendors and contractors. We cannot assure you that a     
market will develop for our new services, that implementing these services will 
be technically or economically feasible, that we can successfully develop or    
market them or that we can operate and maintain our new services profitably.    

SEVERAL OF OUR CUSTOMERS MAY TERMINATE THEIR AGREEMENTS WITH US IF WE DO NOT    
PERFORM BY SPECIFIED TIMES                                                  

    We currently have some contracts to supply leased fiber capacity which allow
the lessee to terminate the contracts and/or provide for liquidated damages if  
we do not supply the stated fiber capacity by a specified time. Terminating any 
of these contracts could adversely affect our operating results.                

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WE MAY BE UNABLE TO RAISE THE ADDITIONAL FINANCING NECESSARY TO COMPLETE THE    
CONSTRUCTION OF OUR NETWORKS, WHICH WOULD ADVERSELY AFFECT OUR LONG-TERM    
BUSINESS STRATEGY                                                           

We may need significant amounts of additional capital to complete the   
build-out of our planned fiber optic communications networks, to expand         
AboveNet's network infrastructure and to meet our long-term business strategies,
including expanding our networks to additional cities and constructing our      
networks in Europe. If we need additional funds, our inability to raise them    
will have an adverse effect on our operations. If we decide to raise additional 
funds by incurring debt, we may become more leveraged and subject to additional 
or more restrictive financial covenants and ratios.                             

    Our ability to arrange financing and the cost of financing depends upon many
factors, including:                                                             

- general economic and capital markets conditions generally, and in     
particular the non-investment grade debt market;                    

- conditions in the telecommunications and Internet markets;            

- regulatory developments;                                              

- credit availability from banks or other lenders;                      

   - investor confidence in the telecommunications and Internet industries and
in us;                                                              

- the success of our fiber optic communications network and Internet    
services; and                                                       

- provisions of tax and securities laws that are conductive to raising  
capital.                                                            

COMPETITORS OFFER SERVICES SIMILAR TO OURS IN OUR CURRENT OR PLANNED MARKETS    
WHICH WOULD AFFECT OUR RESULTS OF OPERATIONS                                

The telecommunications industry and AboveNet's business are extremely   
competitive, particularly with respect to price and service, which may adversely
affect our results of operations. A significant increase in industry capacity or
reduction in overall demand would adversely affect our ability to maintain or   
increase prices. In the telecommunications industry, we compete against         
incumbent local exchange carriers, which have historically provided local       
telephone services and currently dominate their local telecommunications        
markets, and competing carriers in the local services market. In addition to    
these carriers, several other potential competitors, such as facilities-based   
communications service providers, cable television companies, electric          
utilities, microwave carriers, satellite carriers, wireless telephone system    
operators and large end-users with private networks, are capable of offering,   
and in some cases offer, services similar to those offered by us. Furthermore,  
several of these service providers, such as wireless service providers, could   
build wireless networks more rapidly and at lower cost than fiber optic         
networks. Additionally, the business in which AboveNet competes is highly       
competitive due to a lack of barriers to entry and high price sensitivity. Many 
of our competitors have greater financial, research and development and other   
resources than we do.                                                           

   Some of our principal competitors already own fiber optic cables as part of
their telecommunications networks. Accordingly, any of these carriers, some of  
which already have franchise and other agreements with local and state          
governments and substantially greater resources and more experience than us,    
could directly compete with us in the market for leasing fiber capacity, if they
are willing to offer this capacity to their customers. In addition, some        
communications carriers and local cable companies have extensive networks in    
place that could be upgraded to fiber optic cable, as well as numerous personnel
and substantial resources to begin construction to equip their networks. If     
communications carriers and local cable companies decide to equip their networks
with fiber optic cable, they could become significant competitors. Our franchise
and other agreements with the city of New York and other local and state        
governments are not exclusive. Potential competitors with greater resources and 
more experience than us could enter into franchise and other agreements with    
local and state governments and compete directly                                

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with us. Other companies may choose to compete with us in our current or planned
markets, including Europe, by leasing fiber capacity, including dark fiber, to  
our targeted customers. This additional competition could materially and        
adversely affect our operations.                                                

WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS AND ARE MORE VULNERABLE TO CHANGING  
ECONOMIC CONDITIONS AND CONSUMER PREFERENCES                                

    We are particularly dependent on a limited number of customers. In addition,
AboveNet has a long sales cycle. We are, therefore, more susceptible to the     
impact of poor economic conditions than our competitors with a more balanced mix
of business.                                                                    

REGULATION OF THE TELECOMMUNICATIONS INDUSTRY MAY LIMIT THE DEVELOPMENT OF OUR  
NETWORKS AND AFFECT OUR COMPETITIVE POSITION                                

Existing and future government laws and regulations may influence how we
operate our business, our business strategy and ultimately, our viability. U.S. 
Federal and state telecommunications laws and the laws of foreign countries in  
which we operate directly shape the telecommunications market. Consequently,    
regulatory requirements and/or changes could adversely affect our operations and
also influence the market for Internet, web hosting and related services.       
However, we cannot predict the future regulatory framework of our business.     

 U.S. LAWS MAY IMPACT OUR BUSINESS AND RESULTS OF OPERATIONS BY REGULATING
OUR OPERATIONS AND OUR CUSTOMERS' OPERATIONS                          

U.S. Federal telecommunications law imposes legal requirements on common
carriers who engage in interstate or foreign communication by wire or radio, and
on telecommunications carriers. Should these regulations be applied to us, they 
may have a material adverse impact on our business and results of operation. If 
providing dark fiber facilities or related services provided by us were deemed  
to be a telecommunications service, then regulations, both Federal and state,   
applicable to telecommunications carriers might apply to us. This could subject 
the revenues we received from facility leases in interstate commerce to         
assessment by the Federal Communications Commission Universal Service Fund and  
the offering of those facilities or services would be subject to common carrier 
regulation. In addition, our customers and, in the case of Bell Atlantic, one of
our potential shareholders, are local exchange carriers or long distance        
carriers, subject to regulation by Federal Communications Commission. Our       
business may be affected by regulations applicable to these telecommunications  
carriers. For example, the Federal Communications Commission has recently taken 
steps, and may take further steps, to reduce the access charges, the fees paid  
by long distance carriers to local exchange carriers for originating and        
terminating long distance calls on the incumbent local exchange carriers' local 
networks, and to give the local exchange carriers greater flexibility in setting
these charges. While we cannot predict the precise effect reduction in access   
charge will have on our operations, the reduction will likely make it more      
attractive for long distance carriers to use local exchange carriers facilities,
rather than our fiber optic telecommunications network. A recent decision by the
Federal Communications Commission to require unbundling of incumbent local      
exchange carriers' dark fiber could decrease the demand for our dark fiber by   
allowing our potential customers to obtain dark fiber from incumbent local      
exchange carriers at cost-based rates, and thereby have an adverse effect on the
results of our operations.                                                      

STATES LEGISLATION AFFECTS OUR PRICING POLICIES AND OUR COSTS           

 Our offering of transmission services, which is different from dark fiber
capacity, may be subject to regulation in each state to the extent that these   
services are offered for intrastate use, and this regulation may have an adverse
effect on the results of our operations. We cannot assure you that these        
regulations, if any, as well as future regulatory, judicial, or legislative     
action will not have a material adverse effect on us. In particular, state      
regulators have the authority to determine both the rates we will pay to        
incumbent local                                                                 

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exchange carriers for certain interconnection arrangements such as physical     
collocation, and the prices that incumbent local exchange carriers will be able 
to charge our potential customers for services and facilities that compete with 
our services. We will also incur costs in order to comply with regulatory       
requirements such as the filing of tariffs, submission of periodic financial and
operational reports to regulators, and payment of regulatory fees and           
assessments, including contributions to state universal service funds. In some  
jurisdictions, our pricing flexibility for intrastate services may be limited   
because of regulation, although our direct competitors will be subject to       
similar restrictions.                                                           

  LOCAL GOVERNMENTS' CONTROL OVER RIGHTS-OF-WAY CAN LIMIT THE DEVELOPMENT OF
OUR NETWORKS                                                          

  Local governments exercise legal authority that may have an adverse effect
on our business because of our need to obtain rights-of-way for our fiber       
network. While local governments may not prohibit persons from providing        
telecommunications services nor treat telecommunication service providers in a  
discriminatory manner, they can affect the timing and costs associated with our 
use of public rights-of-way.                                                    

  THE REGULATORY FRAMEWORK FOR OUR INTERNATIONAL OPERATIONS IS EXTENSIVE AND
 CONSTANTLY CHANGING, ADDING UNCERTAINTIES TO OUR PLANNED EXPANSION INTO
FOREIGN COUNTRIES                                                     

Various regulatory requirements and limitations also will influence our 
business as we attempt to enter international markets. Regulation of the        
international telecommunications industry is changing rapidly. We are unable to 
predict how the Federal Communications Commission and foreign regulatory bodies 
will resolve the various pending international policy issues and the effect of  
such resolutions on us. Our US/UK undersea cable joint venture is a U.S.        
international common carrier subject to U.S. regulation under Title II of the   
Communications Act of 1934. We are also licensed as a U.S. international common 
carrier subject to U.S. regulation under Title II of the Communications Act of  
1934. Our U.K. joint venture is, and we also are, required, under Sections 214  
and 203 of the Communications Act of 1934, respectively, to obtain authorization
and file an international service tariff containing rates, terms and conditions 
before initiating service. International carriers are also subject to certain   
annual fees and filing requirements such as the requirement to file contracts   
with other carriers, including foreign carrier agreements, and reports          
describing international circuit, traffic and revenue data service. So long as  
our U.K. joint venture and we operate as international common carriers, they    
will also be required to comply with the rules of the Federal Communications    
Commission. The international services provided by our U.K. joint venture are   
and our international services are also subject to regulation in the United     
Kingdom and other European jurisdictions in which we may operate. National      
regulations of relevant European and other foreign countries, as well as        
policies and regulations on the European Union and other foreign governmental   
level, impose separate licensing, service and other conditions on our foreign   
joint ventures and our international service operations, and these requirements 
may have a material adverse impact on us.                                       

OUR FRANCHISES, LICENSES OR PERMITS COULD BE CANCELED OR NOT RENEWED, WHICH     
WOULD IMPAIR THE DEVELOPMENT OF MAJOR MARKETS FOR OUR SERVICES              

   Termination or non-renewal of our franchise with the city of New York or of
certain other rights-of-way or franchises that we use for our networks would    
have a material adverse effect on our business, results of operations and       
financial condition. We will also need to obtain additional franchises, licenses
and permits for our planned intracity networks, intercity networks and          
international networks. We cannot assure you that we will be able to maintain on
acceptable terms our existing franchises, licenses or permits or to obtain and  
maintain the other franchises, licenses or permits needed to implement our      
strategy.                                                                       

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WE MAY NOT BE ABLE TO OBTAIN AND MAINTAIN THE RIGHTS-OF-WAY AND OTHER PERMITS   
NECESSARY TO IMPLEMENT OUR BUSINESS STRATEGY                                

 We must obtain additional rights-of-way and other permits from railroads,
utilities, state highway authorities, local governments and transit authorities 
to install underground conduit for the expansion of our intracity networks,     
intercity networks and international networks. We cannot assure you that we will
be successful in obtaining and maintaining these right-of-way agreements or     
obtaining these agreements on acceptable terms. Some of these agreements may be 
short-term or revocable at will, and we cannot assure you that we will continue 
to have access to existing rights-of-way after they have expired or terminated. 
If any of these agreements were terminated or could not be renewed and we were  
forced to remove our fiberoptic cable from under the streets or abandon our     
networks, the termination could have a material adverse effect on our           
operations. In addition, landowners have asserted that railroad companies and   
others to whom they granted easements to their properties are not entitled as a 
result of these easements to grant rights of way to telecommunications          
providers. If these disputes are resolved in the landowners' favor, we could be 
obligated to make substantial lease payments to these landowners for the lease  
of these rights of way. More specifically, our New York/New Jersey network      
relies upon, and our planned expansions into Long Island and Westchester County 
will rely upon, right-of-way agreements with Bell Atlantic Corporation and our  
subsidiary, Empire City Subway Company (Ltd.). The current agreements may be    
terminated at any time without cause with three months notice. In case of       
termination, we may be required to remove our fiber optic cable from the        
conduits or poles of Bell Atlantic. This termination would have a material      
adverse effect on our operations.                                               

RAPID TECHNOLOGICAL CHANGES COULD AFFECT THE CONTINUED USE OF FIBER OPTIC CABLE 
AND OUR RESULTS OF OPERATIONS                                               

   The telecommunications industry is subject to rapid and significant changes
in technology that could materially affect the continued use of our services,   
including our fiber optic cable and Internet connectivity services. We cannot   
predict the effect of technological changes on our business. We also cannot     
assure you that technological changes in the communications industry and        
Internet-related industry will not have a material adverse effect on our        
operations.                                                                     

WE MAY EXPERIENCE RISKS AS A RESULT OF EXPANDING OUR NETWORKS INTO EUROPEAN AND 
 OTHER FOREIGN COUNTRIES, WHICH MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS

 Our strategy includes expanding our services to provide fiber optic cable
and developing regional Internet services exchange facilities in Europe,        
particularly Austria, Germany and the United Kingdom. The following are risks we
may experience as a result of doing business in Germany, the United Kingdom and 
other foreign countries in which we may expand our networks:                    

    - difficulties in staffing and managing our operations in foreign countries;

- longer payment cycles;                                                

- problems in collecting accounts receivable;                           

- fluctuations in currency exchange rates;                              

    - delays from customs brokers or government agencies encountered as a result
    of exporting fiber from the United States to Germany, the United Kingdom
or other countries in which we may operate; and                     

- potentially adverse consequences resulting from operating in multiple 
      countries such as Germany and the United Kingdom, each with their own laws
 and regulations, including tax laws and industry related regulations.

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    We cannot assure you that we will be successful in overcoming these risks or
any other problems arising because of expansion into Europe and other foreign   
countries.                                                                      

WE MAY NOT BE ABLE TO SUCCESSFULLY IDENTIFY, MANAGE AND ASSIMILATE FUTURE       
ACQUISITIONS, INVESTMENTS AND STRATEGIC ALLIANCES, WHICH WOULD ADVERSELY    
AFFECT OUR RESULTS OF OPERATIONS                                            

    We have in the past, and may in the future, acquire, make investments in, or
enter into strategic alliances, including joint ventures in which we hold less  
than a majority interest, with companies which have customer bases, switching   
capabilities, existing networks or other assets in our current markets or in    
areas into which we intend to expand our networks. Any acquisitions,            
investments, strategic alliances or related efforts will be accompanied by risks
such as:                                                                        

- the difficulty of identifying appropriate acquisition candidates;     

   - the difficulty of assimilating the operations of the respective entities;

- the potential disruption of our ongoing business;                     

 - the potential inability to control joint ventures in which we hold less
than a majority interest;                                           

  - the inability of management to capitalize on the opportunities presented
 by acquisitions, investments, strategic alliances or related efforts;

 - the failure to successfully incorporate licensed or acquired technology
and rights into our services,                                       

- the inability to maintain uniform standards, controls, procedures and 
policies, and                                                       

  - the impairment of relationships with employees and customers as a result
of changes in management.                                           

  We cannot assure you that we would be successful in overcoming these risks
or any other problems encountered with such acquisitions, investments, strategic
alliances or related efforts.                                                   

IN THE TELECOMMUNICATIONS INDUSTRY, CONTINUED PRICING PRESSURES FROM OUR        
  COMPETITORS AND AN EXCESS OF NETWORK CAPACITY CONTINUE TO CAUSE PRICES FOR OUR
SERVICES TO DECLINE                                                         

 We anticipate that prices for our services specifically, and transmission
services in general, will continue to decline over the next several years due   
primarily to the following:                                                     

- price competition as various network providers continue to install    
networks that might compete with our networks,                      

- recent technological advances that permit substantial increases in the
transmission capacity of both new and existing fiber, and           

- strategic alliances or similar transactions, such as long distance    
  capacity purchasing alliances among regional Bell operating companies,
that increase the parties' purchasing power.                        

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WE MAY EXPERIENCE ADDITIONAL RISKS AS A RESULT OF ABOVENET'S CO-LOCATION AND    
INTERNET CONNECTIVITY SERVICES                                              

The legal landscape that governs AboveNet has yet to be interpreted or  
enforced. Regulatory issues for AboveNet's industry include property ownership, 
copyrights and other intellectual property issues, taxation, libel, obscenity   
and personal privacy. AboveNet's business may be adversely affected by the      
adoption and interpretation of any future or currently existing laws and        
regulations. AboveNet has no patented technology and relies on a combination of 
copyright, trademark, service mark and trade secret laws and contractual        
restrictions to establish and protect certain proprietary rights in its         
technology. AboveNet's business may be adversely affected by a claim that it is 
infringing the proprietary rights of others.                                    

Despite AboveNet's design and implementation of a variety of network    
security measures, unauthorized access, computer viruses, accidental or         
intentional action and other disruptions could occur. In addition, we may incur 
significant costs to prevent breaches in AboveNet's security or to alleviate    
problems caused by those breaches. The law relating to the liability of online  
services companies and Internet access providers of information carried on or   
disseminated through their networks is currently unsettled. It is possible that 
claims could be made against online services companies, co-location companies   
and Internet access providers. We may need to implement measures to reduce our  
exposure to this potential liability which may require the expenditure of       
substantial resources. The increased attention focused upon liability issues as 
a result of lawsuits, new laws and legislative proposal could impede the growth 
of Internet use.                                                                

  In addition, some of AboveNet's customers have sent unsolicited commercial
E-mails from servers co-located at its facilities to massive numbers of people. 
This practice known as "spamming" can lead to complaints against service        
providers that enable such activities, such as AboveNet. In addition,           
legislation has recently been passed that prohibits "spamming."                 

ABOVENET DEPENDS ON THE GROWTH AND PERFORMANCE OF THE INTERNET                  

AboveNet's success will depend in large part on growth in the use of the
Internet. Growth of the Internet depends on many factors, including security,   
reliability, cost, ease of access, quality of service and bandwidth. The recent 
growth of the Internet has placed strain on the Internet, necessitating upgrades
to its infrastructure. Any perceived or actual weakening in the performance of  
the Internet could undermine AboveNet's services, which are dependent on third  
parties. AboveNet's ability to attract new customers similarly depends on a     
variety of factors, including the ability to provide continuous service. In     
addition, AboveNet's customers might terminate or decide not to renew           
commitments to use its services. AboveNet must continue to expand and adapt its 
network infrastructure as the number of its users grows, as its users place     
increasing demands on it, and as requirements change.                           

OUR BUSINESS DEPENDS ON A LIMITED NUMBER OF KEY PERSONNEL THE LOSS OF WHOM COULD
ADVERSELY AFFECT OUR BUSINESS.                                              

 Our business is managed by a small number of key management and operating
personnel. We believe that the success of our business strategy and our ability 
to operate profitably depend on the continued employment of our senior          
management team led by Stephen A. Garofalo, Chief Executive Officer and Chairman
of the Board of Directors. Our business and financial results could be          
materially affected if Mr. Garofalo or other members of our senior management   
team became unable or unwilling to continue in their present positions.         

METROMEDIA COMPANY EFFECTIVELY CONTROLS OUR COMPANY AND HAS THE POWER TO CAUSE  
OR PREVENT A CHANGE OF CONTROL                                              

    Metromedia Company and one of its general partners currently own 100% of our
class B common stock, which currently represents approximately 63% of the total 
voting power and also is entitled to elect                                      

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75% of the members of our board of directors. Accordingly, Metromedia Company is
able to control the board of directors and all stockholder decisions and, in    
general, to determine the outcome of any corporate transaction or other matter  
submitted to the stockholders for approval, including mergers, consolidations   
and the sale of all or substantially all of our assets, without the consent of  
our other stockholders. In addition, Metromedia Company has the power to prevent
or cause a change in control of our company.                                    

WE ARE INVOLVED IN A LEGAL PROCEEDING WHICH COULD ADVERSELY AFFECT OUR FINANCIAL
CONDITION                                                                   

    We are involved in a legal proceeding in connection with the sale of 900,000
shares (not adjusted for stock splits) of our class A common stock. Please refer
to the section in this prospectus supplement entitled "Business--Legal          
Proceedings."                                                                   

If we are unsuccessful in defending against the allegations made in this
proceeding, an award of the magnitude being sought in this legal proceeding     
could have a material adverse effect on our financial condition and results of  
operations. We intend to vigorously defend this action because we believe that  
we acted appropriately in connection with the matters at issue in this case.    
However, we cannot assure you that we will not determine that the advantages of 
entering into a settlement outweigh the risk and expense of protracted          
litigation or that ultimately we will be successful in defending against these  
allegations.                                                                    

FAILURES TO ADDRESS THE YEAR 2000 PROBLEM MAY CAUSE DISRUPTIONS IN THE OPERATION
OF OUR NETWORKS AND OUR SERVICES TO CUSTOMERS                               

 Many computer systems and software products will not function properly in
the year 2000 and beyond due to a once-common programming standard that         
represents years using two digits. This problem is often referred to as the year
2000 problem. It is possible that our currently installed computer systems,     
software products or other information technology systems, including imbedded   
technology, or those of our suppliers, contractors, or major systems developers 
working either alone or in conjunction with other softwares or systems, will not
properly function in the year 2000 because of the year 2000 problem. If we or   
our customers, suppliers, contractors, and major systems developers are unable  
to address their year 2000 issues in a timely manner, a material adverse effect 
on our results of operations and financial condition could result. We are       
currently working to evaluate and resolve the potential impact of the year 2000 
on our processing of date-sensitive information and network systems. We have    
contacted all our significant suppliers, contractors and major systems          
developers to determine our vulnerability to their year 2000 situations. We     
cannot assure you that the year 2000 problem will only have a minimal cost      
impact or that other companies will convert their systems on a timely basis and 
that their failure will not have an adverse effect on our systems.              

RISK FACTORS RELATING TO THE NOTES                                              

WE ARE A HOLDING COMPANY AND WILL BE DEPENDENT ON THE CASH FLOWS OF OUR         
SUBSIDIARIES TO MEET OUR OBLIGATIONS                                        

   We are a holding company with little direct operations and little assets of
significance other than the stock of our subsidiaries. As such, we will be      
dependent on the cash flows of our subsidiaries to meet our obligations,        
including the payment of principal and interest on the notes. Our subsidiaries  
are separate legal entities that will have no obligation to pay any amounts due 
under the notes or to make any funds available therefor, whether by dividends,  
loans or other payments. Our subsidiaries will not guarantee the payment of the 
notes. The notes will therefore be effectively subordinated to the claims of the
creditors of our subsidiaries (including trade creditors and holders of         
indebtedness of such subsidiaries). We expect that our current and future       
subsidiaries will incur significant amounts of equipment financing and other    
indebtedness in connection with the development of our networks. Please refer to
the sections in this prospectus supplement entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Business" and "Description of the Notes."                          

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THE NOTES WILL BE SUBORDINATED TO ALL OF OUR EXISTING AND FUTURE SECURED AND    
SUBSIDIARIES' DEBT                                                          

 The notes are unsecured and therefore will be effectively subordinated to
all our existing and future secured indebtedness to the extent of the value of  
the assets securing such indebtedness and to all of our foreign subsidiaries'   
existing or future Indebtedness, whether or not secured. The indenture will     
permit us and our subsidiaries to incur an unlimited amount of secured          
indebtedness to finance the engineering, construction, installation,            
acquisition, lease, development or improvement of telecommunications assets.    
Please refer to the section of this prospectus supplement entitled "Description 
of the Notes." Consequently, in the event of a bankruptcy, liquidation,         
dissolution, reorganization or similar proceeding of our company, our assets    
will be available to satisfy obligations of such secured debt before any payment
may be made on the notes. In addition, to the extent such assets cannot satisfy 
in full the secured indebtedness, the holders of such indebtedness would have a 
claim for any shortfall that would rank equally in right of payment (or         
effectively senior if the indebtedness were issued by a subsidiary) with the    
notes. Accordingly, there might only be a limited amount of assets available to 
satisfy your claims as a holder of the notes upon an acceleration of the        
maturity of the notes.                                                          

THERE IS NO PUBLIC MARKET FOR THE NOTES                                         

The Dollar notes and the Euro notes will be new securities for which    
currently there is no trading market. Application has been made to list the     
Dollar notes and the Euro notes on the Luxembourg Stock Exchange. There is no   
assurance, however, that the notes will qualify for listing on the Luxembourg   
Stock Exchange. The underwriters have informed us that they currently intend to 
make a market in the Dollar notes and the Euro notes. However, the underwriters 
are not obligated to do so and may discontinue any such market making at any    
time without notice. The liquidity of any market for the Dollar notes and the   
Euro notes will depend upon the number of holders of the Dollar notes and the   
Euro notes, the interest of securities dealers in making a market for the Dollar
notes and the Euro notes and other factors. Accordingly, we cannot assure you   
that a market or liquidity will develop for the Dollar notes and the Euro notes.

  Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities 
similar to the notes. We cannot assure you that the market for the notes, if    
any, will not be subject to similar disruptions. Any such disruptions may       
adversely affect you as a holder of the notes.                                  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 

Some of the statements contained in this prospectus supplement under the
sections entitled "Summary," "Risk Factors," "Management's Discussion and       
Analysis of Financial Condition and Results of Operations" and "Business" are   
forward-looking statements within the meaning of Section 27A of the Securities  
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. They include
statements about our expectations, beliefs, plans, objectives, assumptions or   
future events or performance. These statements are often, but not always, made  
through the use of words or phrases such as "will likely result," "expect,"     
"will continue," "anticipate," "estimate," "intends," "plan," "projection,"     
"would," and "outlook." These forward-looking statements are based on our       
expectations and are subject to a number of risks and uncertainties. Certain of 
these risks and uncertainties are beyond our control. In this prospectus        
supplement, we have described our current network and our anticipated program of
network expansion. However, there is no assurance that we will be able to       
implement our proposed business strategy. Our actual results may differ         
materially from those suggested by these forward-looking statements for various 
reasons, including those discussed under the sections entitled "Risk Factors,"  
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" and "Business." Some of the key factors that have a direct bearing  
on our results of operations are:                                               

- general economic and business conditions;                             

- competition in the telecommunications industry;                       

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- industry capacity;                                                    

  - success of acquisitions and operating initiatives, including our ability
to successfully integrate our acquisitions;                         

- management of growth;                                                 

- dependence on senior management;                                      

- brand awareness;                                                      

- general risks of the telecommunications industries;                   

- development risks;                                                    

- risks relating to the availability of financing;                      

- the existence or absence of adverse publicity;                        

- changes in business strategy or development plans;                    

- availability, terms and deployment of capital;                        

- business abilities and judgment of personnel;                         

- availability of qualified personnel;                                  

- labor and employee benefit costs;                                     

- changes in, or failure to comply with, government regulations;        

- construction schedules;                                               

- costs and other effects of legal and administrative proceedings;      

- changes in marketing and technology; and                              

- changes in political, social and economic conditions, especially with 
   respect to our foreign operations, and other factors referenced in this
prospectus supplement.                                              

These factors and the risk factors referred to above could cause actual 
results or outcomes to differ materially from those expressed in any            
forward-looking statements made by us. You should not place undue reliance on   
any such forward-looking statements. Further, any forward-looking statement     
speaks only as of the date on which it is made and we undertake no obligation to
update any forward-looking statement or statements to reflect events or         
circumstances after the date on which such statement is made or to reflect the  
occurrence of unanticipated events. New factors emerge from time to time, and it
is not possible for us to predict which will arise. In addition, we cannot      
assess the impact of each factor on our business or the extent to which any     
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.                         

For a discussion of important risks of an investment in our securities, 
including factors that could cause actual results to differ materially from     
results referred to in the forward-looking statements, see "Risk Factors." You  
should carefully consider the information set forth under the caption "Risk     
Factors." In light of these risks, uncertainties and assumptions, the           
forward-looking events discussed in or incorporated by reference in this        
prospectus supplement might not occur.                                          

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USE OF PROCEEDS 

We estimate that we will receive approximately $975.3 million in net    
proceeds from the sale of the notes in the offering, after we deduct the        
underwriters' discounts and commissions and an estimated $1.0 million in        
expenses payable by us. We intend to use the net proceeds of the offering for   
the build-out of our intra-city and inter-city networks in the United States and
Europe and for other capital expenditures, including possible acquisitions of   
other companies or assets. We currently intend to allocate substantial proceeds 
to each of these uses. Please refer to the section in this prospectus supplement
entitled "Management's Discussion and Analysis of Financial Condition and       
Results of Operations--Liquidity and Capital Resources."                        

Pending application of the net proceeds of the offering of the notes, we
will place the net proceeds in interest bearing bank accounts or invest the net 
proceeds in United States government securities or other short-term, interest   
bearing, investment grade securities.                                           

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CAPITALIZATION

The following table shows our capitalization as of September 30, 1999:  

- on a historical basis;                                                

  - on a pro forma basis to reflect the offering of the notes sold by us, as
if it had been consummated on September 30, 1999; and               

    - on a pro forma basis to reflect the offering of the notes and the purchase
      by Bell Atlantic of shares of our class A common stock and the convertible
   subordinated note, which has not yet been consummated and is subject to
customary closing conditions, as if they had been consummated on    
September 30, 1999.                                                 

You should read this table together with the consolidated financial     
statements and related notes of our company, AboveNet and Palo Alto Internet    
Exchange included in this prospectus supplement beginning on page F-1 and the   
information in the sections entitled "Risk Factors--Failure to Consummate the   
Bell Atlantic Transactions May Cause Us to Seek Alternative Financing,"         
"Unaudited Pro Forma Condensed Combining Financial Information" and             
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations--Liquidity and Capital Resources."                                   

                                                        [Enlarge/Download Table]

                                                                      AS OF SEPTEMBER 30, 1999           
                                                           ----------------------------------------------
                                                                                            PRO FORMA FOR
                                                                            PRO FORMA       BELL ATLANTIC
                                                             ACTUAL      FOR THE OFFERING    INVESTMENT  
                                                           -----------   ----------------   -------------
                                                                           (IN THOUSANDS)                
                                                                                                         
Cash and cash equivalents................................  $   352,900      $1,328,187       $3,019,095  
                                                           ===========      ==========       ==========  
Pledged securities (1)...................................  $    63,864      $   63,864       $   63,864  
                                                           ===========      ==========       ==========  
Debt:                                                                                                    
  Capital lease obligations less current portion.........  $    24,316      $   24,316       $   24,316  
  10% Senior Notes due 2008..............................      650,000         650,000          650,000  
  Senior Notes due 2009 offered by this prospectus                                                       
    supplement...........................................           --       1,002,823        1,002,823  
  6.15% Convertible Subordinated Note to be issued to                                                    
    Bell Atlantic........................................           --              --          975,281  
  Other less current portion.............................       14,720          14,720           14,720  
                                                           -----------      ----------       ----------  
  Total debt.............................................      689,036       1,691,859        2,667,140  
                                                           -----------      ----------       ----------  
Stockholders' equity                                                                                     
    Class A common stock, $.01 par value; 2,404,031,241                                                  
      shares authorized; 198,822,053 shares issued and                                                   
      outstanding, actual and pro forma for the offering;                                                
      224,377,162 shares issued and outstanding, pro                                                     
      forma for Bell Atlantic investment.................        1,988           1,988            2,244  
    Class B common stock, $.01 par value; 522,254,782                                                    
      shares authorized; 33,769,272 shares issued and                                                    
      outstanding, actual, pro forma for the offering and                                                
      pro forma for Bell Atlantic investment.............          338             338              338  
Additional paid-in capital...............................    2,065,316       2,065,316        2,780,687  
Accumulated deficit......................................      (86,526)        (86,526)         (86,526) 
Cumulative comprehensive loss............................       (1,123)         (1,123)          (1,123) 
                                                           -----------      ----------       ----------  
      Total stockholders' equity.........................    1,979,993       1,979,993        2,695,620  
                                                           -----------      ----------       ----------  
Total capitalization.....................................  $ 2,669,029      $3,671,852       $5,362,760  
                                                           ===========      ==========       ==========  

------------------------                                                        

(1) Represents amounts deposited with the security agent pursuant to a security 
agreement to make payments of interest through May 15, 2000 on our 10%  
Senior Notes due 2008.                                                  

Note: There has been no material change in our capitalization since             
September 30, 1999.                                                             

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SELECTED CONSOLIDATED FINANCIAL DATA

  Our selected consolidated financial data presented below and for the years
ended December 31, 1996, 1997 and 1998 have been derived from our consolidated  
financial statements and the related notes included in this prospectus          
supplement beginning on page F-1. Our consolidated financial statements as of   
and for the years ended December 31, 1996, 1997 and 1998 have been audited by   
Ernst & Young LLP, independent auditors. The selected financial data presented  
below as of and for the years ended December 31, 1994 and 1995 have been derived
from our audited financial statements which are not included in this prospectus 
supplement. The selected consolidated financial data and balance sheet data as  
of and for the nine months ended September 30, 1999 and the selected            
consolidated financial data for the nine months ended September 30, 1998 have   
been derived from our unaudited consolidated financial statements, which we     
believe include all adjustments necessary for a fair presentation of the        
financial condition and results of operations for such periods. The results of  
operations for interim periods are not necessarily indicative of the results for
a full year's operations.                                                       

The selected unaudited pro forma balance sheet as of September 30, 1999 
gives pro forma effect to the following transactions:                           

   - the offering of the notes, as if it had been consummated on September 30,
1999; and                                                           

  - the offering of the notes and the purchase by Bell Atlantic of shares of
 our class A common stock and the convertible subordinated note, which
     purchase has not yet been consummated and is subject to customary closing
conditions, as if they had been consummated on September 30, 1999.  

The pro forma adjustments are based upon available information and      
assumptions that we believe are reasonable at the time made. The selected       
unaudited pro forma balance sheet data does not purport to present our financial
position had the transactions occurred on the dates specified, nor are they     
necessarily indicative of the financial position that may be achieved in the    
future.                                                                         

 As you read the selected consolidated financial data, please refer to the
following: "Risk Factors--Failure to Consummate the Bell Atlantic Transactions  
Cause Us to Seek Alternative Financing," "Unaudited Pro Forma Condensed         
Combining Financial Information," "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business," the     
consolidated                                                                    

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financial statements and the related notes of our company, AboveNet and Palo    
Alto Internet Exchange and the other financial data appearing in this prospectus
supplement.                                                                     

                                                        [Enlarge/Download Table]

                                                                     YEAR ENDED                               NINE MONTHS       
                                                                    DECEMBER 31,                          ENDED SEPTEMBER 30,   
                                                ----------------------------------------------------   -------------------------
                                                  1994       1995       1996       1997       1998        1998          1999    
                                                --------   --------   --------   --------   --------   -----------   -----------
                                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)                      
                                                                                                                                
STATEMENT OF OPERATIONS DATA:                                                                                                   
Revenue........................................ $    --    $    56    $    236   $  2,524   $ 36,436     $20,840      $ 49,397  
Expenses:                                                                                                                       
  Cost of sales................................      --         --         699      3,572     13,937       9,499        24,414  
  Selling, general and administrative..........     874      3,886       2,070      6,303     14,712       9,811        27,369  
  Depreciation and amortization................      --        162         613        757      1,532         738        15,645  
  Consulting and employment incentives.........      --         --       3,652     19,218      3,648       3,648            --  
                                                -------    -------    --------   --------   --------     -------      --------  
(Loss) Income from operations..................    (874)    (3,992)     (6,798)   (27,326)     2,607      (2,856)      (18,031) 
Interest income (expense), net.................      --       (327)     (3,561)     1,067      1,927       5,012       (25,784) 
(Loss) from joint venture......................      --         --          --         --       (146)       (264)         (475) 
Income taxes...................................      --         --          --         --      3,402         825            --  
                                                -------    -------    --------   --------   --------     -------      --------  
Net (loss) income.............................. $  (874)   $(4,319)   $(10,359)  $(26,259)  $    986     $ 1,067      $(44,290) 
                                                =======    =======    ========   ========   ========     =======      ========  
Net (loss) income applicable to common                                                                                          
 stockholders per share........................ $ (0.02)   $ (0.09)   $  (0.14)  $  (0.28)  $   0.01     $  0.01      $  (0.23) 
                                                =======    =======    ========   ========   ========     =======      ========  
Weighted average number of shares                                                                                               
 outstanding...................................  46,672     49,658      71,716     94,894    186,990     186,392       190,639  
                                                =======    =======    ========   ========   ========     =======      ========  
Ratio of earnings to fixed charges (1).........      --         --          --         --       1.61        9.95            --  
EBITDA (2)..................................... $  (874)   $(3,830)   $ (6,185)  $(26,569)  $  3,993     $(3,207)     $ (2,861) 
Adjusted EBITDA (2)............................ $  (874)   $(3,830)   $ (2,533)  $ (7,351)  $  7,641     $   441      $ (2,861) 

                                                        [Enlarge/Download Table]

                                                                       AS OF SEPTEMBER 30, 1999           
                                                             ---------------------------------------------
                                                                                             PRO FORMA FOR
                                                                             PRO FORMA FOR   BELL ATLANTIC
                                                                ACTUAL       THE OFFERING     INVESTMENT  
                                                             -------------   -------------   -------------
                                                                            (IN THOUSANDS)                
                                                                                                          
BALANCE SHEET DATA:                                                                                       
Cash and cash equivalents...................................  $  352,900      $1,328,187      $3,019,095  
Pledged securities (3)......................................      63,864          63,864          63,864  
Property and equipment, net.................................     564,798         564,798         564,798  
Total assets................................................   2,918,401       3,921,224       5,612,132  
Long-term debt..............................................     689,036       1,691,859       2,667,140  
Total liabilities...........................................     938,408       1,941,231       2,916,512  
Stockholders' equity........................................   1,979,993       1,979,993       2,695,620  

(1) Earnings were insufficient to cover fixed charges in the years ended        
December 31, 1994, 1995, 1996 and 1997 and for the nine months ended    
 September 30, 1999. The deficiency was $874,000, $4,319,000, $10,359,000,
  $26,259,000 and $44,290,000 for the periods ended December 31, 1994, 1995,
1996, and 1997 and for the nine months ended September 30, 1999,        
respectively.                                                           

(2) "EBITDA" consists of earnings (loss) before income taxes plus all net       
 interest expense and all depreciation and amortization expense. "Adjusted
EBITDA" consists of earnings (loss) before income taxes plus all net    
   interest expense, depreciation and amortization and non cash employment and
 consulting incentives and settlements. You should not think of EBITDA and
  Adjusted EBITDA as alternative measures of operating results or cash flows
from operating activities (as determined in accordance with generally   
    accepted accounting principles). We have included EBITDA and Adjusted EBITDA
    because they are widely used financial measures of the potential capacity of
    a company to incur and service debt. Our reported EBITDA and Adjusted EBITDA
   may not be comparable to similarly titled measures used by other companies.

(3) Represents amounts deposited with the security agent pursuant to a security 
agreement to make payments of interest through May 15, 2000 on our 10%  
Senior Notes due 2008.                                                  

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UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION 

   The following unaudited pro forma condensed combining financial information
illustrates the effect of the merger of AboveNet with our wholly-owned          
subsidiary under the terms of the merger agreement, dated June 22, 1999. Under  
the terms of the merger agreement, the holders of AboveNet common stock received
1.175 shares of our class A common stock for each share of AboveNet common      
stock. The share price used to determine the acquisition cost was derived from  
taking the average of the closing price of our class A common stock for the two 
days prior to and subsequent to the announcement of the proposed merger, which  
was June 23, 1999.                                                              

On June 21, 1999, AboveNet acquired the assets and assumed obligations  
related to the Palo Alto Internet Exchange from Compaq Computer Corporation     
("Compaq") for approximately $76.5 million, consisting of $70 million in cash,  
an obligation to provide various services to Compaq with a value currently      
estimated to be approximately $5 million and expenses of approximately          
$1.5 million.                                                                   

   The unaudited pro forma condensed combining financial information presented
herein gives effect to our acquisition of AboveNet and AboveNet's acquisition of
Palo Alto Internet Exchange. The unaudited pro forma condensed combining        
financial information is based on the historical financial statements of        
Metromedia, AboveNet and Palo Alto Internet Exchange.                           

AboveNet had a fiscal year end of June 30. The unaudited historical     
financial information for AboveNet for the year ended December 31, 1998 consists
of the period from January 1, 1998 to June 30, 1998 combined with the period    
from July 1, 1998 to December 31, 1998 derived from AboveNet's historical       
unaudited financial statements.                                                 

    The unaudited pro forma condensed combining statements of operations for the
nine months ended September 30, 1999 and for the year ended December 31, 1998   
give effect to the above transactions as if they had been consummated on        
January 1, 1998.                                                                

ACCOUNTING TREATMENT                                                            

  We plan to record the acquisition of AboveNet using the purchase method of
accounting. Accordingly, the assets acquired and liabilities assumed will be    
recorded at their estimated fair values, which are subject to further adjustment
based upon appraisals and other analyses.                                       

  AboveNet recorded the acquisition of Palo Alto Internet Exchange using the
purchase method of accounting. Accordingly, the assets acquired and obligations 
assumed have been recorded at their estimated fair values, which are subject to 
further adjustments based upon appraisals and other analyses.                   

The pro forma adjustments are based upon available information and      
assumptions that we believe are reasonable at the time made. The unaudited pro  
forma condensed combining financial statements do not purport to present our    
financial position or results of operations had the acquisitions occurred on the
dates specified, nor are they necessarily indicative of the financial position  
or results of operations that may be achieved in the future. The unaudited pro  
forma condensed combining statements of operations do not reflect any           
adjustments for synergies that we expect to realize following consummation of   
the acquisitions. No assurances can be made as to the amount of cost savings or 
revenue enhancements, if any, that may be realized.                             

  The unaudited pro forma condensed combining financial statements should be
read in conjunction with the consolidated financial statements and notes of our 
company, AboveNet and Palo Alto Internet Exchange.                              

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METROMEDIA FIBER NETWORK, INC.

PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS

(UNAUDITED) 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999

(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                                              METROMEDIA                  METROMEDIA
                        ABOVENET      PAIX(2)                      PRO FORMA    FIBER                       FIBER   
                      HISTORICAL(1)  HISTORICAL  ADJUSTMENTS       ABOVENET   HISTORICAL  ADJUSTMENTS     PRO FORMA 
                      -------------  ----------  -----------       ---------  ----------  -----------     ----------
                                                                                                                    
Revenue..............    $ 18,073      $3,171      $    --         $ 21,244    $ 49,397     $     --      $  70,641 
Expenses:                                                                                                           
Cost of sales........      24,132       2,013         (206)(3)       25,939      24,414           --         50,353 
Selling, general and                                                                                                
  administrative.....      21,810         301           --           22,111      27,369       (2,869)(4)     46,611 
Consulting and                                                                                                      
  employment                                                                                                        
  incentives.........         654          --           --              654          --           --            654 
Depreciation and                                     5,228 (5)                                (5,228)(6)            
  amortization.......       5,006       1,696       (1,490)(3)(5)    10,440      15,645       56,538 (7)     77,395 
                         --------      ------      -------         --------    --------     --------      --------- 
Income (loss) from                                                                                                  
  operations.........     (33,529)       (839)      (3,532)         (37,900)    (18,031)     (48,441)      (104,372)
Other income                                                                                                        
  (expense):                                                                                                        
Interest income......       4,679          --           --            4,679      19,127           --         23,806 
Interest expense.....      (1,780)         --           --           (1,780)    (44,911)          --        (46,691)
Loss in joint                                                                                                       
  venture............        (397)         --           --             (397)       (475)          --           (872)
                         --------      ------      -------         --------    --------     --------      --------- 
Net loss before                                                                                                     
  income taxes.......     (31,027)       (839)      (3,532)         (35,398)    (44,290)     (48,441)      (128,129)
Income taxes.........          --          --           --               --          --           --             -- 
                         --------      ------      -------         --------    --------     --------      --------- 
Net loss.............    $(31,027)     $ (839)     $(3,532)        $(35,398)   $(44,290)    $(48,441)     $(128,129)
                         ========      ======      =======         ========    ========     ========      ========= 
Net loss per                                                                                                        
  share--basic.......                                                          $  (0.23)                  $   (0.55)
                                                                               ========                   ========= 
Net loss per                                                                                                        
  share--diluted.....                                                               n/a                         n/a 
                                                                               ========                   ========= 
Weighted average                                                                                                    
  number of shares                                                                                                  
  outstanding--                                                                                                     
  basic (8)..........                                                           190,639                     230,920 
                                                                               ========                   ========= 
Weighted average                                                                                                    
  number of shares                                                                                                  
  outstanding--                                                                                                     
  diluted............                                                               n/a                         n/a 
                                                                               ========                   ========= 

(SEE THE ACCOMPANYING NOTES ON PAGE S-33) 

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METROMEDIA FIBER NETWORK, INC.

PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS

(UNAUDITED) 

FOR THE YEAR ENDED DECEMBER 31, 1998

(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                                                     METROMEDIA                 METROMEDIA 
                                    ABOVENET      PAIX                   PRO FORMA      FIBER                      FIBER   
                                   HISTORICAL  HISTORICAL  ADJUSTMENTS    ABOVENET   HISTORICAL   ADJUSTMENTS    PRO FORMA 
                                   ----------  ----------  -----------   ----------  -----------  -----------   -----------
                                                                                                                           
Revenue...........................  $  6,777    $ 4,362    $    --        $ 11,139     $36,436    $     --       $ 47,575  
Expenses:                                                                                                                  
Cost of sales.....................     7,551      2,988       (405)(3)      10,134      13,937          --         24,071  
Selling, general and                                                                                                       
  administrative..................     7,843        450         --           8,293      14,712          --         23,005  
Consulting and employment                                                                                                  
  incentives......................     2,396         --         --           2,396       3,648          --          6,044  
                                                            (1,944)(5)                              (6,970)(6)             
Depreciation and amortization.....     1,497      1,944      7,375 (3)(5)     8,872      1,532      77,100 (7)     80,534  
                                    --------    -------    -------        --------     -------    --------       --------  
Income (loss) from operations.....   (12,510)    (1,020)    (5,026)        (18,556)      2,607     (70,130)       (86,079) 
Other income (expense):                                                                                                    
Interest income...................       337         --         --             337       8,788          --          9,125  
Interest expense..................      (529)        --         --            (529)     (6,861)         --         (7,390) 
Loss in joint venture.............        --         --         --              --        (146)         --           (146) 
                                    --------    -------    -------        --------     -------    --------       --------  
Net income (loss) before income                                                                                            
  taxes...........................   (12,702)    (1,020)    (5,026)        (18,748)      4,388     (70,130)       (84,490) 
Income taxes......................        --         --         --              --       3,402      (3,402)(9)         --  
                                    --------    -------    -------        --------     -------    --------       --------  
Net income (loss).................  $(12,702)   $(1,020)   $(5,026)       $(18,748)    $   986    $(66,728)      $(84,490) 
                                    ========    =======    =======        ========     =======    ========       ========  
Net income (loss) per share --                                                                                             
  basic...........................                                                     $  0.01                   $  (0.37) 
                                                                                       =======                   ========  
Net income (loss) per share --                                                                                             
  diluted.........................                                                        0.01                        n/a  
                                                                                       =======                   ========  
Weighted average number of shares                                                                                          
  outstanding -- basic(8).........                                                     186,990                    228,642  
                                                                                       =======                   ========  
Weighted average number of shares                                                                                          
  outstanding -- diluted..........                                                     219,524                        n/a  
                                                                                       =======                   ========  

(SEE THE ACCOMPANYING NOTES ON PAGE S-33) 

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METROMEDIA FIBER NETWORK, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION

(1) AboveNet historical amounts are for the period through the acquisition by us
on September 8, 1999.                                                   

(2) Palo Alto Internet Exchange historical amounts are for the period through   
the acquisition by AboveNet on June 21, 1999.                           

(3) Reflects adjustments to conform to Company's presentation.                  

(4) Reflects the elimination of merger related expenses.                        

(5) Reflects adjustments related to the acquisition by AboveNet of Palo Alto    
  Internet Exchange at January 1, 1998 for the income statements as follows:

  (i) the elimination of Palo Alto Internet Exchange historical intangible
asset amortization; and                                       

   (ii) the addition of amortization of the excess of cost over net tangible
       assets acquired of Palo Alto Internet Exchange ($69.7 million) over
10 years.                                                   

(6) Reflects the elimination of AboveNet's historical intangible asset          
amortization.                                                           

(7) Reflects additional amortization of the excess of cost over net tangible    
assets acquired in the merger by use of the straight-line method over   
20 years.                                                               

(8) The average common shares outstanding used in calculating pro forma loss per
common share are calculated assuming that the number of shares of our   
class A common stock issued in the merger were outstanding from the     
beginning of the periods presented.                                     

(9) Reflects the adjustment of the tax provision.                               

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS 

YOU SHOULD READ THE FOLLOWING INFORMATION TOGETHER WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED IN THIS PROSPECTUS          
SUPPLEMENT BEGINNING ON PAGE F-1. CERTAIN STATEMENTS IN THIS SECTION ARE        
"FORWARD-LOOKING STATEMENTS." YOU SHOULD READ THE INFORMATION UNDER "SPECIAL    
NOTE REGARDING FORWARD-LOOKING STATEMENTS" FOR SPECIAL INFORMATION ABOUT OUR    
PRESENTATION OF FORWARD-LOOKING INFORMATION.                                    

GENERAL                                                                         

   We provide dedicated fiber optic infrastructure and high-bandwidth Internet
connectivity for our communications intensive customers. We are a               
facilities-based provider of technologically advanced, high-bandwidth, fiber    
optic communications infrastructure to communications carriers and corporate and
government customers in the United States and Europe. Through our acquisition of
AboveNet, we also provide "one-hop" connectivity that enables mission critical  
Internet applications to thrive, as well as high-bandwidth infrastructure,      
including managed co-location services.                                         

We currently have operations in, or under construction in, eleven Tier I
cities throughout the United States and seven selected international markets. We
intend to expand our presence to include approximately 50 major markets in the  
United States and 17 major international markets.                               

   Our existing intra-city networks currently consist of approximately 425,000
fiber miles covering in excess of 800 route miles in six of our announced       
markets. Our inter-city network consists of approximately 120,000 fiber miles   
primarily covering our 255 route-mile network that we have built between New    
York City and Washington D.C. We have also built or contracted to acquire       
(primarily through fiber swaps) a nationwide dark fiber network linking our     
intra-city networks.                                                            

    In February 1999, we entered into an agreement with Viatel, Inc. and Carrier
1 Holdings, Ltd. to jointly build a dark fiber inter-city network among selected
cities throughout Germany. Once completed, our German network will consist of   
approximately 291,000 fiber miles covering 1,350 route miles connecting 14 major
cities. We have also swapped strands of fiber in the United States for strands  
of fiber on the Circe network, which connects a number of European markets. In  
addition to our inter-city networks, we are constructing 16 intra-city networks 
throughout Europe. Separately, we have also entered into a contract to gain     
access to dark fiber network facilities in Toronto, Canada.                     

   On September 8, 1999, we completed the acquisition of AboveNet. The holders
of AboveNet common stock received 1.175 shares of our class A common stock for  
each share of AboveNet common stock. AboveNet is a leading provider of          
facilities-based, managed services for customer-owned Web servers and related   
equipment, known as co-location, and high performance Internet connectivity     
solutions for electronic commerce and other business critical Internet          
operations.                                                                     

On October 7, 1999, we entered into a securities purchase agreement with
Bell Atlantic, under which Bell Atlantic would purchase up to approximately     
25.6 million newly issued shares of our class A common stock at a purchase price
of $28.00 per share and a convertible subordinated note of approximately        
$975.3 million, which is convertible into shares of our class A common stock at 
a conversion price of $34.00 per share. We expect this transaction, which is    
subject to customary closing conditions, to be completed by the end of the first
quarter of 2000. Assuming the issuance of the 25.6 million shares of class A    
common stock and conversion of the convertible subordinated note, this          
investment would represent 19.9% of our outstanding shares. Bell Atlantic has   
also agreed to pay us $550 million over the next three years in exchange for    
delivery of fiber optic facilities over the next five years. The proceeds from  
these two transactions will be used to fund the expansion of our network.       

  Most of our contracts for the provision of dark fiber are accounted for as
operating leases under which we recognize recurring monthly revenues. For       
certain other contracts we recognize revenue under the percentage of completion 
method for the provision of dark fiber. Effective June 30, 1999, the Financial  

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Accounting Standards Board issued FASB Interpretation No. 43 "Real Estate Sales"
("FIN 43"), which requires that sales or leases of integral equipment be        
accounted for in accordance with real estate accounting rules. We believe that  
the staff of the Securities and Exchange Commission requires the classification 
of dark fiber cables in the ground as integral equipment as defined in FIN 43.  
Accounting for dark fiber leases as defined by FIN 43 does not change any of the
economics of the contracts. It requires us, however, to recognize the revenue   
from certain leases as operating leases over the term of the contract as opposed
to the prior method of recognizing revenue during the period over which we      
deliver the fiber. As a result, this change in accounting treatment reduces the 
revenue and income that we recognize in the earlier years of the contract and   
spreads it out over the life of the contract regardless of when the cash was    
received or the delivery of the fiber took place.                               

  By way of example, if we entered into an agreement for a 25 year lease for
dark fiber with a customer who pays $100.0 million in cash when the contract is 
signed, we previously recorded average revenues of $20.0 million over the 5     
years during which we delivered the dark fiber. By contrast, the real estate    
accounting rules of FIN 43 would require us to recognize revenue of             
$4.0 million per year over the 25 year term of the contract, even though we     
would receive a cash payment of $100.0 million when the contract is signed.     

  We implemented accounting for certain of our contracts, entered into after
June 30, 1999, under this method of accounting. As a result, although there was 
no change to the economics of the contracts or the timing of the cash to be     
received by us, the impact of the change in accounting resulted in our recording
$10.7 million in revenues for the quarter ended September 30, 1999 rather than  
$32.7 million that would have been recorded prior to this change. Without this  
change in accounting we would also have recorded earnings before interest,      
taxes, depreciation and amortization of $2.6 million rather than a loss before  
interest, taxes, depreciation and amortization of $12.4 million for the three   
months ended September 30, 1999.                                                

STOCK SPLITS                                                                    

On August 28, 1998, December 22, 1998, and May 19, 1999, we completed   
two-for-one stock splits of our class A and class B common stock in the form of 
100 percent stock dividends to all stockholders of record as of certain         
specified dates.                                                                

   All share and per share amounts presented herein give retroactive effect to
the stock dividends. As of September 30, 1999, adjusted for the effect of the   
stock dividends, we had 198,822,053 class A common shares outstanding and       
33,769,272 class B common shares outstanding.                                   

RESULTS OF OPERATIONS                                                           

NINE MONTHS ENDED SEPTEMBER 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 1998   
(HISTORICAL).                                                               

   REVENUES.  Revenues for the nine months ended September 30, 1999 were $49.4
million or 138% greater than revenues of $20.8 million for the same period in   
1998. The increase reflected higher revenues associated with commencement of    
service to an increased total number of customers, as well as revenue recognized
related to sales-type leases of portions of our network for contracts entered   
into before June 30, 1999, sales of portions of our network through joint-build 
agreements and the inclusion of AboveNet's revenue for the period of            
September 9, 1999 through September 30, 1999. Revenues were, however, impacted  
as a direct result of the aforementioned accounting change, effective June 30,  
1999, whereby under real estate accounting we are required to recognize revenue 
on certain dark fiber leases over the term of the contract rather than under the
percentage of completion method. If we had continued to recognize revenues on   
leases entered into after June 30, 1999, under the prior accounting method,     
revenues would have been $71.4 million for the nine months ended September 30,  
1999.                                                                           

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 COST OF SALES.  Cost of sales was $24.4 million for the nine months ended
September 30, 1999, a 157% increase over cost of sales of $9.5 million for the  
first nine months of 1998. Cost of sales increased for the nine months ended    
September 30, 1999 compared with the same period in 1998 due to costs associated
with the commencement of service to customers, as well as higher fixed costs    
associated with the operation and maintenance of our network. Costs of sales as 
percentages of revenue for the first nine months of 1999 and 1998 were 49% and  
46% respectively, increasing as a result of the higher fixed costs related to   
the operation and maintenance of the Company's network. Cost of sales was also  
impacted as a direct result of the aforementioned accounting change, effective  
June 30, 1999, whereby we are required to recognize revenue on certain dark     
fiber leases over the term of the contract rather than under the percentage of  
completion method. Under the prior accounting method, cost of sales would have  
been $31.4 million for the nine months ended September 30, 1999. As a percentage
of revenues, for the nine months ended September 30, 1999, cost of sales would  
have been 44%, rather than the 49% reported.                                    

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and     
administrative expenses increased to $27.4 million during the nine months ended 
September 30, 1999 from $9.8 million during the nine months ended September 30, 
1998, an increase of $17.6 million, or 180%. The increase in selling, general   
and administrative expenses resulted primarily from increased overhead to       
accommodate our network expansion. As a percentage of revenue, selling, general 
and administrative expenses increased to 55% of revenue for the nine months     
ended September 30, 1999, from 47% for the comparable period in 1998. Selling,  
general and administrative expenses were also impacted as a direct result of the
aforementioned accounting change, effective June 30, 1999, whereby we are       
required to recognize revenue on certain dark fiber leases over the term of the 
contract rather than under the percentage of completion method. Under the prior 
accounting method, selling, general and administrative expenses as a percentage 
of revenues for the nine months ended September 30, 1999 would have been 38%,   
rather than the 55% reported.                                                   

  SETTLEMENT AGREEMENT.  We recorded $3.4 million for a settlement agreement
in the three months ended March 31, 1998. The amount represented the expense    
associated with the issuance of stock options and payment of cash related to    
that settlement agreement.                                                      

EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION          
(EBITDA).  For the nine months ended September 30, 1999 we recognized a loss    
before interest, taxes, depreciation and amortization of $2.4 million compared  
with a loss before interest, taxes, depreciation and amortization for the nine  
months ended September 30, 1998 of $2.1 million. If we had not implemented the  
aforementioned accounting change for certain dark fiber leases entered into     
after June 30, 1999, we would have recognized earnings before interest, taxes,  
depreciation and amortization of $12.6 million or $15.0 million higher than     
recorded for the nine month period ended September 30, 1999 and $14.7 million   
higher than recorded for the same period last year.                             

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization of        
$15.6 million was recorded during the nine months ended September 30, 1999      
versus $738,000 during the nine months ended September 30, 1998, an increase of 
$14.9 million. The increase in depreciation and amortization expense resulted   
from amortization of the goodwill relating to the amortization of AboveNet and  
Communications Systems Development, Inc. and increased investment in our        
completed fiber optic network and additional property and equipment acquired.   

INCOME (LOSS) FROM OPERATIONS.  For the nine months ended September 30, 
1999, loss from operations was $18.0 million, a $15.1 million increase over the 
$2.9 million loss for the comparable period in 1998. The loss was greater as a  
direct result of the aforementioned accounting change, effective June 30, 1999. 
If we had not adopted the accounting method change, the loss would have been    
approximately $3.0 million for the nine months ended September 30, 1999.        

  INTEREST INCOME.  Interest income was $19.1 million during the nine months
ended September 30, 1999 compared with $5.0 million during the comparable 1998  
period, an increase of $14.1 million or 282%.                                   

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Interest income increased as a result of the investment of certain of the       
proceeds from the issuance and sale of our 10% senior notes in November 1998.   

INTEREST EXPENSE (NET).  Interest expense increased for the nine months 
ended September 30, 1999 to $44.9 million compared with $16,000 during the same 
period of 1998. The increase in interest expense reflects the cost of additional
debt acquired related to the issuance and sale of 10% senior notes in           
November 1998.                                                                  

   INCOME (LOSS) FROM JOINT VENTURES.  For the nine months ended September 30,
1999 we recorded a $475,000 loss from the joint ventures compared with a        
$264,000 loss for the nine months ended September 30, 1998.                     

NET LOSS.  We had net loss of $44.3 million for the nine months ended   
September 30, 1999, versus net income of $1.1 million for the comparable period 
of 1998. For the nine months ended September 30, 1999, the basic net loss per   
share was $0.23 versus a basic net income per share of $0.01 for the same period
in 1998. The net losses were primarily attributable to the increase in net      
interest expense related to the issuance and sale of our 10% senior notes in    
November 1998. The loss was greater as a direct result of the aforementioned    
accounting change, effective June 30, 1999, whereby we are required to recognize
revenues on certain dark fiber leases over the term of the contract rather than 
under the percentage of completion method. If we had continued to recognize     
revenues under the prior accounting method the loss would have been             
approximately $15 million less ($0.08 per share) for the nine months ended      
September 30, 1999. In addition, net interest expense related to the Company's  
debt amortization of goodwill associated with the AboveNet and Communications   
Systems Development, Inc. acquisitions and inclusion of AboveNet's results of   
operations compounded the loss.                                                 

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997   

REVENUES.  Revenues for 1998 were $36.4 million or 1,356% greater than  
revenues of $2.5 million for 1997. The increase in revenue for 1998 versus 1997 
reflected higher revenues associated with commencement of service to an         
increased total number of customers, as well as revenue recognized related to   
grants of indefeasible rights of use to portions of our network and sales of    
dark fiber classified as sales type leases.                                     

COST OF SALES.  Cost of sales was $13.9 million in 1998, a 286% increase
over cost of sales of $3.6 million in 1997. Cost of sales increased for 1998 as 
compared to 1997 due to costs associated with the commencement of service to    
customers, higher fixed costs associated with the operation of our network in   
service and the allocated costs of the network related to revenue recognized for
grants of indefeasible rights of use to portions of our network and sales type  
leases of portions of our dark fiber classified as capital leases. Costs of     
sales, as percentages of revenue for 1998 and 1997 were 38% and 142%,           
respectively, declining as a result of the significant increase in the number of
customers and revenues.                                                         

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and     
administrative expenses for 1998 were $14.7 million or 133% greater than        
selling, general and administrative expenses of $6.3 million during 1997. The   
increase in selling, general and administrative expenses for 1998 as compared to
1997 resulted primarily from increased overhead to accommodate our network      
expansion.                                                                      

CONSULTING AND EMPLOYMENT INCENTIVES EXPENSE.  Consulting and employment
incentives expense for 1998 were $0.2 million compared with $19.2 million for   
1997. Consulting and employment incentives expense incurred in 1997 reflects the
value of stock options issued to key employees, officers and directors in order 
to attract or retain their services. For 1998, the amount recorded reflects     
amortization for the unvested component of options issued in 1997 to key        
employees.                                                                      

  SETTLEMENT AGREEMENT.  We recorded $3.4 million for a settlement agreement
in 1998. The amount was recorded in the first quarter of 1998 for the expense   
associated with the issuance of stock options and payment of cash related to a  
settlement agreement.                                                           

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DEPRECIATION AND AMORTIZATION EXPENSE.  Depreciation and amortization   
expense for 1998 was $1.5 million or 88% greater than depreciation and          
amortization expense of $0.8 million during 1997. The increases in depreciation 
and amortization expense resulted from increased investment in our completed    
fiber optic network and property and equipment.                                 

INTEREST INCOME (EXPENSE).  Interest income for 1998 was $8.8 million or
389% greater than interest income of $1.8 million during 1997. Interest income  
during 1998 was derived from investment of our excess cash received as proceeds 
from our initial public offering in October 1997 and the additional cash        
received in November 1998 from the proceeds of our $650 million note issuance.  
Interest expense increased in 1998 to $6.9 million as compared to $0.7 million  
for 1997. The increase in interest expense reflects interest accrued for the    
senior notes issued in November 1998.                                           

   INCOME (LOSS) FROM JOINT VENTURE.  We recorded a $0.1 million loss from our
50% share of the ION joint venture's loss for 1998. The loss primarily          
represents startup costs and operating activities for the joint venture.        

INCOME TAXES.  We recorded a provision for income taxes for 1998 in the 
amount of $3.4 million. This represents an estimated effective tax rate, for    
federal and state taxes, of 77.5%.                                              

  NET INCOME (LOSS).  Net income was $1.0 million for 1998, as compared to a
net loss of $26.3 million for 1997. For 1998, basic net income per share was    
$0.01 as compared to a basic net loss per share of $0.28 for 1997. On a diluted 
basis, net income per share for 1998 was $0.01.                                 

The improvements in results for 1998 were primarily attributable to the 
growth of revenues and the improvements in gross margins, as noted above, as    
well as the increase in net interest income related to the investment made by   
Metromedia Company and the funds raised through our initial public offering as  
compared to net interest expense.                                               

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996   

REVENUES.  Revenues for 1997 were $2.5 million, a 1,150% increase as    
compared to 1996 revenues of $0.2 million. The revenue increase was generated by
one-time revenues associated with commencement of services to customers as well 
as increased recurring lease revenues, which reflects the growth in the number  
of our customers.                                                               

    COST OF SALES.  Cost of sales for 1997 was $3.6 million, an increase of 414%
as compared to the $0.7 million that was recorded as cost of sales in 1996. The 
increase in cost of sales was associated with the increased revenues. Cost of   
sales as a percentage of revenues improved to 142% in 1997 from 296% in 1996.   
The improvement in cost of sales as a percentage of revenues reflects the       
increases in revenue outdistancing the increases in cost, as the components of  
cost were mostly of a fixed nature.                                             

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and     
administrative expenses for 1997 was $6.3 million or 200% greater than selling, 
general and administrative expenses of $2.1 million in 1996. This increase      
resulted primarily from increased legal expenses as a result of our increased   
business activities and the increased staffing to accommodate our anticipated   
growth.                                                                         

CONSULTING AND EMPLOYMENT INCENTIVES EXPENSE.  Consulting and employment
incentives expense for 1997 was $19.2 million or 419% greater than consulting   
and employment incentives expenses of $3.7 million in 1996. The 1997 expense    
represents the value of stock options issued to key employees, officers,        
directors and consultants in order to attract or retain their services. The     
amount recorded in 1996 reflects the expense associated with issuance of stock  
and warrants to consultants in consideration for services rendered.             

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DEPRECIATION AND AMORTIZATION EXPENSE.  Depreciation and amortization   
expense was $0.8 million in 1997 as compared to $0.6 million in 1996. The       
increase in depreciation and amortization expense resulted from increased       
investment in our fiber optic network.                                          

  INTEREST INCOME (EXPENSE).  We had interest income of $1.8 million in 1997
as compared to no interest income during 1996. The interest income in 1997 arose
from the investment of our excess cash during the year. In 1996, we had no      
excess cash to invest and, accordingly, earned no interest income. Interest     
expense (including financing costs) decreased in 1997 to $0.7 million from $3.6 
million in 1996. The decrease in interest expense reflects the repayment of all 
of our debt during the year with the proceeds of the investment made by         
Metromedia Company, as well as lower financing costs.                           

   NET LOSS.  We recorded a net loss of $26.3 million in 1997 as compared to a
net loss of $10.4 million in 1996. The increase in the net loss was primarily   
attributable to costs associated with organizing to meet our growth objectives. 
In particular, such costs include the consulting and employment incentive,      
described above, to attract and retain key employees, officers and directors, as
well as increased overhead to meet our growth objectives.                       

LIQUIDITY AND CAPITAL RESOURCES                                                 

 Our initial public offering, on October 28, 1997, of 72,864,000 shares of
class A common stock generated net proceeds of $133.9 million, after deducting  
the underwriter's commission and expenses relating to such initial public       
offering. In addition, on November 25, 1998, we issued and sold 10% Senior Notes
due 2008 which generated net proceeds of $630.0 million. After the end of the   
third quarter, on October 7, 1999, we entered into a securities purchase        
agreement with Bell Atlantic, under which Bell Atlantic would purchase shares of
our class A common stock and a convertible subordinated note.                   

   We expect that the Bell Atlantic transaction, which is subject to customary
closing conditions, will close by the end of the first quarter of 2000 and      
generate net proceeds of approximately $1.7 billion. In addition, Bell Atlantic 
has agreed to purchase a minimum of $550 million of fiber optic facilities      
payable over the next three years.                                              

For the nine months ended September 30, 1999, our operating activities  
generated $6.3 million of cash, compared with $16.9 million during the          
comparable period in 1998. For the nine months ended September 30, 1999, we used
$211.3 million of cash for net investing activities compared with $80.3 million 
for the same period in 1998. This increase was due primarily to investments in  
the expansion of our networks and related construction in progress, the         
restriction of cash as security for letters of credit in connection with our    
German network build, and the acquisition of dark fiber infrastructure in       
certain markets in Texas. Offsetting these items was the cash acquired through  
the AboveNet acquisition. For the nine months ended September 30, 1999, we made 
net payments of $11.5 million of cash from financing activities, compared with  
$892,000 of net proceeds from the issuance of common stock in 1998.             

We anticipate that we will continue to incur net operating losses as we 
expand and complete our existing networks, construct additional networks and    
market our services to an expanding customer base. We anticipate spending       
approximately $3.4 billion through the year ending December 31, 2001 on the     
build-out of our fiber optic networks and Internet service exchanges in 50 major
markets in the United States and in 17 major international markets. We believe  
that the net proceeds from the investment by Bell Atlantic, the net proceeds    
from this offering of notes, cash on hand, certain vendor financing and cash    
generated by operations (including advance customer payments), will enable us to
fully fund the planned build-out of our networks and our other working capital  
needs through the year ended December 31, 2001. The indentures governing our    
debt obligations permit us to incur additional indebtedness to finance the      
engineering, construction, installation, acquisition, lease, development or     
improvement of telecommunications assets. As a result, we may also consider from
time to time private or public sales of additional equity or debt securities,   
entering into other credit facilities and financings, depending upon market     
conditions, in                                                                  

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order to finance the continued build-out of our network. We cannot assure you   
that we will be able to successfully consummate any such financing on acceptable
terms or at all.                                                                

   We expect to continue to experience negative cash flows for the foreseeable
future. In addition, as part of our acquisition of AboveNet, we recorded        
approximately $1.6 billion in goodwill and other intangible assets, which we    
amortized over periods up to twenty years. Accordingly, we expect to report     
further net operating losses for the foreseeable future.                        

YEAR 2000 SYSTEM MODIFICATIONS                                                  

    We are currently working to evaluate and resolve the potential impact of the
Year 2000 on our processing of date-sensitive information and network systems.  
The Year 2000 problem is the result of computer programs being written using two
digits (rather than four) to define the year 2000, which could result in        
miscalculations or system failures resulting from recognition of a date using   
"00" as the year 1900 rather than the year 2000.                                

   We have delegated responsibility to a group of executives to coordinate the
identification, evaluation and implementation of changes to computer systems and
applications necessary to achieve our goal of a Year 2000 date conversion which 
would minimize the effect on our customers and avoid disruption to business     
operations. We are also focusing on hardware and software tools, programming and
outside forces that may affect our operations, including our vendors, banks and 
utility companies. Our analysis of the Year 2000 threat is ongoing and will be  
continuously updated throughout 1999 as necessary.                              

   For Metromedia Fiber Network, we have developed a questionnaire and project
plan to be completed by our systems and operating personnel to identify all     
business and computer applications so that we can identify potential compliance 
problems. We have initiated communications with our significant customers,      
suppliers, contractors and major systems developers to determine their plans to 
remedy any Year 2000 issues that arise in their business with us. We have       
compiled a database of information based upon these responses. To the extent    
problems are identified, we are implementing corrective procedures where        
necessary, then testing the applications for Year 2000 compliance. We expect to 
complete this project prior to January 1, 2000.                                 

 Based on preliminary data, our estimate is that the Year 2000 effort will
have a nominal cost impact, although we can make no assurances as to the        
ultimate cost of the Year 2000 effort or the total cost of information systems. 
Such costs are expensed as incurred, except to the extent such costs are        
incurred for the purchase or lease of capital equipment. We have made some of   
the necessary modifications through our ongoing investment in system upgrades.  
We believe that our exposure to this issue, based on our internal systems, is   
somewhat limited by the fact that substantially all of our existing systems have
been purchased or replaced since 1997.                                          

 As of September 30, 1999, we had incurred nominal costs in respect of our
Year 2000 conversion effort. We have not deferred any other information systems 
projects due to the Year 2000 efforts. The source of funds for Year 2000 costs  
has been cash on hand. Accordingly, we are devoting the necessary resources to  
resolve all significant Year 2000 issues.                                       

If our customers, suppliers, contractors or major systems developers are
unable to resolve Year 2000 processing issues in a timely manner, a material    
adverse effect on our results of operations and financial condition could       
result.                                                                         

  AboveNet's Year 2000 readiness review includes assessment, implementation,
testing and contingency planning. To date, AboveNet has evaluated its internally
developed software and believes that this software is Year 2000 compliant.      
However, AboveNet utilizes software and hardware developed by third parties both
for its network and internal information systems. AboveNet has not done any     
testing of such third party software to determine if such software is Year 2000 
compliant. AboveNet has sought assurances from                                  

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some of its vendors, and intends to continue to seek assurances from others,    
that such vendors' products are or will be Year 2000 compliant.                 

   AboveNet expects to continue assessing and testing its internal information
technology and non-information technology systems. AboveNet is not currently    
aware of any material operations issues or costs associated with preparing its  
internal information technology and non-information technology systems for the  
Year 2000. However, AboveNet may experience material unanticipated problems and 
costs caused by undetected errors or defects in the technology used in its      
internal information technology and non-information technology systems.         

 Based upon the public filings and press releases of AboveNet's equipment,
telecommunications and data communications providers, AboveNet is aware that all
such providers are in the process of reviewing and implementing their own Year  
2000 compliance programs. Since AboveNet does not believe that it will be       
afforded the opportunity to test the systems of these providers, AboveNet will  
seek assurances from them that they are Year 2000 compliant. If AboveNet's      
primary vendors experience business interruptions as a result of the failure to 
achieve Year 2000 compliance, AboveNet's ability to provide Internet            
connectivity could be impaired, which could have a material adverse effect on   
AboveNet's business, results of operations and financial condition.             

AboveNet does not currently have any information regarding the Year 2000
status of its customers, most of whom are private companies. However, AboveNet  
is in the process of developing a plan to survey all of its customers regarding 
their Year 2000 compliance. As in the case with similarly situated companies, if
its customers experience Year 2000 problems, which result in business           
interruptions or otherwise impact their operations, AboveNet could experience a 
decrease in the demand for its services, which could have a material adverse    
impact on its business, results of operations and financial condition.          

  AboveNet has not incurred any significant expenses to date associated with
its Year 2000 plan and is not aware of any material costs associated with its   
anticipated Year 2000 efforts. AboveNet believes that a material loss of revenue
would arise if its major customers or providers fail to achieve Year 2000       
readiness. AboveNet has not yet developed a comprehensive contingency plan to   
address the issues, which could result from such failure.                       

This constitutes a Year 2000 Readiness Disclosure Statement, and the    
statements are subject to the Year 2000 Information and Readiness Disclosure    
Act. We hereby claim the protection of this act for this prospectus supplement  
and all information contained herein.                                           

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BUSINESS

GENERAL                                                                         

   We provide dedicated fiber optic infrastructure and high-bandwidth Internet
connectivity for our communications intensive customers. We are a               
facilities-based provider of technologically advanced, high-bandwidth, fiber    
optic communications infrastructure to communications carriers and corporate and
government customers in the United States and Europe. Through our acquisition of
AboveNet, we also provide "one-hop" connectivity that enables mission critical  
Internet applications to thrive, as well as high-bandwidth infrastructure,      
including managed co-location services.                                         

THE INTRA-CITY NETWORKS.  Our existing intra-city networks consist of   
approximately 425,000 fiber miles covering in excess of 800 route miles in six  
of our announced markets. We are currently planning to expand our existing local
intra-city networks in these metropolitan areas, and to construct additional    
intra-city networks in approximately 40 additional Tier I and Tier II markets in
the United States.                                                              

THE INTER-CITY NETWORKS.  Our inter-city network currently consists of  
approximately 120,000 fiber miles primarily covering our 255 route-mile network 
that we have built between New York City and Washington, D.C. We have also      
obtained, primarily through exchanges of fiber capacity or "fiber swaps" with   
other carriers, a nationwide fiberoptic network.                                

    THE INTERNATIONAL NETWORKS.  In addition to our domestic build-up, we intend
to expand our international presence to include approximately 17 major markets. 
In February 1999, we entered into an agreement with Viatel, Inc. and Carrier 1  
Holdings, Ltd. to jointly build a dark fiber inter-city network between selected
cities throughout Germany. Once completed, the German network will consist of   
approximately 291,000 fiber miles covering 1,350 route miles connecting 14 major
cities. We have also swapped strands of fiber in the United States for strands  
of fiber on the Circe network, which connects a number of European markets. In  
addition to our inter-city networks, we are constructing 16 intra-city networks 
throughout Europe. Separately, we have also entered into a contract to acquire  
dark fiber network facilities in Toronto, Canada.                               

INTERNET CONNECTIVITY.  Through our acquisition of AboveNet, we are a   
leading provider of high performance Internet connectivity services to a wide   
range of Internet service providers, Internet content providers and Web hosting 
companies and facilities based, managed co-location services. Our Internet      
exchange server facilities provide high performance, reliable and scalable      
solutions for electronic commerce and other business critical applications.     
AboveNet developed a network architecture based upon strategically located,     
fault-tolerant Internet exchange servers. We currently operate two Internet     
service exchange campuses, located near two of the major Internet access points,
metropolitan area exchange (often referred to as "MAE") West and MAE East, using
our suite of sophisticated network management and remote monitoring tools. We   
believe that our centralized network architecture provides enhanced connectivity
while eliminating the need to build numerous geographically dispersed data      
centers. AboveNet's Internet service exchange model offers customers the        
benefits of combining direct Internet service providers access with co-location 
services for Internet content providers. As of September 30, 1999, AboveNet had 
more than 270 direct public and private data exchange agreements, known as      
peering arrangements, including relationships with most major network providers.
The convergence of content providers and Internet service providers at our      
Internet service exchanges enables Internet service provider customers to       
provide their users with "one hop" connectivity, through our local area network,
to the Web sites of the Internet content providers that are co-located at the   
same site. This direct connectivity minimizes the risk of delays and data loss  
often encountered in the transmission of data over the public Internet          
infrastructure.                                                                 

CUSTOMERS.  We are focused on providing our broadband communications    
infrastructure and Internet connectivity services to two main customer groups   
located in Tier I and Tier II markets: communications carriers and              
corporate/government customers.                                                 

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Our targeted customers include a broad range of companies such as:      

- ILECs;                                                                

- CLECs;                                                                

- long distance companies/IXCs;                                         

- paging, cellular and PCS companies;                                   

- cable companies;                                                      

- ISPs; and                                                             

- Web hosting and e-commerce companies.                                 

    Our dark fiber customers typically lease our fiber optic capacity with which
they develop their own communications networks. Leasing our fiber optic capacity
is a low-cost alternative to building their own infrastructure or purchasing    
metered services from ILECs or CLECs. Our Internet connectivity and co-location 
customers typically lease bandwidth and co-location space which allow them to   
provide their Internet related services on a reliable and cost effective basis. 
We believe that we are well-positioned to penetrate our target customer base    
since we plan to continue to install most of our dark fiber networks and        
Internet service exchanges in major markets where these customers are           
concentrated. We believe our target customers for our dark fiber and Internet   
connectivity are complementary and will provide significant cross selling       
opportunities.                                                                  

NETWORK INFRASTRUCTURE.  We have designed our networks to provide high  
levels of reliability, security and flexibility by virtue of a self-healing     
SONET architecture that prevents interruption in service to our clients by      
instantaneously rerouting traffic in the event of a fiber cut. Our advanced     
network architecture is also capable of supporting state-of-the-art             
technologies, including DWDM (dense wave division multiplexing) which           
significantly increases the transmission capacity of a strand of fiber optic    
cable. Because DWDM can boost transmission capacity significantly, it has       
greater relevance on our inter-city routes where we have, on average, fewer     
strands of fiber installed than in our intra-city markets. Where practicable, we
install additional unused conduits to cost effectively accommodate future       
network expansion and eliminate the need for future construction.               

   MARKET OPPORTUNITY.  We believe that the market for our dark fiber services
is characterized by significant and growing demand for, and limited supply of,  
fiber optic capacity. To meet our customers' demand, we tailor the amount of    
fiber capacity leased to the needs of our customers. Generally, customers lease 
fiber optic capacity from us and connect their own transmission equipment to the
leased fiber, thereby obtaining a high-bandwidth, fixed-cost, secure            
communications alternative to the metered communications services offered by    
traditional providers. In addition, we believe that we have installation,       
operating and maintenance cost advantages per fiber mile relative to our        
competitors because we generally install 432 fibers, and have begun installing  
as many as 864 fibers, per route mile, as compared to the generally lower number
of fibers per mile in existing competitive networks.                            

    We believe the market for our Internet service exchanges is characterized by
significant and growing demand for, and limited access to, highly reliable      
Internet connectivity and co-location services. To meet our customers' demands, 
we provide scalable connectivity and co-location services that drive our        
customers' electronic commerce and other mission critical Internet applications.
Our customers lease bandwidth and co-location space from us to gain highly      
reliable, secure and cost effective Internet connectivity. Through our existing 
and planned networks, we believe we have the low cost position relative to those
competitors who lease rather than own their networks.                           

MANAGEMENT EXPERTISE.  We benefit from the support of our controlling   
stockholder Metromedia Company and anticipate similar benefits from our         
anticipated investment by Bell Atlantic. On April 30, 1997, Metromedia Company  
and certain of its affiliates made a substantial equity investment in our       

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company (the "Metromedia Investment"). As a result, Metromedia Company and its  
partners own all of our outstanding shares of class B common stock, par value   
$.01 per share. Our class B common stock is entitled to 10 votes per share and  
to vote separately to elect at least 75% of the members of the Board of         
Directors. As of September 30, 1999, Metromedia Company and its partners own and
control approximately 63% of the outstanding voting power of our company.       

RECENT TRANSACTIONS.  On October 7, 1999, we entered into a securities  
purchase agreement with Bell Atlantic, under which Bell Atlantic Investments    
would purchase up to approximately 25.6 million newly issued shares of our class
A common stock at a purchase price of $28.00 per share and a convertible        
subordinated note of approximately $975.3 million, which is convertible into    
shares of our class A common stock at a conversion price of $34.00 per share.   
This transaction, which is subject to customary closing conditions, is expected 
to be completed by the end of the first quarter of 2000. Assuming the issuance  
of the 25.6 million shares of class A common stock and conversion of the        
convertible subordinated note, this investment would represent 19.9% of our     
outstanding shares. Bell Atlantic has also agreed to pay us $550 million over   
the next three years in exchange for delivery of fiber optic facilities over the
next five years. The proceeds from these two transactions will be used to fund  
the expansion of our network.                                                   

BUSINESS STRATEGY                                                               

Our objective is to become the preferred facilities-based provider of   
broadband communications infrastructure and Internet connectivity solutions to  
communications carriers, corporations and government agencies, in our target    
markets. The following are the key elements of our strategy to achieve this     
objective:                                                                      

ESTABLISH THE COMPANY AS THE PREFERRED CARRIERS' CARRIER OF BROADBAND           
COMMUNICATIONS INFRASTRUCTURE AND INTERNET CONNECTIVITY SOLUTIONS           

- Lease broadband communications infrastructure on a fixed cost basis   

- Enable carriers to penetrate markets previously too costly to build or
purchase                                                            

- Allow customers to bypass the ILECs and CLECs                         

 - Continue to differentiate ourselves as the only company whose principal
business is providing dark fiber on a fixed cost basis              

  - Lease high-bandwidth long haul capacity to provide seamless connectivity
between our intra-cities                                            

- Provide Internet connectivity services through leasing bandwidth and  
co-location space to ISPs                                           

- Enable ISPs to provide reliable, high-quality Internet access services

- Capitalize on the fact that we do not offer competing metered         
   communications or retail Internet connectivity solutions in competition
with our carrier and ISP customers                                  

POSITION THE COMPANY AS THE PREFERRED PROVIDER OF BROADBAND COMMUNICATIONS      
 INFRASTRUCTURE AND INTERNET CONNECTIVITY SERVICES TO CORPORATE AND GOVERNMENT
CUSTOMERS                                                                   

   - Target broadband communications infrastructure customers with significant
transmission and high security needs                                

- Provide scalable services for customers seeking lower broadband       
transmission capacity                                               

  - Offer our dark fiber services on a fixed cost rather than metered basis,
to provide a more economical solution to our customers              

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 - Target Internet connectivity customers who require reliable, secure and
 cost effective connectivity to the internet to drive their electronic
commerce and other mission critical business Internet applications  

   - Capitalize on the complementary customer bases for our Infrastructure and
Internet connectivity services through effective cross selling      

REPLICATE SUCCESSFUL BUSINESS MODEL IN NEW MARKETS                              

- Leverage our success in existing markets by replicating our network   
architecture in a number of additional markets                      

- Rapidly roll out our U.S. network to a total of approximately 50      
intra-city networks in Tier I and Tier II markets                   

 - Expand our international market coverage to a total of approximately 17
markets                                                             

- Deploy Internet service exchanges in selected U.S. and international  
markets, replicating the successful AboveNet design                 

CREATE A LOW COST POSITION                                                      

  - Provide our customers a cost effective alternative to constructing their
own networks and Internet connectivity facilities                   

- Install trunks with up to 864 fibers per route mile, which is         
     substantially more fiber than our competitors, reducing our per mile cost
to construct, upgrade and operate our networks                      

  - Capitalize on the operating and maintenance cost advantages generated by
our newly constructed networks, with advanced fiber optic technology

- Create first mover advantages for us versus new entrants by securing  
rights of way and building our networks quickly                     

- Install spare conduit where practical to reduce expansion and upgrade 
costs in the future and provide significant excess capacity         

  - Establish a low cost advantage for our Internet connectivity services by
   utilizing our own network rather than leasing capacity like some of our
competitors                                                         

    - Use our low cost position to remain price competitive with other providers
of broadband communications infrastructure and Internet connectivity
services                                                            

UTILIZE FIBER SWAPS AND STRATEGIC RELATIONSHIPS TO EXPAND THE REACH OF OUR      
NETWORKS                                                                        

  - Opportunistically utilize fiber swaps, as we have in the past, to expand
our network reach at little incremental cost                        

 - Enter into strategic relationships, such as our joint build arrangement
with Viatel, to cost effectively expand our network footprint       

EXPAND PRODUCT AND SERVICE OFFERINGS TO UTILIZE DARK FIBER NETWORK CAPACITY.    

   - Vertically expand our service offering by identifying additional uses for
   our dark fiber network, such as with the AboveNet acqusition, that will
drive new revenue opportunities and cost synergies                  

- Maintain our competitive advantage by offering services that do not   
directly compete with our carrier customers                         

- Focus on serving our carrier and large corporate/government customers'
bandwidth intensive communications needs                            

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INSTALL TECHNOLOGICALLY ADVANCED NETWORKS AND INTERNET SERVICE EXCHANGES        

- Continue to install a technologically advanced network based on       
self-healing SONET architecture                                     

 - Use our self-healing SONET architecture to minimize the interruption to
service caused by fiber cuts                                        

    - Construct our networks to deliver the high levels of reliability, security
and flexibility that our customers demand                           

 - Continually monitor and maintain quality control over our networks on a
24-hour basis                                                       

- Continue to ensure our network is capable of providing the highest    
     commercially available capacity transmission (OC-192) to support capacity
intensive data applications such as Frame Relay, ATM and Internet   
applications                                                        

 - Provide fault tolerant Internet service exchange facilities designed to
enable the uninterrupted operations necessary for mission critical  
business applications                                               

- Use our proprietary software to monitor our network connections for   
 latency and packet loss and automatically reroute Internet traffic to
avoid Internet congestion points                                    

BUILD ON MANAGEMENT EXPERIENCE AND METROMEDIA COMPANY RELATIONSHIP              

   - Leverage the communications industry knowledge and sales expertise of our
management team and board of directors including:                   

- Stephen Garofalo, our Chief Executive Officer and founder, who has  
   approximately 25 years of experience in the cable installation business

 - Howard M. Finkelstein, our President and Chief Operating Officer, who
      served in various capacities in Metromedia Company and its affiliates over
a period of 16 years, including 9 years as President of Metromedia  
 Company's long distance telephone company, until its merger with MCI/
WorldCom, Inc. in 1993                                              

   - David Rand and Sherman Tuan who joined our Board of Directors following
   the acquisition of AboveNet and have extensive experience with Internet
related ventures                                                    

     - John W. Kluge, Stuart Subotnick and David Rockefeller, each of whom bring
extensive communications industry expertise and corporate governance
experience                                                          

BUILD-OUT OF NETWORKS                                                           

 We have concentrated on developing and constructing our networks. We have
either obtained or are currently pursuing the acquisition of necessary licenses,
franchises and rights-of-way to construct these networks. In constructing our   
fiber optic networks, we seek to create strategic alliances with the engineering
and construction management firms that have been engaged to develop routes,     
easements and manage deployment plans. Firms with whom we are allied in this    
regard have deployed local loop network infrastructure for RBOCs as well as for 
CLECs. Though we anticipate to outsource much of the actual construction to     
various construction firms, we maintain strict oversight of the design and      
implementation of our fiber optic communications networks. We utilize only      
advanced commercially available fiber. We have ordered a substantial portion of 
our fiber optic cable from Lucent Technologies, Inc. However, we believe that we
could obtain advanced fiber from other suppliers on acceptable terms.           

   Our existing intra-city networks currently consist of approximately 425,000
fiber miles covering in excess of 800 route miles in six of our announced       
markets. Our inter-city network consists of approximately 120,000 fiber miles   
primarily covering our 255 route-mile network that we have built between New    
York City and Washington D.C. We have also built or, contracted to acquire,     
primarily through fiber swaps, a nationwide dark fiber network linking our      
intra-city networks.                                                            

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 We have entered into a forty year agreement with a subsidiary of Racal, a
United Kingdom manufacturer of electronics and other equipment and a provider of
telecommunications services, to create ION, a joint venture in which we hold a  
50% equity interest. ION has obtained transatlantic fiber optic cable rights on 
Gemini and AC-1 which link our New York network to London, England. Through ION,
we are able to offer our customers seamless broadband transatlantic             
communications services between New York and London. Under the ION joint venture
agreement, each party may contribute additional capital as agreed by the        
parties. In May 1998, ION was awarded a 25 year term contract in excess of $25  
million from a leading provider of undersea cable capacity to provide inland    
capacity services from such provider's undersea cable landing stations in the   
U.K. and the U.S.                                                               

We have also entered into an agreement with Carrier 1 Holdings, Ltd and 
Viatel, Inc., to develop jointly approximately 291,000 fiber miles covering     
1,350 route miles that will connect 14 of Germany's largest cities such as      
Hamburg, Berlin, Munich, Frankfurt and Dusseldorf. We have also signed an       
agreement with Viatel pursuant to which we would receive the right to use       
approximately 3,880 fiber miles covering approximately 970 route miles on       
Viatel's network in France, Germany, The Netherlands and the United Kingdom. Our
networks will be high-capacity broadband networks capable of supporting high-   
quality voice, video, internet protocol and data traffic and built using a      
self-healing SONET architecture.                                                

THE ABOVENET INTERNET SERVICE EXCHANGE                                          

Our Internet service exchanges provide co-location services, Internet   
connectivity services, network management services and tools. Our Internet      
service exchanges are designed to provide customers with the high performance,  
scalability, connectivity, security, reliability and expertise they need to     
enhance their business critical Internet applications. We create solutions for  
our customers based on their specific business and technical requirements,      
modifying the services as each customer's needs evolve. Our Internet related    
services are primarily delivered through centralized campuses located near MAE  
West and MAE East. Our New York facility is connected to our facility located   
near MAE East by high speed, high capacity fiber optic cable. This facility is  
intended to facilitate access to European Internet traffic. Our management      
services and tools enable us and our customers to continuously manage their     
Internet operations jointly, proactively and remotely.                          

INTERNET CONNECTIVITY                                                           

   Our Internet connectivity services are designed to meet the requirements of
high bandwidth, business critical Internet operations by providing highly       
reliable, scalable, non-stop and uncongested operations. On September 30, 1999, 
AboveNet had peering relationships with more than 270 network providers,        
covering over 700 peering points. Any failure by AboveNet to maintain and       
increase peering relationships would have a material adverse effect on our      
business, results of operations and financial condition.                        

    Our network is designed to minimize the likelihood of service interruptions.
Each ISX has multiple physical fiber paths into the facility. We maintain       
multiple network links from multiple vendors and regularly check that our       
network traffic traverses physically separated paths. This network architecture 
enhances the availability of a customer's site, even in the event of a link     
failure. In addition, since our customers' Internet operations often experience 
network traffic spikes due to promotions or events, we have a policy of         
maintaining significant excess capacity. We might not be able to expand or adapt
our telecommunications infrastructure to meet additional demand or our          
customers' changing requirements on a timely basis and at a commercially        
reasonable cost, or at all.                                                     

  Our Internet connectivity services are also designed to reduce latency and
to enhance network performance. Our engineering personnel continuously monitor  
traffic patterns and congestion points throughout the Internet and dynamically  
reroute traffic flows to improve end-user response times. We also enhance       
network performance by maintaining what we believe is among the largest number  
of direct public                                                                

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and private network peering interconnections in the industry. For customers     
seeking a direct communications link to the site of another customer that is    
located at the same ISX, we offer highly secure, fast and efficient             
cross-connections.                                                              

CO-LOCATION SERVICES                                                            

We provide co-location services designed to meet the demands of         
sophisticated, multi-vendor business critical Internet operations. We support   
most leading Internet hardware and software system vendor platforms, including  
those from Ascend Communications, Inc., Nortel Networks, Cisco Systems, Inc.,   
Compaq Computer Corporation, Dell Computer Corporation, EMC Corporation,        
Hewlett-Packard Company, International Business Machines Corporation, Lucent    
Technologies Inc., Microsoft Corporation, Apple Computer, Inc., Network         
Appliance, Inc., Silicon Graphics Inc., Sun Microsystems Inc. and 3Com          
Corporation. This multi-vendor compatibility enables our customers to retain    
control over their choice of technical solution and to integrate their Internet 
operations into our existing information technology architecture. Because       
business critical Internet operations are dynamic and often require timely      
hardware and software upgrades to maintain targeted service levels, customers   
have twenty-four hours a day, seven days a week physical and remote access to   
the ISX facilities. Additional space and electrical power can be added as needed
in order to provide our customers with access to additional server co-location  
services. Customers install and manage their own hardware and software at our   
facilities. We do not provide any Web hosting services.                         

MANAGEMENT SERVICES AND TOOLS                                                   

Our management services and tools support business critical Internet    
operations by providing the customer with detailed monitoring, reporting and    
management tools to control their hardware, network, software and application   
environments. Through our network management services and tools, customers are  
able to remotely manage their business critical Internet operations housed at   
our ISX facilities. We believe that this provides an important advantage to     
enterprises that seek to outsource a portion of their Internet operations and to
link the management of the outsourced operations with in-house operations. Our  
proactive management services and tools enable us to identify and resolve       
hardware, software, network and application problems, often before the customer 
is aware that a problem exists.                                                 

INTERNATIONAL INTERNET SERVICE EXCHANGES                                        

    We are seeking to create a global network by investing in joint ventures and
foreign companies that can develop regional Internet service exchanges          
internationally. In March 1999, AboveNet entered into agreements with local     
partners to establish regional Internet service exchanges in Austria, Germany   
and the United Kingdom. We intend to continue to expand our European network    
through additional investments in joint ventures in other major business centers
and countries with high levels of Internet traffic. We plan to leverage our     
communications infrastructure in Europe, in a similar manner to our market      
entrants in the future. We believe that participants in this market must grow   
rapidly and achieve a significant presence in the market in order to compete    
effectively. We believe that the principal competitive factors in our market are
uncongested connectivity, quality of facilities, level of customer service,     
price, the financial stability and credibility of the provider, brand name and  
the availability of network management tools. We might not have the resources or
expertise to compete successfully in the future.                                

TECHNOLOGY                                                                      

   Our networks consist of fiber optic communications networks which allow for
high speed, high quality transmission of voice, data and video. Fiber optic     
systems use laser-generated light to transmit voice, data and video in digital  
formats through ultra-thin strands of glass. Fiber optic systems are generally  

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characterized by large circuit capacity, good sound quality, resistance to      
external signal interference and direct interface to digital switching equipment
or digital microwave systems. We plan to install backbone fiber optic cables    
containing up to 864 fiber optic strands, which have significantly greater      
bandwidth than traditional analog copper cables. Using current electronic       
transmitting devices, a single pair of glass fibers used by our network can     
transmit up to 8.6 gigabits of data per second or the equivalent of             
approximately 129,000 simultaneous voice conversations, which is substantially  
more than traditional analog copper cable installed in many current             
communications networks. We believe that continuing developments in compression 
technology and multiplexing equipment will increase the capacity of each fiber  
optic strand, thereby providing more bandwidth carrying capacity at relatively  
low incremental costs. Our network is capable of using the highest commercially 
available capacity transmission (OC-192) and thereby can handle advanced,       
capacity-intensive data applications such as voice over Internet Protocol, video
teleconferencing, Frame Relay, ATM, multimedia and Internet-related             
applications. In our intra-city networks, we offer end-to-end fiber optic       
capacity, capable of utilizing SONET capable ring architecture, which has the   
ability to route customer traffic in either direction around its ring design    
thereby assuring that fiber cuts do not interrupt service to customers on our   
networks. Our networks are also capable of supporting dense wave division       
multiplexing (often referred to as "DWDM"). Currently, a state-of-the-art       
network operating system continuously monitors and maintains quality control of 
networks on a 24-hour basis, alerts us of any degradation or loss of fiber      
capacity and pinpoints the location of such degradation. This network operating 
system also enables us to repair or replace impaired fiber without any loss of  
service. In addition, the monitoring system automatically reroutes traffic in   
the event of a catastrophic break in the system, enabling us to ensure that our 
customers obtain continuous service.                                            

    Our connectivity services utilize our proprietary ASAP technology to enhance
Internet connectivity by monitoring all of our direct and indirect network      
connections for congestion. ASAP automatically monitors all of our major        
providers' and peers' direct and indirect connections on a real-time 24-hour    
basis to identify congestion. If packet loss and congestion is detected on any  
of the links that directly affect customers' performance, our network engineers 
are able to dynamically reroute traffic temporarily away from the problem link. 
This functionality is particularly important for emerging applications such as  
audio and video streaming and voice over the Internet.                          

FRANCHISE, LICENSE AND RELATED AGREEMENTS                                       

   When we decide to build a fiber optic communications network, our corporate
development staff seeks to obtain the necessary rights-of-way and governmental  
authorizations. In some jurisdictions, a construction permit is all that is     
required. In other jurisdictions, a license agreement, permit or franchise is   
also required. Such licenses, permits and franchises are generally for a term of
limited duration. Where possible, rights-of-way are leased under multi-year     
agreements with renewal options and are generally non-exclusive. We lease       
underground conduit and pole space and other rights-of-way from entities such as
ILECs, utilities, railroads, IXCs, state highway authorities, local governments 
and transit authorities. We strive to obtain rights-of-way that afford us the   
opportunity to expand our communications networks as business develops.         

SALES AND MARKETING                                                             

Our sales and marketing strategy includes:                              

- positioning ourselves as the preferred facilities based provider of   
broadband communications infrastructure and Internet connectivity   
services;                                                           

- focusing on high dollar volume corporate and government customers;    

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- emphasizing the cost advantages which will allow us to lease our fiber
optic infrastructure at fixed prices which represent potentially    
    significant savings for our large volume carrier and corporate customers
relative to their present build or buy alternatives;                

 - achieve broad market penetration and increase brand recognition for our
     Internet connectivity services among Internet service providers, Internet
content providers and Web hosting companies; and                    

    - identify opportunities to cross sell our Internet connectivity services to
our complementary infrastructure customer base.                     

 We also believe that communications carriers and corporate and government
customers will be attracted to our dark fiber product and our unmetered pricing 
structure. Dark fiber is installed fiber optic cable which is not otherwise     
carrying a signal originated by the service provider, such as our company, but  
which will carry a signal generated by the customer. We intend initially to     
centralize our sales and marketing efforts on carrier customers through a       
national sales team and we are currently in the process of hiring additional    
sales professionals to focus on these customers. As we have constructed fiber   
optic networks in new cities, we have hired sales forces in these areas to      
target regional corporate, government and to a lesser extent carrier customers  
and we plan to continue this strategy.                                          

    For our Internet connectivity services, we have developed a two-tiered sales
strategy to target leading Internet service providers, Internet content         
providers and Web hosting companies through direct sales and channel            
relationships. We maintain a direct sales force of highly trained individuals in
San Jose, California and Vienna, Virginia. Our sales force is supported by our  
sales engineers and, in many circumstances, by our senior management. We are    
also seeking to develop relationships with potential channel partners including 
hardware vendors, value added resellers, system integrators, application hosting
and Web hosting companies in order to leverage their sales organizations.       

COMPETITION                                                                     

Fiber optic systems are currently under construction both locally and   
nationally. In New York City, for example, several franchisees have been granted
the right to install and operate a telecommunications network within the city.  
Development of fiber optic networks is also continuing on a national scale. The 
construction of these networks enables their owners to lease access to their    
networks to other communications carriers or large corporate or government      
customers seeking high bandwidth capacity, without these customers having to    
incur costly expenditures associated with building networks of their own.       
Alternatively, some network owners may choose to use their infrastructure to    
provide switched voice and data services, competing directly with ILECs and     
IXCs. Currently, we do not provide such services or plan to provide such        
services.                                                                       

  In the cities where we plan to deploy fiber optic communications networks,
we face significant competition from the ILECs, which currently dominate their  
local communications markets. We also face competition from CLECs and other     
potential competitors in these markets and will face competition in the cities  
in which we plan to build our networks. Many of our competitors have financial, 
management and other resources substantially greater than ours, as well as other
competitive advantages over us, including established reputations in the        
communications market.                                                          

 Various communications carriers already own fiber optic cables as part of
their communications networks. Accordingly, each of these carriers could, and   
some do, compete directly with us in the market for leasing fiber capacity. In  
addition, although CLECs generally provide a wider array of services to their   
customers than we presently provide to our customers, CLECs nevertheless        
represent an alternative means by which our potential customer could obtain     
direct access to an IXC POP or other site of the customer's choosing. Thus,     
CLECs could compete with us.                                                    

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Some communications carriers and local cable companies have extensive   
networks in place that could be upgraded to fiber optic cable, as well as       
numerous personnel and substantial resources to undertake the requisite         
construction to so equip their networks. To the extent that communications      
carriers and local cable companies decide to equip their networks with fiber    
optic cable, they are potential direct competitors provided that these          
competitors are willing to offer this capacity to all of their customers.       

We believe that as competition in the local exchange market develops, a 
fundamental division between the needs of corporate, governmental and           
institutional end users and residential end users will drive the creation of    
differentiated communications services and service providers. We believe that   
the CLECs, IXCs, ISPs, wireless carriers and corporate and government customers 
on which we focus will have distinct requirements, including maximum            
reliability, consistent high quality transmissions, capacity for high-speed data
transmissions, diverse routing and responsive customer service. We believe that 
we will be able to satisfy the needs of such customers.                         

   Our Internet connectivity services business is intensely competitive. There
are few substantial barriers to entering the co-location service business, and  
we expect that we will face additional competition from existing competitors and
new market entrants in the future. We believe that participants in this market  
must grow rapidly and achieve a significant presence in the market in order to  
compete effectively. We believe that the principal competitive factors in this  
market are uncongested connectivity, quality of facilities, level of customer   
service, price, the financial stability and credibility of the provider, brand  
name and the availability of network management tools. AboveNet might not have  
the resources or expertise to compete successfully in the future. Our current   
and potential competitors in this market include:                               

 - providers of co-location services, such as Exodus Communications, Inc.,
    Frontier Corporation, which has entered into an agreement to be acquired
    by Global Crossing Ltd., Hiway Technologies, Inc., which was acquired by
Verio Inc., and Globix Corporation;                                 

- national and regional ISPs, such as Concentric Network Corporation,   
   PSINet, Inc., MCI WorldCom and certain subsidiaries of GTE Corporation;

  - global, regional and local telecommunications companies, such as Sprint,
   MCI WorldCom and Regional Bell Operating Companies, some of whom supply
capacity to AboveNet; and                                           

- large information technology outsourcing firms, such as International 
Business Machines Corporation and Electronic Data Systems.          

REGULATION                                                                      

As a provider of communications facilities, we are subject to varying   
degrees of regulation in each of the jurisdictions in which we operate. In the  
United States, some aspects of our services are regulated by the Federal        
Communications Commission (the "FCC") and various state regulatory bodies. In   
some local jurisdictions, we must obtain approval to operate or construct our   
networks. In other countries where we operate we may also be subject to         
regulations by the agencies having jurisdiction over the provision of           
telecommunications services.                                                    

FEDERAL                                                                 

In the United States, federal telecommunications law directly shapes the
market in which we compete. We offer two types of services--the leasing of dark 
fiber and the provision of telecommunications transmission services--that are   
subject to varying degrees of regulation by the FCC pursuant to the provisions  
of the Communications Act of 1934, as amended, including by the                 
Telecommunications Act of                                                       

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1996 (the "Communications Act"), and the FCC regulations implementing and       
interpreting the Communications Act.                                            

  The Communications Act imposes legal requirements on "common carriers" who
engage in "interstate or foreign communication by wire or radio" and on         
"telecommunications carriers." Telecommunications carriers, or common carriers, 
are providers of telecommunications services, which is defined by the           
Communications Act as the offering of telecommunications for a fee "directly to 
the public" or to all potential users of an indiscriminate basis subject to     
standardized rates, terms, and conditions.                                      

DARK FIBER LEASING.  We believe that we are not a "telecommunications   
carrier" or "common carrier" with respect to our leasing of dark fiber          
facilities, and therefore that our dark fiber activities are not subject to     
special legal requirements applicable to such carriers. First, we do not believe
that the leasing of dark fiber is a "telecommunications service" that is subject
to FCC regulation. The FCC generally regulates "communication by wire or radio" 
or the "transmission" of "information of the users' choosing," neither of which 
describes the leasing of dark fiber facilities. Second, we do not offer dark    
fiber facilities as a common carrier, I.E., to all potential users on an        
indiscriminate basis. Instead, we enter into individualized negotiations on a   
selective basis with prospective lessees of our dark fiber facilities to        
determine whether and on what terms to serve each potential lessee. Our dark    
fiber offerings should therefore not be subject to the common carrier           
jurisdiction of the FCC or to the common carrier provisions of the              
Communications Act.                                                             

If our offering of dark fiber facilities were deemed to constitute      
"telecommunications," then our revenues from such leases to end users (but not  
to other telecommunication carriers), whether or not provided on a common       
carrier basis, would become subject to assessment for the FCC's Universal       
Service Fund, a fund that was established by the FCC pursuant to the            
Telecommunications Act of 1996 (the "1996 Act") to assist in ensuring the       
universal availability of basic telecommunications services at affordable       
prices, and other FCC assessments. The FCC announced that the rate of assessment
will be approximately 3.9% of gross interstate and 1% of gross intra-state      
end-user revenues for the third quarter of 1999. On July 30, 1999, the U.S.     
Court of Appeals for the Fifth Circuit upheld in part the FCC's order but       
determined that assessments must be limited to interstate revenues. We cannot   
predict the effect of this ruling on the rate of assessment, or what rates of   
assessment will apply in future years. We may also be liable for assessments by 
state commissions for state universal service programs.                         

  TRANSMISSION SERVICES.  With respect to our offering of telecommunications
services, however, we will likely operate as a common carrier, offering such    
transmission services to all potential users indiscriminately, and therefore    
will be subject to the regulatory requirements applicable to common carriers and
to telecommunications carriers. For example, we will be required, with respect  
to our transmission services, to (1) provide such services indiscriminately upon
any reasonable request; (2) charge rates and adopt practices, classifications   
and regulations that are just and reasonable; and (3) avoid unreasonable        
discrimination in charges, practices, regulations, facilities and services. We  
may also be required to file tariffs setting forth the rates for our services.  
Under current FCC policies, these regulatory requirements should not impose any 
substantial burdens on us. The FCC has recently determined, for example, that   
providers of "access" services (intracity transmission services used to         
originate and/or terminate interstate and foreign communications) need not file 
tariffs and may offer such services to customers on a private, contractual      
basis. Our revenues from transmission services will also be subject to FCC      
Universal Service Fund assessments as discussed above, to the extent that these 
services are purchased by end users. Since the revenues of our competitors will 
be subject to comparable assessments, this should not reduce our                
competitiveness. Also, being regulated as a "telecommunications carrier" will   
give us certain legal benefits. In particular, we will be entitled, like other  
competitive local exchange carriers (often referred to as "CLECs"), to insist   
upon access to the existing telecommunications infrastructure by interconnecting
our fiber-optic networks with incumbent local exchange carriers (often referred 
to as "ILECs") central offices                                                  

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and other facilities. Under the 1996 Telecom Act, ILECs must, among other       
things: (i) allow interconnection at any technically feasible point and provide 
service equal in quality to that provided to others, (ii) provide unbundled     
access to network elements, and (iii) provide access to their poles, ducts,     
conduits and other rights-of-way. Our rights as a CLEC may not extend to cover  
our dark fiber business (unless our dark fiber business is considered a         
telecommunications service). Accordingly, an ILEC may refuse to interconnect    
with (or provide the collocation described below) us other than in connection   
with our transmission services business.                                        

   ILECs must also provide "physical collocation" for other telecommunications
carriers. Physical collocation is an offering by an ILEC that enables another   
telecommunications carrier to enter the ILEC's premises to install, maintain and
repair its own equipment that is necessary for interconnection or access to the 
ILEC's network elements. An ILEC is required to allocate reasonable amounts of  
space to carriers on a first-come first-served basis. If space limitations or   
practical or technical reasons prohibit physical collocation, an ILEC must offer
"virtual collocation," by which the other carrier may specify ILEC equipment to 
be dedicated to its use and electronically monitor and control communications   
terminating in such equipment. We intend, in some instances, to collocate       
portions of our network on the premises of certain ILECs. Our ability to do this
on a cost-effective basis will depend on the rates, terms and conditions        
established for collocation, which will be established by state regulators in   
arbitration proceedings and therefore may vary from one state to the next.      

The FCC has responsibility under the 1996 Telecom Act's interconnection 
provisions to determine what elements of an ILEC's network must be provided to  
competitors on an unbundled basis. The FCC declared dark fiber an unbundled     
network element under these provisions. The FCC's requirements for unbundling   
were overturned by the Supreme Court, which ordered the FCC to re-evaluate the  
standard it uses to determine which network elements need to be unbundled. In   
response, the FCC recently issued an order affirming all but one of the network 
elements and also stating for the first time that ILECs must provide access to  
dark fiber as a separate element. In addition, federal district courts in a     
number of jurisdictions have interpreted the 1996 Telecom Act to include dark   
fiber as a network element, which must be unbundled. The FCC decision to treat  
dark fiber as an unbundled element, as well as these court rulings, could       
decrease the demand for dark fiber provided by us because our potential         
customers will be able to obtain dark fiber from ILECs at cost-based rates. In  
addition, the FCC has announced that state commissions may decide to add network
elements to the FCC's list of elements that are required to be unbundled by     
carriers.                                                                       

  ILECs, CLECs and inter-exchange carriers (often referred to as "IXCs") are
subject to other requirements under the Communications Act, the FCC regulations 
and additional federal telecommunications laws. These requirements may affect   
our business by virtue of the inter-relationships that exist among us and many  
of these regulated telecommunications carriers. For example, the FCC recently   
issued an order requiring, among other things, that access charges (fees charged
by ILECs to IXCs for use of local telephone facilities for the origination and  
termination of long-distance calls) shift in part from being usage driven to a  
fixed flat cost-based structure. The FCC recently issued an order granting ILECs
greater pricing flexibility for their access services (both switched and        
non-switched), which may permit the ILECs to compete more effectively against   
some of our service offerings. While it is not possible to predict the precise  
effect the access charge changes will have on our business or financial         
condition, the reforms will reduce access charges paid by IXCs, likely making   
the use of ILEC facilities by IXCs more attractive, which could have a material 
adverse effect on the use of our fiber optic telecommunications networks by     
IXCs. Bell Atlantic's proposed investment could subject us to additional        
regulation by the FCC. Bell Atlantic is an ILEC and pursuant to the             
Communications Act may not provide long distance service within its geographic  
region until certain conditions are met. Companies in which an ILEC owns greater
than a ten percent ownership interest are subject to the same prohibitions. If  
such prohibitions applied to us it would have a material adverse effect on our  
business. For that reason, our agreement with Bell Atlantic                     

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prohibits it from owning more than ten percent of us until the long-distance    
prohibitions no longer apply to Bell Atlantic and its affiliates.               

STATE                                                                   

 The 1996 Telecom Act prohibits state and local governments from enforcing
any law, rule or legal requirement that prohibits, or has the effect of         
prohibiting, any person from providing any interstate or intrastate             
telecommunications service. Nonetheless, this provision of the 1996 Telecom Act 
should enable us and our customers to provide telecommunications services in    
states that previously prohibited competitive entry.                            

 However, states retain jurisdiction, under the 1996 Telecom Act to, adopt
regulations necessary to preserve universal service, protect public safety and  
welfare, manage public rights of way, ensure the continued quality of           
communications services and safeguard the rights of consumers.                  

States continue to determine the rates that ILECs can charge for most of
their intrastate services. They are also responsible for mediating and          
arbitrating ILEC interconnection arrangements with other carriers if voluntary  
agreements are not reached. Accordingly, state involvement in local             
telecommunications services is substantial.                                     

 Each state (and the District of Columbia, which is treated as a state for
the purpose of regulation of telecommunications services) has its own statutory 
scheme for regulating providers of telecommunications services of they are      
"common carriers" or "public utilities". As with the federal regulatory scheme, 
we believe that the offering of dark fiber facilities does not make us of common
carrier or public utility so we would not be subject to this type of regulation 
in most jurisdictions in which we currently have or plan to construct           
facilities. Our offering of transmission services (as distinct from dark fiber  
capacity), however, will likely be subject to regulation in each of these       
jurisdictions to the extent that these services are offered for intra-state use.
Even though our facilities will be physically located in individual states, we  
anticipate that most customers will use our facilities and services for the     
purpose of originating and/or terminating interstate and foreign communications.
Under current FCC policies, any dedicated transmission service or facility that 
is used more than 10% of the time for the purpose of inter-state or foreign     
communication is subject to FCC jurisdiction to the exclusion of any state      
regulation.                                                                     

    State regulation of the telecommunications industry is changing rapidly, and
the regulatory environment varies substantially from state to state. Our        
subsidiaries are currently authorized to provide intrastate telecommunications  
services in California, Colorado, Connecticut, Delaware, District of Columbia,  
Florida, Georgia, Illinois, Maryland, Massachusetts, Missouri, New Jersey, New  
York, Oregon, Pennsylvania, Rhode Island, Texas, Virginia, Washington and have  
applications pending in Arizona, Minnesota and Ohio. At present, we do not      
anticipate that the regulatory requirements to which we will be subject in the  
states in which we currently intend to operate will have any material adverse   
effect on our operations. These regulations may require, among other things,    
that we obtain certification to operate, and that we provide notification of, or
obtain authorization for, certain corporate transactions, such as the           
transaction with Bell Atlantic. In any event, we will incur certain costs to    
comply with these and other regulatory requirements such as the filing of       
tariffs, submission of periodic financial and operational reports to regulators,
and payment of regulatory fees and assessments, including contributions to state
universal service programs. In some jurisdictions, our pricing flexibility for  
intra-state services may be limited because of regulation, although our direct  
competitors will be subject to similar restrictions. However, we make no        
assurances that future regulatory, judicial, or legislative action will not     
materially adversely affect us.                                                 

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Bell Atlantic recently filed an application with the FCC to provide long
distance service in New York on the grounds that it provides access and         
interconnection to its network facilities for the network facilities of one or  
more unaffiliated competing providers of telecommunications services. The FCC   
has until the end of 1999 to approve the application. We hope that Bell Atlantic
will be a significant customer of ours when it enters the long distance market. 

LOCAL                                                                   

In addition to federal and state laws, local governments exercise legal 
authority that affect our business. For example, local governments, such as the 
City of New York, typically retain the ability to manage public rights-of-way,  
subject to the limitation that local governments may not prohibit persons from  
providing telecommunications services and local governments may not treat       
telecommunication service providers in a discriminatory manner. Because of the  
need to obtain approvals, local authorities affect the timing and costs         
associated with our use of public rights-of-way. In addition, some local        
authorities must approve or be notified of certain corporate transactions, such 
as the Bell Atlantic transaction. These regulations may have an adverse effect  
on our business.                                                                

FEDERAL REGULATION OF INTERNATIONAL SERVICE                             

Various regulatory requirements and limitations also will influence our 
business as we enter the market for international telecommunications service. We
have entered into a 50/50 joint venture, ION, with a subsidiary of Racal that   
contemplates jointly acquiring and selling international, facilities-based      
telecommunications capacity between the U.S. and the United Kingdom and possibly
between the U.S. and other markets. ION is a U.S. international common carrier  
subject to U.S. regulation under Title II of the Communications Act, and, we are
also a U.S. international common carrier subject to the same regulations. Under 
current FCC rules, international carriers that do not exercise market power and 
that are not affiliated with dominant foreign carriers (carriers possessing     
market power in their local markets) are subject to relatively relaxed U.S.     
regulation as nondominant international carriers. As a non-dominant common      
carrier, ION and we are subject to, among other policies, the common carrier    
obligation of nondiscrimination. In addition, FCC rules prohibit U.S. carriers  
from bargaining for special concessions from certain foreign partners. ION and  
we are required, under Sections 214 and 203 of the Communications Act to obtain 
authorization and file an international service tariff containing rates, terms  
and conditions prior to initiating service. As a nondominant carrier, ION and we
are eligible to seek "global" authorization under Section 214 to operate as     
facilities-based and/or resale carrier. International carriers are also subject 
to certain annual fees and filing requirements, such as the requirement to file 
contracts with other carriers, including foreign carrier agreements, and reports
setting forth international circuit, traffic and revenue data. Failure to obtain
an appropriate U.S. license for international service or the revocation of a    
license could materially adversely affect our future operations.                

  Until recently, international common carriers were also required to comply
with the FCC's International Settlements Policy which defines the permissible   
boundaries for U.S. carriers and their foreign correspondents to settle the cost
of terminating each other's traffic over their respective networks. The FCC,    
however, recently decided that it is no longer necessary to apply the           
International Settlement Policy rules to U.S. carrier arrangements with         
non-dominant foreign carriers and with arrangements with all foreign carriers in
competitive foreign markets. Since the U.S.-UK route has been declared          
competitive by the FCC, we and ION will not have to comply with the             
International Settlement Policy.                                                

The FCC has also made significant changes to other aspects of its       
international regulatory regime that facilitate our international operations.   
For example, it has approved the provisions of switched services over private   
lines ("ISR") interconnected with the public switched network between the United
States and 22 other countries, including the UK and Germany. Recently, the FCC  
took steps to streamline the application process for authority to provide       
international services, relaxing further the rules for almost all international 
services to almost all countries (with China, Taiwan, Russia, Saudi Arabia, the 
notable exceptions). The FCC continues to refine its international service      
rules to promote competition, reflect                                           

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and encourage liberalization in foreign countries, and reduce accounting rates  
toward cost. We are unable to predict how the FCC will resolve the various      
pending international policy issues and the effect of such resolutions on us.   

REGULATION OF INTERNATIONAL OPERATIONS                                          

    Our international services are also subject to regulation in other countries
where we operate. Such regulation, as well as policies and regulations on the   
European Union level, may impose separate licensing, service and other          
conditions on our international service operations, and these requirements may  
have a material adverse effect on our ability to operate. In addition to our    
joint venture, ION, we have entered into a joint venture with Carrier 1 and     
Viatel to develop a fiber network linking Germany's main cities. We also have an
agreement with Viatel to use Viatel's network in France, Germany, the UK and the
Netherlands. The following discussion is intended to provide a general outline  
of certain regulations and current regulatory posture in certain foreign        
jurisdictions in which we currently operate or intend to operate, and is not    
intended as a comprehensive discussion of such regulations or regulatory        
posture. Local laws and regulations differ significantly among these            
jurisdictions, and, within such jurisdictions, the interpretation and           
enforcement of such laws and regulations can be unpredictable.                  

THE EUROPEAN UNION                                                      

The European Union (the "EU") was established by the Treaty of Rome and 
subsequent treaties. EU member states are required to implement directives      
issued by the European Commission (the "EC") and the European Council by passing
national legislation. The EC and European Council have issued a number of key   
directives establishing basic principles for the liberalization of the EU       
telecommunications market. This basic framework has been advanced by a series of
harmonization directives, which include the so-called Open Network Provision    
directives and the Licensing Directive of April 1997 and the Interconnection    
Directive of June 1997, which address the procedures for granting license       
authorizations and conditions applicable to such licenses and the               
interconnection of networks and the interoperability of services as well as the 
achievement of universal service. The Licensing Directive sets out framework    
rules for the procedures associated with the granting of national authorizations
for the provision of telecommunications services and for the establishment or   
operation of any infrastructure for the provision of telecommunications         
services. It distinguishes between "general authorizations," which should       
normally be easier to obtain since they do not require an explicit decision by  
the national regulatory authority, and "individual licenses." EU member states  
may impose individual license requirements for the establishment and operation  
of public telecommunications networks and for the provision of voice telephony, 
among other things. Consequently, ION's operations in the U.K., our operation   
with respect to the German Network and European Network and our proposed        
operations may require that ION or the Company, respectively, be subject to an  
individual licensing system rather than to a general authorization in the       
majority of EU member states. In some countries where we operate, we may also be
required to contribute to a fund for the provision of universal service. The    
United Kingdom and each other EU member state in which ION currently conducts or
we conduct our business has a different regulatory regime and such differences  
are expected to continue. The requirement that ION, our former joint venture, or
we obtain necessary approvals varies considerably from country to country.      

UNITED KINGDOM                                                          

    The Telecommunications Act of 1984 (the "U.K. Act") provides a licensing and
regulatory framework for telecommunications activities in the United Kingdom.   
The Secretary of State for Trade and Industry at the Department of Trade and    
Industry (the "Secretary of Trade") is responsible for granting licenses under  
the U.K. Act and for overseeing telecommunications policy, while the Director   
General of Telecommunications (the "Director General") and his office (the      
Office of Telecommunications ("OFTEL")) are responsible, among other things, for
enforcing the terms of such licenses. Operators wishing to use their own        
facilities to provide international services were until recently required to    
obtain an International                                                         

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Facilities License ("IFL"). An IFL authorized the running of telecommunication  
systems within the U.K. and permitted the licensee to connect U.K. systems to   
overseas systems, and to offer international services. ION obtained an IFL on   
December 9, 1998.                                                               

   On September 27, 1999, the Telecommunications (licence Modification) (Fixed
Voice Telephony and International Facilities Operator Licences) Regulations 1999
(the "Regulations") came into force. The Regulations implemented the            
requirements of the Licensing Directive and converted existing IFLs, into Public
Telecommunications Operator Licenses ("PTO Licenses") which now include an      
authorization for the provision of international facilities. Under its new PTO  
License, ION is also entitled to offer domestic telecommunications services.    
Metromedia Fiber Network UK Limited ("MFN UK"), which was incorporated by us in 
the United Kingdom on March 4, 1999 was awarded a PTO license on October 7,     
1999. MFN UK will be used as the operating company in the United Kingdom and has
been granted code powers which gives it statutory rights of way over land which 
overide private rights.                                                         

With effect from June 30, 1999, it is no longer necessary to hold an    
individual telecommunications license to have interconnection rights. Similarly,
it is no longer necessary for an operator to build its own infrastructure to be 
included within the "Annex II list" of operators with rights and obligations to 
interconnect pursuant to the Interconnection Directive. Any operator who appears
on the Annex II list on the OFTEL web-site (www.oftel.gov.uk) has the right to  
negotiate interconnection as well as a corresponding obligation to negotiate    
interconnection with any other operator in Annex II. The terms, conditions and  
charges to be applied to interconnection between operators who do not have      
significant market power are not specifically regulated and are therefore       
subject to commercial agreement. All Annex II operators are eligible to benefit 
from the terms and conditions and charges which fixed-line operators with       
significant market power are obliged to offer by the Interconnection Directive. 
In the United Kingdom, British Telecommunications and Kingston Communications   
have significant market power for the provision of fixed networks and services  
and leased lines. ION is included in the Annex II list of operators on OFTEL's  
web-site and therefore has a right coupled with a corresponding obligation to   
negotiate interconnection with any other operator on the Annex II list. MFN UK  
is not currently included in the Annex II list but may apply to OFTEL to be     
included in the list.                                                           

  The U.K. Government passed a Competition Act in November 1998 which grants
concurrent powers to the industry specific regulators and the Director General  
of Fair Trading for the enforcement of prohibitions against anti-trust behavior 
modeled on Articles 81 and 82 of the Treaty of Rome. The Act introduces into    
U.K. legislation prohibitions on the abuse of a dominant position and           
anti-competitive agreements, and provides for third party rights of action,     
stronger investigative powers, interim measures and effective enforcement       
powers. The prohibitions are expected to come into force on March 1, 2000. The  
Act gives the Director General power to exercise concurrent powers with the     
Director General of Fair Trading in relation to "commercial activities connected
with telecommunications." The Act enables third parties to bring enforcement    
actions directly against telecommunications operators who are in breach of the  
prohibitions contained in the Act and seek damages rather than have to wait for 
the Director General to issue an enforcement order. Depending on how these      
provisions of the Act are implemented, it may give us and our competitors       
greater ability to challenge anti-competitive behavior in the U.K.              
telecommunications market.                                                      

GERMANY                                                                 

The German Telecommunications Act of July 25, 1996 (the "German         
Telecommunications Act") liberalized all telecommunications activities. Under   
the German Telecommunications Act, voice telephony was liberalized as of January
1, 1998. The German Telecommunications Act has been complemented by several     
Ordinances. The most significant Ordinances concern license fees, rate          
regulation, interconnection, universal service, frequencies and customer        
protection. Under the German regulatory scheme, licenses can be granted within  
four license classes. A license is required for operation of transmission lines 
that extend beyond the limits of a property and that are used to provide        
telecommunications services for the general public. The licenses required for   
the operation of transmission lines are divided into 3 infrastructure           

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license classes: mobile telecommunications (license class 1); satellite (license
class 2); and telecommunications services for the general public (license class 
3). The provision of dark fiber does not require a license. Beside the          
infrastructure licenses, an additional license is required for provision of     
voice telephony services on the basis of self-operated telecommunications       
networks (license class 4). A class 4 license does not include the right to     
operate transmission lines. According to the License Fees Ordinance, a          
nationwide class 4 license costs a one-time fee of DM 3,000,000. The costs for a
territorial class 3 license will be determined by the Regulierungsbehorde fur   
Telekommunikation und Post (the "RegTP") and is dependent on the population and 
the geographical area covered by the territorial class 3 license. A nationwide  
territorial class 3 license costs DM 10,600,000. The Administrative Court of    
Cologne held in a preliminary ruling that there is a high probability that the  
license fees are excessive and that therefore the Ordinance might be void. The  
RegTP does not invoice any license fees at the present time in view of the      
pending administrative court procedure. Since we have not yet received a license
fee order, it is presently unclear what the amount of our license fee will be.  
Licensees that operate transmission lines crossing the boundary of a property   
have the right to install transmission lines on, in and above public roads,     
squares, bridges and public waterways without payment; however, when installing 
transmission lines a planning agreement must be obtained from the relevant      
authorities.                                                                    

  A company which operates a public telecommunications network has the right
to receive favorable interconnection rates from Deutsche Telekom, as a dominant 
carrier. If the company does not agree with the offered rates or Deutsche       
Telekom refuses to interconnect for whatever reason, the company can refer the  
case to the RegTP which shall decide upon the request for interconnection within
a period of six weeks; if the RegTP decides to extend this deadline, it must at 
the latest decide within ten weeks of the request. Whether, and under which     
conditions, carrier to carrier operators will receive favorable interconnection 
rates or less favorable "special network access rates" from Deutsche Telekom    
depends on whether they operate a "public telecommunications network."          

 According to the regulatory authority, a public telecommunication network
consists of at least one switch and three transmission lines. Therefore, a      
carrier with this minimal network configuration has the right to interconnect   
with Deutsche Telekom or other operators of public telecommunications networks. 
Deutsche Telekom has terminated its Interconnection Agreements with most of the 
carriers and is now imposing, in its new standard interconnection contracts,    
additional interconnection conditions. Deutsche Telekom demands inter alia, that
carriers which do not meet certain minimum traffic requirements must pay a      
stipulated penalty. In addition, Deutsche Telekom requests a minimum lease      
period for interconnection access points (often referred to as "ICA") of        
24 months. If traffic at one point of interconnection exceeds 48.8 Erlang,      
Deutsche Telekom requests the establishment of additional points of             
interconnection up to a maximum of 23 points of interconnection. It is presently
unclear whether or not these and other interconnection conditions will be upheld
by the regulatory authority or the courts.                                      

    The rates of Deutsche Telekom's services in conjunction with interconnection
and special network access are subject to regulatory approval; this approval is 
typically granted for a limited period of time. The current approval expires on 
December 31, 1999. It is uncertain which interconnection rates will apply to the
next year.                                                                      

  Licensed operators are under an obligation to present their standard terms
and conditions (with regard to the provision of telecommunications services for 
the public) to the RegTP. The RegTP may, based upon certain criteria decide not 
to accept these terms and conditions. We may become subject to universal service
financing obligations. Currently, it is unlikely that the universal service     
financing system will be implemented in Germany in the foreseeable future. These
obligations do not apply as far as the provision of mere dark fiber is          
concerned.                                                                      

  Metromedia Fiber Network GmbH has obtained a class 3 license for the whole
territory of Germany. In addition, Metromedia Fiber Network GmbH has concluded  
frameworks agreements with the cities of Frankfurt, Stuttgard and Cologne on the
conditions and procedures for obtaining the necessary planning agreements with  
the city authorities.                                                           

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OTHER COUNTRIES                                                         

In addition to our United Kingdom and German operations, we have        
incorporated local subsidiaries in Belgium, France and The Netherlands. We are  
currently in the process of incorporating local subsidiaries in Austria, The    
Czech Republic, France, Hungary, Ireland, Italy, Japan, Spain and Switzerland.  
In the Netherlands, the local subsidiary has registered with the Dutch          
regulator. We are in the process of applying, through our local subsidiaries,   
for necessary licenses and registrations in the other above mentioned countries 
to enable us to provide dark fiber and DWDM services.                           

EMPLOYEES                                                                       

As of September 30, 1999, we employed 529 people, including 262 in      
engineering and construction, 168 in sales and marketing and 99 in              
administration. Our employees are not represented by any labor union. We        
consider our relationship with employees to be good.                            

PROPERTIES                                                                      

Our principal properties currently are the NY Network and its component 
assets. We own substantially all of the communications equipment required for   
our business. Our installed fiber optic cable is laid under the various         
rights-of-way held by us. Please refer to the section of this prospectus        
supplement entitled "--Build-out of Networks--Rights-of-Way." Our other fixed   
assets are located at various leased locations in the geographic areas that we  
serve. Our executive and administrative offices are located at our principal    
office at One North Lexington Avenue, White Plains, New York. We lease this     
space (currently approximately 21,000 square feet) under an agreement that      
expires in March 2003. Our sales offices are located at 685 Third Avenue, New   
York, New York. We lease this space (approximately 9,670 square feet) under an  
agreement that expires in September 2003. We lease additional space (currently  
8,710 square feet) at 60 Hudson Street, New York, New York, from Hudson         
Telegraph Associates under an agreement that expires in March 2010.             

  AboveNet's executive and administrative offices are located at 50 West San
Fernando Street, San Jose, California. We lease this space (approximately 19,850
square feet) under an agreement that expires in February 2008. Palo Alto        
Internet Exchange's executive and administrative offices are located at 285     
Hamilton Avenue, Palo Alto, California (approximately 5,130 square feet) under  
an agreement that expires in January 2007. In addition, AboveNet and Palo Alto  
Internet Exchange lease various co-location facilities in California, Virginia  
and New York that range from 10,000 to 29,000 square feet under agreements that 
expire within the next 10 to 20 years.                                          

LEGAL PROCEEDINGS                                                               

 On or about October 20, 1997, Vento & Company of New York (referred to as
"VCNY") commenced an action against us, Stephen A. Garofalo, Peter Silverman,   
the law firm of Silverman, Collura, Chernis & Balzano, P.C., Peter Sahagen,     
Sahagen Consulting Group of Florida (collectively, the "Sahagen Defendants") and
Robert Kramer, Birdie Capital Corp., Lawrence Black, Sterling Capital LLC,      
Penrush Limited, Needham Capital Group, Arthur Asch, Michael Asch and Ronald    
Kuzon (the "Kramer Defendants") in the United States District Court for the     
Southern District of New York (No. 97 CIV 7751) (the "VCNY Litigation"). On or  
about May 29, 1998, VCNY filed an amended complaint. On or about July 2, 1999,  
VCNY filed a second amended complaint. In its complaint, as amended, VCNY       
alleges seven causes of action in connection with its sale of 900,000 shares    
(not adjusted for subsequent stock splits) of class A common stock to Peter     
Sahagen and the Kramer Defendants on January 13, 1997. The seven causes of      
action include: (i) violation of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated under such Act; (ii) fraud and fraudulent       
concealment; (iii) breach of fiduciary duty; (iv) negligent misrepresentation   
and omission; and (v) breach of contract. VCNY is seeking, among other things,  
rescission of the VCNY Sale, or alternatively, damages in an amount which cannot
currently be ascertained but VCNY contends to be in excess of $460 million,     
together with interest. VCNY is also seeking unspecified punitive damages,      
reasonable legal fees and the cost of this action. All the defendants,          

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including us and Stephen A. Garofalo, have moved for summary judgment on VCNY's 
second amended complaint.                                                       

  On or about June 12, 1998, Claudio E. Contardi commenced an action against
Peter Sahagen, Sahagen Consulting Group of Florida and the Company in the United
States District Court for the Southern District of New York (No. 98 CIV 4140).  
Mr. Contardi alleges a cause of action for, among other things, breach of a     
finder's fee agreement entered into between Mr. Sahagen and Mr. Contardi on or  
about November 14, 1996 and breach of an implied covenant of good faith and fair
dealing contained in the finder's fee agreement. Mr. Contardi is seeking, among 
other things, a number of shares of the Company which we cannot currently       
ascertain but believe to be approximately 112,500 shares (calculated as of the  
date on which the complaint was filed) or damages in an amount which we cannot  
currently ascertain but believe to be approximately $4.9 million (calculated as 
of the date on which the complaint was filed) and all costs and expenses        
incurred by him in this action. We have filed an answer to the complaint and    
have raised affirmative defenses. We have moved for summary judgment on the     
complaint.                                                                      

    We intend to vigorously defend both these actions because we believe that we
acted appropriately in connection with the matters at issue in these two cases. 
However, we can make no assurances that we will not determine that the          
advantages of entering into a settlement outweigh the risk and expense of       
protracted litigation or that ultimately we will be successful in defending     
against these allegations. If we are unsuccessful in defending against these    
allegations, an award of the magnitude being sought in the VCNY Litigation would
have a material adverse effect on our financial condition or results of         
operations.                                                                     

We were a defendant in Howard Katz, et al. v. Metromedia Fiber Network, 
Inc., et al., No. 97 Civ. 2764 (the "Katz Litigation"). In their second amended 
complaint, Howard Katz, Realprop Capital Corporation and Evelyn Katz            
(collectively, the "Katz Entities") alleged causes of action against our        
company, Stephen A. Garofalo, Peter Sahagen, Peter Silverman, Silverman,        
Collura, Chernis & Balzano, P.C. and Metromedia Company, in connection with the 
repurchase of the Katz Securities, as defined, for, among other things, common  
law fraud, violations of Section 10(b) of the Securities Exchange Act of 1934   
and Rule 10b-5 promulgated under such Act, breach of fiduciary duty and         
negligent misrepresentation. In March 1998, we entered into a settlement        
agreement with the Katz Entities which, among others, settled and resulted in   
the dismissal of the Katz Litigation.                                           

On June 29, 1999 , an alleged stockholder of AboveNet filed a lawsuit,  
captioned KAUFMAN V. TUAN, ET AL, Del. Ch. C.A. No. 17259NC, in the Court of    
Chancery of the State of Delaware in and for the New Castle County. The         
plaintiff, who purports to represent a class of all AboveNet stockholders,      
challenges the terms of the proposed merger between the Company and AboveNet.   
The complaint names, as defendants, AboveNet, the directors of AboveNet, and the
Company (as an aider and abettor). The complaint alleges generally that         
AboveNet's directors breached their fiduciary duty to stockholders of AboveNet, 
and seeks an injunction against the merger, or, in the alternative, rescission  
and the recovery of unspecified damages, fees and expenses. AboveNet, the       
Company and the individual defendants believe the lawsuit is without merit and  
intend to defend themselves vigorously. AboveNet and the individual director    
defendants' responses were filed on July 22, 1999. In connection with these     
responses, a motion to dismiss the complaint in its entirety and a motion to    
stay discovery pending the outcome of the motion to dismiss were filed by the   
AboveNet and the individual directors of AboveNet on July 22, 1999. Similar     
motions to dismiss the complaint and stay discovery were filed by the Company on
July 26, 1999.                                                                  

Four other complaints, which are virtually identical to the complaint in
KAUFMAN V. TUAN, have also been filed in the Delaware Court of the Chancery.    
None of these four complaints have been served. The four actions are captioned  
BROSIOUS V. TUAN, ET AL, Del. Ch. C.A. No. 17271NC, CHONG V. TUAN, ET AL, Del.  
Ch. C.A. No. 17281NC, EHLERT V. TUAN, ET AL, Del. Ch. C.A. No. 17284NC, HORN V. 
TUAN, ET AL, Del. Ch. C.A. No. 17300NC.                                         

In addition, we are subject to various claims and proceedings in the    
ordinary course of business. Based on information currently available, we       
believe that none of such current claims, or proceedings, individually or in the
aggregate, including the VCNY litigation and the Contardi litigation, will have 
a material adverse effect on our financial condition or results of operations,  
although we can make no assurances in this regard.                              

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MANAGEMENT

    The directors and executive officers of our company and their ages as of the
date of this prospectus supplement are as follows:                              

                                                        [Enlarge/Download Table]

NAME                          AGE                           POSITION HELD                     
----                        --------                        -------------                     
                                                                                              
Stephen A. Garofalo........    48     Chairman of the Board and Chief Executive Officer       
Howard M. Finkelstein......    46     President, Chief Operating Officer and Director         
Vincent A. Galluccio.......    53     Senior Vice President and Director                      
Gerard Benedetto...........    42     Senior Vice President--Chief Financial Officer          
Nicholas M. Tanzi..........    40     Senior Vice President--Sales and Marketing              
Silvia Kessel..............    49     Executive Vice President and Director                   
John W. Kluge..............    85     Director                                                
David Rand.................    36     Director; Chief Technology Officer of AboveNet          
David Rockefeller..........    83     Director                                                
Stuart Subotnick...........    56     Director                                                
Sherman Tuan...............    45     Director; Chief Executive Officer of AboveNet           
Arnold L. Wadler...........    56     Executive Vice President, General Counsel, Secretary and
                                      Director                                                
Leonard White..............    60     Director                                                

    STEPHEN A. GAROFALO founded our company in April 1993. Mr. Garofalo has been
serving as Chairman of the Board of Directors since our inception and as Chief  
Executive Officer since October 1996. Mr. Garofalo served as President from 1993
to 1996 and as Secretary from 1993 to 1997. From 1979 to 1993 Mr. Garofalo      
served as president and chief executive officer of F. Garofalo Electric Co.,    
Inc., an electrical contractor.                                                 

HOWARD M. FINKELSTEIN has been President, Chief Operating Officer and a 
Director of our company since April 1997. Prior to joining our company,         
Mr. Finkelstein was employed by various affiliates of Metromedia Company for 16 
years. His most recent position was as executive vice president and chief       
operating officer of Metromedia International Telecommunications, Inc. From 1984
to 1993, Mr. Finkelstein served as president of Metromedia Communications       
Corporation, a national long distance telecommunications carrier. In addition,  
Mr. Finkelstein served as executive vice president and chief operating officer  
of Metromedia Restaurant Group from 1993 to 1995. Mr. Finkelstein is a director 
of Multimedia Medical Systems, Incorporated, a privately held company.          

   VINCENT A. GALLUCCIO has been a Director of our company since February 1997
and Senior Vice President since January 1999. Mr. Galluccio had served as       
president of ION during 1998 and, prior to that, as a senior vice president of  
our company since December 1995. Prior to joining our company, from             
January 1992 to October 1994, Mr. Galluccio was employed by British             
Telecommunications plc, as a global sales manager for network outsourcing       
operations. Prior to joining British Telecommunications plc, Mr. Galluccio spent
25 years with International Business Machines Corporation in various sales,     
marketing and business development positions and was involved in both domestic  
and world trade assignments.                                                    

GERARD BENEDETTO has been Senior Vice President--Chief Financial Officer
since February 1998. From July 1995 to January 1998, he was vice                
president--chief accounting officer at Metromedia International                 
Telecommunications, Inc. From October 1993 to July 1995, he was vice            
president--chief financial officer at Metromedia Restaurant Group. From         
February 1985 to October 1993, he was vice president--chief financial officer at
Metromedia Communications Corporation.                                          

   NICHOLAS M. TANZI has been Senior Vice President--Sales and Marketing since
August 1997. From March 1995 to July 1997, he served as vice                    
president--enterprise networks division at Fujitsu Business Communications      
Systems. From April 1993 to February 1995, Mr. Tanzi was director of sales,     
Eastern                                                                         

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Region at Asante Technologies Inc. Mr. Tanzi was employed in various capacities 
from November 1979 through October 1993 at Digital Equipment Corporation.       

    SILVIA KESSEL has served as a Director of our company since July 1997 and as
Executive Vice President since October 1997. Ms. Kessel has served as chief     
financial officer and treasurer of Metromedia International Group, Inc. since   
1995 and executive vice president of Metromedia International Group, Inc. since 
1996. In addition, Ms. Kessel served as executive vice president of Orion       
Pictures Corporation, a motion picture production and distribution company, from
January 1993 through July 1997, senior vice president of Metromedia Company     
since 1994 and president of Kluge & Company since January 1994. Prior to that   
time, Ms. Kessel served as senior vice president and a director of Orion        
Pictures Corporation from June 1991 to November 1992 and managing director of   
Kluge & Company from April 1990 to January 1994. Ms. Kessel is executive vice   
president and a member of the Board of Directors of Big City Radio, Inc. and of 
Metromedia International Group, Inc. In addition, Ms. Kessel is a director of   
Liquid Audio, Inc.                                                              

   JOHN W. KLUGE has been a Director of our company since July 1997. Mr. Kluge
has been the president and chairman of Metromedia Company and its               
predecessor-in-interest, Metromedia, Inc., for over five years. Mr. Kluge has   
been the chairman of the Board of Metromedia International Group, Inc. since    
1995. In addition, Mr. Kluge has been chairman of the Board of Directors and a  
director of Orion Pictures Corporation from 1992 until July 1997. He also serves
as a director of Conair Corporation and Occidental Petroleum Corporation.       

    DAVID RAND has served as a Director of our company since September 1999. Mr.
Rand has served as AboveNet's Chief Technology Officer since March 1996,        
initially as a consultant, and since May 1998 as an employee. Mr. Rand has      
served as a member of the Internet Engineering Task Force for the past seven    
years. Mr. Rand authored rfc 1962 and rfc 1663, developed the EtherValve        
technology, ASAP and APS, as well as co-developed MRTG. From September 1995 to  
May 1998, Mr. Rand was an engineer at Cisco Systems, Inc., a router             
manufacturer. From February 1994 to August 1995, Mr. Rand was an engineer at    
Innovative Systems and Technologies, a video compression company. From          
October 1993 to February 1994, Mr. Rand was a software engineer at              
Novell, Inc., a network server company.                                         

DAVID ROCKEFELLER has served as a Director of our company since         
October 1997. Mr. Rockefeller currently serves as a member of The Chase         
Manhattan Bank's International Advisory Committee, as chairman of Rockefeller   
Center Properties, Inc. (since 1995) and as a director of Rockefeller & Co.,    
Inc. (since 1994), a privately owned investment management firm, and its parent 
corporation, Rockefeller Financial Services Inc. From 1961 to 1981, Mr.         
Rockefeller served as chairman of The Chase Manhattan Corporation and The Chase 
Manhattan Bank, N.A. From 1981 to 1995, he served as chairman of Rockefeller    
Group, Inc.                                                                     

 STUART SUBOTNICK has served as a Director of our Company since July 1997.
Mr. Subotnick has been the vice chairman of the Board of Directors of Metromedia
International Group, Inc. since 1995 and president and chief executive officer  
of Metromedia International Group, Inc. since December 1996. In addition,       
Mr. Subotnick served as vice chairman of the Board of Directors of Orion        
Pictures Corporation from 1992 until July 1997. Mr. Subotnick has served as     
executive vice president of Metromedia Company and its predecessor-in-interest, 
Metromedia, Inc., for over five years. Mr. Subotnick has served as vice chairman
of Metromedia International Group, Inc. since November 1995 and president and   
chief executive officer of Metromedia International Group, Inc. since November  
1996. Mr. Subotnick is also a director of Carnival Cruise Lines, Inc. and       
chairman of the Board of Directors of Big City Radio, Inc.                      

SHERMAN TUAN, the founder of AboveNet, has served as a Director of our  
company since September 1999. Mr. Tuan has served as Chief Executive Officer and
a Director of AboveNet since 1996, and President until January 1998. Mr. Tuan   
served as chairman of the board of AboveNet from August 1998 to September 1999. 
Mr. Tuan was president of InterNex Information Services, Inc., an Internet      
infrastructure provider, from November 1994 to October 1995 and from            
February 1994 to November 1995, was president                                   

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of Tiara Computer, Inc., a network equipment manufacturer, which merged with    
InterNex Information Services, Inc. in November 1994. From January 1992 to      
June 1993, Mr. Tuan was vice president of worldwide sales and marketing of      
Primus Technologies, Inc., a provider of problem resolution and knowledge       
management software, and president of Celerite Graphics, Inc., a manufacturer of
video chips. Mr. Tuan received an electrical engineering degree from Feng-Chia  
University in Taiwan.                                                           

    ARNOLD L. WADLER has served as our Executive Vice President, General Counsel
and Secretary since October 1997 and has served as a Director of our company    
since July 1997. Mr. Wadler has served as executive vice president, general     
counsel and secretary of Metromedia International Group, Inc. since August 29,  
1996 and, from November 1, 1995 until that date, as senior vice president,      
general counsel and secretary of Metromedia International Group, Inc. and as the
executive vice president, general counsel, secretary and director of Big City   
Radio, Inc. since December 1997. In addition, Mr. Wadler serves as a director of
Metromedia International Group, Inc. and has served as a director of Orion      
Pictures Corporation from 1991 until July 1997 and as senior vice president,    
secretary and general counsel of Metromedia Company, and its                    
predecessor-in-interest, Metromedia, Inc., for over five years.                 

 LEONARD WHITE has served as a Director of our company since October 1997.
Mr. White has served as president and chief executive officer of Rigel          
Enterprises since July 1997. Mr. White served as president and chief executive  
officer of Orion Pictures Corporation from 1992 until 1997 and as president and 
chief executive officer of Orion Home Entertainment Corporation from 1987 to    
1992. Mr. White also serves as a director of Metromedia International Group,    
Inc., Big City Radio, Inc. and American Film Technologies, Inc.                 

BOARD OF DIRECTORS                                                              

    There are presently eleven members on the Board of Directors of our company.
Holders of the class B common stock are entitled to elect 75% of the Board of   
Directors and holders of the class A common stock are entitled to vote as a     
separate class to elect the remaining directors. Currently, eight of the eleven 
directors are nominees of the holders of class B common stock and as a result   
holders of the class A common stock are entitled to fill three vacancies on the 
Board of Directors. Members of each class of directors will hold office until   
their successors are elected and qualified. The directors are elected by a      
plurality vote of all votes cast at each annual meeting of the stockholders     
entitled to vote for such directors and hold office for a one-year term.        

COMPENSATION OF DIRECTORS                                                       

  During 1999, each director of our company who was not an officer, employee
or affiliate of our company (the "Non-Employee Directors") will be entitled to  
receive a $20,000 annual retainer plus a separate attendance fee of $1,200 for  
each meeting of the Board of Directors attended by a Non-Employee Director in   
person or $500 for each meeting of the Board of Directors in which a            
Non-Employee Director participated by conference telephone call. Members of     
committees of the Board of Directors are paid $500 for each meeting attended. In
addition, our 1998 Incentive Stock Plan entitles any Non-Employee Director who  
meets the criteria for "outside director" under Section 162(m) of the Internal  
Revenue Code and who first serves on the Board of Directors subsequent to the   
adoption of the 1998 Incentive Stock Plan to receive awards under such plan of  
40,000 shares of class A common stock, each having an exercise price equal to   
the fair market value of a share of class A common stock on the date of grant.  
Awards to Non-Employee Directors under the 1998 Incentive Stock Plan will be    
aggregated with awards under the 1997 Incentive Stock Plan so that total awards 
under each plan will not exceed 40,000 shares of class A common stock.          

 Non-Employee Directors are entitled to receive options to purchase 40,000
shares of our class A common stock under our 1997 Incentive Stock Plan. Options 
to purchase 40,000 shares of class A common stock will be granted annually on   
the day of each annual stockholder meeting. Each outside director is eligible to
receive options to purchase a maximum of 100,000 shares of class A common stock 
under the plan. Under the 1997 Incentive Stock Plan, each Non-Employee Director 
who was a director of our                                                       

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company on October 28, 1997 was granted an option to purchase 40,000 shares of  
our common stock at an exercise price of $2.00, the price of the class A common 
stock on the date of the Initial Public Offering.                               

In addition, on August 20, 1997, we granted to each of Mr. Kluge and    
Mr. Subotnick options to purchase 2,028,000 shares of class A common stock at an
exercise price of $.245 per share, and to each of Mr. Wadler and Ms. Kessel     
options to purchase 405,600 shares of class A common stock at an exercise price 
of $.245 per share, in each case.                                               

EXECUTIVE COMPENSATION                                                          

The following table provides you with information on the compensation   
awarded to, earned by or paid to the Chief Executive Officer and the four other 
most highly compensated executive officers of our company whose individual      
compensation exceeded $100,000 during the fiscal years ended December 31, 1998, 
1997 and 1996 for services rendered in all capacities to us and our             
subsidiaries. The persons listed in the table below are referred to as the      
"Named Executive Officers."                                                     

                                                        [Enlarge/Download Table]

                                                                                               LONG TERM         
                                                        ANNUAL COMPENSATION               COMPENSATION AWARDS    
                                                ------------------------------------  ---------------------------
                                                                           OTHER         NUMBER OF         ALL   
                                                                           ANNUAL        SECURITIES       OTHER  
                                                                        COMPENSATION  UNDERLYING STOCK   COMPENS.
NAME AND PRINCIPAL POSITION             YEAR    SALARY($)   BONUS ($)      ($)(1)       OPTIONS (2)        ($)   
---------------------------           --------  ---------   ---------   ------------  ----------------   --------
                                                                                                                 
Stephen A. Garofalo..................   1998     328,385    100,000      23,301             --           -- -- --
  Chairman and Chief Executive          1997     295,000     50,000      14,157        3,042,000(3)              
  Officer                               1996     225,960       --          --                                    

Howard M. Finkelstein................   1998    321,462     100,000      24,074             --           -- -- --
  President and Chief Operating         1997    196,756      50,000      11,769       12,168,000(5)              
  Officer(4)                            1996       --          --          --                                    

Vincent A. Galluccio.................   1998     183,400     15,000       1,673           300,000(6)      -- --  
  Senior Vice President                 1997     181,522       --          --           2,481,840(7)        --   
                                        1996     127,087       --          --                                    

Gerard Benedetto.....................   1998    181,423        --         3,355        1,100,000(9)      -- -- --
  Senior Vice President--Chief          1997       --          --          --               --                   
  Financial Officer(8)                  1996       --          --          --                                    

Nicholas M. Tanzi....................   1998    158,000      65,000       2,819         300,000(6)        -- --  
  Senior Vice President--Sales and      1997       --          --          --          721,680(11)               
  Marketing(10)                         1996       --          --          --               --                   

------------------------                                                        

(1) Includes amounts paid as automobile allowance, insurance premiums and 401(k)
matching funds.                                                         

(2) This information gives effect to our stock splits.                          

(3) Includes presently exercisable options to purchase 3,043,000 shares of      
class A common stock at an exercise price of $.245 per share.           

(4) Since Mr. Finkelstein was hired by us during 1997, the preceding year's     
compensation is not applicable.                                         

(5) Includes presently exercisable options to purchase 12,168,000 shares of     
class A common stock at an exercise price of $.245 per share.           

(6) Includes options to purchase 300,000 shares of class A common stock at an   
   exercise price of $5.25 per share that will become exercisable ratably over
a four year period commencing August 31, 1999.                          

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(7) Includes presently exercisable options to purchase 1,281,840 shares of      
    class A common stock at an exercise price of $.245 per share, and options to
purchase 300,000 shares of class A common stock, which Mr. Galluccio    
  exercised during 1998. Also includes options to purchase 600,000 shares of
class A common stock at an exercise price of $2.00 per share that will  
 become exercisable ratably over a four year period commencing October 28,
1998.                                                                   

(8) Since Mr. Benedetto was hired by us during 1998, the preceding year's       
compensation is not applicable.                                         

(9) Includes options to purchase 800,000 and 300,000 shares of class A common   
stock at an exercise price of $1.94 and $5.25 per share that will become
  exercisable ratably over a four year period commencing January 6, 1999 and
August 31, 1999, respectively.                                          

(10) Since Mr. Tanzi was hired by Metromedia Fiber Network during 1997, the     
   preceding year's compensation is not applicable. Compensation information
    for 1997 is omitted because aggregate compensation during such fiscal year
was less than $100,000.                                               

(11) Includes presently exercisable options to purchase 121,680 shares of       
    class A common stock at an exercise price of $.96 per share and options to
 purchase 600,000 shares of class A common stock at an exercise price of
$2.00 per share that will become exercisable ratably over a four year 
period commencing October 28, 1998.                                   

  During 1998 and 1997, Mr. Wadler and Ms. Kessel, each of whom serves as an
executive officer of our company, were employed and paid by Metromedia Company, 
pursuant to a management agreement with Metromedia Company, dated as of         
January 2, 1998, as amended (the "Management Agreement"). Please refer to the   
section in this prospectus supplement entitled "Certain Relationships and       
Related Transactions--Recent Transactions--Management Agreement." We did not pay
any other amounts to the Named Executive Officers during 1997 or 1998.          

    During 1999, certain of our executive officers were granted stock options to
purchase 150,000 shares of class A common stock at an exercise price of $26.375 
per share.                                                                      

EMPLOYMENT AGREEMENTS                                                           

   We have entered into employment agreements with each of our Named Executive
Officers.                                                                       

  GAROFALO EMPLOYMENT AGREEMENT.  Mr. Garofalo's employment agreement, dated
as of February 26, 1997, has a five year term. It provides Mr. Garofalo a base  
salary of $295,000 for the first year, $335,000 for the second year, $375,000   
for the third year, $415,000 for the fourth year and $455,000 for the fifth     
year. Mr. Garofalo is also entitled to receive an annual incentive bonus to be  
determined by the Compensation Committee of the Board of Directors. The         
incentive bonus will not be less than $100,000 per year. Mr. Garofalo's         
employment agreement also provides for other employee benefits such as a car    
allowance, life insurance, health care and certain disability and death         
benefits. In addition, Mr. Garofalo was granted options to purchase 3,042,000   
shares of class A common stock at an exercise price of $.245 per share after    
giving effect to the recent stock splits. These options are immediately         
exercisable and expire 10 years from their grant. We registered the shares of   
class A common stock underlying the options under the Securities Act upon the   
consummation of the initial public offering.                                    

    Except in the case of disability, we may terminate Mr. Garofalo's employment
only for cause, upon which termination Mr. Garofalo will have no right to       
receive any compensation or benefit from us. If the agreement is terminated     
without cause, or if Mr. Garofalo terminates employment for good reason, we will
be obligated to pay Mr. Garofalo an amount equal to the greater of (i) his      
monthly base salary as then in effect multiplied by the number of months        
remaining in term of his employment as of such termination date and (ii)        
$1,000,000. "Good reason" includes:                                             

   - a reduction in the nature or scope of Mr. Garofalo's titles, authorities,
powers, duties or responsibilities;                                 

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    - a change in the method or formula for determining the bonus, which results
in a decrease in the amount of bonus payable to Mr. Garofalo;       

   - the removal of Mr. Garofalo as a member of the Board of Directors, unless
  such removal occurs after termination of Mr. Garofalo's employment for
cause;                                                              

    - a sale of all or substantially all of the ownership interests or assets of
   our company, or a merger or consolidation of our company with any other
corporation or entity;                                              

    - a change in control of our company, defined as any person or entity, other
    than Mr. Garafalo, becoming a beneficial owner, as defined in Rule 13d-3
of the Securities Exchange Act of 1934, directly or indirectly, of  
     securities of our company representing 50% or more of the combined voting
power of our then outstanding securities; or                        

   - a material breach by our company of our affirmative or negative covenants
     or undertakings in the employment agreement, and a failure to remedy such
breach within 15 days.                                              

 Pursuant to the agreement, Mr. Garofalo has agreed not to compete with us
for a period of one year following termination of the agreement. During such    
non-compete period, Mr. Garofalo will be entitled to receive an amount equal to 
his base salary as in effect on the date of termination, so long as the         
agreement was not terminated prior to the expiration of the term by either      
party.                                                                          

  FINKELSTEIN EMPLOYMENT AGREEMENT.  Mr. Finkelstein's employment agreement,
dated as of April 30, 1997, has a three year term. It provides Mr. Finkelstein  
with a base salary of $295,000 for the first year, $335,000 for the second year 
and $375,000 for the third year. Mr. Finkelstein is also entitled to receive an 
annual incentive bonus to be determined by the Compensation Committee of the    
Board of Directors. The incentive bonus will not be less than $100,000 for each 
year. Mr. Finkelstein's employment agreement also provides for other employee   
benefits such as a car allowance, life insurance, health care, and certain      
disability and death benefits. In addition, Mr. Finkelstein was granted options 
to purchase 12,168,000 shares of class A common stock at an exercise price of   
$.245 per share after giving effect to the recent stock splits, which options   
are immediately exercisable and expire 10 years from their grant. We registered 
these shares of class A common stock under the Securities Act upon the          
consummation of our initial public offering.                                    

Except in the case of disability, we may terminate Mr. Finkelstein's    
employment only for cause, upon which termination Mr. Finkelstein will have no  
right to receive any compensation or benefit from us. If the agreement is       
terminated without cause, or if Mr. Finkelstein terminates employment for good  
reason, we will be obligated to pay to Mr. Finkelstein his base salary, bonus   
and benefits that are accrued and unpaid as of the date of termination, as well 
as an amount equal to one and a half time his base salary as then in effect.    
"Good reason" includes                                                          

- a reduction in the nature or scope of Mr. Finkelstein's titles,       
authorities, powers, duties or responsibilities;                    

    - a change in the method or formula for determining the bonus, which results
in a decrease in the amount of bonus payable to Mr. Finkelstein;    

- the removal of Mr. Finkelstein as a member of the Board of Directors, 
unless such removal occurs after termination of Mr. Finkelstein's   
employment for cause;                                               

    - a sale of all or substantially all of the ownership interests or assets of
   our company, or a merger or consolidation of our company with any other
corporation or entity;                                              

    - a change in control of our company, defined as any person or entity, other
    than Mr. Garofalo, becoming a beneficial owner, as defined in Rule 13d-3
of the Securities Exchange Act of 1934, directly or indirectly, of  
     securities of our company representing 50% or more of the combined voting
power of our then outstanding securities; or                        

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- a material breach by us of our affirmative or negative covenants or   
  undertakings in the employment agreement, and a failure to remedy such
breach within 15 days.                                              

    Pursuant to the agreement, Mr. Finkelstein has agreed not to compete with us
for a period of one year following termination of the agreement. During such    
non-compete period, Mr. Finkelstein will be entitled to receive an amount equal 
to his base salary as in effect on the date of termination, so long as the      
agreement was not terminated prior to the expiration of the term by either      
party.                                                                          

    GALLUCCIO EMPLOYMENT AGREEMENT.  Mr. Galluccio's employment agreement, dated
as of August 31, 1998, has a one year term and contains a one-year renewal      
option which was exercised by the Company. It provides Mr. Galluccio with an    
annual base salary of $225,000 for the current year. Mr. Galluccio is also      
entitled to receive an annual incentive bonus, which is dependent upon our      
performance, to be determined by the Compensation Committee of the Board of     
Directors. If approved by the Compensation Committee, the incentive bonus has an
initial target of 20% of Mr. Galluccio's base salary. Mr. Galluccio's employment
agreement also provides for other employee benefits such as the right to        
participate in all group health and insurance programs. In addition,            
Mr. Galluccio was granted options to purchase 300,000 shares of class A common  
stock at an exercise price of $5.25 per share. These shares have been registered
under the Securities Act on Form S-8.                                           

 Except in the case of disability or a change of control, we may terminate
Mr. Galluccio's employment only for cause, upon which termination Mr. Galluccio 
will have no right to receive any compensation or benefit from us. If           
Mr. Galluccio's employment is terminated for any reason other than for cause, or
in the event that there is a change of control of our company and Mr. Galluccio 
is requested, in connection with such change of control, to perform his duties  
under this agreement on a regular, full-time basis at a location further than 75
miles from Mr. Galluccio's current principal office location, Mr. Galluccio, in 
his sole and absolute discretion, may deem this agreement to be terminated by us
without cause. Upon such termination, Mr. Galluccio will be entitled to receive 
his base salary for the remaining term of his employment agreement, all         
previously earned and accrued entitlements and benefits from us and our employee
benefit plans, and an amount equal to 25% of Mr. Galluccio's base salary.       

 Mr. Galluccio has agreed not to compete with us or any affiliated company
for a period of two years following the termination of his employment agreement.

    BENEDETTO EMPLOYMENT AGREEMENT.  Mr. Benedetto's employment agreement, dated
as of August 31, 1998, has a three and one-half year term. It provides          
Mr. Benedetto with an annual base salary of $225,000 for the current year.      
Mr. Benedetto is also entitled to receive an annual incentive bonus, which is   
dependent upon our performance, to be determined by the Compensation Committee  
of the Board of Directors. If approved by the Compensation Committee, the       
incentive bonus has an initial target of 20% of Mr. Benedetto's base salary.    
Mr. Benedetto's employment agreement also provides for other employee benefits  
such as the right to participate in all group health and insurance programs. In 
addition, Mr. Benedetto was granted options to purchase 300,000 shares of       
class A common stock at an exercise price of $5.25 per share. These shares have 
been registered under the Securities Act on Form S-8.                           

 Except in the case of disability or a change of control, we may terminate
Mr. Benedetto's employment only for cause, upon which termination Mr. Benedetto 
will have no right to receive any compensation or benefit from us. If           
Mr. Benedetto's employment is terminated for any reason other than for cause, or
in the event that there is a change of control of our company and Mr. Benedetto 
is requested, in connection with such change of control, to perform his duties  
under this agreement on a regular, full-time basis at a location further than 75
miles from Mr. Benedetto's current principal office location, Mr. Benedetto, in 
his sole and absolute discretion, may deem this agreement to be terminated by us
without cause. Upon such termination, Mr. Benedetto will be entitled to receive 
his base salary for the remaining term of his employment agreement, all         
previously earned and accrued entitlements and benefits from us and our employee
benefit plans, and an amount equal to 25% of Mr. Benedetto's base salary.       

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 Mr. Benedetto has agreed not to compete with us or any affiliated company
for a period of two years following termination of his employment agreement.    

  TANZI EMPLOYMENT AGREEMENT.  Mr. Tanzi's employment agreement, dated as of
August 31, 1998, has a two year term. It provides Mr. Tanzi with an annual base 
salary of $225,000 for the current year. Mr. Tanzi is also entitled to receive  
an annual incentive bonus, which is dependent upon our performance, to be       
determined by the Compensation Committee of the Board of Directors. If approved 
by the Compensation Committee, the incentive bonus has an initial target of 40% 
of Mr. Tanzi's base salary. Mr. Tanzi's employment agreement also provides for  
other employee benefits such as the right to participate in all group health and
insurance programs. In addition, Mr. Tanzi was granted options to purchase      
300,000 shares of class A common stock at an exercise price of $5.25 per share. 
These shares have been registered under the Securities Act on Form S-8.         

Except in the case of disability or change of control, we may terminate 
Mr. Tanzi's employment only for cause, upon which termination Mr. Tanzi will    
have no right to receive any compensation or benefit from us. If Mr. Tanzi's    
employment is terminated for any reason other than for cause, or in the event   
that there is a change of control of our company and Mr. Tanzi is requested, in 
connection with such change of control, to perform his duties under this        
agreement on a regular, full-time basis at a location further than 75 miles from
Mr. Tanzi's current principal office location, Mr. Tanzi, in his sole and       
absolute discretion, may deem this agreement to be terminated by us without     
cause. Upon such termination, Mr. Tanzi will be entitled to receive his base    
salary for the remaining term of his employment agreement, all previously earned
and accrued entitlements and benefits from us and our employee benefit plans,   
and an amount equal to 25% of Mr. Tanzi's base salary.                          

   Mr. Tanzi has agreed not to compete with us or any affiliated company for a
period of two years following termination of his employment agreement.          

1997 AND 1998 INCENTIVE STOCK PLANS                                             

  We have adopted the 1997 Incentive Stock Plan and the 1998 Incentive Stock
Plan pursuant to which key employees, officers and directors (including         
independent directors and members of the Compensation Committee) of our company 
and its subsidiaries who have substantial responsibility in the direction of our
company and its subsidiaries, and others whom the option committee determines   
provide substantial and important services to our company, may be granted       
(i) incentive stock options ("ISOs") and/or (ii) non-qualified stock options    
("NQSOs" and, together with ISOs, "Stock Options"). The aggregate number of     
shares of the class A common stock that may be the subject of Stock Options     
under the Incentive Stock Plans is 28,000,000 (8,000,000 under the 1997         
Incentive Stock Plan and 20,000,000 under the 1998 Incentive Stock Plan), and   
the maximum number of shares of class A common stock available with respect to  
Stock Options granted to any one grantee is 2,000,000 (800,000 under the 1997   
Incentive Stock Plan and 1,200,000 under the 1998 Incentive Stock Plan) shares. 

The exercise price of all ISOs is the fair market value of the class A  
common stock on the date of grant (or 110% of such fair market value with       
respect to ISOs granted to persons who own stock possessing more than 10% of the
voting rights of our company's capital stock), and the exercise price of all    
NQSOs is determined by the Compensation Committee, although the initial awards  
will be made at fair market value of the class A common stock on the date of    
grant. Stock Options vest and become exercisable over a period of years, as     
determined by the Compensation Committee, and have a term not to exceed ten     
years.                                                                          

If a grantee's employment with us is terminated because of the grantee's
death, or the grantee's retirement on or after attaining the age which the      
company may from time to time establish as the retirement age for any class of  
its employees, or the age specified in the employment agreement with such       
grantee, prior to the date when the Stock Option is by its terms exercisable,   
the Stock Option will be immediately exercisable as of the date of the          
termination of the grantee's employment, subject to the other terms of the      
Incentive Stock Plans. Upon a "change in control" of our company (as defined in 
the                                                                             

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Incentive Stock Plans), each holder of a Stock Option will have the right to    
exercise the Stock Option in full without regard to any waiting period,         
installment period or other limitation or restriction thereon, and the right,   
exercisable by written notice within 60 days after the change in control, to    
receive in exchange for the surrender of an option an amount of cash equal to   
the difference between the fair market value of the class A common stock on the 
date of exercise and the exercise price of the Stock Option. For options granted
under the 1998 Incentive Stock Plan on or after November 13, 1998, in the event 
of a change in control, the Board of Directors may in its sole discretion       
determine (i) that each holder of such a Stock Option will have the right to    
exercise the Stock Option in full without regard to any waiting period,         
installment period or other limitation or restriction thereon, and/or (ii) each 
holder of such a Stock Option will have the right, exercisable by written notice
within 60 days after the change of control, to receive, in exchange for the     
surrender of a Stock Option, an amount of cash equal to the difference between  
the fair market value of the class A common stock on the date of exercise and   
the exercise price of the Stock Option. Alternatively, the board of directors   
may in its sole discretion determine to take neither action. Upon a grantee's   
termination of employment from our company or a subsidiary on account of        
disability, the grantee or the legal representative of the grantee will have the
right, for a period of one year following the date of such termination, to      
exercise a Stock Option, to the extent such award is exercisable and to the     
extent such Stock Option has not yet expired. In the event the grantee's        
employment with us is terminated for any reason other than disability, death or 
retirement, the grantee may exercise a Stock Option within three months after   
his or her termination of employment.                                           

INDEMNIFICATION AGREEMENTS                                                      

 We have entered into indemnification agreements with certain officers and
directors. The indemnification agreements provide for indemnification of such   
directors and officers to the fullest extent authorized or permitted by law. The
indemnification agreements also provide that:                                   

- we will advance all expenses incurred by the director or officer in   
defending certain litigation,                                       

  - we will appoint in certain circumstances an independent legal counsel to
     determine whether the director or officer is entitled to indemnification,
and                                                                 

- we will continue to maintain a directors' and officers' liability     
      insurance (which currently consists of $25.0 million of primary coverage).

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

The Compensation Committee consists of Messrs. Rockefeller and White.   
Neither member of the Compensation Committee served as an officer or employee of
our company or any of its subsidiaries during fiscal 1998. There were no        
material transactions between us and any of the members of the Compensation     
Committee during fiscal 1998.                                                   

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRADEMARK LICENSE AGREEMENT.  We are a party to a ten year royalty free 
license agreement with Metromedia Company, pursuant to which Metromedia Company 
has granted us a nonexclusive, nontransferable and nonassignable right and      
license, without the right to grant sublicenses and to use the trade name,      
trademark and corporate name Metromedia in the United States and worldwide. The 
license agreement with Metromedia Company can be terminated by Metromedia       
Company upon one month's prior written notice in the event that:                

- Metromedia Company or its affiliates own less than 20% of the common  
stock;                                                              

- a change in control of our company occurs; or                         

  - any of the stock or all or substantially all of the assets of any of our
      subsidiaries are sold or transferred, in which case, the license agreement
   with Metromedia Company will terminate with respect to such subsidiary.

A change in control of our company for purpose of the trademark license 
agreement is defined as:                                                        

- a transaction in which a person or group, within the meaning of       
     Section 13(d)(3) of the Securities Exchange Act of 1934, not in existence
    at the time of the execution of the Metromedia license agreement becomes
    the beneficial owner of stock entitling such person or group to exercise
 50% or more of the combined voting power of all classes of our stock;

  - a change in the composition of our Board of Directors whereby a majority
     of the members are not directors serving on the Board of Directors at the
time of the license agreement with Metromedia Company, or any person
      succeeding such director who was recommended or elected by such directors;

- a reorganization, merger or consolidation where following consummation
thereof, Metromedia Company would hold less than 20% of the combined
voting power of all classes of our stock;                           

   - a sale or other disposition of all or substantially all of our assets; or

  - any transaction the result of which would be that the common stock would
 not be required to be registered under the Securities Exchange Act of
   1934, and the holders of common stock would not receive common stock of
    the survivor to the transaction which is required to be registered under
the Securities Exchange Act of 1934.                                

In addition, Metromedia Company has reserved the right to terminate this
trademark license agreement in its entirety immediately upon written notice to  
us if, in Metromedia Company's sole judgment, our continued use of Metromedia as
a trade name would jeopardize or be detrimental to the good will and reputation 
of Metromedia Company.                                                          

   We have agreed to indemnify Metromedia Company and hold it harmless against
any and all losses, claims, suits, actions, proceedings, investigations,        
judgments, deficiencies, damages, settlements, liabilities and reasonable legal 
expenses, and other related expenses, arising in connection with the license    
agreement with Metromedia Company.                                              

As long as the Notes are listed on the Luxembourg Stock Exchange, the   
Company will maintain a copy of the license agreement at the specified office of
the paying agent in Luxembourg.                                                 

MANAGEMENT AGREEMENT.  We are a party to the management agreement under 
which Metromedia Company provides us with consultation and advisory services    
relating to legal matters, insurance, personnel and other corporate policies,   
cash management, internal audit and finance, taxes, benefit plans and other     
services as we may reasonably request. The management agreement terminates on   
December 31 of each year, and is automatically renewed for successive one year  
terms unless either party terminates upon                                       

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60 days prior written notice. We are also obligated to reimburse Metromedia     
Company all its out-of-pocket costs and expenses incurred and advances paid by  
Metromedia Company in connection with the management agreement. In this         
agreement, we have agreed to indemnify Metromedia Company and hold it harmless  
from and against any and all damages, liabilities, losses, claims, actions,     
suits, proceedings, fees, costs or expenses, including reasonable attorneys'    
fees and other costs and expenses incident to any suit, proceeding or           
investigation of any kind imposed on, incurred by or asserted against Metromedia
Company in connection with the management agreement. In 1997, Metromedia Company
received no money for its out-of-pocket costs and expenses or for interest on   
advances extended by it to us under the management agreement. For the year ended
December 31, 1998, we incurred $500,000 to Metromedia Company under this        
agreement. The management fee for 1999 under the agreement is $1,000,000,       
payable quarterly at a rate of $250,000.                                        

As long as the Notes are listed on the Luxembourg Stock Exchange, the   
Company will maintain copies of the management agreement at the specified office
of the paying agent in Luxembourg.                                              

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SECURITY OWNERSHIP

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                  

The following table provides you with certain information, as of        
September 30, 1999, regarding the beneficial ownership of our voting stock after
giving effect to the stock split by (i) each of our directors and director      
nominees, (ii) each person whom we believe beneficially owns more than 5% of our
outstanding voting stock, (iii) each Named Executive Officer and (iv) all our   
executive officers and directors as a group. In accordance with the             
rules promulgated by the Securities and Exchange Commission, the ownership      
includes shares currently owned as well as shares which the named person has the
right to acquire beneficial ownership of within 60 days, including through the  
exercise of options, warrants or other rights, or through the conversion of a   
security. Accordingly, more than one more person may be deemed to be a          
beneficial owner of the same securities. Except as otherwise indicated, each    
stockholder listed below has sole voting and investment power of the shares     
beneficially owned by that person. Some of the stockholders listed below intend 
to dispose of a portion of their shares in a concurrent offering. See "Recent   
and Proposed Transactions."                                                     

                                                        [Enlarge/Download Table]

                                           CLASS A                   CLASS B                             
                                        COMMON STOCK             COMMON STOCK(1)                         
                                  -------------------------  ------------------------                    
                                    NUMBER         PERCENT     NUMBER        PERCENT       PERCENT OF    
                                  OF SHARES        OF CLASS  OF SHARES       OF CLASS  TOTAL VOTING POWER
                                  ----------       --------  ----------      --------  ------------------
                                                                                                         
Stephen A. Garofalo.............. 45,495,512(2)      22.5%       --            --              8.4%      
Metromedia Company(3)............     --             --      31,462,048        93.2%          58.6%      
Putnam Investments, Inc.......... 29,056,060(4)      14.6%       --            --              5.4%      
FMR Corp......................... 13,344,000(5)       6.7%       --            --              2.4%      
Howard M. Finkelstein............ 12,218,000(6)       5.8%       --            --              2.2%      
Vincent A. Galluccio.............  1,524,015(7)      *   %       --            --           *            
Gerard Benedetto.................    475,000(8)      *           --            --           *            
Nicholas M. Tanzi................    366,880(9)      *           --            --           *            
Silvia Kessel....................    510,472(10)     *           --            --           *            
John W. Kluge....................  2,028,000(11)        1%   31,462,048(12)    93.2%          59.0%      
David Rockefeller................  2,829,104(13)      1.4%       --            --           *            
Stuart Subotnick.................  2,028,000(11)        1%   33,769,272(12)   100.0%          62.9%      
Arnold L. Wadler.................    615,344(10)     *           --            --           *            
Leonard White....................     46,000(14)     *           --            --           *            
Sherman Tuan.....................  1,074,889(15)     *           --            --           *            
David Rand.......................    455,175(16)     *           --            --           *            
All Directors and Executive                                                                              
  Officers as a Group............ 69,626,391(17)     31.5%   33,769,272       100.0%          75.9%      

------------------------                                                        

*   less than 1.0%                                                              

(1) The shares of class B common stock are convertible into shares of class A   
    common stock at the rate of one share of class A common stock for each share
  of class B common stock, and the holders of shares of class B common stock
are entitled to 10 votes per share.                                     

(2) Includes presently exercisable options to purchase 3,042,000 shares of      
class A common stock at an exercise price of $.245 per share of which   
  2,882,000 are held by the Stephen A. Garofalo 1999 Annuity Trust No. 1 and
160,000 are held by the Stephen A. Garofalo 1999 Annuity Trust No. 2.   
 Mr. Garofalo is the trustee of both trusts. Mr. Garofalo's address is One
North Lexington Avenue, White Plains, New York, New York 10601.         

(3) Metromedia Company's address is One Meadowlands Plaza, East Rutherford, NJ  
07073.                                                                  

(4) Based solely upon the Schedule 13G, dated February 2, 1999 filed by Putnam  
Investments, Inc. Putnam Investments, Inc's address is One Post Office  
Square, Boston, Massachusetts, 02109.                                   

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(5) Based solely on the Schedule 13G, dated February 16, 1999 filed by FMR      
Corp., Edward C. Johnson III and Abigail P. Johnson. FMR's address is 82
Devonshire Street, Boston, Massachusetts 02109.                         

(6) Includes presently exercisable options to purchase 12,168,000 shares of     
class A common stock at an exercise price of $.245 per share and 50,000 
    shares of class A common stock owned by members of Mr. Finkelstein's family.
  Mr. Finkelstein's address is One North Lexington Avenue, White Plains, New
York, New York 10601.                                                   

(7) Includes presently exercisable options to purchase 1,131,840 and 325,000    
  shares of class A common stock at an exercise price of $.245 and $2.00 per
share, respectively and 17,175 shares owned by his spouse.              

(8) Includes presently exercisable options to purchase 350,000 and 75,000 shares
    of class A common stock at an exercise price of $1.9375 and $5.25 per share,
respectively.                                                           

(9) Includes presently exercisable options to purchase 285,000, 75,000 and 880  
shares of class A common stock at an exercise price of $2.00, $5.25 and 
$.95375 per share, respectively. Also includes 5,200 shares of class A  
  common stock owned by members of Mr. Tanzi's family, with respect to which
    Mr. Tanzi has been granted a proxy to vote. Mr. Tanzi's address is One North
Lexington Avenue, White Plains, New York 10601.                         

(10) Includes 405,600 presently exercisable options to acquire shares of        
    class A common stock at an exercise price of $.245 per share held by each of
Ms. Kessel and Mr. Wadler. Does not include shares owned by Metromedia  
 Company. Ms. Kessel and Mr. Wadler are employed by Metromedia Company and
disclaim beneficial ownership of the shares owned by Metromedia Company.

(11) Consists of 2,028,000 presently exercisable options to acquire shares of   
    class A common stock at an exercise price of $.245 per share held by each of
 Mr. Kluge and Mr. Subotnick. Mr. Kluge's address is 215 East 67th Street,
   New York, NY 10021 and Mr. Subotnick's address is 215 East 67th Street, New
York, NY 10021.                                                         

(12) Includes 31,462,048 shares owned by Metromedia Company. Messrs. Kluge and  
Subotnick, directors of our company, are general partners of Metromedia 
Company.                                                                

(13) Represents 2,789,104 shares owned by DR & Descendants LLC, of which        
Mr. Rockefeller is Managing Member and for which he exercises voting and
investment power plus presently exercisable options in his own name to  
    purchase 40,000 shares of class A common stock at an exercise price of $2.00
  per share. Mr. Rockefeller disclaims actual beneficial ownership of shares
   owned by DR & Descendants LLC except as to one seventh ( 1/7) of the shares
  attributable to his proportionate interest in the LLC. The other interests
of the LLC are owned by Mr. Rockefeller's six children.                 

(14) Includes 40,000 presently exercisable options to acquire shares of class A 
common stock at an exercise price of $2.00 per share.                   

(15) Includes presently exercisable options to purchase                         
    205,625, 146,875, 11,750, 284,025, 5,875 and 35,250 shares of class A common
stock at an exercise price of $.018, $.171,, $.511, $4.25, $5.16 and    
$33.192, respectively.                                                  

(16) Includes presently exercisable options to purchase                         
10,260, 58,750, 11,750, 237,937, 15,875, 58,750 and 35,250 shares of  
  class A common stock at an exercise price of $.052, $.171, $.171, $.511,
$4,256, $5.16, $22.208 and $33.192, respectively.                     

(17) Includes presently exercisable options to acquire 21,209,040, 880, 350,000,
690,800, 150,000, 10,260, 205,625, 23,500, 521,962, 11,750, 58,750 and  
70,500 shares of class A common stock at an exercise price of $.245,    
$.95375, $1.9375, $2.00, $5.25, $.052, $.511, $4.256, $5.16, $22.208 and
$33.192, respectively.                                                  

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DESCRIPTION OF OTHER INDEBTEDNESS 

DESCRIPTION OF OUR 10% SENIOR NOTES DUE 2008                                    

 GENERAL.  On November 25, 1998 we issued $650 million of 10% Senior Notes
due 2008 pursuant to an indenture between us and IBJ Schroeder Bank and Trust   
Company (which has been succeeded by The Bank of New York), as trustee. On      
May 26, 1999, we consummated an offer to exchange those notes for $650 million  
of 10% Senior Notes due 2008 that had been registered under the Securities Act. 

    PRINCIPAL, MATURITY AND INTEREST.  The 10% Senior Notes due 2008 are limited
in aggregate principal amount to $650 million and will mature on November 15,   
2008. Interest on the 10% Senior Notes due 2008 accrues at 10% per annum and is 
payable semiannually in arrears on May 15 and November 15 of each year.         

    RANKING  The 10% Senior Notes due 2008 are our unsecured senior obligations,
that rank equally in right of payment with all of our existing and future senior
unsecured obligations and rank senior in right of payment to all of our future  
subordinated obligations. The 10% Senior Notes due 2008, however, are           
effectively subordinated to all of our existing and future secured indebtedness 
to the extent of the assets that secure that indebtedness and to all of our     
subsidiaries existing and future obligations, whether or not secured.           

REDEMPTION.  The 10% Senior Notes due 2008 are redeemable on or after   
November 15, 2003, at our option, in whole or in part, at the following         
redemption prices (expressed as percentages of principal amount) described below
plus accrued interest, if redeemed during the twelve-month period beginning on  
November 15 of the years indicated below:                                       

                                                                [Download Table]

YEAR                                                          PERCENTAGE
----                                                          ----------
                                                                        
2003........................................................    105.000%
2004........................................................    103.333%
2005........................................................    101.667%
2006 and thereafter.........................................    100.000%

    In addition, at any time on or before November 15, 2001, we may redeem up to
35% of the original aggregate principal amount of the 10% Senior Notes due 2008 
with the net proceeds of a sale of common equity at a redemption price equal to 
110% of the principal amount thereof, plus accrued interest, provided that at   
least 65% of the original aggregate principal amount of 10% Senior Notes due    
2008 remains outstanding after such redemption and provided further, that we use
the net cash proceeds of any public equity offering resulting in gross proceeds 
of at least $100 million. Except in connection with a change of control or an   
asset sale, as defined in the indenture relating to the 10% Senior Notes due    
2008, of our company, we are not required to make mandatory redemption or       
sinking fund payments with respect to the 10% Senior Notes due 2008.            

COVENANTS.  The indenture relating to the 10% Senior Notes due 2008     
restricts, among other things, our ability to incur additional indebtedness, pay
dividends or make certain other restricted payments, incur certain liens, sell, 
assign, transfer, lease, convey or otherwise dispose of substantially all of our
assets, enter into certain transactions with affiliates, or incur certain       
indebtedness. The indenture relating to the 10% Senior Notes due 2008 permits,  
under certain circumstances, our subsidiaries to be deemed unrestricted         
subsidiaries and thus not subject to the restrictions of the indenture.         

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   EVENTS OF DEFAULT.  The indenture relating to the 10% Senior Notes due 2008
contains standard events of default, including:                                 

- defaults in the payment of principal, premium or interest;            

- defaults in the compliance with covenants contained in the indenture; 

- cross defaults on more than $15 million of other indebtedness;        

- failure to pay more than $15 million of judgements; and               

- certain events of our subsidiaries.                                   

RECENT AND PROPOSED TRANSACTIONS

OFFERING OF DECS SECURITIES                                                     

    Concurrently with the offering described in this prospectus supplement, some
of our stockholders intend to enter into prepaid forward contracts with DECS    
Trust VI, under which DECS Trust VI will agree to purchase from those           
stockholders on November 15, 2002 (which date may be extended to February 15,   
2003) an aggregate of up to 10,000,000 (excluding the over-allotment option)    
shares of class A common stock beneficially owned by those stockholders subject 
to the terms and conditions set forth in those contracts. Stockholders who enter
into these prepaid forward contracts will continue to beneficially own and vote 
these shares until such future date. We understand that DECS Trust VI will      
concurrently sell an aggregate of 10,000,000 (excluding the over-allotment      
option) DECS securities. We will receive no portion of the proceeds from these  
transactions.                                                                   

SALE OF CLASS A COMMON STOCK BY THE SELLING STOCKHOLDERS                        

    Concurrently with the offering described in this prospectus supplement, some
of our stockholders intend to sell 4,895,000 (excluding the over-allotment      
option) shares of class A common stock. Each share of class A common stock will 
be sold at $39 7/16 per share resulting in $193,046,563 aggregate gross proceeds
to those stockholders. We will receive no portion of the proceeds from this     
sale.                                                                           

 Neither of the transactions described above nor the offering described in
this prospectus supplement is conditioned upon any of the other transactions.   

PROPOSED INVESTMENT BY BELL ATLANTIC                                            

On October 7, 1999, Bell Atlantic entered into a securities purchase    
agreement with us, under which Bell Atlantic has agreed to purchase             
approximately 25.6 million newly issued shares of our class A common stock at a 
price of $28.00 per share and a convertible subordinated note of approximately  
$975.3 million, which note is convertible into shares of our class A common     
stock at a conversion price of $34.00 per share. The closing of these           
transactions under the securities purchase agreement is subject to:             

    - the expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended;                               

- approvals from various regulatory authorities;                        

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- with respect to that portion of the issuance of the shares and the    
    convertible subordinated note in the aggregate in excess of 19.9% of the
     number of shares of our common stock outstanding at the closing (assuming
    conversion of the note to be acquired by Bell Atlantic), the approval of
our stockholders; and                                               

- other customary closing conditions.                                   

 At the closing of the issuance and sale of the shares and the convertible
subordinated note, we will enter into an indenture with U.S. Bank Trust National
Association, as trustee, governing the terms of the convertible subordinated    
note. In addition, we will enter into registration rights agreements giving Bell
Atlantic registration rights with respect to the shares and the convertible     
subordinated note at the closing of the issuance and sale of the shares and the 
convertible subordinated note.                                                  

As a condition to closing, we have agreed to enter into a stockholders' 
agreement with Bell Atlantic, together with Metromedia Company, Mr. John W.     
Kluge and Mr. Stuart Subotnick. Under the stockholders agreement, except under  
certain circumstances, Bell Atlantic will agree to a "standstill" provision     
under which it will agree not to acquire more that 22% of our common stock and  
will not participate in certain acquisition proposals, tender offers, proxy     
solicitations or similar transactions with respect to us without the consent of 
our board of directors for a period of ten years. The parties to the            
stockholders agreement will also agree to a number of restrictions on their     
respective abilities to sell the shares of our common stock which they own      
during a period of two years following closing of the transactions contemplated 
by the securities purchase agreement. In addition, the stockholders agreement   
will provide for certain tag-along rights and rights of first refusal among the 
parties. Metromedia Company and Messrs. Kluge and Subotnick will agree to vote  
all of their shares of class B common stock (which constitute approximately 63% 
of the voting power of our common stock) in favor of the issuance of the shares 
and the convertible subordinated note in the aggregate in excess of 19.9% of the
number of shares of our common stock outstanding at the closing. Bell Atlantic  
will also have the right to have an observer at meetings of our board of        
directors, and after converting the convertible subordinated note into shares of
class A common stock, Bell Atlantic will have the right to appoint two directors
to our board of directors.                                                      

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DESCRIPTION OF THE NOTES

  THIS DESCRIPTION OF THE TERMS OF THE 10% SENIOR NOTES DUE 2009 DENOMINATED
IN U.S. DOLLARS (THE "DOLLAR NOTES") AND THE 10% SENIOR NOTES DUE 2009          
DENOMINATED IN EUROS (THE "EURO NOTES" AND, TOGETHER WITH THE DOLLAR NOTES, THE 
"NOTES") SUPPLEMENTS AND, TO THE EXTENT INCONSISTENT, MODIFIES THE DESCRIPTION  
OF THE GENERAL TERMS AND PROVISIONS OF THE DEBT SECURITIES SET FORTH IN THE     
ACCOMPANYING PROSPECTUS, TO WHICH REFERENCE IS MADE.                            

    The following description of material terms of the Notes does not purport to
be complete and is qualified in its entirety by reference to the Indenture to be
dated November 17, 1999 (the "Indenture"), between Metromedia Fiber Network,    
Inc. and The Bank of New York, as trustee (the "Trustee") and to those terms    
made part of the Indenture by reference to the Trust Indenture Act of 1939, as  
amended (the "Trust Indenture Act"). We have filed the proposed form of the     
Indenture as Exhibit 4.3 to the Registration Statement, of which this prospectus
supplement and the accompanying prospectus form a part. References in this      
"Description of the Notes" to the "Company" or the "Issuer" refer to Metromedia 
Fiber Network, Inc. only and not its subsidiaries. Terms (whether or not        
capitalized) used but not defined herein have the meanings given to them in the 
Indenture.                                                                      

GENERAL                                                                         

 The Dollar Notes and the Euro Notes are each to be issued pursuant to the
Indenture. The terms of the Notes will include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act. The   
Notes will be subject to all such terms, and Holders of Notes are referred to   
the Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Indenture does not purport to be      
complete and is qualified in its entirety by reference to the Indenture,        
including the definitions therein of certain terms used below. The definitions  
of certain terms used in the following summary are set forth below under        
"--Certain Definitions." For purposes of this summary, the term "Company" refers
only to Metromedia Fiber Network, Inc. and not to any of its Subsidiaries.      

As of the Issue Date, all of the Subsidiaries will be Restricted        
Subsidiaries. Under certain circumstances, the Company will be able to designate
existing or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted      
Subsidiaries will not be subject to many of the restrictive covenants contained 
in the Indenture. Neither the Company's investment in ION nor its investment in 
the joint venture constructing the German Network will be considered            
Subsidiaries for purposes of the Indenture.                                     

TERMS OF NOTES                                                                  

   The Notes will be general obligations of the Company and will rank equal in
right of payment with all existing and future unsecured senior Indebtedness of  
the Company. The Notes will rank senior in right of payment to all subordinated 
Indebtedness of the Company that may be issued in the future, if any. The Notes 
will not be secured by any assets and, therefore, will be effectively           
subordinated to any existing and future secured Indebtedness of the Company and 
its Subsidiaries, including the Credit Agreement, to the extent of the value of 
the assets securing such Indebtedness.                                          

The Company conducts substantially all of its operations through its    
Subsidiaries and, therefore, the Company is dependent on the cash flow of its   
Subsidiaries to meet its obligations, including its obligations with respect to 
the Notes. The Notes will be effectively subordinated to all Indebtedness and   
other liabilities and commitments (including trade payables and lease           
obligations) of the Company's Subsidiaries, including any Guarantees of such    
Subsidiaries with respect to the Credit Agreement. Any right of the Company to  
receive assets of any of its Subsidiaries upon the latter's liquidation or      
reorganization (and the consequent right of the Holders of the Notes to         
participate in those assets) will be effectively subordinated to the claims of  
that Subsidiary's creditors, except to the extent that the Company is itself    
recognized as a                                                                 

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creditor of such Subsidiary, in which case the claims of the Company would still
be subordinate to any security in the assets of such Subsidiary and any         
indebtedness of such Subsidiary that is senior to that held by the Company. See 
"Risk Factors Relating to the Notes."                                           

PRINCIPAL, MATURITY AND INTEREST                                                

The Dollar Notes will be limited in aggregate principal amount to       
$750 million and the Euro Notes will be limited in aggregate principal amount to
[EURO]250 million. The Notes will mature on December 15, 2009 at a price equal  
to 100% of the principal amount. Interest on the Dollar Notes and the Euro Notes
will accrue at the rate of 10% and 10% per annum, respectively, and will be     
payable semi-annually in arrears on June 15 and December 15, commencing         
June 15, 2000, to Holders of record on the immediately preceding June 1 and     
December 1 until payment in full of the principal of the Notes has been made or 
duly made available for payment. Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,   
from the date of original issuance. Interest will be computed on the basis of a 
360-day year comprised of twelve 30-day months. Interest on overdue principal   
and (to the extent permitted by law) on overdue installments of interest will   
accrue at a rate equal 1% per annum in excess of the rate borne by the Notes.   
For additional information concerning payments on the Notes. See "--Book Entry, 
Delivery and Form--Payment on the Notes."                                       

 We have appointed The Bank of New York to serve as register and principal
paying agent for the Notes. Application has been made to list the Notes on the  
Luxembourg Stock Exchange. As long as the Notes are listed on the Luxembourg    
Stock Exchange and as long as the rules of this exchange require, we will also  
maintain a paying agent and a transfer agent in Luxembourg. The Dollar Notes    
will be issued in definitive, fully registered, global form, without coupons in 
denominations of $1,000 and integral multiples thereof. The Euro Notes will be  
issued in definitive, fully registered, global form, without coupons in         
denominations of [EURO]1,000 and integral multiples thereof. Except as described
below under "Book Entry, Delivery and Form," owners of beneficial interests in  
global notes will not be entitled to receive physical delivery of certificated  
Notes. The Trustee initially will be Paying Agent and Registrar under the       
Indenture, and the Company may act as Paying Agent or Registrar under the       
Indenture. No service will be made for any registration of transfer or exchange 
of the Senior Notes, but we may require payment to cover any transfer tax or    
similar governmental charge.                                                    

 The Company may, to the extent it is required to do so by applicable law,
deduct or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.                          

OPTIONAL REDEMPTION                                                             

    Except as set forth below, the Notes will not be redeemable at the Company's
option prior to December 15, 2004. Thereafter, the Notes will be subject to     
redemption at any time at the option of the Company, in whole or in part, upon  
not less than 30 nor more than 60 days' notice, at the redemption prices        
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest thereon to the applicable redemption date (subject to the right 
of Holders of record on the relevant record date to receive interest due on the 
relevant interest payment date), if redeemed during the twelve-month period     
beginning on December 15 of the years indicated below:                          

                                                                [Download Table]

                                      PERCENTAGE        PERCENTAGE  
YEAR                               FOR DOLLAR NOTES   FOR EURO NOTES
----                               ----------------   --------------
                                                                    

2004.............................       105.000%         105.000%   

2005.............................       103.333%         103.333%   

2006.............................       101.667%         101.667%   

2007 and thereafter..............       100.000%         100.000%   

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  Notwithstanding the foregoing, at any time prior to December 15, 2002, the
Company may, on any one or more occasions, redeem up to 35% of the aggregate    
principal amount of each of the Dollar Notes and the Euro Notes (determined     
separately) originally issued pursuant to the Indenture at a redemption price of
110% of the principal amount of the Dollar Notes and 110% of the principal      
amount of the Euro Notes, in each case plus accrued and unpaid interest thereon 
to the redemption date (subject to the right of Holders of record on the        
relevant record date to receive interest due on the relevant interest payment   
date), with the Net Cash Proceeds received from any Public Equity Offering made 
by the Company resulting in gross proceeds to the Company of at least           
$100 million; PROVIDED that at least 65% of the aggregate principal amount of   
the Dollar Notes and the Euro Notes (determined separately) originally issued   
pursuant to the Indenture remain outstanding immediately after the occurrence of
any such redemption. The Company may make any such redemption upon not less than
30 nor more than 60 days' notice (but in no event more than 90 days after the   
closing of the related Public Equity Offering).                                 

SELECTION AND NOTICE                                                            

  If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the         
requirements of the principal national securities exchange, if any, on which the
Notes are then listed, or, if the Notes are not so then listed, on a pro rata   
basis, by lot or by such method as the Company shall deem fair and appropriate; 
PROVIDED that no Notes of $1,000 or [EURO]1,000, as the case may be, or less    
shall be redeemed in part. Notices of redemption shall be mailed by first class 
mail at least 30 but not more than 60 days prior to the redemption date to each 
Holder of Notes to be redeemed at its registered address. As long as the Notes  
are listed on the Luxembourg Stock Exchange, such notice will be published in an
authorized newspaper in Luxembourg. Notices of redemption may not be            
conditional. If any Note is to be redeemed in part only, the notice of          
redemption that relates to such Note shall state the portion of the principal   
amount thereof to be redeemed. A new Note in principal amount equal to the      
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption will become due  
on the date fixed for redemption. On and after the redemption date, interest    
will cease to accrue on Notes or portions thereof called for redemption unless  
the Company defaults in the payment thereof.                                    

MANDATORY REDEMPTION                                                            

The Company will not be required to make mandatory redemption or sinking
fund payments with respect to the Notes.                                        

REPURCHASE AT THE OPTION OF HOLDERS                                             

CHANGE OF CONTROL                                                       

  Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to purchase all or any part (equal to $1,000 or
[EURO]1,000, as the case may be, or an integral multiple thereof) of such       
Holder's Notes pursuant to the offer described below (the "Change of Control    
Offer") at a purchase price in cash equal to 101% of the aggregate principal    
amount thereof (the "Change of Control Payment"), plus accrued and unpaid       
interest (and Liquidated Damages, if any) thereon to the date of purchase       
(subject to the right of Holders of record on the relevant record date to       
receive interest due on the relevant interest payment date); provided, that, the
Company shall not be obligated to repurchase Notes pursuant to a Change of      
Control Offer in the event that it has exercised its rights to redeem all of the
Notes pursuant to the Indenture. Within 30 days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or     
transactions that constitute the Change of Control and offering to purchase     
Notes on the date specified in such notice, which date shall be no earlier than 
30 and no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), in accordance with the procedures required by the       
Indenture and described in such notice. As long                                 

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as the Notes are listed on the Luxembourg Stock Exchange, such notice will be   
published in an authorized newspaper in Luxembourg.                             

The Company will comply with the requirements of Rule 14e-1 under the   
Exchange Act and any other securities laws and regulations to the extent such   
laws and regulations are applicable in connection with the purchase of Notes as 
a result of a Change of Control. To the extent that the provisions of any       
securities laws or regulations conflict with any of the provisions of this      
covenant, the Company will comply with the applicable securities laws and       
regulations and will be deemed not to have breached its obligations under this  
covenant by virtue thereof.                                                     

On the Change of Control Payment Date, the Company will, to the extent  
lawful, (1) accept for payment all Notes or portions thereof properly tendered  
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an   
amount equal to the Change of Control Payment plus accrued and unpaid interest  
thereon in respect of all Notes or portions thereof so tendered and (3) deliver 
or cause to be delivered to the Trustee Notes so accepted together with an      
Officers' Certificate stating the aggregate principal amount of Notes or        
portions thereof being purchased by the Company. The Paying Agent will promptly 
mail or deliver to each Holder of Notes so tendered the Change of Control       
Payment plus accrued and unpaid interest thereon for such Notes, and the Trustee
will promptly authenticate and mail or deliver (or cause to be transferred by   
book entry) to each Holder a new Note equal in principal amount to any          
unpurchased portion of Notes surrendered, if any; PROVIDED that each such new   
Note will be in a principal amount of $1,000 or [EURO]1,000, as the case may be 
or an integral multiple thereof. The Company will publicly announce the results 
of the Change of Control Offer on or as soon as practicable after the Change of 
Control Payment Date.                                                           

   The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture will not contain       
provisions that permit the Holders of the Notes to require that the Company     
purchase or redeem the Notes in the event of a takeover, recapitalization or    
similar transaction. The Company's ability to purchase Notes upon a Change of   
Control may be limited by the Company's then existing financial resources. There
can be no assurance that sufficient funds will be available when necessary to   
make any such required purchases. See "Risk Factors--Purchase of Notes Upon a   
Change of Control." The Company shall not be required to make a Change of       
Control Offer if a third party makes the Change of Control Offer in the manner, 
at the times and otherwise in compliance with the requirements set forth in the 
Indenture and purchases all Notes validly tendered and not withdrawn.           

ASSET SALES                                                             

    The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, consummate any Asset Sale, unless (i) the Company   
(or such Restricted Subsidiary, as the case may be) receives consideration at   
the time of such Asset Sale at least equal to the fair market value (as         
determined in good faith by the Board of Directors (including as to the value of
all noncash consideration) and set forth in an Officer's Certificate delivered  
to the Trustee) of the assets or Equity Interests issued or sold or otherwise   
disposed of and (ii) at least 75% of the consideration therefor is in the form  
of cash and/or Cash Equivalents or Telecommunications Assets, and (iii) the Net 
Cash Proceeds received by the Company (or such Restricted Subsidiary, as the    
case may be) from such Asset Sale are applied within 360 days following the     
receipt of such Net Cash Proceeds, to the extent the Company (or such Restricted
Subsidiary, as the case may be) elects, (a) to the permanent redemption or      
repurchase of outstanding Indebtedness (other than Subordinated Indebtedness)   
that is secured Indebtedness (including that in the case of a revolver or       
similar arrangement that makes credit available, such commitment is so          
permanently reduced by such amount) or Indebtedness of the Company or such      
Restricted Subsidiary that ranks equally with the Notes but has a maturity date 
that is prior to the maturity date of the Notes and/or (b) to reinvest such Net 
Cash Proceeds (or any portion thereof) in Telecommunications Assets.            
Notwithstanding anything herein to the contrary, with respect to the            
reinvestment of Net Cash Proceeds, only proceeds from an Asset Sale of          

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assets, or Equity Interests, of a Foreign Subsidiary may be used to retire      
Indebtedness of a Foreign Subsidiary or reinvest in assets or Equity Interests  
of a Foreign Subsidiary. The balance of such Net Cash Proceeds, after the       
application of such Net Cash Proceeds as described in the immediately preceding 
clauses (a) and (b), shall constitute "Excess Proceeds."                        

When the aggregate amount of Excess Proceeds equals or exceeds          
$15.0 million (taking into account income earned on such Excess Proceeds), the  
Company will be required to make a pro rata offer to all Holders of Notes and   
PARI PASSU Indebtedness with comparable provisions requiring such Indebtedness  
to be purchased with the proceeds of such Asset Sale (an "Asset Sale Offer") to 
purchase the maximum principal amount or accreted value in the case of          
Indebtedness issued with an original issue discount of Notes and PARI PASSU     
Indebtedness that may be purchased out of the Excess Proceeds, at a purchase    
price in cash in an amount equal to 100% of the principal amount thereof or the 
accreted value thereof, as applicable, plus accrued and unpaid interest thereon 
to the date of purchase (subject to the right of Holders of record on the       
relevant record date to receive interest due on the relevant interest payment   
date), in accordance with the procedures set forth in the Indenture and the     
agreements governing such PARI PASSU Indebtedness. To the extent that any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use  
such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. 
If the aggregate principal amount of Notes and PARI PASSU Indebtedness tendered 
into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of 
Excess Proceeds, the Company shall select the Notes and PARI PASSU Indebtedness 
to be purchased on a pro rata basis in proportion to the respective principal   
amounts (or accreted values in the case of Indebtedness issued with an original 
issue discount) of the Notes and such other Indebtedness. Upon completion, of   
such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero for 
purposes of the first sentence of this paragraph.                               

The amount of (x) any liabilities (as shown on the Company's (or such   
Restricted Subsidiary's, as the case may be), most recent balance sheet), other 
than Subordinated Indebtedness, of the Company or any Restricted Subsidiary,    
that are assumed by the transferee of any such assets pursuant to an agreement  
that immediately releases the Company and all of its Restricted Subsidiaries    
from all liability in respect thereof, (y) Indebtedness of any Restricted       
Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset  
Sale, if the Company and all of its Restricted Subsidiaries immediately are     
released from all Guarantees of payment of such Indebtedness and such           
Indebtedness is no longer the liability of the Company or any of its Restricted 
Subsidiaries, and (z) any securities, notes or other obligations received by the
Company (or such Restricted Subsidiary, as the case may be) from such transferee
that are contemporaneously (subject to ordinary settlement periods) converted by
the Company (or such Restricted Subsidiary, as the case may be) into cash and/or
Cash Equivalents (to the extent of the cash and/or Cash Equivalents received),  
will be deemed to be cash and/or Cash Equivalents for purposes of this          
provision.                                                                      

CERTAIN COVENANTS                                                               

RESTRICTED PAYMENTS                                                     

    The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any other   
payment or distribution on account of the Company's or any of its Restricted    
Subsidiaries' Equity Interests or to the direct or indirect holders of the      
Company's or any of its Restricted Subsidiaries' Equity Interests in their      
capacity as stockholders (other than dividends or distributions payable in      
Equity Interests (other than Disqualified Stock) of the Company or to the       
Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or    
otherwise acquire or retire for value any Equity Interests of the Company or any
of its Restricted Subsidiaries or any direct or indirect parent of the Company  
(other than any such Equity Interests owned by the Company or any Consolidated  
Subsidiary of the Company); (iii) make any payment on or with respect to, or    
purchase, redeem, defease or otherwise acquire or retire for value any          
Subordinated Indebtedness, except a payment of interest or                      

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principal at Stated Maturity; or (iv) make any Restricted Investment (all such  
payments and other actions set forth in clauses (i) through (iv) above being    
collectively referred to as "Restricted Payments"), unless:                     

 (a) at the time of and after giving effect to such Restricted Payment, no
  Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof,                             

(b) the Company would, at the time of such Restricted Payment and after 
    giving pro forma effect thereto as if such Restricted Payment had been
    made at the beginning of the applicable period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to either
       clause (i) or (ii) of the first paragraph of the covenant described below
       under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock"; and                                                       

    (c) such Restricted Payment, together with the aggregate amount of all other
     Restricted Payments made by the Company and its Restricted Subsidiaries
      on and after the Issue Date (excluding Restricted Payments permitted by,
and made pursuant to, clauses (ii), (iii) and (viii) of the next  
  succeeding paragraph), is less than the sum, without duplication and
    except as credited in the next succeeding paragraph, of (i) 50% of the
 Consolidated Net Income of the Company for the period (taken as one
accounting period) beginning on the last day of the fiscal quarter
    immediately preceding the Issue Date and ending on the last day of the
      fiscal quarter immediately preceding the date of such Restricted Payment
     (or, if such Consolidated Net Income for such period is a deficit, less
      100% of such deficit), plus (ii) 100% of the aggregate Net Cash Proceeds
 received by the Company on and after November 25, 1998 as a Capital
       Contribution or from the issue or sale of Equity Interests of the Company
       (other than Disqualified Stock) or from the issue or sale of Disqualified
 Stock or debt securities of the Company that have been converted or
   exchanged into such Equity Interests (other than Equity Interests (or
      Disqualified Stock or converted debt securities) sold to a Subsidiary of
the Company), plus the amount of Net Cash Proceeds received by the
       Company upon such conversion or exchange, plus (iii) the aggregate amount
       equal to the net reduction in Investments in Unrestricted Subsidiaries on
   and after the Issue Date resulting from (x) dividends, distributions,
      interest payments, return of capital, repayments of Investments or other
      transfers of assets to the Company or any Restricted Subsidiary from any
  Unrestricted Subsidiary, (y) proceeds realized by the Company or any
      Restricted Subsidiary upon the sale of such Investment to a Person other
than the Company or any Subsidiary of the Company, or (z) the     
      redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary,
   not to exceed in the case of any of the immediately preceding clauses
    (x), (y) or (z) the aggregate amount of Restricted Investments made by
      the Company or any Restricted Subsidiary in such Unrestricted Subsidiary
      on and after the Issue Date, plus (iv) to the extent that any Restricted
      Investment that was made on and after the Issue Date is sold for cash or
   otherwise liquidated or repaid for cash, the lesser of, to the extent
    paid to the Company or a Restricted Subsidiary, (A) the cash return of
  capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted
Investment.                                                       

  The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of        
declaration such payment would have complied with the foregoing provisions;     
(ii) the redemption, repurchase, retirement, defeasance or other acquisition of 
any Subordinated Indebtedness or Equity Interests of the Company in exchange    
for, or out of the Net Cash Proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of, Equity Interests of the Company (other 
than any Disqualified Stock); PROVIDED that the amount of any such Net Cash     
Proceeds that are utilized for, and the Equity Interests issued or exchanged    
for, any such redemption, repurchase, retirement, defeasance or other           
acquisition shall be excluded from clause (c) of the preceding paragraph and    
each other clause of this paragraph; (iii) the defeasance, redemption,          
retirement, repurchase or other acquisition of Subordinated Indebtedness with   
the Net Cash Proceeds from, or issued in exchange for, a substantially          
concurrent incurrence of Permitted Refinancing Indebtedness; PROVIDED that the  
amount of any such Net Cash Proceeds that are utilized for any such redemption, 
repurchase,                                                                     

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retirement, defeasance or other acquisition shall be excluded from              
clause (c) of the preceding paragraph and each other clause of this paragraph;  
(iv) the payment of any dividend or other distribution by a Restricted          
Subsidiary of the Company to the holders of its Equity Interests on a pro rata  
basis; (v) the repurchase, redemption or other acquisition or retirement for    
value of any Equity Interests of the Company or any of its Restricted           
Subsidiaries held by any member of the Company's or such Restricted Subsidiary's
management; PROVIDED that the aggregate price paid for all such repurchased,    
redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in 
any fiscal year; (vi) retiring any Equity Interests of the Company to the extent
necessary (as determined in good faith by a majority of the disinterested       
members of the Board of Directors, whose determination shall be evidenced by a  
resolution thereof) to prevent the loss, or to secure the renewal or            
reinstatement, of any license or franchise held by the Company or any Restricted
Subsidiary from any governmental agency; (vii) Investments in Telecommunications
Assets, PROVIDED that the aggregate fair market value (measured on the date each
such Investment was made or returned, as applicable), when taken together with  
all other Investments made pursuant to this clause (vii) that are at the time   
outstanding, does not exceed the sum of (y) $15.0 million, plus (z) the         
aggregate amount equal to the net reduction in Investments made pursuant to this
clause (vii) on and after the Issue Date resulting from dividends,              
distributions, interest payments, return of capital, repayments of such         
Investments or Net Cash Proceeds realized by the Company or any Restricted      
Subsidiary upon the sale of such Investment to a Person other than the Company  
or any Subsidiary of the Company, except to the extent any such net reduction   
amount is included in the amount calculated pursuant to clause (c) of the       
preceding paragraph or any other clause of this paragraph; (viii) Investments in
Telecommunications Assets made after November 25, 1998 with the Net Cash        
Proceeds, the fair market value of Telecommunications Assets or Equity Interests
of a Person that becomes a Restricted Subsidiary (PROVIDED the assets of such   
Person consist entirely or substantially entirely of Telecommunications Assets) 
received from the sale (other than to a Subsidiary of the Company) of Equity    
Interests of the Company (other than any Disqualified Stock) and, PROVIDED,     
FURTHER, that the amount of any such Net Cash Proceeds that are utilized for any
such Investment shall be excluded from clause (c) of the preceding paragraph and
each other clause of this paragraph; (ix) Investments in ION, PROVIDED that the 
aggregate fair market value thereof (measured on the date each such Investment  
was made or returned, as applicable), when taken together with all other        
Investments made pursuant to this clause (ix) does not exceed the sum of (I)    
$15.0 million, plus, (II) for each fiscal year, an amount equal to the amount of
cash received by the Company or any of its Restricted Subsidiaries from ION or  
any of its Subsidiaries during such fiscal year except to the extent any such   
amount is included in the amount calculated pursuant to clause (c) of the       
preceding paragraph or any other clause of this paragraph during such fiscal    
year plus, (III) to the extent necessary to pay reasonable and necessary        
operating expenses of ION, an amount not to exceed $1.0 million in each fiscal  
year; and (x) Investments in the German Joint Venture, PROVIDED that the        
aggregate fair market value (measured on the date each such Investment was made 
or returned, as applicable), when taken together with all other Investments made
pursuant to this clause (x) that are at the time outstanding, does not exceed   
the sum of (y) $100.0 million, plus (z) the aggregate amount equal to the net   
reduction in Investments made pursuant to this clause (x) on and after the Issue
Date resulting from dividends, distributions, interest payments, return of      
capital, repayments of such Investments or Net Cash Proceeds realized by the    
Company or any Restricted Subsidiary upon the sale of such Investment to a      
Person other than the Company or any Subsidiary of the Company, except to the   
extent such amount is included in the amount calculated pursuant to clause (c)  
of the preceding paragraph or any other clause of this paragraph.               

The Board of Directors may not designate any Subsidiary of the Company  
(other than a newly created Subsidiary in which no Investment has previously    
been made (other than any de minimus amount required to capitalize such         
Subsidiary in connection with its organization)) as an Unrestricted Subsidiary  
(a "Designation") unless: (i) no Default or Event of Default shall have occurred
and be continuing at the time of or after giving effect to such Designation;    
(ii) the Company would, immediately after giving effect to such Designation,    
have been permitted to incur at least $1.00 of additional Indebtedness pursuant 
to either clause (i) or (ii) of the first paragraph of the covenant described   
below under the caption                                                         

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"--Incurrence of Indebtedness and Issuance of Preferred Stock" and (iii) the    
Company would not be prohibited under the Indenture from making an Investment at
the time of such Designation (assuming the effectiveness of such Designation for
purposes of this covenant) in an amount equal to the fair market value of the   
net Investment of the Company and all Restricted Subsidiaries in such Subsidiary
on such date.                                                                   

  In the event of any such Designation, all outstanding Investments owned by
the Company and its Restricted Subsidiaries in the Subsidiary so designated will
be deemed to be an Investment made as of the time of such Designation and will  
reduce the amount available for Restricted Payments under the first or second   
paragraph of this covenant or Investments, as applicable. All such outstanding  
Investments will be deemed to constitute Restricted Payments in an amount equal 
to the fair market value of such Investments at the time of such Designation.   

   The Indenture will further provide that a Designation may be revoked and an
Unrestricted Subsidiary may thus be redesignated as a Restricted Subsidiary (a  
"Revocation") by a resolution of the Board of Directors delivered to the        
Trustee; PROVIDED that the Company will not make any Revocation unless: (i) no  
Default or Event of Default shall have occurred and be continuing at the time of
or after giving effect to such Designation; and (ii) all Liens and Indebtedness 
of such Unrestricted Subsidiary outstanding immediately following such          
Revocation would, if incurred at such time, have been permitted to be incurred  
at such time for all purposes under the Indenture.                              

 The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company (or such Restricted         
Subsidiary, as the case may be) pursuant to the Restricted Payment. The fair    
market value of any asset(s) or securities that are required to be valued by    
this covenant shall be determined in good faith by the Board of Directors (such 
determination to be based upon an opinion or appraisal issued by an accounting, 
appraisal or investment banking firm of national standing if such fair market   
value exceeds $15.0 million).                                                   

INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK              

    The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise (including by   
way of merger, consolidation or acquisition), with respect to (collectively,    
"incur") any Indebtedness and the Company will not issue or incur any           
Disqualified Stock and will not permit any of its Restricted Subsidiaries to    
issue or incur any shares of Preferred Stock; PROVIDED, HOWEVER, that the       
Company may incur Indebtedness or issue or incur shares of Disqualified Stock   
and its Restricted Subsidiaries may incur Acquired Debt or Acquired Preferred   
Stock if either:                                                                

(i) the Consolidated Leverage Ratio at the end of the Company's most    
  recently ended fiscal quarter (the "Reference Period") for which a
  consolidated balance sheet of the Company is available immediately
       preceding the date on which such additional Indebtedness is incurred or
        such Preferred Stock is issued or incurred would have been less than 5.5
       to 1.0 (if the Reference Period ends on or prior to December 31, 2001),
      or 5.0 to 1.0 (if the Reference Period ends subsequent to December 31,
2001), determined on a pro forma basis (including a pro forma   
application of the net proceeds therefrom), as if the additional
       Indebtedness had been incurred, or the Preferred Stock had been issued,
as the case may be, at the beginning of the Reference Period; or

    (ii) the Consolidated Capital Ratio at the end of the Reference Period would
       have been less than 2.0 to 1.0, determined after giving effect to the
        incurrence or issuance of such Indebtedness or Preferred Stock and, to
     the extent set forth in the definitions used herein, on a pro forma
basis (including a pro forma application of the net proceeds  
therefrom).                                                   

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Notwithstanding the foregoing, the provisions of the paragraph set forth
immediately above will not prohibit the incurrence of any of the following items
of Indebtedness (collectively, "Permitted Indebtedness"):                       

   (a) the incurrence by the Company of Indebtedness represented by the Notes;

  (b) the incurrence by the Company or any of its Restricted Subsidiaries of
Existing Indebtedness;                                            

(c) the incurrence of Indebtedness by the Company to any Consolidated   
       Subsidiary or Indebtedness of any Restricted Subsidiary to the Company or
      any Consolidated Subsidiary (but such Indebtedness shall be deemed to be
     incurred upon such Indebtedness being held by any person other than the
    Company or such Consolidated Subsidiary including upon Designation and
      upon such Restricted Subsidiary otherwise no longer being a Consolidated
    Subsidiary); PROVIDED that in the case of Indebtedness of the Company,
     such obligations shall be unsecured and subordinated in all respects to
the Company's obligations pursuant to the Notes;                  

(d) the incurrence by the Company of Indebtedness in an aggregate amount
    incurred and outstanding at any time pursuant to this clause (d) (plus
any Permitted Refinancing Indebtedness and any other Indebtedness 
incurred to retire, defease, refinance, replace or refund such    
Indebtedness) of up to $25.0 million;                             

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(e) the incurrence by the Company, or any Guarantee thereof by any      
Restricted Subsidiary (other than any Foreign Subsidiary), of     
  Indebtedness pursuant to the Credit Agreement in an aggregate amount
    incurred and outstanding at any time pursuant to this clause (e) (plus
any Permitted Refinancing Indebtedness and any other Indebtedness 
incurred to retire, defease, refinance, replace or refund such    
 Indebtedness) of up to $300.0 million, minus the amount of any such
     Indebtedness (i) retired with the Net Cash Proceeds from any Asset Sale
      applied to permanently reduce the outstanding amounts or the commitments
      with respect to such Indebtedness pursuant to the covenant "Asset Sales"
or (ii) assumed by a transferee in an Asset Sale;                 

 (f) the incurrence by the Company or any Foreign Subsidiaries of Purchase
     Money Indebtedness; PROVIDED that in each case, such Indebtedness shall
      not constitute more than 100% of the cost (determined in accordance with
 GAAP in good faith by the Board of Directors of the Company) to the
   Company or such Foreign Subsidiary, as applicable, of the property so
purchased, developed, acquired, constructed, improved or leased;  

  (g) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or
     hedging interest or foreign currency exchange rate risk with respect to
    any floating rate Indebtedness or foreign currency based Indebtedness,
 respectively, that is permitted by the terms of the Indenture to be
outstanding; PROVIDEDthat the notional amount of any such Hedging 
      Obligation does not exceed the amount of Indebtedness or other liability
to which such Hedging Obligation relates;                         

(h) the incurrence by a Foreign Subsidiary of Indebtedness pursuant to a
  Foreign Subsidiary Credit Agreement (or any Guarantee thereof by any
     other Foreign Subsidiary) in an aggregate principal amount incurred and
     outstanding at any time pursuant to this clause (h) (plus any Permitted
     Refinancing Indebtedness and any other Indebtedness incurred to retire,
defease, refinance, replace or refund such Indebtedness) of up to 
    $150.0 million (or the equivalent thereof at the time of incurrence in
the applicable foreign currencies), minus the amount of any such  
     Indebtedness (i) retired with the Net Cash Proceeds from any Asset Sale
      applied to permanently reduce the outstanding amounts or the commitments
      with respect to such Indebtedness pursuant to the covenant "Asset Sales"
or (ii) assumed by a transferee of an Asset Sale;                 

(i) the Company and its Restricted Subsidiaries may incur Indebtedness  
solely in respect of bankers acceptances, letters of credit and   
     performance bonds, all in the ordinary course of business in accordance
with customary industry practices, in amounts and for the purposes
customary in the Company's industry (other than to the extent not 
supporting Indebtedness); and                                     

   (j) the incurrence by the Company or any of its Restricted Subsidiaries, as
       applicable, of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to, refund, refinance or replace   
      Indebtedness that was incurred pursuant to the first paragraph hereof or
clauses (a), (b), (d), (e), (f), (h) or this clause (j) of this   
paragraph.                                                        

 Indebtedness or Preferred Stock of any Person which is outstanding at the
time such Person becomes a Restricted Subsidiary of the Company (including upon 
designation of any Subsidiary or other Person as a Restricted Subsidiary or upon
a Revocation such that such Subsidiary becomes a Restricted Subsidiary) or is   
merged with or into or consolidated with the Company or a Restricted Subsidiary 
of the Company shall be deemed to have been incurred at the time such Person    
becomes such a Restricted Subsidiary of the Company or is merged with or into or
consolidated with the Company or a Restricted Subsidiary of the Company, as     
applicable.                                                                     

   Upon each incurrence, the Company may designate pursuant to which provision
of this covenant such Indebtedness is being incurred and such Indebtedness shall
not be deemed to have been incurred by the Company under any other provision of 
this covenant, except as stated otherwise in the foregoing provisions.          

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    The Company will not, and will not permit any of its Restricted Subsidiaries
to, incur any Indebtedness (including Permitted Indebtedness) that is           
contractually subordinated in right of payment to any other Indebtedness of the 
Company unless such Indebtedness is also contractually subordinated in right of 
payment to the Notes on substantially identical terms; PROVIDED, HOWEVER, that  
no Indebtedness of the Company shall be deemed to be contractually subordinated 
in right of payment to any other Indebtedness of the Company solely by virtue of
being unsecured.                                                                

LIENS                                                                   

    The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or otherwise cause or suffer  
to exist or become effective any Lien of any kind (other than Permitted Liens)  
upon any of their property or assets, now owned or hereafter acquired, or upon  
any income or profits therefrom unless all payments due under the Indenture and 
the Notes are secured (except as provided in the next clause) on an equal and   
ratable basis with the obligations so secured and no Lien shall be granted or be
allowed to exist which secures Subordinated Indebtedness except with respect to 
Acquired Debt, in which case, however, such Liens must be made junior and       
subordinate to the Liens granted to the Holders of the Notes.                   

 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES

    The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or     
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to (i)(a) pay dividends or make any other distributions to the       
Company or any of its Restricted Subsidiaries (1) on its Capital Stock or       
(2) with respect to any other interest or participation in, or measured by, its 
profits, or (b) pay any indebtedness owed to the Company or any of its          
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of   
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing       
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the Issue Date, (b) the     
Indenture and the Notes and Indebtedness ranking PARI PASSU with the Notes      
provided such provisions are no more restrictive than the Notes, (c) the Credit 
Agreement, any Foreign Subsidiary Credit Agreement, PROVIDED that the           
restrictions contained in the Credit Agreement are no more restrictive, taken as
a whole, than those contained in a credit agreement with terms that are         
commercially reasonable for a borrower that has substantially comparable        
Indebtedness, and PROVIDED, FURTHER, that no such provision shall prohibit or   
restrict the ability of any Restricted Subsidiary to pay dividends or make other
upstream distributions or other payments to the Company or any of its Restricted
Subsidiaries, (d) applicable law, (e) any instrument governing Indebtedness or  
Capital Stock of a Person or assets acquired by the Company or any of its       
Restricted Subsidiaries as in effect at the time of such acquisition (except to 
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any 
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired; PROVIDED, that in the case of    
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to  
be incurred, (f) customary non-assignment provisions in leases entered into in  
the ordinary course of business and consistent with past practices,             
(g) purchase money obligations (including pursuant to Purchase Money            
Indebtedness obligations) for property acquired in the ordinary course of       
business that impose restrictions of the nature described in clause (iii) above 
on the property so acquired, constructed, leased or improved, (h) any agreement 
for the sale or other disposition of a Restricted Subsidiary that restricts     
distributions by that Restricted Subsidiary pending its sale or other           
disposition, provided that the consummation of such transaction would not result
in an Event of Default or an event that, with the passing of time or giving of  
notice or both, would constitute an Event of Default, that such restriction     
terminates if such transaction is not consummated and that the consummation or  
abandonment of such transaction occurs within one year of the date such         
agreement was entered into, (i) Permitted Refinancing Indebtedness, PROVIDED    
that the restrictions contained in the agreements                               

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governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness   
being extended, refinanced, renewed, replaced, defeased or refunded, (j) Liens  
securing Indebtedness otherwise permitted to be incurred pursuant to the        
provisions of the covenant described above under the caption "--Liens" that     
limit the right of the Company or any of its Restricted Subsidiaries to dispose 
of the assets subject to such Lien, (k) provisions with respect to the          
disposition or distribution of assets or property in joint venture agreements   
and other similar agreements entered into in the ordinary course of business,   
and (l) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business.                

MERGER, CONSOLIDATION, OR SALE OF ASSETS                                

 The Company may not, directly or indirectly, consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of its        
properties or assets, in one or more related transactions, to another Person    
unless: (i) the Company is the surviving corporation or the Person formed by or 
surviving any such consolidation or merger (if other than the Company) or to    
which such sale, assignment, transfer, conveyance or other disposition shall    
have been made is a corporation organized or existing under the laws of the     
United States, any state thereof or the District of Columbia; (ii) the Person   
formed by or surviving any such consolidation or merger (if other than the      
Company) or the Person to which such sale, assignment, transfer, conveyance or  
other disposition shall have been made assumes all the obligations of the       
Company under the Notes and the Indenture pursuant to a supplemental indenture  
in a form reasonably satisfactory to the Trustee; (iii) no Default or Event of  
Default (or an event that, with the passing of time or giving of notice or both,
would constitute an Event of Default) shall exist or shall occur immediately    
after giving effect on a pro forma basis to such transaction; (iv) except in the
case of a merger of the Company with or into a Wholly Owned Restricted          
Subsidiary of the Company, the Company or the Person formed by or surviving any 
such consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made will 
immediately after such transaction and after giving pro forma effect thereto and
any related financing transactions as if the same had occurred at the beginning 
of the applicable period, be permitted to incur at least $1.00 of additional    
Indebtedness pursuant to either clause (i) or (ii) of the first paragraph of the
covenant described above under the caption "--Incurrence of Indebtedness and    
Issuance of Preferred Stock"; (v) if, as a result of any such transaction,      
property or assets of the Company would become subject to a Lien subject to the 
provisions of the Indenture described under "--Liens" above, the Company or the 
successor entity to the Company shall have secured the Notes as required by said
covenant; and (vi) the Company shall have delivered to the Trustee an Officers' 
Certificate and an opinion of counsel, each stating that such consolidation,    
merger or transfer and such supplemental indenture (if any) comply with the     
Indenture. The Indenture will also provide that the Company may not, directly or
indirectly, lease all or substantially all of its properties or assets, in one  
or more related transactions, to any other Person. The provisions of this       
covenant will not be applicable to a sale, assignment, transfer, conveyance or  
other disposition of assets solely between or among the Company and its Wholly  
Owned Restricted Subsidiaries.                                                  

    Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor    
corporation formed by such consolidation or into which the Company is merged or 
to which such transfer is made shall succeed to and (except in the case of a    
lease) be substituted for, and may exercise every right and power of, the       
Company under the Indenture with the same effect as if such successor           
corporation had been named therein as the Company, and (except in the case of a 
lease) the Company shall be released from the obligations under the Notes and   
the Indenture except with respect to any obligations that arise from, or are    
related to, such transaction.                                                   

For purposes of the foregoing, the transfer (by assignment, sale or     
otherwise) of all or substantially all of the properties and assets of one or   
more Subsidiaries, the Company's interest in which constitutes all or           

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substantially all of the properties and assets of the Company, shall be deemed  
to be the transfer of all or substantially all of the properties and assets of  
the Company.                                                                    

TRANSACTIONS WITH AFFILIATES                                            

    The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter  
into or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the    
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are not materially less favorable to the Company or the relevant  
Restricted Subsidiary than those that would have been obtained in a comparable  
transaction by the Company or such Restricted Subsidiary with an unrelated      
Person and (ii) with respect to any Affiliate Transaction or series of related  
Affiliate Transactions (A) involving aggregate consideration in excess of       
$5.0 million, the Company delivers to the Trustee a resolution of the Board of  
Directors set forth in an Officers' Certificate that such Affiliate Transaction 
is approved by a majority of the disinterested members of the Board of Directors
and that, except with respect to matters governed by the Management Agreement,  
certifying that such Affiliate Transaction complies with clause (i) above and is
in the best interests of the Company or such Restricted Subsidiary and (B) if   
involving aggregate consideration in excess of $15.0 million, a favorable       
written opinion as to the fairness to the Company of such Affiliate Transaction 
from a financial point of view is also obtained by the Company from an          
accounting, appraisal or investment banking firm of national standing with a    
copy delivered to the Trustee. Notwithstanding the foregoing, the following     
items shall not be deemed to be Affiliate Transactions: (i) (a) the entering    
into, maintaining or performance of any employment contract, collective         
bargaining agreement, benefit plan, program or arrangement, related trust       
agreement or any other similar arrangement for or with any employee, officer or 
director heretofore or hereafter entered into in the ordinary course of         
business, including vacation, health, insurance, deferred compensation,         
retirement, savings or other similar plans, (b) the payment of compensation,    
performance of indemnification or contribution obligations, or an issuance,     
grant or award of stock, options, or other equity-related interests or other    
securities, to employees, officers or directors in the ordinary course of       
business, (c) any transaction with an officer or director in the ordinary course
of business not involving more than $100,000 in any one case, or (d) Management 
Advances and payments in respect thereof, (ii) transactions between or among the
Company and/or its Restricted Subsidiaries, (iii) payment of reasonable         
directors fees, (iv) any sale or other issuance of Equity Interests (other than 
Disqualified Stock) of the Company, (v) Affiliate Transactions in effect or     
approved by the Board of Directors on the Issue Date, including any amendments  
thereto (PROVIDED that the terms of such amendments are not materially less     
favorable to the Company than the terms of such agreement prior to such         
amendment), (vi) transactions with respect to capacity between the Company or   
any Restricted Subsidiary and any Unrestricted Subsidiary or another Affiliate  
and joint sales and marketing pursuant to an agreement or agreements between the
Company or any Restricted Subsidiary and any Unrestricted Subsidiary or another 
Affiliate (PROVIDED that in the case of this clause (vi), such agreements are on
terms that are no less favorable to the Company or the relevant Restricted      
Subsidiary than those that could have been obtained at the time of such         
transaction in an arm's-length transaction with an unrelated third party or, in 
the case of a transaction with an Unrestricted Subsidiary, ION or an other      
Affiliate, are either (x) entered into in connection with a transaction         
involving the selection by a customer of cable system capacity entered into in  
the ordinary course of business or (y) involve the provision by the Company or a
Restricted Subsidiary to an Unrestricted Subsidiary, ION or an other Affiliate  
of sales and marketing services, operations, administration and maintenance     
services or development services for which the Company or such Restricted       
Subsidiary receives a fair rate of return (as determined by the Board of        
Directors and set forth in an Officers' Certificate delivered to the Trustee)   
above its expenses of providing such services), and (vii) Restricted Payments   
that are permitted by the covenant described above under the caption            
"--Restricted Payments."                                                        

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BUSINESS ACTIVITIES                                                     

    The Company will not, and will not permit any of its Restricted Subsidiaries
to, engage, to more than a de minimus extent, in any business other than a      
Telecommunications Business.                                                    

PAYMENTS FOR CONSENT                                                    

    Neither the Company nor any of its Restricted Subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of        
interest, fee or otherwise, to any Holder of any Notes for or as an inducement  
to any consent, waiver or amendment of any of the terms or provisions of the    
Indenture or the Notes unless such consideration is offered to be paid or is    
paid to all Holders of the Notes that consent, waive or agree to amend such     
terms or provisions of the Indenture or the Notes in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.       

REPORTS                                                                 

  Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company will furnish to the Trustee and  
the Holders of the Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q 
and 10-K if the Company were required to file such Forms, including a           
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" that describes the financial condition and results of operations of 
the Company and its consolidated Subsidiaries and, with respect to the annual   
information only, a report thereon by the Company's certified independent       
accountants, and (ii) all current reports that would be required to be filed    
with the Commission on Form 8-K if the Company were required to file such       
reports, in each case within the time periods specified in the Commission's     
rules and regulations.                                                          

EVENTS OF DEFAULT AND REMEDIES                                                  

The Indenture will provide that each of the following will constitute an
Event of Default: (i) default for 30 days in the payment when due of interest on
the Notes; (ii) default in the payment when due of the principal of, or premium,
if any, on, the Notes; (iii) failure by the Company or any of its Restricted    
Subsidiaries to comply with the provisions described above under the captions   
"--Change of Control," or "--Asset Sales"; (iv) failure by the Company or any of
its Restricted Subsidiaries for 60 days after notice to comply with any of its  
other agreements in the Indenture or the Notes; (v) default under any mortgage, 
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any  
of its Restricted Subsidiaries (or the payment of which is Guaranteed by the    
Company or any of its Restricted Subsidiaries) whether such Indebtedness or     
Guarantee now exists, or is created after the Issue Date, which default results 
in the acceleration of such Indebtedness prior to its express maturity and, in  
each case, the amount of any such Indebtedness, together with the amount of any 
other such Indebtedness or the maturity of which has been so accelerated,       
aggregates $15 million or more; (vi) failure by the Company or any of its       
Restricted Subsidiaries to pay final judgments not subject to appeal aggregating
in excess of $15 million (net of applicable insurance coverage which is         
acknowledged in writing by the insurer), which judgments are not paid, vacated, 
discharged or stayed for a period of 60 days; and (vii) certain events of       
bankruptcy or insolvency with respect to the Company or any of its Restricted   
Subsidiaries.                                                                   

    If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare   
all the Notes to be due and payable immediately. Notwithstanding the foregoing, 
in the case of an Event of Default arising from certain events of bankruptcy or 
insolvency, with respect to the Company, any Restricted Subsidiary that is a    
Significant Subsidiary or any group of Restricted Subsidiaries that, taken      
together, would constitute a Significant Subsidiary, all outstanding Notes will 
become due and payable without further action or notice. Holders of the Notes   
may not enforce the Indenture or the Notes except as provided in the Indenture. 
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the                                           

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Trustee in its exercise of any trust or power. The Trustee may withhold from    
Holders of the Notes notice of any continuing Default or Event of Default       
(except a Default or Event of Default relating to the payment of principal of,  
premium, if any, or interest on, the Notes) if it determines that withholding   
notice is in their interest.                                                    

    The Holders of a majority (or super majority of at least 66 2/3% in the case
of any covenant requiring 66 2/3% to amend) in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of 
all of the Notes waive any existing Default or Event of Default and its         
consequences under the Indenture, except a continuing Default or Event of       
Default in the payment of principal of, premium, if any, or interest on the     
Notes.                                                                          

   The Company will be required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company will be required upon  
becoming aware of any Default or Event of Default to deliver to the Trustee a   
statement specifying such Default or Event of Default.                          

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS OR       
SHAREHOLDERS                                                                

   No director, officer, employee, incorporator or shareholder of the Company,
as such, will have any liability for any obligations of the Company with respect
to the Notes or the Indenture, or for any claim based on, or in respect or by   
reason of, such obligations or their creation. Each Holder of Notes by accepting
a Note will waive and release any and all such liability. Such waiver and       
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under federal securities laws and it is   
the view of the Commission that such a waiver is against public policy.         

LEGAL DEFEASANCE AND COVENANT DEFEASANCE                                        

The Indenture will be discharged and cancelled upon the delivery by the 
Company to the Trustee for cancellation of all the Notes or upon irrevocable    
deposit with the Trustee, within not more than one year prior to the final      
stated maturity of the Notes, or when the Notes are to be called for redemption 
within one year under arrangements satisfactory to the Trustee, of funds        
sufficient for the payment or redemption of all the Notes. In addition, the     
Indenture will provide that the Company may, at its option and at any time,     
elect to have all of its obligations discharged with respect to the outstanding 
Notes ("Legal Defeasance"), except for: (i) the rights of Holders of outstanding
Notes to receive payments in respect of the principal of, premium, if any, and  
interest on such Notes when such payments are due from the trust referred to    
below; (ii) the Company's obligations with respect to the Notes concerning      
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or   
stolen Notes and the maintenance of an office or agency for payment and money   
for security payments held in trust; (iii) the rights, powers, trusts, duties   
and immunities of the Trustee, and the Company's obligations in connection      
therewith; and (iv) the Legal Defeasance provisions of the Indenture. In        
addition, the Company may, at its option and at any time, elect to have its     
obligations released with respect to certain covenants that are contained in the
Indenture ("Covenant Defeasance") and, thereafter, any omission to comply with  
such obligations will not constitute a Default or Event of Default. In the event
Covenant Defeasance occurs, certain events (but not including non-payment,      
bankruptcy, receivership, rehabilitation or insolvency events) described under  
"--Events of Default and Remedies" will no longer constitute an Event of        
Default.                                                                        

In order to exercise either Legal Defeasance or Covenant Defeasance,    
(i) the Company must irrevocably deposit, or cause to be deposited, with the    
Trustee, in trust, for the benefit of the Holders of the Notes, (a) cash in U.S.
dollars, non-callable Government Securities, or a combination thereof (with     
respect to the Dollar Notes) and (b) legal tender in the countries constituting 
the European Monetary Union, EEA Government Obligations, or a combination       
thereof (with respect to the Euro Notes), in all cases in such amounts as will  
be sufficient, in the opinion of a nationally recognized firm of independent    
public accountants, to pay the principal of, premium, if any, and interest on   
the outstanding Notes on the stated maturity thereof or on the applicable       
redemption date, as the case may be, and the Company must specify whether the   
Notes are being defeased to maturity or to a particular redemption date;        
(ii) in the case of Legal Defeasance, the Company must deliver to the Trustee an
opinion of counsel in the United States                                         

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reasonably acceptable to the Trustee confirming that, since the Issue Date, the 
Company has received from, or there has been published by, the Internal Revenue 
Service a ruling, or there has been a change in the applicable United States    
federal income tax law, in either case to the effect that, and based thereon    
such opinion of counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for United States federal income tax    
purposes as a result of such Legal Defeasance, and will be subject to United    
States federal income tax on the same amounts, in the same manner and at the    
same times as would have been the case if such Legal Defeasance had not         
occurred; (iii) in the case of Covenant Defeasance, the Company must deliver to 
the Trustee an opinion of counsel in the United States reasonably acceptable to 
the Trustee confirming that the Holders of the outstanding Notes will not       
recognize income, gain or loss for United States federal income tax purposes as 
a result of such Covenant Defeasance, and such Holders will be subject to United
States federal income tax on the same amounts, in the same manner and at the    
same times as would have been the case if such Covenant Defeasance had not      
occurred; (iv) no Default or Event of Default shall have occurred and be        
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar 
as Events of Default from bankruptcy or insolvency events are concerned, at any 
time in the period ending on the 91st day after the date of deposit; (v) such   
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under, any material agreement or instrument (other  
than the Indenture) to which the Company or any of its Restricted Subsidiaries  
is a party or by which the Company or any of its Restricted Subsidiaries is     
bound; (vi) the Company must deliver to the Trustee an Officers' Certificate    
stating that the deposit was not made by the Company with the intent of         
preferring the Holders of the Notes over other creditors of the Company, or with
the intent of defeating, hindering, delaying or defrauding creditors of the     
Company or others; and (vii) the Company must deliver to the Trustee an         
Officers' Certificate and an opinion of counsel in the United States reasonably 
acceptable to the Trustee, each stating that the conditions precedent provided  
for or relating to Legal Defeasance or Covenant Defeasance, as applicable, in   
the case of the Officers' Certificate, in clauses (i) through (vi) and, in the  
case of the opinion of counsel, in clauses (i) (with respect to the validity and
perfection of the security interest) and clauses (ii) and (iii) of this         
paragraph, have been complied with.                                             

TRANSFER AND EXCHANGE                                                           

 A Holder may transfer or exchange Notes in accordance with the procedures
set forth in the Indenture. The Registrar and the Trustee may require a Holder, 
among other things, to furnish appropriate endorsements and transfer documents, 
and the Company may require a Holder to pay any taxes and fees required by law  
or permitted by the Indenture. The Company will not be required to transfer or  
exchange any Note selected for redemption. Also, the Company will not be        
required to transfer or exchange any Note for a period of 15 days before (i) a  
selection of Notes to be redeemed, (ii) an interest payment date or (iii) the   
mailing of notice of a Change of Control Offer or Asset Sale Offer. The         
registered Holder of a Note will be treated as the owner of it for all purposes 
under the Indenture. Except in the limited circumstances described below under  
"--Book-Entry, Delivery and Form," owners of beneficial interests in Global     
Notes will not be entitled to receive physical delivery of certificated notes.  
Transfers of beneficial interests in Global Notes will be subject to the        
applicable rules and procedures of DTC, Euroclear and Cedelbank and their       
respective direct or indirect participants, which rules and procedures may      
change from time to time. If certificated Notes are issued, holders of such     
certificated Notes will be able to transfer their Notes in New York and, so long
as the Notes are listed on the Luxembourg Stock Exchange, in Luxembourg in      
accordance with the procedures set forth under "--Book-Entry, Delivery and Form 
--Certificated Notes."                                                          

AMENDMENT, SUPPLEMENT AND WAIVER                                                

    The Indenture will contain provisions permitting the Company and the Trustee
to enter into a supplemental indenture for certain limited purposes without the 
consent of the Holders. With the consent of the Holders of not less than a      
majority in aggregate principal amount of the Notes at the time outstanding, the
Company and the Trustee are permitted to amend or supplement the Indenture or   
any                                                                             

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supplemental indenture or modify the rights of the Holders; PROVIDED that no    
such modification may, without the consent of Holders of at least 66 2/3% in    
aggregate principal amount of Notes at the time outstanding, modify the         
provisions (including the defined terms used therein) of the covenant           
"Repurchase at the Option of the Holders--Change of Control" in a manner adverse
to the Holders or, except with respect to the Lien on the Security Account,     
release or modify a Lien granted to the Holders of the Notes; and PROVIDED that 
no such modification may, without the consent of each Holder affected thereby:  
(i) change the Stated Maturity on any Note, or reduce the principal amount      
thereof or the rate (or extend the time for payment) of interest thereon or any 
premium payable upon the redemption at the option of the Company thereof, or    
change the place of payment where, or the coin or currency in which, any Note or
any premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity    
thereof (or, in the case of redemption at the option of the Company, on or after
the Redemption Date), or reduce the Change of Control Payment or the Asset Sale 
Offer Price after the corresponding Asset Sale or Change of Control has         
occurred, or (ii) alter the provisions (including the defined terms used        
therein) regarding the right of the Company to redeem the Notes as a right, or  
at the option, of the Company in a manner adverse to the Holders, or            
(iii) reduce the percentage in principal amount of the outstanding Notes, the   
consent of whose Holders is required for any such amendment, supplemental       
indenture or waiver provided for in the Indenture, or (iv) modify any of the    
waiver provisions, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without  
the consent of the Holder of each outstanding Note affected thereby, or         
(v) cause the Notes to become subordinate in right of payment to any other      
Indebtedness.                                                                   

  Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes  
to cure any ambiguity, defect or inconsistency, to provide for uncertificated   
Notes in addition to or in place of certificated Notes, to provide for the      
assumption of the Company's obligations to Holders of Notes in the case of a    
merger or consolidation or sale of all or substantially all of the Company's    
assets in accordance with the terms of the Indenture, to make any change that   
would provide any additional rights or benefits to the Holders of Notes or that 
does not adversely affect the legal rights under the Indenture of any such      
Holder, or to comply with the requirements of the Commission in order to effect 
or maintain the qualification of the Indenture under the Trust Indenture Act.   

CONCERNING THE TRUSTEE                                                          

   The Trustee, The Bank of New York, is organized under the laws of the State
of New York, with offices located at 101 Barclay Street, Floor 21 West, New     
York, New York 10286. The Indenture contains certain limitations on the rights  
of the Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect  
of any such claim as security or otherwise. The Trustee will be permitted to    
engage in other transactions; however, if it acquires any conflicting interest, 
it must eliminate such conflict within 90 days, apply to the Commission for     
permission to continue, or resign.                                              

   The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any      
proceeding for exercising any remedy available to the Trustee, subject to       
certain exceptions. In case an Event of Default shall occur (which shall not be 
cured), the Trustee will be required, in the exercise of its power, to use the  
degree of care of a prudent person in the conduct of their own affairs. Subject 
to such provisions, the Trustee will be under no obligation to exercise any of  
its rights or powers under the Indenture at the request of any Holder of Notes, 
unless such Holder shall have offered to the Trustee security and indemnity     
satisfactory to it against any loss, liability or expense.                      

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GOVERNING LAW                                                                   

   The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York.                                         

    The Company will submit to the jurisdiction of the U.S. federal and New York
state courts located in the Borough of Manhattan, City and State of New York for
purposes of all legal actions and proceedings instituted in connection with the 
Notes and the Indenture.                                                        

CERTAIN DEFINITIONS                                                             

  Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.        

"ACQUIRED DEBT" or "ACQUIRED PREFERRED STOCK" means, with respect to any
specified Person, Indebtedness or Preferred Stock of any other Person existing  
at the time such other Person is merged with or into or became a Subsidiary of  
such specified Person (including by Designation or Revocation), provided such   
Indebtedness or Preferred Stock is not incurred in connection with, or in       
contemplation of, such other Person merging with or into or becoming a          
Subsidiary of such specified Person.                                            

"AFFILIATE" of any specified Person means any other Person directly or  
indirectly controlling, controlled by or under direct or indirect common control
with such specified Person. For purposes of this definition, "control"          
(including, with correlative meanings, the terms "controlling," "controlled by" 
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the     
direction of the management or policies of such Person, whether through the     
ownership of voting securities, by agreement or otherwise; PROVIDED that        
beneficial ownership of 10% or more of the Voting Stock of a Person shall be    
deemed to be control.                                                           

"ASSET SALE" means (i) the sale, lease, transfer, conveyance or other   
disposition of any assets or rights (including, without limitation, by way of a 
sale and leaseback) other than sales of inventory in the ordinary course of     
business and other than any sale, lease, transfer, conveyance or other          
disposition in the ordinary course of business of capacity on any fiber optic or
cable system owned, controlled or operated by the Company or any Restricted     
Subsidiary or of telecommunications capacity, transmission rights, conduit or   
rights-of-way acquired by the Company or any Restricted Subsidiary for use in a 
Telecommunications Business of the Company or any Restricted Subsidiary         
(PROVIDED that the sale, lease, transfer, conveyance or other disposition of all
or substantially all of the assets of the Company and its Restricted            
Subsidiaries taken as a whole will be governed by the provisions of the         
Indenture described above under the caption "--Repurchase at the Option of      
Holders--Change of Control" and/or the provisions described above under the     
caption "--Certain Covenants--Merger, Consolidation or Sale of Assets" and not  
by the provisions of the Asset Sale covenant), and (ii) the issue or sale by the
Company or any of its Restricted Subsidiaries of Equity Interests of any        
Subsidiary. Notwithstanding the foregoing, the following items shall not be     
deemed to be Asset Sales: (i) a transfer of assets by the Company to a          
Consolidated Subsidiary or by a Subsidiary to the Company or to a Consolidated  
Subsidiary, (ii) an issuance of Equity Interests by a Subsidiary to the Company 
or to a Consolidated Subsidiary, (iii) a Restricted Payment that is permitted by
the covenant described above under the caption "--Certain Covenants--Restricted 
Payments," (iv) Permitted Investments made in accordance with clause (a) or     
(c) of the definition thereof, (v) a disposition of obsolete or worn out        
equipment or equipment that is no longer useful in the conduct of a             
Telecommunications Business of the Company and its Restricted Subsidiaries and  
that is disposed of in the ordinary course of business, (vi) the surrender or   
waiver by the Company or any of its Restricted Subsidiaries of contract rights  
or the settlement, release or surrender of contract, tort or other claims of any
kind by the Company or any of its Restricted Subsidiaries or the grant by the   
Company or any of its Restricted Subsidiaries of a Lien not prohibited by the   
Indenture, (vii) the sale of Cash Equivalents in the ordinary course of         
business; and (viii) sales, transfers, assignments and other dispositions of    
assets (or                                                                      

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related assets in related transactions) in the ordinary course of business with 
an aggregate fair market value of less than $1.0 million.                       

    "BOARD OF DIRECTORS" means the board of directors or other governing body of
the Company or, if the Company is owned or managed by a single entity, the board
of directors or other governing body of such entity, or, in either case, any    
committee thereof duly authorized to act on behalf of such board or governing   
body.                                                                           

"BOARD RESOLUTION" means a duly authorized resolution of the Board of   
Directors.                                                                      

  "CAPITAL CONTRIBUTION" means any contribution to the equity of the Company
from a direct or indirect parent of the Company for which no consideration other
than the issuance of common stock with no redemption rights and no special      
preferences, privileges or voting rights is given.                              

  "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.                                                                           

"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,      
interests, participations, rights or other equivalents (however designated) of  
corporate stock, (iii) in the case of a partnership or limited liability        
company, partnership or membership interests (whether general or limited) and   
(iv) any other interest or participation that confers on a Person the right to  
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.                                                                 

"CASH EQUIVALENTS" means (i) United States dollars and Euros,           
(ii) securities issued or directly and fully guaranteed or insured by (a) the   
United States government or any agency or instrumentality thereof (provided that
the full faith and credit of the United States is pledged in support thereof) or
(b) any member of the European Economic Area or Switzerland or any agency or    
instrumentality thereof provided that such country, agency or instrumentality   
has a credit rating at least equal to that of the United States of America      
(provided, further, that the full faith and credit of such respective nation is 
pledged in support thereof), in each case having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and          
eurodollar time deposits with maturities of six months or less from the date of 
acquisition, bankers' acceptances with maturities not exceeding six months and  
overnight bank deposits, in each case with any domestic commercial bank having  
capital and surplus in excess of $500 million and a Thompson Bank Watch Rating  
of "B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (ii) above      
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Ratings Group and in  
each case maturing within six months after the date of acquisition and          
(vi) money market funds at least 95% of the assets of which constitute Cash     
Equivalents of the kinds described in clauses (i)-(v) of this definition,       
PROVIDED that with respect to any Foreign Subsidiary, Cash Equivalents shall    
also mean those investments that are comparable to clauses (iii) through        
(vi) above in such Foreign Subsidiary's country of organization or country where
it conducts business operations.                                                

 "CHANGE OF CONTROL" means the occurrence of any of the following: (i) any
"person" or "group" (as such terms are used in Section 13(d)(3) of the Exchange 
Act), other than a Permitted Holder, is or becomes the beneficial owner,        
directly or indirectly, of 35% or more of the Voting Stock (measured by voting  
power rather than number of shares) of the Company and the Permitted Holders    
own, in the aggregate, a lesser percentage of the total Voting Stock (measured  
by voting power rather than by number of shares) of the Company than such person
and do not have the right or ability by voting power, contract or otherwise to  
elect or designate for election a majority of the board of directors of the     
Company (for the purposes of this clause, such other person shall be deemed to  
"beneficially own" any Voting Stock of a specified corporation held by a parent 
corporation if such other person beneficially owns, directly or                 

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indirectly, more than 35% of the Voting Stock (measured by voting power rather  
than by number of shares) of such parent corporation and the Permitted Holders  
beneficially own, directly or indirectly, in the aggregate a lesser percentage  
of Voting Stock (measured by voting power rather than by number of shares) of   
such parent corporation and do not have the right or ability by voting power,   
contract or otherwise to elect or designate for election a majority of the board
of directors of such parent corporation), (ii) during any period of two         
consecutive years, Continuing Directors cease for any reason to constitute a    
majority of the Board of Directors of the Company, (iii) the Company            
consolidates or merges with or into any other Person, other than a consolidation
or merger (a) of the Company into a Wholly Owned Restricted Subsidiary of the   
Company or (b) pursuant to a transaction in which the outstanding Voting Stock  
of the Company is changed into or exchanged for cash, securities or other       
property with the effect that the beneficial owners of the outstanding Voting   
Stock of the Company immediately prior to such transaction, beneficially own,   
directly or indirectly, at least a majority of the Voting Stock (measured by    
voting power rather than number of shares) of the surviving corporation         
immediately following such transaction or (iv) the sale, transfer, conveyance or
other disposition (other than by way of merger or consolidation), in one or a   
series of related transactions, of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole to any person other    
than a Wholly Owned Restricted Subsidiary of the Company or a Permitted Holder  
or a person more than 50% of the Voting Stock (measured by voting power rather  
than by number of shares) of which is owned, directly or indirectly, following  
such transaction or transactions by the Permitted Holders; PROVIDED, HOWEVER,   
that sales, transfers, conveyances or other dispositions in the ordinary course 
of business of capacity on cable systems owned, controlled or operated by the   
Company or any Restricted Subsidiary or fiber optic or of telecommunications    
capacity or transmission rights, rights-of-way or conduit acquired by the       
Company or any Restricted Subsidiary for use in the Telecommunications Business 
of the Company or a Restricted Subsidiary, including, without limitation, for   
sale, lease, transfer, conveyance or other disposition to any customer of the   
Company or any Restricted Subsidiary shall not be deemed a disposition of assets
for purposes of this clause (iv).                                               

The definition of a Change of Control includes a phrase relating to the 
sale, lease, transfer, conveyance or other disposition of "all or substantially 
all" of the assets of the Company and its Restricted Subsidiaries taken as a    
whole. The Indenture will be governed by New York law, and there is no clearly  
established meaning under New York law of the phrase "substantially all" of the 
assets of a corporation. Accordingly, the ability of a Holder of Notes to       
require the Company to purchase such Notes as a result of a sale, lease,        
transfer, conveyance or other disposition of less than all of the assets of the 
Company and its Restricted Subsidiaries taken as a whole to another Person or   
group may be uncertain.                                                         

 "CONSOLIDATED CAPITAL RATIO" means, with respect to the Company as of any
date, the ratio of (i) the aggregate consolidated amount of Indebtedness of the 
Company and its Restricted Subsidiaries then outstanding to (ii) the            
Consolidated Net Worth of the Company and its Consolidated Subsidiaries as of   
such date.                                                                      

   "CONSOLIDATED CASH FLOW" means, with respect to the Company for any period,
the Consolidated Net Income of the Company and its Consolidated Subsidiaries for
such period plus (A), to the extent that any of the following items were        
deducted in computing such Consolidated Net Income, but without duplication,    
(i) provision for taxes based on income or profits of the Company and its       
Consolidated Subsidiaries for such period, plus (ii) consolidated interest      
expense of the Company and its Consolidated Subsidiaries for such period,       
whether paid or accrued and whether or not capitalized (including, without      
limitation, amortization of debt issuance costs and original issue discount,    
non-cash interest payments, the interest component of any deferred payment      
obligations, the interest component of all payments associated with Capital     
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments 
(if any) pursuant to Hedging Obligations), plus (iii) depreciation, amortization
(including amortization of goodwill and other intangibles and the amount of     
capacity available for sale (other than for backhaul capacity) charged to cost  
of sales), but excluding amortization of prepaid cash expenses that were paid in
a prior period), and other non-cash                                             

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expenses (excluding any such non-cash expense to the extent that it represents  
an accrual of or reserve for cash expenses in any future period or amortization 
of a prepaid cash expense that was paid in a prior period) of the Company and   
its Consolidated Subsidiaries for such period, minus (B) non-cash items         
increasing such Consolidated Net Income for such period (other than items that  
were accrued in the ordinary course of business), in each case, on a            
consolidated basis and determined in accordance with GAAP. Notwithstanding the  
foregoing, the provision for taxes on the income or profits of, and the         
depreciation and amortization and other non-cash expenses of, a Restricted      
Subsidiary of the Company shall be added to Consolidated Net Income to compute  
Consolidated Cash Flow of the Company only to the extent that a corresponding   
amount would be permitted at the date of determination to be dividended to the  
Company by such Restricted Subsidiary without prior governmental approval (that 
has not been obtained), and without direct or indirect restriction pursuant to  
the terms of its charter and all agreements, instruments, judgments, decrees,   
orders, statutes, rules and governmental regulations applicable to that         
Restricted Subsidiary or its shareholders.                                      

   "CONSOLIDATED LEVERAGE RATIO" means, with respect to the Company, as of any
date, the ratio of (i) the aggregate consolidated amount of Indebtedness of the 
Company and its Restricted Subsidiaries then outstanding to (ii) the annualized 
Consolidated Cash Flow of the Company and its Consolidated Subsidiaries for the 
most recently ended fiscal quarter.                                             

    "CONSOLIDATED NET INCOME" means, with respect to the Company for any period,
the aggregate of the Net Income of the Company and its Consolidated Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;   
PROVIDED that (i) the Net Income (but not loss) of any Person that is accounted 
for by the equity method of accounting shall be included only to the extent of  
the amount of dividends or distributions paid in cash to the Company or a       
Consolidated Subsidiary thereof by such Person but not in excess of the         
Company's Equity Interests in such Person, (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of   
dividends or similar distributions by that Restricted Subsidiary of that Net    
Income is not at the date of determination permitted without any prior          
governmental approval (that has not been obtained) or, directly or indirectly,  
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that      
Restricted Subsidiary or its shareholders, except that the Company's equity in  
the net income of any such Restricted Subsidiary for such period may be included
in such Consolidated Net Income up to the aggregate amount of cash that could   
have been distributed by such Restricted Subsidiary during such period to the   
Company as a dividend, (iii) the Net Income of any Person acquired in a pooling 
of interests transaction for any period prior to the date of such acquisition   
shall be excluded, (iv) the equity of the Company or any Restricted Subsidiary  
in the net income (if positive) of any Unrestricted Subsidiary shall be included
in such Consolidated Net Income up to the aggregate amount of cash actually     
distributed by such Unrestricted Subsidiary during such period to the Company or
a Consolidated Subsidiary as a dividend or other distribution (but not in excess
of the amount of the Net Income of such Unrestricted Subsidiary for such period)
and (v) the cumulative effect of a change in accounting principles shall be     
excluded.                                                                       

   "CONSOLIDATED NET WORTH" means, with respect to the Company as of any date,
the sum of (i) the consolidated equity of the common shareholders of the Company
and its Consolidated Subsidiaries that are Consolidated Subsidiaries as of such 
date plus (ii) the respective amounts reported on the Company's balance sheet as
of such date with respect to any series of Preferred Stock (other than          
Disqualified Stock) that by its terms is not entitled to the payment of         
dividends unless such dividends may be declared and paid only out of net        
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by the Company upon issuance of such Preferred      
Stock, less (x) all write-ups (other than write-ups resulting from foreign      
currency translations and write-ups of tangible assets of a going concern       
business made within 12 months after the acquisition of such business)          
subsequent to the Issue Date in the book value of any asset owned by the Company
or a Restricted Subsidiary that is a Consolidated Subsidiary of the Company,    
(y) all outstanding net Investments as of such date in unconsolidated Restricted

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Subsidiaries and in Persons that are not Restricted Subsidiaries (except, in    
each such case, Permitted Investments), and (z) all unamortized debt discount   
and expense and unamortized deferred charges as of such date, all of the        
foregoing determined in accordance with GAAP.                                   

   "CONSOLIDATED SUBSIDIARY" means, for any Person, each Restricted Subsidiary
of such Person (whether now existing or hereafter created or acquired) the      
financial statements of which are consolidated for financial statement reporting
purposes with the financial statements of such Person in accordance with GAAP.  

   "CONTINUING DIRECTORS" means individuals who at the beginning of the period
of determination constituted the Board of Directors of the Company, together    
with any new directors whose election by such Board of Directors or whose       
nomination for election by the shareholders of the Company was approved by a    
vote of a majority of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved or is the designee of any one of the    
Permitted Holders or any combination thereof or was nominated or elected by any 
such Permitted Holder(s) or any of their designees.                             

  "CREDIT AGREEMENT" means one or more credit agreements, loan agreements or
similar facilities, secured or unsecured, entered into from time to time by the 
Company and its Restricted Subsidiaries, and including any related notes,       
Guarantees, collateral documents, instruments and agreements executed in        
connection therewith, as the same may be amended, supplemented, modified,       
restated or replaced from time to time.                                         

    "CURRENCY AGREEMENT" means, with respect to any Person, any foreign exchange
contract, currency swap agreement or other similar agreement as to which such   
Person is a party or beneficiary.                                               

    "DEFAULT" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.                                

  "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is          
exchangeable, in each case at the option of the holder thereof), or upon the    
happening of any event, matures or is mandatorily redeemable, pursuant to a     
sinking fund obligation or otherwise, or redeemable at the option of the Holder 
thereof, in whole or in part, on or prior to the date that is 91 days after the 
date on which the Notes mature; PROVIDED, HOWEVER, that any Capital Stock that  
would constitute Disqualified Stock solely because the holders thereof have the 
right to require the Company to repurchase such Capital Stock upon the          
occurrence of a Change of Control or an Asset Sale shall not constitute         
Disqualified Stock if the terms of such Capital Stock provide that the Company  
may not repurchase or redeem any such Capital Stock pursuant to such provisions 
unless such repurchase or redemption complies with the covenant described above 
under the caption "--Certain Covenants--Restricted Payments."                   

"EEA GOVERNMENT OBLIGATION" means direct non-callable obligations of, or
non-callable obligations permitted by, any member nation of the European Union  
of the payment of such obligation or guarantee the full faith and credit of the 
respective nation is pledged, PROVIDED that such nation has a credit rating at  
least equal to that of the highest rated member nation of the European Economic 
Area.                                                                           

 "EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is        
convertible into, or exchangeable for, Capital Stock).                          

"EURO" OR "[EURO]" means the currency adopted by those countries        
participating in the third stage of European Monetary Union.                    

  "EUROPEAN ECONOMIC AREA" means the member nations of the European Economic
Area pursuant to the Oporto Agreement on the European Economic Area dated       
May 2, 1992 as amended.                                                         

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    "EUROPEAN UNION" means the member nations to the third stage of economic and
monetary union pursuant to the Treaty of Rome establishing the European         
Community, as amended by the Treaty on European Union, signed at Maastricht on  
February 7, 1992.                                                               

"EXISTING ASSETS" means property, plant and equipment and other tangible
business assets existing as of the Issue Date used in a Telecommunications      
Business of the Company, but does not include cash or Cash Equivalents existing 
on the Issue Date, and the proceeds from the sale, disposition or other transfer
of any Existing Assets outside the ordinary course of business.                 

    "EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Restricted
Subsidiaries in existence on the Issue Date, until such amounts are repaid.     

 "FOREIGN SUBSIDIARY" means any Restricted Subsidiary of the Company which
(i) is not organized under the laws of the United States, any state thereof or  
the District of Columbia, and (ii) conducts substantially all of its business   
operations outside the United States of America.                                

  "FOREIGN SUBSIDIARY CREDIT AGREEMENT" means one or more credit agreements,
loan agreements or similar facilities, secured or unsecured, entered into from  
time to time by one or more of the Company's Foreign Subsidiaries, and including
any related notes, Guarantees, collateral documents, instruments and agreements 
executed in connection therewith, as the same may be amended, supplemented,     
modified, restated or replaced from time to time.                               

"GAAP" means generally accepted accounting principles set forth in the  
opinions and pronouncements of the Accounting Principles Board of the American  
Institute of Certified Public Accountants and statements and pronouncements of  
the Financial Accounting Standards Board or in such other statements by such    
other entity as have been approved by a significant segment of the accounting   
profession, which are in effect on the Issue Date.                              

   "GERMAN JOINT VENTURE" means the Person(s) formed or organized to engineer,
develop, construct and own the German Network.                                  

    "GOVERNMENT SECURITIES" means securities that are (a) direct obligations (or
certificates representing an ownership interest in such obligations) of the     
United States of America (including any agency or instrumentally thereof) of the
payment of which the full faith and credit of the United States of America is   
pledged, (b) obligations of a Person controlled or supervised by and acting as  
an agency or instrumentality of the United States of America the payment of     
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or (c) obligations of a Person the payment of which is 
unconditionally guaranteed as a full faith and credit obligation by the United  
States of America.                                                              

"GUARANTEE" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person (i) to 
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership     
arrangements, or by agreement to keep-well, to purchase assets, goods,          
securities or services, to take-or-pay, or to maintain financial statement      
conditions or otherwise) or (ii) entered into for purposes of assuring in any   
other manner the obligee of such Indebtedness of the payment thereof or to      
protect such obligee against loss in respect thereof (in whole or in part);     
PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for 
collection or deposit in the ordinary course of business. The term "Guarantee"  
used as a verb has a corresponding meaning.                                     

   "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under any Interest Rate Agreement or Currency Agreement.            

  "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by 
bonds, notes, debentures or similar instruments or letters of credit (or        
reimbursement agreements in respect thereof) or banker's acceptances or         
representing Capital Lease Obligations or the balance of the deferred and unpaid
of the purchase price of any                                                    

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property or representing any Hedging Obligations, except any such balance that  
constitutes an accrued expense or trade payable, if and to the extent any of the
foregoing (other than letters of credit (or reimbursement agreements in respect 
thereof), banker's acceptances and Hedging Obligations) would appear as a       
liability upon a balance sheet of such Person prepared in accordance with GAAP, 
as well as all Indebtedness of others secured by a Lien on any asset of such    
Person (whether or not such Indebtedness is assumed by such Person),            
Disqualified Stock of such Person and Preferred Stock of such Person's          
Restricted Subsidiaries and, to the extent not otherwise included, the Guarantee
by such Person of any Indebtedness of any other Person. The amount of any       
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, but the    
accretion of original issue discount in accordance with the original terms of   
Indebtedness issued with an original issue discount will not be deemed to be an 
incurrence, and (ii) the principal amount thereof, together with any interest   
thereon that is more than 30 days past due, in the case of any other            
Indebtedness.                                                                   

 "INTEREST RATE AGREEMENT" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate option 
agreement, interest rate swap agreement, interest rate cap agreement, interest  
rate collar agreement, interest rate hedge agreement or other similar agreement 
or arrangement to which such Person is a party or beneficiary.                  

"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or        
indirect loans (including Guarantees of Indebtedness or other obligations),     
advances or capital contributions (excluding commission, travel and similar     
advances to directors, officers and employees made in the ordinary course of    
business), purchases or other acquisitions for consideration of Indebtedness,   
Equity Interests or other securities, together with all items that are or would 
be classified as investments on a balance sheet prepared in accordance with     
GAAP. If the Company or any of its Restricted Subsidiaries sells or otherwise   
disposes of any Equity Interests of any direct or indirect Subsidiary such that,
after giving effect to any such sale or disposition, such Person is no longer a 
Subsidiary of the Company or such Restricted Subsidiary, the Company shall be   
deemed to have made an Investment on the date of any such sale or disposition   
equal to the fair market value of the Equity Interests of such Subsidiary not   
sold or disposed of in an amount determined as provided in the final paragraph  
of the covenant described above under the caption "--Certain                    
Covenants--Restricted Payments."                                                

"ION" means International Optical Network, L.L.C., a Delaware limited   
liability company.                                                              

"ISSUE DATE" means the date of first issuance of the Notes under the    
Indenture.                                                                      

    "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether  
or not filed, recorded or otherwise perfected under applicable law (including   
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in,  
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).                  

    "MANAGEMENT ADVANCES" means loans or advances made to directors, officers or
employees of the Company or any Restricted Subsidiary (i) in respect of travel, 
entertainment or moving-related expenses incurred in the ordinary course of     
business, (ii) in respect of moving-related expenses incurred in connection with
any closing or consolidation of any facility, or (iii) otherwise in the ordinary
course of business not exceeding $3.0 million in the aggregate at any time      
outstanding.                                                                    

    "MANAGEMENT AGREEMENT" means the Metromedia Management Agreement as the same
may be amended, supplemented, modified, restated or replaced from time to time  
with the approval of a majority of the disinterested members of the Board of    
Directors.                                                                      

  "NET CASH PROCEEDS" means the aggregate amount of cash or Cash Equivalents
received by the Company in the case of a sale, or Capital Contribution in       
respect, of Capital Stock and by the Company                                    

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and its Restricted Subsidiaries in respect of an Asset Sale plus, in the case of
an issuance of Capital Stock upon any exercise, exchange or conversion of       
securities (including options, warrants, rights and convertible or exchangeable 
debt) of the Company that were issued for cash on or after the Issue Date, the  
amount of cash originally received by the Company upon the issuance of such     
securities (including options, warrants, rights and convertible or exchangeable 
debt) less, in each case, the sum of all payments, fees, commissions and        
reasonable and customary expenses (including, without limitation, the fees and  
expenses of legal counsel and investment banking fees and expenses) incurred in 
connection with such Asset Sale or sale of Capital Stock, and, in the case of an
Asset Sale only, less the amount (estimated reasonably and in good faith by the 
Company) of income, franchise, sales and other applicable federal, state,       
provincial, foreign and local taxes required to be paid or accrued as a         
liability by the Company or any of its respective Restricted Subsidiaries in    
connection with such Asset Sale in the taxable year that such sale is           
consummated or in the immediately succeeding taxable year, the computation of   
which shall take into account the reduction in tax liability resulting from any 
available operating losses and net operating loss carryovers, tax credits and   
tax credit carryforwards, and similar tax attributes.                           

"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in     
respect of preferred stock dividends, excluding, however, (i) any gain (but not 
loss), together with any related provision for taxes on such gain (but not      
loss), realized in connection with (a) any Asset Sale or (b) the disposition of 
any securities by such Person or any of its Restricted Subsidiaries or the      
extinguishment of any Indebtedness of such Person or any of its Restricted      
Subsidiaries and (ii) any extraordinary gain or loss, together with any related 
provision for taxes on such extraordinary gain or loss.                         

  "NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor an Restricted Subsidiary (a) provides any Guarantee or credit support of any
kind (including any undertaking, guarantee, indemnity, agreement or instrument  
that would constitute Indebtedness) or (b) is directly or indirectly liable (as 
a guarantor or otherwise) and (ii) no default with respect to which (including  
any rights that the holders thereof may have to take enforcement action against 
an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both)   
any holder of any other Indebtedness of the Company or any Restricted Subsidiary
to declare a default under such other Indebtedness or cause the payment thereof 
to be accelerated or payable prior to its Stated Maturity.                      

 "OFFICER" means the President, the Chief Executive Officer, any Executive
Vice President, and the Chief Financial Officer of the Company.                 

"OFFICERS' CERTIFICATE" means a certificate signed by two Officers.     

    "PARI PASSU INDEBTEDNESS" means Indebtedness of the Company ranking equal in
right of payment with the Notes.                                                

   "PERMITTED HOLDER" means Metromedia Company, its general partners and their
respective Related Persons and Persons that would constitute a Class B Permitted
Holder as defined in the Company's Amended and Restated Certificate of          
Incorporation.                                                                  

"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a 
Consolidated Subsidiary of the Company that is engaged entirely or substantially
entirely in a Telecommunications Business; (b) any Investment in Cash           
Equivalents; and (c) any Investment by the Company or any of its Restricted     
Subsidiaries in a Person, if as a result of such Investment (i) such Person     
becomes a Consolidated Subsidiary of the Company that is engaged entirely or    
substantially entirely in a Telecommunications Business or (ii) such Person is  
merged, consolidated or amalgamated with or into, or transfers or conveys       
substantially all of its assets to, or is liquidated into, the Company or a     
Consolidated Subsidiary of the Company that is engaged entirely or substantially
entirely in a Telecommunications Business.                                      

"PERMITTED LIENS" means (i) Liens to secure Indebtedness permitted by   
clauses (e), (f), (g) and (h) of the second paragraph of the covenant described 
above under the caption "--Incurrence of Indebtedness                           

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and Issuance of Preferred Stock", PROVIDED that with respect to Liens to secure 
Indebtedness permitted by clause (f) thereof or any Permitted Refinancing       
Indebtedness of such Indebtedness, such Lien must cover only the assets acquired
with such Indebtedness; (ii) Liens in favor of the Company or any Restricted    
Subsidiary; (iii) Liens on property of a Person existing at the time such Person
is merged with or into or consolidated with the Company or any of its Restricted
Subsidiaries, PROVIDED that such Liens were in existence prior to the           
contemplation of such merger or consolidation and do not extend to any assets   
other than those of the Person merged into or consolidated with the Company or  
such Restricted Subsidiary; (iv) Liens on property existing at the time of      
acquisition thereof by the Company or any of its Restricted Subsidiaries,       
PROVIDED that such Liens were in existence prior to the contemplation of such   
acquisition; (v) Liens to secure the performance of statutory obligations,      
surety or appeal bonds, performance bonds or other obligations of a like nature 
incurred in the ordinary course of business; (vi) Liens existing on the Issue   
Date; (vii) Liens for taxes, assessments or governmental charges or claims that 
are not yet delinquent or that are being contested in good faith by appropriate 
proceedings promptly instituted and diligently concluded, PROVIDED that any     
reserve or other appropriate provision as shall be required in conformity with  
GAAP shall have been made therefor; (viii) zoning restrictions, rights-of-way,  
easements and similar charges or encumbrances incurred in the ordinary course   
which in the aggregate do not detract from the value of the property thereof,   
and (ix) Liens incurred in the ordinary course of business of the Company or any
of its Restricted Subsidiaries with respect to obligations that do not exceed   
$5.0 million at any one time outstanding and that (a) are not incurred in       
connection with the borrowing of money or the obtaining of advances or credit   
(other than trade credit in the ordinary course of business) and (b) do not in  
the aggregate materially detract from the value of the property or materially   
impair the use thereof in the operation of business by the Company or such      
Restricted Subsidiary.                                                          

  "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net        
proceeds of which are used to extend, refinance, renew, replace, defease or     
refund other Indebtedness of the Company or any of its Restricted Subsidiaries  
(other than intercompany Indebtedness); PROVIDED that: (i) the principal amount 
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness   
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,         
replaced, defeased or refunded (plus the amount of any premium required to be   
paid in connection with such refinancing pursuant to the terms of such          
Indebtedness or otherwise reasonably determined by the Company to be necessary  
and reasonable expenses incurred in connection therewith); (ii) such Permitted  
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than   
the Weighted Average Life to Maturity of, the Indebtedness being extended,      
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness  
being extended, refinanced, renewed, replaced, defeased or refunded is          
subordinated in right of payment to the Notes, such Permitted Refinancing       
Indebtedness has a final maturity date later than the final maturity date of,   
and is expressly subordinated in right of payment to, the Notes on terms at     
least as favorable to the Holders of the Notes as those contained in the        
documentation governing the Indebtedness being extended, refinanced, renewed,   
replaced, defeased or refunded; (iv) such Indebtedness is incurred solely by the
Company or the Restricted Subsidiary who is the obligor on the Indebtedness     
being extended, refinanced, renewed, replaced, defeased or refunded; and        
(v) such Indebtedness is secured only by the assets, if any, that secured the   
Indebtedness being extended, refinanced, renewed, replaced, defeased or         
refunded.                                                                       

"PERSON" means any individual, corporation, partnership, joint venture, 
limited liability company, incorporated or unincorporated association,          
joint-stock company, trust, unincorporated organization or government or other  
agency or political subdivision thereof or other entity of any kind.            

"PREFERRED STOCK" means any Equity Interest of any class or classes of a
Person (however designated) which is preferred as to payments of dividends, or  
as to distributions upon any liquidation or dissolution, over Equity Interests  
of any other class of such Person.                                              

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  "PUBLIC EQUITY OFFERING" means an underwritten offering of common stock of
the Company for cash pursuant to an effective registration statement under the  
Securities Act.                                                                 

  "PURCHASE MONEY INDEBTEDNESS" means Indebtedness (including Acquired Debt,
in the case of leases, Capital Lease Obligations, mortgage financings and       
purchase money obligations) incurred for the purpose of financing all or any    
part of the cost of the engineering, construction, installation, acquisition,   
lease (other than pursuant to a sale and leaseback of Existing Assets),         
development or improvement of any Telecommunications Assets used by the Company 
or any Restricted Subsidiary, in the case of Indebtedness incurred by the       
Company, or any Foreign Subsidiary, in the case of Indebtedness incurred by any 
Foreign Subsidiary, including any related notes, Guarantees, collateral         
documents, instruments and agreements executed in connection therewith, as the  
same may be amended, supplemented, modified or restated from time to time.      

    "RELATED PERSON" means any Person who controls, is controlled by or is under
common control with a Permitted Holder; PROVIDED, that for purposes of this     
definition "control" means the beneficial ownership of more than 50% of the     
total voting power of a Person normally entitled to vote in the election of     
directors, managers or trustees, as applicable, of a Person.                    

"RESTRICTED INVESTMENT" means any Investment other than a Permitted     
Investment.                                                                     

"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary. Unless the context specifically  
requires otherwise, Restricted Subsidiary means a direct or indirect Restricted 
Subsidiary of the Company.                                                      

"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,  
promulgated pursuant to the Act, as such Regulation is in effect on the date    
hereof.                                                                         

"STATED MATURITY" means, with respect to any installment of interest or 
principal on any series of Indebtedness, the date on which such payment of      
interest or principal was scheduled to be paid in the original documentation    
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date    
originally scheduled for the payment thereof.                                   

"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company that is   
subordinated in right of payment by its terms or the terms of any document or   
instrument or instrument relating thereto to the Notes, in any respect.         

"SUBSIDIARY" means, with respect to any Person, (i) any corporation,    
association or other business entity of which more than 50% of the total voting 
power of shares of Capital Stock entitled (without regard to the occurrence of  
any contingency) to vote in the election of directors, managers or trustees     
thereof is at the time owned or controlled, directly or indirectly, by such     
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing  
general partner of which is such Person or a Subsidiary of such Person or       
(b) the only general partners of which are such Person or of one or more        
Subsidiaries of such Person (or any combination thereof).                       

"TELECOMMUNICATIONS ASSETS" means all assets, rights (contractual or    
otherwise) and properties, whether tangible or intangible, used or intended for 
use in connection with a Telecommunications Business and the Equity Interests of
a Person engaged entirely or substantially entirely in a Telecommunications     
Business.                                                                       

"TELECOMMUNICATIONS BUSINESS" means the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data through
owned or leased transmission facilities, (ii) constructing, creating, developing
or marketing communications related network equipment, software and other       
devices for use in a telecommunications business or (iii) evaluating,           
participating or pursuing any other activity or                                 

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opportunity that is primarily related to those identified in (i) or (ii) above; 
PROVIDED, THAT, the determination of what constitutes a Telecommunications      
Business shall be made in good faith by the Board of Directors of the Company.  

 "UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary at the time of    
such designation: (a) has no Indebtedness other than Non-Recourse Debt; (b) is a
Person with respect to which neither the Company nor any of its Restricted      
Subsidiaries has any direct or indirect obligation to maintain or preserve such 
Person's financial condition or to cause such Person to achieve any specified   
levels of operating results; and (c) has not Guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors     
shall be evidenced by filing with the Trustee a certified copy of the Board     
Resolution giving effect to such designation and an Officers' Certificate       
certifying that such designation complied with the foregoing conditions and was 
permitted by the covenant described above under the caption "--Certain          
Covenants--Restricted Payments." The Board of Directors of the Company may at   
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;   
provided that such designation shall be deemed to be an incurrence of           
Indebtedness by a Restricted Subsidiary of the Company of any outstanding       
Indebtedness of such Unrestricted Subsidiary and such designation shall only be 
permitted if (i) such Indebtedness is permitted under the covenant described    
under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance 
of Preferred Stock," calculated on a pro forma basis as if such designation had 
occurred at the beginning of the applicable reference period, and (ii) no       
Default or Event of Default would be in existence following such designation.   

   "VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of     
Directors of such Person.                                                       

   "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the        
products obtained by multiplying (a) the amount of each then remaining          
installment, sinking fund, serial maturity or other required payments of        
principal, including payment at final maturity, in respect thereof, by (b) the  
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.                                                    

"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted   
Subsidiary of such Person all of the outstanding Capital Stock or other         
ownership interests of which (other than directors' qualifying shares) shall at 
the time be owned by such Person or by one or more Wholly Owned Restricted      
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.                                                                 

BOOK-ENTRY, DELIVERY AND FORM                                                   

DENOMINATION                                                            

 Except as set forth below, the Notes will be issued in registered, global
form in minimum denominations of $1,000 or [EURO]1,000, as applicable, and      
integral multiples of $1,000 or [EURO]1,000, as applicable, in excess thereof.  
The Notes will be issued at the closing of the offering only against payment in 
immediately available funds.                                                    

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FORM                                                                    

The Dollar Notes will be represented by one or more Global Notes in     
definitive, fully registered form without interest coupons (the "Dollar Global  
Notes") and will be deposited with or on behalf of The Depository Trust Company 
("DTC") and registered in the name of a nominee of DTC.                         

The Euro Notes will be represented by one or more Global Notes in       
definitive, fully registered form without interest coupons (the "Euro Global    
Notes" and, together with the Dollar Global Notes, the "Global Notes") and will 
be deposited with a common depositary for Morgan Guarantee Trust Company of New 
York as operator of the Euroclear System ("Euroclear") and Cedelbank (the       
"Common Depositary") and registered in the name of a nominee of the Common      
Depositary.                                                                     

TRANSFER PROCEDURE                                                      

 Except in the limited circumstances described below, owners of beneficial
interests in Global Notes will not be entitled to receive physical delivery of  
certificated notes. Transfers of beneficial interests in the Global Notes will  
be subject to the applicable rules and procedures of DTC, Euroclear and         
Cedelbank and their respective direct or indirect participants which rules and  
procedures may change from time to time.                                        

BOOK-ENTRY PROCEDURES                                                   

    GLOBAL NOTES.  The following description of the operations and procedures of
DTC, Euroclear and Cedelbank are provided solely as a matter of convenience.    
These operations and procedures are solely within the control of the respective 
settlement systems and are subject to changes by them from time to time. We take
no responsibility for these operations and procedures and we urge investors to  
contact the system or their participants directly to discuss these matters.     

    DOLLAR GLOBAL NOTES.  Upon the issuance of the Dollar Global Notes, DTC will
credit, on its internal system, the respective principal amount of the          
individual beneficial interests represented by such Global Notes to the accounts
of persons who have accounts with such depositary. Such accounts initially will 
be designated by or on behalf of the Underwriters. Ownership of beneficial      
interests in a Dollar Global Note will be limited to participants or persons who
hold interests through its participants. Ownership of beneficial interests in   
the Dollar Global Notes will be shown on, and the transfer of that ownership    
will be effected only through, records maintained by DTC or its nominee (with   
respect to interests of participants) and the records of participants (with     
respect to interests of persons other than participants).                       

  EURO GLOBAL NOTES.  Upon the issuance of the Euro Global Notes, the Common
Depositary will credit, on its internal system, the respective principal amount 
of the beneficial interests represented by such Global Notes to the accounts of 
Euroclear and Cedelbank. Euroclear and Cedelbank will credit, on their internal 
systems, the respective principal amounts of the individual beneficial interests
in such Global Notes to the accounts of persons who have accounts with Euroclear
and Cedelbank.                                                                  

Such accounts initially will be designated by or on behalf of the       
Underwriters. Ownership of beneficial interests in a Euro Global Note will be   
limited to participants or persons who hold interests through participants in   
Euroclear or Cedelbank. Ownership of beneficial interests in the Euro Global    
Notes will be shown on, and the transfer of that ownership will be effected only
through, records maintained by Euroclear and Cedelbank or their respective      
nominees (with respect to interests of participants) and the records of         
participants (with respect to interests of persons other than participants).    

  AS LONG AS DTC OR THE COMMON DEPOSITARY, OR ITS RESPECTIVE NOMINEE, IS THE
REGISTERED HOLDER OF A GLOBAL NOTE, DTC OR THE COMMON DEPOSITARY OR SUCH        
NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER AND HOLDER OF THE
NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES UNDER THE INDENTURE AND  
THE NOTES.                                                                      

Unless:                                                                 

    (1) in the case of a Dollar Global Note DTC notifies us that it is unwilling
     or unable to continue as depositary for a Global Note or ceases to be a
"Clearing Agency" registered under the Exchange Act;              

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(2) in the case of a Euro Global Note, Euroclear and Cedelbank notify us
that they are unwilling or unable to continue as clearing agency; 

(3) in the case of a Euro Global Note, the Common Depositary notifies us
      that they are unwilling or unable to continue as Common Depositary and a
  successor Common Depositary is not appointed within 120 days of such
notice; or                                                        

(4) in the case of any Note, an event of default has occurred and is    
continuing with respect to such Note,                             

owners of beneficial interests in a Global Note will not be entitled to have any
portions of such Global Note registered in their names, will not receive or be  
entitled to receive physical delivery of Notes in certificated form and will not
be considered the owners or holders of the Global Note (or any Notes represented
thereby) under the Indenture or the Notes. In addition, no beneficial owner of  
an interest in a Global Note will be able to transfer that interest except in   
accordance with DTC's and/or Euroclear's and Cedelbank's applicable procedures  
(in addition to those under the Indenture referred to herein).                  

Investors may hold their interests in the Euro Global Notes through     
Cedelbank or Euroclear, if they are participants in such systems, or indirectly 
through organizations which are participants in such systems. Cedelbank and     
Euroclear will hold interests in the Euro Global Notes on behalf of their       
participants through customers' securities accounts in their respective names on
the books of the Common Depositary. Investors may hold their interests in the   
Dollar Global Notes directly through DTC, if they are participants in such      
system, or indirectly through organizations (including Euroclear and Cedelbank) 
which are participants in such system. All interests in a Global Note may be    
subject to the procedures and requirements of DTC and/or Euroclear and          
Cedelbank.                                                                      

PAYMENTS ON THE NOTES                                                   

Payments of the principal of and interest on Dollar Global Notes will be
made to DTC or its nominee as the registered owner thereof. Payments of the     
principal of and interest on Euro Global Notes will be made to the order of the 
Common Depositary or its nominee as the registered owner thereof. Neither we,   
the Trustee, the Common Depositary nor any of their respective agents will have 
any responsibility or liability for any aspect of the records relating to or    
payments made on account of beneficial ownership interests in the Global Notes  
or for maintaining, supervising or reviewing any records relating to such       
beneficial ownership interests.                                                 

   We expect that DTC or its nominee, upon receipt of any payment of principal
or interest in respect of a Global Note representing any Notes held by it or its
nominee, will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount  
of such Global Note for such Notes as shown on the records of DTC or its        
nominee.                                                                        

   We expect that the Common Depositary, in its capacity as paying agent, upon
receipt of any payment of principal or interest in respect of a Global Note     
representing any Notes held by it or its nominee, will immediately credit the   
accounts of Euroclear and Cedelbank which in turn will immediately credit       
accounts of participants in Euroclear and Cedelbank with payments in amounts    
proportionate to their respective beneficial interests in the principal amount  
of such Global Note for such Notes as shown on the records of Euroclear and     
Cedelbank.                                                                      

We also expect that payments by participants to owners of beneficial    
interests in such Global Note held through such participants will be governed by
standing instructions and customary practices, as is now the case with          
securities held for the accounts of customers registered in "street name." Such 
payments will be the responsibility of such participants.                       

Because DTC, Euroclear and Cedelbank can only act on behalf of their    
respective participants, who in turn act on behalf of indirect participants and 
certain banks, the ability of a holder of a beneficial interest in Global Notes 
to pledge such interest to persons or entities that do not participate in the   
DTC, Euroclear or Cedelbank systems, or otherwise take actions in respect of    
such interest, may be limited by the lack of a definitive certificate for such  
interest. The laws of some countries and some U.S. states require that certain  

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persons take physical delivery of securities in certificated form. Consequently,
the ability to transfer beneficial interests in a Global Note to such persons   
may be limited. Because DTC, Euroclear and Cedelbank can act only on behalf of  
participants, which, in turn, act on behalf of indirect participants and certain
banks, the ability of a person having a beneficial interest in a Global Note to 
pledge such interest to persons or entities that do not participate in the DTC  
system or in Euroclear and Cedelbank, as the case may be, or otherwise take     
actions in respect of such interest, may be affected by the lack of a physical  
certificate evidencing such interest.                                           

Except for trades involving only Euroclear and Cedelbank participants,  
interests in the Dollar Global Notes will trade in DTC's Same-Day Funds         
Settlement System and secondary market trading activity in such interests will  
therefore settle in immediately available funds, subject in all cases to the    
rules and procedures of DTC and its participants. Transfers of interests in     
Dollar Global Notes between participants in DTC will be effected in accordance  
with DTC's procedures, and will be settled in same-day funds. Transfers of      
interests in Euro Global Notes and Dollar Global Notes between participants in  
Euroclear and Cedelbank will be effected in the ordinary way in accordance with 
their respective rules and operating procedures.                                

   Cross-market transfers of dollar notes between DTC participants, on the one
hand, and Euroclear or Cedelbank participants, on the other hand, will be       
effected in DTC in accordance with DTC's rules on behalf of Euroclear or        
Cedelbank, as the case may be, by its respective depositary; however, such      
cross-market transactions will require delivery of instructions to Euroclear or 
Cedelbank, as the case may be, by the counterparty in such system in accordance 
with the rules and procedures and within the established deadlines (Brussels    
time) of such system. Euroclear or Cedelbank, as the case may be, will, if the  
transaction meets its settlement requirements, deliver instructions to its      
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Notes in DTC, and      
making or receiving payments in accordance with normal procedures for same-day  
funds settlement applicable to DTC. Euroclear participants and Cedelbank        
participants may not deliver instructions directly to the depositories for      
Euroclear or Cedelbank.                                                         

  Because of time zone differences, the securities account of a Euroclear or
Cedelbank participant purchasing an interest in a Dollar Global Note from a DTC 
participant will be credited, and any such crediting will be reported to the    
relevant Euroclear or Cedelbank participant, during the securities settlement   
processing day (which must be a business day for Euroclear and Cedelbank        
immediately following the DTC settlement date). Cash received in Euroclear or   
Cedelbank as a result of sales of interests in a Global Note by or through a    
Euroclear or Cedelbank participant to a DTC participant will be received with   
value on the DTC settlement date but will be available in the relevant Euroclear
or Cedelbank cash account only as of the business day for Euroclear or Cedelbank
following the DTC settlement date.                                              

   DTC, Euroclear and Cedelbank have advised us that they will take any action
permitted to be taken by a holder of Notes (including the presentation of Notes 
for exchange as described below) only at the direction of one or more           
participants to whose account with DTC or Euroclear or Cedelbank, as the case   
may be, interests in the Global Notes are credited and only in respect of such  
portion of the aggregate principal amount of the Notes as to which such         
participant or participants has or have given such direction. However, if there 
is an event of default under the Notes, DTC, Euroclear and Cedelbank reserve the
right to exchange the Global Notes for Notes in certificated form, and to       
distribute such Notes to their respective participants.                         

  If the Notes are issued in certificated form, holders of such certificated
Notes will be able to receive payments of principal and interest on their Notes 
in accordance with the procedures described under "--Certificated Notes."       

DEPOSITARY PROCEDURES                                                   

   DTC.  DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal      
Reserve System, a "clearing corporation" within                                 

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the meaning of the Uniform Commercial Code and a "Clearing Agency" registered   
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created  
to hold securities for its participants and facilitate the clearance and        
settlement of securities transactions between participants through electronic   
book-entry changes in accounts of its participants, thereby eliminating the need
for physical transfer and delivery of certificates. Participants include        
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations. Indirect access to the DTC system  
is available to other entities such as banks, brokers, dealers and trust        
companies that clear through or maintain a custodial relationship with a        
participant, either directly or indirectly ("indirect participants").           

EUROCLEAR AND CEDELBANK.  Euroclear and Cedelbank have advised us as    
follows: Euroclear and Cedelbank each hold securities for their account holders 
and facilitate the clearance and settlement of securities transactions by       
electronic book-entry transfer between their respective account holders, thereby
eliminating the need for physical movements of certificates and any risk from   
lack of simultaneous transfers of securities.                                   

    Euroclear and Cedelbank each provide various services including safekeeping,
administration, clearance and settlement of internationally traded securities   
and securities lending and borrowing. Euroclear and Cedelbank each also deal    
with domestic securities markets in several countries through established       
depository and custodial relationships. The respective systems of Euroclear and 
Cedelbank have established an electronic bridge between their two systems across
which their respective account holders may settle trades with each other.       

Account holders in both Euroclear and Cedelbank are world-wide financial
institutions including underwriters, securities brokers and dealers, trust      
companies and clearing corporations. Indirect access to both Euroclear and      
Cedelbank is available to other institutions that clear through or maintain a   
custodial relationship with an account holder of either system.                 

  An account holder's overall contractual relations with either Euroclear or
Cedelbank are governed by the respective rules and operating procedures of      
Euroclear or Cedelbank and any applicable laws. Both Euroclear and Cedelbank act
under such rules and operating procedures only on behalf of their respective    
account holders, and have no record of or relationship with persons holding     
through their respective account holders.                                       

Although DTC, Euroclear and Cedelbank currently follow the foregoing    
procedures to facilitate transfers of interests in Global Notes among           
participants of DTC, Euroclear and Cedelbank, they are under no obligation to do
so, and such procedures may be discontinued or modified at any time. Neither we 
nor the Trustee will have any responsibility for the performance by DTC,        
Euroclear or Cedelbank or their respective participants or indirect participants
of their respective obligations under the rules and procedures governing their  
operations.                                                                     

CERTIFICATED NOTES                                                      

If any depositary is at any time unwilling or unable to continue as a   
depositary for the Notes for the reasons set forth above under "Book Entry      
Procedures," we will issue certificates for such Notes in definitive, fully     
registered, non-global form without interest coupons in exchange for the Global 
Notes. Certificates for Notes delivered in exchange for any Global Note or      
beneficial interests therein will be registered in the names, and issued in any 
approved denominations, requested by DTC, Euroclear, Cedelbank or the Common    
Depositary (in accordance with their customary procedures).                     

 In the event definitive Notes are issued, the holders of definitive Notes
will be able to receive payments of principal and interest on their Notes at the
office of the Company's paying agent maintained in the Borough of Manhattan,    
and, if the definitive Notes are listed on the Luxembourg Stock Exchange, at the
offices of the paying agent in Luxembourg. All payments of interest may be      
received at the offices of a paying agent upon presentation of certificated     
Notes and all payments of principal may be received at such offices upon        
surrender of the Notes. The Company also has the option of mailing checks to the
registered holders of the Notes.                                                

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  The Company's paying agent with respect to the Dollar Notes in the Borough
of Manhattan is currently the corporate trust office of The Bank of New York,   
located at 101 Barclay Street, Floor 21 West, New York, New York. The Company's 
paying agent with respect to the Euro Notes in London, United Kingdom is        
currently the corporate trust office of The Bank of New York, London Branch, at 
1 Canada Square, London E14 5AL, United Kingdom. The Company's paying agent and 
transfer agent in Luxembourg is Kredietbank S.A. Luxembourgeoise, currently     
located at 43 boulevard Royal, L-2955 Luxembourg. As long as the Notes are      
listed on the Luxembourg Stock Exchange, the Company will maintain a paying     
agent and transfer agent in Luxembourg. Any change in the Luxembourg paying     
agent and transfer agent will be published in Luxembourg. See "--Notices."      

 In the event definitive Notes are issued, the holders of definitive Notes
will be able to transfer their Notes, in whole or in part, by surrendering the  
Notes for registration of transfer at the office of The Bank of New York and, so
long as definitive Notes are listed on the Luxembourg Stock Exchange, at the    
offices of the paying agent in Luxembourg, duly endorsed by or accompanied by a 
written instrument of transfer in form satisfactory to the Company and the      
securities registrar. Upon surrender, the Company will execute, and the trustee 
will authenticate and deliver new Notes to the designated transferee in the     
amount being transferred, and a new Note for any amount not being transferred   
will be issued to the transferor. The Company will not charge any fee for the   
registration of transfer or exchange, except that the Company may require the   
payment of a sum sufficient to cover any applicable tax or other governmental   
charge payable in connection with the transfer. Notwithstanding any statement   
herein, we and the Trustees reserve the right to impose such transfer,          
certification, exchange or other requirements, if any, as they may determine are
necessary to ensure compliance with applicable laws or as DTC, Euroclear or     
Cedelbank may require.                                                          

SAME-DAY SETTLEMENT AND PAYMENT                                         

   The Indenture will require that payment in respect of the Notes represented
by the Global Notes, including principal, and premium, if any, be made by wire  
transfer of immediately available funds to the accounts specified by the Global 
Note holder. With respect to Notes in certificated form, we will make all       
payments of principal, and premium, if any, by wire transfer of immediately     
available funds to the accounts specified by the holders thereof or, if no such 
account is specified, by mailing a check to each such holder's registered       
address. The Notes represented by the Global Notes will be eligible to trade in 
DTC's Same-Day Firm Settlement System, and any permitted secondary market       
trading activity in such Notes will, therefore, be required by DTC to be settled
in immediately available funds.                                                 

  Because of time zone differences, the securities account of a Euroclear or
Cedelbank participant purchasing an interest in a Global Note from a participant
in DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedelbank participant, during the securities settlement processing 
day (which must be a business day for Euroclear and Cedelbank) immediately      
following the settlement date of DTC. Cash received in Euroclear or Cedelbank as
a result of sales of interests in a Global Note by or through a Euroclear or    
Cedelbank participant to a participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or       
Cedelbank cash account only as of the business day for Euroclear or Cedelbank   
following DTC's settlement date.                                                

NOTICES                                                                         

 Notices to holders of the Notes will be made by first class mail, postage
prepaid, to the addresses that appear on the register of the Company. So long as
the Notes are listed on the Luxembourg Stock Exchange, notices to non-United    
States residents will be made by publication in authorized newspapers in        
Luxembourg. It is expected that publication will be made in Luxembourg in the   
LUXEMBURGER WORT. Any notice will be deemed to have been given on the date of   
publication or, if published more than once, on the date of the first           
publication.                                                                    

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS 

The following discussion is a summary of certain United States federal  
income tax considerations that may be relevant to the purchase, ownership and   
disposition of the notes. This summary does not purport to be a complete        
analysis of all of the potential United States federal income tax considerations
relating to the purchase, ownership and disposition of the notes and generally  
does not address any other taxes that might be applicable to a holder of the    
notes. We cannot assure you that the United States Internal Revenue Service (the
"IRS") will take a similar view of such consequences. Further, the discussion   
does not address all aspects of taxation that may be relevant to particular     
purchasers in light of their individual circumstances (including the effect of  
any foreign, state or local laws) or to certain types of purchasers subject to  
special treatment under United States federal income tax laws (including dealers
in securities, insurance companies, financial institutions, persons that hold   
notes that are a hedge or that are hedged against currency risks or that are    
part of a straddle or conversion transaction or a constructive sale, persons    
whose functional currency is not the U.S. dollar and tax-exempt entities). The  
discussion below assumes that the notes are held as capital assets within the   
meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the   
"Code").                                                                        

   The discussion of the United States federal income tax considerations below
is based on currently existing provisions of the Code, the applicable Treasury  
regulations promulgated and proposed thereunder (the "Treasury Regulations"),   
judicial decisions, and administrative interpretations, all of which are subject
to change, possibly on a retroactive basis. Because individual circumstances may
differ, as a prospective purchaser of the notes, you are strongly urged to      
consult your tax advisor with respect to your particular tax situation and the  
particular tax effects of any state, local, non-United States or other tax laws 
and possible changes in the tax laws.                                           

   As used in this section, the term "U.S. Holder" means a beneficial owner of
a note who or which is for United States federal income tax purposes (i) an     
individual who is a citizen or resident of the United States, (ii) a            
corporation, partnership or other entity created or organized in or under the   
laws of the United States or of any political subdivision thereof, (iii) an     
estate the income of which is subject to United States federal income taxation  
regardless of its source, (iv) a trust if a court within the United States is   
able to exercise primary supervision over the administration of the trust and   
one or more United States persons have the authority to control all substantial 
decisions of the trust, or (v) otherwise subject to United States federal income
tax on a net income basis in respect of the notes. The term also includes       
certain former citizens of the United States whose income and gain on the notes 
will be subject to United States taxation. As used herein, the term "Non-U.S.   
Holder" means a beneficial owner of a note that is not a U.S. Holder.           

TAX CONSIDERATIONS FOR U.S. HOLDERS                                             

PAYMENTS OF INTEREST                                                    

 Interest on a note generally will be taxable to a U.S. Holder as ordinary
interest income at the time it accrues or is received in accordance with the    
U.S. Holder's method of accounting for United States federal income tax         
purposes.                                                                       

    FOREIGN CURRENCY ASPECTS OF INTEREST.  The amount of interest required to be
included in income by a cash-basis U.S. Holder upon receipt of a payment on a   
Euro note will be the U.S. dollar value of the Euro amount paid (determined     
using the "spot rate" on the date such payment is received), regardless of      
whether the payment is in fact converted into U.S. dollars. A spot rate is a    
rate that is demonstrated to reflect a fair market rate of exchange available to
the public for currency under a spot contract in a free market and involving    
representative amounts. The tax basis of Euros received by a U.S. Holder        
generally will equal the U.S. dollar value of such Euros (as described) when    
paid. Upon any subsequent exchange of such Euros for U.S. dollars or for another
foreign currency, or upon the use of such Euros to purchase                     

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property, a U.S. Holder will generally recognize exchange gain or loss equal to 
the difference between the U.S. Holder's tax basis for the Euros and the amount 
of U.S. dollars received (or, where another foreign currency is received, the   
U.S. dollar value of such foreign currency based on the U.S. dollar spot rate on
the date of the exchange) or, if property is purchased, the U.S. dollar value of
the Euros exchanged for such property based on the U.S. dollar spot rate on the 
date of the exchange. Generally, no exchange gain or loss should be realized if 
a U.S. Holder receives Euros and exchanges such Euros for U.S. dollars on the   
same day.                                                                       

 Except in the case of a Spot Rate Convention Election (as defined below),
interest (including OID) on a Euro note held by a U.S. Holder that is required  
to accrue interest on a note prior to receipt of such interest will be          
determined for any accrual period in Euros and then translated into U.S. dollars
using the average exchange rate for the accrual period or, with respect to an   
accrual period that spans two taxable years, using the average rate for the     
partial period within each taxable year. The average rate of exchange for an    
interest accrual period is the simple average of the exchange rates for each    
business day of such period (or such other average that is reasonably derived   
and consistently applied by the holder).                                        

 Applicable Treasury Regulations allow accrual basis taxpayers to elect (a
"Spot Rate Convention Election") to translate interest income at the spot rate  
on the last day of the interest accrual period (and in the case of a partial    
accrual period, the spot rate on the last day of the taxable year). In addition,
a holder may elect to use the spot rate in effect on the date of receipt (or    
payment) for such purpose if such date is within five business days of the last 
date of an interest accrual period. A holder that makes such an election must   
apply it consistently to all debt instruments from year to year and may not     
revoke the election without the consent of the IRS.                             

 Upon receipt of an interest payment on a Euro note, an accrual basis U.S.
Holder will recognize ordinary gain or loss with respect to accrued interest    
income in an amount equal to the difference between the U.S. dollar value of the
payment received (determined using the spot rate in effect on the date such     
payment is received) in respect of such interest accrual period and the U.S.    
dollar value of the interest income that has accrued during such interest       
accrual period (as determined above)). Any such gain or loss will be treated as 
ordinary income or loss but generally will not be treated as interest income or 
expense, except to the extent provided by future regulations or administrative  
pronouncements of the IRS.                                                      

For purposes of computing exchange gain and loss, payments received on a
Euro note shall be treated first as payments of interest, and second as payments
of principal.                                                                   

MARKET DISCOUNT AND BOND PREMIUM                                        

If a U.S. Holder purchases a note for an amount that is less than its   
principal amount, the difference generally will be treated as "market discount".
In such case, any partial principal payment on and gain realized on the sale,   
exchange or retirement of the note and unrealized appreciation on certain       
nontaxable dispositions of the note will be treated as ordinary income to the   
extent of the market discount that has not previously been included in income   
and that is treated as having accrued on the note prior to such payment or      
disposition and the U.S. Holder might be required to defer all or a portion of  
the interest expense on any indebtedness incurred or continued to purchase or   
carry such note (in each case, unless the U.S. Holder has made an election to   
include such market discount in income as it accrues). Unless the U.S. Holder   
elects to treat market discount as accruing on a constant yield method, market  
discount will be treated as accruing on a straight-line basis over the remaining
term of the note. An election made to include market discount in income as it   
accrues will apply to all debt instruments acquired by the U.S. Holder on or    
after the first day of the taxable year to which such election applies and may  
be revoked only with the consent of the IRS. In the case of Euro notes, market  
discount will be determined in Euros. If the U.S. Holder elects to include      
market discount in income as it accrues, the amount included for any accrual    
period will be translated into U.S. dollars at the average exchange rate for    
that period. If the U.S. Holder                                                 

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has not elected to include market discount in income as it accrues, the amount  
of the discount will be translated into U.S. dollars at the spot rate on the    
date the Euro note is disposed of.                                              

If a U.S. Holder purchases a note for an amount in excess of all amounts
payable on the note after the purchase date, other than payments of stated      
interest, such excess will be treated as "bond premium." In general, a U.S.     
Holder may elect to amortize bond premium over the remaining term of the note on
a constant yield method. The amount of bond premium allocable to any accrual    
period is offset against the stated interest allocable to such accrual period   
(and any excess may be deducted, subject to certain limitations). An election to
amortize bond premium applies to all taxable debt instruments held at the       
beginning of the first taxable year to which such election applies and          
thereafter acquired by the U.S. Holder and may be revoked only with the consent 
of the IRS. In the case of Euro notes, bond premium will be determined in Euros 
and will offset stated interest in Euros. A U.S. Holder will recognize exchange 
gain or loss with respect to any such bond premium on a Euro note, calculated by
treating the portion of the premium amortized with respect to any period as if  
it were a return of principal.                                                  

SALE, EXCHANGE OR RETIREMENT OF NOTES                                   

Upon the sale, exchange or retirement of a note, a U.S. Holder will     
recognize taxable gain or loss equal to the difference between the amount of    
cash plus the fair market value of any property received (not including any     
amount attributable to accrued but unpaid interest) and such holder's adjusted  
tax basis in the note. A U.S. Holder's adjusted tax basis in a note will be its 
cost, increased by any accrued market discount included in income and reduced by
any amortized bond premium and any principal payment on the note received by    
such holder.                                                                    

  Subject to the discussions of market discount and foreign currency gain or
loss, gain or loss realized on the sale, exchange or retirement of a note by a  
U.S. Holder generally will be capital gain or loss if the note is held as a     
capital asset by the U.S. Holder. Net capital gains of individuals are subject  
to tax at lower rates than items of ordinary income. The deductibility of       
capital losses is subject to limitations.                                       

    In general, a U.S. Holder will realize exchange gain or loss with respect to
payments of principal on a Euro note, determined by translating the             
Euro-denominated principal amount paid at the spot rate on the date of payment  
and subtracting from that the Euro-denominated principal amount at the spot rate
on the date the U.S. Holder acquired the Euro note. Any such exchange gain or   
loss will be treated as ordinary income or loss.                                

TAX CONSIDERATIONS FOR NON-U.S. HOLDERS                                         

   Generally, payments of principal or interest on the notes by the Company or
any paying agent to a beneficial owner of a note that is a Non-U.S. Holder will 
not be subject to U.S. federal income or income withholding tax, provided that, 
in the case of interest, (i) such Non-U.S. Holder does not own, actually or     
constructively, 10% or more of the combined voting power of all classes of stock
of the Company entitled to vote, (ii) such Non-U.S. Holder is not, for U.S.     
federal income tax purposes, a controlled foreign corporation related to the    
Company actually or constructively through stock ownership, (iii) such Non-U.S. 
Holder is not a bank receiving interest described in section 881(c)(3)(A) of the
Code and (iv) either (a) the Non-U.S. Holder provides the Company or its agent  
with an IRS Form W-8 (or a suitable substitute form) signed under penalties of  
perjury that includes its name and address and certifies as to its non-United   
States status in compliance with applicable law and Treasury Regulations or     
(b) a securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business     
holds the note and provides a statement to the Company or its agent signed under
penalties of perjury in which such organization, bank or financial institution  
certifies that such a Form W-8 (or a suitable substitute form) has been received
by it from the Non-U.S. Holder or from another financial institution acting on  
behalf of the Non-U.S. Holder and furnishes the Company or its agent with a copy

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thereof. If these requirements cannot be met, a Non-U.S. Holder generally will  
be subject to United States federal income withholding tax at a rate of 30% (or 
such lower rate provided by an applicable treaty) with respect to payments of   
interest on the notes. The Non-U.S. Holder must inform the Company or its agent 
or the financial institution to which the Non-U.S. Holder provided the Form W-8 
(or suitable substitute) within 30 days of any change in the information        
provided in such form.                                                          

Treasury Regulations generally effective for payments made after        
December 31, 2000 (the "New Regulations") provide alternative methods for       
satisfying the certification requirements described in clause (iv) above. The   
New Regulations also will require, in the case of notes held by a foreign       
partnership, that (i) the certification be provided by the partners rather than 
by the foreign partnership and (ii) the partnership provide certain information,
including a U.S. taxpayer identification number.                                

  A Non-U.S. Holder of a note generally will not be subject to United States
federal income or income withholding tax on gain realized on the sale, exchange,
redemption, retirement or other disposition of such Note, unless (i) such       
Non-U.S. Holder is an individual who is present in the United States for 183    
days or more in the taxable year of the disposition, and certain other          
conditions are met or (ii) such gain is effectively connected with the conduct  
by such Non-U.S. Holder of a trade or business in the United States.            

 Notwithstanding the above, if a Non-U.S. Holder of a note is engaged in a
trade or business in the United States and if interest on the note, or gain     
realized on the disposition of the note, is effectively connected with the      
conduct of such trade or business, the Non-U.S. Holder generally will be subject
to regular United States federal income tax on such interest or gain in the same
manner as if it were a U.S. Holder, unless an applicable treaty provides        
otherwise. In addition, if such Non-U.S. Holder is a foreign corporation, it may
be subject to a branch profits tax equal to 30% (or such lower rate provided by 
an applicable treaty) of its effectively connected earnings and profits for the 
taxable year, subject to certain adjustments. Even though such effectively      
connected income is subject to income tax, and may be subject to the branch     
profits tax, it generally is not subject to income withholding if the Non-U.S.  
Holder delivers a properly executed IRS Form 4224 (or other form applicable     
under the New Regulations) to the payor.                                        

TAX CONSIDERATIONS APPLICABLE TO BOTH U.S. HOLDERS AND NON-U.S. HOLDERS         

BACKUP WITHHOLDING AND INFORMATION REPORTING                            

    Under current United States federal income tax law, a 31% backup withholding
tax might apply to certain payments on, and the proceeds from a sale, exchange  
or redemption of, the notes, unless the holder of the note (i) is a corporation 
or comes within certain other exempt categories and, when required, demonstrates
that fact or (ii) provides a correct taxpayer identification number, certifies  
as to its exemption from backup withholding and otherwise complies with         
applicable requirements of the backup withholding rules.                        

Backup withholding and information reporting generally will not apply to
payments made by the Company or a paying agent on a note to a Non-U.S. Holder if
the certification described under "Tax Considerations for Non-U.S. Holders" is  
duly provided or the Non-U.S. Holder otherwise establishes an exemption and the 
payor does not have actual knowledge that the holder is a U.S. Holder or that   
the conditions of any other exemption are not, in fact, satisfied. The payments 
of proceeds from the disposition of a note to or through a non-United States    
office of a broker that is (i) a United States person, (ii) a controlled foreign
corporation for United States federal income tax purposes, (iii) a foreign      
person, 50% or more of whose gross income from all sources for certain periods  
is from activities effectively connected with the conduct of a United States    
trade or business or (iv) after December 31, 2000, a foreign partnership if     
either (A) more than 50% of the income or capital interest is owned by U.S.     
Holders or (B) such partnership has certain connections to the United States,   
will be subject to information reporting                                        

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requirements unless such broker has documentary evidence in its files of the    
holder's Non-U.S. Holder status and has no actual knowledge to the contrary or  
otherwise establishes an exemption. Before January 1, 2001, backup withholding  
will not apply to any payment of the proceeds from the sale of a note made to or
through a foreign office of a "broker" (as defined in applicable Treasury       
Regulations). However, after December 31, 2000, backup withholding might apply  
if the broker has actual knowledge that the payee is a U.S. Holder. Payments of 
the proceeds from the sale of a note to or through the United States office of a
broker are subject to information reporting and possible backup withholding     
unless the holder certifies, under penalties of perjury, that it is not a U.S.  
Holder and that certain other conditions are met or otherwise establishes an    
exemption, provided that the broker does not have actual knowledge that the     
holder is a U.S. Holder or that the conditions of any other exemption are not,  
in fact, satisfied.                                                             

    Holders of notes should consult their tax advisors regarding the application
of backup withholding in their particular situations, the availability of an    
exemption therefrom, and the procedure for obtaining such an exemption, if      
available. Any amounts withheld from payment under the backup withholding rules 
will be allowed as a credit against the holder's United States federal income   
tax liability and may entitle the holder to a refund if the required information
is furnished to the IRS.                                                        

THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX 
ADVICE. ACCORDINGLY, AS A PROSPECTIVE HOLDER OF A NOTE, YOU SHOULD CONSULT YOUR 
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF PURCHASING, HOLDING 
AND DISPOSING OF THE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE,
LOCAL, OR NON-UNITED STATES TAX LAWS AND ANY RECENT OR PROSPECTIVE CHANGES IN   
APPLICABLE TAX LAWS AND THE EFFECT OF THE NEW REGULATIONS WITH RESPECT TO       
PAYMENTS MADE AFTER DECEMBER 31, 2000.                                          

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UNDERWRITING

   Subject to the terms and conditions set forth in the underwriting agreement
dated November 12, 1999, each underwriter named below has severally agreed to   
purchase from us, and we have agreed to sell to such underwriter, the principal 
amount of notes set forth opposite the name of such underwriter.                

                                                        [Enlarge/Download Table]

                                                             PRINCIPAL AMOUNT  PRINCIPAL AMOUNT 
UNDERWRITER                                                  OF DOLLAR NOTES    OF EURO NOTES   
-----------                                                  ----------------  ---------------- 
                                                                                                

Salomon Smith Barney Inc....................................   $375,000,000    [EURO]125,000,000
Chase Securities Inc........................................     93,750,000        31,250,000   
Deutsche Bank Securities Inc................................     75,000,000        25,000,000   
Donaldson, Lufkin & Jenrette Securities Corporation.........     93,750,000        31,250,000   
Goldman, Sachs & Co.........................................     75,000,000        25,000,000   
Morgan Stanley & Co. Incorporated...........................     37,500,000        12,500,000   
                                                               ------------      ------------   
    Total...................................................   $750,000,000    [EURO]250,000,000
                                                               ============      ============   

    The underwriting agreement provides that the obligations of the underwriters
to purchase the notes included in this offering are subject to the approval of  
legal matters by counsel and to other conditions. The underwriters are obligated
to purchase all of the notes if they purchase any of the notes.                 

  The underwriters propose to offer some of the notes directly to the public
at the public offering prices set forth on the cover page of this prospectus    
supplement and some of the notes to certain dealers at the public offering price
less a concession not in excess of:                                             

- 0.50% of the principal amount in the case of the Dollar notes; and    

- 0.50% of the principal amount in the case of the Euro notes.          

 The underwriters may allow, and such dealers may reallow, a concession to
certain other dealers not in excess of:                                         

- 0.25% of the principal amount in the case of the Dollar notes; and    

- 0.25% of the principal amount in the case of the Euro notes.          

  After the initial offering of the notes to the public, the public offering
prices and the concessions to dealers may be changed by the underwriters.       

  The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us in connection with this offering (expressed as a 
percentage of the principal amount of the notes).                               

                                                                [Download Table]

                                                         PAID BY US      
                                                         ----------      
                                                                         
Per note...............................................     2.625%       

The underwriters are offering the notes subject to prior sale and their 
acceptance of the notes from us. The underwriters may reject any order in whole 
or in part.                                                                     

The underwriters may over-allot or effect transactions that stabilize or
cover, each of which is described below.                                        

- Over-allotment involves syndicate sales of notes in excess of the     
principal amount of notes to be purchased by the underwriters, which
creates a short position for the underwriters.                      

  - Stabilizing transactions involve bids or purchases of notes made for the
   purpose of preventing or retarding a decline in the market price of the
notes while the offering is in progress.                            

    - Syndicate covering transactions involve purchases of the notes in the open
market after the distribution has been completed in order to cover  
syndicate short positions.                                          

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These transactions may cause the price of the notes to be higher than it
would otherwise be in the absence of such transactions. The underwriters are not
required to engage in any of these activities and may end any of these          
activities at any time. The underwriters may also impose a penalty bid. Penalty 
bids permit an underwriter to reclaim a selling concession from a syndicate     
member when that underwriter, in covering syndicate short positions or making   
stabilizing purchases, purchases notes originally sold by that syndicate member.

We estimate that our total expenses of this offering will be $1,000,000.

  The notes are new issues of securities with no established trading market.
Application has been made to list the notes on the Luxembourg Stock Exchange. We
have been advised by the underwriters that they presently intend to make a      
market in the notes, as permitted by applicable laws and regulations. The       
underwriters are not obligated, however, to make a market in the notes and may  
discontinue any market making at any time at their sole discretion. Accordingly,
we can make no assurance as to the liquidity of, or trading markets for, the    
notes.                                                                          

    Purchasers of the notes may be required to pay stamp taxes and other charges
in accordance with the laws and practices of the country of purchase in addition
to the issue price set forth on the cover page of this document.                

  We have agreed with the underwriters not to offer, sell, contract to sell,
grant any other option to purchase or otherwise dispose of, directly or         
indirectly, any notes or similar securities, or enter into any agreement to do  
any of the foregoing, for a period of 180 days after the date of issuance of the
notes without the prior written consent of Salomon Smith Barney Inc., except for
the convertible subordinated note to be issued to Bell Atlantic.                

 We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments in
respect thereto.                                                                

 Each underwriter has represented and agreed in the underwriting agreement
that:                                                                           

- it has not offered or sold and will not offer or sell, any notes to   
      persons in the United Kingdom, except to persons whose ordinary activities
    involve them in acquiring, holding, managing or disposing of investments
     (as principal or agent) for the purposes of their businesses or otherwise
    in circumstances which shall not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995;                                                   

- it has complied and will comply with all applicable provisions of the 
    Financial Services Act 1986 (the "FSA") with respect to anything done by
  it in relation to the notes in, from or otherwise involving the United
Kingdom; and                                                        

- it has only issued or passed on and will only issue or pass on in the 
      United Kingdom any document received by it in connection with the issue or
     sale of the notes to a person who is of a kind described in Article 11(3)
   of the FSA 1986 (Investment Advertisements) (Exemptions) Order 1996, as
  amended, or is a person to whom the document may otherwise lawfully be
issued or passed on.                                                

    Certain of the underwriters, their affiliates or predecessors are providing,
have provided and may in the future provide investment banking or other         
financial services to us and our affiliates in the ordinary course of business  
and will receive customary compensation in connection therewith. Certain of the 
underwriters in this offering are acting as underwriters in the sale of class A 
common stock by certain of our stockholders and in an offering by DECS          
Trust VI, both of which are expected to be completed concurrently with the      
offering of the notes and none of which are conditioned on the other. See       
"Recent and Proposed Transactions."                                             

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NOTICE TO CANADIAN RESIDENTS

THE OFFERING                                                                    

The distribution of notes in Canada is being made on a private placement
basis solely in the Provinces of Quebec, Ontario, Manitoba, Saskatchewan,       
Alberta and British Columbia.                                                   

RESALE RESTRICTIONS                                                             

 Any resale of the notes must be made in accordance with an exemption from
the registration and prospectus requirements of applicable securities laws,     
which vary depending on the province. Purchasers of notes are advised to seek   
legal advice prior to any resale of the notes.                                  

REPRESENTATION BY PURCHASERS                                                    

    Confirmations of the acceptance of offers to purchase the notes will be sent
to purchasers in Canada who have not withdrawn their offers to purchase prior to
the issuance of such confirmations. Each purchaser who receives a purchase      
confirmation will, by the purchaser's receipt thereof, be deemed to represent to
us and the dealer from whom such purchase confirmation is received that such    
purchaser is entitled under applicable provincial securities laws to purchase   
the notes without the benefit of a prospectus qualified under such securities   
laws.                                                                           

CANADIAN FEDERAL INCOME TAX CONSIDERATIONS                                      

 The following summary fairly describes the principal Canadian federal tax
considerations generally applicable to a person who acquires notes pursuant to  
this offering memorandum and who, at all relevant times and for purposes of the 
INCOME TAX ACT (Canada) and any applicable tax treaty or convention, is or is   
deemed to be resident in Canada, deals at arm's length with us and holds the    
notes as capital property. Generally, the notes will constitute capital property
to a holder of notes provided that the holder of notes does not hold the notes  
in the course of carrying on a business and does not acquire them as part of an 
adventure in the nature of trade. Certain holders of notes who might not        
otherwise be considered to hold their notes as capital property may, in certain 
circumstances, be entitled to have them treated as capital property by making   
the one time election permitted by subsection 39(4) of the INCOME TAX ACT       
(Canada). This summary is not applicable to a holder of notes that is a         
"financial institution" as defined in the INCOME TAX ACT (Canada) for purposes  
of certain rules applicable to any income, gain or loss arising from a          
"mark-to-market property". Holders of notes that are "financial institutions"   
for the purposes of these rules should consult their own tax advisors.          

This summary is based upon the current provisions of the INCOME TAX ACT 
(Canada) and the regulations thereunder, all specific proposals to amend the    
INCOME TAX ACT (Canada) and regulations publicly announced by or on behalf of   
the Minister of Finance (Canada) prior to the date hereof and counsel's         
understanding of the current published administrative and assessing policies and
practices of Revenue Canada, Customs, Excise and Taxation. This summary is not  
exhaustive of all possible Canadian federal income tax considerations and,      
except for the proposed amendments described above, does not take into account  
or anticipate any changes in the law or administrative practice, whether by     
judicial, governmental or legislative decision or action, nor does it take into 
account tax legislation or considerations of any province, territory or foreign 
jurisdiction, which may differ significantly from those discussed herein.       

This summary is of a general nature only and is not intended to be and  
should not be construed to be, legal or tax advice to any particular holder of  
notes, and no representations with respect to the income tax consequences to any
particular holder of notes are made. ACCORDINGLY, PROSPECTIVE PURCHASERS OF     
NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS FOR ADVICE WITH RESPECT TO THE TAX  
CONSEQUENCES TO THEM OF ACQUIRING, HOLDING AND DISPOSING OF NOTES.              

    For the purposes of the INCOME TAX ACT (Canada), all amounts relating to the
acquisition, holding or disposition of notes, including interest, adjusted cost 
base and proceeds of disposition, must be converted                             

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into Canadian dollars based on the prevailing United States dollar or Euro      
exchange rate, as the case may be, at the time such amounts arise.              

INTEREST                                                                

   A holder of notes that is a corporation, partnership, unit trust or a trust
of which a corporation or partnership is a beneficiary will be required to      
include in computing its income for a taxation year all interest that accrues to
such holder on the notes to the end of that year or that becomes receivable or  
is received by it before the end of that year, to the extent that such interest 
was not included in computing the holder's income for a preceding taxation year.
Any other holder of notes, including an individual, will be required to include 
in computing its income for a taxation year all interest on the notes that is   
received or receivable by such holder of notes in that year (depending on the   
method regularly followed by the holder of notes in computing income) to the    
extent that such interest was not included in computing the holder's income for 
a preceding taxation year.                                                      

 Any premium paid by us because of the exercise of the right to redeem the
notes before the maturity thereof will be deemed to be interest received at that
time by a holder to the extent that such premium can reasonably be considered to
relate to, and does not exceed the value at the time of redemption of, the      
interest that would have been paid or payable by us on those notes for a        
taxation year ending after the redemption.                                      

DISPOSITION                                                             

    On a disposition or a deemed disposition (which will include a redemption or
repayment at maturity) of a note, a holder of notes will generally be required  
to include in computing its income for the taxation year in which the           
disposition occurs all interest that accrued on the note from the date of the   
last interest payment to the date of disposition except to the extent that such 
interest has otherwise been included in the holder's income for that year or a  
preceding taxation year. In general, a disposition or a deemed disposition of a 
note will result in a capital gain (or a capital loss) equal to the amount by   
which the proceeds of disposition, net of any amount included in the holder's   
income as interest and any reasonable costs of disposition, exceed (or are      
exceeded by) the adjusted cost base of the note to the holder immediately before
the disposition.                                                                

Generally, three-quarters of any capital gain (a "taxable capital gain")
realized by a holder of notes in a taxation year must be included in computing  
such holder's income for that taxation year, and three-quarters of any capital  
loss (an "allowable capital loss") realized by a holder of notes in a taxation  
year may be deducted from any taxable capital gains realized by the holder in   
the year. Allowable capital losses in excess of taxable capital gains may be    
carried back and deducted in any of the three preceding taxation years or       
carried forward and deducted in any following taxation year against taxable     
capital gains realized in such years, subject to and in accordance with the     
provisions of the INCOME TAX ACT (Canada).                                      

REFUNDABLE TAX                                                          

 A holder of notes that is a "Canadian-controlled private corporation" (as
defined in the INCOME TAX ACT (Canada)) may be liable for a refundable tax of   
6 2/3% on investment income, including interest and taxable capital gains earned
or realized in respect of the notes.                                            

FOREIGN TAX CREDIT                                                      

  Subject to certain limitations, a holder may be entitled to claim a credit
or a deduction in computing such holder's Canadian tax liability for any United 
States withholding or other income tax payable by the holder in respect of      
interest received on, or any gain realized on a disposition of, the notes.      

FOREIGN PROPERTY                                                        

  The notes will be "foreign property" for the purpose of the tax imposed on
certain deferred income plans under Part XI of the INCOME TAX ACT (Canada).     

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ENFORCEMENT OF LEGAL RIGHTS                                                     

ONTARIO                                                                     

    The notes being offered are those of a foreign issuer and Ontario purchasers
will not receive the contractual right of action prescribed by section 32 of the
Regulation under the SECURITIES ACT (Ontario). As a result, Ontario purchasers  
must rely on other remedies that may be available, including common law rights  
of action for damages or rescission or rights of action under the civil         
liability provisions of the U.S. federal securities laws.                       

All of our directors and officers, and the experts named herein may be  
located outside Canada and, as a result, it may not be possible for Canadian    
purchasers to effect service of process within Canada upon Metromedia or such   
persons. All or a substantial portion of our assets and such persons may be     
located outside of Canada and, as a result, it may not be possible to satisfy a 
judgment against us or such persons in Canada or to enforce a judgment obtained 
in Canadian courts against us or such persons outside of Canada.                

SASKATCHEWAN                                                                

THE SECURITIES ACT, 1988 (Saskatchewan) provides purchasers with certain
statutory rights of action, including: (a) if the prospectus or any amendment   
thereto contains a misrepresentation, which was a misrepresentation at the time 
of purchase (i) a right of action for damages or rescission against us, (ii) a  
right of action for damages against every promoter and director of ours who was 
a promoter or director at the time the prospectus or any amendment thereto was  
sent or delivered, and (iii) a right of action for damages against the dealer   
from whom the notes were purchased; (b) a right of action for damages against   
any individual who makes a verbal misrepresentation to such Saskatchewan        
purchaser prior to or contemporaneously with the purchase of the notes; (c) a   
right to void the agreement to purchase the notes and recover the purchase price
if the notes are sold in contravention of the Act, the regulations under the Act
or a decision of the Saskatchewan Securities Commission; and (d) a right of     
action for damages or rescission if a copy of this notice, the attached         
prospectus or any amendment thereto was not delivered to such purchaser before  
the notes were subscribed for.                                                  

  An action for damages must be started by the earlier of (a) one year after
the investor first had knowledge of the facts giving rise to the action or      
(b) six years after the date of the transaction that gave rise to the action. An
action for rescission must be commenced by 180 days after the date of the       
transaction that gave rise to the action.                                       

The rights available to Saskatchewan purchasers are in addition to and  
without derogation from any other right or remedy which such purchasers may have
at law, are intended to correspond to the provisions of the Act and are subject 
to the defences contained therein.                                              

ALBERTA                                                                     

Securities legislation in Alberta provides that every purchaser of      
securities pursuant to this offering memorandum shall have, in addition to any  
other rights they may have at law, a right of action for damages or recession,  
or both, against the issuer on whose behalf the distribution is made if the     
offering memorandum or any amendment thereto contains a misrepresentation.      
However such rights must be exercised within prescribed time limits. Purchasers 
should refer to the applicable provisions of the Alberta securities legislation 
for particulars of these rights or consult with a lawyer.                       

The SECURITIES ACT (Alberta) provides that no action may be commenced to
enforce such right of action unless the right is exercised: (a) in the case of  
an action for rescission, 180 days from the day of the transaction that gave    
rise to the cause of action; or (b) in the case of any action, other than an    
action for rescission, the earlier of: (i) 180 days from the day that the       
purchaser first had knowledge of the facts giving rise to the cause of action;  
or (ii) one year from the day of the transaction that gave rise to the cause of 
action.                                                                         

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VALIDITY OF THE NOTES 

    Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York, will pass upon
certain legal matters for us in connection with the offering of the notes.      
Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles, California, will pass    
upon certain legal matters for the underwriters in connection with the offering 
of the notes. Skadden, Arps, Slate, Meagher & Flom LLP has represented us on    
other unrelated matters.                                                        

EXPERTS 

  The consolidated financial statements of Metromedia Fiber Network, Inc. at
December 31, 1997 and 1998 and for each of the years in the three-year period   
ended December 31, 1998, appearing in this prospectus supplement, have been     
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere in this prospectus supplement and are included in   
reliance upon such report given on the authority of such firm as experts in     
accounting and auditing.                                                        

    AboveNet's financial statements as of June 30, 1998 and 1999 and for each of
the three years in the period ended June 30, 1999 included and incorporated by  
reference in this prospectus supplement have been audited by Deloitte & Touche  
LLP, independent auditors, as stated in their report, which is included and     
incorporated by reference herein, and have been so included and incorporated in 
reliance upon the report of such firm given upon their authority as experts in  
accounting and auditing.                                                        

The Combined Statement of Assets to be Acquired and Liabilities to be   
Assumed of Palo Alto Internet Exchange as of December 26, 1998 and December 27, 
1997 and the related Combined Statement of Revenues and Direct Expenses for the 
period June 12, 1998 through December 26, 1998, the period December 28, 1997    
through June 12, 1998 and the fiscal years ended December 27, 1997 and          
December 29, 1996 appearing in this prospectus supplement, have been included in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, 
given on the authority of said firm as experts in auditing and accounts.        

WHERE YOU CAN FIND MORE INFORMATION 

  We are currently subject to the periodic reporting and other informational
requirements of the Exchange Act. The reports and other information that we     
filed with the Securities and Exchange Commission can be inspected and copied at
prescribed rates at the public reference facilities maintained by the Securities
and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,  
Washington, D.C. 20549, and will also be available for inspection and copying at
the regional offices of the Securities and Exchange Commission located at 7     
World Trade Center, Suite 1300, New York, New York 10048 and the Citicorp Center
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may   
obtain information on the operation of the public reference facilities by       
calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities
and Exchange Commission also maintains an Internet Web Site at                  
http://www.sec.gov that contains reports, proxy and information statements and  
other information. As long as the Notes are listed on the Luxembourg Stock      
Exchange, the Company will maintain copies of such materials at the specified   
office of the paying agent in Luxembourg where they will be made available upon 
request. You can also obtain copies of such materials from us upon request. We  
have agreed that, whether or not we are required to do so by the rules and      
regulations of the Securities and Exchange Commission, for so long as any of the
notes remain outstanding, we will furnish you as a holder of the notes and will,
if permitted, file with the Securities and Exchange Commission (i) all quarterly
and annual financial information that would be required to be contained in a    
filing with the Securities and Exchange Commission on Forms 10-Q and 10-K if we 
were required to file such forms, including a "Management's Discussion and      
Analysis of Financial Condition and Results of Operations" and, with respect to 
the annual information only, a report thereon by our certified independent      
accountants, and (ii) all reports that would be required to be filed with the   
Securities and Exchange Commission on Form 8-K if we were required to file such 
reports.                                                                        

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INCORPORATION OF INFORMATION WE FILE WITH THE SEC 

The following documents and other materials, which have been filed by us
with the Securities and Exchange Commission, are incorporated herein and        
specifically made a part of this prospectus supplement by this reference:       

- our Annual Report on Form 10-K for the fiscal year ended December 31, 
1998;                                                               

- our Quarterly Report on Form 10-Q for the three months ended March 31,
1999;                                                               

   - our Quarterly Report on Form 10-Q for the six months ended June 30, 1999;

   - our Quarterly Report on Form 10-Q for the nine months ended September 30,
1999;                                                               

- our Current Report on Form 8-K dated June 30, 1999;                   

    - our Current Report on Form 8-K dated September 10, 1999, as amended by our
     Current Report on Form 8-K/A dated October 14, 1999 as further amended by
our Current Report on Form 8-K/A dated October 26, 1999;            

  - the "Risk Factors--Risk Factors Applicable to AboveNet" and "Business of
  AboveNet" sections contained in our Registration Statement on Form S-4
dated August 5, 1999 (File No. 333-84541); and                      

- our Current Report on Form 8-K filed on October 18, 1999.             

   So long as the notes are listed on the Luxembourg Stock Exchange, the above
referenced documents and materials will be available at the offices of paying   
agent in Luxembourg.                                                            

    In addition, all documents filed with the Securities and Exchange Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act  
of 1934 by us subsequent to the date of this prospectus supplement shall be     
deemed to be incorporated by reference into this prospectus supplement and to be
a part hereof from the date of filing of such documents with the Securities and 
Exchange Commission. Any statement contained in this prospectus supplement or in
a document incorporated or deemed to be incorporated by reference in this       
prospectus supplement shall be deemed to be modified or superseded for purposes 
of this prospectus supplement to the extent that a statement contained in this  
prospectus supplement or in any other subsequently filed document which also is 
or is deemed to be incorporated by reference herein modifies or supersedes such 
statement. Any such statement so modified or superseded shall not be deemed,    
except as so modified or superseded, to constitute a part of this prospectus    
supplement.                                                                     

Statements contained in this prospectus supplement or in any document   
incorporated by reference in this prospectus supplement as to the contents of   
any contract or other document referred to herein or therein are not necessarily
complete, and in each instance, reference is made to the copy of such contract  
or other document filed as an exhibit to the documents incorporated by          
reference, each such statement being qualified in all respects by such          
reference.                                                                      

   This prospectus supplement incorporates documents by reference that are not
presented herein or delivered herewith. Copies of such documents, other than    
exhibits to such documents that are not specifically incorporated by reference  
herein, are available without charge to any person to whom this prospectus      
supplement is delivered, upon written or oral request to: Metromedia Fiber      
Network, Inc., c/o Metromedia Company, One Meadowlands Plaza, East Rutherford,  
NJ 07073; Attention: General Counsel; tel: (201) 531-8000. So long as the notes 
are listed on the Luxembourg Stock Exchange, copies of the documents            
incorporated by reference in this prospectus supplement will be made available  
at the specified office of the paying agent in Luxembourg.                      

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GENERAL INFORMATION 

LISTING                                                                         

In connection with the application for the notes to be listed on the    
Luxembourg Stock Exchange, a notice relating to the issue of the notes and a    
copy of the charter of our company have been filed with the Chief Registrar of  
the District Court of Luxembourg (GREFFLER EN CHEF DU TRIBUNAL D'ARRONDISSEMENT 
DE ET A LUXEMBOURG) where such documents are available for inspection and where 
copies of such documents will be obtainable upon request.                       

CLEARING SYSTEMS                                                                

    The notes have been accepted for clearance by Cedelbank, SOCIETE anonyme and
by Morgan Guaranty Trust Company of New York, Brussels office as operator of the
Euroclear System. The Common Code and the International Security Identification 
Number (ISIN) for the Dollar notes are 010441226 and US591689AE42, respectively.
The Common Code and the ISIN for the Euro notes are 010441323 and XS0104413231, 
respectively.                                                                   

AUTHORIZATION                                                                   

The issue of the notes was authorized by our Board of Directors on      
November 10, 1999.                                                              

DOCUMENTS                                                                       

  Copies of our charter and by-laws will be available for inspection so long
as any notes are outstanding at the specified office of the paying agent in     
Luxembourg.                                                                     

Copies of our latest annual report and quarterly interim financial      
statements will be available at the specified office of the paying agent in     
Luxembourg, so long as any notes are outstanding.                               

  Copies of the indenture and all agreements in connection with the issuance
of the senior notes will be available at the specified office of the Paying     
Agent in Luxembourg, so long as any notes are outstanding.                      

MATERIAL ADVERSE CHANGE                                                         

Except as disclosed in this prospectus supplement, the accompanying     
prospectus and the documents incorporated by reference, there has been no       
material adverse change in our financial position since December 31, 1998.      

LITIGATION                                                                      

Except as disclosed in this prospectus supplement, the accompanying     
prospectus and the documents incorporated by reference, we are not involved in  
any litigation or arbitration proceedings relating to claims or amounts which   
are material in the context of the issue of the notes nor, so far as we are     
aware, is any such litigation or arbitration pending or threatened.             

FINANCIAL STATEMENTS                                                            

We only publish consolidated financial statements and do not publish    
non-consolidated financial statements. This prospectus supplement includes      
financial statements of AboveNet and Palo Alto Internet Exchange for the last   
reporting periods prior to their respective acquisition. AboveNet and Palo Alto 
Internet Exchange are currently included in our consolidated financial          
statements, and the separate financial statements of these companies are no     
longer published or required.                                                   

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
METROMEDIA FIBER NETWORK, INC. AND SUBSIDIARIES:                  

Report of Independent Auditors..............................   F-2

Consolidated Balance Sheets as of December 31, 1998 and           
  1997......................................................   F-3

Consolidated Statements of Operations for the years ended         
December 31, 1998, 1997 and 1996............................   F-4

Consolidated Statements of Cash Flows for the years ended         
December 31, 1998, 1997 and 1996............................   F-5

Consolidated Statements of Changes in Stockholders' Equity        
(Deficiency) for the years ended December 31, 1998, 1997 and      
1996........................................................   F-6

Notes to Consolidated Financial Statements..................   F-7

Consolidated Statements of Operations for the nine months         
ended                                                             
September 30, 1998 and 1999 (unaudited).....................  F-24

Consolidated Balance Sheet as of September 30, 1999               
  (unaudited)...............................................  F-25

Consolidated Statements of Cash Flows for the nine months         
ended                                                             
September 30, 1998 and 1999 (unaudited).....................  F-26

Notes to Consolidated Financial Statements..................  F-27

ABOVENET COMMUNICATIONS INC.:                                     

Independent Auditors' Report................................  F-37

Consolidated Balance Sheets as of June 30, 1998 and 1999....  F-38

Consolidated Statements of Operations for the Years Ended         
  June 30, 1997, 1998 and 1999..............................  F-39

Consolidated Statements of Stockholders' Equity for the           
  Years Ended                                                     
  June 30, 1997, 1998 and 1999..............................  F-40

Consolidated Statements of Cash Flows for the Years Ended         
  June 30, 1997, 1998 and 1999..............................  F-41

Notes to Consolidated Financial Statements..................  F-42

PALO ALTO INTERNET EXCHANGE:                                      

Independent Accountants' Reports............................  F-58

Combined Statements of Assets to be Acquired and Liabilities      
  to be Assumed as of March 27, 1999 (unaudited), December        
  26, 1998 and December 27, 1997............................  F-60

Combined Statement of Revenues and Direct Expenses for the        
  Quarters Ended March 27, 1999 and March 26, 1998                
  (unaudited), period from June 12, 1998 through December         
  26, 1998, period from December 28, 1997 through June 11,        
  1998 and the Fiscal Years Ended December 27, 1997 and           
  December 29, 1996.........................................  F-61

Notes to Combined Statements of Assets to be Acquired and         
  Liabilities to be Assumed and Combined Statements of            
  Revenues and Direct Expenses..............................  F-62

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REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of                                   
Metromedia Fiber Network, Inc.                                              

  We have audited the accompanying consolidated balance sheets of Metromedia
Fiber Network, Inc. and Subsidiaries (the "Company") as of December 31, 1998 and
1997, and the related consolidated statements of operations, stockholders'      
equity and cash flows for each of the three years in the period ended December  
31, 1998. Our audits also included the financial statement schedule listed in   
the index at Item 14(a). These consolidated financial statements and schedule   
are the responsibility of the Company's management. Our responsibility is to    
express an opinion on these consolidated financial statements and schedule based
on our audits.                                                                  

We conducted our audits in accordance with generally accepted auditing  
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the consolidated financial position of
Metromedia Fiber Network, Inc. and Subsidiaries as of December 31, 1998 and     
1997, and the consolidated results of their operations and their cash flows for 
each of the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. Also, in our opinion, the related     
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the       
information set forth therein.                                                  

                                                                [Download Table]
                     
/s/ ERNST & YOUNG LLP

New York, New York                                                              
March 4, 1999, except for paragraph 16 of note 2,                               
as to which the date is May 19, 1999                                            

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

(IN 000'S, EXCEPT SHARE AMOUNTS)

                                                                [Download Table]

                                                                DECEMBER 31,     
                                                             ------------------- 
                                                               1998       1997   
                                                             --------   -------- 
                                                                                 
                           ASSETS                                                
Current assets:                                                                  
  Cash and cash equivalents................................. $569,319   $138,846 
  Pledged securities, current portion.......................   61,384         -- 
  Accounts receivable.......................................   30,910        837 
Prepaid expenses and other current assets...................    4,210        874 
                                                             --------   -------- 
      Total current assets..................................  665,823    140,557 
Fiber optic transmission network and related equipment,                          
  net.......................................................  244,276     24,934 
Property and equipment, net.................................    2,716        759 
Pledged securities..........................................   30,512         -- 
Investment in/advance to joint venture......................    4,156         56 
Other assets................................................   26,934      1,072 
                                                             --------   -------- 
      Total assets.......................................... $974,417   $167,378 
                                                             ========   ======== 
            LIABILITIES AND STOCKHOLDERS' EQUITY                                 
Current liabilities:                                                             
  Accounts payable.......................................... $  6,106   $  3,072 
  Accrued liabilities.......................................   96,512      3,271 
  Deferred revenue, current portion.........................    8,100      1,184 
  Capital lease obligations, current portion................       55         -- 
                                                             --------   -------- 
      Total current liabilities.............................  110,773      7,527 
Senior notes payable........................................  650,000         -- 
Capital lease obligations...................................   22,675         -- 
Deferred revenue............................................   33,455     10,311 
Commitments and contingencies (see notes)                                        
Stockholders' equity:                                                            
  Class A common stock, $.01 par value; 360,000,000 shares                       
    authorized; 155,210,220 and 149,793,136 shares issued                        
    and outstanding, respectively...........................    1,552      1,498 
  Class B common stock, $.01 par value; 40,000,000 shares                        
    authorized; 33,769,272 shares issued and outstanding....      338        338 
  Additional paid-in capital................................  197,861    190,927 
  Accumulated deficit.......................................  (42,237)   (43,223)
                                                             --------   -------- 
      Total stockholders' equity............................  157,514    149,540 
                                                             --------   -------- 
      Total liabilities and stockholders' equity............ $974,417   $167,378 
                                                             ========   ======== 

See accompanying notes

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF OPERATIONS 

(IN 000'S, EXCEPT PER SHARE AMOUNTS)

                                                        [Enlarge/Download Table]

                                                              FOR THE YEAR ENDED DECEMBER 31, 
                                                             ---------------------------------
                                                               1998        1997        1996   
                                                             ---------   ---------   ---------
                                                                                              
Revenue.....................................................  $36,436    $  2,524    $    236 

Expenses:                                                                                     

  Cost of sales.............................................   13,937       3,572         699 
  Selling, general and administrative.......................   14,712       6,303       2,070 
  Consulting and employment incentives......................      248      19,218       3,652 
  Settlement agreement......................................    3,400          --          -- 
  Depreciation and amortization.............................    1,532         757         613 
                                                              -------    --------    -------- 
Income (loss) from operations...............................    2,607     (27,326)     (6,798)
  Interest income...........................................    8,788       1,808          -- 
  Interest expense (including financing costs)..............   (6,861)       (741)     (3,561)
  Loss from joint venture...................................     (146)         --          -- 
                                                              -------    --------    -------- 
Income (loss) before income taxes...........................    4,388     (26,259)    (10,359)
  Income taxes..............................................    3,402          --          -- 
                                                              -------    --------    -------- 
Net income (loss)...........................................  $   986    $(26,259)   $(10,359)
                                                              =======    ========    ======== 
Net income (loss) per share, basic..........................  $  0.01    $  (0.28)   $  (0.14)
                                                              =======    ========    ======== 
Net income per share, diluted...............................  $  0.01         N/A         N/A 
                                                              =======    ========    ======== 
Weighted average number of shares outstanding, basic........  186,990      94,894      71,716 
                                                              =======    ========    ======== 
Weighted average number of shares outstanding, diluted......  219,524      N/A         N/A    
                                                              =======    ========    ======== 

See accompanying notes. 

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(IN 000'S)

                                                        [Enlarge/Download Table]

                                                               FOR THE YEAR ENDED DECEMBER 31, 
                                                              ---------------------------------
                                                                1998        1997        1996   
                                                              ---------   ---------   ---------
                                                                                               
CASH FLOWS FROM OPERATING ACTIVITIES:                                                          
Net income (loss)...........................................  $    986    $(26,259)   $(10,359)
Adjustments to reconcile net income (loss) to net cash                                         
  provided by (used in) operating activities:                                                  
    Depreciation and amortization...........................     1,532         757         613 
    Stock options and warrants issued for services..........       248      19,439       5,395 
    Warrants issued for settlement agreement................     3,000          --          -- 
    Deferred taxes..........................................     2,707                         
    Reserve for note receivable.............................        --         338          -- 
    Loss from joint venture.................................       146          --          -- 
CHANGE IN OPERATING ASSETS AND LIABILITIES:                                                    
    Accounts receivable.....................................   (30,073)       (656)          2 
    Accounts payable and accrued expenses...................    13,449         (12)        758 
    Deferred revenue........................................    30,060      10,387         833 
    Other...................................................    (4,070)     (1,806)         12 
                                                              --------    --------    -------- 
Net cash provided by (used in) operating activities.........    17,985       2,188      (2,746)
                                                              --------    --------    -------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                          
Capital expenditures on fiber optic transmission network and                                   
  related equipment.........................................  (114,849)    (19,206)       (974)
Deposit payments............................................    (4,675)        (87)         -- 
Investment in / advance to joint venture....................    (4,246)        (56)         -- 
Purchase of pledged securities..............................   (91,896)         --          -- 
Capital expenditures on property and equipment..............    (2,305)       (318)        (95)
                                                              --------    --------    -------- 
  Net cash used in investing activities.....................  (217,971)    (19,667)     (1,069)
                                                              --------    --------    -------- 
CASH FLOWS FROM FINANCING ACTIVITIES:                                                          
Proceeds from issuance of common stock......................     1,038     133,975         123 
Proceeds from issuance of preferred stock and warrants......        --      32,500       2,025 
Dividends paid on preferred stock...........................        --         (77)         -- 
Repayments of notes payable- private placement..............        --      (1,408)         25 
Repayments of notes payable.................................        --      (5,950)     (3,350)
Proceeds from notes payables, net...........................   630,000          --       5,450 
Payments of capital lease obligations.......................      (579)         --          -- 
Purchase of common stock....................................        --      (1,140)         -- 
Purchase of preferred stock.................................        --      (2,039)         -- 
                                                              --------    --------    -------- 
  Net cash provided by financing activities.................   630,459     155,861       4,273 
                                                              --------    --------    -------- 
NET INCREASE IN CASH AND CASH EQUIVALENTS...................   430,473     138,382         458 
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD...............   138,846         464           6 
CASH AND CASH EQUIVALENTS-END OF PERIOD.....................  $569,319    $138,846    $    464 
Supplemental information:                                                                      
    Interest paid...........................................  $    219    $  1,145    $    996 
                                                              ========    ========    ======== 
    Income taxes paid.......................................  $  3,760    $     --    $     -- 
                                                              ========    ========    ======== 
Supplemental disclosure of significant non-cash investing                                      
  activities:                                                                                  
    Capital lease obligations...............................  $ 23,309    $     --    $     -- 
                                                              ========    ========    ======== 
    Accrued capital expenditures............................  $ 82,916    $     --    $     -- 
                                                              ========    ========    ======== 

See accompanying notes

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(IN THOUSANDS OF DOLLARS) 

                                                        [Enlarge/Download Table]

                                                                                   COMMON STOCK         COMMON STOCK    
                                        SERIES A & B                            -------------------  -------------------
                                       PREFERRED STOCK        COMMON STOCK       CLASS                CLASS             
                                     -------------------   -------------------     A                    B               
                                      SHARES     AMOUNT     SHARES     AMOUNT    SHARES     AMOUNT    SHARES     AMOUNT 
                                     --------   --------   --------   --------  --------   --------  --------   --------
                                                                                                                        
Balance at December 31, 1995.......      --        --       49,920     $ 499         --     $   --        --      $ --  
Issuance of common stock and                                                                                            
  warrants for services rendered...      --        --       21,305       213         --         --        --        --  
Issuance of common stock and                                                                                            
  warrants related to debt                                                                                              
  financing activities.............      --        --        6,870        69         --         --        --        --  
Issuance of common stock in                                                                                             
  connection with the exercise of                                                                                       
  warrants.........................      --        --        1,525        15         --         --        --        --  
Sale of common stock and                                                                                                
  warrants.........................      --        --          392         4         --         --        --        --  
Sale of preferred stock with                                                                                            
  warrants.........................     300        30           --        --         --         --        --        --  
Net loss for the year..............      --        --           --        --         --         --        --        --  
                                       ----       ---      -------     -----    -------     ------    ------      ----  
Balance at December 31, 1996.......     300        30       80,012       800         --         --        --        --  
Issuance of common stock in                                                                                             
  connection with the exercise of                                                                                       
  warrants.........................      --        --        1,216        12         --         --        --        --  
Issuance of options to employees...      --        --           --        --         --         --        --        --  
Issuance of warrants in connection                                                                                      
  with debt extension..............      --        --           --        --         --         --        --        --  
Dividends on preferred stock.......      --        --           --        --         --         --        --        --  
Repurchase and retirement of Series                                                                                     
  A preferred stock and warrants...    (300)      (30)          --        --         --         --        --        --  
Repurchase and retirement of common                                                                                     
  stock and warrants...............      --        --       (4,707)      (47)        --         --        --        --  
Sale of Series B preferred stock...      16        --           --        --         --         --        --        --  
Net proceeds from initial Public                                                                                        
  Offering.........................      --        --           --        --     72,863        729        --        --  
Conversion of Common Stock to                                                                                           
  Series A Common Stock............      --        --      (76,521)     (765)    76,520        765        --        --  
Conversion of Series B Preferred                                                                                        
  Stock to Series A & B Common                                                                                          
  Stock............................     (16)       --           --        --        314          3    33,769       338  
Sale of Series A Common Stock for                                                                                       
  warrant..........................      --        --           --        --         96          1        --        --  
Net loss for the year..............      --        --           --        --         --         --        --        --  
                                       ----       ---      -------     -----    -------     ------    ------      ----  
Balance at December 31, 1997.......      --        --           --        --    149,793      1,498    33,769       338  
Issuance of options to employees...      --        --           --        --         --         --        --        --  
Issuance of warrants in connection                                                                                      
  with settlement agreement........      --        --           --        --         --         --        --        --  
Issuance of common stock in                                                                                             
  connection with the exercise of                                                                                       
  warrants.........................      --        --           --        --      4,317         43        --        --  
Issuance of common stock in                                                                                             
  connection with the exercise of                                                                                       
  stock options....................      --        --           --        --      1,100         11        --        --  
Net income for the year............      --        --           --        --         --         --        --        --  
Income tax benefit from exercises                                                                                       
  of employee stock options........      --        --           --        --         --         --        --        --  
                                       ----       ---      -------     -----    -------     ------    ------      ----  
Balance at December 31, 1998.......      --        --           --     $  --    155,210     $1,552    33,769      $338  
                                       ====       ===      =======     =====    =======     ======    ======      ====  



                                     ADDITIONAL                                                                         
                                      PAID-IN     ACCUMULATED                                                           
                                      CAPITAL       DEFICIT       TOTAL                                                 
                                     ----------   ------------   --------                                               
                                                                                                                        
Balance at December 31, 1995.......   $   (454)     $ (5,381)      (5,336)                                              
Issuance of common stock and                                                                                            
  warrants for services rendered...      4,702            --        4,915                                               
Issuance of common stock and                                                                                            
  warrants related to debt                                                                                              
  financing activities.............      1,703            --        1,772                                               
Issuance of common stock in                                                                                             
  connection with the exercise of                                                                                       
  warrants.........................        (15)           --           --                                               
Sale of common stock and                                                                                                
  warrants.........................        120            --          124                                               
Sale of preferred stock with                                                                                            
  warrants.........................      1,995            --        2,025                                               
Net loss for the year..............         --       (10,359)     (10,359)                                              
                                      --------      --------     --------                                               
Balance at December 31, 1996.......      8,051       (15,740)      (6,859)                                              
Issuance of common stock in                                                                                             
  connection with the exercise of                                                                                       
  warrants.........................         (2)           --           10                                               
Issuance of options to employees...     19,218            --       19,218                                               
Issuance of warrants in connection                                                                                      
  with debt extension..............        220            --          220                                               
Dividends on preferred stock.......         --           (77)         (77)                                              
Repurchase and retirement of Series                                                                                     
  A preferred stock and warrants...     (1,996)          (13)      (2,039)                                              
Repurchase and retirement of common                                                                                     
  stock and warrants...............         42        (1,134)      (1,139)                                              
Sale of Series B preferred stock...     32,500            --       32,500                                               
Net proceeds from initial Public                                                                                        
  Offering.........................    133,150            --      133,879                                               
Conversion of Common Stock to                                                                                           
  Series A Common Stock............         --            --           --                                               
Conversion of Series B Preferred                                                                                        
  Stock to Series A & B Common                                                                                          
  Stock............................       (341)           --           --                                               
Sale of Series A Common Stock for                                                                                       
  warrant..........................         85            --           86                                               
Net loss for the year..............         --       (26,259)     (26,259)                                              
                                      --------      --------     --------                                               
Balance at December 31, 1997.......    190,927       (43,223)     149,540                                               
Issuance of options to employees...        248            --          248                                               
Issuance of warrants in connection                                                                                      
  with settlement agreement........      3,000            --        3,000                                               
Issuance of common stock in                                                                                             
  connection with the exercise of                                                                                       
  warrants.........................        118            --          161                                               
Issuance of common stock in                                                                                             
  connection with the exercise of                                                                                       
  stock options....................        861            --          872                                               
Net income for the year............         --           986          986                                               
Income tax benefit from exercises                                                                                       
  of employee stock options........      2,707            --        2,707                                               
                                      --------      --------     --------                                               
Balance at December 31, 1998.......   $197,861      $(42,237)    $157,514                                               
                                      ========      ========     ========                                               

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BUSINESS OPERATIONS AND LINE OF BUSINESS                                

 The Company is a facilities-based provider of a technologically advanced,
high-bandwidth, fiber optic communications infrastructure to communications     
carriers and corporate/government customers in the United States. The Company   
focuses its operations on domestic intracity fiber optic networks in clusters of
the 15 largest cities, based on population, throughout the United States.       

  The Company operates high-bandwidth fiber optic communications networks in
New York and Philadelphia. The Company also is engineering and constructing     
networks in Washington, D.C., Chicago, San Francisco and Boston. The Company is 
designing networks in Atlanta, Dallas, Houston, Seattle and Los Angeles.        

  The Company has also built or obtained intercity fiber optic capacity that
links certain of its intracity networks. The Company has under construction a   
250-route mile network from New York to Washington, D.C. The Company has also   
obtained rights for fiber optic capacity with other facilities-providers and    
obtained fiber optic capacity linking certain of the metropolitan areas (New    
York-Chicago, New York-Boston, Chicago-Seattle-Portland) in which it plans to   
construct intracity networks, except in Portland.                               

In addition, the Company has entered into a joint venture with a United 
Kingdom telecommunications company to connect its New York network to London.   
The Company has formed a joint venture to construct a high-bandwidth fiber optic
network connecting 13 major cities in Germany and obtain certain additional     
fiber optic capacity in Western Europe.                                         

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                              

BASIS OF PRESENTATION                                                           

 The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant inter-company balances and transactions   
have been eliminated in consolidation. The investment in a 50% owned joint      
venture with a United Kingdom telecommunications company is accounted for by the
equity method. Certain balances in the consolidated financial statements have   
been restated to conform to the current period presentation.                    

MANAGEMENT ESTIMATES                                                            

The preparation of financial statements, in conformity with generally   
accepted accounting principles, requires management to make estimates and       
assumptions that affect the reported amounts of assets and liabilities and      
disclosures of contingent assets and liabilities at the date of the financial   
statements and the reported amounts of revenues and expenses during the         
reporting periods. Actual results may differ from those estimates.              

FAIR VALUE OF FINANCIAL INSTRUMENTS                                             

The carrying amounts for cash, accounts receivable, accounts payable and
accrued liabilities approximate their fair value. The fair value of long-term   
debt is determined based on quoted market rates or the cash flows from such     
financial instruments discounted at the Company's estimated current interest    
rate to enter similar financial instruments. At December 31, 1998, the fair     
value of the Company's fixed rate long-term debt for the 10% Senior Notes due in
2008, was $650 million. The recorded amounts for all other long-term debt of the
Company approximates fair values.                                               

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                  
CASH AND CASH EQUIVALENTS                                                       

    For purposes of the consolidated financial statements, the Company considers
all highly liquid investments with an original maturity of three months or less 
when purchased to be cash equivalents.                                          

PLEDGED SECURITIES                                                              

  In connection with the sale of 10% Senior Notes (see Note 9), a portion of
the net proceeds was utilized to purchase a portfolio consisting of U.S.        
government securities, which mature at dates sufficient to provide for payment  
in full of interest on the 10% Senior Notes through May 15, 2000. The pledged   
securities are stated at cost, adjusted for premium amortization and accrued    
interest. The fair value of the pledged securities approximates the carrying    
value.                                                                          

ACCOUNTS RECEIVABLE                                                             

Accounts receivable includes trade receivables and costs and estimated  
earnings in excess of billings for those contracts where the Company utilizes   
the percentage of completion method for recognizing revenue.                    

FIBER OPTIC TRANSMISSION NETWORK AND RELATED EQUIPMENT                          

The fiber optic transmission network and related equipment are stated at
cost. Costs in connection with the installation and expansion of the network are
capitalized. Depreciation is computed using the straight-line method through the
life of either the franchise agreement or right of way for the related network. 

PROPERTY AND EQUIPMENT                                                          

 Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.         

OTHER ASSETS                                                                    

    Other assets include debt issuance costs, franchise agreements and deposits.
Those costs, which are amortizable, are amortized on a straight-line basis over 
a period ranging from ten to fifteen years.                                     

LONG-LIVED ASSETS                                                               

The Company reviews for the impairment of long-lived assets and certain 
identifiable intangibles whenever events or changes in circumstances indicate   
that the carrying amount of an asset may not be recoverable. The Company has    
identified no such impairment indicators.                                       

INCOME TAXES                                                                    

   In accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," the Company recognizes deferred income taxes
for the tax consequences in future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each year end,  
based on enacted tax laws and statutory tax rates applicable to the periods in  
which the differences are expected to affect taxable income. Valuation          
allowances are established when necessary to reduce deferred                    

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                  
tax assets to the amount that is "more likely than not" to be realized. The     
provision for income taxes is the tax payable for the period and the change,    
during the period, in deferred tax assets and liabilities.                      

RECAPITALIZATIONS                                                               

    In April 1997, the Company increased its authorized common stock of $.01 par
value to 60,000,000 shares; in addition, authorized preferred stock with a par  
value of $.01 was increased to 2,000,000 shares. On April 29, 1997, the Company 
effected a 3-for-one stock split of its outstanding shares of common stock.     

  In September 1997, the Company effected a .507-for-one reverse stock split
of its common stock.                                                            

  On October 28, 1997, the total authorized number of shares of common stock
of the Company was increased to 200 million shares, par value $0.01 per share,  
of which 180 million shares were designated Class A common stock and 20 million 
shares were designated Class B common stock.                                    

  On August 28, 1998, the Company completed a two-for-one stock split of the
Company's Class A and Class B Common Stock in the form of a 100 percent stock   
dividend to all shareholders of record as of the close of business on August 7, 
1998. In addition, on December 22, 1998, the Company completed another          
two-for-one stock split of the Company's Class A and Class B Common Stock in the
form of a 100 percent stock dividend to all shareholders of record as of the    
close of business on December 8, 1998.                                          

On May 19, 1999, the Company completed a two-for-one stock split of the 
Company's Class A Common Stock and Class B Common Stock in the form of a 100    
percent stock dividend.                                                         

  The accompanying financial statements give retroactive effect to the above
recapitalizations.                                                              

RECOGNITION OF REVENUE                                                          

  The Company recognizes revenue on telecommunications services ratably over
the term of the applicable lease agreements with customers. Amounts billed in   
advance of the service provided are recorded as deferred revenue. The Company   
also provides installation services for its customers, and as these services    
typically are completed within a year, the Company records the revenues and     
related costs for these services under the completed contract method. In        
addition, the Company occasionally grants Indefeasible Rights of Use ("IRU's")  
to portions of its network. For those grants occurring prior to completion of   
the portion of the network granted, the Company recognizes revenue on these     
telecommunication services using the percentage of completion method. Under the 
percentage of completion method, progress is generally measured on performance  
milestones relating to the contract where such milestones fairly reflect the    
progress toward contract completion. Network construction costs include all     
direct material and labor costs and those indirect costs related to contract    
performance. General and administrative costs are charged to expense as         
incurred. If necessary, the estimated loss on an uncompleted contract is        
expensed in the period in which it is identified. Contract costs are estimated  
using allocations of the total cost of constructing the specific phase of the   
network. Revisions to estimated profits on contracts are recognized in the      
period that they become known.                                                  

STOCK OPTIONS                                                                   

The Company has adopted the disclosure-only provisions of SFAS No. 123, 
"Accounting for Stock-Based Compensation." The Company applies APB Opinion No.  
25, "Accounting for Stock Issued to Employees," and related interpretations in  
accounting for its stock options.                                               

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                  
CONSULTING AND EMPLOYMENT INCENTIVES                                            

    The amounts represent the value of common stock, warrants and options issued
to consultants, officers, employees and directors of the Company as incentive to
provide services to the Company. The 1997 amounts represent the value of options
to purchase 24,762,600 shares of the Company's common stock issued in 1997 to   
officers, employees and directors of the Company. The options have been valued  
in accordance with APB Opinion No. 25 at the difference between the exercise    
price of the options and the fair market value of the Company's common stock at 
the date of grant.                                                              

EARNINGS PER SHARE                                                              

In accordance with the Financial Accounting Standards Board's ("FASB")  
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per     
Share," basic earnings per share is computed based upon the weighted average    
number of common shares outstanding during the periods. Diluted earnings per    
share is computed based upon the weighted average number of common shares       
outstanding plus the assumed issuance of common stock equivalents computed in   
accordance with the treasury stock method.                                      

DEFERRED REVENUE                                                                

  Deferred revenue represents prepayments received from customers for future
use of the Company's fiber optic network as well as prepayment for installation 
services, which have not yet been provided. Lease payments are structured as    
either prepayments or monthly recurring charges. Prepayments are accounted for  
as deferred revenues and recognized over the term of the respective customer    
lease agreement. At December 31, 1998, the Company had received prepaid lease   
payments in excess of revenue recognized totaling $41.6 million.                

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS                                  

In June 1997, the FASB released SFAS No. 130 "Reporting Comprehensive   
Income," governing the reporting and display of comprehensive income and its    
components. This statement is effective for financial statements issued for     
periods beginning after December 15, 1997. The Company adopted this standard as 
required in fiscal 1998 in its Statement of Changes in Stockholders' Equity     
(Deficiency).                                                                   

  In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 redefines how operating    
segments are determined and requires disclosure of certain financial and        
descriptive information about a company's operating segments. In 1998 the       
Company adopted SFAS No. 131. The Company currently operates in one business    
segment.                                                                        

   In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for   
derivative instruments and hedging activities. This standard is effective for   
all fiscal quarters of fiscal years beginning after June 15, 1999. The Company  
does not expect the adoption of SFAS No. 133 to have an impact on its results of
operations, financial position or cash flows.                                   

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3: ACCOUNTS RECEIVABLE                                                     

Accounts receivable consists of the following (in 000's):               

                                                                [Download Table]

                                                                DECEMBER 31,    
                                                             -------------------
                                                               1998       1997  
                                                             --------   --------
                                                                                
Trade accounts receivable................................... $   560      $837  
Costs and earnings in excess of billings....................  30,134        --  
Other.......................................................     216        --  
                                                             -------      ----  
                                                             $30,910      $837  
                                                             =======      ====  

At December 31, 1998, three customers accounted for 43%, 40% and 14%,   
respectively, of the Company's combined accounts receivable.                    

NOTE 4: FIBER OPTIC TRANSMISSION NETWORK AND RELATED EQUIPMENT                  

Fiber optic transmission network and related equipment consists of the  
following (in 000's):                                                           

                                                                [Download Table]

                                                              DECEMBER 31,    
                                                           -------------------
                                                             1998       1997  
                                                           --------   --------
                                                                              
Material-fiber optic cable...............................  $ 23,436   $ 1,133 
Engineering and layout costs.............................     7,101     3,322 
Fiber optic cable installation costs.....................    16,639     1,869 
Other....................................................     4,242     2,019 
Construction in progress.................................   195,256    17,835 
                                                           --------   ------- 
                                                            246,674    26,178 
Less: accumulated depreciation...........................    (2,398)   (1,244)
                                                           --------   ------- 
                                                           $244,276   $24,934 
                                                           ========   ======= 

Construction in progress includes amounts incurred in the Company's     
expansion of its network. These amounts include fiber optic cable and other     
materials, engineering and other layout costs, fiber optic cable installation   
costs and other network assets held under capital leases. Construction in       
progress also includes payments for rights of way for the underlying sections of
the network build.                                                              

NOTE 5: PROPERTY AND EQUIPMENT                                                  

Property and equipment consists of the following:                       

                                                                [Download Table]

                                                            DECEMBER 31,           
                                                  ---------------------------------
                                                    1998       1997     USEFUL LIFE
                                                  --------   --------   -----------
                                                                                   
Leasehold improvements...........................  $  614      $538     174 months 
Furniture, equipment and software................   2,581       352     5 years    
                                                   ------      ----                
                                                    3,195       890                
Less: accumulated depreciation and                                                 
  amortization...................................    (479)     (131)               
                                                   ------      ----                
                                                   $2,716      $759                
                                                   ======      ====                

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6: INVESTMENT IN/ADVANCES TO JOINT VENTURE                                 

The Company has a joint venture agreement with Racal Telecommunications,
Inc. ("Racal"), that provides broad-based transatlantic communication services  
between New York and London. As of December 31, 1997, neither party had made a  
capital contribution. The balance of the investment at December 31, 1997        
represents advances made to the joint venture by the Company. During 1998, each 
party made capital contributions of $4.3 million. The Company and Racal may each
be required to contribute additional capital as needed for their respective 50% 
interests. The Company accounts for its investment using the equity method. For 
1998, the Company recorded a $146,000 loss from the joint venture based on its  
50% interest in the joint venture. Included within the Company's accounts       
receivable is $70,000 for administrative services provided to the joint venture 
which were not reimbursed as of December 31, 1998.                              

NOTE 7: GERMAN NETWORK BUILD                                                    

In February, 1999, the Company entered into a joint venture with Viatel,
Inc. and Carrier 1 Holdings, Ltd. to jointly build a national fiber optic       
telecommunications network in Germany. Upon completion of construction, the     
joint venture will be dissolved and the Company will own its own separate German
broadband network. In connection with the terms of this agreement, the Company  
made a deposit payment of $4.7 million, during the third quarter of 1998. Upon  
signing a definitive agreement, the Company provided an irrevocable standby     
letter of credit in the amount of $64 million as security for the construction  
costs of the network, which, in addition to the deposit payment made, covers the
Company's portion of the estimated construction costs.                          

NOTE 8: RELATED PARTY TRANSACTIONS                                              

  The Company is a party to a management agreement under which the Company's
controlling shareholder, Metromedia Company, provides consultation and advisory 
services relating to legal matters, insurance, personnel and other corporate    
policies, cash management, internal audit and finance, taxes, benefit plans and 
other services as are reasonably requested. The management agreement terminates 
on December 31, of each year, and is automatically renewed for successive       
one-year terms unless either party terminates upon 60 days prior written notice.
The 1998 management fee under the agreement was $500,000 per year, payable      
quarterly at a rate of $125,000. The Company is also obligated to reimburse     
Metromedia Company for all its out-of-pocket costs and expenses incurred and    
advances paid by Metromedia Company in connection with the management agreement.
In 1997, Metromedia Company received no money for its out-of-pocket costs and   
expenses or for interest on advances extended by it to the Company under the    
management agreement.                                                           

In March and June 1997, the Company entered into two one-year leases for
office space with an affiliate. Subsequent to June 1997, the affiliate sold this
property. For the year ended December 31, 1997, office rent expenses for these  
leases amounted to approximately $110,000.                                      

NOTE 9: SETTLEMENT AGREEMENTS                                                   

In February 1996, the Company entered into a settlement agreement with a
former officer regarding the termination of his employment. This agreement      
provided for the Company to make payments to the officer totaling $1,003,000,   
including interest. The former officer's services effectively terminated prior  
to December 31, 1995. Accordingly, as of December 31, 1995, the Company recorded
$876,146 as a liability in accordance with the terms of the settlement          
agreement. The settlement agreement also reaffirmed an option previously issued 
to this former officer on May 1, 1995, which entitles the holder to purchase    

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9: SETTLEMENT AGREEMENTS (CONTINUED)                                       
415,766 shares of the Company's common stock at $0.003 per share through        
February 1, 1999. In 1997 the Company repurchased and retired the warrants held 
by this former officer. On November 14, 1996, the Company amended the above     
referenced settlement agreement with the former officer, whereby a consultant to
the Company agreed to purchase common stock of the company from the former      
officer and certain of his affiliates in exchange for $640,000 and the complete 
satisfaction of the aforementioned liability.                                   

On February 11, 1997, the Company entered into an agreement with a      
consultant/director. Pursuant to the agreement the Company agreed to pay the    
consultant/director a fee of $250,000 in full and complete payment for all      
services provided to the Company by the consultant/director and for any fees or 
compensation due to the consultant/director resulting from any prior agreements 
with the Company, and the consultant/director agreed to release the Company from
any claims against the Company.                                                 

  In March 1998, the Company entered into a settlement agreement with Howard
Katz, Realprop Capital Corporation and Evelyn Katz, among others, which settled 
and resulted in the dismissal of litigation for which the Company was a         
defendant in KATZ, ET AL. V. NATIONAL FIBER NETWORK, INC., ET AL., No. 97 Civ.  
2764 (JGK) (the "Katz Litigation").                                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10:  NOTES PAYABLE                                                         

On November 25, 1998, the Company issued and sold $650.0 million of 10% 
Senior Notes due November 15, 2008. The net proceeds of the 10% Senior Notes    
were approximately $630.0 million, after deducting offering costs, which are    
included in other long-term assets. Interest on the 10% Senior Notes is payable 
semi-annually in arrears on May 15 and November 15 of each year, commencing May 
15, 1999. Approximately $91.5 million of the net proceeds was utilized to       
purchase certain pledged securities, the proceeds of which, together with       
interest earned on such securities, will be used to satisfy the Company's       
semi-annual interest obligations through May 15, 2000. The 10% Senior Notes are 
subject to redemption at the option of the Company, in whole or in part, at any 
time on or after November 15, 2003, at specified redemption prices. In addition,
prior to November 15, 2001, the Company may use the net cash proceeds from      
certain specified equity transactions to redeem up to 35% of the 10% Senior     
Notes at specified redemption prices. The indentures pursuant to which the 10%  
Senior Notes are issued contain certain covenants that, among other matters,    
limit the ability of the Company and its subsidiaries to incur additional       
indebtedness, issue stock in subsidiaries, pay dividends or make other          
distributions, repurchase equity interests or subordinated indebtedness, engage 
in sale and leaseback transactions, create certain liens, enter into certain    
transactions with affiliates, sell assets, and enter into certain mergers and   
consolidations.                                                                 

In the event of a change in control of the Company as defined in the    
indentures, holders of the 10% Senior Notes will have the right to require the  
Company to purchase their Notes, in whole or in part, at a price equal to 101%  
of the stated principal amount thereof, plus accrued and unpaid interest, if    
any, thereon to the date of purchase. The 10% Senior Notes are senior unsecured 
obligations of the Company, and are subordinated to all current and future      
indebtedness of the Company's subsidiaries, including trade payables.           

NOTE 11:   EQUITY TRANSACTIONS                                                  

COMMON STOCK                                                                    

   On November 3, 1997, the Company completed the initial public offering (the
"IPO") of 72,864,000 shares of its Class A common stock, at an offering price of
$2 per share. The net proceeds to the Company from the IPO, after deducting     
expenses of the IPO, were approximately $133.9 million.                         

    In addition, on October 28, 1997, a total of 76,519,520 shares of the common
stock of the Company owned by stockholders prior to the IPO were exchanged for  
an equal number of shares of Class A common stock. The Company also reserved for
issuance 34,083,888 shares of Class A common stock for conversion of the        
Class B common stock.                                                           

   On October 28, 1996, a shareholder granted to the Company's Chairman of the
Board an option to purchase 3,199,112 shares of common stock of the company for 
an aggregate exercise price of $500,000. By letter dated December 3, 1996, the  
option was amended to reduce the number of option shares to 2,590,712 shares.   
The Chairman thereafter assigned the option to the Company. On February 11,     
1997, the Company exercised the option by payment of $500,000.                  

   On April 15, 1996, the Company entered into a stock purchase agreement with
Vento & Company of New York, LLC ("VCNY"). Pursuant to this agreement, the      
Company issued 12,168,000 shares of common stock to VCNY as consideration for   
services provided by VCNY. The Company estimated the value of the stock issued  
approximated $2,760,000.                                                        

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11:   EQUITY TRANSACTIONS (CONTINUED)                                      
Concurrent with the execution of the aforementioned stock purchase      
agreement, the parties entered into a consulting agreement. The term of the     
agreement was from April 15, 1996 to April 15, 2001. Under the terms of the     
agreement, VCNY was to provide guidance and advice with respect to the          
management of the day-to-day operations of the Company's fiber optic            
transmission network. In consideration for such services, the Company reimbursed
VCNY for all reasonable personnel and travel costs incurred by VCNY with respect
to the performance of these services. On October 9, 1996, the Company entered   
into a settlement agreement with the Company's former chief executive officer   
and VCNY regarding the termination of such officer's employment and services    
provided by VCNY. The agreement provided for VCNY to deliver a total of         
12,168,000 shares of common stock in exchange for payments made by the Company. 
The payments were not made and the sale of the shares and the Company's         
obligation to buy the shares was deemed null and void.                          

  In September 1996, the Company sold 87,472 shares of common stock to three
individuals for total proceeds of $23,500.                                      

In August 1996, the Company issued 1,460,160 shares of common stock for 
consulting services. The Company recorded a non-cash charge of $334,800 for such
issuance.                                                                       

In July 1996, the Company issued 97,344 shares of common stock as       
consideration for consulting services. The Company recorded a non-cash charge of
$21,200 for such issuance. In addition, the Company issued 1,204,632 shares to  
three employees for services rendered. The transaction was later rescinded and  
the shares were returned to the Company.                                        

   In June 1996, the Company sold a total of 304,200 shares of common stock to
two individuals for total proceeds of $100,000. Concurrent with the issuance of 
these shares, the Company issued warrants to these shareholders entitling the   
holders to purchase a total of 304,200 shares at $0.33 per share for a          
three-year period.                                                              

 On January 12, 1996, the Company entered into an agreement with its legal
counsel to issue common stock as additional consideration for legal services    
provided. Pursuant to this agreement, as amended, the Company issued a total of 
3,928,840 shares of its common stock. Management has estimated the value of the 
3,928,840 shares issued to be $907,301 and has recorded a non-cash charge in    
connection with such issuance.                                                  

PREFERRED STOCK                                                                 

On April 30, 1997, the Company sold an aggregate of 67,226,600 shares of
Series B convertible preferred stock, par value $0.01 per share (the "Series B  
preferred stock"), to Metromedia Company and affiliates ("Metromedia") for an   
aggregate purchase price of $32.5 million (the "Metromedia Investment"). Each   
share of the Series B preferred stock was convertible into 507 shares of the    
Company's common stock. On October 28, 1997, the Series B convertible preferred 
shares were converted into 34,083,888 shares of Class B common stock. Further,  
on October 28,1997, a total of 314,616 shares of Class B common stock           
outstanding were converted into an equivalent number of shares of Class A common
stock.                                                                          

  A portion of the proceeds from the Metromedia Investment was used to repay
the Metromedia Loan, discussed below, and accrued interest thereon ($4,058,127),
repay other short-term indebtedness                                             

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11:   EQUITY TRANSACTIONS (CONTINUED)                                      
($3,485,000), and redeem (for $2,115,000) all of the outstanding shares of the  
Company's preferred stock (the "Series A preferred stock") and related warrants.

Through April 30, 1997, Metromedia loaned the Company an aggregate of   
$4,000,000 (the "Metromedia Loan"). A portion of the proceeds from the          
Metromedia Loan was used to purchase 4,707,760 shares of the Company's common   
stock and warrants to purchase 1,663,064 shares of its common stock.            

 No shares of the Company's Series A preferred stock or Series B preferred
stock remained outstanding at December 31, 1997. Both the Series A and Series B 
preferred stock of the Company have been eliminated pursuant to actions by the  
Board of Directors.                                                             

STOCK WARRANTS                                                                  

A. In 1996, the Company entered into an agreement with a Customer for   
exclusive usage rights for fibers on portions of its network. In connection with
this agreement, the Company borrowed $4.9 million from the customer. On         
April 30, 1997, the Company amended this agreement to satisfy the obligations of
the above-referenced note by providing (i) additional leased fiber miles,       
(ii) a cash payment of $1,370,000 and (iii) a warrant to purchase common stock  
of the Company. In July 1998, the agreement was amended to include additional   
fiber miles on the Company's network and for cancellation of the warrants.      

 B. From October 1995 through February 1996, the Company issued and sold a
private offering of $858,000 of convertible subordinated notes. Concurrent with 
the issuance of these notes, warrants were issued by the Company to the         
noteholders to purchase 1,044,016 shares of common stock at $1.00 per share     
through November 2000. In 1996 and 1997, in exchange for the extension of the   
due dates of the notes, the Company issued warrants to purchase 1,318,084 shares
of its common stock at $1.00 per share and recorded a charge of $111,306 and    
$220,036 in 1996 an 1997, respectively. In 1997, the Company repaid the         
outstanding balance of these notes plus all accrued interest. As of             
December 31, 1998, 1,564,032 of such warrants have been exercised.              

C. In September 1996, the Company entered into a loan agreement with a  
finance company for $550,000. The loan bore interest at 10% per annum and was   
repaid in 1997. As an incentive for the loan, the Company issued to the finance 
company warrants to purchase 754,416 shares of common stock at an exercise price
of $0.74. The warrants are exercisable through September 1999. In 1996, the     
Company recorded a non-cash charge of $13,640 in connection with the issuance of
the warrants. All of the warrants have been exercised.                          

D. In August 1995, the Company initiated a $600,000 private offering of 
subordinated notes which bore interest at an annual rate of 15% and were repaid 
in 1997. With the issuance of the notes, warrants were issued to the            
noteholders. In April 1996, the Company issued a total of 474,872 shares of the 
Company's common stock in exchange for the surrender and cancellation of the    
warrants and a three-month extension of the maturity date of the notes. In 1996,
the Company recorded a non-cash charge of $107,322 in connection with such      
issuance.                                                                       

   E. In April 1995, the Company entered into a loan agreement with a customer
for $500,000 bearing interest at 11% per annum. In July 1997, the note was      
repaid in full. In connection with this loan, the Company issued the customer a 
warrant entitling the holder to purchase a total of 5,353,336 shares of the     
Company's common stock. In February 1997, this warrant was exchanged for a new  
warrant to purchase                                                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11:   EQUITY TRANSACTIONS (CONTINUED)                                      
3,650,400 shares of the Company's common stock at $0.61 per share. The new      
warrant expires on February 13, 2000. As of December 31, 1998, none of the      
warrants have been exercised.                                                   

   F. On December 13, 1996, the Company issued and sold to a private investor,
for an aggregate cash consideration of $2,025,000, (i) 1,200,000 shares of 10%  
cumulative convertible preferred stock (the "Series A preferred stock") bearing 
dividends at a rate of $.17 per share per annum, (ii) warrants to purchase      
912,600 shares of Class A common stock at an exercise price of $0.62 per share  
and (iii) a contingent stock subscription warrant to purchase a number of shares
of Class A common stock (such number to be determined based on certain future   
events) at an exercise price of $0.005 per share. In connection with the        
Metromedia Investment, the private investor allowed the Series A preferred stock
and the contingent warrants to be redeemed at an aggregate redemption price of  
$2,115,000 (which includes accrued but unpaid dividends on the Series A         
preferred stock) and the number of shares underlying the private investor's     
warrants to be increased from 912,600 to 1,825,200. In January 1998, the private
investor made a cashless exercise of all its warrants and the number of its     
shares issuable upon exercise was reduced by the number of shares at the closing
on the day of exercise having a value equal to the aggregate exercise price.    
Accordingly, the Company issued the private investor 1,382,120 common shares for
all its warrants.                                                               

G. In June 1996, the Company granted 1,216,800 common stock purchase    
warrants to the Company's legal counsel exercisable at $.01 per share for a     
period of four years as additional consideration for legal services provided.   
The Company recorded a non-cash charge of $200,000 for such issuance. As of     
December 31, 1998, all of the warrants have been exercised.                     

As of December 31, 1998, in the aggregate, the Company had reserved     
approximately 4,456,100 shares of its Class A common stock for exercise of      
outstanding warrants.                                                           

STOCK OPTIONS                                                                   

 In 1997, the Company granted to certain officers, employees and directors
options to purchase up to 24,761,888 shares of its Class A common stock. The    
options have exercise prices between $0.25 and $0.96 per share and expire in    
2007. The Company recorded a non-cash charge of $19,218,591 for such issuance.  

    On October 28, 1997, the Stockholders of the Company approved the Metromedia
Fiber Network, Inc. 1997 Incentive Stock Plan ("1997 Option Plan"). The 1997    
Option Plan authorized the award of up to 8,000,000 options to acquire Class A  
common stock of the Company to directors, officers and employees of the Company 
and others who are deemed to provide substantial and important services to the  
Company. In 1997, options to purchase 4,900,000 shares of the Company's Class A 
common stock were granted at an exercise price of $2.00 per share, the market   
price at the date of grant. In 1998, options to purchase 3,400,000 shares of the
Company's Class A common stock were granted at exercise prices ranging from     
$1.94 to $4.30 per share, the market price at the date of grant. Of these       
grants, 1,115,000 were canceled and 235,000 were exercised as of December 31,   
1998.                                                                           

On May 18, 1998, the Stockholders of the Company approved the Metromedia
Fiber Network, Inc. 1998 Incentive Stock Plan ("1998 Option Plan"). The 1998    
Option Plan authorized the award of up to 20,000,000 options to acquire Class A 
common stock of the Company to directors, officers and employees of the Company 
and others who are deemed to provide substantial and important services to the  
Company. Options to purchase 6,918,000 shares of the Company's Class A common   
stock were granted at exercise prices ranging from $3.64 to $13.25 per share,   
the market prices at the dates of grant.                                        

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11:   EQUITY TRANSACTIONS (CONTINUED)                                      
The compensation committee of the Company's Board of Directors is       
responsible for determining the type of award, when and to whom awards are      
granted, the number of shares and terms of the awards and the exercise price.   
The options are exercisable for a period not to exceed ten years from the date  
of the grant. Vesting periods range from immediate vesting to four years.       

The following table summarizes the stock option transactions for the two
years ended December 31, 1998:                                                  

                                                        [Enlarge/Download Table]

                                                               NUMBER OF                     
                                                                OPTIONS      EXERCISE PPRICES
                                                             --------------  ----------------
                                                                                             
Granted prior to December 31, 1997..........................   29,661,888    $0.25 to $ 2.00 
                                                               ----------                    
Balance outstanding at December 31, 1997....................   29,661,888    0.25 to   2.00  
                                                               ----------                    
Granted.....................................................   10,318,000    1.94 to  13.25  
Excercised..................................................    1,100,048    0.25 to   3.74  
Cancelled...................................................    1,135,000    0.25 to   4.30  
                                                               ----------                    
Balance outstanding at December 31, 1998....................   37,744,840    0.25 to  13.25  
                                                               ==========                    
Exercisable at:                                                                              

December 31, 1997...........................................   24,482,344    0.25 to   0.96  
                                                               ==========                    
December 31, 1998...........................................   24,881,840    0.25 to   2.00  
                                                               ==========                    

  The following table summarizes information about stock options outstanding
at December 31, 1998:                                                           

                                                        [Enlarge/Download Table]

                                                   OPTIONS GRANTED              OPTIONS EXERCISABLE  
                                        -------------------------------------  ----------------------
                                                        WEIGHTED                             WEIGHTED
                          RANGES OF       NUMBER        AVERAGE      AVERAGE     NUMBER      AVERAGE 
                          EXERCISE      OUTSTANDING    REMAINING     EXERCISE  EXERCISABLE   EXERCISE
YEAR OF GRANT              PRICES       AT 12/31/98   LIFE (YEARS)    PRICE    AT 12/31/98    PRICE  
-------------          ---------------  -----------   ------------   --------  -----------   --------
                                                                                                     
1997.................. $0.25 to $ 2.00  27,596,840        8.40        $0.49    24,881,840     $0.33  
1998.................. 1.94 to  13.25   10,148,000        9.42         4.88            --        --  
                                        ----------        ----        -----    ----------     -----  
                                        37,744,840        8.67        $1.67    24,881,840     $0.33  
                                        ==========        ====        =====    ==========     =====  

Pro forma information regarding net income and earnings per share is    
required by Statement of Financial Standards No. 123, "Accounting for           
Stock-Based Compensation", and has been determined as if the Company had        
accounted for its employees' stock options under the fair value method provided 
by that Statement. The fair value of the options was estimated at the date of   
grant using the Black-Scholes option pricing model with the following           
assumptions for vested and non-vested options:                                  

                                                        [Enlarge/Download Table]

                                                                  DECEMBER 31,               
                                                     --------------------------------------- 
                                                           1998                   1997       
                                                     ----------------       ---------------- 
                                                                                             
Risk-free interest yield............................        5.53-6.56%             5.73-6.56%
Volatility factor...................................             .499                   .369 
Dividend yield......................................               --                     -- 
Average life........................................          5 years                5 years 

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11:   EQUITY TRANSACTIONS (CONTINUED)                                      
The Black-Scholes options valuation model was developed for use in      
estimating the fair value of traded options, which have no vesting restrictions 
and are fully transferable. In addition, option valuation models require the    
input of highly subjective assumptions including the expected stock price       
volatility.                                                                     

Because the Company's employee stock options have characteristics       
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in  
management's opinion, the existing models do not necessarily provide a reliable 
single measure of the fair value of its employee stock options.                 

For purposes of pro forma disclosures, the estimated fair value of the  
options is amortized to expense over the vesting period of the options. The     
Company's pro forma information is as follows (000's):                          

                                                                [Download Table]

                                                                YEAR ENDED      
                                                               DECEMBER 31,     
                                                            ------------------- 
                                                              1998       1997   
                                                            --------   -------- 
                                                                                
Pro forma net loss applicable to common stock.............   $ (864)   $(28,043)
Pro forma net loss per share applicable to common stock,                        
  basic...................................................   $(0.01)   $  (0.30)

NOTE 12: SIGNIFICANT CUSTOMERS                                                  

    During the years ended December 31, 1998 and 1997 one customer accounted for
40% and 21%, respectively of the Company's total revenue. During the years ended
December 31, 1998 and 1997 another customer accounted for 35% and 15%,          
respectively of the Company's total revenue. During the years ended             
December 31, 1998 a third customer accounted for 12% of the Company's total     
revenue.                                                                        

NOTE 13: INCOME TAXES                                                           

    Income tax expense (benefit) for the years ended December 31, 1998, 1997 and
1996 is as follows (in thousands):                                              

                                                                [Download Table]

                                                          1998      1997      1996  
                                                        --------  --------  --------
                                                                                    
CURRENT                                                                             
  Federal..............................................  $4,513     $ --      $ --  
  State and local......................................   2,720       --        --  
                                                         ------     ----      ----  
                                                          7,233       --        --  
                                                         ------     ----      ----  
DEFERRED                                                                            
  Federal..............................................  (2,375)      --        --  
  State and local......................................  (1,456)      --        --  
                                                         ------     ----      ----  
                                                         (3,831)      --        --  
                                                         ------     ----      ----  
                                                         $3,402     $ --      $ --  
                                                         ======     ====      ====  

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13: INCOME TAXES (CONTINUED)                                               
Total income tax expense (benefit) differed from the amounts computed by
applying the federal statutory income tax rate (35%) to earnings (loss) before  
income tax expense (benefit) as a result of the following items for the years   
ended December 31, 1998, 1997 and 1996 (in thousands):                          

                                                                [Download Table]

                                                          1998      1997      1996  
                                                        --------  --------  --------
                                                                                    
U.S. statutory rate applied to pre-tax income (loss)...  $1,492     $ --      $ --  
State and local taxes, net of federal tax benefit......     834       --        --  
Non deductible expenses................................   1,118       --        --  
Valuation allowance....................................      --       --        --  
Others, net............................................     (42)      --        --  
                                                         ------     ----      ----  
                                                         $3,402     $ --      $ --  
                                                         ======     ====      ====  

The tax effects of temporary differences that give rise to significant  
portions of the deferred tax assets and liabilities at December 31, 1998 and    
1997 are as follows (in thousands):                                             

                                                                [Download Table]

                                                    1998       1997       1996  
                                                  --------   --------   --------
                                                                                
DEFERRED TAX ASSETS                                                             
  Deferred revenue..............................  $ 19,923   $  5,173   $   499 
  Employee benefits.............................     9,893     10,074     1,425 
  Cost of sales of IRU's and sales type                                         
    leases......................................     5,599        573        -- 
  Net operating losses..........................        --      1,125     3,668 
  Others........................................     2,522      1,465     1,047 
                                                  --------   --------   ------- 
                                                  $ 37,937   $ 18,410   $ 6,639 
                                                  --------   --------   ------- 
  Valuation allowance...........................   (18,309)   (18,309)   (6,579)
                                                  --------   --------   ------- 
                                                    19,628        101        60 

DEFERRED TAX (LIABILITIES)                                                      
  Capitalized leases............................   (14,782)        --        -- 
  Depreciation and amortization.................    (1,003)       (89)      (48)
  Other.........................................       (12)       (12)      (12)
                                                  --------   --------   ------- 
                                                   (15,797)      (101)      (60)
                                                  --------   --------   ------- 
  Net deferred asset............................  $  3,831   $     --   $    -- 
                                                  ========   ========   ======= 

A portion of the deferred tax asset has been reserved since it is not   
certain that future taxable income will be realized in the carryforward period  
or in year of asset turnaround.                                                 

    There was no provision for federal or state income taxes for the years ended
December 31, 1997 and 1996. At December 31, 1998, the Company expects to have   
fully utilized its net operating losses                                         

NOTE 14:  401(K) PLAN                                                           

 In 1998, the Company implemented a 401(k) Plan (the "Plan") which permits
employees to make contributions to the Plan on a pre-tax salary reduction basis 
in accordance with the Internal Revenue Code. All full-time employees are       
eligible to participate at the beginning of the quarter following three         

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14:  401(K) PLAN (CONTINUED)                                               
months of service. Eligible employees may contribute up to 15% of their annual  
compensation. The Company matches 50% of the employees first 6% of              
contributions. The Company contributed $78,000 for 1998 as these matching       
contributions. The company bore the nominal administrative cost of the plan     
during 1998.                                                                    

NOTE 15: RECONCILIATION OF EARNINGS PER SHARE (IN THOUSANDS):                   

                                                                [Download Table]

                                                   YEAR ENDED DECEMBER 31,     
                                                ------------------------------ 
                                                  1998       1997       1996   
                                                --------   --------   -------- 
                                                                               
Net income (loss).............................  $    986   $(26,259)  $(10,359)
Deduct dividend on preferred shares...........        --         77         -- 
                                                --------   --------   -------- 
Net loss applicable to common stock...........       986    (26,336)   (10,359)
                                                ========   ========   ======== 
Shares                                                                         
Weighted average number of common shares                                       
  outstanding--basic..........................   186,990     94,894     71,716 
Net income (loss) per common share--basic.....  $   0.01   $  (0.28)  $  (0.14)
                                                ========   ========   ======== 
Weighted average number of common shares                                       
  outstanding--basic..........................   186,990     94,894     71,716 
Assuming conversion of warrants and options                                    
  outstanding.................................    32,534         --         -- 
                                                --------   --------   -------- 
Weighted average number of common shares                                       
  outstanding--diluted........................   219,524     94,894     71,716 
                                                ========   ========   ======== 
Net income (loss) per common share--diluted...  $   0.01        N/A        N/A 
                                                ========   ========   ======== 

NOTE 16:  COMMITMENTS AND CONTINGENCIES                                         

NETWORK CONSTRUCTION PROJECTS                                                   

  In 1998, the Company commenced construction of various networks outside of
the New York Metropolitan area. The Company's commitment to purchase materials  
and contracts for the construction of fiber optic network systems was           
approximately $70 million as of December 31, 1998.                              

FRANCHISE, LICENSE, RIGHT-OF WAY AGREEMENTS AND OPERATING AND CAPITAL LEASES    

  The Company has entered into various franchise and license agreements with
municipalities and utility-related companies to, in most instances, install,    
operate, repair, maintain and replace cable, wire, fiber or other transmission  
media and the related equipment and facilities. The terms for these agreements  
vary in length, with various renewal and termination provisions. The Company    
charges the portions of these agreements incurred to construction-in-progress   
until the related portion of the network is completed. The fees charged to      
operations in connection with these agreements were approximately $1,673,000,   
$607,000 and $459,000 for the years ended December 31, 1998, 1997 and 1996,     
respectively.                                                                   

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16:  COMMITMENTS AND CONTINGENCIES (CONTINUED)                             
   In addition, the company leases office and operation facilities and various
equipment, which expire at various times through March 31, 2010. Rent expense   
charged to operations was approximately $958,000, $268,000 and $158,000 for the 
years ended December 31, 1998, 1997 and 1996, respectively.                     

 The Company has entered into capital lease agreements for certain network
assets and for certain rights-of-ways. Total assets acquired under capital      
leases were approximately $27,876,000 at December 31, 1998. The capital leases  
are held as construction-in-progress until the related portion of the network is
completed.                                                                      

Approximate minimum payments under the aforementioned agreements are (in
thousands):                                                                     

                                                                [Download Table]

                                                FRANCHISE,                      
                                               LICENSE AND                      
                                               RIGHT-OF-WAY  CAPITAL   OPERATING
                                                AGREEMENTS    LEASES    LEASES  
                                               ------------  --------  ---------
                                                                                
For the year ended December 31,                                                 
1999..........................................   $ 1,018     $ 1,551    $ 1,994 
2000..........................................     1,121       1,797      2,032 
2001..........................................     1,121       1,859      2,054 
2002..........................................       971       1,923      2,050 
2003..........................................       661       1,991      1,532 
Thereafter....................................     7,922      42,972      7,339 
                                                 -------     -------    ------- 
Total minimum lease payments..................   $12,814      52,093    $17,001 
                                                 =======                ======= 
Less amounts representing interest............                29,363            
                                                             -------            
Present value of future minimum lease                                           
  payments....................................                22,730            
Less amounts due in one year..................                    55            
                                                             -------            
                                                             $22,675            
                                                             =======            

EMPLOYMENT AGREEMENTS                                                           

    The Company has executed employment contracts for future services, for up to
five years, with certain senior executives for whom the Company has a minimum   
commitment aggregating approximately $3.4 million at December 31, 1998. This    
amount is not included in the consolidated financial statements at December 31, 
1998.                                                                           

LITIGATION                                                                      

   On or about October 20, 1997, Vento & Company of New York, LLC commenced an
action against Metromedia Fiber Network, Stephen A. Garofalo, Peter Silverman,  
the law firm of Silverman, Collura, Chernis & Balzano, P.C., Peter Sahagen,     
Sahagen Consulting Group of Florida (collectively, the "Sahagen Defendants") and
Robert Kramer, Birdie Capital Corp., Lawrence Black, Sterling Capital LLC,      
Penrush Limited, Needham Capital Group, Arthur Asch, Michael Asch and Ronald    
Kuzon (the "Kramer Defendants") in the United States District Court for the     
Southern District of New York (No. 97 CIV 7751). On or about May 29, 1998, Vento
& Company filed an amended complaint. In its complaint, as amended, Vento &     
Company alleges four causes of action in connection with its sale of 900,000    
shares (not adjusted for subsequent stock splits) of Class A Common Stock to    
Peter Sahagen and the Kramer Defendants on                                      

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16:  COMMITMENTS AND CONTINGENCIES (CONTINUED)                             
January 13, 1997. The four causes of action include: (i) violation of Section   
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated under   
such Act; (ii) fraud and fraudulent concealment; (iii) breach of fiduciary duty;
and (iv) negligent misrepresentation and omission. On the first and second      
causes of action, Vento & Company is seeking, among other things, rescission of 
the Vento & Company sale, or alternatively, damages in an amount which we cannot
currently ascertain but believe to be in excess of $36 million, together with   
interest. On the third and fourth causes of action, Vento & Company is seeking  
damages in an amount which we cannot currently ascertain but believe to be in   
excess of $36 million, together with interest. Vento & Company is also seeking  
punitive damages in the amount of $50 million, reasonable legal fees and the    
cost of this action. All the defendants, including Metromedia Fiber Network and 
Stephen A. Garofalo, have moved to dismiss Vento and Company's amended          
complaint.                                                                      

  On or about June 12, 1998, Claudio E. Contardi commenced an action against
Peter Sahagen, Sahagen Consulting Group of Florida and Metromedia Fiber Network 
in the United States District Court for the Southern District of New York (No.  
98 CIV 4140). Mr. Contardi alleges a cause of action for, among other things,   
breach of a finder's fee agreement entered into between Mr. Sahagen and         
Mr. Contardi on or about November 14, 1996 and breach of an implied covenant of 
good faith and fair dealing contained in the finder's fee agreement.            
Mr. Contardi is seeking, among other things, a number of shares of Metromedia   
Fiber Network which we cannot currently ascertain but believe to be             
approximately 225,000 shares (calculated as of the date on which the complaint  
was filed and not adjusted for subsequent stock splits) or damages in an amount 
which we cannot currently ascertain but believe to be approximately $4.9 million
(calculated as of the date on which the complaint was filed) and all costs and  
expenses incurred by him in this action. We have filed an answer to the         
complaint and has raised affirmative defenses.                                  

    We intend to vigorously defend both these actions because we believe that we
acted appropriately in connection with the matters at issue in these two cases. 
However, we cannot assure you that we will not determine that the advantages of 
entering into a settlement outweigh the risk and expense of protracted          
litigation or that ultimately we will be successful in defending against these  
allegations. If we are unsuccessful in defending against these allegations, an  
award of the magnitude being sought in the Vento & Company litigation would have
a material adverse effect on our financial condition or results of operations.  

In addition, we are subject to various claims and proceedings in the    
ordinary course of business. Based on information currently available, we       
believe that none of such current claims, or proceedings, individually, or in   
the aggregate, including the Vento & Company litigation and the Contardi        
litigation, will have a material adverse effect on our financial condition or   
results of operations, although we can make no assurances in this regard.       

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) 

(IN 000'S, EXCEPT PER SHARE AMOUNTS)

                                                                [Download Table]

                                                              NINE MONTHS ENDED 
                                                                SEPTEMBER 30,   
                                                             -------------------
                                                               1999       1998  
                                                             --------   --------
                                                                                
Revenue..................................................... $ 49,397   $20,840 
Expenses:                                                                       
  Cost of sales.............................................   24,414     9,499 
  Selling, general and administrative.......................   27,369     9,811 
  Consulting and employment incentives......................       --       248 
  Settlement agreement......................................       --     3,400 
  Depreciation and amortization.............................   15,645       738 
                                                             --------   ------- 
Income (loss) from operations...............................  (18,031)   (2,856)
Other income (expenses):                                                        
  Interest income...........................................   19,127     5,028 
  Interest expense..........................................  (44,911)      (16)
  Loss from joint venture...................................     (475)     (264)
                                                             --------   ------- 
Income (loss) before income taxes...........................  (44,290)    1,892 
Income taxes................................................       --       825 
                                                             ========   ======= 
Net income (loss)........................................... $(44,290)  $ 1,067 
                                                             ========   ======= 
Net income (loss) per share, basic.......................... $  (0.23)  $  0.01 
                                                             ========   ======= 
Net income (loss) per share, diluted........................      N/A   $  0.00 
                                                             ========   ======= 
Weighted average number of shares outstanding, basic........  190,639   186,392 
                                                             ========   ======= 
Weighted average number of shares outstanding, diluted......      N/A   217,208 
                                                             ========   ======= 

See accompanying notes

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

CONSOLIDATED BALANCE SHEET (UNAUDITED)

(IN 000'S, EXCEPT SHARE AMOUNTS)

                                                                [Download Table]

                                                              SEPTEMBER 30,
                                                                  1999     
                                                              -------------
                                                                           
                           ASSETS                                          
Current assets:                                                            
  Cash and cash equivalents.................................   $  352,900  
  Marketable securities.....................................       29,628  
  Pledged securities, current portion.......................       63,864  
  Accounts receivable.......................................      105,934  
  Prepaid expenses and other current assets.................        6,311  
                                                               ----------  
    Total current assets....................................      558,637  
Fiber optic transmission network and related equipment,                    
  net.......................................................      557,662  
Property and equipment, net.................................        7,136  
Pledged securities..........................................           --  
Restricted cash.............................................       94,234  
Investment in/advances to joint ventures....................       20,014  
Intangible assets, net......................................    1,648,059  
Other assets................................................       32,659  
                                                               ----------  
    Total assets............................................   $2,918,401  
                                                               ==========  
            LIABILITIES AND STOCKHOLDERS' EQUITY                           
Current liabilities:                                                       
  Accounts payable..........................................   $   31,680  
  Accrued liabilities.......................................      112,382  
  Notes payable, current portion............................        5,607  
  Deferred revenue, current portion.........................       15,863  
  Capital lease obligations, current portion................          569  
                                                               ----------  
    Total current liabilities...............................      166,101  
Senior notes payable........................................      650,000  
Notes payable...............................................       14,720  
Capital lease obligations...................................       24,316  
Deferred revenue............................................       83,271  
Commitments and contingencies (see notes)                                  
Stockholders' equity:                                                      
  Preferred stock, $.01 par value; 20,000,000 shares                       
    authorized;                                                            
    none issued and outstanding.............................           --  
  Class A common stock, $.01 par value; 2,404,031,241 shares               
    authorized;                                                            
    198,822,053 and 155,210,220 shares issued and                          
    outstanding, respectively...............................        1,988  
  Class B common stock, $.01 par value; 522,254,782 shares                 
    authorized;                                                            
    33,769,272 shares issued and outstanding................          338  
  Additional paid-in capital................................    2,065,316  
  Accumulated deficit.......................................      (86,526) 
  Cumulative comprehensive loss.............................       (1,123) 
                                                               ----------  
    Total stockholders' equity..............................    1,979,993  
                                                               ----------  
    Total liabilities and stockholders' equity..............   $2,918,401  
                                                               ==========  

See accompanying notes

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 

(IN 000'S)

                                                                [Download Table]

                                                              NINE MONTHS ENDED   
                                                                SEPTEMBER 30,     
                                                             -------------------- 
                                                               1999        1998   
                                                             ---------   -------- 
                                                                                  
Cash flows from operating activities:                                             
Net income (loss)........................................... $ (44,290)  $  1,067 
Adjustments to reconcile net income (loss) to net cash                            
  provided by operating activities:                                               
  Depreciation and amortization.............................    15,645        738 
  Amortization of deferred financing costs..................     1,503         -- 
  Options issued for settlement agreement...................        --      3,000 
  Stocks, options and warrants issued for services..........       401        248 
  Reserve for note receivable...............................        --        156 
  Loss from joint ventures..................................       329        264 
CHANGE IN OPERATING ASSETS AND LIABILITIES (NET OF                                
  ACQUISITIONS):                                                                  
  Accounts receivable.......................................   (61,465)   (17,221)
  Accounts payable and accrued liabilities..................    52,350      3,442 
  Deferred revenue..........................................    50,765     26,920 
  Other.....................................................    (8,925)    (1,749)
                                                             ---------   -------- 
  Net cash provided by operating activities.................     6,313     16,865 
                                                             ---------   -------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                             
Purchase of marketable securities...........................   (29,628)        -- 
Capital expenditures on fiber optic network,                                      
  telecommunications and related equipment..................  (229,104)   (71,739)
Deposit.....................................................        --     (4,675)
Restricted cash secured by letters of credit................   (63,014)        -- 
Investment in / advances to joint ventures..................    (3,359)    (2,745)
Capital expenditures on property and equiptment.............    (3,284)    (1,109)
Cash acquired through AboveNet acquisition..................   142,092         -- 
CSD acquisition (net of cash acquired)......................   (24,966)        -- 
                                                             ---------   -------- 
  Net cash used in investing activities.....................  (211,263)   (80,268)
                                                             ---------   -------- 
CASH FLOWS FROM FINANCING ACTIVITIES:                                             
Proceeds from issuance of common stock......................     3,559        892 
Payments of CSD pre-acquisition debt........................   (15,028)        -- 
                                                             ---------   -------- 
  Net cash provided by (used in) financing activities.......   (11,469)       892 
                                                             ---------   -------- 
NET DECREASE IN CASH AND CASH EQUIVALENTS...................  (216,419)   (62,511)
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD...............   569,319    138,846 
                                                             ---------   -------- 
CASH AND CASH EQUIVALENTS-END OF PERIOD..................... $ 352,900   $ 76,335 
                                                             =========   ======== 
Supplemental information:                                                         
  Interest paid............................................. $  31,375   $     16 
                                                             =========   ======== 
  Income taxes paid......................................... $   2,771   $  3,080 
                                                             =========   ======== 
Supplemental disclosure of significant non-cash investing                         
  activites:                                                                      
  Capital lease obligations................................. $     908   $ 19,742 
                                                             =========   ======== 
  Accrued capital expenditures.............................. $  65,629   $ 32,743 
                                                             =========   ======== 

See accompanying notes

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

BUSINESS OPERATIONS AND LINE OF BUSINESS                                        

Metromedia Fiber Network, Inc. and its subsidiaries (collectively, "the 
Company") provides dedicated fiber optic infrastructure and high-bandwidth      
Internet connectivity for its communications intensive customers. The Company is
a facilities-based provider of technologically advanced, high-bandwidth, fiber  
optic communications infrastructure to communications carriers and corporate and
government customers in the United States and Europe. Through its acquisition of
AboveNet Communications, Inc. ("AboveNet"), the Company also provides "one-hop" 
connectivity that enables mission critical Internet applications to thrive, as  
well as high-bandwidth infrastructure, including managed co-location services.  

 The Company currently has operations in, or under construction in, eleven
Tier I cities throughout the United States and seven selected international     
markets. The Company intends to expand its presence to include approximately 50 
Tier I and Tier II markets in the United States and 17 major international      
markets.                                                                        

   The Company's existing intra-city networks consist of approximately 425,000
fiber miles covering in excess of 800 route miles in six of its announced       
markets. Its inter-city network consists of approximately 120,000 fiber miles   
primarily covering its 255 route-mile network that the Company has built between
New York City and Washington D.C. The Company has also built or contracted to   
acquire (primarily through fiber swaps) a nationwide dark fiber network linking 
its intra-city networks.                                                        

 In February 1999, the Company entered into an agreement with Viatel, Inc.
and Carrier 1 Holdings, Ltd. to jointly build a dark fiber inter-city network   
among selected cities throughout Germany. Once completed, its German network    
will consist of approximately 291,000 fiber miles covering 1,350 route miles    
connecting 14 major cities. The Company has also swapped strands of fiber in the
United States for strands of fiber on the Circe network, which connects a number
of European markets. In addition to its inter-city networks, the Company is     
constructing 16 intra-city networks throughout Europe. Separately, the Company  
has also entered into a contract to gain access to dark fiber network facilities
in Toronto, Canada.                                                             

    On September 8, 1999, the Company completed the acquisition of AboveNet. The
holders of AboveNet's common stock received 1.175 shares of the Company's class 
A common stock for each share of AboveNet common stock. AboveNet is a leading   
provider of facilities-based, managed services for customer-owned Web servers   
and related equipment, known as co-location, and high performance Internet      
connectivity solutions for electronic commerce and other business critical      
Internet operations.                                                            

 Subsequent to the quarter, on October 7, 1999, the Company entered into a
securities purchase agreement with Bell Atlantic Investments, Inc. ("Bell       
Atlantic"), under which Bell Atlantic would purchase up to approximately 25.6   
million newly issued shares of its class A common stock at a purchase price of  
$28.00 per share and a convertible subordinated note of approximately $975.3    
million, which is convertible into shares of its class A common stock at a      
conversion price of $34.00 per share. The Company expects this transaction,     
which is subject to customary closing conditions, to be completed by the end of 
the first quarter of 2000. Assuming the issuance of the 25.6 million shares of  
class A common stock and conversion of the convertible subordinated note, this  
investment would represent 19.9% of the Company's outstanding shares. Bell      
Atlantic has also agreed to pay the Company $550 million over the next three    
years in exchange for delivery of fiber optic facilities over the next five     
years. The proceeds from these two transactions will be used to fund the        
expansion of the Company's network.                                             

Most of the Company's contracts for the provision of dark fiber are     
accounted as operating leases under which it recognizes recurring monthly       
revenues. For certain other contracts the Company recognizes                    

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                       
revenue under the percentage of completion method for the provision of dark     
fiber. Effective June 30, 1999, the Financial Accounting Standards Board issued 
FASB Interpretation No. 43 "Real Estate Sales" ("FIN 43") which requires that   
sales or leases of integral equipment be accounted for in accordance with real  
estate accounting rules. The Company believes that the staff of the Securities  
and Exchange Commission requires the classification of dark fiber cables in the 
ground as integral equipment as defined in FIN 43. Accounting for dark fiber    
leases as defined by FIN 43 does not change any of the economics of the         
contracts. It requires the Company, however, to recognize the revenue from      
certain leases as operating leases over the term of the contract as opposed to  
the prior method of recognizing revenue during the period over which the Company
delivers the fiber. As a result, this change in accounting treatment reduces the
revenue and income that the Company recognizes in the earlier years of the      
contract and spreads it out over the life of the contract regardless of when the
cash was received or the delivery of the fiber took place.                      

 By way of example, if the Company entered into an agreement for a 25 year
lease for dark fiber with a customer who pays $100.0 million in cash when the   
contract is signed, the Company previously recorded revenues of $20.0 million   
over the 5 years during which the Company delivered the dark fiber. By contrast,
the real estate accounting rules of FIN 43 would require recognition of revenue 
of $4.0 million per year over the 25 year term of the contract., even though the
Company would receive a cash payment of $100.0 million when the contract is     
signed.                                                                         

The Company implemented FIN 43 real estate accounting for certain of its
leases entered into after June 30, 1999, and has not restated any amounts for   
contracts executed prior to such date. As a result, although there was no change
to the economics of the contracts or the timing of the cash to be received by   
the Company, the impact of the change in accounting resulted in the Company     
recording $10.7 million in revenue for the quarter ended September 30, 1999     
rather than $32.7 million that would have been recorded had this change not been
made. Without this change in accounting, the Company would have also recorded   
earnings before interest, taxes, depreciation and amortization of $2.6 million  
rather than a loss before interest, taxes, depreciation and amortization of     
$12.4 million for the three months ended September 30, 1999 due to this change. 

BASIS OF PRESENTATION                                                           

   The interim unaudited consolidated financial statements in this Report have
been prepared in accordance with the United States Securities and Exchange      
Commission's Regulation S-X and consequently do not include all disclosures     
required under generally accepted accounting principles. The interim unaudited  
consolidated financial statements should be read in conjunction with the audited
Consolidated Financial Statements of the Company and accompanying Notes for the 
year ended December 31, 1998, contained in the Company's Annual Report on Form  
10-K for the year then ended. The Form 10-K includes information with respect to
the Company's significant accounting and financial reporting policies and other 
pertinent information. The Company believes that all adjustments of a normal    
recurring nature that are necessary for a fair presentation of the results of   
the interim periods presented in this report have been made. Certain balances   
have been reclassified to conform to the current period presentation.           

STOCK SPLITS                                                                    

    On August 28, 1998, December 22, 1998 and May 19, 1999 the Company completed
two-for-one stock splits of the Company's class A and class B common stock in   
the form of 100 percent stock dividends to all                                  

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                       
stockholders of record as of certain specified dates. All share and per share   
information, contained herein, give retroactive effect for all of the stock     
splits.                                                                         

RECOGNITION OF REVENUE                                                          

  The Company recognizes revenue on telecommunications services ratably over
the term of the applicable lease agreements with customers. Amounts billed in   
advance of the service provided are recorded as deferred revenue. In addition,  
the Company occasionally enters into sales-type leases for portions of its      
network. For those leases entered into prior to completion of the portion of the
network and under contracts entered into before June 30, 1999, the Company      
recognizes revenue using the percentage of completion method.                   

    Under the percentage of completion method, progress is generally measured on
performance milestones relating to the contract where such milestones fairly    
reflect the progress toward contract completion. Network construction costs     
include all direct material and labor costs and those indirect costs related to 
contract performance. General and administrative costs are charged to expense as
incurred. If necessary, the estimated loss on an uncompleted contract is        
expensed in the period in which it is identified. Contract costs are estimated  
using allocations of the total cost of constructing the specific phase of the   
network. Revisions to estimated profits on contracts are recognized in the      
period that they become known.                                                  

   For sales-type leases for portions of its network entered into prior to the
completion of the portion of the network and after June 30, 1999, the Company   
follows the aforementioned FIN 43 real estate accounting rules. Although there  
was no change to the economics of the contracts or the timing of the cash to be 
received by the Company, the impact of the change in accounting resulted in the 
Company recording $10.7 million in revenues for the quarter ended September 30, 
1999 rather than the $32.7 million amount that would have been recorded if this 
change had not been imposed.                                                    

 The Company also provides installation services for its customers, and as
these services typically are completed within a short time period, the Company  
records the revenues and related costs for these services under the completed   
contract method.                                                                

FOREIGN CURRENCY TRANSLATION                                                    

 For translation of the financial statements of its recently formed German
operations, the Company has determined that the local currency is the functional
currency. Assets and liabilities of foreign operations are translated at the    
period-end exchange rates and income statement items are translated at average  
exchange rates for the period. The resulting adjustments are made directly to   
the Cumulative Translation Adjustment component of Stockholders' Equity. Foreign
currency transactions are recorded at the exchange rate prevailing on the       
transaction date.                                                               

MARKETABLE SECURITIES                                                           

    For purposes of the consolidated financial statements, the Company considers
all highly liquid investments with a maturity of greater than three months from 
the financial statement date to be marketable securities.                       

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                       
COMPREHENSIVE INCOME (LOSS)                                                     

    In 1998, the Company adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130") Reporting Comprehensive Income (Loss). This statement          
establishes rules for the reporting of comprehensive income and its components. 
Comprehensive income (loss) consists of net income (loss) and foreign currency  
translation adjustments. The comprehensive loss for the three and nine months   
ended September 30, 1999 was $28.2 million and $45.4 million, respectively,     
compared with comprehensive income of $3.1 million and $1.1 million,            
respectively, for the comparable periods in 1998.                               

2. FIBER OPTIC TRANSMISSION NETWORK AND RELATED EQUIPMENT                       

Fiber optic transmission network and related equipment consist of the   
following (in 000's):                                                           

                                                                [Download Table]

                                                              SEPTEMBER 30,
                                                                  1999     
                                                              -------------
                                                                           
Material-fiber optic cable..................................    $ 91,563   
Engineering and layout costs................................       7,338   
Fiber optic cable installation costs........................     100,285   
Telecommunications equipment and other......................      59,638   
Construction in progress....................................     315,519   
                                                                --------   
                                                                 574,343   
Less: accumulated depreciation..............................     (16,681)  
                                                                --------   
                                                                 557,662   
                                                                ========   

Construction in progress includes amounts incurred in the Company's     
expansion of its network or build-out of its facilities. These amounts include  
fiber optic cable and other materials, engineering and other layout costs, fiber
optic cable installation costs and other network assets held under capital      
leases. Construction in progress also includes payments for rights of way for   
the underlying sections of the network build.                                   

3. INVESTMENT IN/ADVANCES TO JOINT VENTURES                                     

The Company has a joint venture agreement with Racal Telecommunications,
Inc. ("Racal") that provides broad-based transatlantic communication services   
between New York and London. During 1998, each party made capital contributions 
of $4.3 million. The Company and Racal may each be required to contribute       
additional capital as needed for their respective 50% interests. The Company    
accounts for its investment using the equity method. For the three and nine     
months ended September 30, 1999, the Company recorded a loss of $82,000 and a   
loss of $475,000, respectively, from the joint venture based on its 50% interest
in the joint venture compared with losses of $13,000 and $264,000, respectively,
for the comparable periods in 1998.                                             

In March 1999, as part of its international expansion strategy, the     
Company's AboveNet subsidiary entered into agreements to form joint ventures in 
Austria, Germany ("AboveNet GmbH"), and the United Kingdom to provide managed   
co-location and Internet connectivity solution for mission critical Internet    
operations. The Company has invested a total of $5.5 million, which is included 
in deposits and other assets                                                    

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. INVESTMENT IN/ADVANCES TO JOINT VENTURES (CONTINUED)                         
at September 30, 1999. In addition, the Company has agreed to provide $2.0      
million of additional financing to these joint ventures and, if required, up to 
$2.0 million in a convertible loan note(s).                                     

    For an initial equity contribution of $1.9 million, the Company will own 45%
of a joint venture in Germany, Carrierhaus GmbH. AboveNet GmbH will own 5% of   
the joint venture. Carrierhaus GmbH will own and operate buildings in Frankfurt,
Germany. For an equity contribution of $22.5 million, the Company will own      
87.42% of a second joint venture, Worldswitch GmbH, which will lease facilities 
from Carrierhaus GmbH. Worldswitch GmbH will complete improvements to the       
buildings, including build-out of co-location facilities, and lease managed     
co-location space to AboveNet GmbH and other third parties. Approximately $7.5  
million was paid as an initial equity contribution with the remainder of the    
$22.5 million to be contributed over the following 14 to 20 months. These       
AboveNet joint ventures are accounted for using the equity method.              

4. ACQUISITIONS                                                                 

On September 8, 1999, the Company acquired all of the outstanding common
stock of AboveNet for a total purchase price, paid in Company class A common    
stock, of approximately $1.9 billion. The holders of AboveNet common stock,     
stock options and warrants received 1.175 shares of the Company's class A common
stock, stock options and warrants, respectively. AboveNet has its primary       
operations in San Jose, California and is a leading provider of                 
facilities-based, managed services for customer-owned Web servers and related   
equipment, known as co-location, and high performance Internet connectivity     
solutions for electronic commerce and other business critical Internet          
operations. The acquisition has been accounted for by the purchase method and,  
accordingly, the results of operations of AboveNet have been included in the    
Company's consolidated financial statements from September 9, 1999. The purchase
price has been preliminarily allocated based on estimated fair values as of the 
date of acquisition pending final determination of certain tangible and         
intangible assets. In addition, in connection with the acquisition, the Company 
issued a letter of credit, secured by the Company's restricted cash in the      
amount of $25 million, to further secure a credit facility of AboveNet.         

   On March 11, 1999, the Company acquired all the outstanding common stock of
Communication Systems Development, Inc. ("CSD") for $25 million in cash. CSD has
its primary operations in Dallas, Texas and is engaged in the engineering and   
construction of fiber optic networks. The acquisition has been accounted for by 
the purchase method and, accordingly, the results of operations of CSD have been
included in the Company's consolidated financial statements from March 11, 1999.
The purchase price has been preliminarily allocated based on estimated fair     
values as of the date of acquisition pending final determination of certain     
tangible and intangible assets.                                                 

On June 21, 1999, AboveNet acquired certain assets and assumed certain  
liabilities of the Palo Alto Internet Exchange ("PAIX") from Compaq Computer    
Corporation ("Compaq") for a total purchase price of $76.4 million consisting of
$70 million in cash, certain future ongoing services to be provided by AboveNet 
to Compaq, with a value estimated to be $5.0 million, and acquisition related   
costs of $1.4 million. PAIX is a high-level switching and peering point for     
global and Internet service providers and content providers. The acquisition has
been recorded using the purchase method of accounting.                          

The following unaudited pro forma financial information presents the    
combined results of operations of the Company and the above acquisitions as if  
the acquisitions had occurred as of the beginning of 1999 and 1998, after giving
effect to certain adjustments, including amortization of goodwill, additional   

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. ACQUISITIONS (CONTINUED)                                                     
depreciation expense and related income tax effects. The pro forma financial    
information does not necessarily reflect the results of operations that would   
have occurred had the entities constituted a single entity during such periods. 
The amounts are presented in thousands, except per share amounts.               

                                                                [Download Table]

                                                          NINE MONTHS ENDED   
                                                            SEPTEMBER 30,     
                                                         -------------------- 
                                                           1999        1998   
                                                         ---------   -------- 
                                                                              
Revenue................................................  $  70,641   $ 28,339 
                                                         =========   ======== 
Net Income/(Loss)......................................  $(128,204)  $(64,628)
                                                         =========   ======== 
Income/(Loss) per share, basic.........................  $   (0.56)  $  (0.28)
                                                         =========   ======== 

5. GERMAN NETWORK BUILD                                                         

    In February 1999, the Company entered into a joint venture with Viatel, Inc.
and Carrier 1 Holdings, Ltd. to jointly build a national fiber optic            
telecommunications network in Germany. Upon completion of construction, the     
joint venture will be dissolved and the Company will own its own separate German
broadband network. In connection with the terms of this agreement, the Company  
made a deposit payment of $4.7 million during the third quarter of 1998. Upon   
signing a definitive agreement, the Company provided irrevocable standby letters
of credit in the amount of approximately DM110 million (approximately $63       
million) as security for the construction costs of the network, which, in       
addition to the deposit payment made, covers the Company's portion of the       
estimated construction costs of the network. As of September 30, 1999, the      
Company had restricted cash of approximately $38 million to secure the remaining
value of the irrevocable standby letters of credit.                             

6. RELATED PARTY TRANSACTIONS                                                   

The Company is party to a management agreement under which the Company's
controlling shareholder, Metromedia Company, provides consultation and advisory 
services relating to legal matters, insurance, personnel and other corporate    
policies, cash management, internal audit and finance, taxes, benefit plans and 
other services as are reasonably requested. The management agreement terminates 
on December 31 of each year, and is automatically renewed for successive        
one-year terms unless either party terminates upon 60 days prior written notice.
The 1998 management fee under the agreement was $500,000 per year, payable      
quarterly at a rate of $125,000. The 1999 management fee under the agreement is 
$1,000,000 per year, payable quarterly at a rate of $250,000. The Company is    
also obligated to reimburse Metromedia Company for all its out-of-pocket costs, 
expenses incurred and advances paid by Metromedia Company in connection with the
management agreement.                                                           

7. SETTLEMENT AGREEMENT                                                         

  In March 1998, the Company entered into a settlement agreement with Howard
Katz, Realprop Capital Corporation and Evelyn Katz, among others, which settled 
and resulted in the dismissal of litigation in which the Company was a defendant
in KATZ, ET AL. V. NATIONAL FIBER NETWORK, INC., ET AL., No. 97 Civ. 2764 (JGK).

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. NOTES PAYABLE                                                                

On November 25, 1998, the Company issued and sold $650.0 million of 10% 
Senior Notes due November 15, 2008. The net proceeds of the 10% Senior Notes    
were approximately $630.0 million, after deducting offering costs, which are    
included in other long-term assets. Interest on the 10% Senior Notes is payable 
semi-annually in arrears on May 15 and November 15 of each year, commencing May 
15, 1999. Approximately $91.5 million of the net proceeds was utilized to       
purchase certain pledged securities the proceeds of which, together with        
interest earned on such securities, will be used to satisfy the Company's       
semi-annual interest obligations through May 15, 2000. The 10% Senior Notes are 
subject to redemption at the option of the Company, in whole or in part, at any 
time on or after November 15, 2003, at specified redemption prices. In addition,
prior to November 15, 2001, the Company may use the net cash proceeds from      
certain specified equity transactions to redeem up to 35% of the 10% Senior     
Notes at specified redemption prices.                                           

The indenture pursuant to which the 10% Senior Notes are issued contains
certain covenants that, among other matters, limit the ability of the Company   
and its subsidiaries to incur additional indebtedness, issue stock in           
subsidiaries, pay dividends or make other distributions, repurchase equity      
interests or subordinated indebtedness, engage in sale and leaseback            
transactions, create liens, enter into transactions with affiliates, sell       
assets, and enter into mergers and consolidations.                              

In the event of a change in control of the Company as defined in the    
indentures, holders of the 10% Senior Notes will have the right to require the  
Company to purchase their Notes, in whole or in part, at a price equal to 101%  
of the stated principal amount thereof, plus accrued and unpaid interest, if    
any, thereon to the date of purchase. The 10% Senior Notes are senior unsecured 
obligations of the Company, and are subordinated to all current and future      
indebtedness of the Company's subsidiaries, including trade payables.           

    The Company made an interest payment on May 15, 1999. As a result, the value
of pledged securities to satisfy the Company's semi-annual interest obligation  
through May 15, 2000 was reduced to approximately $64 million.                  

9. EQUITY TRANSACTIONS                                                          

AUTHORIZED CAPITAL                                                              

 On May 18, 1999, the stockholders of the Company approved an amendment to
its Certificate of Incorporation to increase the authorized number of shares of 
its capital stock to 2,946,286,022 shares consisting of (a) 2,404,031,240 shares
of class A common stock, (b) 522,254,782 shares of class B common stock, and (c)
20,000,000 shares of preferred stock.                                           

STOCK SPLITS                                                                    

 As discussed in Note 1, on August 28, 1998, December 22, 1998 and May 19,
1999 the Company completed two-for-one stock splits of the Company's class A and
class B common stock in the form of 100 percent stock dividends to all          
stockholders of record as of certain specified dates. The accompanying financial
statements give retroactive effect to the stock dividends.                      

 As of September 30, 1999, adjusted for the effect of the stock dividends,
the Company had 198,822,053 class A common shares outstanding and 33,769,272    
class B common shares outstanding.                                              

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. EQUITY TRANSACTIONS (CONTINUED)                                              
STOCK WARRANTS                                                                  

    (a) On December 13, 1996, the Company issued and sold to a private investor,
for an aggregate cash consideration of $2,025,000, (i) 1,200,000 shares of 10%  
cumulative convertible preferred stock (the "Series A preferred stock") bearing 
dividends at a rate of $.17 per share per annum, (ii) warrants to purchase      
912,600 shares of class A common stock at an exercise price of $.62 per share   
and (iii) a contingent stock subscription warrant to purchase a number of shares
of class A common stock (such number to be determined based on certain future   
events) at an exercise price of $0.01 per share. In connection with the         
investment in the Company by Metromedia Company, the private investor allowed   
the Series A preferred stock and the contingent warrants to be redeemed at an   
aggregate redemption price of $2,115,000 (which includes accrued but unpaid     
dividends on the Series A preferred stock) and the number of shares underlying  
the private investor's warrants to be increased from 912,600 to 1,825,200. In   
January 1998, the private investor made a cashless exercise of all its warrants 
and the number of its shares issuable upon exercise was reduced by the number of
shares at the closing on the day of exercise having a value equal to the        
aggregate exercise price. Accordingly, the Company issued the private investor  
1,382,120 shares of class A common stock for all its warrants.                  

    (b) In April 1995, the Company entered into a loan agreement with a customer
for $500,000 bearing interest at 11% per annum. In July 1997, the note was      
repaid in full. In connection with this loan, the Company issued the customer a 
warrant entitling the holder to purchase a total of 5,353,336 shares of the     
Company's common stock. In February 1997, this warrant was exchanged for a new  
warrant to purchase 3,650,400 shares of the Company's common stock at $0.60 per 
share. In February 1999, in accordance with an anti-dilution provision in the   
warrant, the Company increased the warrant to include the right to purchase an  
additional 331,882 shares of the Company's class A common stock at $0.56 per    
share and repriced the existing warrant to the same $0.56 per share. As of      
March 31, 1999, none of the warrants have been exercised. The warrant expires on
February 13, 2000.                                                              

ABOVENET TRANSACTION                                                            

   On September 8, 1999, the Company completed its acquisition of AboveNet for
an aggregate consideration of approximately $1.9 billion. In connection with the
acquisition, the company issued (i) 41,652,675 shares of its class A common     
stock at an exchange ratio of 1.175 shares of the Company's common stock for    
each share of AboveNet common stock; (ii) 5,355,723 options to purchase the     
Company's class A common stock at an average exercise price of $19.23; and      
417,163 warrants to purchase the Company's class A common stock at an average   
exercise price of $7.75.                                                        

10. CONTINGENCIES                                                               

   On or about October 20, 1997, Vento & Company of New York, LLC commenced an
action against the Company, Stephen A. Garofalo, Peter Silverman, the law firm  
of Silverman, Collura, Chernis & Balzano, P.C., Peter Sahagen, Sahagen          
Consulting Group of Florida, Robert Kramer, Birdie Capital Corp., Lawrence      
Black, Sterling Capital LLC, Penrush Limited, Needham Capital Group, Arthur     
Asch, Michael Asch and Ronald Kuzon in the United States District Court for the 
Southern District of New York, No. 97 CIV 7751(JGK). On or about May 29, 1998,  
Vento & Company filed an amended complaint. On or about July 1, 1999, Vento &   
Company filed a second amended complaint. In its complaint, as amended, Vento & 
Company alleges seven causes of action in connection with its sale of 900,000   
shares, not adjusted for subsequent stock splits, of the Company's class A      
common stock to Mr. Sahagen and some of the                                     

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. CONTINGENCIES (CONTINUED)                                                   
defendants on January 13, 1997. These seven causes of action include:           
(i) violation of Section 10(b) of the Securities Exchange Act of 1934 and       
Rule 10b-5 promulgated under such Act; (ii) fraud and fraudulent concealment;   
(iii) breach of fiduciary duty (but not against the Company); (iv) negligent    
misrepresentation and omission; and (v) breach of contract. Vento & Company is  
seeking, among other things, recission of the Vento & Company sale, or          
alternatively, damages in an amount not currently ascertainable but Vento &     
Company contends to be in excess of $460 million, together with interest        
thereon. Vento & Company is also seeking unspecified punitive damages,          
reasonable legal fees and the costs of this action. All the defendants,         
including the Company and its Chairman, have moved for summary judgment of Vento
& Company's second amended complaint.                                           

  On or about June 12, 1998, Claudio E. Contardi commenced an action against
Peter Sahagen, Sahagen Consulting Group of Florida and the Company in the United
States District Court for the Southern District of New York, No. 98 CIV         
4140(JGK). Mr. Contardi alleges a cause of action for, among other things,      
breach of a finder's fee agreement entered into between Mr. Sahagen and Mr.     
Contardi on or about November 14, 1996 and breach of an implied covenant of good
faith and fair dealing contained in the finder's fee agreement. Mr. Contardi is 
seeking, among other things, a number of our shares of class A common stock     
which we cannot currently ascertain but believe to be approximately 112,500     
shares (calculated as of the date on which the complaint was filed without      
taking into account subsequent stock splits) or damages in an amount which we   
cannot currently ascertain but believe to be approximately $4.9 million         
(calculated as of the date on which the complaint was filed) and all costs and  
expenses incurred by him in this action. The Company has filed an answer to the 
complaint and has raised affirmative defenses. The Company has moved for summary
judgement on the complaint.                                                     

The Company intends to vigorously defend both these actions because the 
Company believes that it acted appropriately in connection with the matters at  
issue in these two cases. However, the Company cannot assure you that it will   
not determine that the advantages of entering into a settlement outweigh the    
risk and expense of protracted litigation or that ultimately the Company will be
successful in defending against these allegations. If the Company is            
unsuccessful in defending against these allegations, an award of the magnitude  
being sought in the Vento & Company litigation would have a material adverse    
effect on our financial condition and results of operations.                    

On June 29, 1999, an alleged stockholder of AboveNet filed a lawsuit,   
captioned KAUFMAN V. TUAN, et al, Del. Ch. C.A. No. 17259NC, in the Court of    
Chancery of the State of Delaware in and for the New Castle County. The         
plaintiff, who purports to represent a class of all AboveNet stockholders,      
challenges the terms of the proposed merger between the Company and AboveNet.   
The complaint names, as defendants, AboveNet, the directors of AboveNet, and the
Company (as an aider and abettor). The complaint alleges generally that         
AboveNet's directors breached their fiduciary duty to stockholders of AboveNet, 
and seeks an injunction against the merger, or, in the alternative, rescission  
and the recovery of unspecified damages, fees and expenses. AboveNet, the       
Company and the individual defendants believe the lawsuit is without merit and  
intend to defend themselves vigorously. AboveNet and the individual director    
defendants' responses were filed on July 22, 1999. In connection with these     
responses, a motion to dismiss the complaint in its entirety and a motion to    
stay discovery pending the outcome of the motion to dismiss were filed by the   
AboveNet and the individual directors of AboveNet on July 22, 1999. Similar     
motions to dismiss the complaint and stay discovery were filed by the Company on
July 26, 1999.                                                                  

Four other complaints, which are virtually identical to the complaint in
KAUFMAN V. TUAN, have also been filed in the Delaware Court of the Chancery.    
None of these four complaints have been served. The                             

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METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. CONTINGENCIES (CONTINUED)                                                   
four actions are captioned BROSIOUS V. TUAN, et al, Del. Ch. C.A. No. 17271NC,  
CHONG V. TUAN, et al, Del. Ch. C.A. No. 17281NC, EHLERT V. TUAN, et al, Del. Ch.
C.A. No. 17284NC, HORN V. TUAN, et al, Del. Ch. C.A. No. 17300NC.               

    In addition, the Company is subject to various claims and proceedings in the
ordinary course of business. Based on information currently available, the      
Company believes that none of such current claims, or proceedings, individually,
or in the aggregate, including the Vento & Company litigation and the Contardi  
litigation, will have a material adverse effect on our financial condition or   
results of operations, although the Company can make no assurances in this      
regard.                                                                         

11. SUBSEQUENT EVENT                                                            

    On October 7, 1999, the Company entered into a securities purchase agreement
with Bell Atlantic, under which Bell Atlantic would purchase up to approximately
25.6 million newly issued shares of the Company's class A common stock at a     
purchase price of $28.00 per share and a convertible subordinated note of       
approximately $975.3 million, which is convertible into shares of its class A   
common stock at a conversion price of $34.00 per share. The Company expects this
transaction, which is subject to customary closing conditions, to be completed  
by the end of the first quarter of 2000. Assuming the issuance of the 25.6      
million shares of class A common stock and conversion of the convertible        
subordinated note, this investment would represent 19.9% of the Company's       
outstanding shares. Bell Atlantic has also agreed to pay the Company $550       
million over the next three years in exchange for delivery of fiber optic       
facilities over the next five years. The proceeds from these two transactions   
will be used to fund the expansion of its network.                              

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INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of                                   
AboveNet Communications Inc.:                                               

We have audited the accompanying consolidated balance sheets of AboveNet        
Communications Inc. as of June 30, 1998 and 1999 and the related consolidated   
statements of operations, stockholders' equity and cash flows for each of the   
three years in the period ended June 30, 1999. These financial statements are   
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.                   

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, such consolidated financial statements present fairly, in all   
material respects, the financial position of AboveNet Communications Inc. as of 
June 30, 1998 and 1999 and the results of its operations and its cash flows for 
each of the three years in the period ended June 30, 1999 in conformity with    
generally accepted accounting principles.                                       

DELOITTE & TOUCHE LLP                                                           
San Jose, California                                                            

July 28, 1999                                                                   
(September 8, 1999 as to Note 17)                                               

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ABOVENET COMMUNICATIONS INC.

CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                                       JUNE 30,          
                                                              -------------------------- 
                                                                 1998           1999     
                                                              -----------   ------------ 
                                                                                         
                                         ASSETS                                          
Current assets:                                                                          
  Cash and equivalents......................................  $ 8,141,200   $209,126,300 
  Short-term investments....................................           --     11,744,200 
  Accounts receivable, net of reserve for doubtful accounts                              
    of $60,000 and $388,300, respectively...................      357,000      3,355,000 
  Prepaid expenses and other current assets.................      269,600      3,850,400 
                                                              -----------   ------------ 
      Total current assets..................................    8,767,800    228,075,900 
Property and equipment, net.................................    4,436,100     46,590,900 
Rights to use fiber optic capacity..........................           --     12,904,500 
Intangible assets...........................................           --     69,474,100 
Restricted cash.............................................      300,000     21,475,900 
Deposits and other assets...................................      189,400      5,377,400 
                                                              -----------   ------------ 
Total assets................................................  $13,693,300   $383,898,700 
                                                              ===========   ============ 

                          LIABILITIES AND STOCKHOLDERS' EQUITY                           
Current liabilities:                                                                     
  Accounts payable..........................................  $ 2,301,300   $ 13,593,300 
  Remaining obligation for rights to use fiber optic                                     
    capacity................................................           --        800,000 
  Accrued liabilities.......................................      619,900      1,322,600 
  Unearned revenue..........................................      309,400      2,510,700 
  Current portion of long-term obligations..................      476,000      5,984,800 
                                                              -----------   ------------ 
      Total current liabilities.............................    3,706,600     24,211,400 
Convertible notes payable and advances......................    8,000,000             -- 
Unearned revenue............................................           --      4,375,000 
Other long-term obligations.................................    1,325,300     21,588,600 
Commitments and contingencies (Notes 4, 5 and 12)                                        
Stockholders' equity:                                                                    
  Preferred stock, $0.001 par value, 10,000,000 shares                                   
    authorized;                                                                          
    shares issued and outstanding--none.....................           --             -- 
  Convertible preferred stock, $0.001 par value:                                         
    Series A; shares issued and outstanding: 2,050,000 and                               
      none, respectively....................................      410,000             -- 
    Series B; shares issued and outstanding: 3,263,792 and                               
      none, respectively....................................    2,323,100             -- 
    Series C; shares issued and outstanding: 4,006,000 and                               
      none, respectively....................................    3,873,400             -- 
    Series D; no shares issued and outstanding..............           --             -- 
    Series E; no shares issued and outstanding..............           --             -- 
  Common stock, $0.001 par value, 60,000,000 shares                                      
    authorized; shares issued and outstanding: 728,696 and                               
    34,548,308, respectively................................       38,900    363,218,000 
  Common stock options......................................    1,861,500      4,413,800 
  Deferred stock compensation...............................     (540,100)       (47,800)
  Accumulated deficit.......................................   (7,305,400)   (33,860,300)
                                                              -----------   ------------ 
      Total stockholders' equity............................      661,400    333,723,700 
                                                              -----------   ------------ 
Total liabilities and stockholders' equity..................  $13,693,300   $383,898,700 
                                                              ===========   ============ 

See notes to consolidated financial statements. 

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ABOVENET COMMUNICATIONS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                                                 YEARS ENDED JUNE 30,           
                                                       ---------------------------------------- 
                                                          1997          1998           1999     
                                                       -----------   -----------   ------------ 
                                                                                                
Revenues.............................................. $   551,600   $ 3,436,400   $ 13,967,800 
                                                       -----------   -----------   ------------ 
Costs and expenses:                                                                             
  Data communications and telecommunications..........     558,600     2,199,800     12,649,700 
  Network operations..................................     416,700     1,571,800      6,084,300 
  Sales and marketing.................................     382,600     1,618,700     11,251,300 
  General and administrative..........................     433,700     1,621,500      6,610,900 
  Depreciation and amortization.......................     132,700       475,500      3,412,600 
  Stock-based compensation expense....................          --     1,276,400      1,688,700 
  Joint venture termination fee.......................     431,100            --             -- 
                                                       -----------   -----------   ------------ 
    Total costs and expenses..........................   2,355,400     8,763,700     41,697,500 
Loss from operations..................................  (1,803,800)   (5,327,300)   (27,729,700)
Interest expense......................................      (7,400)     (160,800)    (1,573,100)
Interest and other income.............................       8,400        63,100      2,947,900 
                                                       -----------   -----------   ------------ 
Loss before equity interest in affiliates.............  (1,802,800)   (5,425,000)   (26,354,900)
Equity interest in losses of affiliates...............          --            --       (200,000)
                                                       -----------   -----------   ------------ 
Net loss.............................................. $(1,802,800)  $(5,425,000)  $(26,554,900)
                                                       ===========   ===========   ============ 
Basic and diluted loss per share...................... $     (4.58)  $    (10.34)  $      (1.60)
                                                       ===========   ===========   ============ 
Shares used in basic and diluted loss per share.......     393,236       524,608     16,643,027 
                                                       ===========   ===========   ============ 

See notes to consolidated financial statements. 

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ABOVENET COMMUNICATIONS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

                                                        [Enlarge/Download Table]

                                       PREFERRED STOCK               COMMON STOCK           COMMON      DEFERRED                 
                                  --------------------------   -------------------------    STOCK        STOCK      ACCUMULATED  
                                    SHARES         AMOUNT        SHARES        AMOUNT      OPTIONS    COMPENSATION    DEFICIT    
                                  -----------   ------------   ----------   ------------  ----------  ------------  ------------ 
                                                                                                                                 
BALANCES, July 1, 1996..........           --   $         --      250,000   $      5,000  $       --  $        --   $    (77,600)
Issuance of common stock........                                  125,000          2,500                                         
Issuance of Series A convertible                                                                                                 
  preferred stock...............    2,050,000        410,000                                                                     
Exercise of common stock                                                                                                         
  options.......................                                   31,250            600                                         
Issuance of Series B convertible                                                                                                 
  preferred stock...............    1,000,000        600,000                                                                     
Issuance of Series B convertible                                                                                                 
  preferred stock in conjunction                                                                                                 
  with acquisition of DSK, Inc.                                                                                                  
  (Note 11).....................    1,000,000        600,000                                                                     
Net loss........................                                                                                      (1,802,800)
                                  -----------   ------------   ----------   ------------  ----------  -----------   ------------ 
BALANCES, June 30, 1997.........    4,050,000      1,610,000      406,250          8,100          --           --     (1,880,400)
Exercise of common stock                                                                                                         
  options.......................                                  322,446         30,800                                         
Issuance of warrants in                                                                                                          
  connection with issuance of                                                                                                    
  debt..........................                     112,000                                  45,000                             
Issuance of Series B convertible                                                                                                 
  preferred stock...............    1,263,792      1,011,100                                                                     
Issuance of Series C convertible                                                                                                 
  preferred stock...............    4,006,000      3,873,400                                                                     
Compensatory stock                                                                                                               
  arrangements..................                                                           1,816,500   (1,816,500)               
Amortization of deferred stock                                                                                                   
  compensation..................                                                                        1,276,400                
Net loss........................                                                                                      (5,425,000)
                                  -----------   ------------   ----------   ------------  ----------  -----------   ------------ 
BALANCES, June 30, 1998.........    9,319,792      6,606,500      728,696         38,900   1,861,500     (540,100)    (7,305,400)
Issuance of Series D convertible                                                                                                 
  preferred stock...............    4,230,756     10,771,000                                                                     
Issuance of Series E convertible                                                                                                 
  preferred stock...............      817,550      3,846,400                                                                     
Exercise of Series B warrants...      209,400             --                                                                     
Conversion of convertible                                                                                                        
  preferred stock to common                                                                                                      
  stock.........................  (14,577,498)   (21,223,900)  14,577,498     21,223,900                                         
Issuance of common stock upon                                                                                                    
  initial public offering.......                               11,500,000     67,822,000                                         
Issuance of common stock upon                                                                                                    
  public offering...............                                6,850,356    273,421,500                                         
Exercise of common stock options                                                                                                 
  and warrants..................                                  842,440        439,200                                         
Issuance of common stock under                                                                                                   
  employee stock purchase                                                                                                        
  plan..........................                                   49,318        272,500                                         
Issuance of warrants in                                                                                                          
  connection with issuance of                                                                                                    
  debt and leases...............                                                           1,355,900                             
Compensatory stock                                                                                                               
  arrangements..................                                                           1,196,400   (1,196,400)               
Amortization of deferred stock                                                                                                   
  compensation..................                                                                        1,688,700                
Net loss........................                                                                                     (26,554,900)
                                  -----------   ------------   ----------   ------------  ----------  -----------   ------------ 
BALANCES, June 30, 1999.........           --   $         --   34,548,308   $363,218,000  $4,413,800  $   (47,800)  $(33,860,300)
                                  ===========   ============   ==========   ============  ==========  ===========   ============ 



                                  SHAREHOLDERS'                                                                                  
                                     EQUITY                                                                                      
                                  -------------                                                                                  
                                                                                                                                 
BALANCES, July 1, 1996..........  $    (72,600)                                                                                  
Issuance of common stock........         2,500                                                                                   
Issuance of Series A convertible                                                                                                 
  preferred stock...............       410,000                                                                                   
Exercise of common stock                                                                                                         
  options.......................           600                                                                                   
Issuance of Series B convertible                                                                                                 
  preferred stock...............       600,000                                                                                   
Issuance of Series B convertible                                                                                                 
  preferred stock in conjunction                                                                                                 
  with acquisition of DSK, Inc.                                                                                                  
  (Note 11).....................       600,000                                                                                   
Net loss........................    (1,802,800)                                                                                  
                                  ------------                                                                                   
BALANCES, June 30, 1997.........      (262,300)                                                                                  
Exercise of common stock                                                                                                         
  options.......................        30,800                                                                                   
Issuance of warrants in                                                                                                          
  connection with issuance of                                                                                                    
  debt..........................       157,000                                                                                   
Issuance of Series B convertible                                                                                                 
  preferred stock...............     1,011,100                                                                                   
Issuance of Series C convertible                                                                                                 
  preferred stock...............     3,873,400                                                                                   
Compensatory stock                                                                                                               
  arrangements..................            --                                                                                   
Amortization of deferred stock                                                                                                   
  compensation..................     1,276,400                                                                                   
Net loss........................    (5,425,000)                                                                                  
                                  ------------                                                                                   
BALANCES, June 30, 1998.........       661,400                                                                                   
Issuance of Series D convertible                                                                                                 
  preferred stock...............    10,771,000                                                                                   
Issuance of Series E convertible                                                                                                 
  preferred stock...............     3,846,400                                                                                   
Exercise of Series B warrants...            --                                                                                   
Conversion of convertible                                                                                                        
  preferred stock to common                                                                                                      
  stock.........................            --                                                                                   
Issuance of common stock upon                                                                                                    
  initial public offering.......    67,822,000                                                                                   
Issuance of common stock upon                                                                                                    
  public offering...............   273,421,500                                                                                   
Exercise of common stock options                                                                                                 
  and warrants..................       439,200                                                                                   
Issuance of common stock under                                                                                                   
  employee stock purchase                                                                                                        
  plan..........................       272,500                                                                                   
Issuance of warrants in                                                                                                          
  connection with issuance of                                                                                                    
  debt and leases...............     1,355,900                                                                                   
Compensatory stock                                                                                                               
  arrangements..................            --                                                                                   
Amortization of deferred stock                                                                                                   
  compensation..................     1,688,700                                                                                   
Net loss........................   (26,554,900)                                                                                  
                                  ------------                                                                                   
BALANCES, June 30, 1999.........  $333,723,700                                                                                   
                                  ============                                                                                   

See notes to consolidated financial statements. 

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ABOVENET COMMUNICATIONS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                        YEARS ENDED JUNE 30,           
                                                              ---------------------------------------- 
                                                                 1997          1998           1999     
                                                              -----------   -----------   ------------ 
                                                                                                       
Cash flows from operating activities:                                                                  
  Net loss..................................................  $(1,802,800)  $(5,425,000)  $(26,554,900)
  Adjustments to reconcile net loss to net cash used in                                                
    operating activities:                                                                              
    Equity interest in losses of affiliates.................           --            --        200,000 
    Depreciation and amortization...........................      132,700       475,500      3,412,600 
    Stock-based compensation expense........................           --     1,276,400      1,688,700 
    Noncash interest expense................................           --       133,200        117,000 
    Joint venture termination fee...........................      431,100            --             -- 
    Changes in assets and liabilities:                                                                 
      Accounts receivable...................................      (29,100)     (315,900)    (2,728,000)
      Prepaid expenses and other current assets.............           --      (269,600)    (3,577,800)
      Restricted cash.......................................           --      (300,000)   (21,175,900)
      Accounts payable......................................      298,900     1,989,300     11,292,000 
      Accrued liabilities...................................      109,700       510,200        702,700 
      Unearned revenue......................................       85,000       224,400      1,313,300 
      Deferred rent.........................................       30,400        18,200        156,100 
                                                              -----------   -----------   ------------ 
        Net cash used in operating activities...............     (744,100)   (1,683,300)   (35,154,200)
                                                              -----------   -----------   ------------ 
Cash flows from investing activities:                                                                  
  Purchase of short-term investments........................           --            --    (11,744,200)
  Cash paid for rights to use fiber optic capacity..........           --            --     (7,480,000)
  Purchase of property and equipment........................     (474,500)   (3,666,000)   (37,426,300)
  Increase in deposits and other assets.....................      (32,700)     (111,700)    (1,519,000)
  Investments in affiliates.................................           --            --     (2,630,100)
  Cash paid for acquisition.................................           --            --    (71,420,200)
                                                              -----------   -----------   ------------ 
        Net cash used in investing activities...............     (507,200)   (3,777,700)  (132,219,800)
                                                              -----------   -----------   ------------ 
Cash flows from financing activities:                                                                  
  Proceeds from notes payable and advances..................      739,900    13,395,000     23,722,300 
  Debt repayments...........................................           --       (70,000)    (3,297,100)
  Capital lease repayments..................................      (49,600)      (84,700)      (638,700)
  Proceeds from issuance of common stock....................        3,100        30,800    341,955,200 
  Proceeds from issuance of convertible preferred stock.....      800,000            --      6,617,400 
                                                              -----------   -----------   ------------ 
        Net cash provided by financing activities...........    1,493,400    13,271,100    368,359,100 
                                                              -----------   -----------   ------------ 
Net increase in cash and equivalents........................      242,100     7,810,100    200,985,100 
Cash and equivalents, beginning of period...................       89,000       331,100      8,141,200 
                                                              -----------   -----------   ------------ 
Cash and equivalents, end of period.........................  $   331,100   $ 8,141,200   $209,126,300 
                                                              ===========   ===========   ============ 
Supplemental cash flow information--cash paid for                                                      
  interest..................................................  $     7,400   $    27,600   $  1,456,100 
                                                              ===========   ===========   ============ 
Noncash investing and financing activities:                                                            
  Remaining obligation for rights to use fiber optic                                                   
    capacity................................................  $        --   $        --   $    800,000 
                                                              ===========   ===========   ============ 
  Acquisition of equipment under capital lease..............  $   206,200   $   479,200   $  5,829,500 
                                                              ===========   ===========   ============ 
  Acquisition of leasehold improvements in conjunction with                                            
    DSK, Inc. acquisition...................................  $   168,900   $        --   $         -- 
                                                              ===========   ===========   ============ 
  Exchange of notes, advances, accrued interest and warrants                                           
    for convertible preferred stock.........................  $   210,000   $ 4,884,500   $  8,000,000 
                                                              ===========   ===========   ============ 
  Conversion of preferred stock into common stock...........  $        --   $        --   $ 21,223,900 
                                                              ===========   ===========   ============ 
  Issuance of warrants in connection with issuance of debt                                             
    and leases..............................................  $        --   $    45,000   $  1,355,900 
                                                              ===========   ===========   ============ 

See notes to consolidated financial statements. 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                  

 ORGANIZATION--AboveNet Communications Inc. (the "Company"), was formed on
March 8, 1996 (inception). The Company provides facilities-based, managed       
services for customer-owned Web servers and related equipment, known as         
co-location, and high performance Internet connectivity solutions for electronic
commerce and other business critical Internet operations.                       

  PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the Company and its subsidiaries. All significant intercompany transactions and 
amounts are eliminated in consolidation. Minority investments in joint ventures 
are accounted for under the equity method of accounting, under which the Company
records in income its proportionate share of the earnings or losses of the joint
ventures.                                                                       

    USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities and  
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of revenues and expenses during the         
reporting period. Actual results could differ from those estimates.             

    CONCENTRATION OF CREDIT RISK--Financial instruments that potentially subject
the Company to concentration of credit risk consist of trade receivables.       
However, the Company's credit risk is mitigated by its credit evaluation process
and the reasonably short collection terms. The Company does not require         
collateral or other security to support accounts receivable and maintains       
reserves for potential credit losses.                                           

 CASH AND EQUIVALENTS--The Company considers all highly liquid investments
with maturities of ninety days or less when purchased by the Company to be cash 
equivalents.                                                                    

SHORT-TERM INVESTMENTS--Short term investments consist of treasury bills
with a maturity greater than 90 days but less than twelve months. The Company's 
short-term investments are classified as available-for-sale. The investments are
carried at cost, which approximated fair value at June 30, 1999. Material       
unrealized gains or losses would be reported as a separate component of         
stockholders' equity. No investments were sold in the periods presented.        

PROPERTY AND EQUIPMENT--Property and equipment are stated at cost.      
Depreciation is computed using the straight-line method over the estimated      
useful lives of three to five years. Leasehold improvements and assets acquired 
under capital lease are amortized over the shorter of the lease term or the     
useful lives of the improvement.                                                

RIGHTS TO USE FIBER OPTIC CAPACITY--Indefeasible rights to use (IRU)    
capacity on fiber optic cable systems are stated at cost. Amortization will be  
recognized over the shorter of the term of the IRU or its useful life beginning 
when such capacity becomes available to the Company.                            

  INTANGIBLE ASSETS--Goodwill is amortized on a straight-line basis over its
estimated life of ten years.                                                    

  RESTRICTED CASH--Restricted cash consists of certificates of deposit which
are restricted from use pursuant to certain lease agreements.                   

   REVENUE RECOGNITION--Revenue consists primarily of service revenue which is
recognized in the period in which the services are provided. The services       
primarily include bandwidth and space requirement charges which are recognized  
monthly as well as installation fees which are recognized as revenue in the     

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

period of installation. Unearned revenue consists of customer advances and the  
value assigned to certain ongoing services to be rendered to Compaq Computer    
Corporation in connection with the acquisition of the Palo Alto Internet        
Exchange ("PAIX") (see Note 2). Unearned revenue is recognized in the period in 
which the services are rendered.                                                

INCOME TAXES--Deferred tax liabilities are recognized for future taxable
amounts, and deferred tax assets are recognized for future deductions, net of a 
valuation allowance to reduce net deferred tax assets to amounts that are more  
likely than not to be realized.                                                 

STOCK-BASED COMPENSATION--The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting        
Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES.

    IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF--The
Company evaluates its long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the        
carrying amount of such assets or intangibles may not be recoverable.           
Recoverability of assets to be held and used is measured by a comparison of the 
carrying amount of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment to be   
recognized is measured by the amount by which the carrying amount of the assets 
exceeds the fair value of the assets. Assets to be disposed of are reported at  
the lower of the carrying amount or fair value less costs to sell.              

    NET INCOME (LOSS) PER SHARE--Basic income (loss) per share excludes dilution
and is computed by dividing net income (loss) by the weighted-average number of 
common shares outstanding, less shares subject to repurchase by the Company, for
the period. Diluted income (loss) per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were         
exercised or converted into common stock. Common share equivalents are excluded 
from the computation in loss periods as their effect would be antidilutive.     

 RECLASSIFICATIONS--Certain prior period amounts have been reclassified to
conform to the current period presentation. Such reclassifications had no effect
on stockholders' equity (deficiency) or net loss.                               

    RECENTLY ISSUED ACCOUNTING STANDARDS--In June 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 130, REPORTING COMPREHENSIVE INCOME, which requires an enterprise to report,
by major components and as a single total, the change in the Company's net      
assets during the period from nonowner sources. The Company adopted SFAS        
No. 130 in fiscal 1999. For all periods presented, comprehensive loss was equal 
to the Company's net loss.                                                      

   Additionally, in June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which establishes annual and 
interim reporting standards for an enterprise's business segments and related   
disclosures about the enterprise's products, services, geographic areas and     
major customers. The Company adopted this statement in fiscal 1999. The Company 
has determined that it operates in one reporting segment.                       

   In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued SOP 98-1, ACCOUNTING FOR THE   
COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1     
provides guidance for an enterprise on accounting for the costs of computer     
software developed or obtained for internal use. SOP 98-1 is effective for the  
Company in fiscal 2000. The Company anticipates that accounting for transactions
under SOP 98-1 will not have a material impact on its financial position or     
results of operations.                                                          

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE   
INSTRUMENTS AND HEDGING ACTIVITIES, which defines derivatives, requires that all
derivatives be carried at fair value, and provides for hedge accounting when    
certain conditions are met. SFAS No. 133 is effective for the Company in fiscal 
2001. Although the Company has not fully assessed the implications of SFAS      
No. 133, the Company does not believe adoption of this statement will have a    
material impact on its financial position or results of operations.             

2. ACQUISITION OF PALO ALTO INTERNET EXCHANGE                                   

   On June 21, 1999, the Company consummated the acquisition of certain assets
and the assumption of certain liabilities of the Palo Alto Internet Exchange    
("PAIX"), a business within the Technology and Corporate Development and        
Operations Management Services business units of Compaq Computer Corporation    
("Compaq"). The total purchase price of $76.4 million consisted of              
$70.0 million in cash, certain future ongoing services to be provided by the    
Company to Compaq, with a value currently estimated to be $5.0 million, and     
acquisition-related costs of $1.4 million. PAIX is a high-level switching and   
peering point for global and regional Internet service providers and content    
providers.                                                                      

  The acquisition has been recorded using the purchase method of accounting.
The excess of the aggregate purchase price over the fair market value of net    
assets acquired of $69.7 million was recognized as goodwill and is being        
amortized over 10 years. Amortization of goodwill for fiscal 1999 was $190,000. 
At June 30, 1999, the Company made a preliminary allocation of the purchase     
price. The Company will record adjustments to the purchase price allocation as  
deemed necessary.                                                               

The operating results of PAIX have been included in the Company's       
consolidated financial statements since the date of acquisition. Had the        
acquisition of PAIX occurred on July 1, 1997 the unaudited proforma revenue, net
loss applicable to common stockholders and related basic and diluted loss per   
share for the years ended June 30, 1998 and 1999 would have been: $6.6 million  
and $19.7 million; $23.8 million and $44.4 million, and $45.45 per share and    
$2.66 per share, respectively. These results, which are based on various        
assumptions, are not necessarily indicative of what would have occurred had the 
acquisition been consummated on July 1, 1997.                                   

    A reconciliation of the cash and noncash aspects of the above transaction is
as follows:                                                                     

                                                                [Download Table]
                                                                          
Tangible and intangible assets acquired.....................  $76,683,200 
Liabilities assumed.........................................     (263,000)
Liabilities incurred in connection with purchase............   (5,000,000)
                                                              ----------- 
Net cash paid for acquisition...............................  $71,420,200 
                                                              =========== 

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ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

3. PROPERTY AND EQUIPMENT, NET                                                  

Property and equipment at June 30 are comprised of the following:       

                                                                [Download Table]

                                                         1998         1999     
                                                      ----------   ----------- 
                                                                               
Property and equipment at cost:                                                
  Telecommunication equipment.......................  $2,295,300   $10,255,500 
  Leasehold improvements (primarily                                            
    co-location facilities).........................     224,700    20,385,900 
  Office equipment..................................     186,500     1,262,000 
  Construction in progress..........................   2,389,400    18,224,900 
                                                      ----------   ----------- 
Total...............................................   5,095,900    50,128,300 
Less accumulated depreciation and amortization......    (659,800)   (3,537,400)
                                                      ----------   ----------- 
Property and equipment, net.........................  $4,436,100   $46,590,900 
                                                      ==========   =========== 

Construction in progress primarily relates to costs incurred during the 
expansion of the Company's facilities.                                          

4. INDEFEASIBLE RIGHTS TO USE FIBER OPTIC CAPACITY                              

During fiscal 1999, the Company entered into a series of agreements     
providing for the acquisition of an indefeasible right to use capacity on a     
fiber optic cable system between the U.S. and the United Kingdom for            
$8.3 million, $7.5 million of which has been paid as of June 30, 1999. The terms
of these agreements are 25 years.                                               

In fiscal 1999, the Company entered into a series of agreements to lease
fiber optic cable systems between Washington D.C. and New York City. These      
leases were initiated in the fourth quarter of fiscal 1999 and require annual   
payments of $630,000 for 20 years. The leases are accounted for as capital      
leases and had a net book value of $4.6 million at June 30, 1999.               

5. JOINT VENTURES                                                               

   In March 1999, as part of its international expansion strategy, the Company
entered into agreements to form joint ventures in Austria, Germany ("AboveNet   
GmbH"), and the United Kingdom to provide managed co-location and Internet      
connectivity solutions for mission critical Internet operations. The Company    
invested a total of $2.4 million in fiscal 1999, which is included in deposits  
and other assets at June 30, 1999. In addition, the Company has agreed to       
provide up to $2 million of additional financing to certain of these joint      
ventures, if required, and to arrange or provide for an additional $4.5 million 
contingent upon the joint ventures raising an equivalent amount from third      
parties. These joint ventures are accounted for under the equity method of      
accounting.                                                                     

    In July 1999, the Company agreed to enter into two additional joint ventures
in Germany. The first joint venture will own real property in Frankfurt,        
Germany. For an equity contribution of approximately $2 million, the Company    
will own 45% and AboveNet GmbH will own 5% of this joint venture. The second    
joint venture will lease the real property from the aforementioned joint        
venture. It will complete improvements to the property and will manage the      
property. This entity will lease managed co-location space to AboveNet GmbH and 
provide leased space to other third parties. The Company will own 87.42% of this
second joint venture in exchange for equity contributions which will total      
approximately $23 million,                                                      

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

of which approximately $8 million will be paid as an initial equity             
contribution, with the remainder to be contributed over the following 18 to     
24 months.                                                                      

6. CONVERTIBLE NOTES PAYABLE AND ADVANCES                                       

 In June 1997, the Company received $739,900 in cash advances from certain
individuals, including stockholders and employees. In July and August 1997, the 
Company received an additional $250,000 in cash advances. In August 1997, the   
advances were converted into notes payable of $989,900 and warrants to acquire  
989,906 shares of Series B convertible preferred stock at $1.00 per share. The  
notes generally bore an annual interest rate of 10%. The related warrants were  
valued at $112,000, or $0.12 per share, and were recorded as noncash interest   
expense in fiscal 1998.                                                         

   On December 31, 1997, the Company entered into exchange agreements with the
note holders. Pursuant to the exchange agreements, the above notes, accrued     
interest of $21,200 and the related warrants were exchanged for (i) 1,263,792   
shares of Series B convertible preferred stock and (ii) warrants to acquire     
247,472 shares of Series B convertible preferred stock at $1.00 per share.      

 During fiscal 1998, the Company received $3,873,400 of cash advances from
certain potential investors. In May 1998, these advances were converted into    
4,006,000 shares of Series C convertible preferred stock.                       

    On June 30, 1998, in anticipation of the Company's pending sale of preferred
stock, the Company received $8 million in cash, of which $1 million represented 
a noninterest-bearing cash advance and $7 million represented convertible notes 
payable. The notes bore interest at 6%, were due on July 15, 1998 and were      
convertible into Series D convertible preferred stock at $2.60 per share. On    
July 15, 1998, the convertible notes and advance were converted into Series D   
convertible preferred stock (see Note 9).                                       

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ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

7. OTHER LONG-TERM OBLIGATIONS                                                  

Long-term obligations at June 30 consist of:                            

                                                                [Download Table]

                                                         1998         1999     
                                                      ----------   ----------- 
                                                                               
Credit facility.....................................  $1,201,600   $21,626,800 
Capital lease facility..............................     551,100     5,741,900 
Deferred rent.......................................      48,600       204,700 
                                                      ----------   ----------- 
Total obligations...................................   1,801,300    27,573,400 
Less current portion of long-term obligations.......    (476,000)   (5,984,800)
                                                      ----------   ----------- 
Long-term obligations...............................  $1,325,300   $21,588,600 
                                                      ==========   =========== 

CREDIT FACILITY                                                                 

    At June 30, 1999, the Company had $21.6 million outstanding under its credit
facility (the "Credit Facility"), with no additional borrowings available as of 
June 30, 1999. Borrowings outstanding under the Credit Facility are payable in  
42 monthly installments, bear interest at rates ranging from 13.3% to 15.1% and 
are collateralized by the equipment and leasehold improvements purchased with   
the proceeds of the borrowing. At June 30, 1999, the outstanding borrowings on  
the Credit Facility are due as follows: fiscal 2000, $5,480,000; fiscal 2001,   
$6,286,600; fiscal 2002, $6,874,200; and fiscal 2003, $2,986,000.               

CAPITAL LEASE FACILITY                                                          

At June 30, 1999, the Company had $820,000 available on a $2.5 million  
facility under which the Company leases certain equipment under capital leases. 
Leases outstanding at June 30, 1999 expire on various dates through fiscal 2019 
(see Note 12).                                                                  

8. INCOME TAXES                                                                 

The Company's deferred income tax assets at June 30 are comprised of the
following:                                                                      

                                                                [Download Table]

                                                       1998           1999     
                                                    -----------   ------------ 
                                                                               
Net deferred tax assets:                                                       
  Net operating loss carryforwards................  $ 1,871,700   $ 10,755,900 
  Stock compensation expense on nonqualified stock                             
    options.......................................      485,300      1,067,000 
  Accruals deductible in different periods........      114,700        935,200 
  Depreciation and amortization...................      (65,200)      (231,600)
                                                    -----------   ------------ 
                                                      2,406,500     12,526,500 
Valuation allowance...............................   (2,406,500)   (12,526,500)
                                                    -----------   ------------ 
Total.............................................  $        --   $         -- 
                                                    ===========   ============ 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

    The Company's effective rate differs from the federal statutory tax rate for
the years ended June 30, 1997, 1998 and 1999 as follows:                        

                                                        [Enlarge/Download Table]

                                                           1997      1998      1999  
                                                         --------  --------  --------
                                                                                     
Federal statutory tax rate..............................   35.0%     35.0%     35.0% 
State taxes, net of federal benefit.....................    3.0       3.0       2.9  
Joint venture termination fee...........................   (9.1)       --        --  
Other...................................................   (0.1)     (0.3)     (0.4) 
Valuation allowance.....................................  (28.8)    (37.7)    (37.5) 
                                                          -----     -----     -----  
Effective tax rate......................................     --%       --%       --% 
                                                          =====     =====     =====  

The Company has no income tax provision due to its history of operating 
losses. Due to the uncertainty surrounding the realization of the benefits of   
its favorable tax attributes in future tax returns, the Company has fully       
reserved its net deferred tax assets as of June 30, 1997,1998 and 1999.         

At June 30, 1999, the Company had net operating loss carryforwards of   
approximately $28.4 million for federal and $14.2 million for state income tax  
purposes. These carryforwards begin to expire in 2003 for state and 2010 for    
federal purposes. Additionally, Section 382 of the Internal Revenue Code and the
applicable California law impose annual limitations on the use of net operating 
loss carryforwards if there is a change in ownership, as defined, within any    
three-year period. The utilization of certain net operating loss carryforwards  
may be limited due to the Company's capital stock transactions.                 

9. STOCKHOLDERS' EQUITY                                                         

STOCK SPLITS                                                                    

 During November 1998, the Company reincorporated in the State of Delaware
and effected a stock exchange of one share of common stock and preferred stock  
for every two and one-half shares of common stock and preferred stock,          
respectively, of its California predecessor entity. The Company also effected   
another reverse stock split during November 1998 whereby one share of common and
preferred stock was issued for every 1.6 shares of common stock and preferred   
stock. All share and per share amounts in these financial statements have been  
adjusted to give effect to these reverse stock splits.                          

  On May 7, 1999, the Company distributed a two-for-one stock split effected
as a stock dividend. All share or per share amounts in the consolidated         
financial statements have been adjusted to give effect to this stock split.     

INITIAL PUBLIC OFFERING                                                         

   On December 10, 1998, the Company sold 10,000,000 shares of common stock in
an underwritten public offering and on December 30, 1998 sold an additional     
1,500,000 shares through the exercise of the underwriters' over-allotment option
for net proceeds of approximately $67,822,000.                                  

STOCK OFFERING                                                                  

   On April 30, 1999, the Company sold 5,650,356 shares of its common stock in
an underwritten public offering at a price of $42.50 per share and on May 5,    
1999 sold an additional 1,200,000 shares through the exercise of the            
underwriters' overallotment option for net proceeds to the Company of           
approximately $273,421,500.                                                     

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

CONVERTIBLE PREFERRED STOCK AND WARRANTS                                        

   In fiscal 1997, the Company issued 2,050,000 shares of Series A convertible
preferred stock for cash of $200,000 and the conversion of advances of $210,000.
Also in fiscal 1997, the Company issued 1,000,000 shares of Series B convertible
preferred stock in connection with the acquisition of DSK, Inc. (see Note 11)   
and issued 1,000,000 shares of Series B convertible preferred stock for cash of 
$600,000. In fiscal 1998, the Company issued 1,263,792 shares of Series B       
convertible preferred stock and 4,006,000 shares of Series C convertible        
preferred stock upon conversions of notes, advances, and accrued interest of    
$1,011,100 and $3,873,400, respectively (see Note 6). In fiscal 1999, the       
Company issued 4,230,756 shares of Series D convertible preferred stock for cash
of $2,771,000 (net of costs of $229,000) and the conversion of notes and        
advances of $8,000,000. During the same period, the Company issued 817,550      
shares of Series E convertible preferred stock for cash of $3,846,400 (net of   
costs of $223,600).                                                             

    As discussed in Note 6, pursuant to certain exchange agreements entered into
on December 31, 1997, the Company issued warrants to acquire 247,472 shares of  
Series B convertible preferred stock at $1.00 per share. Also, during fiscal    
1998, the Company issued a warrant to purchase 2,500 shares of Series D         
convertible preferred stock at an exercise price of $2.00 per share in          
connection with a revolving line of credit from a bank that expired in          
May 1999.                                                                       

Simultaneously with the closing of the initial public offering, all     
14,368,098 shares of the Company's preferred stock were converted into common   
stock on a share for share basis. Additionally, all of the holders of warrants  
to purchase 247,472 shares of Series B convertible preferred stock exercised    
such warrants through a net issuance provision and were issued 209,400 shares of
common stock. Also in connection with the initial public offering, the warrant  
to acquire 2,500 shares of Series D convertible preferred stock was converted   
into a warrant to purchase an equivalent number of common shares at an exercise 
price of $2.00 per share.                                                       

COMMON STOCK RESERVED FOR FUTURE ISSUANCE                                       

 At June 30, 1999, the Company has reserved the following shares of common
stock for issuance in connection with:                                          

                                                                [Download Table]
                                                                       
Warrants issued and outstanding.............................    350,036
Options issued and outstanding..............................  5,057,606
Options available under stock option plans..................  1,108,547
Shares available under 1998 Purchase Plan...................    263,182
                                                              ---------
Total.......................................................  6,779,371
                                                              =========

COMMON STOCK SUBJECT TO REPURCHASE                                              

 Upon the exercise of certain unvested employee stock options, the Company
issued to the employees common stock which is subject to repurchase by the      
Company at the original exercise price of the stock option. This right lapses   
over the original vesting period. At June 30, 1999, 66,661 shares were subject  
to repurchase.                                                                  

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ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

STOCK OPTION PLANS                                                              

  Under the Company's stock option plans (collectively, the "Plans") a total
of 5,656,712 nonstatutory and incentive common stock options are authorized for 
issuance. Nonstatutory stock options may be granted to employees, outside       
directors and consultants, and incentive stock options may only be granted to   
employees. The Plans provide for the granting of incentive stock options at not 
less than 100% of the fair market value of the underlying stock at the grant    
date. Nonstatutory stock options may be granted at not less than 85% of the fair
market value of the underlying stock at the date of grant. Options granted to   
employees generally vest over four years and expire ten years from the date of  
the grant. In addition, upon change in control, all options granted under       
certain plans shall immediately vest.                                           

The plans provide that each nonemployee director who is elected to the  
Company's board of directors will automatically be granted a nonstatutory stock 
option to purchase 18,750 shares of common stock at an exercise price equal to  
the fair value of the common stock on the grant date. These grants vest ratably 
over three years. An additional option to purchase 6,250 shares of common stock 
will be granted to the nonemployee director each year thereafter with an        
exercise price equal to the fair market value of the common stock on that date. 
These grants vest after one year of service.                                    

EMPLOYEE STOCK PURCHASE PLAN                                                    

  On December 10, 1998, the Company adopted the 1998 Employee Stock Purchase
Plan (the "1998 Purchase Plan"). Under the 1998 Purchase Plan, eligible         
employees are allowed to have salary withholdings of up to 15% of their base    
compensation to purchase shares of common stock at a price equal to 85% of the  
lower of the market value of the stock at the beginning or end of defined       
purchase periods. The initial purchase period commenced on December 10, 1998.   
The Company has reserved 312,500 shares of common stock for issuance under this 
plan. As of June 30, 1999, 49,318 shares have been issued under the 1998        
Purchase Plan.                                                                  

NONPLAN OPTION GRANT                                                            

    In connection with its hiring of the Company's President and Chief Operating
Officer in November 1997, the Company granted to this officer options to        
purchase 350,000 shares of common stock with an exercise price of $0.20 per     
share. The option was immediately exercisable with respect to 20% of the option 
shares with the balance exercisable in equal monthly installments over the next 
36 months of employment with the Company. However, vesting accelerated upon the 
closing of the Company's underwritten public offering. In addition, the option  
grant contained an antidilution clause which guaranteed that, prior to any      
underwritten initial public offering of the Company's common stock, the number  
of shares under the option grant would always be equal to 5% of its outstanding 
common stock on a fully diluted basis less 36,666 shares. As a result of various
sales of equity securities and option grants since the initial grant in         
November 1997, the officer was issued options to purchase an additional 638,850 
shares of common stock at an exercise price of $0.20 per share during fiscal    
1999. In connection with this award, the Company recognized $362,100 and        
$1,087,200 in stock-based compensation expense during fiscal 1998 and 1999,     
respectively.                                                                   

OPTIONS AND WARRANTS GRANTED TO NONEMPLOYEES                                    

 The Company has granted options and warrants to nonemployees for services
performed and to be performed after the date of grant. In connection with these 
awards, the Company recognized $310,100 and $601,500 in stock-based compensation
expense during fiscal 1998 and 1999, respectively. At June 30, 1999,            

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

options to purchase 85,000 shares of common stock at an exercise price of $42.53
were unearned by certain nonemployees. These options vest over three years and  
have a term of three years. At June 30, 1999, all services relating to all other
nonemployee awards have been rendered and the related options and warrants were 
fully exercisable.                                                              

    In connection with the Company's formation of its European joint ventures in
March 1999, the Company agreed that it will grant options to purchase up to     
600,000 shares of common stock to employees of the joint ventures upon the joint
ventures meeting certain performance criteria of over the next four years. The  
exercise price for these options would be based on the fair market value of the 
Company's common stock at the date of grant.                                    

In connection with the Credit Facility (see Note 7), in fiscal 1998, the
Company issued warrants to purchase 45,000 shares of common stock at a          
weighted-average exercise price of $2.31 per share. The fair value of these     
warrants is being recognized as interest expense through June 30, 1999. During  
fiscal 1999, in connection with an amendment to the Credit Facility, the Company
issued warrants to purchase 67,032 shares of common stock which have a          
weighted-average exercise price of $18.72 per share and a term of five years.   
The estimated fair value of these warrants of $787,600 is included in deposits  
and other assets at June 30, 1999 and is being amortized to interest expense    
over the repayment period.                                                      

In connection with the signing of a new facility lease (See Note 12) in 
fiscal 1999, the Company issued the lessor a warrant to purchase 200,000 shares 
of its common stock at $5.00 per share. The estimated fair value of this warrant
of $609,100 is included in deposits and other assets at June 30, 1999 and will  
be amortized to expense over the lease period.                                  

 At June 30, 1998, warrants to purchase 64,686 shares of common stock at a
weighted-average exercise price of $2.10 per share were outstanding; such       
warrants expire in 2003. All of these warrants were issued during the year ended
June 30, 1998 and had an estimated weighted-average fair value of $1.23 per     
share at the date of grant. During fiscal 1999, warrants to purchase 302,662    
shares of common stock at a weighted-average exercise price of $7.99 were issued
and had an estimated weighted-average fair value of $4.72 per share at date of  
grant. At June 30, 1999, warrants to purchase 350,036 shares of common stock at 
a weighted-average exercise price of $7.17 per share were outstanding.          

OPTION REPRICING                                                                

    On December 1, 1998, the Company repriced 928,850 options previously granted
at $6.00 to $8.00 per share to fair value at that date of $5.00 per share.      

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ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

Stock option activity is summarized as follows:                         

                                                                [Download Table]

                                                           OUTSTANDING OPTIONS 
                                                          ---------------------
                                                                       WEIGHTED
                                                                       AVERAGE 
                                                            NUMBER     EXERCISE
                                                          OF SHARES     PRICE  
                                                          ----------   --------
                                                                               
Balance, July 1, 1996 (137,500 shares vested at a                              
  weighted average exercise price of $0.02 per share)...   1,140,000    $ 0.02 

Granted.................................................     450,000      0.07 
Exercised...............................................     (31,250)     0.02 
Canceled................................................    (388,750)     0.02 
                                                          ----------           
Balance, June 30, 1997 (219,374 shares vested at a                             
  weighted average exercise price of $0.02 per share)...   1,170,000      0.03 

Granted.................................................   1,142,612      0.59 
Exercised...............................................    (322,446)     0.10 
Canceled................................................     (32,334)     0.31 
                                                          ----------           
Balance, June 30, 1998 (734,270 shares vested at a                             
  weighted average exercise price of $0.19 per share)...   1,957,832      0.34 

Granted.................................................   5,058,100     15.61 
Exercised...............................................    (822,908)     0.50 
Canceled................................................  (1,135,418)     6.35 
                                                          ----------           
Balance, June 30, 1999..................................   5,057,606    $14.24 
                                                          ==========           

 The following table summarizes information as of June 30, 1999 concerning
currently outstanding and vested options:                                       

                                                                [Download Table]

                                  OPTIONS OUTSTANDING              OPTIONS VESTED   
                         -------------------------------------  --------------------
                                         WEIGHTED                                   
                                         AVERAGE      WEIGHTED              WEIGHTED
       RANGE OF                         REMAINING     AVERAGE               AVERAGE 
       EXERCISE            NUMBER      CONTRACTUAL    EXERCISE   NUMBER     EXERCISE
        PRICES           OUTSTANDING   LIFE (YEARS)    PRICE    OF SHARES    PRICE  
-----------------------  -----------   ------------   --------  ---------   --------
                                                                                    
        $ 0.02 - $ 0.60   1,621,374        8.3        $   0.17  1,185,423   $   0.19
          2.00 -   2.60     276,628        8.5            2.29     45,397       2.12
          4.00 -   6.50   1,337,654        9.2            5.17    337,103       5.36
         12.25 -  41.06   1,595,550        9.7           33.34    690,668      36.47
         42.53 - $75.13     226,400        9.5           48.55      7,500      46.63
                          ---------        ---        --------  ---------   --------
                          5,057,606        9.1        $  14.24  2,266,091   $  12.21
                          =========        ===        ========  =========   ========

At June 30, 1999, 1,108,547 shares remained available for future grant. 

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ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

ADDITIONAL STOCK PLAN INFORMATION                                               

  As discussed in Note 1, the Company accounts for its stock-based awards to
employees using the intrinsic value method in accordance with APB Opinion       
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and its related               
interpretations.                                                                

SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires the     
disclosure of pro forma net income (loss) and net income (loss) per share had   
the Company adopted the fair value method since the Company's inception. Under  
SFAS No. 123, the fair value of stock-based awards to employees is calculated   
through the use of option pricing models, even though such models were developed
to estimate the fair value of freely tradable, fully transferable options       
without vesting restrictions, which significantly differ from the Company's     
stock option awards. These models also require subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly      
affect the calculated values.                                                   

  The Company's calculations for employee grants were made using the minimum
value method for grants prior to September 8, 1998 and the fair value method for
grants after that date with the following weighted average assumptions: expected
life, one year following vesting; risk free interest rate of 6%; and no         
dividends during the expected term. In addition, volatility of 70% was used for 
grants valued under the fair value method. The Company's calculations are based 
on a multiple award valuation approach and forfeitures are recognized as they   
occur. If the computed values of the Company's stock-based awards to employees  
had been amortized to expense over the vesting period of the awards as specified
under SFAS No. 123, net loss would have been $1,803,800 ($4.59 per basic and    
diluted share), $5,111,000 ($9.75 per basic and diluted share) and $37,202,000  
($2.24 per basic and diluted share) for the years ended June 30, 1997, 1998 and 
1999, respectively.                                                             

 The number and estimated weighted-average grant date value per option for
employee and nonemployee awards during the year are as follows:                 

                                                                [Download Table]

                                               1997        1998         1999   
                                             --------   ----------   ----------
                                                                               
Employee options:                                                              
  Number of shares.........................        --    1,003,250    4,957,600
  Estimated weighted average value.........  $     --   $     0.10   $     5.98
Nonemployee options:                                                           
  Number of shares.........................   450,000      139,362      100,500
  Estimated weighted average value.........  $   0.02   $     0.08   $    20.43

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ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999. 

10. NET LOSS PER SHARE                                                          

    The following is a reconciliation of the numerators and denominators used in
computing basic and diluted net loss per share at June 30:                      

                                                                [Download Table]

                                          1997          1998           1999     
                                       -----------   -----------   ------------ 
                                                                                
Net loss (numerator), basic and                                                 
  diluted............................. $(1,802,800)  $(5,425,000)  $(26,554,900)
                                       ===========   ===========   ============ 
Shares (denominator):                                                           
  Weighted average common shares                                                
    Outstanding.......................     393,236       530,224     16,675,822 
  Weighted average common shares                                                
    Outstanding subject to                                                      
    repurchase........................          --        (5,616)       (32,795)
                                       -----------   -----------   ------------ 
Shares used in computation, basic and                                           
  diluted.............................     393,236       524,608     16,643,027 
                                       ===========   ===========   ============ 
Net loss per share, basic and                                                   
  diluted............................. $     (4.58)  $    (10.34)  $      (1.60)
                                       ===========   ===========   ============ 

For the above mentioned periods, the Company had securities outstanding 
which could potentially dilute basic net income per share in the future, but    
were excluded in the computation of diluted net loss per share in the periods   
presented, as their effect would have been antidilutive. At June 30, 1999,      
outstanding potentially dilutive securities consist of 66,661 outstanding shares
of common stock subject to repurchase, and options and warrants to purchase     
5,407,642 shares of common stock.                                               

11. JOINT VENTURE TERMINATION FEE                                               

In fiscal 1996, the Company entered into a joint venture agreement (the 
"Agreement") with DSK, Inc. ("DSK") to cooperatively market and develop the     
Company's services. The Company paid $33,700 to DSK during the year ended       
June 30, 1997 related to the Agreement.                                         

  In April 1997, the Company terminated the Agreement and hired the majority
stockholders of DSK as either employees or consultants by issuing 1,000,000     
fully vested shares of the Series B preferred stock with a fair value of $0.60  
per share, or $600,000, for the outstanding shares of common stock of DSK. The  
Company recorded the transaction by allocating the value of the shares issued to
property and equipment (at DSK's net book value of $168,900, which approximated 
fair value), with the balance of $431,100 reflected as a joint venture          
termination fee.                                                                

 Additionally, in April 1997, the Company granted to certain of the former
owners of DSK options to purchase a total of 250,000 shares of its common stock 
at $0.06 per share for real estate consulting services to be performed. In      
June 1998, the Company accelerated the vesting of all the DSK options awarded.  
In conjunction with this award, the Company recognized $604,200 of stock-based  
compensation expense during fiscal 1998.                                        

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ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999. 

12. COMMITMENTS AND CONTINGENCIES                                               

LEASES                                                                  

The Company leases its facilities under noncancelable operating leases. 
These leases expire on various dates through fiscal 2002. Minimum future lease  
payments under noncancelable operating and capital leases as of June 30, 1999   
are summarized as follows:                                                      

                                                        [Enlarge/Download Table]

YEARS ENDING                                                   CAPITAL      OPERATING 
JUNE 30,                                                       LEASES        LEASES   
------------                                                 -----------   -----------
                                                                                      
  2000...................................................... $ 1,320,600   $ 3,903,200
  2001......................................................   1,282,100     4,108,000
  2002......................................................     921,500     4,215,100
  2003......................................................     630,000     4,305,600
  2004......................................................     630,000     4,341,700
Thereafter..................................................   9,060,000    47,604,800
                                                             -----------   -----------
Total minimum lease payments................................ $13,844,200   $68,478,400
                                                             ===========   ===========
Less amount representing interest at rates ranging from                               
  13.253% to 14.68%.........................................  (8,102,300)             
                                                             -----------              
Present value of minimum lease payments.....................   5,741,900              
Less current portion........................................    (569,200)             
                                                             -----------              
Long-term portion........................................... $ 5,172,700              
                                                             ===========              

   Rent expense under operating leases for the years ended June 30, 1997, 1998
and 1999 was $444,900, $917,000 and $1.3 million, respectively.                 

Effective in fiscal 2000, the Company has committed to lease additional 
facilities. The lease is for a minimum term of 20 years with annual rental      
payments increasing from approximately $3 million to $4 million over the lease  
term.                                                                           

On June 29, 1999, the Company entered into an agreement to purchase     
approximately nine acres of land in Fairfax County, Virginia, for $7,750,000    
which is expected to close in fiscal 2000. The Company intends to open a        
facility on the site in fiscal 2001.                                            

See Note 4 regarding the Company's agreements to lease fiber optic cable
systems.                                                                        

PURCHASE COMMITMENTS                                                    

   The Company has entered into noncancelable commitments to purchase property
and equipment related to the expansion of its operations facilities. As of      
June 30, 1999, approximately $48 million was committed for purchases under these
agreements through fiscal 2000.                                                 

TELECOMMUNICATIONS AND PEERING ARRANGEMENTS                             

   The Company has guaranteed to pay certain monthly usage levels or fees with
various communications or interconnect providers. Minimum payments under these  
agreements at June 30, 1999 are approximately $24.8 million in fiscal 2000;     
$24.7 million in fiscal 2001; $23.1 million in fiscal 2002; $14.4 million in    
fiscal 2003; $13.7 million in fiscal 2004; and $8.6 million in fiscal 2005.     

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ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999. 

 The Company is a party to numerous peering agreements with other internet
providers to allow for the exchange of internet traffic. These agreements do not
have fee commitments and generally have a one year term with automatic renewals.
The Company does not record any revenue or expense associated with these        
non-cash transactions as such transactions do not represent the culmination of  
the earnings process and the fair value of such transactions are not reasonably 
determinable.                                                                   

LEGAL MATTERS                                                           

   On June 29, 1999, an alleged stockholder of AboveNet filed a lawsuit in the
Court of Chancery of the State of Delaware. The plaintiff, who purports to      
represent a class of all AboveNet stockholders, challenges the terms of the     
merger between AboveNet and Metromedia Fiber Network, Inc. ("Metromedia") (see  
Note 17). Four other vitually identical complaints have also been filed in the  
Delaware Court of Chancery. None of these four complaints has been served.      
AboveNet believes these lawsuits are without merit and intends to defend itself 
vigorously, and accordingly, management does not expect that the outcome of     
these cases will have a material effect on the Company's financial position or  
results of operations.                                                          

13. RELATED PARTY TRANSACTIONS                                                  

 A member of the Board of Directors is the president of an entity which is
the co-manager of the Company's primary facilities. Rent expense in fiscal 1997,
1998 and 1999 for these facilities was $16,400, $265,200 and $1,073,200,        
respectively. The Company believes that its lease arrangements were on an arm's 
length basis.                                                                   

During fiscal 1999, the same entity was granted a warrant to purchase   
200,000 shares of common stock in connection with the signing of a new facility 
lease (see Note 9). The estimated fair value of the warrant when granted was    
$609,100.                                                                       

14. MAJOR CUSTOMERS                                                             

 For the year ended June 30, 1999, no one customer accounted for more than
10% of revenues. One customer accounted for 14% and 12% of revenues in fiscal   
1998 and 1997, respectively.                                                    

At June 30, 1999, one customer accounted for approximately 10% of trade 
receivables. At June 30, 1998, two customers accounted for approximately 22% and
13% of trade receivables.                                                       

15. GEOGRAPHIC DATA                                                             

    During the year ended June 30, 1999, the Company generated approximately 14%
of its revenues from customers domiciled in countries other than the United     
States, primarily in Asia. For the years ended June 30, 1998 and 1997,          
substantially all of the Company's revenues were derived from domestic          
customers.                                                                      

16. 401(K) PLAN                                                                 

In May 1998, the Company began a 401(k) plan (the Plan) that covers all 
employees who meet the Plan's eligibility requirements. Eligible employees can  
contribute up to 15% of their salary, subject to certain IRS limitations. The   
Company's contributions related to fiscal 1998 and 1999 were zero and $168,100, 
respectively.                                                                   

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ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999. 

17. SUBSEQUENT EVENTS                                                           

In August 1999, the Company entered into an additional agreement for the
acquisition of an indefeasible right to use additional capacity on a fiber optic
cable system between the U.S. and the United Kingdom for a 25-year period. The  
agreement commits the Company to pay approximately $15.8 million in a series of 
installments through October 1999.                                              

  On September 8, 1999, the Company completed a merger with Metromedia Fiber
Network, Inc. ("MFN"). Under the terms of the agreement, AboveNet stockholders  
received 1.175 shares of MFN Class A common stock for each AboveNet share owned.
Additionally, upon completion of the merger, all outstanding stock options      
granted prior to June 18, 1999 became immediately vested.                       

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Board of Directors of                                                    
Compaq Computer Corporation                                                     

    We have audited the accompanying Combined Statement of Assets to be Acquired
and Liabilities to be Assumed of Palo Alto Internet Exchange (the "Business") as
of December 26, 1998 and the related Combined Statement of Revenues and Direct  
Expenses for the period June 12, 1998 through December 26, 1998. These          
statements are the responsibility of the Business' and Compaq Computer          
Corporation's management. Our responsibility is to express an opinion on these  
statements based on our audit.                                                  

We conducted our audit in accordance with generally accepted auditing   
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the statements are free of material          
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the statements. An audit also includes assessing 
the accounting principles used and significant estimates made by management, as 
well as evaluating the overall presentation of the statements. We believe that  
our audit provides a reasonable basis for our opinion.                          

   The accompanying statements were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for        
inclusion in the Current Report on Form 8-K of AboveNet Communications Inc.) as 
described in Note 2 and are not intended to be a complete presentation of the   
Business' financial position or results of operations.                          

In our opinion, the statements referred to above present fairly, in all 
material respects, the assets to be acquired and liabilities to be assumed as of
December 26, 1998 and the revenues and direct expenses described in Note 2 of   
the Business for the period June 12, 1998 through December 26, 1998, in         
conformity with generally accepted accounting principles.                       

PRICEWATERHOUSECOOPERS LLP                                                      

Boston, Massachusetts                                                           
June 15, 1999                                                                   

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Board of Directors of                                                    
Compaq Computer Corporation                                                     

    We have audited the accompanying Combined Statement of Assets to be Acquired
and Liabilities to be Assumed of Palo Alto Internet Exchange (the "Business") as
of December 27, 1997 and the related Combined Statement of Revenues and Direct  
Expenses for the period December 28, 1997 through June 11, 1998 and the fiscal  
years ended December 27, 1997 and December 29, 1996. These statements are the   
responsibility of the Business' and Compaq Computer Corporation's management.   
Our responsibility is to express an opinion on these statements based on our    
audits.                                                                         

We conducted our audits in accordance with generally accepted auditing  
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the statements are free of material          
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the statements. An audit also includes assessing 
the accounting principles used and significant estimates made by management, as 
well as evaluating the overall presentation of the statements. We believe that  
our audits provide a reasonable basis for our opinion.                          

   The accompanying statements were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for        
inclusion in the Current Report on Form 8-K of AboveNet Communications Inc.) as 
described in Note 2 and are not intended to be a complete presentation of the   
Business' financial position or results of operations.                          

In our opinion, the statements referred to above present fairly, in all 
material respects, the assets to be acquired and liabilities to be assumed as of
December 27, 1997 and the revenues and direct expenses described in Note 2 of   
the Business for the period December 28, 1997 through June 11, 1998 and the     
fiscal years ended December 27, 1997 and December 29, 1996, in conformity with  
generally accepted accounting principles.                                       

PRICEWATERHOUSECOOPERS LLP                                                      

Boston, Massachusetts                                                           
June 15, 1999                                                                   

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PALO ALTO INTERNET EXCHANGE 

COMBINED STATEMENT OF ASSETS TO BE ACQUIRED AND LIABILITIES TO BE ASSUMED 

(IN THOUSANDS)

                                                                [Download Table]

                                           MARCH 27,                             
                                             1999      DECEMBER 26,  DECEMBER 27,
                                          (UNAUDITED)      1998          1997    
                                          -----------  ------------  ------------
                                                                                 
ASSETS TO BE ACQUIRED:                                                           
  Unbilled accounts receivable...........   $   102       $    18       $   14   
  Prepaid expenses.......................        29             2            1   
  Property and equipment, net............     3,405         3,088        2,750   
  Intangible assets, net.................    32,863        33,756           --   
                                            -------       -------       ------   
      Total assets to be acquired........   $36,399       $36,864       $2,765   
                                            =======       =======       ======   
LIABILITIES TO BE ASSUMED:                                                       
  Unearned service revenue...............       166           200          106   
                                            -------       -------       ------   
      Total liabilities to be assumed....       166           200          106   
                                            -------       -------       ------   
        Net assets to be acquired........   $36,233       $36,664       $2,659   
                                            =======       =======       ======   

The accompanying notes are an integral part of these financial statements.

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PALO ALTO INTERNET EXCHANGE 

COMBINED STATEMENT OF REVENUES AND DIRECT EXPENSES

(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                PERIOD FROM                                            
                                         QUARTER     QUARTER   JUNE 12, 1998   PERIOD FROM      FISCAL        FISCAL   
                                          ENDED       ENDED       THROUGH     DECEMBER 28,    YEAR ENDED    YEAR ENDED 
                                        MARCH 27,   MARCH 26,  DECEMBER 26,   1997 THROUGH   DECEMBER 27,  DECEMBER 29,
                                          1999        1998         1998       JUNE 11, 1998      1997          1996    
                                        ---------   ---------  -------------  -------------  ------------  ------------
                                             (UNAUDITED)                                                               
                                                                                                                       
Service revenues.......................  $1,534       $ 892       $ 2,630        $1,732        $ 1,895       $   155   
                                         ------       -----       -------        ------        -------       -------   
Direct expenses:                                                                                                       
  Cost of revenues.....................     616         817         1,548         1,440          2,579           537   
  Research and development.............      --           4             9             8             54           599   
  Selling, general and administrative                                                                                  
    expenses...........................     131          83           191           242            700           121   
  Amortization of intangible assets....     893          --         1,944            --             --            --   
                                         ------       -----       -------        ------        -------       -------   
      Total direct expenses............   1,640         904         3,692         1,690          3,333         1,257   
                                         ------       -----       -------        ------        -------       -------   
        Excess (shortfall) of revenues                                                                                 
          over direct expenses.........  $ (106)      $ (12)      $(1,062)       $   42        $(1,438)      $(1,102)  
                                         ======       =====       =======        ======        =======       =======   

The accompanying notes are an integral part of these financial statements.

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PALO ALTO INTERNET EXCHANGE 

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED 
AND LIABILITIES TO BE ASSUMED AND 
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES 

(AMOUNTS IN THOUSANDS)

1. DESCRIPTION OF BUSINESS:                                                     

The Palo Alto Internet Exchange ("PAIX" or the "Business") is a business
within the Technology & Corporate Development and Operations Management Services
business units of Compaq Computer Corporation ("Compaq," formerly Digital       
Equipment Corporation, "Digital," collectively the "Company"). The Business is a
high-level switching and peering point for global and regional Internet Service 
Providers ("ISP") and content providers. The Business features a data center to 
provide global services to PAIX customers for transmission of data in           
high-volume over the worldwide Internet network. The Business utilizes a highly 
redundant fiber-based infrastructure owned by multiple data carriers, including 
the 30-mile fiber ring owned by the City of Palo Alto. The Business was started 
in 1993 as a research project within the Company and commenced meaningful       
operations during fiscal year 1996. The business is engaged primarily in        
providing Internet interconnectivity solutions and related services in support  
of mission critical Internet operations of its customers.                       

2. BASIS OF PRESENTATION:                                                       

    The accompanying Combined Statement of Assets to be Acquired and Liabilities
to be Assumed and Combined Statement of Revenues and Direct Expenses ("the      
financial statements") have been prepared for the purpose of complying with the 
rules and regulations of the Securities and Exchange Commission for inclusion in
the Current Report on Form 8-K of AboveNet Communications, Inc. ("AboveNet").   
The Combined Statement of Assets to be Acquired and Liabilities to be Assumed   
includes the Business' assets to be sold to and liabilities to be assumed by    
AboveNet, in accordance with the Asset Purchase Agreement dated May 21, 1999    
(the "Agreement"). Compaq and AboveNet also entered into certain service        
contracts and other arrangements that are described in the Agreement. These     
arrangements include, but are not limited to, access to the Internet, favorable 
pricing terms on such future services, and non-relocation and non-compete       
arrangements. The terms of such contracts and other arrangements range from one 
to 20 years. The assets to be acquired and liabilities to be assumed include    
unbilled accounts receivable, prepaid expenses, property and equipment,         
intangibles and unearned service revenue. The Combined Statement of Revenues and
Direct Expenses includes only those revenues and expenses directly related to   
the Business to be sold. The financial statements exclude any other activity and
related expense that are not directly attributable to the Business, such as     
corporate general and administrative costs, income taxes and interest expense.  

    The financial statements of the Business are derived from the historic books
and records of Digital through June 11, 1998. As a result of the acquisition of 
Digital by Compaq on June 11, 1998, the financial statements of the Business    
after the acquisition date are derived from the historic books and records of   
Compaq.                                                                         

As mentioned above, indirect costs allocated to the Business from the   
Company, such as certain corporate general and administrative costs, have been  
excluded from the financial statements on the basis that such costs are not     
direct costs of the Business. However, in determining the Business' direct      
expenses, certain allocations were made for expenses incurred by the Company, as
appropriate, that are directly attributed to the services provided to the       
Business. These allocations relate primarily to engineering support in          
connection with the delivery of services, facility and other occupancy costs,   
and other general and administrative functions performed directly on behalf and 
for the benefit of the Business. Costs for                                      

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PALO ALTO INTERNET EXCHANGE 

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED 
AND LIABILITIES TO BE ASSUMED AND 
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED) 

(AMOUNTS IN THOUSANDS)

2. BASIS OF PRESENTATION: (CONTINUED)                                           
such services have been reflected in the financial statements on the basis of   
activity or utilization, estimated support provided to the Business, or other   
methods management believe to be reasonable.                                    

    Cost of revenues primarily consists of costs relating to facility rent, data
communications and telecommunication expenses, service delivery and engineering 
support personnel and depreciation expense.                                     

    The financial statements have been prepared in accordance with the Company's
accounting policies and generally accepted accounting principles. However, these
statements do not purport to represent the costs and expenses which may be      
incurred by an unaffiliated company to achieve similar results. In addition, the
financial statements do not purport to represent the financial position of the  
Business.                                                                       

FISCAL YEAR                                                                     

For purposes of these financial statements the fiscal year of PAIX is a 
fifty-two week period ending the Saturday nearest the last day of December.     

USE OF ESTIMATES                                                                

The preparation of financial statements in conformity with generally    
accepted accounting principles requires management to make estimates and        
judgments that affect the reported amounts of assets, liabilities, revenues and 
direct expenses, and related disclosure of contingent assets and liabilities.   
Actual results could differ from those estimates.                               

PROPERTY AND EQUIPMENT                                                          

 Building improvements, computer, telecommunications, and office equipment
and construction-in-progress are stated at cost less depreciation, which is     
computed using the straight-line method. Expenditures for improvements which    
substantially extend the useful life or increase the capacity of an asset are   
capitalized. Ordinary repairs and maintenance are expensed as incurred.         
Estimated useful lives for purposes of computing depreciation expense range from
two to 10 years.                                                                

INTANGIBLE ASSETS                                                               

  Intangible assets, which consist of goodwill and customer lists related to
the acquisition of Digital by Compaq, are amortized on a straight-line basis    
over 10 years.                                                                  

REVENUE                                                                         

 Service revenue relating to Internet and colocation service contracts are
recognized over the contract period the services are provided. The Business     
recognizes installation and certain other service fees as revenue on a per event
basis. Unearned service revenue represents the unearned portion of prepaid      
service from Internet and colocation service contracts with customers. Such     
amounts are amortized to revenue over the contract period, which ranges from one
year to three years. The Business provides for estimated                        

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PALO ALTO INTERNET EXCHANGE 

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED 
AND LIABILITIES TO BE ASSUMED AND 
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED) 

(AMOUNTS IN THOUSANDS)

2. BASIS OF PRESENTATION: (CONTINUED)                                           
future losses on Internet and colocation service contracts, to the extent such  
losses are probable and estimable.                                              

RESEARCH AND DEVELOPMENT                                                        

    Research and development costs of the Business are charged to expense in the
period incurred.                                                                

LONG-LIVED ASSETS                                                               

    The Business reviews for the impairment of long-lived assets whenever events
or changes in circumstances indicate that the carrying amount of an asset may   
not be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual        
disposition is less than its carrying amount.                                   

CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS                          

The Business sells to customers primarily in the Internet and           
Telecommunications industries and customers are primarily located in the United 
States. The Company performs ongoing credit evaluations of its customers'       
financial condition and maintains adequate provisions for uncollectible amounts 
when necessary.                                                                 

For the periods in the fiscal year ended December 26, 1998, and for the 
years ended December 27, 1997 and December 29, 1996, PAIX generated more than   
10% of its total revenue from the following customers:                          

                                                        [Enlarge/Download Table]

                                                              1998      1997      1996  
                                                            --------  --------  --------
                                                                                        
UUNet......................................................    12%       19%       35%  
BBN\GTE Internetworking....................................    --        --        14%  
Epoch......................................................    --        --        31%  
Genuity....................................................    --        --        11%  

    As of December 26, 1998 and December 27, 1997, customers which comprised 10%
or more of accounts receivable were as follows:                                 

                                                                [Download Table]

                                                               1998      1997  
                                                             --------  --------
                                                                               
UUNet.......................................................    23%       25%  
Epoch.......................................................    --        20%  

UNAUDITED INTERIM FINANCIAL INFORMATION                                         

   The interim financial information for the quarters ended March 27, 1999 and
March 26, 1998 is unaudited and has been prepared on the same basis as the      
audited financial statements. In the opinion of management, such unaudited      
information includes all adjustments (consisting only of normal recurring       
adjustments) necessary for a fair presentation of the interim information.      
Results for the three months                                                    

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PALO ALTO INTERNET EXCHANGE 

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED 
AND LIABILITIES TO BE ASSUMED AND 
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED) 

(AMOUNTS IN THOUSANDS)

2. BASIS OF PRESENTATION: (CONTINUED)                                           
ended March 27, 1999 are not necessarily indicative of results to be expected   
for the year ending December 31, 1999.                                          

3. PROPERTY AND EQUIPMENT:                                                      

   Major classifications of property and equipment consisted of the following:

                                                                [Download Table]

                                        ESTIMATED     DECEMBER 26,  DECEMBER 27,
                                      USEFUL LIVES        1998          1997    
                                     ---------------  ------------  ------------
                                                                                
Building improvements...............        10 years     $2,479        $2,450   
Computer equipment..................      2-3 years          52            87   
Office equipment....................        10 years          6            --   
Electrical and telecommunications                                               
  equipment.........................         3 years        251           388   
Construction in progress............              --        521           112   
                                                         ------        ------   
Less: accumulated depreciation......                       (221)         (287)  
                                                         ------        ------   
                                                         $3,088        $2,750   
                                                         ======        ======   

Depreciation expense was approximately $221, $184, $286 and $1 for the  
period June 12, 1998 through December 26, 1998, the period December 28, 1997    
through June 11, 1998, and the fiscal years ended December 27, 1997 and         
December 29, 1996, respectively.                                                

4. INTANGIBLE ASSETS:                                                           

Intangible assets consisted of the following:                           

                                                                [Download Table]

                                                         DECEMBER 26,   JUNE 11,
                                                             1998         1998  
                                                         ------------   --------
                                                                                
Goodwill...............................................     $27,400     $27,400 
Customer lists.........................................       8,300       8,300 
Less: accumulated amortization.........................      (1,944)         -- 
                                                            -------     ------- 
                                                            $33,756     $35,700 
                                                            =======     ======= 

On June 11, 1998, Compaq consummated its acquisition of Digital and     
allocated its purchase price to the assets acquired and liabilities assumed     
based on Compaq's estimates of fair value. The fair value assigned to intangible
assets acquired was based on a valuation prepared by an independent third-party 
appraisal company and included goodwill and customer lists related to the       
Business.                                                                       

5. COMMITMENTS AND CONTINGENCIES:                                               

  The Company, on behalf of the Business, has entered into service contracts
with customers and telecommunications vendors to provide services.              

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PALO ALTO INTERNET EXCHANGE 

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED 
AND LIABILITIES TO BE ASSUMED AND 
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED) 

(AMOUNTS IN THOUSANDS)

5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)                                   
  In some instances, the Company provides limited warranties to customers in
connection with Internet and colocation service contracts. To date, costs       
incurred in connection with such warranties have been immaterial.               

6. LEGAL MATTERS:                                                               

    The Company is involved in lawsuits, claims, investigations, and proceedings
which are being handled and defended in the ordinary course of business. There  
are no such matters pending that the Company and its General Counsel expect to  
be material in relation to the Business and no amounts have been accrued in the 
financial statements for such matters.                                          

7. RELATED PARTY TRANSACTIONS:                                                  

    As described in Note 2, the Company incurred expenses for services performed
directly on behalf and for the benefit of the Business. Costs for such services 
have been reflected in the accompanying Statement of Revenues and Direct        
Expenses on the basis of activity or utilization, estimated support provided to 
the Business, or other methods management believe to be reasonable. The cost of 
such services is presented as cost of revenue, research and development and     
general and administrative.                                                     

   The Business has no external borrowings and there has been no allocation of
the Company's consolidated borrowings and related interest expense in the       
financial statements.                                                           

 The Business recognized revenue from AboveNet of $66, $36, $22 and $0 for
the period June 12, 1998 through December 26, 1998, the period December 28, 1997
through June 11, 1998, and the fiscal years ended December 27, 1997 and         
December 29, 1996, respectively. Accounts receivable from AboveNet are $11 and  
$4 at December 26, 1998 and December 27, 1997, respectively.                    

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P R O S P E C T U S                                                             

[LOGO]
--------------

From time to time, we may sell any of the following securities:         

-  Debt Securities                                                      

-  Preferred Stock                                                      

-  Class A Common Stock                                                 

-  Warrants                                                             

We will provide the specific terms of these securities in one or more   
supplements to this prospectus. You should read this prospectus and any         
prospectus supplement carefully before you invest.                              

Our class A common stock is traded over-the-counter on The Nasdaq Stock 
Market's National Market under the trading symbol "MFNX." The applicable        
prospectus supplement will contain information, where applicable, as to any     
other listing on The Nasdaq Stock Market's National Market or any securities    
exchange of the securities covered by the prospectus supplement.                

In addition, up to 21,505,376 shares of class A common stock being      
registered may be offered by certain selling stockholders. For additional       
information on the methods of sale, you should refer to the section entitled    
"Plan of Distribution."                                                         

The securities may be sold directly by us or, in case of class A common 
stock, may be sold by selling stockholders, to investors, through agents        
designated from time to time or to or through underwriters or dealers. See "Plan
of Distribution." If any underwriters are involved in the sale of any securities
in respect of which this prospectus is being delivered, the names of such       
underwriters and any applicable commissions or discounts will be set forth in a 
prospectus supplement. The net proceeds we expect to receive from such sale also
will be set forth in a prospectus supplement. We would not receive any of the   
proceeds from the sale of class A common stock by selling stockholders.         

This prospectus may not be used to offer or sell any securities unless  
accompanied by a prospectus supplement. We urge you to read carefully this      
prospectus and the accompanying prospectus supplement, which will describe the  
specific terms of the securities being offered to you, before you make your     
investment decision.                                                            

   INVESTING IN THE SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 3.                                                                         

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES 
COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS   
PROSPECTUS OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR ADEQUATE. ANY        
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.                           

The date of this prospectus is October 28, 1999.

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TABLE OF CONTENTS 

                                                                [Download Table]

                                                                PAGE  
                                                              --------
                                                                      
RISK FACTORS................................................      3   
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS...........     10   
ABOUT THIS PROSPECTUS.......................................     11   
BUSINESS....................................................     11   
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK                
  DIVIDENDS.................................................     12   
USE OF PROCEEDS.............................................     12   
DESCRIPTION OF DEBT SECURITIES..............................     13   
DESCRIPTION OF CAPITAL STOCK................................     22   
DESCRIPTION OF WARRANTS.....................................     28   
SELLING STOCKHOLDERS........................................     29   
PLAN OF DISTRIBUTION........................................     29   
VALIDITY OF SECURITIES......................................     30   
EXPERTS.....................................................     30   
WHERE YOU CAN FIND MORE INFORMATION.........................     31   
INCORPORATION OF INFORMATION WE FILE WITH THE SEC...........     31   

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RISK FACTORS

WE HAVE A LIMITED HISTORY OF OPERATIONS                                         

 You will have limited historical financial information upon which to base
your evaluation of our performance. We were formed in April 1993 and have a     
limited operating history. We currently have a limited number of customers and  
are still in the process of building many of our networks. Accordingly, you must
consider our prospects in light of the risks, expenses and difficulties         
frequently encountered by companies in their early stage of development.        

WE EXPECT TO CONTINUE TO INCUR NET LOSSES                                       

We cannot assure you that we will succeed in establishing an adequate   
revenue base or that our services will generate profitability. In connection    
with the construction of our networks, we have incurred substantial losses. We  
expect to continue incurring losses while we concentrate on the development and 
construction of our networks and until our networks have established a          
sufficient revenue-generating customer base. We also expect to incur losses     
during the initial startup phases of any services that we may provide. We expect
to continue experiencing net operating losses for the foreseeable future.       
Continued losses may prevent us from pursuing our strategies for growth and     
could cause us to be unable to meet our debt service obligations, capital       
expenditure requirements or working capital needs.                              

WE HAVE SUBSTANTIAL DEBT WHICH MAY LIMIT OUR ABILITY TO BORROW, RESTRICT THE USE
 OF OUR CASH FLOWS AND CONSTRAIN OUR BUSINESS STRATEGY, AND WE MAY NOT BE ABLE
TO MEET OUR DEBT OBLIGATIONS                                                

    We have substantial debt and debt service requirements. Our substantial debt
has important consequences, including:                                          

- our ability to borrow additional amounts for working capital, capital 
expenditures or other purposes is limited,                          

    - a substantial portion of our cash flow from operations is required to make
debt service payments, and                                          

    - our leverage could limit our ability to capitalize on significant business
     opportunities and our flexibility to react to changes in general economic
conditions, competitive pressures and adverse changes in government 
regulation.                                                         

We cannot assure you that our cash flow and capital resources will be   
sufficient to repay our existing indebtedness and any indebtedness we may incur 
in the future, or that we will be successful in obtaining alternative financing.
In the event that we are unable to repay our debts, we may be forced to reduce  
or delay the completion or expansion of our networks, sell some of our assets,  
obtain additional equity capital or refinance or restructure our debt.          

WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS STRATEGY BECAUSE WE   
  DEPEND ON FACTORS BEYOND OUR CONTROL, WHICH COULD ADVERSELY AFFECT OUR RESULTS
OF OPERATIONS                                                               

    Our future largely depends on our ability to implement our business strategy
and proposed expansion in order to create the new business and revenue          
opportunities. Our results of operations will be adversely affected if we cannot
fully implement our business strategy. Successful implementation depends on     
numerous factors beyond our control, including economic, competitive and other  
conditions and uncertainties, the ability to obtain licenses, permits,          
franchises and rights-of-way on reasonable terms and conditions and the ability 
to hire and retain qualified management personnel.                              

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WE CANNOT ASSURE YOU THAT WE WILL SUCCESSFULLY COMPLETE THE CONSTRUCTION OF OUR 
NETWORKS                                                                    

The construction of future networks and the addition of Internet service
exchange facilities entail significant risks, including management's ability to 
effectively control and manage these projects, shortages of materials or skilled
labor, unforeseen engineering, environmental or geological problems, work       
stoppages, weather interference, floods and unanticipated cost increases. The   
failure to obtain necessary licenses, permits and authorizations could prevent  
or delay the completion of construction of all or part of our networks or       
increase completion costs. In addition, our AboveNet Communications Inc.        
subsidiary's establishment and maintenance of interconnections with other       
network providers at various public and private points (often referred to as    
"peering arrangements") is necessary for AboveNet to provide cost efficient     
services. We cannot assure you that the budgeted costs of our current and future
projects will not be exceeded or that these projects will commence operations   
within the contemplated schedules, if at all.                                   

WE CANNOT ASSURE YOU THAT A MARKET FOR OUR CURRENT OR FUTURE SERVICES WILL      
DEVELOP                                                                     

  The practice of leasing dark fiber, which is fiber optic cable without any
of the electronic or optronic equipment necessary to use the fiber for          
transmission, is not widespread and we cannot assure you that the market will   
develop or that we will be able to enter into contracts, comply with the terms  
of these contracts or maintain relationships with communications carriers and   
corporate and government customers. We also cannot assure you that these        
contracts or relationships will be on economically favorable terms or that      
communications carriers and corporate and government customers will not choose  
to compete against, rather than cooperate with us. If we are unable to enter    
into contracts, comply with the terms of the contracts or maintain relationships
with these constituencies, our operations would be materially and adversely     
affected. We cannot predict whether providing services to governments will      
evolve into a significant market because governments usually already control    
existing rights-of-way and often build their own communications infrastructure. 
We will need to strengthen our marketing efforts and increase our staff to      
handle future marketing and sales requirements. If we fail to obtain            
significant, widespread commercial and public acceptance of our networks and    
access to sufficient buildings our visibility in the telecommunications market  
could be jeopardized. We cannot assure you that we will be able to secure       
customers for the commercial use of our proposed networks or access to such     
buildings in each market. In addition, the market for co-location and Internet  
services, which are offered by AboveNet, is new and evolving. We cannot assure  
you that AboveNet's services will achieve widespread acceptance in this new     
market. Further, AboveNet's success depends in large part on growth in the use  
of the Internet. The growth of the Internet is highly uncertain and depends on a
variety of factors.                                                             

We may expand the range of services that we offer. These services may   
include assisting customers with the integration of their leased dark fiber with
appropriate electronic and optronic equipment by facilitating the involvement of
third party suppliers, vendors and contractors. We cannot assure you that a     
market will develop for our new services, that implementing these services will 
be technically or economically feasible, that we can successfully develop or    
market them or that we can operate and maintain our new services profitably.    

SEVERAL OF OUR CUSTOMERS MAY TERMINATE THEIR AGREEMENTS WITH US IF WE DO NOT    
PERFORM BY SPECIFIED TIMES                                                  

    We currently have some contracts to supply leased fiber capacity which allow
the lessee to terminate the contracts and/or provide for liquidated damages if  
we do not supply the stated fiber capacity by a specified time. Terminating any 
of these contracts could adversely affect our operating results.                

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WE MAY BE UNABLE TO RAISE THE ADDITIONAL FINANCING NECESSARY TO COMPLETE THE    
CONSTRUCTION OF OUR NETWORKS, WHICH WOULD ADVERSELY AFFECT OUR LONG-TERM    
BUSINESS STRATEGY                                                           

We may need significant amounts of additional capital to complete the   
build-out of our planned fiber optic communications networks, to expand         
AboveNet's network infrastructure and to meet our long-term business strategies,
including expanding our networks to additional cities and constructing our      
networks in Europe. If we need additional funds, our inability to raise them    
will have an adverse effect on our operations. If we decide to raise additional 
funds by incurring debt, we may become more leveraged and subject to additional 
or more restrictive financial covenants and ratios. In addition, if we issue    
equity securities or securities convertible or exchangeable into our equity     
securities, current stockholders may face dilution.                             

COMPETITORS OFFER SERVICES SIMILAR TO OURS IN OUR CURRENT OR PLANNED MARKETS    
WHICH WOULD AFFECT OUR RESULTS OF OPERATIONS                                

The telecommunications industry and AboveNet's business are extremely   
competitive, particularly with respect to price and service, which may adversely
affect our results of operations. A significant increase in industry capacity or
reduction in overall demand would adversely affect our ability to maintain or   
increase prices. In the telecommunications industry, we compete against         
incumbent local exchange carriers, which have historically provided local       
telephone services and currently dominate their local telecommunications        
markets, and competing carriers in the local services market. In addition to    
these carriers, several other potential competitors, such as facilities-based   
communications service providers, cable television companies, electric          
utilities, microwave carriers, satellite carriers, wireless telephone system    
operators and large end-users with private networks, are capable of offering,   
and in some cases offer, services similar to those offered by us. Furthermore,  
several of these service providers, such as wireless service providers, could   
build wireless networks more rapidly and at lower cost than fiber optic         
networks. Additionally, the business in which AboveNet competes is highly       
competitive due to a lack of barriers to entry and high price sensitivity. Many 
of our competitors have greater financial, research and development and other   
resources than we do.                                                           

   Some of our principal competitors already own fiber optic cables as part of
their telecommunications networks. Accordingly, any of these carriers, some of  
which already have franchise and other agreements with local and state          
governments and substantially greater resources and more experience than us,    
could directly compete with us in the market for leasing fiber capacity, if they
are willing to offer this capacity to their customers. In addition, some        
communications carriers and local cable companies have extensive networks in    
place that could be upgraded to fiber optic cable, as well as numerous personnel
and substantial resources to begin construction to equip their networks. If     
communications carriers and local cable companies decide to equip their networks
with fiber optic cable, they could become significant competitors. Our franchise
and other agreements with the city of New York and other local and state        
governments are not exclusive. Potential competitors with greater resources and 
more experience than us could enter into franchise and other agreements with    
local and state governments and compete directly with us. Other companies may   
choose to compete with us in our current or planned markets, including Europe,  
by leasing fiber capacity, including dark fiber, to our targeted customers. This
additional competition could materially and adversely affect our operations.    

WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS AND ARE MORE VULNERABLE TO CHANGING  
ECONOMIC CONDITIONS AND CONSUMER PREFERENCES                                

    We are particularly dependent on a limited number of customers. In addition,
AboveNet has a long sales cycle. We are, therefore, more susceptible to the     
impact of poor economic conditions than our competitors with a more balanced mix
of business.                                                                    

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REGULATION OF THE TELECOMMUNICATIONS INDUSTRY MAY LIMIT THE DEVELOPMENT OF OUR  
NETWORKS AND AFFECT OUR COMPETITIVE POSITION                                

 Existing and future government laws and regulations may greatly influence
how we operate our business, our business strategy and ultimately, our          
viability. U.S. Federal and state telecommunications laws and the laws of       
foreign countries in which we operate directly shape the telecommunications     
market. Consequently, regulatory requirements and/or changes could adversely    
affect our operations and also influence the market for Internet, web hosting   
and related services. However, we cannot predict the future regulatory framework
of our business.                                                                

 U.S. LAWS MAY IMPACT OUR BUSINESS AND RESULTS OF OPERATIONS BY REGULATING
OUR OPERATIONS AND OUR CUSTOMERS' OPERATIONS                          

U.S. Federal telecommunications law imposes legal requirements on common
carriers who engage in interstate or foreign communication by wire or radio, and
on telecommunications carriers. Should these regulations be applied to us, they 
may have a material adverse impact on our business and results of operation. If 
providing dark fiber facilities or related services provided by us were deemed  
to be a telecommunications service, then regulations, both Federal and state,   
applicable to telecommunications carriers might apply to us. This could subject 
the revenues we receive from facility leases in interstate commerce to          
assessment by the Federal Communications Commission Universal Service Fund and  
the offering of those facilities or services would be subject to common carrier 
regulation. In addition, our customers and, in the case of Bell Atlantic, one of
our potential shareholders, are local exchange carriers or long distance        
carriers, subject to regulation by the Federal Communications Commission. Our   
business may be affected by regulations applicable to these telecommunications  
carriers. For example, the Federal Communications Commission has recently taken 
steps, and may take further steps, to reduce the access charges, the fees paid  
by long distance carriers to local exchange carriers for originating and        
terminating long distance calls on the local exchange carriers' local networks, 
and to give the local exchange carriers greater flexibility in setting these    
charges. While we cannot predict the precise effect reduction in access charge  
will have on our operations, the reduction will likely make it more attractive  
for long distance carriers to use local exchange carriers facilities, rather    
than our fiber optic telecommunications network. A recent decision by the       
Federal Communications Commission to require unbundling of incumbent local      
exchange carriers' dark fiber could decrease the demand for our dark fiber by   
allowing our potential customers to obtain dark fiber from incumbent local      
exchange carriers at cost-based rates, and thereby have an adverse effect on the
results of our operations.                                                      

STATE LEGISLATION AFFECTS OUR PRICING POLICIES AND OUR COSTS            

 Our offering of transmission services, which is different from dark fiber
capacity, may be subject to regulation in each state to the extent that these   
services are offered for intrastate use, and this regulation may have an adverse
effect on the results of our operations. We cannot assure you that these        
regulations, if any, as well as future regulatory, judicial, or legislative     
action will not have a material adverse effect on us. In particular, state      
regulators have the authority to determine both the rates we will pay to        
incumbent local exchange carriers for certain interconnection arrangements such 
as physical collocation, and the prices that incumbent local exchange carriers  
will be able to charge our potential customers for services and facilities that 
compete with our services. We will also incur costs in order to comply with     
regulatory requirements such as the filing of tariffs, submission of periodic   
financial and operational reports to regulators, and payment of regulatory fees 
and assessments including contributions to state universal service funds. In    
some jurisdictions, our pricing flexibility for intrastate services may be      
limited because of regulation, although our direct competitors will be subject  
to similar restrictions.                                                        

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  LOCAL GOVERNMENTS' CONTROL OVER RIGHTS-OF-WAY CAN LIMIT THE DEVELOPMENT OF
OUR NETWORKS                                                          

  Local governments exercise legal authority that may have an adverse effect
on our business because of our need to obtain rights-of-way for our fiber       
network. While local governments may not prohibit persons from providing        
telecommunications services nor treat telecommunication service providers in a  
discriminating manner, they can affect the timing and costs associated with our 
use of public rights-of-way.                                                    

  THE REGULATORY FRAMEWORK FOR OUR INTERNATIONAL OPERATIONS IS EXTENSIVE AND
 CONSTANTLY CHANGING, ADDING UNCERTAINTIES TO OUR PLANNED EXPANSION INTO
FOREIGN COUNTRIES                                                     

Various regulatory requirements and limitations also will influence our 
business as we attempt to enter international markets. Regulation of the        
international telecommunications industry is changing rapidly. We are unable to 
predict how the Federal Communications Commission and foreign regulatory bodies 
will resolve the various pending international policy issues and the effect of  
such resolutions on us. Our US/UK undersea cable joint venture is a U.S.        
international common carrier subject to U.S. regulation under Title II of the   
Communications Act of 1934. We are also licensed as a U.S. international common 
carrier subject to U.S. regulation under Title II of the Communications Act of  
1934. Our U.K. joint venture is, and we also are, required, under Sections 214  
and 203 of the Communications Act of 1934, respectively, to obtain authorization
and file an international service tariff containing rates, terms and conditions 
before initiating service. International carriers are also subject to certain   
annual fees and filing requirements such as the requirement to file contracts   
with other carriers, including foreign carrier agreements, and reports          
describing international circuit, traffic and revenue data service. So long as  
our U.K. joint venture and we operate as international common carriers, they    
will also be required to comply with the rules of the Federal Communications    
Commission. The international services provided by our U.K. joint venture are   
and our international services are also subject to regulation in the United     
Kingdom and other European jurisdictions in which we may operate. National      
regulations of relevant European and other foreign countries, as well as        
policies and regulations on the European Union and other foreign governmental   
level, impose separate licensing, service and other conditions on our foreign   
joint ventures and our international service operations, and these requirements 
may have a material adverse impact on us.                                       

OUR FRANCHISES, LICENSES OR PERMITS COULD BE CANCELED OR NOT RENEWED, WHICH     
WOULD IMPAIR THE DEVELOPMENT OF MAJOR MARKETS FOR OUR SERVICES              

   Termination or non-renewal of our franchise with the city of New York or of
certain other rights-of-way or franchises that we use for our networks would    
have a material adverse effect on our business, results of operations and       
financial condition. We will also need to obtain additional franchises, licenses
and permits for our planned intracity networks, intercity networks and          
international networks. We cannot assure you that we will be able to maintain on
acceptable terms our existing franchises, licenses or permits or to obtain and  
maintain the other franchises, licenses or permits needed to implement our      
strategy.                                                                       

WE MAY NOT BE ABLE TO OBTAIN AND MAINTAIN THE RIGHTS-OF-WAY AND OTHER PERMITS   
NECESSARY TO IMPLEMENT OUR BUSINESS STRATEGY                                

 We must obtain additional rights-of-way and other permits from railroads,
utilities, state highway authorities, local governments and transit authorities 
to install underground conduit for the expansion of our intracity networks,     
intercity networks and international networks. We cannot assure you that we will
be successful in obtaining and maintaining these right-of-way agreements or     
obtaining these agreements on acceptable terms. Some of these agreements may be 
short-term or revocable at will, and we cannot assure you that we will continue 
to have access to existing rights-of-way after they have expired or terminated. 
If any of these agreements were terminated or could not be renewed and we were  
forced to remove our fiberoptic cable from under the streets or abandon our     
networks, the termination could have a material adverse effect on our           
operations. In addition, landowners have asserted that railroad companies and   
others                                                                          

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to whom they granted easements to their properties are not entitled as a result 
of these easements to grant rights of way to telecommunications providers. If   
these disputes are resolved in the landowners' favor, we could be obligated to  
make substantial lease payments to these landowners for the lease of these      
rights of way. More specifically, our New York/New Jersey network relies upon,  
and our planned expansions into Long Island and Westchester County will rely    
upon, right-of-way agreements with Bell Atlantic Corporation and our subsidiary,
Empire City Subway Company (Ltd.). The current agreements may be terminated at  
any time without cause with three months notice. In case of termination, we may 
be required to remove our fiber optic cable from the conduits or poles of Bell  
Atlantic. This termination would have a material adverse effect on our          
operations.                                                                     

RAPID TECHNOLOGICAL CHANGES COULD AFFECT THE CONTINUED USE OF OUR SERVICES AND  
OUR RESULTS OF OPERATIONS                                                   

   The telecommunications industry is subject to rapid and significant changes
in technology that could materially affect the continued use of our services,   
including fiber optic cable and Internet connectivity services. We cannot       
predict the effect of technological changes on our business. We also cannot     
assure you that technological changes in the communications industry and        
Internet related industry will not have a material adverse effect on our        
operations.                                                                     

WE MAY EXPERIENCE RISKS AS A RESULT OF EXPANDING OUR NETWORKS INTO EUROPEAN AND 
 OTHER FOREIGN COUNTRIES, WHICH MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS

 Our strategy includes expanding our services to provide fiber optic cable
and developing regional Internet service exchange facilities in Europe,         
particularly Austria, Germany and the United Kingdom. The following are risks we
may experience as a result of doing business in Germany, the United Kingdom and 
other foreign countries in which we may expand our networks:                    

    - difficulties in staffing and managing our operations in foreign countries;

- longer payment cycles;                                                

- problems in collecting accounts receivable;                           

- fluctuations in currency exchange rates;                              

    - delays from customs brokers or government agencies encountered as a result
    of exporting fiber from the United States to Germany, the United Kingdom
or other countries in which we may operate; and                     

- potentially adverse consequences resulting from operating in multiple 
  countries, such as Germany and the United Kingdom, each with their own
      laws and regulations, including tax laws and industry related regulations.

    We cannot assure you that we will be successful in overcoming these risks or
any other problems arising because of expansion into Europe and other foreign   
countries.                                                                      

WE MAY NOT BE ABLE TO SUCCESSFULLY IDENTIFY, MANAGE AND ASSIMILATE FUTURE       
ACQUISITIONS, INVESTMENTS AND STRATEGIC ALLIANCES, WHICH WOULD ADVERSELY    
AFFECT OUR RESULTS OF OPERATIONS                                            

    We have in the past, and may in the future, acquire, make investments in, or
enter into strategic alliances, including joint ventures in which we hold less  
than a majority interest, with, companies which have customer bases, switching  
capabilities, existing networks or other assets in our current markets or in    
areas into which we intend to expand our networks. Any acquisitions,            
investments, strategic alliances or related efforts will be accompanied by risks
such as:                                                                        

- the difficulty of identifying appropriate acquisition candidates;     

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   - the difficulty of assimilating the operations of the respective entities;

- the potential disruption of our ongoing business;                     

 - the potential inability to control joint ventures in which we hold less
than a majority interest;                                           

  - the inability of management to capitalize on the opportunities presented
 by acquisitions, investments, strategic alliances or related efforts;

 - the failure to successfully incorporate licensed or acquired technology
and rights into our services;                                       

- the inability to maintain uniform standards, controls, procedures and 
policies; and                                                       

  - the impairment of relationships with employees and customers as a result
of changes in management.                                           

  We cannot assure you that we would be successful in overcoming these risks
or any other problems encountered with such acquisitions, investments, strategic
alliances or related efforts.                                                   

IN THE TELECOMMUNICATIONS INDUSTRY, CONTINUED PRICING PRESSURES FROM OUR        
  COMPETITORS AND AN EXCESS OF NETWORK CAPACITY CONTINUE TO CAUSE PRICES FOR OUR
SERVICES TO DECLINE                                                         

 We anticipate that prices for our services specifically, and transmission
services in general, will continue to decline over the next several years due   
primarily to the following:                                                     

- price competition as various network providers continue to install    
networks that might compete with our networks;                      

- recent technological advances that permit substantial increases in the
transmission capacity of both new and existing fiber; and           

- strategic alliances or similar transactions, such as long distance    
  capacity purchasing alliances among regional Bell operating companies,
that increase the parties' purchasing power.                        

WE MAY EXPERIENCE ADDITIONAL RISKS AS A RESULT OF ABOVENET'S CO-LOCATION AND    
INTERNET CONNECTIVITY SERVICES                                              

The legal landscape that governs AboveNet has yet to be interpreted or  
enforced. Regulatory issues for AboveNet's industry include property ownership, 
copyrights and other intellectual property issues, taxation, libel, obscenity   
and personal privacy. AboveNet's business may be adversely affected by the      
adoption and interpretation of any future or currently existing laws and        
regulations. AboveNet has no patented technology and relies on a combination of 
copyright, trademark, service mark and trade secret laws and contractual        
restrictions to establish and protect certain proprietary rights in its         
technology. Despite AboveNet's design and implementation of a variety of network
security measures, unauthorized access, computer viruses, accidental or         
intentional action and other disruptions could occur. In addition, we may incur 
significant costs to prevent breaches in AboveNet's security or to alleviate    
problems caused by those breaches. The law relating to the liability of online  
services companies and Internet access providers for information carried on or  
disseminated through their networks is currently unsettled. It is possible that 
claims could be made against online services companies, co-location companies   
and Internet access providers. We may need to implement measures to reduce our  
exposure to this potential liability.                                           

METROMEDIA COMPANY EFFECTIVELY CONTROLS OUR COMPANY AND HAS THE POWER TO CAUSE  
OR PREVENT A CHANGE OF CONTROL                                              

    Metromedia Company and one of its general partners currently own 100% of our
class B common stock, which currently represents approximately 63% of our total 
voting power and also is entitled to elect 75% of the members of our board of   
directors. Accordingly, Metromedia Company is able to control the               

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board of directors and all stockholder decisions and, in general, to determine  
the outcome of any corporate transaction or other matter submitted to the       
stockholders for approval, including mergers, consolidations and the sale of all
or substantially all of our assets, without the consent of other stockholders.  
In addition, Metromedia Company has the power to prevent or cause a change in   
control of our company.                                                         

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 

Any statements in this prospectus about our expectations, belief, plans,
objectives, assumptions or future events or performance are not historical facts
and are forward-looking statements within the meaning of Section 27A of the     
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange  
Act of 1934, as amended. These statements are often, but not always, made       
through the use of words or phrases such as "will likely result," "expect,"     
"will continue," "anticipate," "estimate," "intend," "plan," "projection,"      
"would" and "outlook." Accordingly, these statements involve estimates,         
assumptions and uncertainties which could cause actual results to differ        
materially from those expressed in them. Any forward-looking statements are     
qualified in their entirety by reference to the factors discussed throughout    
this document. The following cautionary statements identify important factors   
that could cause our actual results to differ materially from those projected in
the forward-looking statements made in this document. Among the key factors that
have a direct bearing on our results of operation are:                          

- general economic and business conditions;                             

- the existence or absence of adverse publicity;                        

- changes in, or failure to comply with, government regulations;        

- changes in marketing and technology;                                  

- changes in political, social and economic conditions, especially with 
respect to our foreign operations;                                  

- competition in the telecommunications industry;                       

- industry capacity;                                                    

- general risks of the telecommunications industries;                   

    - success of acquisition and operating initiatives, including our ability to
successfully integrate our acquisitions;                            

- changes in business strategy or development plans;                    

- management of growth;                                                 

- availability, terms and deployment of capital;                        

- construction schedules;                                               

- costs and other effects of legal and administrative proceedings;      

- dependence on senior management;                                      

- business abilities and judgments of personnel;                        

- availability of qualified personnel; and                              

- labor and employee benefit costs.                                     

These factors and the risk factors referred to above could cause actual 
results or outcomes to differ materially from those expressed in any            
forward-looking statements made by us. You should not place undue reliance on   
any such forward-looking statements. Further, any forward-looking statement     
speaks only as of the date on which it is made and we undertake no obligation to
update any forward-looking                                                      

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statement or statements to reflect events or circumstances after the date on    
which such statement is made or to reflect the occurrence of unanticipated      
events. New factors emerge from time to time, and it is not possible for us to  
predict which will arise. In addition, we cannot assess the impact of each      
factor on our business or the extent to which any factor, or combination of     
factors, may cause actual results to differ materially from those contained in  
any forward-looking statements.                                                 

For a discussion of important risks of an investment in our securities, 
including factors that could cause actual results to differ materially from     
results referred to in the forward-looking statements, see "Risk Factors." You  
should carefully consider the information set forth under the caption "Risk     
Factors." In light of these risks, uncertanities and assumptions, the           
forward-looking events discussed in or incorporated by reference in this        
prospectus might not occur.                                                     

ABOUT THIS PROSPECTUS 

  This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may, 
over the next two years, sell any combination of the securities described in    
this prospectus in one or more offerings up to a total dollar amount of         
$1,500,000,000. In addition, the selling stockholders may, over the next two    
years, sell up to 21,505,376 shares of class A common stock.                    

    This prospectus provides you with a general description of the securities we
or the selling stockholders may offer. Each time we or the selling stockholders 
sell securities, we will provide a prospectus supplement that will contain      
specific information about the terms of that offering. The prospectus supplement
may also add, update or change information contained in this prospectus. You    
should read both this prospectus and any prospectus supplement together with    
additional information described immediately below under the heading "Where You 
Can Find More Information."                                                     

BUSINESS

We are a facilities-based provider of technologically advanced,         
high-bandwidth, fiber optic communications infrastructure to carrier and        
corporate/government customers in the United States and Europe. We have         
installed and intend to install local intracity networks that will consist of in
excess of 2.9 million fiber miles, which is equal to the number of strands of   
fiber in a length of fiber optic cable multiplied by the length of the cable in 
miles, covering approximately 6,941 route miles, which is equal to the number of
miles spanned by fiber optic cable calculated without including physically      
overlapping segments of cable, in 50 metropolitan markets in the United States  
and Europe.                                                                     

We focus on leasing or otherwise making available for use our broadband 
communications infrastructure to two main customer groups: communications       
carriers and corporate/governmental customers. In addition, through our         
subsidiary AboveNet Communications Inc., we are providing facilities-based,     
managed services for customer-owned webservers and related equipment, known as  
co-location, and high performance Internet connectivity solutions for electronic
commerce and other business critical Internet operations. AboveNet has developed
a network architecture based upon strategically located facilities. These       
facilities, known as Internet service exchanges, allow Internet content         
providers direct access to Internet service providers.                          

Our company was founded in 1993 and is a Delaware corporation and its   
executive offices are located at One North Lexington Avenue, White Plains, NY   
10601.                                                                          

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RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

  The following table sets forth our consolidated ratio of earnings to fixed
charges, the deficiency of our consolidated earnings to cover fixed charges, our
consolidated ratio of earnings to combined fixed charges and preferred stock    
dividends and the deficiency of our consolidated earnings to cover combined     
fixed charges and preferred stock dividends for the periods indicated. We have  
no preferred stock outstanding as of October 14, 1999.                          

                                                        [Enlarge/Download Table]

                                                                                              SIX MONTHS     
                                                        YEARS ENDED                              ENDED       
                                                        DECEMBER 31,                           JUNE 30,      
                                    ----------------------------------------------------  -------------------
                                      1994       1995       1996       1997       1998      1998       1999  
                                    --------   --------   --------   --------   --------  --------   --------
                                               (IN THOUSANDS OF DOLLARS, EXCEPT RATIOS)                      
                                                                                                             
Consolidated ratio of earnings to                                                                            
  fixed charges...................      --          --         --         --       1.61        --         -- 
Deficiency of consolidated                                                                                   
  earnings to cover fixed                                                                                    
  charges.........................    $874      $4,319    $10,359    $26,259         --    $2,056    $12,278 
Consolidated ratio of earnings to                                                                            
  combined fixed charges and                                                                                 
  preferred stock dividends.......      --          --         --         --       1.61        --         -- 
Deficiency of consolidated                                                                                   
  earnings to cover combined fixed                                                                           
  charges and preferred stock                                                                                
  dividends.......................    $874      $4,319    $10,359    $26,259         --    $2,056    $12,278 

For purposes of computing the ratios of earnings to fixed charges and   
earnings to combined fixed charges and preferred stock dividends, earnings      
represent income (loss) before income taxes and fixed charges. Fixed charges    
consist of interest expense, the interest component of operating leases and     
amortization of deferred financing costs.                                       

USE OF PROCEEDS 

We will use the net proceeds from our sale of the securities for the    
development, engineering, construction, installation, acquisition, lease,       
development or improvement of our telecommunications assets and for our general 
corporate purposes, which may include, repaying indebtedness, making additions  
to our working capital, funding future acquisitions or for any other purpose we 
describe in the applicable prospectus supplement.                               

We will not receive any of the proceeds from the sale of class A common 
stock or other securities that may be sold by selling stockholders.             

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DESCRIPTION OF DEBT SECURITIES

  The following is a summary of the general terms of the debt securities. We
will file a prospectus supplement that may contain additional terms when we     
issue debt securities. The terms presented here, together with the terms in a   
related prospectus supplement, which could be different from the terms described
below, will be a description of the material terms of the debt securities. You  
should also read the indenture. We have filed the indenture with the SEC as an  
exhibit to the registration statement of which this prospectus is a part. All   
capitalized terms have the meanings specified in the Indenture. The terms and   
provisions of the debt securities below will most likely be modified by the     
documents that set forth the specific terms of the debt securities issued.      

We may issue, from time to time, debt securities, in one or more series,
that will consist of either our senior debt ("Senior Debt Securities"), our     
senior subordinated debt ("Senior Subordinated Debt Securities"), our           
subordinated debt ("Subordinated Debt Securities") or our junior subordinated   
debt ("Junior Subordinated Debt Securities" and, together with the Senior       
Subordinated Debt Securities and the Subordinated Debt Securities, the          
"Subordinated Securities"). The debt securities we offer will be issued under an
indenture between us and the trustee. Debt securities, whether senior, senior   
subordinated, subordinated or junior subordinated, may be issued as convertible 
debt securities or exchangeable debt securities.                                

GENERAL TERMS OF THE INDENTURE                                                  

The indenture does not limit the amount of debt securities that we may  
issue. It provides that we may issue debt securities up to the principal amount 
that we may authorize and may be in any currency or currency unit that we may   
designate. The terms of the indenture do not contain any covenants or other     
provisions designed to give holders of any debt securities protection against   
changes in our operations, financial condition or transactions involving us, but
such provisions may be included in the documents that set forth the specific    
terms of the debt securities.                                                   

We may issue the debt securities issued under the indenture as "discount
securities," which means they may be sold at a discount below their stated      
principal amount. These debt securities, as well as other debt securities that  
are not issued at a discount, may, for United States federal income tax         
purposes, be treated as if they were issued with "original issue discount"      
("OID") because of interest payment and other characteristics. Special United   
States federal income tax considerations applicable to debt securities issued   
with original issue discount will be described in more detail in any applicable 
prospectus supplement.                                                          

    The applicable prospectus supplement for a series of debt securities that we
issue will describe, among other things, the following terms of the offered debt
securities:                                                                     

-  the title;                                                           

-  any limit on the aggregate principal amount;                         

-  whether issued in fully registered form without coupons or in a form 
 registered as to principal only with coupons or in bearer form with
coupons;                                                          

  -  whether issued in the form of one or more global securities and whether
all or a portion of the principal amount of the debt securities is
represented thereby;                                              

-  the price or prices at which the debt securities will be issued;     

-  the date or dates on which principal is payable;                     

  -  the place or places where and the manner in which principal, premium or
interest will be payable and the place or places where the debt   
     securities may be presented for transfer and, if applicable, conversion
or exchange;                                                      

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  -  interest rates, and the dates from which interest, if any, will accrue,
and the dates when interest is payable and the maturity;          

-  the right, if any, to extend the interest payment periods and the    
duration of the extensions;                                       

-  our rights or obligations to redeem or purchase the debt securities; 

-  any sinking fund provisions;                                         

-  conversion or exchange provisions, if any, including conversion or   
exchange prices or rates and adjustments thereto;                 

-  the currency or currencies of payment of principal or interest;      

-  the terms applicable to any debt securities issued at a discount from
their stated principal amount;                                    

 -  the terms, if any, under which any debt securities will rank junior to
any of our other debt;                                            

    -  if the amount of payments of principal or interest is to be determined by
    reference to an index or formula, or based on a coin or currency other
  than that in which the debt securities are stated to be payable, the
     manner in which these amounts are determined and the calculation agent,
if any, with respect thereto;                                     

-  if other than the entire principal amount of the debt securities when
      issued, the portion of the principal amount payable upon acceleration of
maturity as a result of a default on our obligations;             

-  if applicable, covenants affording holders of debt protection against
      changes in our operations, financial condition or transactions involving
us;                                                               

-  if other than dollars, the coin, currency or currencies in which the 
series of debt securities are denominated; and                    

-  any other specific terms of any debt securities.                     

The applicable prospectus supplement will present United States federal 
income tax considerations for holders of any debt securities and the securities 
exchange or quotation system on which any debt securities are listed or quoted. 

SENIOR DEBT SECURITIES                                                          

 Payment of the principal of, premium, if any, and interest on Senior Debt
Securities will rank on a parity with all of our other unsecured and            
unsubordinated debt.                                                            

SENIOR SUBORDINATED DEBT SECURITIES                                             

Payment of the principal of, premium, if any, and interest on Senior    
Subordinated Debt Securities will be junior in right of payment to the prior    
payment in full of all of our unsubordinated debt, including Senior Debt        
Securities. We will state in the applicable prospectus supplement relating to   
any Senior Subordinated Debt Securities the subordination terms of the          
securities as well as the aggregate amount of outstanding debt, as of the most  
recent practicable date, that by its terms would be senior to the Senior        
Subordinated Debt Securities. We will also state in such prospectus supplement  
limitations, if any, on issuance of additional senior debt.                     

SUBORDINATED DEBT SECURITIES                                                    

  Payment of the principal of, premium, if any, and interest on Subordinated
Debt Securities will be subordinated and junior in right of payment to the prior
payment in full of all of our senior debt, including                            

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our senior subordinated debt. We will state in the applicable prospectus        
supplement relating to any Subordinated Debt Securities the subordination terms 
of the securities as well as the aggregate amount of outstanding indebtedness,  
as of the most recent practicable date, that by its terms would be senior to the
Subordinated Debt Securities. We will also state in such prospectus supplement  
limitations, if any, on issuance of additional senior indebtedness.             

JUNIOR SUBORDINATED DEBT SECURITIES                                             

Payment of the principal of, premium, if any, and interest on Junior    
Subordinated Debt Securities will be subordinated and junior in right of payment
to the prior payment in full of all of our senior, senior subordinated and      
subordinated debt. We will state in the applicable prospectus supplement        
relating to any Junior Subordinated Debt Securities the subordination terms of  
the securities as well as the aggregate amount of outstanding debt, as of the   
most recent practicable date, that by its terms would be senior to the Junior   
Subordinated Debt Securities. We will also state in such prospectus supplement  
limitations, if any, on issuance of additional senior indebtedness.             

CONVERSION OR EXCHANGE RIGHTS                                                   

 Debt securities may be convertible into or exchangeable for shares of our
equity securities or equity securities of our subsidiaries or affiliates. The   
terms and conditions of conversion or exchange will be stated in the applicable 
prospectus supplement. The terms will include, among others, the following:     

-  the conversion or exchange price;                                    

-  the conversion or exchange period;                                   

 -  provisions regarding the convertibility or exchangeability of the debt
securities, including who may convert or exchange;                

-  events requiring adjustment to the conversion or exchange price;     

-  provisions affecting conversion or exchange in the event of our      
redemption of the debt securities; and                            

-  any anti-dilution provisions, if applicable.                         

EVENTS OF DEFAULT                                                               

   Unless otherwise provided for in the prospectus supplement, the term "Event
of Default," when used in the indenture, unless otherwise indicated, means any  
of the following:                                                               

-  failure to pay interest for 30 days after the date payment is due and
payable; provided that if we extend an interest payment period in 
      accordance with the terms of the debt securities, the extension will not
be a failure to pay interest;                                     

 -  failure to pay principal or premium, if any, on any debt security when
due, either at maturity, upon any redemption, by declaration or   
otherwise;                                                        

-  failure to make sinking fund payments when due;                      

-  failure to perform other covenants for 60 days after notice that     
performance was required;                                         

-  events in bankruptcy, insolvency or reorganization of our company; or

  -  any other Event of Default provided in the applicable resolution of our
       Board or the supplemental indenture under which we issue a series of debt
securities.                                                       

An Event of Default for a particular series of debt securities does not 
necessarily constitute an Event of Default for any other series of debt         
securities issued under the indenture. IF AN EVENT OF DEFAULT RELATING          

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TO THE PAYMENT OF INTEREST, PRINCIPAL OR ANY SINKING FUND INSTALLMENT INVOLVING 
ANY SERIES OF DEBT SECURITIES HAS OCCURRED AND IS CONTINUING, THE TRUSTEE OR THE
HOLDERS OF NOT LESS THAN 25% IN AGGREGATE PRINCIPAL AMOUNT OF THE DEBT          
SECURITIES OF EACH AFFECTED SERIES MAY DECLARE THE ENTIRE PRINCIPAL OF ALL THE  
DEBT SECURITIES OF THAT SERIES TO BE DUE AND PAYABLE IMMEDIATELY.               

    If an Event of Default relating to the performance of other covenants occurs
and is continuing for a period of 60 days after notice of such, or if any other 
Event of Default occurs and is continuing involving all of the series of Senior 
Debt Securities, then the trustee or the holders of not less than 25% in        
aggregate principal amount of all of the series of Senior Debt Securities may   
declare the entire principal amount of all of the series of Senior Debt         
Securities due and payable immediately.                                         

Similarly, if an Event of Default relating to the performance of other  
covenants occurs and is continuing for a period of 60 days after notice of such,
or if any other Event of Default occurs and is continuing involving all of the  
series of Subordinated Securities, then the trustee or the holders of not less  
than 25% in aggregate principal amount of all of the series of Subordinated     
Securities may declare the entire principal amount of all of the series of      
Subordinated Securities due and payable immediately.                            

If, however, the Event of Default relating to the performance of other  
covenants or any other Event of Default that has occurred and is continuing is  
for less than all of the series of Senior Debt Securities or Subordinated       
Securities, as the case may be, then, the trustee or the holders of not less    
than 25% in aggregate principal amount of each affected series of the Senior    
Debt Securities or the Subordinated Securities, as the case may be, may declare 
the entire principal amount of all debt securities of such affected series due  
and payable immediately. The holders of not less than a majority, or any        
applicable supermajority, in aggregate principal amount of the debt securities  
of a series may, after satisfying conditions, rescind and annul any of the      
above-described declarations and consequences involving the series.             

If an Event of Default relating to events in bankruptcy, insolvency or  
reorganization of our company occurs and is continuing, then the principal      
amount of all of the debt securities outstanding, and any accrued interest, will
automatically become due and payable immediately, without any declaration or    
other act by the trustee or any holder.                                         

The indenture imposes limitations on suits brought by holders of debt   
securities against us. Except for actions for payment of overdue principal or   
interest, no holder of debt securities of any series may institute any action   
against us under the indenture unless:                                          

   -  the holder has previously given to the trustee written notice of default
and continuance of such default,                                  

  -  the holders of at least 25% in principal amount of the outstanding debt
securities of the affected series have requested that the trustee 
institute the action,                                             

   -  the requesting holders have offered the trustee reasonable indemnity for
   expenses and liabilities that may be incurred by bringing the action,

   -  the trustee has not instituted the action within 60 days of the request,
and                                                               

  -  the trustee has not received inconsistent direction by the holders of a
    majority in principal amount of the outstanding debt securities of the
series.                                                           

   We will be required to file annually with the trustee a certificate, signed
by an officer of our company, stating whether or not the officer knows of any   
default by us in the performance, observance or fulfillment of any condition or 
covenant of the indenture.                                                      

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REGISTERED GLOBAL SECURITIES                                                    

    We may issue the debt securities of a series in whole or in part in the form
of one or more fully registered global securities. We will deposit any          
registered global securities with a depositary or with a nominee for a          
depositary identified in the applicable prospectus supplement and registered in 
the name of such depositary or nominee. In such case, we will issue one or more 
registered global securities denominated in an amount equal to the aggregate    
principal amount of all of the debt securities of the series to be issued and   
represented by such registered global security or securities.                   

   Unless and until it is exchanged in whole or in part for debt securities in
definitive registered form, a registered global security may not be transferred 
except as a whole:                                                              

-  by the depositary for such registered global security to its nominee,

 -  by a nominee of the depositary to the depositary or another nominee of
the depositary, or                                                

 -  by the depositary or its nominee to a successor of the depositary or a
nominee of the successor.                                         

The prospectus supplement relating to a series of debt securities will  
describe the specific terms of the depositary arrangement involving any portion 
of the series represented by a registered global security.                      

We anticipate that the following provisions will apply to all depositary
arrangements for debt securities:                                               

    -  ownership of beneficial interests in a registered global security will be
limited to persons that have accounts with the depositary for such
registered global security, these persons being referred to as    
      "participants," or persons that may hold interests through participants;

    -  upon the issuance of a registered global security, the depositary for the
    registered global security will credit, on its book-entry registration
 and transfer system, the participants' accounts with the respective
    principal amounts of the debt securities represented by the registered
global security beneficially owned by the participants;           

    -  any dealers, underwriters, or agents participating in the distribution of
 the debt securities will designate the accounts to be credited; and

   -  ownership of beneficial interest in such registered global security will
       be shown on, and the transfer of such ownership interest will be effected
    only through, records maintained by the depositary for such registered
  global security for interests of participants, and on the records of
 participants for interests of persons holding through participants.

   The laws of some states may require that specified purchasers of securities
take physical delivery of the securities in definitive form. These laws may     
limit the ability of those persons to own, transfer or pledge beneficial        
interests in registered global securities.                                      

   So long as the depositary for a registered global security, or its nominee,
is the registered owner of such registered global security, the depositary or   
such nominee, as the case may be, will be considered the sole owner or holder of
the debt securities represented by the registered global security for all       
purposes under the indenture. Except as stated below, owners of beneficial      
interests in a registered global security:                                      

-  will not be entitled to have the debt securities represented by a    
registered global security registered in their names,             

   -  will not receive or be entitled to receive physical delivery of the debt
securities in the definitive form, and                            

    -  will not be considered the owners or holders of the debt securities under
the Indenture.                                                    

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    Accordingly, each person owning a beneficial interest in a registered global
security must rely on the procedures of the depositary for the registered global
security and, if the person is not a participant, on the procedures of a        
participant through which the person owns its interest, to exercise any rights  
of a holder under the indenture.                                                

We understand that under existing industry practices, if we request any 
action of holders or if an owner of a beneficial interest in a registered global
security desires to give or take any action that a holder is entitled to give or
take under the indenture, the depositary for the registered global security     
would authorize the participants holding the relevant beneficial interests to   
give or take the action, and the participants would authorize beneficial owners 
owning through the participants to give or take the action or would otherwise   
act upon the instructions of beneficial owners holding through them.            

We will make payments of principal and premium, if any, and interest, if
any, on debt securities represented by a registered global security registered  
in the name of a depositary or its nominee to the depositary or its nominee, as 
the case may be, as the registered owners of the registered global security.    
None of our company, the trustee or any other agent of our company or the       
trustee will be responsible or liable for any aspect of the records relating to,
or payments made on account of, beneficial ownership interests in the registered
global security or for maintaining, supervising or reviewing any records        
relating to the beneficial ownership interests.                                 

We expect that the depositary for any debt securities represented by a  
registered global security, upon receipt of any payments of principal and       
premium, if any, and interest, if any, in respect of the registered global      
security, will immediately credit participants' accounts with payments in       
amounts proportionate to their respective beneficial interests in the registered
global security as shown on the records of the depositary. We also expect that  
standing customer instructions and customary practices will govern payments by  
participants to owners of beneficial interests in the registered global security
held through the participants, as is now the case with the securities held for  
the accounts of customers in bearer form or registered in "street name." We also
expect that any of these payments will be the responsibility of the             
participants.                                                                   

    If the depositary for any debt securities represented by a registered global
security is at any time unwilling or unable to continue as depositary or stops  
being a clearing agency registered under the Exchange Act, we will appoint an   
eligible successor depositary. If we fail to appoint an eligible successor      
depositary within 90 days, we will issue the debt securities in definitive form 
in exchange for the registered global security. In addition, we may at any time 
and in our sole discretion decide not to have any of the debt securities of a   
series represented by one or more registered global securities. In that event,we
will issue debt securities of the series in a definitive form in exchange for   
all of the registered global securities representing the debt securities. The   
trustee will register any debt securities issued in definitive form in exchange 
for a registered global security in the name or names as the depositary, based  
upon instructions from its participants, shall instruct the trustee.            

  We may also issue bearer debt securities of a series in the form of one or
more global securities, referred to as "bearer global securities." We will      
deposit these securities with a common depositary for Euroclear System and      
CedelBank, SOCIETE ANONYME, or with a nominee for the depositary identified in  
the prospectus supplement relating to the series. The prospectus supplement     
relating to a series of debt securities represented by a bearer global security 
will describe the applicable terms and procedures. These will include the       
specific terms of the depositary arrangement and any specific procedures for the
issuance of debt securities in definitive form in exchange for a bearer global  
security, in proportion to the series represented by a bearer global security.  

DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE                                   

 We can discharge or defease our obligations under the indenture as stated
below or as provided in the prospectus supplement.                              

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 Unless otherwise provided in the applicable prospectus supplement, we may
discharge obligations to holders of any series of debt securities that have not 
already been delivered to the trustee for cancellation and that have either     
become due and payable or are by their terms to become due and payable, or are  
scheduled for redemption, within one year. We may effect a discharge by         
irrevocably depositing with the trustee cash or U.S. government obligations, as 
trust funds, in an amount certified to be enough to pay when due, whether at    
maturity, upon redemption or otherwise, the principal of, premium, if any, and  
interest on the debt securities and any mandatory sinking fund payments.        

 Unless otherwise provided in the applicable prospectus supplement, we may
also discharge any and all of our obligations to holders of any series of debt  
securities at any time ("defeasance"). We may also be released from the         
obligations imposed by any covenants of any outstanding series of debt          
securities and provisions of the indenture, and we may omit to comply with those
covenants without creating an event of default under the trust declaration      
("covenant defeasance"). We may effect defeasance and covenant defeasance only  
if, among other things:                                                         

-  we irrevocably deposit with the trustee cash or U.S. government      
     obligations, as trust funds, in an amount certified to be enough to pay
  at maturity, or upon redemption, the principal, premium, if any, and
interest on all outstanding debt securities of the series;        

-  we deliver to the trustee an opinion of counsel from a nationally    
recognized law firm to the effect that (i) in the case of covenant
defeasance, the holders of the series of debt securities will not 
      recognize income, gain or loss for U.S. federal income tax purposes as a
      result of such defeasance, and will be subject to tax in the same manner
 and at the same times as if no covenant defeasance had occurred and
    (ii) in the case of defeasance, either we have received from, or there
       has been published by, the Internal Revenue Service a ruling or there has
been a change in applicable U.S. federal income tax law, and based
      thereon, the holders of the series of debt securities will not recognize
      income, gain or loss for U.S. federal income tax purposes as a result of
     such defeasance, and will be subject to tax in the same manner as if no
defeasance had occurred; and                                      

   -  in the case of subordinated debt securities, no event or condition shall
 exist that, based on the subordination provisions applicable to the
     series, would prevent us from making payments of principal of, premium,
if any, and interest on any of the applicable subordinated debt   
       securities at the date of the irrevocable deposit referred to above or at
       any time during the period ending on the 91st day after the deposit date.

    Although we may discharge or decrease our obligations under the indenture as
described in the two preceding paragraphs, we may not avoid, among other things,
our duty to register the transfer or exchange of any series of debt securities, 
to replace any temporary, mutilated, destroyed, lost or stolen series of debt   
securities or to maintain an office or agency in respect of any series of debt  
securities.                                                                     

MODIFICATION OF THE INDENTURE                                                   

    Except as provided in the prospectus supplement, the indenture provides that
we and the trustee may enter into supplemental indentures without the consent of
the holders of debt securities to:                                              

-  secure any debt securities,                                          

 -  evidence the assumption by a successor corporation of our obligations,

-  add covenants for the protection of the holders of debt securities,  

-  cure any ambiguity or correct any inconsistency in the Indenture,    

-  establish the forms or terms of debt securities of any series, and   

-  evidence and provide for the acceptance of appointment by a successor
trustee.                                                          

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    The indenture also provides that we and the trustee may, with the consent of
the holders of not less than a majority in aggregate principal amount of debt   
securities of all series of Senior Debt Securities or of Subordinated           
Securities, as the case may be, then outstanding and affected, voting as one    
class, add any provisions to, or change in any manner, eliminate or modify in   
any way the provisions of, the indenture or modify in any manner the rights of  
the holders of the debt securities. We and the trustee may not, however, without
the consent of the holder of each outstanding debt security affected thereby:   

-  extend the final maturity of any debt security;                      

-  reduce the principal amount or premium, if any;                      

-  reduce the rate or extend the time of payment of interest;           

-  reduce any amount payable on redemption;                             

    -  change the currency in which the principal, unless otherwise provided for
a series, premium, if any, or interest is payable;                

 -  reduce the amount of the principal of any debt security issued with an
      original issue discount that is payable upon acceleration or provable in
bankruptcy;                                                       

   -  impair the right to institute suit for the enforcement of any payment on
any debt security when due; or                                    

  -  reduce the percentage of holders of debt securities of any series whose
consent is required for any modification of the indenture.        

CONCERNING THE TRUSTEE                                                          

The indenture provides that there may be more than one trustee under the
indenture, each for one or more series of debt securities. If there are         
different trustees for different series of debt securities, each trustee will be
a trustee of a Trust under the indenture separate and apart from the trust      
administered by any other trustee under the indenture. Except as otherwise      
indicated in this prospectus or any prospectus supplement, any action permitted 
to be taken by a trustee may be taken by such trustee only on the one or more   
series of debt securities for which it is the trustee under the indenture. Any  
trustee under the indenture may resign or be removed from one or more series of 
debt securities. All payments of principal of, premium, if any, and interest on,
and all registration, transfer, exchange, authentication and delivery of, the   
debt securities of a series will be effected by the trustee for such series at  
an office designated by such trustee in New York, New York.                     

If the trustee becomes a creditor of our company, the indenture places  
limitations on the right of the trustee to obtain payment of claims or to       
realize on property received in respect of any such claim as security or        
otherwise. The trustee may engage in other transactions. If it acquires any     
conflicting interest relating to any duties concerning the debt securities,     
however, it must eliminate the conflict or resign as trustee.                   

The holders of a majority in aggregate principal amount of any series of
debt securities then outstanding will have the right to direct the time, method 
and place of conducting any proceeding for exercising any remedy available to   
the trustee concerning the applicable series of debt securities, provided that  
the direction:                                                                  

-  would not conflict with any rule of law or with the indenture,       

 -  would not be unduly prejudicial to the rights of another holder of the
debt securities, and                                              

-  would not involve any trustee in personal liability.                 

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   The indenture provides that in case an Event of Default shall occur, not be
cured and be known to any trustee, the trustee must use the same degree of care 
as a prudent person would use in the conduct of his or her own affairs in the   
exercise of the Trust's power. The trustee will be under no obligation to       
exercise any of its rights or powers under the indenture at the request of any  
of the holders of the debt securities, unless they shall have offered to the    
trustee security and indemnity satisfactory to the trustee.                     

NO INDIVIDUAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS OR DIRECTORS   

  The indenture provides that no incorporator and no past, present or future
shareholder, officer or director of our company or any successor corporation in 
their capacity as such shall have any individual liability for any of our       
obligations, covenants or agreements under the debt securities or the indenture.

GOVERNING LAW                                                                   

   The indenture and the debt securities will be governed by, and construed in
accordance with, the laws of the State of New York.                             

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DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 2,404,031,240 shares of class A
common stock, par value $.01 per share, 522,254,782 shares of class B common    
stock, par value $.01 per share, and 20,000,000 shares of preferred stock, par  
value $.01 per share. As of October 4, 1999 there were 198,835,335 shares of    
class A common stock outstanding, 33,769,272 shares of class B common stock     
outstanding and no shares of preferred stock outstanding.                       

COMMON STOCK                                                                    

    The shares of class A common stock and class B common stock are identical in
all respects, except for different voting rights described below and conversion 
rights and restrictions on transfer applicable only to the class B common stock 
that we also describe below.                                                    

    VOTING RIGHTS.  The holders of class A common stock are entitled to one vote
per share. Holders of class B common stock are entitled to ten votes per share. 
Holders of all classes of common stock are entitled to vote together as a single
class on all matters presented to our stockholders for their vote or approval   
except for the election and the removal of directors and as otherwise required  
by applicable law. With respect to the election of directors, our amended and   
restated certificate of incorporation provides that holders of class B common   
stock vote as a separate class to elect at least 75% of the members of our      
board.                                                                          

   Directors may be removed, with or without cause, only by the holders of the
class of common stock or series of preferred stock that, as of the date such    
removal is effected, would be entitled to elect such director at the next annual
meeting of stockholders. Vacancies in a directorship may be filled only by      

  - the remaining directors elected by holders of each class of common stock
      or series of preferred stock that elected such director and as of the date
   such vacancy is filled, would be entitled to elect such director at the
next annual meeting of the stockholders; or                         

   - if there are no such remaining directors, then by the vote of the holders
 of the class or classes of common stock or series of preferred stock,
   that, as of the date such vacancy is filled, would be entitled to elect
 such director at the next annual meeting of stockholders, voting as a
separate class at a meeting, special or otherwise, of the holders of
common stock of such class or series of preferred stock.            

    DIVIDENDS.  Holders of class A common stock and the class B common stock are
entitled to receive dividends at the same rate if, as and when such dividends   
are declared by our board out of assets legally available therefor after payment
of dividends required to be paid on shares of outstanding preferred stock. We   
may not make any dividend or distribution to any holder of any class of common  
stock unless simultaneously with such dividend or distribution we make the same 
dividend or distribution with respect to each outstanding share of common stock 
regardless of class. In the case of a dividend or other distribution payable in 
shares of class of common stock, including distributions pursuant to stock      
splits or divisions of common stock, only shares of class A common stock may be 
distributed with respect to class A common stock and only shares of class B     
common stock may be distributed with respect to class B common stock. Whenever a
dividend or distribution, including distributions pursuant to stock splits or   
divisions of the common stock, is payable in shares of a class of common stock, 
the number of shares of each class of common stock payable per share of such    
class of common stock will be equal in number. In the case of dividends or other
distributions consisting of our other voting securities or of voting securities 
of any corporation which is our wholly-owned subsidiary, we will declare and pay
such dividends in two separate classes of such voting securities, identical in  
all respects except that:                                                       

    - the voting rights of each security issued to the holders of class A common
   stock will be one-tenth of the voting rights of each security issued to
holders of class B common stock;                                    

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   - such security issued to holders of class B common stock will convert into
   the security issued to the holders of class A common stock into class A
      common stock and will have the same restrictions on transfer and ownership
     applicable to the transfer and ownership of the class B common stock; and

    - with respect only to dividends or other distributions of voting securities
   of any corporation which is our wholly owned subsidiary, the respective
voting rights of each such security issued to holders of the class A
common stock and class B common stock with respect to election of   
    directors shall otherwise be as comparable as is practicable to those of
the class A common stock and class B common stock.                  

In the case of dividends or other distributions consisting of securities
convertible into, or exchangeable for, our voting securities or of voting       
securities of any corporation which is our wholly owned subsidiary, we will     
provide that such convertible or exchangeable securities and the underlying     
securities be identical in all respects (including, without limitation, the     
conversion or exchange rate) except that the underlying securities may have the 
same difference as they would have if we issued voting securities of our wholly 
owned subsidiary rather than issuing securities convertible into or exchangeable
for, such securities. We do not anticipate paying cash dividends in the         
foreseeable future.                                                             

    RESTRICTIONS ON ADDITIONAL ISSUANCES AND TRANSFER.  We may not issue or sell
any shares of class B common stock or any securities (including, without        
limitation, any rights, options, warrants or other securities) convertible into,
or exchangeable or exercisable for, shares of class B common stock to any person
or entity other than to Metromedia Company, John W. Kluge and Stuart Subotnick, 
their affiliates, relatives and other permitted holders that are controlled by  
these persons. Additionally, shares of class B common stock may not be          
transferred, whether by sale, assignment, gift, bequest, appointment or         
otherwise, to a person other than to a permitted holder. Notwithstanding the    
foregoing:                                                                      

  - any permitted holder may pledge his, her or its shares of class B common
   stock to a financial institution pursuant to a bona fide pledge of such
     shares as collateral security for indebtedness due to the pledgee as long
   as such shares remain subject to the transfer restrictions and that, in
 the event of foreclosure or other similar action by the pledgee, such
pledged shares of class B common stock may only be transferred to a 
     permitted holder or converted into shares of class A common stock, as the
pledgee may elect; and                                              

   - the foregoing transfer restrictions do not apply in the case of a merger,
consolidation or business combination of us with or into another    
  corporation in which all of the outstanding shares of common stock and
preferred stock regardless of class are purchased by the acquiror.  

CONVERSION.  Class A common stock has no conversion rights. Shares of   
class B common stock are convertible into class A common stock, in whole or in  
part, at any time and from time to time at the option of the holders, on the    
basis of one share of class A common stock for each share of class B common     
stock converted. Additionally, at such time as a person ceased to be a permitted
holder, any share of class B common stock held by such person at such time shall
convert into a share of class A common stock. We agree that:                    

   - we will at all times reserve and keep available out of our authorized but
     unissued shares of class A common stock, such number of shares of class A
  common stock issuable upon the conversion of all outstanding shares of
class B common stock;                                               

   - we will cause any shares of class A common stock issuable upon conversion
of a share of class B common stock that require registration with or
    approval of any governmental authority under federal or state law before
      such shares may be issued upon conversion to be so registered or approved;
and                                                                 

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 - we will use our best efforts to list the shares of class A common stock
     required to be delivered upon conversion prior to such delivery upon such
  national securities exchange upon which the outstanding class A common
stock is listed at the time of such delivery.                       

 RECLASSIFICATION AND MERGER.  In the event of a reclassification or other
similar transaction as a result of which the shares of class A common stock are 
converted into another security, then a holder of class B common stock will be  
entitled to receive upon conversion the amount of such other securities that the
holder would have received if the conversion occurred immediately prior to the  
record date of such reclassification or other similar transaction. No           
adjustments in respect of dividends will be made upon the conversion of any     
share of class B common stock. If a share is converted subsequent to the record 
date for the payment of a dividend or other distribution on shares of class B   
common stock but prior to such payment, then the registered holder of such share
at the close of business on such record date will be entitled to receive the    
dividend or other distribution payable on such date regardless of the conversion
thereof or our default in payment of the dividend due on such date.             

  In the event we enter into any consolidation, merger, combination or other
transaction in which shares of common stock are exchanged for or changed into   
other stock or securities, cash and/or any other property, then, and in such    
event, the shares of each class of common stock will be exchanged for or changed
into either:                                                                    

  - the same amount of stock, securities, cash and/or any other property, as
     the case may be, into which or for which each share of any other class of
  common stock is exchanged for or changed into shares of capital stock,
      such shares so exchanged for or changed into may differ only to the extent
that the class A common stock and the class B common stock differ as
 provided in our amended and restated certificate of incorporation; or

- if holders of each class of common stock are to receive different     
  distributions of stock, securities, cash and/or any other property, an
      amount of stock, securities, cash and/or property per share having a value
as determined by an independent investment banking firm of national 
 reputation selected by the board of directors, equal to the value per
 share into which or for which each share of any other class of common
stock is exchanged or changed.                                      

 LIQUIDATION.  In the event of our liquidation, after payment of our debts
and other liabilities and after making provision for the holders of preferred   
stock, if any, our remaining assets will be distributable ratably among the     
holders of the class A common stock and class B common stock treated as a single
class.                                                                          

OTHER PROVISIONS.  Except as described below, the holders of the class A
common stock and class B common stock are not entitled to preemptive rights.    
None of the class A common stock or class B common stock may be subdivided or   
combined in any manner unless the other classes are subdivided or combined in   
the same proportion. We may not make any offering of options, rights or warrants
to subscribe for shares of class B common stock. If we make an offering of      
options, rights or warrants to subscribe for shares of any other class or       
classes of capital stock (other than class B common stock) to all holders of a  
class of common stock, then we are required to simultaneously make an identical 
offering to all holders of the other classes of common stock other than to any  
class the holders of which, voting as a separate class, agrees that such        
offerings need not be made to such class. All such options, rights or warrants  
offerings will offer the respective holders of class A common stock and class B 
common stock the right to subscribe at the same rate per share. All outstanding 
shares of common stock are, and all shares of common stock offered hereby when  
issued will be upon payment therefor, validly issued, fully paid and            
nonassessable.                                                                  

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PREFERRED STOCK                                                                 

   The board has the authority, without any further action by our stockholders
to issue from time to time shares of preferred stock in one or more series and  
to fix the designations, preferences, rights, qualifications, limitations and   
restrictions thereof, including voting rights, dividend rights, dividend rates, 
conversion rights, terms of redemption, redemption prices, liquidation          
preferences and the number of shares constituting any series. The issuance of   
preferred stock with voting rights could have an adverse effect on the voting   
power of holders of common stock by increasing the number of outstanding shares 
having voting rights. In addition, if the board authorizes preferred stock with 
conversion rights, the number of shares of common stock outstanding could       
potentially be increased up to the authorized amount. The issuance of preferred 
stock could decrease the amount of earnings and assets available for            
distribution to holders of common stock. Any such issuance could also have the  
effect of delaying, deterring or preventing a change in control of the company  
and may adversely affect the rights of holders of common stock.                 

CERTIFICATE OF INCORPORATION AND BY-LAWS                                        

Stockholders' rights and related matters are governed by the Delaware   
General Corporation Law, and our certificate of incorporation and the by-laws.  
Certain provisions of our certificate of incorporation and by-laws, which are   
summarized below, may have the effect, either alone or in combination with each 
other, of discouraging or making more difficult a tender offer or takeover      
attempt that is opposed by our board of directors but that a stockholder might  
consider to be in its best interest. Such provisions may also adversely affect  
prevailing market prices for the common stock. We believe that such provisions  
are necessary to enable us to develop our business in a manner that will foster 
our long-term growth without disruption caused by the threat of a takeover not  
deemed by our board of directors to be in our best interests and those of our   
stockholders.                                                                   

  ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS

 Our by-laws establish advance notice procedures for stockholder proposals
and the nomination, other than by or at the direction of the board of directors,
of candidates for election as directors. These procedures provide that the      
notice of stockholder proposals and stockholder nominations for the election of 
directors at an annual meeting must be in writing and received by our secretary 
at least 60 days but not more than 90 days prior to the scheduled date of the   
annual meeting. However, if public disclosure of our annual meeting date is made
less than 70 days before the annual meeting, notice by a stockholder will be    
considered timely if it is delivered not later than the 10th day following the  
earlier of (i) the day on which public disclosure of the date of the annual     
meeting was made or (ii) the day on which such notice of the date of the meeting
was mailed. The notice of nominations for the election of directors must set    
forth certain information concerning the stockholder giving the notice and each 
nominee.                                                                        

    By requiring advance notice of nominations by stockholders, these procedures
will afford our board of directors an opportunity to consider the qualifications
of the proposed nominees and, to the extent deemed necessary or desirable by the
board of directors, to inform stockholders about these qualifications. By       
requiring advance notice of other proposed business, these procedures will      
provide our board of directors with an opportunity to inform stockholders of any
business proposed to be conducted at a meeting, together with any               
recommendations as to the board of directors' position on action to be taken on 
such business. This should allow stockholders to better decide whether to attend
a meeting or to grant a proxy for the disposition of any such business.         

DILUTION                                                                    

Our certificate of incorporation provides that our board of directors is
authorized to create and issue, whether or not in connection with the issuance  
and sale of any of its stock or other securities or property, rights entitling  
the holders to purchase from us shares of stock or other securities of us or of 
any other                                                                       

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corporation. Our board of directors is authorized to issue these rights even    
though the creation and issuance of these rights could have the effect of       
discouraging third parties from seeking, or impairing their right to seek, to:  

(1) acquire a significant portion of our outstanding securities;        

  (2) engage in any transaction which might result in a change of control of
the corporation; or                                               

(3) enter into any agreement, arrangement or understanding with another 
     party to accomplish these transactions or for the purpose of acquiring,
holding, voting or disposing of any of our securities.            

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW                             

Section 203 of the Delaware General Corporation Law prohibits certain   
transactions between a Delaware corporation and an "interested stockholder",    
which is defined as a person who, together with any affiliates and/or associates
of such person, beneficially owns, directly or indirectly, 15% or more of the   
outstanding voting shares of a Delaware corporation. This provision prohibits   
certain business combinations between an interested stockholder and a           
corporation for a period of three years after the date the interested           
stockholder acquired its stock, unless:                                         

- the business combination is approved by the corporation's board of    
   directors prior to the date the interested stockholder acquired shares;

 - the interested stockholder acquired at least 85% of the voting stock of
the corporation in the transaction in which it became an interested 
stockholder; or                                                     

- the business combination is approved by a majority of the board of    
  directors and by the affirmative vote of two-thirds of the outstanding
    voting stock owned by disinterested stockholders at an annual or special
meeting.                                                            

A business combination is defined broadly to include mergers,           
consolidations, sales or other dispositions of assets having an aggregate value 
of 10% or more of the consolidated assets of the corporation, and certain       
transactions that would increase the interested stockholder's proportionate     
share ownership in the corporation. A Delaware corporation, under a provision in
its certificate of incorporation or by-laws, may elect not to be governed by    
Section 203 of the Delaware General Corporation Law. We are subject to the      
restrictions imposed by Section 203.                                            

Under certain circumstances, Section 203 makes it more difficult for a  
person who could be an "interested stockholder" to effect various business      
combinations with a corporation for a three-year period, although the           
stockholders may elect to exclude a corporation from the restrictions imposed   
thereunder. Our certificate of incorporation does not exclude us from the       
restrictions imposed under Section 203 of the Delaware General Corporation Law. 
It is anticipated that the provisions of Section 203 of the Delaware General    
Corporation Law may encourage companies interested in acquiring us to negotiate 
in advance with the board of directors, since the stockholder approval          
requirement would be avoided if a majority of the directors then in office      
approves, prior to the date on which a stockholder becomes an interested        
stockholder, either the business combination or the transaction which results in
the stockholder becoming an interested stockholder. Mr. Stephen Garafalo and    
Metromedia Company are interested stockholders under the Delaware General       
Corporation Law. However since their acquisition of our securities was approved 
in advance by our board, they would not be prohibited from engaging in a        
business transaction with us.                                                   

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LIMITATIONS OF DIRECTORS' LIABILITY                                             

    Our certificate of incorporation provides that none of our directors will be
personally liable to us or our stockholders for monetary damages for breach of  
fiduciary duty as a director except for liability:                              

- for any breach of the director's duty of loyalty to us or our         
stockholders,                                                       

- for acts of omissions not in good faith or which involve intentional  
misconduct or a knowing violation of law,                           

- under Section 174 of the Delaware General Corporation Law, or         

  - for any transaction from which the director derived an improper personal
benefit.                                                            

The effect of these provisions will be to eliminate our rights and our  
stockholders (through stockholders' derivatives suits on behalf of us) to       
recover monetary damages against a director for breach of fiduciary duty as a   
director (including breaches resulting from grossly negligent behavior), except 
in the situations described above. These provisions will not limit the liability
of directors under federal securities laws and will not affect the availability 
of equitable remedies such as an injunction or rescission based upon a          
director's breach of his duty of care.                                          

TRANSFER AGENT                                                                  

    The Transfer Agent and Registrar for our class A common stock is ChaseMellon
Shareholder Services, L.L.C.                                                    

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DESCRIPTION OF WARRANTS 

  We may issue warrants for the purchase of debt securities, preferred stock
or common stock. Warrants may be issued independently or together with debt     
securities, preferred stock or common stock offered by any prospectus supplement
and may be attached to or separate from any such offered securities. Each series
of warrants will be issued under a separate warrant agreement to be entered into
between us and a bank or trust company, as warrant agent. The warrant agent will
act solely as our agent in connection with the warrants and will not assume any 
obligation or relationship of agency or trust for or with any holders or        
beneficial owners of warrants. The following summary of certain provisions of   
the warrants does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the provisions of the warrant agreement that will 
be filed with the SEC in connection with the offering of such warrants.         

DEBT WARRANTS                                                                   

 The prospectus supplement relating to a particular issue of debt warrants
will describe the terms of the debt warrants, including the following: (a) the  
title of the debt warrants; (b) the offering price for the debt warrants, if    
any; (c) the aggregate number of the debt warrants; (d) the designation and     
terms of the debt securities purchasable upon exercise of the debt warrants;    
(e) if applicable, the designation and terms of the debt securities with which  
the debt warrants are issued and the number of such debt warrants issued with   
each debt security; (f) if applicable, the date from and after which the debt   
warrants and any debt securities issued therewith will be separately            
transferable; (g) the principal amount of debt securities purchasable upon      
exercise of a debt warrant and the price at which the principal amount of debt  
securities may be purchased upon exercise (which price may be payable in cash,  
securities, or other property); (h) the date on which the right to exercise the 
debt warrants shall commence and the date on which the right shall expire;      
(i) if applicable, the minimum or maximum amount of the debt warrants that may  
be exercised at any one time; (j) whether the debt warrants represented by the  
debt warrant certificates or debt securities that may be issued upon exercise of
the debt warrants will be issued in registered or bearer form; (k) information  
with respect to book-entry procedures, if any; (1) the currency or currency     
units in which the offering price, if any, and the exercise price are payable;  
(m) if applicable, a discussion of material United States federal income tax    
considerations; (n) the antidilution provisions of the debt warrants, if any;   
(o) the redemption or call provisions, if any, applicable to such debt warrants;
and (p) any additional terms of the debt warrants, including terms, procedures, 
and limitations relating to the exchange and exercise of the debt warrants.     

STOCK WARRANTS                                                                  

The prospectus supplement relating to any particular issue of preferred 
stock warrants or common stock warrants will describe the terms of the warrants,
including the following: (a) the title of the warrants; (b) the offering price  
for the warrants, if any; (c) the aggregate number of the warrants; (d) the     
designation and terms of the common stock or preferred stock purchasable upon   
exercise of the warrants; (e) if applicable, the designation and terms of the   
offered securities with which the warrants are issued and the number of the     
warrants issued with each such offered security; (f) if applicable, the date    
from and after which the warrants and any offered securities issued therewith   
will be separately transferable; (g) the number of shares of common stock or    
preferred stock purchasable upon exercise of a warrant and the price at which   
the shares may be purchased upon exercise; (h) the date on which the right to   
exercise the warrants shall commence and the date on which the right shall      
expire; (i) if applicable, the minimum or maximum amount of the warrants that   
may be exercised at any one time; (j) the currency or currency units in which   
the offering price, if any, and the exercise price are payable, (k) if          
applicable, a discussion of material United States federal income tax           
considerations; (l) the antidilution provisions of the warrants, if any;        
(m) the redemption or call provisions, if any, applicable to such warrants; and 
(n) any additional terms of the warrants, including terms, procedures and       
limitations relating to the exchange and exercise of the warrants.              

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SELLING STOCKHOLDERS

 The selling stockholders may be our directors, executive officers, former
directors, employees or certain holders of our common stock, including          
Metromedia Company and its general partners. The prospectus supplement for any  
offering of the common stock by selling stockholders will include the following 
information:                                                                    

- the names of the selling stockholders;                                

  - the nature of any position, office, or other material relationship which
      the selling stockholder has had within the last three years with us or any
of our predecessors or affiliates;                                  

  - the number of shares held by each of the selling stockholders before the
offering;                                                           

- the percentage of the common stock held by each of the selling        
stockholders after the offering; and                                

 - the number of shares of the common stock offered by each of the selling
stockholders.                                                       

PLAN OF DISTRIBUTION

   The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed from time 
to time), at market prices prevailing at the time of sale, at prices related to 
such prevailing market prices or at negotiated prices. Each prospectus          
supplement will describe the method of distribution of the securities offered   
therein.                                                                        

   We are also registering shares of our class A common stock on behalf of the
selling stockholders. We and any selling stockholders may sell securities       
directly, through agents designated from time to time, through underwriting     
syndicates led by one or more managing underwriters or through one or more      
underwriters acting alone. The selling stockholders may also distribute         
securities through one or more special purpose entities, which may enter into   
forward purchase arrangements with selling stockholders and distribute their own
securities. In connection with an offering of securities of such a special      
purpose entity, the selling stockholders may also enter into securities loan    
agreements with the underwriters of the entity's securities in order to         
facilitate such underwriters' market-making activities in the entity's          
securities. Each prospectus supplement will describe the terms of the securities
to which the prospectus supplement relates, the names of the selling            
stockholders and the number of shares of class A common stock to be sold by     
each, the name or names of any underwriters or agents with whom we or the       
selling stockholders, or both, have entered into arrangements with respect to   
the sale of the securities, the public offering or purchase price of the        
securities and the net proceeds we or the selling stockholders will receive from
the sale. In addition, each prospectus supplement will describe any underwriting
discounts and other items constituting underwriters' compensation, any discounts
and commissions allowed or paid to dealers, if any, any commissions allowed or  
paid to agents, and the securities exchange or exchanges, if any, on which the  
securities will be listed. Dealer trading may take place in certain of the      
securities, including securities not listed on any securities exchange.         

  If so indicated in the applicable prospectus supplement, we or the selling
stockholders, or both, will authorize underwriters or agents to solicit offers  
by certain institutions to purchase securities from us or the selling           
stockholders, or both, pursuant to delayed delivery contracts providing for     
payment and delivery at a future date. Institutions with which the contracts may
be made include, among others:                                                  

- commercial and savings banks;                                         

- insurance companies;                                                  

- pension funds;                                                        

- investment companies; and                                             

- educational and charitable institutions.                              

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In all cases, the institutions must be approved by us or the selling    
stockholders, or both. Unless otherwise set forth in the applicable prospectus  
supplement, the obligations of any purchaser under any contract will not be     
subject to any conditions except that (i) the purchase of the securities will   
not at the time of delivery be prohibited under the laws of the jurisdiction to 
which the purchaser is subject and (ii) if the securities are also being sold to
underwriters acting as principals for their own account, the underwriters will  
have purchased the securities not sold for delayed delivery. The underwriters   
and such other persons will not have any responsibility in respect of the       
validity or performance of such contracts.                                      

Any selling stockholder, underwriter or agent participating in the      
distribution of the securities may be deemed to be an underwriter, as that term 
is defined in the Securities Act, of the securities so offered and sold and any 
discounts or commissions received by them, and any profit realized by them on   
the same or resale of the securities may be deemed to be underwriting discounts 
and commissions under the Securities Act.                                       

   Certain of any such underwriters and agents including their associates, may
be customers of, engage in transactions with and perform services for us and our
subsidiaries in the ordinary course of business. One or more of our affiliates  
may from time to time act as an agent or underwriter in connection with the sale
of the securities to the extent permitted by applicable law. The participation  
of any such affiliate in the offer and sale of the securities will comply with  
Rule 2720 of the Conduct Rules of the National Association of Securities        
Dealers, Inc. regarding the offer and sale of securities of an affiliate.       

   Under agreements which may be entered into by us, the underwriters, dealers
and agents who participate in the distribution of securities may be entitled to 
indemnification by us against or contribution toward some liabilities, including
liabilities under the Securities Act.                                           

   Except as indicated in the applicable prospectus supplement, the securities
are not expected to be listed on a securities exchange, except for the class A  
common stock, which is listed on The Nasdaq Stock Market's National Market, and 
any underwriters or dealers will not be obligated to make a market in           
securities. We cannot predict the activity or liquidity of any trading in the   
securities.                                                                     

  We will not receive any proceeds from the sale of shares of class A common
stock or any other securities by the selling stockholders. We will, however,    
bear certain expenses in connection with the registration of the securities     
being offered under this prospectus by the selling stockholders, including all  
costs incident to the offering and sale of the securities to the public other   
than any commissions and discounts of underwriters, dealers or agents and any   
transfer taxes.                                                                 

VALIDITY OF SECURITIES

   The validity of the securities offered hereby will be passed upon for us by
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York, and certain       
matters may be passed upon for the underwriters or agents, if any, by Skadden,  
Arps, Slate, Meagher & Flom LLP, Los Angeles, California. Skadden, Arps, Slate, 
Meagher & Flom LLP has represented us on other unrelated matters.               

EXPERTS 

The consolidated financial statements of Metromedia Fiber Network, Inc. 
appearing in Metromedia Fiber Network, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1998, have been audited by Ernst & Young LLP,           
independent auditors, as set forth in their report thereon included therein and 
incorporated herein by reference. Such consolidated financial statements are    
incorporated herein by reference in reliance upon such report given on the      
authority of such firm as experts in accounting and auditing.                   

    AboveNet's financial statements as of June 30, 1998 and 1999 and for each of
the three years in the period ended June 30, 1999 included and incorporated by  
reference in this prospectus have been audited by Deloitte & Touche LLP,        
independent auditors, as stated in their report, which is included and          

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incorporated by reference herein, and have been so included and incorporated in 
reliance upon the report of such firm given upon their authority as experts in  
accounting and auditing.                                                        

The Combined Statement of Assets to be Acquired and Liabilities to be   
Assumed of Palo Alto Internet Exchange as of December 26, 1998 and December 27, 
1997 and the related Combined Statement of Revenues and Direct Expenses for the 
period June 12, 1998 through December 26, 1998, the period December 28, 1997    
through June 12, 1998 and the fiscal years ended December 27, 1997 and          
December 29, 1996, that are incorporated by reference in this prospectus by     
reference to the Registration Statement on Form S-4 (Registration               
No. 333-84541) of Metromedia Fiber Network, Inc. filed with the Securities and  
Exchange Commission on August 4, 1999, have been so incorporated in reliance on 
the reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.                   

WHERE YOU CAN FIND MORE INFORMATION 

 We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the  
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at the SEC's following public reference       
facilities:                                                                     

                                                                [Download Table]
                                                                              
 Public Reference Room  New York Regional Office     Chicago Regional Office  
450 Fifth Street, N.W.    7 World Trade Center           Citicorp Center      
       Room 1024               Suite 1300            500 West Madison Street  
Washington, D.C. 20549  New York, New York 10048           Suite 1400         
                                                  Chicago, Illinois 60661-2511

  You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information on   
the operations of the public reference facilities. Our SEC filings are also     
available at the offices of The Nasdaq Stock Market at 1735 K Street, N.W.,     
Washington, D.C. 20006.                                                         

INCORPORATION OF INFORMATION WE FILE WITH THE SEC 

    The SEC allows us to "incorporate by reference" the information we file with
them, which means: incorporated documents are considered part of this           
prospectus; we can disclose important information to you by referring you to    
those documents; and information that we file with the SEC will automatically   
update and supersede this incorporated information.                             

    We incorporate by reference the documents listed below which were filed with
the SEC under the Securities Exchange Act of 1934:                              

 - Our Annual Report on Form 10-K for the year ended on December 31, 1998;

- Our Quarterly Report on Form 10-Q for the three months ended March 31,
1999;                                                               

   - Our Quarterly Report on Form 10-Q for the six months ended June 30, 1999;

- Our Current Report on Form 8-K dated June 30, 1999;                   

    - Our Current Report on Form 8-K dated September 10, 1999, as amended by our
      Current Report on Form 8-K/A dated October 14, 1999 and as further amended
by our Current Report on Form 8-K/A dated October 26, 1999;         

- Our Current Report on Form 8-K dated October 18, 1999;                

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  - The "Risk Factors--Risk Factors Applicable to AboveNet" and "Business of
 AboveNet" sections and the financial statements of Palo Alto Internet
Exchange contained in our Registration Statement on Form S-4 dated  
August 5, 1999 (File No. 333-84541); and                            

   - The description of our class A common stock contained in our Registration
Statement on Form 8-A, filed on October 17, 1997.                   

We also incorporate by reference each of the following documents that we
will file with the SEC after the date of the initial filing of the registration 
statement and prior to the time we sell all of the securities offered by this   
prospectus:                                                                     

- Reports filed under Section 13(a) and (c) of the Exchange Act;        

  - Definitive proxy or information statements filed under Section 14 of the
    Exchange Act in connection with any subsequent shareholders meeting; and

- Any reports filed under Section 15(d) of the Exchange Act.            

    You can obtain any of the filings incorporated by reference in this document
through us, or from the SEC through the SEC's web site or at the addresses      
listed above. Documents incorporated by reference are available from us without 
charge, excluding any exhibits to those documents unless the exhibit is         
specifically incorporated by reference as an exhibit in this prospectus. You can
obtain documents incorporated by reference in this prospectus by requesting them
in writing or by telephone from us at the following address:                    

Metromedia Fiber Network, Inc.
One North Lexington Avenue
White Plains, New York 10601
Attention: Investor Relations 
Telephone: (914) 421-6700 

   If you request any incorporated documents from us, we will mail them to you
by first class mail, or another equally prompt means, within one business day   
after we receive your request.                                                  

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OUR PRINCIPAL EXECUTIVE OFFICE
Metromedia Fiber Network, Inc.
One North Lexington Avenue
White Plains, New York 10601, U.S.A.

AUDITORS
Ernst & Young LLP 
787 Seventh Avenue
New York, New York 10019, U.S.A.

LEGAL ADVISORS

                                                                [Download Table]
                                                                                  
            FOR OUR COMPANY:                        FOR THE UNDERWRITERS:         
Paul, Weiss, Rifkind, Wharton & Garrison  Skadden, Arps, Slate, Meagher & Flom LLP
       1285 Avenue of the Americas                 300 South Grand Avenue         
    New York, New York 10019, U.S.A.        Los Angeles, California 90071, U.S.A. 

TRUSTEE 
The Bank of New York
101 Barclay Street
Floor 21 West 
New York, New York 10286, U.S.A.

                                                                [Download Table]
                                                                              
PRINCIPAL PAYING AGENT FOR DOLLAR NOTES  PRINCIPAL PAYING AGENT FOR EURO NOTES
         The Bank of New York                    The Bank of New York         
          101 Barclay Street                         London Branch            
             Floor 21 West                          1 Canada Square           
   New York, New York 10286, U.S.A.         London, E14 5AL, United Kingdom   

LUXEMBOURG PAYING AND TRANSFER AGENT
Kredietbank S.A. Luxembourgeoise
43 boulevard Royal
L-2955 Luxembourg 

LISTING AGENT 
Kredietbank S.A. Luxembourgeoise
43 boulevard Royal
L-2955 Luxembourg 

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--------------------------------------------------------------------------------

$1,010,900,000

METROMEDIA FIBER NETWORK, INC.

$750,000,000 10% SENIOR NOTES DUE 2009

[EURO]250,000,000 10% SENIOR NOTES DUE 2009 

[LOGO]

------

PROSPECTUS SUPPLEMENT 
NOVEMBER 12, 1999 
--------- 

SALOMON SMITH BARNEY
CHASE SECURITIES INC. 
DEUTSCHE BANC ALEX. BROWN 
DONALDSON, LUFKIN & JENRETTE
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER

--------------------------------------------------------------------------------
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