HYPERION TELECOMMUNICATIONS INC, S-1/A, 1996-12-27

HYPERION TELECOMMUNICATIONS INC
S-1/A, 1996-12-27
CABLE & OTHER PAY TELEVISION SERVICES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 27, 1996

REGISTRATION NO. 333-12619
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------

AMENDMENT NO. 1

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
HYPERION TELECOMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 4813 25-1669404
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)

5 WEST THIRD STREET -- P.O. BOX 472
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------
DANIEL R. MILLIARD, PRESIDENT
HYPERION TELECOMMUNICATIONS, INC.
5 WEST THIRD STREET -- P.O. BOX 472
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------
PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO:
CARL E. ROTHENBERGER, JR., ESQUIRE
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
21ST FLOOR, 301 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219
(412) 562-8826

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION DECEMBER , 1996

HYPERION TELECOMMUNICATIONS, INC.

329,000 WARRANTS TO PURCHASE AN AGGREGATE OF 613,427 SHARES OF CLASS B

COMMON STOCK AND 613,427 SHARES OF CLASS B COMMON STOCK ISSUABLE UPON
EXERCISE OF THE WARRANTS
-----------

This Prospectus is being used in connection with the offering from time to
time by certain holders (the "Selling Securityholders") of warrants (the
"Warrants"), each to purchase 1.8645 shares of Class B common stock, $.01 par
value per share (the "Class B Common Stock"), of Hyperion Telecommunications,
Inc., a Delaware corporation (together with its subsidiaries, the "Company" or
"Hyperion"), at an exercise price of $.01 per share (subject as to both the
number of shares and the exercise price to anti-dilution provisions), and the
shares of Class B Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares"). This Prospectus may also be used by the Company in
connection with the issuance from time to time of the Warrant Shares. The
Warrants may be exercised at any time after the earlier to occur of (i) May 1,
1997 or (ii) in the event of a Change of Control (as defined), the date the
Company mails notice thereof to holders of the Warrants. Unless exercised, the
Warrants will expire on April 1, 2001.

The Warrants and the Warrant Shares may be offered by the Selling
Securityholders in transactions in the over-the-counter-market at prices
obtainable at the time of sale or in privately negotiated transactions at
prices determined by negotiation. The Selling Securityholders may effect such
transactions by selling the Warrants or the Warrant Shares to or through
securities broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the Selling
Securityholders and/or the purchasers of the Warrants or the Warrant Shares for
whom such broker-dealers may act as agent or to whom they sell as principal, or
both (which compensation as to a particular broker-dealer might be in excess of
customary commissions). Additionally, agents or dealers may acquire Warrants,
Warrant Shares or interests therein as a pledgee and may, from time to time,
effect distributions of the Warrants, Warrant Shares or interests in such
capacity. See "The Selling Securityholders" and "Plan of Distribution." The
Selling Securityholders, the brokers and dealers through whom sales of the
Warrants or Warrant Shares are made and any agent or dealer who distributes
Warrants or Warrant Shares acquired as pledgee may be deemed "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), and any profits realized by them on the sale of the Warrants or Warrant
Shares may be considered to be underwriting compensation.

The Company will receive proceeds from the exercise of the Warrants. Except
for the sale of the Warrant Shares upon exercise of the Warrants, the Company
is not selling any of the Warrants or Warrant Shares and will not receive any
of the proceeds from the sale of the Warrants or Warrant Shares being sold by
the Selling Securityholders. The cost of registering the Warrants and the
Warrant Shares is being borne by the Company.

The Company has not and does not intend to apply for the listing of the
Warrants or the Warrant Shares on any securities exchange or for quotation
through the Nasdaq National Market.

PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY MATTERS DISCUSSED UNDER THE
CAPTION "RISK FACTORS" ON PAGE 12.

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof.

This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities offered hereby by anyone in any jurisdiction in
which such offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or to anyone to
whom it is unlawful to make such offer or solicitation.

THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>

AVAILABLE INFORMATION

In accordance with Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), Hyperion is subject to the informational
requirements of the Exchange Act and files reports and other information with
the Securities and Exchange Commission (the "Commission"). Such reports and
other information may be inspected and copied at the Public Reference Section
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549, and will also be available at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048, and the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.

The Company has filed with the Commission in Washington, D.C. a Registration
Statement on Form S-1 under the Securities Act with respect to the securities
offered by this Prospectus. This Prospectus, which is part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company, reference is made to such
Registration Statement and the exhibits and schedules filed as part thereof.
The Registration Statement and the exhibits and schedules thereto filed with
the Commission may be inspected without charge at the Public Reference Section
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549, and will also be available for inspection and copying at
the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048, and the Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661.

Copies of all or any portion of the reports and other information referred
to above and the Registration Statement may be obtained from the Public
Reference Section of the Commission upon payment of certain prescribed fees.
Electronic registration statements made through the Electronic Data Gathering,
Analysis, and Retrieval system are publicly available through the Commission's
Web site (http://www.sec.gov), which is maintained by the Commission and which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including the consolidated Financial Statements and Notes thereto,
appearing elsewhere in this Prospectus. For a description of certain terms used
in this Prospectus, see the Glossary attached to this Prospectus as Appendix A.
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth under
the caption "Risk Factors," which could cause actual results to differ
materially from those indicated by such forward-looking statements. References
in this Prospectus to the "Company" or "Hyperion" mean Hyperion
Telecommunications, Inc. together with its subsidiaries, except where the
context otherwise requires. Unless the context otherwise requires, references
herein to the "networks," the "Company's networks" or the "Operating Companies'
networks" mean the 18 telecommunications networks (including three networks
under construction) owned as of September 30, 1996 by 14 Operating Companies
(which, as defined herein, are (i) wholly owned subsidiaries of the Company and
(ii) joint venture partnerships and corporations managed by the Company and in
which the Company holds less than a majority equity interest with one or more
other partners). See "--Company and Partnership Ownership." As of September 30,
1996, thirteen of the Operating Companies (comprising 15 of the 18 networks)
were partnerships or corporations that were 50% or less owned by the Company,
and the Operating Companies did not include TCG of South Florida (the "South
Florida Partnership"). As described more fully herein, the Company designs,
constructs, manages and operates networks on behalf of the Operating Companies,
and it is through these networks that the Company and the Operating Companies
provide telecommunications services. Unless otherwise specifically indicated
herein, all of the share data contained herein gives effect to or assumes a
reclassification of the outstanding common stock and common stock reserved for
issuance upon the exercise of outstanding Warrants approved by the Board of
Directors and Stockholders of the Company on October 3, 1996 and completed on
October 9, 1996 (as defined herein) (the "Recapitalization Event").

THE COMPANY

The Company is a leading provider of local telecommunications services over
state-of-the-art fiber optic networks in selected markets within the United
States. Hyperion believes it is the third largest competitive local exchange
carrier ("CLEC") in the United States, based upon route miles and buildings
connected data made publicly available by other CLECs. Each of the Company's 18
networks (including three currently under construction) has been developed by
partnering with a cable operator or utility provider (the "Local Partner") with
operations in that region. This approach has allowed Hyperion to rapidly
construct high-capacity networks which generally have broader coverage of its
markets than those of other CLECs. The Company believes that the breadth of its
networks will allow it to originate and terminate a significant proportion of
its customers' local telephone calls over its own network, instead of relying
on the network of the incumbent local exchange carrier ("LEC"). The Company
also believes that working with a Local Partner significantly reduces the cost
of constructing its fiber optic networks through the utilization of existing
cable or utility facilities and by sharing construction costs with its Local
Partners, who usually upgrade the capacity of their cable or utility
infrastructure during construction of the telecommunications network.

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believes its networks will be attractive to IXCs, such as AT&T, MCI and Sprint,
and other resellers because the Company's networks are 100% fiber optic-based
and generally offer the broadest market coverage (other than that of the
incumbent LEC). Hyperion believes its services will also be attractive to end
users because it can offer (i) lower prices than the incumbent LEC, (ii) high-
capacity fiber optic network connection directly to substantially all of its
customers' premises in a particular city, (iii) high quality customer service
and reliability, and (iv) brand name recognition through its alliances with its
Local Partners and IXCs.

The Company plans to offer switched services, including customer dial tone,
in each of its 18 networks by mid-1997 and has already installed switches or
remote switching capability in six of its networks. According to industry data,
revenues from switched services, including local dial tone, represented 85% of
local telecommunications revenues in the United States in 1995. The Company
also offers traditional access services to IXCs, and large customers, which to
date have represented the principal source of revenue for the Company's
networks. The Company currently offers enhanced data services to its customers
in four of its networks in a partnership with !NTERPRISE, a wholly owned
subsidiary of U S WEST, and plans to offer such services in all of its
networks. Enhanced data services currently include frame relay, Asynchronous
Transfer Mode ("ATM") data transport, business video conferencing, private line
data interconnect service and LAN connection and monitoring services. These
services, along with the long distance services provided by IXCs, enable the
Company to provide an integrated telecommunications service offering to network
customers that is more reliable, has a superior level of service and is priced
lower relative to that of the incumbent LEC in markets served by the Company's
networks.

From the Company's inception in October 1991 through September 30, 1996, the
Company and its partners have invested approximately $198.5 million to build
and develop the network infrastructure and operations (excluding the South
Florida Partnership (as defined herein), see "--Recent Developments"). As of
September 30, 1996, the Company's 18 operating networks served 33 cities, and
included approximately 2,887 route miles of fiber optic cable and were
connected to approximately 1,101 buildings. The Company also has three networks
which are currently under construction. The Company intends to increase the
density of its existing network clusters and expand into new geographic markets
or clusters through the Company's continued construction of new networks with
cable and utility partners.

Hyperion's ownership interest in its networks ranges from 19.7% to 100%. See
"--Ownership of the Company and the Operating Companies." Consistent with the
Company's goal of owning at least a 50% interest in its Operating Companies,
the Company has recently entered into a non-binding letter of intent to
consolidate its interests in its networks in the State of New York. This
transaction would increase its weighted average ownership interest in its
networks from 40% to 44% (based on total fixed assets of the networks). See "--
Recent Developments." The Company reports its interest in joint ventures in
which it owns an interest of 50% or less pursuant to the equity method of
accounting consistent with generally accepted accounting principles. The
Company manages the day-to-day operation of all of the Company's networks, for
which it receives management fees which are based on the Company's costs.

The Company believes the passage of the Telecommunications Act of 1996 (the
"Telecommunications Act") on February 8, 1996 will substantially expand the
market opportunities for the Company and its networks. Based upon data compiled
by the Federal Communications Commission (the "FCC"), the Company believes that
the passage of the Telecommunications Act increases the potential market for
CLECs to approximately $97.1 billion annually due to the opening of the market
for all switched services which will permit CLECs to offer a full range of
local telecommunications services including local dial tone, local calls,
customer calling features and intraLATA toll services for both businesses and
residential customers. The Telecommunications Act provides for the removal of
legal barriers to entering the local exchange telecommunications market and
directs the incumbent LECs to negotiate with CLECs to resolve network and
competitive issues such as interconnection of CLEC and incumbent LEC networks,
reciprocal compensation for termination of calls originating on a

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competing network, telephone number portability, access to rights-of-way and
the unbundling of network services. The Telecommunications Act may provide an
incentive for incumbent LECs to cooperate with local facilities-based
competitors, such as the Company, on interconnection issues because the
existence of an interconnection agreement with a facilities-based competitor is
a prerequisite for incumbent LEC entry into the long distance market unless no
such facilities-based competitor has requested access and interconnection in
accordance with the terms of the Telecommunications Act. In the markets where
the Company's 18 networks are currently operating or are under construction,
the Company believes it has an addressable market of approximately $5.1 billion
annually, substantially all of which is currently provided by the incumbent
LECs. This addressable market estimate does not include the market for enhanced
data services (currently targeted by the Company through its partnerships with
!NTERPRISE) or the market for interLATA toll, which the Company has the ability
to enter at its option.

COMPANY STRATEGY

The Company, through its networks, is a leading provider of integrated local
telecommunications services to small, medium and large businesses, government
and educational end users, and resellers, including IXCs, in its markets. By
partnering with local cable television operators and utility companies, the
Company develops networks that will provide customers with greater market
coverage, lower costs and superior service. The Company's networks also
leverage the IXCs' name recognition, reputation for quality and reliability and
existing customer base by becoming preferred suppliers for IXCs of local
telecommunications services in the Company's markets. The IXCs market their
long distance services in conjunction with the Company's local service
offerings to provide end users with a fully integrated telecommunications
service offering in all of the Company's operating markets. Principal elements
of the Company's strategy include:

Develop a Rapid Entry/Low Cost Approach with Local Partners. The Company
works with a Local Partner in order to significantly reduce the cost and time
to construct a fiber optic network, enable the Company to rapidly begin
offering services and lower the overhead associated with operating and
maintaining the Company's networks. Advantages of building the Company's
networks with Local Partners include (i) sharing the cost of building a fiber
optic network, which the Company believes reduces the cost of aerial fiber
construction by approximately 62% in the case of cable partners and 40% in the
case of utility partners, (ii) reducing the time and cost of obtaining access
to rights-of-way and building entrances and (iii) leveraging the Local
Partners' existing fiber optic network maintenance and installation
infrastructure. Through the partnerships, the Company has financed its
expansion at a lower cost relative to its competitors by utilizing pro rata
equity investments and Local Partner financings of a significant portion of
fiber construction. Local Partners generally provide funding for the fiber
build in a network and lease the fiber capacity back to the partnership under
long-term agreements, while the partnership funds other capital expenditures,
including switching infrastructure and electronics.

Create Additional Partnerships with Utility Companies. The Company believes
that a significant proportion of the networks the Company constructs in the
future will be through partnerships with utility companies. Utility companies
have a number of attributes which make them particularly attractive as partners
for the Company, including (i) contiguous and broad geographic coverage with
extensive conduits and rights-of-way in both business and residential areas;
(ii) significant access to capital; (iii) existing relationships with business
and residential customers; and (iv) a reputation for reliability and quality
customer service. The Company believes that it is an attractive partner for
utility companies because it builds large metropolitan networks which are
similar to those of the utility company and because it can offer utility
companies a significant stake in its networks, both from a financial and
operational perspective.

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the Company and its networks operate, management believes that the Company has
the broadest network coverage in terms of route miles of any of its CLEC
competitors. The Company believes that expanded network coverage will enable
the Company to (i) provide broader and more reliable coverage for network
customers, (ii) carry a greater amount of traffic on its own networks rather
than on the networks of other carriers thereby increasing the Company's
revenues and profit margins, (iii) increase the potential market available to
the Company due to the greater number of buildings, LEC-COs and customers that
the Company's networks can service, (iv) increase the attractiveness of the
Company's networks to IXCs, cellular providers and new telecommunications
providers such as Personal Communications Service ("PCS") operators that need
wide backbone coverage, (v) offer services in areas where there are fewer
potential CLECs with facilities and (vi) leverage the fixed cost structure of
the Company's networks, particularly with regard to network electronics such as
switches.

Expand through Development of Network Clusters. The Company intends to build
on its extensive network size by expanding its existing networks into nearby
areas and establishing new networks in close proximity to existing ones.
Management believes that there are significant operating and marketing
advantages to locating its networks in clusters. Clustering enables the Company
to (i) take advantage of economies of scale in management, construction,
network operations and sales and marketing, (ii) reduce capital expenditures by
optimizing the networks' switching capacity through the use of remote switch
capacity in nearby cities, (iii) cost-effectively offer services to smaller
markets which are adjacent to its networks and in which the Company's networks
are less likely to face strong competition from incumbent LECs and other CLECs
and (iv) increase the networks' ability to offer highly reliable, end-to-end
connectivity on a regional basis. The Company also believes that creating
regional networks will enable the Company to gain a greater share of high
margin long distance transport traffic.

Leverage Strategic Relationships with IXCs. The Company, through its
networks, provides customers with an integrated, one-stop shopping approach to
their telecommunications needs through its strategic relationships with IXCs
such as AT&T, MCI, Sprint, WorldCom and others. The goal of these relationships
is for the Company's networks to offer their local services in conjunction with
the long distance services of these IXCs. Management believes that working in
partnership with IXCs enables the Company to (i) utilize extensive market
information from the IXCs regarding traffic patterns and building requirements
to more optimally construct and extend its networks, (ii) work closely with IXC
account teams to provide an integrated service approach to end users, (iii)
increase market penetration by capitalizing on the IXCs' name recognition and
(iv) lower sales and marketing costs by utilizing the extensive marketing
resources and salesforce of the IXCs to market the networks' products and
services. In pursuing this strategy, the Company has entered into a national
service agreement with AT&T (the "National Service Agreement") pursuant to
which the Company, through its networks, will be an AT&T preferred supplier of
dedicated special access and switched access transport services. The Company
has also passed AT&T's Switch Network Validation Test.

Expand Enhanced Service Offerings. Four of the Company's networks operate in
partnership with !NTERPRISE, a leading, nationwide network integrator that
designs, develops and deploys state-of-the-art data networks (including both
network services and equipment) to support and enhance the information systems
with which the customers of the !NTERPRISE Partnerships (as defined herein)
operate their businesses. !NTERPRISE co-markets enhanced services, including
frame relay, ATM data transport, business video conferencing, private line data
interconnect service and LAN connection and monitoring services to the
networks' customers in the networks' respective markets through its
partnerships with the Company's networks. The Company believes that the
partnerships with !NTERPRISE provide the opportunity to offer network customers
a full complement of enhanced services more rapidly and without the Company
incurring the cost and overhead of establishing its own nationwide enhanced
services marketing, sales and installation effort. The Operating Companies
intend to enter into additional partnerships with !NTERPRISE in all of the
Company's existing networks and may enter into agreements with other enhanced
service integrators in the future.

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OWNERSHIP OF THE COMPANY AND THE OPERATING COMPANIES

Prior to the offerings of the Warrants and the Warrant Shares, the Company
was an 89% owned subsidiary of Adelphia, the seventh largest cable television
company in the United States, with the balance of the Company owned by senior
management. After the issuance of the Warrant Shares, Adelphia will own 83.87%
of the outstanding Class B Common Stock of the Company. See "Risk Factors--
Control by Principal Stockholder." As of September 30, 1996, Adelphia owned or
managed cable television systems that served approximately 1.8 million
subscribers in 15 states.

The Company currently has 18 networks (including three under construction).
The Company owns these networks through (i) partnerships with 10 Local Partners
(the "Operating Partnerships") and (ii) three wholly owned subsidiaries of the
Company and one corporation in which it is a minority shareholder ("Operating
Corporations") (collectively, the Operating Partnerships and the Operating
Corporations are referred to herein as the "Operating Companies"). The Company
is responsible for the network design, construction, management and operation
of the Operating Companies, for which it receives management fees which are
based on the Company's costs.

The Company's executive offices are located at 5 West Third Street,
Coudersport, Pennsylvania 16915, and its telephone number is (814) 274-9830.

The following is an overview of the Company's current network structure.

<TABLE>
<CAPTION>
ACTUAL OR
EXPECTED DATE HYPERION
COMPANY NETWORKS OF OPERATION(B) INTEREST LOCAL PARTNER(S)
- ---------------- --------------- -------- -------------------------
<S> <C> <C> <C>
Northeast Cluster
Albany, NY(a)................ 2/95 50.0% Time Warner/Advance(c)
Binghamton, NY(a)............ 3/95 20.0 Time Warner/Advance(c)
Buffalo, NY(a)............... 1/95 40.0 Tele-Communications, Inc.
Time Warner/Advance(d)
Syracuse, NY(a).............. 8/92 50.0 Time Warner/Advance(c)(d)
Vermont...................... 11/94 100.0 (d)
Mid-Atlantic Cluster
Charlottesville, VA.......... 11/95 100.0 (d)
Harrisburg, PA............... 4/95 50.0 Lenfest Communications
Morristown, NJ............... 7/96 19.7 TKR Cable(e)
New Brunswick, NJ............ 11/95 19.7 TKR Cable(e)
Philadelphia, PA............. 8/96 50.0 PECO Energy
Richmond, VA................. 9/93 37.0 Continental Cablevision
Scranton/Wilkes-Barre, PA.... mid-1997 100.0 (d)
York, PA..................... mid-1997 50.0 Susquehanna Cable
Mid-South Cluster
Lexington, KY(f)............. mid-1997 50.0 TKR Cable(g)
Louisville, KY(f)............ 3/95 50.0 TKR Cable(g)
Nashville, TN(f)............. 11/94 95.0 InterMedia Partners
Other Networks
Jacksonville, FL............. 9/92 20.0 Continental Cablevision
Wichita, KS.................. 9/94 49.9 Gannett
</TABLE>

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- --------

(a) The Company has entered into a non-binding letter of intent with Time
Warner to increase its ownership interest in the Buffalo network to 50% and
in the Syracuse network to 100%, and to eliminate its ownership interests
in and management responsibility for the Albany and Binghamton networks.
See "--Recent Developments."

(b) Refers to the date on which (i) the network is connected to at least one
IXC POP; (ii) the network is capable of accepting traffic from IXCs and end
users; (iii) the Company's central office is fully functional and (iv) the
initial network SONET fiber rings has been completed.

(d) Adelphia or its affiliates lease fiber capacity to the Operating Companies
in these networks.

(e) The interests in the Morristown and New Brunswick networks are owned by one
Operating Company. Sutton Capital Associates also owns a minority interest
in the Operating Company.

(f) The Company's interest in these networks has recently changed. See "--
Recent Developments."

(g) The interests in the Lexington and Louisville networks are owned by one
Operating Company.

RECENT DEVELOPMENTS

Recapitalization Event. On October 3, 1996, the Board of Directors and
stockholders of the Company approved an amendment to the certificate of
incorporation of the Company to reclassify each previously authorized and
outstanding share of the Company's Common Stock as Class B Common Stock and to
authorize 300,000,000 shares of a second class of common stock, designated
Class A Common Stock. The Recapitalization Event became effective upon the
filing of the amendment with the Department of State of Delaware on October 9,
1996. Holders of Class A Common Stock and Class B Common Stock vote as a single
class on all matters submitted to a vote of the stockholders, with each share
of Class A Common Stock entitled to one vote and each share of Class B Common
Stock entitled to ten votes. In addition, each share of Class B Common Stock is
automatically convertible into one share of Class A Common Stock. In accordance
with the terms of the Warrant Agreement (as defined herein), holders of
Warrants shall be entitled to receive Class B Common Stock in lieu of
previously authorized Common Stock of the Company upon exercise of the
Warrants. There are currently no shares of Class A Common Stock outstanding.
See "Description of the Capital Stock--Common Stock" and "Description of
Warrants."

Time Warner Letter of Intent. Under a non-binding letter of intent with Time
Warner, dated as of June 17, 1996, the Company would consolidate its Operating
Partnership interests in the State of New York by (i) increasing its ownership
interest in the Buffalo Operating Partnership to 50% and in the Syracuse
network to 100% and (ii) eliminating its ownership interests in and management
responsibility for the Albany and Binghamton networks. In addition, the letter
of intent provides that, upon the consummation of the transaction, neither
party will be subject to the non-competition provisions contained in the
existing partnership agreements with respect to the markets from which they are
withdrawing. The consummation of this transaction is subject to numerous terms
and conditions including the negotiation and execution of definitive, binding
agreements. No assurances can be given as to whether or when, or the terms upon
which, such transaction will be consummated.

Sale of Partnership Interest in the South Florida Partnership. On May 16,
1996, the Company completed the sale of its 15.7% partnership interest in TCG
South Florida (the "South Florida Partnership") to Teleport Communications
Group Inc. for an aggregate sales price of approximately $11.6 million
resulting in a pre-tax gain of approximately $8.4 million. Amounts related to
the South Florida Partnership included in the Company's investments and equity
in net loss of joint ventures as of and for the year ended March 31, 1996 and
as of the date of sale and the six months ended September 30, 1996 were
approximately $3.4 million and ($0.8) million, respectively, and $3.2 million
and ($0.2) million, respectively. As part of the transaction, the Company was
released from its covenant not to compete with respect to the South Florida
market. The Company plans to use the proceeds from the sale to continue to
expand and develop its existing markets, complete new networks under
construction and enter additional markets.

7
<PAGE>

Other Changes in Partnership Interests. The Company recently entered into
agreements pursuant to which the Company's ownership interests in certain of
the Operating Partnerships have increased in three networks. These transactions
are consistent with the Company's goal to own at least a 50% interest in its
Operating Partnerships in the future, and where appropriate the Company may
consider similar transactions from time to time in its other markets. Following
the completion of the transactions described below, Hyperion owned at least 50%
of ten of its 17 then existing markets and markets under construction.

Pursuant to a binding letter of intent with TKR, dated as of January 29,
1996, and a subsequent amendment to the related partnership agreement dated May
8, 1996, the Company has agreed to make additional capital contributions to its
Louisville, Kentucky Operating Partnership (which will also operate the network
under construction in Lexington, Kentucky) and has increased its partnership
ownership interest to 50%. As of September 30, 1996, the required additional
capital contributions were approximately $1.0 million.

Pursuant to a Purchase Agreement dated as of July 25, 1996 the Company
purchased general and limited partnership interests in the Nashville, Tennessee
Operating Partnership from InterMedia and Robin Media on August 1, 1996. The
aggregate purchase price was approximately $5 million. As a result of this
acquisition, the Company's ownership interest in this partnership was increased
to 95%.

Issuance of 13% Senior Discount Notes and Warrants. On April 15, 1996, the
Company received net proceeds of $168.6 million from the issuance of $329
million in aggregate principal amount at maturity of 13% Senior Discount Notes
due April 15, 2003 (the "Senior Notes") and Warrants to purchase an aggregate
of 5.78% of the then outstanding common stock (which, in accordance with the
Recapitalization Event, has been reclassified as Class B Common Stock). See
"Description of Warrants."

Acquisition of Fiber Backbone. Effective September 30, 1996, the Vermont
Operating Company (as defined herein) purchased approximately 280 miles of
SONET ring fiber backbone presently used by the Company in Vermont from
Adelphia for $5.4 million, Adelphia's historical cost for such assets, subject
to post-closing adjustments. Prior to such purchase, the Company had been
leasing such fiber backbone in the Vermont network from Adelphia at an annual
rate of approximately $1.0 million.

Interconnection Activities. The Company has completed the required
interconnection agreements with NYNEX, subject to state regulatory approval,
for all of its networks in the Northeast Cluster. The Company is also a
participant in a stipulation executed with Bell South in December 1995, that
provides for interconnection in the Jacksonville market, and is involved in
negotiations with Bell South and Bell Atlantic for interconnection agreements
that will cover its operating networks throughout the Mid-South and Mid-
Atlantic Clusters (other than Charlottesville), respectively. The Company
expects that these negotiations will be completed by the end of 1996.

Recent Regulatory Actions. The FCC has adopted many, but not all, of the
rules required to implement the Telecommunications Act. Rulemakings regarding
support for universal telephone service and reform of the current regime of
access charges paid by long distance carriers are expected to be completed in
the first half of 1997. The FCC's orders implementing the provisions of the
Telecommunications Act relating to telephone number portability and local
telephone competition are subject to Petitions for Reconsideration at the FCC
and the FCC's order implementing the Telecommunications Act relating to local
telephone competition is subject to Petitions for Review filed before federal
appeals courts. The Eighth Circuit Court of Appeals has granted a stay of the
pricing and certain other provisions of the FCC's local telephone competition
rules. The stay is limited to certain FCC rules. None of the provisions of the
Telecommunications Act has been stayed. See "Regulation--Telecommunications Act
of 1996."

8
<PAGE>

SUMMARY DESCRIPTION OF WARRANTS

Total Number of Warrants....
329,000 Warrants, which when exercised would
entitle the holders thereof to acquire an
aggregate of 613,427 shares of Class B Common
Stock of the Company, representing
approximately 5.78% of the outstanding Common
Stock of the Company on a fully-diluted basis
as of the date of issuance of the Warrants.

Expiration of Warrants...... The Warrants will expire automatically on
April 1, 2001 (the "Expiration Date"). The
Company will give notice of expiration not
less than 90 nor more than 120 days prior to
the Expiration Date to the registered holders
of the then outstanding Warrants. If the
Company fails to give this Notice, the
Warrants will not expire until 90 days after
the Company gives such notice.

Exercise....................
Each Warrant, when exercised, will entitle
the holder thereof to purchase 1.8645 shares
of the Class B Common Stock of the Company at
an exercise price of $.01 per share. The
Warrants are exercisable at any time on or
after the earlier to occur of (i) May 1, 1997
and (ii) in the event a Change of Control
occurs, the date the Company mails notice
thereof to holders of the Warrants. The
number of shares of Class B Common Stock of
the Company for which, and the price per
share at which, a Warrant is exercisable are
subject to adjustment upon the occurrence of
certain events, as provided in the warrant
agreement relating to the Warrants (the
"Warrant Agreement"). See "Description of
Warrants."

THE OFFERING OF WARRANT SHARES

Shares of Class B Common
Stock to be Offered by
Hyperion Upon Exercise of
the Warrants...........
613,427(1)

Shares of Class B Common
Stock to be Outstanding
after the Offering of
Warrant Shares.........
10,613,427(1)

Use of Proceeds............. Any proceeds received by the Company upon the
exercise of the Warrants will be used for
general corporate purposes.
- --------
(1) Subject to adjustment upon the occurrence of certain events, as provided in
the Warrant Agreement. See "Description of Warrants."

9
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA

The following summary financial data (except the unaudited information for
the fiscal years ended March 31, 1992 and 1993, and the six months ended
September 30, 1995 and 1996) are derived from, and should be read in
conjunction with, the audited Consolidated Financial Statements of the Company
and the related Notes thereto contained herein. The unaudited information for
the fiscal years ended March 31, 1992 and 1993 and the six months ended
September 30, 1995 and 1996 are derived from other Company information. All of
the following information should be read in conjunction with the Company's
Consolidated Financial Statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
COMPANY DATA (A): SIX MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
--------------------------------------------- -----------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- -------- -------- ------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Telecommunications
service and management
fee revenue........... $ -- $ 89 $ 417 $ 1,729 $ 3,322 $ 1,298 $ 2,277
Operating expenses:
Network operations..... 2 19 330 1,382 2,690 1,241 1,587
Selling, general and
administrative........ 209 921 2,045 2,524 3,084 1,365 2,191
Depreciation and
amortization.......... -- 30 189 463 1,184 528 1,581
------- ------- ------- -------- -------- ------- --------
Operating loss......... (211) (881) (2,147) (2,640) (3,636) (1,836) (3,082)
Gain on sale of
investment............ -- -- -- -- -- -- 8,405
Interest income........ -- -- 17 39 199 26 3,129
Interest expense and
fees.................. -- -- (2,164) (3,321) (6,088) (2,700) (13,277)
Equity in net loss of
joint ventures........ -- (194) (528) (1,799) (4,292) (1,642) (2,998)
Net loss............... $ (211) $(1,075) $(4,725) $ (7,692) $(13,620) $(6,074) (7,706)
Net loss per weighted
average share of
common stock.......... $ (0.01) $ (0.05) $ (0.24) $ (0.38) $ (0.68) $ (0.61) $ (0.73)
Weighted average shares
of common stock
outstanding........... 10,000 10,000 10,000 10,000 10,000 10,000 10,576
OTHER COMPANY DATA:
EBITDA (b)............. $ (211) $ (851) $(1,958) $ (2,177) $ (2,452) $(1,308) $ (1,501)
Capital expenditures
and Company
investments (c)....... 60 3,891 8,607 10,376 18,899 8,079 24,671
Cash used in operating
activities............ (184) (725) (2,121) (2,130) (833) (1,352) (2,092)
Cash used in investing
activities............ (60) (3,806) (8,607) (10,376) (18,899) (8,079) (18,093)
Cash provided by
financing activities.. 248 4,645 10,609 12,506 19,732 9,431 130,780
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF
------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1996
----- ------- ------- -------- -------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 5 $ 118 $ -- $ -- $ -- $110,595
Total assets........... 82 4,316 14,765 23,212 35,269 177,736
Long term debt......... -- 4,814 19,968 35,541 50,855 201,699
Stockholders' equity
(deficiency).......... (211) (1,286) (6,011) (13,703) (27,323) (26,942)
</TABLE>
- --------

(a) Financial information for the Company and its consolidated subsidiaries. As
of September 30, 1996, 14 of the Company's networks were owned by joint
ventures in which it owns an interest of 50% or less, and for which the
Company reports its interest pursuant to the equity method of accounting
consistent with generally accepted accounting principles.

(b) EBITDA consists of net loss before interest, equity in net loss of joint
ventures, gain on sale of investment, income taxes, depreciation and
amortization for the periods presented. It is a measure commonly used in
the telecommunications industry and is presented to assist in understanding
the Company's operating results. However, it is not intended to represent
cash flow or results of operations in accordance with generally accepted
accounting principles. See the Company's Consolidated Financial Statements
and Notes thereto appearing elsewhere in this Prospectus.

(c) For the fiscal years ended March 31, 1992, 1993, 1994, 1995, 1996 and the
six months ended September 30, 1995 and 1996, the Company's capital
expenditures (including capital expenditures relating to its wholly owned
Operating Companies) were $0.1, $2.0, $3.1, $2.9, $6.1, $3.3 and $10.7
million, respectively, and the Company's investments in its less than
wholly owned Operating Companies and the South Florida Partnership were
$0.0, $1.9, $5.5, $7.5, $12.8, $4.8 and $14.0 million, respectively, for
the same periods. See the Company's Consolidated Financial Statements and
Notes thereto appearing elsewhere in this Prospectus.

10
<PAGE>

SUMMARY OPERATING DATA

The following summary operating data is unaudited information that represents
data for 100% of the Operating Companies' networks and is derived from Company
information. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Supplementary Operating Company Financial Analysis."
As of September 30, 1996, 14 of the Company's 18 networks were 50% or less
owned by the Company. The Company reports its interest in such 50% or less
owned networks pursuant to the equity method of accounting consistent with
generally accepted accounting principles. As a result, the financial
information set forth below is not indicative of the Company's overall
financial position and investors should not place undue reliance on such
information when considering an investment in the Warrants or the Warrant
Shares. The Company was organized in October 1991 and did not offer service
through its Operating Companies until after Fiscal 1992.

<TABLE>
NETWORK DATA
(UNAUDITED)(A):
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
--------------------------------------- ----------------
1992 1993 1994 1995 1996 1995 1996
---- ------ ------- ------- -------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Network revenues....... $-- $ 195 $ 962 $ 3,056 $ 7,763 $ 3,350 $ 6,177
Operating expenses:
Network operations..... -- 504 789 1,946 4,871 1,937 3,308
Selling, general and
administrative......... -- 353 1,145 2,439 5,316 2,237 4,145
Depreciation and
amortization........... -- 207 839 2,467 6,137 2,756 6,262
--- ------ ------- ------- -------- ------- -------
Operating loss......... -- (869) (1,811) (3,796) (8,561) (3,580) (7,536)
Net loss............... -- (948) (2,077) (4,569) (11,285) (4,445) (8,182)
OTHER OPERATING DATA:
EBITDA (b)............. $-- $ (662) $ (972) $(1,329) $ (2,424) $ (900) $(1,261)
Capital expenditures... -- 4,947 13,790 24,658 45,177 23,956 55,232
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF
----------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1996
---- ------ ------- ------- ------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Gross Property, Plant &
Equipment (c)............... $60 $6,952 $21,907 $49,107 $97,318 $143,808
Capital lease obligations
(d)......................... -- 1,244 3,291 11,166 18,163 56,738
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF
MARCH 31, SEPTEMBER 30,
1996 1996
--------- -------------
<S> <C> <C>
OTHER NETWORK DATA:
Networks in operation.................................. 13 15
Cities served (e)...................................... 19 33
Networks under construction............................ 4 3
Route miles (e)........................................ 2,210 2,887
Fiber miles (e)........................................ 106,080 138,571
Buildings connected.................................... 822 1,101
LEC-COs collocated (f)................................. 44 89
Voice grade equivalent circuits........................ 186,292 316,080
Switches installed (g)................................. 5 6
Employees (h).......................................... 155 179
</TABLE>
- --------

(a) Unless otherwise stated, represents the summation of all of the networks'
financial and operating information for each of the categories presented.
Network Data is derived from the Operating Companies' records and presents
information for the Company's networks, but does not include information
for the South Florida Partnership.

(c) Represents total property, plant and equipment (before accumulated
depreciation) of the networks, the Company's Network Operations and Control
Center (the "NOCC") and the Company. Excludes the $5.4 million (subject to
post-closing adjustments) SONET ring fiber backbone purchased by the
Vermont Operating Company from Adelphia effective September 30, 1996. See
"--Recent Developments."

(d) Represents fiber lease financings with the respective Local Partners for
each network.

(e) Excludes networks under construction.

(f) LEC-CO collocated means that the Company has interconnected its network at
the LEC-CO.

(g) Represents Lucent Technologies ("Lucent") 5ESS switches or remote switch
modules which deliver full switch functionality.

(h) Employees includes combined employees of the Operating Companies and the
Company.

11
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, prospective
investors should consider carefully the following risk factors in evaluating
the Company and its business before purchasing Warrants or Warrant Shares in
this offering.

Absence of a Public Market for Warrants and Warrant Shares. The Warrants
were issued by the Company as part of a private placement of units in April
1996 (the "Private Placement"). Neither the Warrants nor the Warrant Shares
are listed on any securities exchange or for quotation through the Nasdaq
National Market. Accordingly, there can be no assurance as to the liquidity of
or the development any market for the Warrants or the Warrant Shares.

Negative Cash Flow and Operating Losses; Limited History of Operations. The
Company has experienced significant losses since its inception, with operating
losses of approximately ($2.1) million, ($2.6) million and ($3.6) million for
the fiscal years ended March 31, 1994, 1995 and 1996, respectively and ($1.8)
million and ($3.1) million for the quarters ended September 30, 1995 and 1996,
respectively. The Company expects to continue to incur substantial operating
losses in the foreseeable future as it pursues its plans to expand its
networks, service offerings and customer base. There can be no assurance that
such losses will not continue indefinitely. The Company currently accounts for
its ownership interests in the Operating Companies in which it does not have
majority ownership interest using the equity method and, therefore, the
Company's consolidated financial statements include only the Company's pro
rata share of the Operating Companies' and the South Florida Partnership's net
losses as equity in net losses of joint ventures.

The Company was formed in October 1991 and, as of September 30, 1996, only
four of its 18 networks had been in operation for more than 24 months, and
three networks were not yet in operation. Prospective investors therefore have
limited historical financial information about the Company upon which to base
an evaluation of the Company's performance. The development of the Company's
businesses and the installation and expansion of its networks require
significant expenditures, a substantial portion of which are made before any
revenues may be realized. Certain of the expenditures, including marketing,
sales and general and administrative costs, are expensed as incurred, while
certain other expenditures, including network design and construction,
negotiation of rights-of-way and costs to obtain legal and regulatory
approval, are deferred until the applicable network is operational. The
Company will continue to incur significant expenditures in connection with the
construction, acquisition, development and expansion of the Company's and
Operating Companies' networks, services and customer base.

In light of the Company's limited operating history, its history of
significant operating losses and its expectation that it will continue to
incur significant expenses and operating losses for the foreseeable future,
there can be no assurance that the Company will be able to implement its
growth strategy, or achieve or sustain profitability.

Substantial Leverage. As of September 30, 1996, the Company's total amount
of debt outstanding was $201.7 million and the Company had a stockholders'
deficiency of $26.9 million. In addition, in each year since its inception,
the Company's earnings have been inadequate to cover its fixed charges by a
substantial margin. Commencing on October 15, 2001, semi-annual cash interest
payments of $21.4 million will be due on the Senior Notes, which substantially
exceeds the Company's gross revenues of approximately $3.3 million for the
year ended March 31, 1996.

Because the Company currently has a consolidated cash flow deficit, its
ability to make cash interest payments on the Senior Notes commencing on
October 15, 2001 and to repay its obligations on the Senior Notes at maturity
will be dependent on developing one or more sources of cash flow prior to the
date on which cash interest payment obligations begin on the Senior Notes. To
accomplish this the Company may seek to (i) refinance all or a portion of the
Senior Notes, (ii) sell all or a portion of its interests in one or more of
the Operating Companies, (iii) negotiate with its current Local Partners to
permit any excess cash generated by its Operating Companies to be distributed
to partners rather than invested in the businesses of such Operating

12
<PAGE>

Companies and/or (iv) invest in companies that will make substantial cash
distributions on or before the maturity of the Senior Notes. There can be no
assurance that (i) there will be a market for the debt or equity securities of
the Company in the future, (ii) the Company will be able to sell assets in a
timely manner or on commercially reasonable terms or in an amount that will be
sufficient to make cash interest payments and repay the Senior Notes when due,
(iii) the Company will be able to persuade its Local Partners that cash
generated by the operations of the Operating Companies should be distributed
to partners or shareholders or (iv) the Company will be able to locate and
invest in companies that will be mature enough to make substantial cash
contributions to the Company prior to the maturity date of the Senior Notes.

Holding Company Structure; Inability to Access Cash Flow. The Company is a
holding company with substantially all of its operations conducted through the
Operating Companies and the Company expects that it could develop new networks
and operations in the future through Joint Ventures in which the Company will
own less than 50% of the equity interests. Accordingly, the Company's cash
flow and, consequently, its ability to service its debt, including the Senior
Notes, is dependent on its pro rata share of the cash flow of the Operating
Companies and the payment of funds by those Operating Companies in the form of
management fees, loans, dividends, distributions or otherwise. The Operating
Companies are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Senior Notes
or to make any funds available therefor, whether in the form of loans,
dividends, distributions or otherwise. Furthermore, the Company may be unable
to access the cash flow of certain of the Operating Companies because it holds
a 50% or less ownership interest in certain of such entities and, therefore,
does not have the requisite control to cause such entities to make
distributions or pay dividends (as applicable) to the partners or equity
holders (as applicable). In addition, such entities will be permitted to incur
indebtedness that may severely restrict or prohibit the making of
distributions, the payment of dividends (as applicable) or the making of
loans.

Risks Associated with Joint Ventures. Most of the Operating Companies' Local
Partner Agreements (as defined) contain mandatory buy/sell provisions that,
after a certain number of years, can be initiated by either partner and result
in one partner purchasing all of the other partner's interests. Accordingly,
there can be no assurance that the Company and its subsidiaries will continue
to be in partnership with their current Local Partner, or any other partner,
in each of their respective markets, or that the Company or its subsidiaries
will have sufficient funds to purchase the partnership interest of such other
partner. In addition, if a partner triggers such buy/sell provisions and the
Company is unable to purchase the initiating partner's interests, the Company
will be forced to sell its interests to the partner, thereby terminating the
partnership, which could result in a material adverse effect on the future
cash flow of the Company.

The bankruptcy or insolvency of a Local Partner or an Operating Company
could result in the termination of the respective Local Partner Agreement and
the related Fiber Lease Agreement (as defined). The effect of such
terminations could be materially adverse to the Company and the respective
Operating Company. Similarly, all of the Management Agreements (as defined),
two of the Local Partner Agreements and five of the Fiber Lease Agreements can
be terminated by the respective Local Partner at various times during the next
seven years. While the Company believes such agreements will be renewed, there
can be no assurance that the Local Partner will not seek to terminate the
agreements. See "Business--Operating Agreements." Accordingly, the failure to
renew such agreements could materially adversely affect the Company and the
respective Operating Companies. In addition, the failure of a Local Partner to
make required capital contributions could have a material adverse effect on
the Company and the respective Operating Company.

The Indenture with respect to the Senior Notes does not restrict Operating
Companies in which the Company owns a less than 45% interest with respect to
the amount of indebtedness they can incur. Accordingly, the Company's ability
to access the cash flow and assets of such Operating Companies may be severely
limited. While none of the Operating Companies currently have a substantial
amount of indebtedness, there can be no assurance that such Operating
Companies will not incur substantial indebtedness in the future.

Significant Future Capital Requirements. Expansion of the Company's existing
networks and services and the development of new networks and services require
significant capital expenditures. The Company's

13
<PAGE>

operations have required and will continue to require substantial capital
investment for (i) the installation of electronics for switched services in
the Company's networks, (ii) the expansion and improvement of the Company's
NOCC and existing networks and (iii) the design, construction and development
of additional networks. The Company plans to make substantial capital
investments and investments in Operating Companies in connection with the
installation of 5ESS switches or remote switching modules in all of its
operating markets by mid-1997, the expansion of existing markets and the
construction and development of new markets. Expansion of the Company's
networks will include the geographic expansion of the Company's existing
clusters and the development of new markets. The Company expects to continue
to build networks in additional markets, which the Company anticipates will
include additional networks with cable and utility partners that have broader
geographic coverage and require higher capital outlays than those with cable
partners in the past. The Company estimates that it will require approximately
$200 million to fund anticipated capital expenditures, working capital
requirements and operating losses of the Company and to make investments in
existing and new Operating Companies and to enter certain additional markets
during calendar years 1997 and 1998. The Company expects to fund additional
capital requirements through existing resources, secured credit facilities and
vendor financings at the Company and Operating Company levels, internally
generated funds, equity invested by Local Partners in Operating Companies,
additional Operating Companies and additional debt or equity financings, as
appropriate.

The Company has also been required to fund the purchase of certain
partnership interests in the Louisville Operating Partnership and the
Nashville Operating Partnership and may be required to raise capital to
purchase the partnership interests of a Local Partner seeking to exercise its
right to sell its partnership interest. See "--Risks Associated with Joint
Ventures," "Prospectus Summary--Recent Developments" and "Business--Local
Partner Agreements." There can be no assurance, however, that the Company will
be successful in generating sufficient cash flow or in raising sufficient debt
or equity capital on terms that it will consider acceptable, or at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

The expectations of required future capital expenditures are based on the
Company's current estimates. There can be no assurance that actual
expenditures will not significantly exceed current estimates.

Expansion Risk. The Company is experiencing a period of rapid expansion
which the Company believes will increase further following the Offering. The
operating complexity of the Company, as well as the level of responsibility
for management personnel, has increased as a result of this expansion. The
Company's ability to manage such growth effectively will require it to
continue to expand and improve its operational and financial systems and to
expand, train and manage its employee base.

Competition. In each of the markets served by the Company's networks, the
services offered by the Company compete principally with the services offered
by the incumbent LEC serving that area. Incumbent LECs have long-standing
relationships with their customers, have the potential to subsidize
competitive services from monopoly service revenues, and benefit from
favorable state and federal regulations. In light of the passage of the
Telecommunications Act, federal and state regulatory initiatives will provide
increased business opportunities to CLECs such as the Company, but regulators
are likely to provide incumbent LECs with increased pricing flexibility for
their services as competition increases. If incumbent LECs are allowed by
regulators to lower their rates substantially, engage in excessive volume and
term discount pricing practices for their customers, or charge CLECs excessive
fees for interconnection to the incumbent LECs' networks, the net income and
cash flow of CLECs, including the Operating Companies, could be materially
adversely affected.

The Telecommunications Act also establishes procedures under which the
Regional Bell Operating Companies ("RBOCs") can obtain authority to provide
long distance services if they comply with certain interconnection
requirements. There has been significant merger activity among the RBOCs in
anticipation of entry into the long distance market. If RBOCs are permitted to
provide such services, they ultimately will be in
a position to offer single source service. This could result in decreased
market share for the major IXCs, which are the Company networks' major
customers. Such a result could have an adverse effect on the Company.

14
<PAGE>

The Company also faces, and will continue to face, competition from other
current and potential market entrants, including other CLECs, AT&T, MCI,
Sprint and other IXCs, cable television companies, electric utilities,
microwave carriers, wireless telecommunications providers and private networks
built by large end users. A number of markets served by the Company already
are served by another CLEC or other CLECs. In addition, all three major IXCs
are expected to enter the market for local telecommunications services. MCI
has announced that it will invest more than $2.0 billion in fiber optic rings
and local switching equipment in major metropolitan markets throughout the
United States and AT&T has filed applications with state regulatory
authorities for authority to provide local telecommunications services in all
50 states. Although the Company has good relationships with the IXCs, there
are no assurances that any of these IXCs will not build their own facilities
or resell the services of other carriers rather than use the Company's
services when entering the market for local exchange services.

The Company also competes with equipment vendors and installers, and
telecommunications management companies with respect to certain portions of
its business.

Many of the Company's current and potential competitors, particularly
incumbent LECs, have financial, personnel and other resources substantially
greater than those of the Company, as well as other competitive advantages
over the Company. See "Competition" for more detailed information on the
competitive environment faced by the Company.

Dependence on Business from IXCs. For the year ended March 31, 1996,
approximately 75% of the Operating Companies' combined revenues were
attributable to access services provided to MCI, AT&T and other IXCs. The loss
of access revenues from IXCs in general or the loss of MCI or AT&T as a
customer could have a material adverse effect on the Company's business. See
"Business--Company Strategy--Customer Strategy."

The Company's growth strategy assumes increased revenues from IXCs and end
users following the deployment of switches on the Company's networks and the
provision of switched access origination and termination services. In
addition, the Company competes in its markets with other CLECs for IXC
business. Accordingly, there is no assurance that the IXCs will continue to
increase their utilization of the Company's services, or will not reduce or
cease their utilization of the Company's services, either of which could have
a material adverse effect on the Company.

Furthermore, the Telecommunications Act establishes procedures under which
RBOCs can obtain authority to compete with the IXCs in the long distance
market. Due to the Operating Companies' dependence on business from IXCs, any
loss of market share by the IXCs could have a material adverse effect on the
Company.

Regulation and Risks of the Telecommunications Act. The Company is subject
to varying degrees of federal, state and local regulation. The Company is not
currently subject to price cap or rate of return regulation by the FCC, nor is
it currently required to obtain FCC authorization for the installation,
acquisition or operation of its network facilities. However, the FCC has
determined that nondominant carriers, such as the Company and the Operating
Companies, are required to file interstate tariffs on an ongoing basis. The
Telecommunications Act also requires the FCC to establish a subsidy mechanism
for universal telephone service to which the Company will be required to
contribute. The Operating Companies that provide intrastate services are also
generally subject to certification and tariff filing requirements by state
regulators and may also be subject to state reporting, customer service and
universal service requirements. Challenges to these tariffs and certificates
by third parties could cause the Company to incur substantial legal and
administrative expenses. In addition, under the Telecommunications Act,
provision of switched services by the Company could be subject to new
universal service and other federal regulatory requirements.

Although the Telecommunications Act eliminates legal barriers to entry, no
assurance can be given that changes in current or future regulations adopted
by the FCC or state regulators or other legislative or judicial initiatives
relating to the telecommunications industry would not have a material adverse
effect on the Company. In particular, the Company's belief that the entire $97
billion local exchange market may ultimately be open to

15
<PAGE>

CLEC competition depends upon favorable interpretation of the
Telecommunications Act, and the ability of the Company and the Operating
Companies to compete in these new market segments may be adversely affected if
incumbent LECs are granted greater pricing flexibility and other regulatory
relief that enables them to impose costs on potential competitors or otherwise
restrict the Company's ability to serve its customers and attract new
customers. In addition, the Telecommunications Act removes entry barriers for
all companies and could increase substantially the number of competitors
offering comparable services in the Company's markets. See "Regulation--
Overview" for more detailed information on the regulatory environment in which
the Company and the Operating Companies operate.

Need to Obtain and Maintain Permits and Rights-of-Way. There can be no
assurance that the Company or the Operating Companies, through Local Partners,
Adelphia or their own efforts, will be able to maintain existing permits and
rights-of-way or to obtain and maintain the other permits and rights-of-way
needed to develop and operate existing and future networks. In addition, the
Company and the Operating Companies may require pole attachment agreements
with incumbent LECs and electric utilities to operate existing and future
networks, and there can be no assurance that such agreements will be obtained
or will be obtainable on reasonable terms. Failure to obtain or maintain such
permits, rights-of-way and agreements could have a material adverse effect on
the Company's ability to operate and expand its networks. See "Business--
Operating Agreements--Fiber Lease Agreements."

The amount of lease payments could be affected by the costs the Local
Partners incur for attachments to poles, or use of conduit, owned by incumbent
LECs or electric utilities. Various state public utility commissions ("State
PUCs"), and the FCC are reviewing whether use of Local Partner facilities for
telecommunications purposes (as occurs when the Operating Companies lease
fiber optic capacity from Local Partners) should entitle incumbent LECs and
electric utilities to higher pole attachment or conduit occupancy fees. Such
increased fees could result in an increase in the amount of the lease payments
made by the Operating Companies to the Local Partners and could have a
significant impact on the profitability of the Operating Companies.

Control by Principal Stockholder. Adelphia owns approximately 89% of the
outstanding capital stock of the Company, with the remaining 11% owned by
certain of the Company's senior management (the "Management Shareholders").
Accordingly, Adelphia is able to control the vote on corporate matters
requiring shareholder approval, including, but not limited to, electing
directors, amending the Company's certificate of incorporation and approving
mergers or sales of substantially all of the Company's assets. In addition,
pursuant to a shareholders agreement, as amended, between the Company,
Adelphia and the Management Shareholders, Adelphia has the power to control
certain corporate transactions of the Company, including its ability to enter
into joint ventures and other business relationships, and Adelphia has the
right, under certain circumstances, to purchase the interests of the
Management Shareholders. As a result, the Company may be subject to the effect
of possible conflicts of interest arising from the relationship with Adelphia
in connection with the pursuit of business opportunities in the
telecommunications industry. Although directors of the Company who are also
directors of Adelphia have certain fiduciary obligations to the Company under
Delaware law, such directors are in positions that may create conflicts of
interest. There can be no assurance that any such conflict will be resolved in
favor of the Company. Three directors of Adelphia serve on the Special
Nominating Committee of the Board of Directors of the Company, which is
empowered to expand the number of seats on the Company's Board of Directors by
up to four and to fill the vacancies created thereby. In addition, Adelphia
has agreed to vote its shares of the Common Stock of the Company to elect the
Management Shareholders to the Company's Board of Directors. See "Certain
Relationships and Transactions" and "Principal Stockholders."

Rapid Technological Changes. The telecommunications industry is subject to
rapid and significant changes in technology. While the Company believes that
for the foreseeable future these changes will neither materially affect the
continued use of fiber optic telecommunications networks nor materially hinder
the Company's ability to acquire necessary technologies, the effect of
technological changes on the businesses of the Company cannot be predicted.
Thus, there can be no assurance that technological developments will not have
a material adverse effect on the Company.

16
<PAGE>

Dependence on Key Personnel. The success of the Company and its growth
strategy depends in large part on the Company's ability to attract and retain
key management, marketing and operations personnel. Currently, the Company's
businesses are managed by a small number of management and operating personnel
with certain other services, including financial and certain accounting
services, provided by Adelphia. There can be no assurance that the Company
will attract and retain the qualified personnel needed to manage, operate and
further develop its business. In addition, the loss of the services of any one
or more members of the Company's senior management team could have a material
adverse effect on the Company.

Anti-Takeover Provisions. The Company's Certificate of Incorporation and
Bylaws, the provisions of the Delaware General Corporation Law and the
Indenture with respect to the Senior Notes may make it difficult in some
respects to effect a change of control of the Company and replace incumbent
management. The existence of these provisions may have a negative impact on
the price of the Common Stock, may discourage third party bidders from making
a bid for the Company, or may reduce any premiums paid to stockholders for
their Common Stock. In addition, the Board has the authority to fix the rights
and preferences of and issue shares of the Company's Preferred Stock, which
may have the effect of delaying or preventing a change of control of the
Company without action by its stockholders.

The Company and its Operating Companies are subject to regulation by State
PUCs in the states in which they operate. Certain State PUCs have passed or
are considering passing regulations that would require an investor who
acquires a specified percentage of the Company's or the relevant Operating
Company's securities, to obtain approval to own such securities from such
State PUC. See "Regulation--State Regulation."

Lack of Dividend History. The Company has never declared or paid any cash
dividends on its Class A Common Stock or its Class B Common Stock (together,
the "Common Stock") and does not expect to declare any such dividends in the
foreseeable future. Payment of any future dividends will depend upon earnings
and capital requirements of the Company, the Company's debt facilities and
other factors the Board of Directors considers appropriate. The Company
intends to retain its earnings, if any, to finance the development and
expansion of its business, and therefore does not anticipate paying any
dividends in the foreseeable future. In addition, the terms of the Indenture
relating to the Senior Notes prohibits the payment of dividends. See "Dividend
Policy."

USE OF PROCEEDS

Except for the sale of the Warrant Shares upon the exercise of the Warrants,
the Company is not selling any of the Warrants or the Warrant Shares and will
not receive any of the proceeds from the sale of the Warrants and the Warrant
Shares by the Selling Securityholders. Any proceeds received by the Company
upon the exercise of the Warrants will be used for general corporate purposes.

CAPITALIZATION

The effect from the sale of the Warrant Shares upon exercise of the Warrants
will be approximately $6.0 thousand in gross proceeds to the Company.

DIVIDEND POLICY

The Company has no plans to pay dividends on the Common Stock. The Company
presently intends to retain earnings to reduce outstanding indebtedness and to
fund the growth of the Company's business. The payment of any future dividends
will be determined by the Board of Directors in light of conditions then
existing, including the Company's results of operations, financial condition,
cash requirements, restrictions in financing agreements, business conditions
and other factors. The ability of the Company to pay dividends is restricted
by covenants contained in the Indenture relating to the Senior Notes.

17
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data (except the unaudited information for
the fiscal years ended March 31, 1992 and 1993, and the six months ended
September 30, 1995 and 1996) are derived from, and should be read in
conjunction with, the audited Consolidated Financial Statements of the Company
and the related Notes thereto contained herein. The unaudited information for
the fiscal years ended March 31, 1992 and 1993 and the six months ended
September 30, 1995 and 1996 are derived from other Company information. All of
the following information should be read in conjunction with the Company's
Consolidated Financial Statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
COMPANY DATA (A): SIX MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
--------------------------------------------- -----------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- -------- -------- ------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Telecommunications
service and management
fee revenue........... $ -- $ 89 $ 417 $ 1,729 $ 3,322 $ 1,298 $ 2,277
Operating expenses:
Network operations..... 2 19 330 1,382 2,690 1,241 1,587
Selling, general and
administrative........ 209 921 2,045 2,524 3,084 1,365 2,191
Depreciation and
amortization.......... -- 30 189 463 1,184 528 1,581
------- ------- ------- -------- -------- ------- --------
Operating loss......... (211) (881) (2,147) (2,640) (3,636) (1,836) (3,082)
Gain on sale of
investment............ -- -- -- -- -- -- 8,405
Interest income........ -- -- 17 39 199 26 3,129
Interest expense and
fees.................. -- -- (2,164) (3,321) (6,088) (2,700) (13,277)
Equity in net loss of
joint ventures........ -- (194) (528) (1,799) (4,292) (1,642) (2,998)
Net loss............... $ (211) $(1,075) $(4,725) $ (7,692) $(13,620) $(6,074) $ (7,706)
Net loss per weighted
average share of
common stock.......... $ (0.01) $ (0.05) $ (0.24) $ (0.38) $ (0.68) $ (0.61) $ (0.73)
Weighted average shares
of common stock
outstanding........... 10,000 10,000 10,000 10,000 10,000 10,000 10,576
OTHER COMPANY DATA:
EBITDA (b)............. $ (211) $ (851) $(1,958) $ (2,177) $ (2,452) $(1,308) $ (1,501)
Capital expenditures
and Company
investments (c)....... 60 3,891 8,607 10,376 18,899 8,079 24,671
Cash used in operating
activities............ (184) (725) (2,121) (2,130) (833) (1,352) (2,092)
Cash used in investing
activities............ (60) (3,806) (8,607) (10,376) (18,899) (8,079) (18,093)
Cash provided by
financing activities.. 248 4,645 10,609 12,506 19,732 9,431 130,780
</TABLE>

(a) Financial Information for the Company and its consolidated subsidiaries.
As of September 30, 1996, 14 of the Company's networks were owned by joint
ventures in which it owns an interest of 50% or less, and for which the
Company reports its interest pursuant to the equity method of accounting
consistent with generally accepted accounting principles.

(b) EBITDA consists of net loss before interest, equity in net loss of joint
ventures, gain on sale of investment, income taxes, depreciation and
amortization for the periods presented. It is a measure commonly used in
the telecommunications industry and is presented to assist in
understanding the Company's operating results. However, it is not intended
to represent cash flow or results of operations in accordance with
generally accepted accounting principles. See the Company's Consolidated
Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.

18
<PAGE>

SUMMARY OPERATING DATA

The following summary operating data is unaudited information that
represents data for 100% of the Operating Companies' networks and is derived
from Company information. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Supplementary Operating Company
Financial Analysis." As of September 30, 1996, 14 of the Company's 18 networks
were 50% or less owned by the Company. The Company reports its interest in
such 50% or less owned networks pursuant to the equity method of accounting
consistent with generally accepted accounting principles. As a result, the
financial information set forth below is not indicative of the Company's
overall financial position and investors should not place undue reliance on
such information when considering an investment in the Warrants or the Warrant
Shares. The Company was organized in October 1991 and did not provide any
service through its Operating Companies until after Fiscal 1992.

<TABLE>
NETWORK DATA
(UNAUDITED)(A):
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
--------------------------------------- ----------------
1992 1993 1994 1995 1996 1995 1996
---- ------ ------- ------- -------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Network revenues....... $-- $ 195 $ 962 $ 3,056 $ 7,763 $ 3,350 $ 6,177
Operating expenses:
Network operations.... -- 504 789 1,946 4,871 1,937 3,308
Selling, general and
administrative........ -- 353 1,145 2,439 5,316 2,237 4,145
Depreciation and
amortization.......... -- 207 839 2,467 6,137 2,756 6,262
--- ------ ------- ------- -------- ------- -------
Operating loss......... -- (869) (1,811) (3,796) (8,561) (3,580) (7,536)
Net loss............... -- (948) (2,077) (4,569) (11,285) (4,445) (8,182)
OTHER OPERATING DATA:
EBITDA (b)............. $-- $ (662) $ (972) $(1,329) $ (2,424) $ (900) $(1,261)
Capital expenditures... -- 4,947 13,790 24,658 45,177 23,956 55,232
</TABLE>

(b) EBITDA consists of net loss before interest, equity in net loss of joint
ventures, gain on sale of investment, income taxes, depreciation and
amortization for the periods presented. It is a measure commonly used in
the telecommunications industry and is presented to assist in
understanding the Company's operating results. However, it is not intended
to represent cash flow or results of operations in accordance with
generally accepted accounting principles.

(c) Represents total property, plant and equipment (before accumulated
depreciation) of the networks, the NOCC and the Company. Excludes the $5.4
million (subject to post-closing adjustments) SONET ring fiber backbone
purchased by the Vermont Operating Company from Adelphia effective
September 30, 1996. See "Prospectus Summary--Recent Developments."

(d) Represents fiber lease financings with the respective Local Partners for
each network.

(e) Excludes networks under construction.

(f) LEC-CO collocated means that the Company has interconnected its network at
the LEC-CO.

(g) Represents Lucent 5ESS switches or remote switch modules which deliver
full switch functionality.

(h) Employees includes combined employees of the Operating Companies and the
Company.

19
<PAGE>

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

The following discussion and analysis should be read in conjunction with the
Company's audited Consolidated Financial Statements and the Notes thereto
appearing elsewhere in this Prospectus. Unless otherwise stated or the context
otherwise requires, the following information is as of September 30, 1996.

OVERVIEW

The Company, through its Operating Companies, provides a competitive
alternative to the telecommunications services offered by the incumbent LECs
in its markets. Since its inception in October 1991 through September 30,
1996, the Company experienced substantial growth, building from its original
two partnerships covering two networks to 14 Operating Companies and 18
networks. At September 30, 1996, 15 of these 18 networks were operational. The
Operating Companies' customers are principally small, medium and large
businesses and government and educational end users and resellers, including
IXCs. The Company believes that its strategy of utilizing Local Partners to
develop its networks has allowed the Company to build networks with greater
coverage, lower upfront and ongoing costs and superior service and
reliability.

As of September 30, 1996, the Company's Operating Companies were made up of
three wholly owned subsidiaries, one majority owned subsidiary, and ten joint
ventures (through which the Company has an interest in 14 networks) where the
Company owns 50% or less of the aggregate equity interests in such Operating
Companies. Results of majority owned subsidiaries are consolidated into the
Company's financial statements in this Prospectus. The Company's pro rata
share of the results of the Operating Companies where the Company owns 50% or
less and the South Florida Partnership, until the date of sale, are recorded
under the caption "Equity in net loss of joint ventures" in the Company's
Consolidated Financial Statements utilizing the equity method of accounting.
Correspondingly, the Company's initial investments in these Operating
Companies and the South Florida Partnership are carried at cost and are
subsequently adjusted for the Company's pro rata share of the Operating
Companies' and the South Florida Partnership's net losses, additional capital
contributions to the Operating Companies and the South Florida Partnership,
and distributions from the Operating Companies and the South Florida
Partnership to the Company. The Company is responsible for the design,
construction, management and operation of the networks owned by all of the
Operating Companies and receives management fees from the Operating Companies
for its management and network monitoring services. Management fees, which are
generally based on the Company's costs of providing such services, are
determined by Local Partner Agreements and vary depending upon the market.
Management fees are accounted for as revenues of the Company. To date, the
Company's principal source of revenues has been derived through management
fees from its Operating Companies, although in the future the Company expects
that wholly owned and majority owned Operating Companies' revenues will
represent an increasing proportion of the Company's revenue.

Since its inception, the Company, in conjunction with its Local Partners,
has made substantial investments in designing, constructing and enhancing the
Operating Companies' fiber optic networks. As of September 30, 1996, the
Company's networks had approximately 2,887 route miles, approximately 138,571
fiber miles and were connected to approximately 1,101 buildings in 15
operating networks. As of September 30, 1996, the Operating Companies had also
installed six switches or remote modules which serve six networks, and the
Company had built its NOCC in Coudersport, Pennsylvania, which provides for
remote control, monitoring and diagnosis of all of the Operating Companies'
networks. The Company believes it is the third largest CLEC in the United
States based upon route miles and buildings connected data made publicly
available by other CLECs. Funding for the development of the Operating
Companies has come from investments by the Company and the Local Partners as
well as from Fiber Lease Financings which enable the Company to finance the
building of fiber optic plant through long-term leases. Excluding investments
in the South Florida Partnership, the combined capital invested through
September 30, 1996 in the Operating Companies' networks, the NOCC and other
activities totaled approximately $198.5 million. Due to savings achieved in
the construction of fiber optic networks by working with Local Partners, the
Company believes that building a comparable level of network infrastructure
without Local Partners would require a substantially greater level of capital
investment.

20
<PAGE>

The Company believes that as a result of the Telecommunications Act, the
potential market for its services has expanded significantly. According to the
Company's analysis of FCC data and its knowledge of the industry, in the
markets where the Company's 18 networks are currently operating or are under
construction, the Company believes it has an addressable market of
approximately $5.1 billion annually, substantially all of which is currently
provided by the incumbent LECs. This addressable market estimate does not
include the market for enhanced data services (currently targeted by the
Company through its partnership with !NTERPRISE) or the market for interLATA
toll, which the Company has the ability to enter at its option. The Company
plans to deploy switches or remote switching modules in the balance of its
markets by mid-1997 in order to more fully address this potential market
opportunity. See "Business" and "Regulation."

RESULTS OF OPERATIONS

Six Months Ended September 30, 1996 in Comparison with Six Months Ended
September 30, 1995

Revenues increased 75% to $2.3 million for the six months ended September
30, 1996 from $1.3 million for the same period in the prior fiscal year.
Growth in revenues of $1.0 million resulted from continued expansion in the
number and size of Operating Companies and the resultant increase in
management fees of $0.7 million over the same period in the prior fiscal year
period. Revenues from majority and wholly-owned Operating Companies also
increased approximately $0.3 million as compared to same period in the prior
fiscal year due to increases in the customer base and the impact of
consolidation of the Nashville Operating Company during the current fiscal
quarter.

Network operations expense increased 28% to $1.6 million for the six months
ended September 30, 1996 from $1.2 million for the same period in the prior
fiscal year. Substantially all of the increase was attributable to the
expansion of operations at the NOCC, as well as the increased number and size
of the Operating Companies which resulted in increased employee related costs
and equipment maintenance costs.

Selling, general and administrative expense increased 61% to $2.2 million
for the six months ended September 30, 1996 from $1.4 million for the same
period in the prior fiscal year. Corporate and NOCC overhead costs increased
due to growth in the number of Operating Companies managed and monitored by
the Company.

Depreciation and amortization expense increased 199% to $1.6 million during
the six months ended September 30, 1996 from $0.5 million for the same period
in the prior fiscal year primarily as a result of increased amortization of
$0.5 million of costs incurred in connection with the issuance of the 13%
Senior Discount Notes and Warrants, and increased depreciation resulting from
higher capital expenditures at the NOCC and the wholly-owned Operating
Companies.

Interest income for the six months ended September 30, 1996 increased to
$3.1 million from $0.03 million for the same period in the prior fiscal year
as a result of interest income earned on investment of the proceeds of the 13%
Senior Discount Notes and Warrants.

Interest expense and fees increased 392% to $13.3 million during the six
months ended September 30, 1996 from $2.7 million for the same period in the
prior fiscal year. The increase was directly attributable to $10.9 million of
interest expense associated with the 13% Senior Discount Notes partially
reduced by lower affiliate interest expense due to decreased borrowings from
Adelphia.

Equity in net loss of joint ventures increased by 83% to $3.0 million during
the six months ended September 30, 1996 from $1.6 million for the same period
in the prior fiscal year as more nonconsolidated Operating Companies began
operations. The net losses of the Operating Companies for the six months ended
September 30, 1996 were primarily the result of revenues only partially
offsetting startup and other costs and expenses associated with design,
construction, operation and management of the networks of the Operating
Companies, and the effect of the typical lag time between the incurrence of
such costs and expenses and the subsequent generation of revenues by a
network.

21
<PAGE>

The number of nonconsolidated networks paying management fees to the Company
increased from 10 at September 30, 1995 to 11 at September 30, 1996. These
Operating Companies and networks under construction paid management and
monitoring fees to the Company, which are included in revenues, aggregating
approximately $1.5 million for the six months ended September 30, 1996, an
increase of approximately $0.7 million over the same period in the prior
fiscal year. The nonconsolidated Operating Companies' net losses, including
networks under construction, for the six months ended September 30, 1996
aggregated approximately $7.5 million.

Net loss increased from $6.1 million for the six months ended September 30,
1995 to $7.7 million for the same period in the current fiscal year. The
increase was primarily attributable to greater interest expense associated
with the 13% Senior Discount Notes, increased equity in the net losses of the
Company's joint ventures, and increased depreciation and amortization reduced
by higher interest income and the gain recognized for the sale of the
Company's investment in TCG of South Florida.

EBITDA decreased to $(1.5) million for the six months ended September 30,
1996 from $(1.3) million for the same period in the prior fiscal year.
Increased revenues from management fees, the Vermont Operating Company and the
consolidation of the Nashville Operating Company were more than offset by
increased operating costs. EBITDA consists of net loss before interest, equity
in net loss of joint ventures, gain on sale of investment, income taxes,
depreciation and amortization for the periods presented. It is a measure
commonly used in the telecommunications industry and is presented to assist in
understanding the Company's operating results. However, it is not intended to
represent cash flow or result of operations in accordance with generally
accepted accounting principles.

Fiscal 1996 in Comparison with Fiscal 1995

Revenues increased 92.1% to $3.3 million for the year ended March 31, 1996
("Fiscal 1996") from $1.7 million for the prior fiscal year. Approximately
$1.0 million of the increase resulted from continued expansion in the number
and size of Operating Companies and the resulting increase in management fees,
and $0.6 million of the increase resulted from the Company's first wholly
owned Operating Company which operates in the Vermont market (the "Vermont
Operating Company") generating revenues during the entire fiscal year.

Network operations expense increased 94.6% to $2.7 million in Fiscal 1996
from $1.4 million for the prior fiscal year. Approximately $0.8 million of the
increase was attributable to the Vermont Operating Company reporting expenses
relating to its operations for the entire fiscal year and $0.4 million was
attributable to the expansion of operations at the NOCC, including systems
upgrades.

Selling, general and administrative expense increased 22% to $3.1 million in
Fiscal 1996 from $2.5 million for the prior fiscal year. Of the increase,
approximately $0.4 million was attributable to corporate overhead increases to
accommodate the growth in the number of Operating Companies managed by the
Company, and $0.1 million was attributable to the full twelve-months of
operations at the Vermont Operating Company.

Depreciation and amortization expense increased 156% to $1.2 million in
Fiscal 1996 from $0.5 million for the prior fiscal year primarily as a result
of increased capital expenditures at the Vermont Operating Company and the
NOCC.

Interest expense and fees increased 83% to $6.1 million in Fiscal 1996 from
$3.3 million for the prior fiscal year. The increase was directly attributable
to increased borrowings from Adelphia which were used to fund investments in
Operating Companies and the South Florida Partnership, capital expenditures
and the Company's operations. All of the Company's interest expense was non-
cash and was added to amounts due to Adelphia.

22
<PAGE>

Equity in net loss of joint ventures increased by 139% to ($4.3) million in
Fiscal 1996 from ($1.8) million for the prior fiscal year as two more
nonconsolidated Operating Companies began operations. The net loss for the
nonconsolidated Operating Companies and the South Florida Partnership for the
year ended March 31, 1996 aggregated approximately ($14.5) million. The net
losses of the Operating Companies for the year ended March 31, 1996 were
primarily the result of revenues only partially offsetting startup and other
costs and expenses associated with the design, construction, operation and
management of the networks of the Operating Companies, and the effect of the
typical lag time between the incurrence of such costs and expenses and the
subsequent generation of revenues by a network.

The number of nonconsolidated networks paying management fees to the Company
increased from nine at March 31, 1995 to 12 at March 31, 1996. Such 12
networks paid management and monitoring fees to the Company aggregating
approximately $2.4 million for Fiscal 1996, an increase of approximately $1.1
million over Fiscal 1995.

Net loss increased to ($13.6) million for Fiscal 1996 from ($7.7) million
for Fiscal 1995. The increase was primarily attributable to greater interest
expense, increased equity in the net losses of the Company's joint ventures,
and increased depreciation and amortization, as noted above.

EBITDA decreased 13% to ($2.5) million in Fiscal 1996 from ($2.2) million
for the prior fiscal year. Increased revenues from management fees and the
Vermont Operating Company were more than offset by increased operating costs.

Fiscal 1995 in Comparison with Fiscal 1994

Revenues increased 315% from $0.4 million to $1.7 million from the year
ended March 31, 1994 ("Fiscal 1994") to the year ended March 31, 1995 ("Fiscal
1995"). Approximately $1.0 million of the increase in revenues resulted from
growth in the number of Operating Companies and the resulting management fees.
The number of nonconsolidated networks paying management fees to the Company
increased from three at March 31, 1994 to nine at March 31, 1995.
Approximately $0.2 million of the increase was due to the Vermont Operating
Company which commenced operations during Fiscal 1995.

Network operations expense increased 319% from $0.3 million in Fiscal 1994
to $1.4 million in Fiscal 1995. Approximately $0.8 million of the increase was
the result of the expansion of the Company's NOCC staff and technical
resources staff required to support an increasing number of Operating
Companies that were operating during Fiscal 1995 and the expansion of the
Vermont Operating Company staff.

Selling, general, and administrative expense increased 23% from $2.0 million
in Fiscal 1994 to $2.5 million in Fiscal 1995. The change was primarily due to
increases in accounting, regulatory and marketing personnel to support
increased management and monitoring operations and, to a lesser extent, to
additional personnel and related costs for the commencement of operations at
the Vermont Operating Company.

Depreciation and amortization expense increased by 145% from $0.2 million in
Fiscal 1994 to $0.5 million in Fiscal 1995. Approximately two-thirds of the
increase was attributable to the addition of telecommunications monitoring
equipment totaling $1.5 million and the expansion of the telecommunications
networks in the Company's wholly owned Operating Companies.

Interest expense and fees increased by 53% from $2.2 million in Fiscal 1994
to $3.3 million in Fiscal 1995. The increase was primarily due to the increase
in borrowings from Adelphia to fund investments in Operating Companies and the
South Florida Partnership, capital expenditures and the Company's operations.
All of the Company's interest expense was non-cash and was added to amounts
due to Adelphia.

Equity in net loss of joint ventures increased by ($1.3) million from ($0.5)
million in Fiscal 1994 to ($1.8) million in Fiscal 1995. The increase was
primarily due to the six nonconsolidated networks beginning operations in
Fiscal 1995, resulting in a total of nine nonconsolidated networks at year
end. The net loss for such

23
<PAGE>

nonconsolidated Operating Companies and the South Florida Partnership for the
year ended March 31, 1995 was approximately ($7.3) million. The net losses of
the Operating Companies for Fiscal 1995 were primarily the result of revenues
only partially offsetting startup and other costs and expenses associated with
the design, construction, operation and management of the networks of the
Operating Companies, and the effect of the typical lag time between the
incurrence of such costs and expenses and the subsequent generation of
revenues by a network. The nine nonconsolidated networks paid the Company an
aggregate of approximately $1.3 million in management and monitoring fees for
Fiscal 1995, an increase of $1.0 million over Fiscal 1994.

Net loss increased ($3.0) million from ($4.7) million in Fiscal 1994 to
($7.7) million in Fiscal 1995. This increase was primarily the result of the
increase in the Company's operating loss, greater interest expense and
increased equity in the net losses of the Company's joint ventures, as noted
above.

EBITDA decreased by $0.2 million or 10% from ($2.0) million in Fiscal 1994
to ($2.2) million in Fiscal 1995. This decrease was the result of increasing
expenses incurred in advance of new networks becoming operational, which more
than offset increased revenues.

SUPPLEMENTARY OPERATING COMPANY FINANCIAL ANALYSIS

The Company believes that working with Local Partners to develop markets
enables the Company to build larger networks in a rapid and cost effective
manner. In pursuit of this strategy, the Company currently has ten joint
ventures with Local Partners where the Company owns 50% or less of each
partnership or corporation. As a result of the Company's ownership position in
these joint ventures, a substantial portion of the Operating Companies' results
are reported by the Company on the equity method of accounting for investments
which only reflects the Company's pro rata share of net income or loss of the
Operating Companies. Because all of the assets, liabilities and results of
operations of the Operating Companies are not presented in the Company's
consolidated financial statements, financial analysis of these Operating
Companies based upon the Company's results does not represent a complete measure
of the growth or operations of the Operating Companies.

In order to provide an additional measure of the growth and performance of
all of the Company's networks, management of the Company analyzes a variety of
financial information including revenues, EBITDA and capital expenditures.
Revenues and EBITDA of the Operating Companies indicate the level of activity
in the Company's networks. Capital expenditures of the Operating Companies
along with network construction statistics, such as route miles and buildings
connected, indicate the extensiveness of the Company's construction and
expansion efforts in those markets. The financial information set forth below,
however, is not indicative of the Company's overall financial position and
investors should not place undue reliance on such information.

The Operating Companies have shown substantial growth in revenues since the
Company's inception in October 1991. Total combined revenues for the Operating
Companies have more than doubled each year since the Company's inception.

The increase in revenue during Fiscal 1995 as compared to Fiscal 1994 of
$2.1 million or 218% was due to the expansion of the Syracuse and Jacksonville
networks and the commencement of operations in the Vermont, Albany,
Binghamton, Richmond, Nashville and Wichita networks. Revenues during Fiscal
1996 of $7.8 million were $4.7 million or 154% higher than during Fiscal 1995
due to the expansion of the above mentioned networks and the initial
generation of revenues in the Buffalo and Louisville networks. Revenues
continued to expand in all markets during the six months ended September 30,
1996 as compared with the corresponding period in the prior year.

There can be no assurance that the Operating Companies will continue to
experience revenue growth at this rate, or at all. See "Risk Factors--Negative
Cash Flow and Operating Losses; Limited History of Operations." Furthermore,
there can be no assurance that the Company will be able to benefit from such
growth in revenues if such growth occurs. See "Risk Factors--Holding Company
Structure; Inability to Access Cash Flow."

24
<PAGE>

EBITDA decreased by ($0.3) million in Fiscal 1995 to ($1.3) million as
compared to ($1.0) million in Fiscal 1994. The decrease was primarily
attributable to operating losses in many of the networks as operations
commenced, particularly in Vermont, Buffalo, Richmond, Louisville and
Nashville, offset somewhat by increased EBITDA in the more established
Syracuse and Jacksonville markets. For Fiscal 1996, EBITDA decreased by ($1.1)
million to ($2.4) million from ($1.3) million in Fiscal 1995. The decrease was
primarily due to a continued increase in operating expenses in several
networks, including Vermont, Buffalo, New Brunswick, Harrisburg,
Charlottesville and Louisville, offset somewhat by increased EBITDA in the
Syracuse, Richmond, Nashville and Wichita networks.

The Operating Companies' capital expenditures for Fiscal 1995 and 1996 have
grown consistently, reflecting the addition of new networks and the expansion
and growth of existing networks. Capital expenditures for the quarter and six
months ended September 30, 1996 also increased substantially over the
respective prior periods. There can be no assurance, however, that the Company
and Operating Companies will continue to be able to fund the Company's
significant requirements for future capital expenditures of the Operating
Companies. See "Risk Factors--Significant Future Capital Requirements."

Supplementary Operating Company Financial Information by Cluster (unaudited)

<TABLE>
<CAPTION>
REVENUES
----------------------------------
SIX MONTHS
ENDED
SEPTEMBER 30,
FISCAL FISCAL FISCAL -------------
1994 1995 1996 1995 1996
------ ------ ------ ------ ------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Northeast.................................... $703 $1,393 $3,991 $1,723 $2,561
Mid-Atlantic................................. 4 267 735 307 812
Mid-South.................................... -- 44 473 191 515
Other Networks............................... 255 1,352 2,564 1,129 2,289
---- ------ ------ ------ ------
Total...................................... $962 $3,056 $7,763 $3,350 $6,177
==== ====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
EBITDA
----------------------------------------
SIX MONTHS
ENDED
SEPTEMBER 30,
FISCAL FISCAL FISCAL --------------
1994 1995 1996 1995 1996
------ ------- ------- ----- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Northeast.............................. $ 180 $ (183) $ (765) $(528) $ 258
Mid-Atlantic........................... (170) (308) (766) (293) (1,779)
Mid-South.............................. -- (605) (878) (280) (424)
Other Networks......................... (982) (233) (15) 201 684
----- ------- ------- ----- -------
Total................................ $(972) $(1,329) $(2,424) $(900) $(1,261)
===== ======= ======= ===== =======
</TABLE>

<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
---------------------------------------
SIX MONTHS
ENDED
SEPTEMBER 30,
FISCAL FISCAL FISCAL ----------------
1994 1995 1996 1995 1996
------- ------- ------- ------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Northeast........................... $ 5,629 $ 8,167 $ 6,978 $ 3,696 $10,192
Mid-Atlantic........................ 2,831 3,923 14,351 5,164 32,066
Mid-South........................... 1,591 4,002 7,321 4,425 6,190
Other Networks...................... 3,739 8,566 16,527 10,671 6,784
------- ------- ------- ------- -------
Total............................. $13,790 $24,658 $45,177 $23,956 $55,232
======= ======= ======= ======= =======
</TABLE>

25
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The development of the Company's business and the installation and expansion
of the Operating Companies' networks, combined with the construction of the
Company's NOCC, have resulted in substantial capital expenditures and
investments during the past several years. Capital expenditures by the Company
were $3.1 million, $2.9 million and $6.1 million for Fiscal 1994, Fiscal 1995
and Fiscal 1996, respectively and $3.3 million and $10.7 million for the six
months ended September 30, 1995 and 1996, respectively. Further, investments
made in the Company's nonconsolidated Operating Companies and the South
Florida Partnership by the Company were $5.5 million, $7.5 million and $12.8
million in Fiscal 1994, Fiscal 1995 and Fiscal 1996, respectively, and $4.8
million and $14.0 million for the six months ended September 30, 1995 and
1996, respectively. The Company expects that it will continue to have
substantial capital and investment requirements. The Company also expects to
have to continue to fund operating losses as the Company develops and grows
its business. See "Risk Factors--Significant Future Capital Requirements."

Through September 30, 1996, Adelphia had made loans and advances totaling
approximately $66.0 million, including accrued interest, in the Company and
$1.3 million in fiber network construction leased to certain Operating
Companies. During April 1996, the Company repaid $37.8 million of such loans
and advances. In addition, Local Partners have invested approximately $67.0
million as their pro rata investment in those networks. These amounts exclude
previous investments in the South Florida Partnership which were sold on May
16, 1996. These partners have also provided additional capital of $33.4
million for the construction of the Company's networks through the partnership
agreements by funding the fiber construction of the network and leasing the
fiber to the partnership under long-term, renewable agreements. In addition,
the Company used $30.8 million to fund its pro rata investment in the
networks, capital expenditures and operations. Collectively, Adelphia's and
the Company's partners' investments and the Fiber Lease Financings have
totaled $198.5 million from the Company's inception through September 30,
1996.

The Company has experienced negative cash flow since its inception. A
combination of operating losses, the substantial capital investments required
to build the Company's wholly owned networks and its state-of-the-art NOCC,
and incremental investments in the Operating Companies has resulted in
substantial negative cash flow. See "Risk Factors--Negative Cash Flow and
Operating Losses; Limited History of Operations." For the fiscal years ended
March 31, 1994, 1995 and 1996, cash used in operating activities totalled $2.1
million, $2.1 million and $.8 million, respectively, cash used in investing
activities totalled $8.6 million, $10.4 million and $18.9 million,
respectively, and cash provided by financing activities totalled $10.6
million, $12.5 million and $19.7 million, respectively. For the six month
periods ended September 30, 1995 and 1996, cash used in investing activities
totalled $8.1 million and $18.1 million, respectively. Cash provided by
financing activities totalled $9.4 million and $130.8 million, respectively,
for the six month periods ended September 30, 1995 and 1996. Prior to April
15, 1996, funding of the Company's cash flow deficiency was principally
accomplished through additional borrowings from Adelphia. Prior to April 15,
1996, interest and fees on this unsecured credit facility were based upon the
weighted average cost of unsecured borrowings of Adelphia. The average
interest rate charged for all periods was 11.3% through April 15, 1996
(excluding fees charged which were based on the amount borrowed) and 16.5% for
the period since April 16, 1996.

On April 15, 1996, the Company issued $329.0 million of 13% Senior Discount
Notes due April 15, 2003, and 329,000 Warrants to purchase an aggregate of
613,427 shares of its common stock, prior to adjustment for the
Recapitalization Event. See "Description of Capital Stock--Warrants." Proceeds
to the Company, net of discounts, commissions, and other transaction costs
were approximately $168.6 million. Such net proceeds were or are to be used to
fund the Company's capital expenditures, working capital requirements,
operating losses and its pro-rata investments in joint ventures, to pay $25.0
million of indebtedness owing to Adelphia and to make loans of $3.0 million to
certain key members of management. Proceeds from the Senior Notes and Warrants
were also used to repay amounts related to capital expenditures, working
capital requirements, operating losses and pro-rata investments in joint
ventures totaling $12.8 million incurred during the period from January 1,
1996 to April 15, 1996. These amounts had been funded during the same time
period through advances from Adelphia. As of April 15, 1996, approximately
$25.9 million of outstanding indebtedness owed to Adelphia was evidenced by an
unsecured subordinated note due April 16, 2003 (the "Adelphia Note"), that
accrued interest at 16.5%

26
<PAGE>

and was subordinated to the Senior Notes. Interest on the Adelphia Note is
payable quarterly in cash, through the issuance of identical subordinated
notes, or in any combination thereof, at the option of the Company. See
"Certain Relationships and Transactions." Interest accrued through September
30, 1996 on the Adelphia Note totaled $2.3 million.

On May 16, 1996, the Company completed the sale of its 15.7% partnership
interest in the South Florida Partnership to Teleport Communications Group
Inc. for an aggregate sales price of approximately $11.6 million resulting in
a pre-tax gain of approximately $8.4 million. Amounts related to the South
Florida Partnership included in the Company's investments and equity in net
loss of joint ventures as of the sale date and for the six months ended
September 30, 1996 were approximately $3.2 million and ($0.2) million,
respectively. As part of the transaction, the Company was released from its
covenant not to compete with respect to the South Florida market. The Company
plans to use the proceeds from the sale to continue to expand and develop its
existing markets, complete new networks under construction and enter
additional markets.

Effective September 30, 1996, the Company purchased approximately 280 miles
of SONET ring fiber backbone used by the Vermont Operating Company from
Adelphia for $5.4 million, Adelphia's historical cost for such assets, subject
to post-closing adjustments. Prior to such purchase, the Company had been
leasing such fiber backbone in the Vermont network from Adelphia at an annual
rate of approximately $1.0 million.

The competitive local telecommunication service business is a capital-
intensive business. The Company's operations have required and will continue
to require substantial capital investment for (i) the installation of
electronics for switched services in the Company's networks, (ii) the
expansion and improvement of the Company's NOCC and (iii) the design,
construction and development of additional networks. The Company plans to make
substantial capital investments and investments in Operating Companies in
connection with (i) the deployment of switches in all of its operating markets
by mid-1997, (ii) the expansion of existing networks and (iii) the
construction and development of new networks. Expansion of the Company's
networks will include the geographic expansion of the Company's existing
clusters and the development of new markets. The Company expects to continue
to build new networks in additional markets which the Company anticipates will
include additional networks with local partners. In addition, the Company may
acquire existing networks in the future. The Company estimates that it will
require substantial capital to fund anticipated capital expenditures, working
capital requirements and operating losses of the Company and to make
investments in existing and new Operating Companies. The Company expects that
it will have adequate resources to fund such short and long term liquidity
needs through the proceeds from the offering of the Senior Notes and Warrants,
anticipated vendor financings by the Operating Companies, internal sources of
funds, including cash flow from operations generated by the Company, and
additional debt or equity financings, as appropriate. See "Use of Proceeds".
There can be no assurance, however, as to the availability of funds from
internal cash flow or from the private or public equity or debt markets. See
"Risk Factors--Significant Future Capital Requirements." The Company recently
increased its interests in three other markets. See "Prospectus Summary--
Recent Developments."

In addition, the Company expects that pro rata investments by the Company
and its Local Partners as well as Fiber Lease Financings and anticipated
vendor financings will be adequate to fund the requirements of the Operating
Companies for capital expenditures, operating losses and working capital for
existing networks, networks currently under construction and certain of the
Company's planned additional markets during calendar years 1997 and 1998.
There can be no assurance as to the availability of funds from internal cash
flow, the Local Partners or other external sources or as to the terms of such
financings. In addition, the Indenture provides certain restrictions upon the
Company's ability to incur additional indebtedness. The Company's inability to
fund pro rata investments required for the Operating Companies could result in
a dilution of the Company's interest in the individual Operating Companies or
could otherwise have a material adverse effect upon the Company and/or the
Operating Companies.

On November 11, 1996, Adelphia and the Company announced that the Company
elected not to proceed with an initial public offering of its Class A Common
Stock at such time.

27
<PAGE>

IMPACT OF INFLATION

The Company does not believe that inflation has had a significant impact on
the Company's consolidated operations or on the operations of the Operating
Companies over the past three fiscal years.

28
<PAGE>

BUSINESS

INDUSTRY HISTORY

Deregulation, technological change and the increasingly information
intensive nature of the United States economy have significantly expanded the
role of telecommunications in business. In particular these changes have
accelerated the growth of certain aspects of the telecommunications market.
For example, industry sources estimate that voice traffic is growing at a rate
of approximately seven percent per year while data communications are growing
at three to five times that rate due to the increase in computerized
transaction processing and video applications, the movement to distributed
data processing and the rise of decentralized management structures, all of
which require the transmission of large amounts of information with speed,
accuracy and reliability.

The present structure of the U.S. telecommunications market resulted largely
from the divestiture of the "Bell System" in 1984 (the "Divestiture"). As part
of the Divestiture, seven RBOCs were created to offer services in
geographically defined areas called LATAs. The RBOCs were separated from the
long distance provider, AT&T, resulting in the creation of two distinct
industries: local exchange and interexchange (commonly known as long
distance). The Divestiture facilitated direct, open competition in the long
distance segment of the telecommunications market; however, it did not promote
competition in the local telecommunications market. Nonetheless, several
factors have served to promote competition in the local telecommunications
market and the emergence of competitive access providers ("CAPs"), including
(i) the incumbent LECs' monopoly position and regulated pricing structure,
which provided little incentive for incumbent LECs to reduce prices, improve
service or upgrade their networks, (ii) customer demand for an alternative to
the incumbent LEC monopoly, which demand grew rapidly and was spurred in part
by the development of competitive activities in the long distance market and
increasing demand for high quality, reliable services, (iii) the advancement
of fiber optic and digital electronic technologies (such as ATM and SONET),
which combined the ability to transmit voice, data and video at high speeds
with greatly increased capacity and reliability as compared to the incumbent
LECs' copper-based networks and (iv) the significant fees, called "access
charges," IXCs are required to pay to incumbent LECs for originating and
terminating calls on the incumbent LEC networks.

Established in the mid 1980s, CAPs were among the first competitors in the
local telecommunications market. CAPs provided non-switched services (i.e.,
dedicated special access and private line) by installing fiber optic
facilities connecting IXC POPs within a metropolitan area and, in some cases,
connecting end users (primarily large businesses and government agencies) with
IXCs. CAPs used the substantial capacity and economies of scale inherent in
fiber optic cable to offer customers service that was generally less expensive
and of a higher quality than could be obtained from incumbent LECs. In
addition, CAPs offered customers shorter installation and repair intervals and
improved service reliability in comparison to incumbent LECs.

The Company believes the passage of the Telecommunications Act on February
8, 1996 will substantially expand the market opportunities for the Company and
its networks. Based upon data compiled by the FCC, the Company believes that
the passage of the Telecommunications Act increases the potential market for
CLECs to approximately $97.1 billion annually due to the opening of the market
for all switched services which will permit CLECs to offer a full range of
local telecommunications services including local dial tone, local calls,
customer calling features and intraLATA toll services for both businesses and
residential customers. The Telecommunications Act provides for the removal of
legal barriers to entering the local exchange telecommunications market and
directs the incumbent LECs to negotiate with CLECs to resolve network and
competitive issues such as interconnection of CLEC and incumbent LEC networks,
reciprocal compensation for termination of calls originating on a competing
network, telephone number portability, access to rights-of-way and the
unbundling of network services. The Telecommunications Act may provide an
incentive for incumbent LECs to cooperate with local facilities-based
competitors, such as the Company, on interconnection issues because the
existence of an interconnection agreement with a facilities-based competitor
is a prerequisite for incumbent LEC entry into the long distance market unless
no such facilities-based competitor has requested

29
<PAGE>

access and interconnection in accordance with the terms of the
Telecommunications Act. According to industry data, revenues from switched
services, including local dial tone, represented 85% of local
telecommunications revenues in the United States in 1995. In the markets where
the Company's networks are currently operating or are under construction, the
Company believes it has an addressable market of approximately $5.1 billion
annually, substantially all of which is currently provided by the incumbent
LECs. This addressable market estimate does not include the market for
enhanced data services (currently targeted by the Company through its
partnerships with !NTERPRISE) or the market for interLATA toll, which the
Company has the ability to enter at its option.

THE COMPANY

The Company is a leading provider of local telecommunications services over
state-of-the-art fiber optic networks in selected markets within the United
States. Hyperion believes it is the third largest CLEC in the United States,
based upon route miles and buildings connected data made publicly available by
other CLECs. Each of the Company's 18 networks (including three currently
under construction) has been developed by partnering with a Local Partner with
operations in that region. This approach has allowed Hyperion to rapidly
construct high-capacity networks which generally have broader coverage of its
markets than those of other CLECs. The Company believes that the breadth of
its networks will allow it to originate and terminate a significant proportion
of its customers' local telephone calls over its own network, instead of
relying on the network of the incumbent LEC. The Company also believes that
working with a Local Partner significantly reduces the cost of constructing
its fiber optic networks through the utilization of existing cable or utility
facilities and by sharing construction costs with its Local Partners, who
usually upgrade the capacity of their cable or utility infrastructure during
construction of the telecommunications network.

The Company offers a broad array of integrated, high quality voice, video
and enhanced data communications services to end users such as small, medium
and large businesses, as well as to resellers, including IXCs. The Company
believes the design and breadth of its networks is a key competitive advantage
in attracting customers. As IXCs seek to offer their customers an integrated
switched local and long distance service offering, the Company believes IXCs
will increasingly rely on the local networks of CLECs such as the Company.
This is in part due to the IXCs' desire to minimize usage of the incumbent
LEC's network due to the expected entry of incumbent LECs into the long
distance marketplace. The Company believes its networks will be attractive to
IXCs, such as AT&T, MCI and Sprint, and other resellers because the Company's
networks are 100% fiber optic-based and generally offer the broadest market
coverage (other than that of the incumbent LEC). Hyperion believes its
services will also be attractive to end users because it can offer (i) lower
prices than the incumbent LEC, (ii) high-capacity fiber-optic network
connection directly to substantially all of its customers' premises in a
particular city, (iii) high quality customer service and reliability, and (iv)
brand name recognition through its alliances with its Local Partners and IXCs.

The Company plans to offer switched services, including customer dial tone,
in each of its 18 networks by mid-1997, and has already installed switches or
remote switching capability in six of its networks. According to industry
data, revenues from switched services, including local dial tone, represented
85% of local telecommunications revenues in the United States in 1995. The
Company also offers traditional access services to IXCs, and large customers,
which to date have represented the principal source of revenue for the
Company's networks. The Company currently offers enhanced data services to its
customers in four of its networks in a partnership with !NTERPRISE, a wholly
owned subsidiary of U S WEST, and plans to offer such services in all of its
networks. Enhanced data services currently include frame relay, ATM data
transport, business video conferencing, private line data interconnect service
and LAN connection and monitoring services. These services, along with the
long distance services provided by IXCs, enable the Company to provide an
integrated telecommunications service offering to network customers that is
more reliable, has a superior level of service and is priced lower relative to
that of the incumbent LEC in markets served by the Company's networks.

30
<PAGE>

(excluding the South Florida Partnership; see "Management Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources"). As of September 30, 1996, the Company's 18 operating
networks served 33 cities, and included approximately 2,887 route miles of
fiber optic cable and were connected to approximately 1,101 buildings. The
Company also has three networks which are currently under construction. The
Company intends to increase the density of its existing network clusters and
expand into new geographic markets or clusters through the Company's continued
construction of new networks with cable and utility partners.

Hyperion's ownership interest in its networks ranges from 19.7% to 100%. See
"--The Company's Markets." Consistent with the Company's goal of owning at
least a 50% interest in its Operating Companies, the Company has recently
entered into a non-binding letter of intent to consolidate its interests in
its networks in the State of New York. This transaction would increase its
weighted average ownership interest in its networks from 40% to 44% (based on
total fixed assets of the networks). See "Prospectus Summary--Recent
Developments." The Company reports its interest in joint ventures in which it
owns an interest of 50% or less pursuant to the equity method of accounting
consistent with generally accepted accounting principles. The Company manages
the day-to-day operation of all of the Company's networks, for which it
receives management fees which are based on the Company's costs.

COMPANY STRATEGY

The Company, through its networks, is a leading provider of integrated local
telecommunications services to small, medium and large businesses, government
and educational end users and resellers, including IXCs, in its markets. By
partnering with local cable television operators and utility companies, the
Company develops networks that will provide customers with greater market
coverage, lower costs and superior service. The Company's networks leverage
the IXCs' name recognition and reputation for quality and reliability and
existing customer base by becoming preferred suppliers for IXCs of local
telecommunications services in the Company's markets. The IXCs market their
long distance services in conjunction with the Company's local service
offerings to provide end users with a fully integrated telecommunications
service offering in all of the Company's operating markets. Principal elements
of the Company's network, market and customer strategies include:

The Company estimates that approximately 70% of its network construction
will be aerial and in many cases, where conduit is available, the Company can
achieve similar savings in underground construction. These estimates are based
upon historical experience, and there can be no assurance that the Company
will be able to achieve similar results in future efforts. These cost savings
are achieved primarily through the sharing of pole attachment costs ("Pole
Attachment Costs") and the elimination of costs of the engineering and
rearrangement of cables to prepare telephone poles for the attachment of new
fiber optic cable ("Make Ready Costs"). An analysis of the estimated cost
savings for the Company for one mile of aerial construction is set forth in
the following table.

31
<PAGE>

<TABLE>
<CAPTION>
WITH LOCAL WITH LOCAL WITHOUT
COSTS CABLE PARTNER UTILITY PARTNER LOCAL PARTNER
- ----- ------------- --------------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Make Ready Costs.................... $ --(a) $ --(b) $18.0(c)
Pole Attachment Costs............... 3.4(d) --(b) 5.0
Fiber Costs and Installation........ 8.0(e) 18.5(e) 8.0
Splicing Costs...................... 0.6(f) 0.6(f) 0.6
----- ----- -----
Total............................. $12.0(g) $19.1(g) $31.6
===== ===== =====
</TABLE>
- --------

(a) Assumes a fiber overlash of existing cable plant.

(b) Assumes placing fiber in the space allocated for the local utility partner
on the pole.

(c) Assumes an average cost of $200 per pole, 40 poles per mile, to move the
telephone and cable television wires in the space allocated for
communications providers on the pole and the replacement of two poles per
mile.

(d) Assumes the payment of a pro rata portion (approximately 33%) of such
costs by the Local Partner with respect to capacity to be available for
such partner's use.

(e) Represents the cost of the Operating Company's fiber and its installation
on the pole.

(f) Represents the cost of cutting and integrating new fiber components.

(g) In the above analysis, this would be the amount amortized by an applicable
fiber lease financing between an Operating Company and its Local Partner.

Create Additional Partnerships with Utility Companies. The Company believes
that a significant proportion of the networks the Company constructs in the
future will be through partnerships with utility companies. Utility companies
have a number of features which make them particularly attractive as partners
for the Company, including (i) contiguous and broad geographic coverage with
extensive conduits and rights-of-way in both business and residential areas;
(ii) significant access to capital; (iii) existing relationships with business
and residential customers; and (iv) a reputation for reliability and quality
customer service. The Company believes that it is an attractive partner for
utility companies because it builds large metropolitan networks which are
similar to those of the utility company and because it can offer utility
companies a significant stake in its networks, both from a financial and
operational perspective.

Build Broad Network Coverage. The Company intends to build substantially
larger networks than the networks of the CLECs it competes with in its
markets. As of September 30, 1996, in all of the markets in which the Company
and its networks operate, management believes that the Company has the
broadest network coverage in terms of route miles of any of its CLEC
competitors. The Company believes that expanded network coverage will enable
the Company to (i) provide broader and more reliable coverage for network
customers, (ii) carry a greater amount of traffic on its own networks rather
than on the networks of other carriers thereby increasing the Company's
revenues and profit margins, (iii) increase the potential market available to
the Company due to the greater number of buildings, LEC-COs and customers that
the Company's networks can service, (iv) increase the attractiveness of the
Company's networks to IXCs, cellular providers and new telecommunications
providers such as PCS operators that need wide backbone coverage, (v) offer
services in areas where there are fewer potential CLECs with facilities and
(vi) leverage the fixed cost structure of the Company's networks, particularly
with regard to network electronics such as switches.

Expand through Development of Network Clusters. The Company's networks are
located primarily in the eastern half of the United States. The Company
expects to continue to focus on this region due to the eastern location of the
Company's existing networks and the Company's NOCC and headquarters. The
Company also believes that the eastern half of the United States, particularly
the Northeast, has greater concentrations of large business, government and
educational end users and telecommunications traffic. The Company intends to
build on its extensive network size by expanding its existing networks into
nearby areas and establishing new networks in close proximity to existing
ones. Management believes that there are significant operating and marketing

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advantages to locating its networks in clusters. Clustering enables the
Company to (i) take advantage of economies of scale in management,
construction, network operations and sales and marketing, (ii) reduce capital
expenditures by optimizing the networks' switching capacity through the use of
remote switch capacity in nearby cities, (iii) cost-effectively offer services
to smaller markets which are adjacent to its networks and in which the
Company's networks are less likely to face strong competition from incumbent
LECs and other CLECs and (iv) increase the networks' ability to offer highly
reliable, end-to-end connectivity on a regional basis. The Company also
believes that creating regional networks will enable the Company to gain a
greater share of high margin long distance transport traffic.

Leverage Strategic Relationships with IXCs. The Company, through its
networks, provides customers with an integrated, one-stop shopping approach to
their telecommunications needs through its strategic relationships with IXCs
such as AT&T, MCI, Sprint, WorldCom and others. The goal of these
relationships is for the Company's networks to offer their local services in
conjunction with the long distance services of these IXCs. Management believes
that working in partnership with IXCs enables the Company to (i) utilize
extensive market information from the IXCs regarding traffic patterns and
building requirements to more optimally construct and extend its networks,
(ii) work closely with IXC account teams to provide an integrated service
approach to end users, (iii) increase market penetration by capitalizing on
the IXCs' name recognition and (iv) lower sales and marketing costs by
utilizing the extensive marketing resources and salesforce of the IXCs to
market the networks' products and services. In pursuing this strategy, the
Company has entered into a national service agreement with AT&T pursuant to
which the Company, through its networks, will be an AT&T preferred supplier of
dedicated special access and switched access transport services. The Company
has also passed AT&T's Switch Network Validation test.

Expand Enhanced Service Offerings. Four of the Company's networks operate in
partnership with !NTERPRISE, a leading, nationwide network integrator that
designs, develops and deploys state-of-the-art data networks (including both
network services and equipment) to support and enhance the information systems
with which the customers of the !NTERPRISE Partnerships operate their
businesses. !NTERPRISE co-markets enhanced services, including frame relay,
ATM data transport, business video conferencing, private line data
interconnect service and LAN connection and monitoring services to the
networks' customers in the networks' respective markets through its
partnerships with the Company's networks. The Company believes that the
partnerships with !NTERPRISE provide the opportunity to offer network
customers a full complement of enhanced services more rapidly and without the
Company incurring the cost and overhead of establishing its own nationwide
enhanced services marketing, sales and installation effort. The Operating
Companies intend to enter into additional agreements with !NTERPRISE in all of
the Company's existing networks and may enter into agreements with other
service integrators in the future.

COMPANY SERVICES

The Company currently offers traditional access services to all of its
customers. The Company has installed six switches or remote switching modules,
and plans to offer switched services, including dial tone, in its 18 networks
by mid-1997. The Company currently offers enhanced data services in four
networks, and plans to offer these services in all of its networks.

Traditional Access Services

Special Access and Private Line Services. Non-switched dedicated
connections, including high capacity interconnections between (i) POPs of an
IXC, (ii) the POPs of different IXCs, (iii) large end users and their selected
IXCs and (iv) different locations of particular customers. These services are
billed at a flat, non-usage sensitive, monthly rate.

Collocated Special Access Services. A dedicated line carrying switched
transmissions from the IXC POP, through the LEC-CO to the end user.

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Switched Access Transport Services. A dedicated line carrying switched
transmissions from the LEC-CO to an IXC POP.

Long Distance Transport Services. Non-switched, high capacity intraLATA
services sold on a wholesale basis to IXCs and cellular and PCS operators.

Switched Services

Local Exchange Services. Switched services providing dial tone to business
customers, as well as intraLATA toll.

Long Distance Services. Switching and transport of interexchange traffic,
including voice, data and video billed on a minutes-of-use basis. The Company
currently offers these services to its customers in conjunction with IXCs.

Enhanced Data Services

The Company and the Operating Companies currently offer, or intend to offer,
their customers a broad array of high bandwidth, enhanced data services,
including frame relay, ATM transport services, business Internet access and
high speed video conferencing. Operating Companies currently offer some of
those services to customers in four markets through partnerships with
!NTERPRISE, a wholly owned subsidiary of U S WEST, and the Company plans to
offer such services in all of its markets.

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<PAGE>

THE COMPANY'S MARKETS

Overview

The Company currently has 18 networks (including three under construction).
The networks are owned by the Operating Companies, ten of which are Operating
Partnerships and four of which are Operating Corporations. Three of the
Operating Corporations are wholly owned subsidiaries of the Company. The
Company manages and operates these networks through a combination of local
management, the Company's headquarters and NOCC in Coudersport, Pennsylvania,
and the Company's marketing offices in Pittsburgh, Pennsylvania. The following
table describes the Company's current networks:

(a) The Company has entered into a non-binding letter of intent with Time
Warner to increase its ownership interest in the Buffalo network to 50%
and in the Syracuse network to 100%, and to eliminate its ownership
interests in and management responsibility for the Albany and Binghamton
networks. See "Prospectus Summary--Recent Developments."

(b) Refers to the date on which (i) the network is connected to at least one
IXC POP; (ii) the network is capable of accepting traffic from IXCs and
end users; (iii) the Company's central office is fully functional and (iv)
the initial network SONET fiber rings have been completed.

(d) Adelphia or its affiliates lease fiber capacity to the Operating Companies
in these networks.

(e) The interests in the Morristown and New Brunswick networks are owned by
one Operating Company. Sutton Capital Associates also owns a minority
interest in the Operating Company.

(f) The Company's interest in these networks has recently changed. See
"Prospectus Summary--Recent Developments."

(g) The interests in the Lexington and Louisville networks are owned by one
Operating Company.

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<PAGE>

CLUSTER STATISTICS(A)

<TABLE>
<CAPTION>
SIX MONTHS
ROUTE FIBER BUILDINGS ENDED SEPTEMBER 30, 1996
CLUSTER MILES MILES CONNECTED VGES(B) REVENUES
- ------- ----- ------- --------- ------- ------------------------
<S> <C> <C> <C> <C> <C>
Northeast............... 1,084 52,054 294 101,952 $2,561
Mid-Atlantic............ 786 37,714 309 65,664 812
Mid-South............... 364 17,472 201 39,264 515
Other Networks.......... 653 31,331 297 109,200 2,289
----- ------- ----- ------- ------
Total................. 2,887 138,571 1,101 316,080 $6,177
===== ======= ===== ======= ======
</TABLE>
- --------

(a) Non-financial information does not include networks under construction.

(b) Voice grade equivalents circuits.

OPERATING AGREEMENTS

Generally, subsidiaries of the Company enter into partnership agreements with
Local Partners to take advantage of the benefits of building networks in
conjunction with local cable television or utility operators. Typically
Operating Partnerships are formed and operated pursuant to three key
agreements: (i) a partnership agreement between the Company or one of its
wholly owned subsidiaries and a cable operator or utility company (the "Local
Partner Agreement"); (ii) a fiber capacity lease agreement between the Local
Partner and the Operating Partnership (the "Fiber Lease Agreement"); and (iii)
a management agreement between the Operating Partnership and the Company or one
of its subsidiaries (the "Management Agreement"). Four of the Operating
Companies have also entered into agreements with !NTERPRISE, a wholly owned
subsidiary of U S WEST, to co-market enhanced services.

The following chart summarizes the allocation of responsibilities and certain
payments to be made under the Local Partner Agreements, Fiber Lease Agreements
and Management Agreements.

LOGO

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Local Partner Agreements

Each Local Partner Agreement establishes the structure of the applicable
Operating Partnership by determining, among other things, the partner's
capital contribution requirements, capital structure, purpose and scope of
business activities, transfer restrictions, dissolution procedures, duration
and competition restrictions, as well as the voting and buy/sell rights and
rights of first refusal of the partners of the Operating Partnership.

Ownership and Capital Contributions. The initial capital contributions and
percentage of ownership of the Operating Partnerships vary. Some of the Local
Partner Agreements establish maximum capital contributions such that each
partner's ultimate aggregate capital contribution is determined at the
Operating Partnership's inception. Initial capital contributions are generally
paid on an installment basis as determined by the management committee of the
Operating Partnership, which is comprised of representatives of each partner.
Additional capital contributions in excess of the initial capital contribution
may be required in several Local Partner Agreements, but generally either must
be initiated by the manager of the Operating Partnership or approved by at
least a majority vote of the management committee. Generally, the percentage
of ownership is also fixed at the Operating Partnership's inception. Absent an
agreement by the partners, generally, the only circumstances that result in
the dilution of such partner's ownership interest are a partner's failure to
make a capital contribution or its failure to exercise a right of first
refusal.

Matters Requiring a Vote. Most partner votes of an Operating Partnership
require only a majority vote; however, a unanimous vote of the partners is
required for, among other things, expansion of the scope of the business
activities in the defined business area, admission of additional partners and
merger or consolidation with any other entity if the Operating Partnership is
not the surviving entity.

Distributions. Generally, the Local Partner Agreements allow for
distributions to the partners; however, the Local Partner Agreements vary with
regard to the procedure for determining if, when and how much of a
distribution should be made. In one Local Partner Agreement, the Company,
through its affiliate, controls such determinations. In the remaining Local
Partner Agreements, the partners or the partnership's managing committee makes
such determinations by either majority, approval or unanimous consent. All
distributions are required to be made in proportion to each partner's
percentage interest in the partnership.

Transfer of Ownership. The Local Partner Agreements generally prohibit the
transfer of partnership interests, including most changes in control.
Generally, transfers of entire partnership interests to subsidiaries of a
partner's parent corporation and the sale or disposition of all or
substantially all of the stock or assets of a partner's parent are expressly
permitted in the typical Local Partner Agreement.

Rights of First Refusal; Buy/Sell Agreements. The partners of most of the
Operating Partnerships also retain certain rights of first refusal and
buy/sell rights. See "Risk Factors--Risks Associated with Joint Ventures."
Generally, after a specified period of time, usually three to six years after
the inception of the Operating Partnership, either partner may transfer its
interest to an unrelated third party if such partner first offers its interest
to the other partner at the same terms and the other partner elects not to
purchase the interest. The right of first refusal usually requires that the
selling partner sell all, and not less than all, of its partnership interest
pursuant to an offer by a bona fide third party. The selling party must first
give the other partners the opportunity to purchase (on a pro rata basis) the
interest at the same price and under the same terms as the third party's
offer.

Several of the Local Partner Agreements set forth rights of first refusal in
connection with the sale of cable television systems. These provisions give
partners the right to sell all of their partnership interests in conjunction
with the sale of all or substantially all of the assets of, or controlling
interest in, the cable television systems operated by the selling partner or
its affiliates in the defined business area, on any terms and conditions
agreed to among the selling partners, its affiliates and the purchaser;
provided, however, that if a partner elects to sell its interest in the
partnership to an entity that, at the time of the potential sale, is engaged
in a competitive business in the business area, the remaining partner
generally has a right of first refusal to purchase the selling partner's

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<PAGE>

interest at a price and terms comparable to the offer made by the competitor.
In addition, in most of the Operating Partnerships, either partner can, after
a specified period of time, usually five years after the inception of the
partnership, make an offer to the other partner(s) to sell its own interest.
Within 30 days of submitting a price which generally must be based on a
written third party valuation of the partnership interest, the other partner
must respond to the offer indicating its election to either accept the offer
to buy or sell at the offered price. Certain partners in two of the
partnerships have the right after a specified period of time to put their
interest in the respective partnership (i) to the other partners at an amount
equal to the fair market value of such partner's interest pursuant to one
agreement and (ii) to the Company at an amount equal to the partner's capital
contributions plus interest less any distributions pursuant to the other
agreement.

Term. Most of the Operating Partnerships were created in the last three and
half years and have a duration of 10 to 25 years unless earlier dissolved. Two
of the Local Partner Agreements contain provisions whereby the respective
Local Partner can terminate its interest, at such Local Partner's sole
discretion, prior to 2003. See "Risk Factors--Risks Associated with Joint
Ventures." Generally, each partner and certain of its affiliates are
restricted from competing with the Operating Partnership in the defined
business area so long as the partner is a partner plus two or three years
thereafter.

Fiber Lease Agreements

Generally, the Operating Partnerships lease fiber optic capacity from their
Local Partners. In some instances, the Operating Partnerships lease existing
fiber optic capacity and in other instances, the Operating Partnerships
request the Local Partners to construct new fiber optic capacity. In many
cases, Local Partners upgrade the capacity of their cable or utility
infrastructure, and as a result, share construction costs equally with the
Operating Partnership. Monthly lease payments in both instances are based on
the amortization of the Operating Partnership's share of the Local Partner's
cost of construction and material costs over the term of the Fiber Lease
Agreement. Because construction and material costs are amortized over the then
current term of the Fiber Lease Agreement, it is possible for the amount of a
monthly lease payment to be significantly lower during a renewal term unless
the construction of additional fiber optic cable is scheduled for such renewal
term. Typically, the amount of the lease payments in a renewal period equals
the amount of monthly maintenance costs for the leased fiber optic cable.

Each of the Fiber Lease Agreements is in its initial term. The initial terms
vary from five to 25 years in length. The Fiber Lease Agreements contain
various renewal options. Generally, either party can terminate the Fiber Lease
Agreement at the end of the then current term if the terminating party
provides prior written notice to the other party. Several of the Fiber Lease
Agreements contain termination rights which provide the lessor with the option
to terminate the lease if the lessor becomes subject to telecommunications
regulation, an action is brought against the lessor challenging or seeking to
adversely modify the lessor's continued validity or authority to operate,
legal or regulatory determination renders it unlawful or impossible for the
lessor to satisfy its obligations under the lease or in case of an imposition
of public utility or common carrier status on the lessor as a result of its
performance of the lease.

Throughout the term of the Fiber Lease Agreements and thereafter, title to
the fiber optic cable remains with the Local Partner. Similarly, the Operating
Partnerships retain title to all of their own electronics and switches that
become a part of the network. A Local Partner cannot sell the fiber subject to
the Fiber Lease Agreement to a third party unless its obligations under the
Fiber Lease Agreement are assumed by the third party.

The amount of the lease payments could be affected by the costs the Local
Partners incur for attachments to poles, or use of conduit, owned by incumbent
LECs or electric utilities. Various State PUCs and the FCC are reviewing
whether use of Local Partner facilities for telecommunications purposes (as
occurs when the Operating Companies lease fiber optic capacity from Local
Partners) should entitle incumbent LECs and electric utilities to higher pole
attachment or conduit occupancy fees. Such increased fees could result in an
increase in the amount of the lease payments made by the Operating Companies
to the Local Partners.

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<PAGE>

Management Agreements

Generally, the Company or a wholly owned subsidiary of the Company provides
the Operating Partnerships with the following services pursuant to the
Management Agreement for a fee based on the Company's cost of providing such
services: general management, monitoring, marketing, regulatory processing,
accounting, engineering, designing, planning, construction, maintenance,
operations, service ordering and billing. The term of the typical Management
Agreement is three or five years and automatically renews for continuous one-
year periods unless one party provides the other with written notice that it
intends to terminate the agreement.

Enhanced Data Services Agreements

Four of the Operating Companies have entered into partnerships with
!NTERPRISE, a wholly owned subsidiary of U S WEST (the "!NTERPRISE
Partnerships"), in order to provide enhanced services such as frame relay, ATM
data transport, business video conferencing, private line data interconnect
service and LAN connection and monitoring services. The partners in the
!NTERPRISE Partnerships each have a 50% ownership interest and are required to
contribute equal amounts in order to retain their shares. The business area
serviced by the !NTERPRISE Partnerships is generally the same as that serviced
by the applicable Operating Company. The partners and their respective
affiliates are also prohibited from competing for as long as the partners are
partners plus two years thereafter. In addition, the partners have a right of
first refusal with regard to the sale of partnership interests and, under
certain circumstances, may put their interest to the !NTERPRISE Partnership.
Generally, the !NTERPRISE Partnerships have a 20 year duration.

AT&T CERTIFICATION

AT&T has established a certification process called Operational Readiness
Testing ("ORT") in order to determine whether a supplier's network, systems
and processes are capable of providing a level of service which meets AT&T
standards. ORT is a lengthy process comprised of the following components: (i)
Operational Readiness Assessment ("ORA"), (ii) Network Validation Testing
("NVT") and (iii) Switch Network Validation Testing ("SNVT"). CLECs must pass
AT&T's ORT for access services in order to provide access services to AT&T and
AT&T's ORT for switched services in order to provide switched services to
AT&T. The Company has passed AT&T's ORA, NVT and SNVT.

SALES AND MARKETING

The Company targets its network sales and marketing activities at resellers,
including IXCs, and business, government and educational end users. The
Company and the Operating Companies currently have 45 local sales
representatives and eight national account representatives. The Company's
primary reseller customers are the major IXCs as well as smaller and regional
IXCs; however, the Company also targets other resellers, such as PCS, cellular
and local distance resellers. The Company's networks offer their services in
accordance with tariffs filed with the FCC for interstate services and state
regulatory authorities for intrastate services. The Operating Companies are
classified as non-dominant carriers by the FCC and therefore have substantial
pricing flexibility and in many cases may enter into customer and product
specific agreements.

Resellers

Resellers utilize the Operating Companies' services primarily as a local
component of their own service offerings to end users. In many cases, the
Company works in conjunction with IXCs when marketing to these end users in
order to leverage the name recognition, marketing reputation and resources of
IXCs.

The Company has national supplier agreements with all of the major IXCs. The
Company believes it can effectively provide IXCs with a full complement of
traditional access services as well as switched services. Factors that
increase the value of the Company's networks to IXCs include reliability,
state-of-the-art technology, route diversity, ease of ordering and customer
service. The Company also generally prices the services of an Operating
Company at a discount relative to the incumbent LEC. In order to further
complement the services

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<PAGE>

provided to the IXCs, the Company integrates its networks with IXC networks to
enable the IXC to (i) access service, billing and other data directly from the
Company and (ii) electronically send automated service requests to the
Company.

An important component of the Company's strategy is to work with major IXCs
to provide local services which the IXC can integrate with its long distance
offering, and thereby provide a single source for the customers'
telecommunications needs. The Company believes this strategy will provide
greater access to the IXCs' large customer base and enable the Operating
Companies to leverage the IXCs' name recognition and reputation for
reliability and quality. In pursuing this strategy, the Company has entered
into the National Service Agreement with AT&T pursuant to which the Company
through its networks will be an AT&T preferred supplier of dedicated special
access and switched access transport services. The National Service Agreement
requires the Company to provide such services to AT&T at a discount from the
tariffed or published LEC rates. See "--AT&T Certification."

The Company currently utilizes national account representatives to market to
IXC customers since the major IXCs have established national or regional
groups to manage and coordinate their purchasing of access services. These
groups assess CLECs not only upon price, quality, service and ease of
provisioning in a particular market, but also upon size, scope of operations
and financial stability in order to maximize the leverage of their CLEC
relationships. The Company focuses on serving the Operating Companies' IXC
customers in all of the Company's markets with a view to establishing national
preferred vendor relationships. The terms and conditions applicable to
services ordered by IXCs are generally specified in agreements under which
some services can be terminated by the IXC on 60 days or less notice.

End Users

The Company targets end users which include small, medium and large
businesses as well as government and educational institutions. Each Operating
Company works in conjunction with IXCs to offer an integrated package of local
and long distance service offerings to end users. Initially, the Operating
Company offers high quality access services to these end users in combination
with an IXC's long distance offerings. Building on its success with the end
users, the Operating Company attempts to increase the size and number of
service offerings it provides by working with customers to analyze the
customers' local telecommunications needs. In particular, the typical
Operating Company offers end users a variety of services, including local dial
tone, frame relay, ATM transport, business video conferencing and other
services. The Company believes that, based upon the Operating Companies'
reputation developed in conjunction with major IXCs, the Operating Companies
will be able to systematically increase their share of the end users'
telecommunications expenditures. The Company believes the networks will be
able to compete for end users' needs based upon price, reliability, product
diversity, service and custom solutions to end user needs. A significant
component of an Operating Company's reliability will be its ability to offer
customers end-to-end SONET ring construction for many localized applications.
The Operating Companies' construction of SONET rings combined with the
Company's large network size will enable the Operating Companies to offer
fiber optic coverage superior to the incumbent LEC in its markets.

End users are currently marketed through Company direct sales
representatives in each market. The national sales organization also provides
support for the local sales groups and develops new product offerings and
customized telecommunications applications and solutions which address the
specific requirements of particular customers. In addition, the Company
markets the Operating Companies' products through advertisements, media
relations, direct mail and participation in trade conferences. End users
typically commit to a service agreement for a term of three to five years
which is either renegotiated or automatically converted to a month-to-month
arrangement at the end of the contract term.

Special Purpose Networks

The Company develops special purpose networks in conjunction with the
Operating Companies in order to meet specific customer network requirements.
To date, these special purpose networks have included

40
<PAGE>

construction of IXC backbone networks, campus networks, private carriage
networks and other similar network applications. The terms and conditions for
these special purpose networks are generally specified in agreements with
three to five year terms which automatically renew on a month-to-month basis.
In addition, special customer networks are normally constructed with excess
fiber bandwith capacity, which allows the Company to make additional capacity
available to other end users.

NETWORK DEVELOPMENT AND DESIGN

Prior to any network construction in a particular market, the Company's
corporate development staff reviews the demographic, economic, competitive and
telecommunications demand characteristics of the market. These characteristics
generally include market location, the size of the telecommunications market,
the number and size of business, educational and government end users and the
economic prospects for the area. In addition, the Company also carefully
analyzes demand information provided by IXCs, including demand for end user
special access and volume of traffic from the LEC-CO and the IXC POPs. The
Company also analyzes market size utilizing a variety of data, including
available estimates of the number of interstate access and intrastate private
lines in the region, which is available from the FCC.

If a particular market targeted for development is deemed to have
sufficiently attractive demographic, economic, competitive and
telecommunications demand characteristics, the Company's network planning and
design personnel, working in conjunction with the Company's Local Partner,
Adelphia, or one of Adelphia's affiliates, design a large regional network
targeted to provide access to the identified business, educational and
government end user revenue base and to the IXC POPs and the LEC-COs in the
geographic area covered by the proposed network.

The actual network design is influenced by a number of market, cost and
technical factors including:

. Availability and ease of fiber deployment

. Location of IXC POPs

. Density of telecommunications revenue based upon IXC information

. The Company's market information

. Cost of construction

The objective of the network design is to maximize revenue derived from
service to IXC POPs, LEC-COs and important customers in consideration of
network construction costs. In most cases, the Local Partner bears the costs
of construction for the required fiber, retains ownership of the fiber and
leases the fiber to the Operating Company. The fiber lease costs are
determined by amortizing the Operating Company's portion of the Local
Partner's cost of construction over the term of the Fiber Lease Agreement at
an assumed interest rate. This structure generally allows the Operating
Company to better match its capital costs to cash flows. See "--Operating
Agreements--Fiber Lease Agreements."

NETWORK CONSTRUCTION

The Company's networks are constructed to cost-effectively access areas of
significant end user telecommunications traffic, as well as the POPs of most
IXCs and the majority of the LEC-COs. The Company establishes with its Local
Partner or Adelphia general requirements for network design including,
engineering specifications, fiber type and amount, construction timelines and
quality control. The Company's engineering personnel provide project
management, including contract negotiation and overall supervision of the
construction, testing and certification of all facilities. The construction
period for a new network varies depending upon the number of route miles to be
installed, the initial number of buildings targeted for connection to the
network, the general deployment of the network and other factors. Networks
that the Company has installed to date have generally become operational
within six to ten months after the beginning of construction.

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NETWORK OPERATING CONTROL CENTER

In Coudersport, Pennsylvania, the Company has built a NOCC that is equipped
with state-of-the-art system monitoring and control technology. The NOCC is a
single point interface for monitoring all of the Company's networks and
provisioning all services and systems necessary to operate the networks. The
NOCC currently supports all of the Company's networks including the management
of approximately 1,101 building connections, six switches or remote switching
modules and approximately 2,887 network route miles. The NOCC is designed to
accommodate the Company's anticipated growth.

The NOCC is utilized for a variety of network management and control
functions including monitoring, managing and diagnosing the Company's SONET
networks, central office equipment, customer circuits and signals and the
Company's switches and associated equipment. The NOCC is also the location
where the Company provisions, coordinates, tests and accepts all orders for
switched and dedicated circuit orders. In addition, the NOCC maintains the
database for the Company's circuits and network availability. Network
personnel at the NOCC also develop and distribute a variety of software
utilized to manage and maintain the networks.

EQUIPMENT SUPPLY

The Company and the Operating Companies purchase fiber optic transmission
and other electronic equipment from Lucent, Fujitsu, Tellabs, and other
suppliers at negotiated prices. The Company expects that fiber optic cable,
equipment and supplies for the construction and development of its networks
will continue to be readily available from Lucent, Fujitsu and other suppliers
as required. The Company has negotiated multi-year contracts for equipment
with Lucent, Fujitsu, and Tellabs. The Company and the Operating Companies
have deployed three Lucent 5ESS Switches ("5ESSs") and three Lucent remote
switching modules, which deliver full switching functionality, in six of their
current markets. The Company and the Operating Companies plan to deploy 5ESSs
or remote switching modules in all of its existing networks by mid-1997 and
additional 5ESSs or remote switching modules in each of the Company's future
networks.

CONNECTIONS TO CUSTOMER LOCATIONS

Office buildings are connected by network backbone extensions to one of a
number of physical rings of fiber optic cable, which originate and terminate
at the Operating Company's central office. Signals are sent simultaneously on
both primary and alternate protection paths through a network backbone to the
Operating Company's central office. Within each building, Operating Company-
owned internal wiring connects the Operating Company's fiber optic terminal
equipment to the customer premises. Customer equipment is connected to
Operating Company-provided electronic equipment generally located where
customer transmissions are digitized, combined and converted to an optical
signal. The traffic is then transmitted through the network backbone to the
Operating Company's central office where it can be reconfigured for routing to
its ultimate destination on the network.

The Operating Company locates its fiber optic equipment in space provided by
the building owner or, more typically, on a customer's premises. IXCs often
enter into discussions with building owners to allow the Company to serve the
IXCs' customers. This network configuration enables the Company to share
electronic equipment among multiple customers, causes little interruption for
customers during installation and maintenance and allows the Company to
introduce new services rapidly and at low incremental cost.

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The following diagram is an illustration of an Operating Company fiber optic
transport network in a typical market.

LOGO

EMPLOYEES

As of September 30, 1996, the Operating Companies and the Company employed a
total of 99 and 80 full-time employees, respectively, in support of the
Operating Companies' and the Company's operations. The Company also regularly
uses the services of its Local Partners, employees and contract technicians
for the installation and maintenance of its networks. None of the Operating
Companies' or the Company's employees is represented by a collective
bargaining agreement. The Company believes that the Operating Companies' and
the Company's relations with their respective employees are good.

PROPERTIES

The Company leases its principal executive offices in Coudersport,
Pennsylvania and its offices in Pittsburgh, Pennsylvania. Additionally, the
Company owns its NOCC facilities, and leases certain office space from
Adelphia, in Coudersport, Pennsylvania.

All of the fiber optic cable, fiber optic telecommunications equipment and
other properties and equipment used in the networks, are owned or leased by
the applicable Operating Company. See "--The Company's Markets." Fiber optic
cable plant used in providing service is primarily on or under public roads,
highways or streets, with the remainder being on or under private property. As
of September 30, 1996, the Company's total telecommunications equipment in
service consists of fiber optic telecommunications equipment, fiber optic
cable, furniture and fixtures, leasehold improvements and construction in
progress. Such properties do not lend themselves to description by character
and location of principal units.

Substantially all of the fiber optic telecommunications equipment used in
the Company's networks is housed in multiple leased facilities in various
locations throughout the metropolitan areas served by the Company. The Company
believes that its properties and those of its Operating Companies are adequate
and suitable for their intended purpose.

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LEGAL PROCEEDINGS

The Company is not a party to any pending legal proceedings except for
claims and lawsuits arising in the normal course of business. The Company does
not believe that these claims or lawsuits will have a material effect on the
Company's financial condition or results of operations.

COMPETITION

The Company operates in a highly competitive environment and has no
significant market share in any market in which it operates. In each of the
areas served by an Operating Company, services similar to those offered by the
Operating Company are offered by the incumbent LEC serving that area.
Incumbent LECs have long-standing relationships with their customers, have far
greater technical and financial resources and provide services that an
Operating Company may not currently be authorized by state regulators to
offer. See "Regulation--State Regulation." Following the enactment of the
Telecommunications Act, there has been significant merger activity among the
RBOCs which will result in competitors with even greater financial resources
and geographic scope than currently faced by the Company. In addition, in many
markets, the incumbent LEC currently is excused from paying license or
franchise fees or pays fees materially lower than those required to be paid by
the Operating Companies.

While new business opportunities will be made available to the Company
through the Telecommunications Act and other federal and state regulatory
initiatives, regulators are likely to provide the incumbent LECs with an
increased degree of flexibility with regard to pricing of their services as
competition increases. If the incumbent LECs elect to lower their rates and
can sustain lower rates over time, this may adversely affect the revenues of
the Operating Companies and the Company by placing downward pressure on the
rates the Operating Companies can charge. The Company believes this effect
will be offset by the increased revenues available by offering new services,
but if future regulatory decisions afford the incumbent LECs excessive pricing
flexibility or other regulatory relief, such decisions could have a material
adverse effect on the Company.

Competition for the Company's and the Operating Companies' services are
based on price, quality, network reliability, service features and
responsiveness to customer needs. The Company believes that its management
expertise, coupled with its highly reliable, state-of-the-art digital networks
and back-office infrastructure, which offer significant transmission capacity
at competitive prices, will allow it to compete effectively with the incumbent
LECs, which may not yet have fully deployed fiber optic networks in many of
the Company's target markets. The Company believes that the Operating
Companies price their services at a modest discount compared to the prices of
incumbent LECs while providing a higher level of customer service. The
Company's networks provide diverse access routing and redundant electronics,
design features not widely deployed by the incumbent LEC networks at the
present time. However, as incumbent LECs continue to upgrade their networks,
any competitive advantage held by the Company due to the superiority of its
facilities may diminish.

Other current or potential competitors of the Company's networks include
other CLECs, IXCs, wireless telecommunications providers, microwave carriers,
satellite carriers, private networks built by large end users and cable
television operators or utilities in markets in which the Company has not
partnered with one or the other. In many markets served by the Company, one or
more CLECs already are providing service. Furthermore, the three major IXCs
have announced ambitious plans to enter the local exchange market. There is no
assurance that these IXCs will choose to obtain local services from the
Operating Companies in the Company's markets. In addition, the
Telecommunications Act requires all local exchange providers, including new
entrants, to offer their services for resale. See "Regulation--
Telecommunications Act of 1996." This requirement permits companies to enter
the market for local telecommunications services without investing in new
facilities, thereby increasing the number of likely competitors in any given
market, and enables the IXCs to provide local services by reselling the
service of the incumbent LEC rather than using services provided by the
Company.

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REGULATION

OVERVIEW

Telecommunications services provided by the Company and its networks are
subject to regulation by federal, state and local government agencies. At the
federal level, the FCC has jurisdiction over interstate services, which
constitute a majority of the Operating Companies' current services. Interstate
services, for the purpose of determining FCC jurisdiction, are communications
that originate in one state and terminate in another state or foreign country.
State regulatory commissions exercise jurisdiction over intrastate services.
Intrastate services are communications that originate and terminate in the
same state. Additionally, municipalities and other local government agencies
may regulate limited aspects of the Company's business, such as use of rights-
of-way.

TELECOMMUNICATIONS ACT OF 1996

On February 8, 1996, the Telecommunications Act of 1996 was signed into law
and is considered to be the most comprehensive reform of the nation's
telecommunications laws since the Communications Act of 1934. The
Telecommunications Act will result in substantial changes in the marketplace
for voice, data and video services. These changes will open the local exchange
market to competition and will result in a substantial increase in the
addressable market for the Company's networks. Among its more significant
provisions, the Telecommunications Act (i) removes legal barriers to entry in
local telephone markets, (ii) requires incumbent LECs to "interconnect" with
competitors, (iii) establishes procedures for incumbent LEC entry into new
markets, such as long distance and cable television, (iv) relaxes regulation
of telecommunications services provided by incumbent LECs and all other
telecommunications service providers, and (v) directs the FCC to establish a
subsidy mechanism for the preservation of universal service.

Removal of Entry Barriers

Prior to enactment of the Telecommunications Act, many states limited the
services that could be offered by a company competing with the incumbent LEC.
See "--State Regulation." In these states, the incumbent LEC retained a
monopoly over basic local exchange services pursuant to state statute or
regulatory policy. In states with these legal barriers to entry, the Company
had been limited to the provision of dedicated telecommunications services,
which constitutes only a small portion of the local telephone market.

The Telecommunications 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 interstate or intrastate
telecommunications services. States retain jurisdiction under the
Telecommunications Act to adopt laws necessary to preserve universal service,
protect public safety and welfare, ensure the continued quality of
telecommunications services and safeguard the rights of consumers.

This provision of the Telecommunications Act should enable the Operating
Companies to provide a full range of local telecommunications services in any
state. The Operating Companies will continue their policy of not providing
long distance services that compete with the major IXCs to enable the Company
to work with IXCs to provide an integrated local and long distance service
offering to end users. Although the Operating Companies will be required to
obtain certification from the state regulatory commission in almost all cases,
the Telecommunications Act limits substantially the ability of a state
commission to deny a request for certification filed by an Operating Company.
While this provision of the Telecommunications Act expands significantly the
markets available to the Operating Companies, it also reduces the barriers to
entry by other potential competitors and therefore increases the level of
competition the Operating Companies will face in all their markets. See
"Competition."

The Vermont Public Service Board ("PSB") is currently considering actions
that would attempt to preserve universal service and protect the public safety
and welfare. The actions would impose conditions on the certificate issued to
the Vermont Operating Company which would require it to offer service on a
geographically widespread basis through the construction of facilities to
serve all residents and business customers in such areas,

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the acquisition from other carriers of network facilities required to provide
such service, or the resale of other carriers' services. The Company does not
believe that the Vermont PSB has the authority to impose such requirements
under the Telecommunications Act. The imposition of such conditions by the
Vermont PSB or other state commissions could increase the cost to the
Operating Companies to provide local exchange services.

Access and Interconnection with LEC Facilities

A company cannot compete effectively with the incumbent LEC in the market
for switched local telephone services unless it is able to connect its
facilities with the incumbent LEC and obtain access to certain essential
services and resources under reasonable rates, terms and conditions. Incumbent
LECs historically have been reluctant to provide these services voluntarily
and generally have done so only when ordered to by state regulatory
commissions.

The Telecommunications Act imposes a number of access and interconnection
requirements on all local exchange providers, including CLECs, with additional
requirements imposed on incumbent LECs. These requirements will provide access
to certain networks under reasonable rates, terms and conditions.
Specifically, LECs must provide the following:

Telephone Number Portability. Telephone number portability enables a
customer to keep the same telephone number when the customer switches local
exchange carriers. New entrants are at a competitive disadvantage without
telephone number portability because of inconvenience and costs to customers
that must change numbers.

Dialing Parity. All LECs must provide dialing parity, which means that a
customer calling to or from a CLEC network cannot be required to dial more
digits than required for a comparable call originating and terminating on the
LEC's network.

Reciprocal Compensation. The duty to provide reciprocal compensation means
that LECs must terminate calls that originate on competing networks in
exchange for a given level of compensation and that they are entitled to
termination of calls that originate on their network for which they must pay a
given level of compensation.

Resale. A LEC may not prohibit or place unreasonable restrictions on the
resale of its services. In addition, incumbent LECs must offer services to
resellers at a wholesale rate that is less than the retail rate charged to end
users.

Access to Rights-of-Way. A LEC must provide access to its poles, ducts,
conduits and rights-of-way on a reasonable, nondiscriminatory basis.

Unbundling of Network Services. Incumbent LECs must offer unbundled access
to the various elements of their network. This requirement allows new entrants
to purchase elements of an incumbent LEC's network that may be necessary to
provide service to customers not located in the new entrants' networks.

On July 2, 1996 the FCC released its First Report and Order and Further
Notice of Proposed Rulemaking promulgating rules and regulations to implement
Congress' statutory directive concerning number portability (the "Number
Portability Order"). The FCC ordered all LECs to begin phased development of a
long-term service provider portability method in the 100 largest Metropolitan
Statistical Areas ("MSAs") no later than October 1, 1997, and to complete
deployment in those MSAs by December 31, 1998. Number portability must be
provided in those areas by all LECs to all requesting telecommunications
carriers. After December 31, 1998, each LEC must make number portability
available within six months after receiving a specific request by another
telecommunications carrier in areas outside the 100 largest area MSAs in which
the requesting carrier is operating or plans to operate. Until long-term
service portability is available, all LECs must provide currently available
number portability measures as soon as reasonably possible after a specific
request from another carrier. As new carriers are at a competitive
disadvantage without telephone number portability, the Number Portability

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<PAGE>

Order should enhance the Company's ability to offer service in competition
with the incumbent LECs, but it is uncertain how effective these regulations
will be in promoting number portability. The Number Portability Order does not
address how the costs of implementing long-term service portability will be
recovered. This issue is subject to an additional comment period and is not
expected to be decided until 1997. Further, the Number Portability Order is
subject to Petitions for Reconsideration filed at the FCC and US West has
filed a suit in the United States Court of Claims arguing that the Number
Portability Order does not provide sufficient compensation for interim number
possibility measures. To the extent that the outcome of the Petitions or the
US West suit results in new rules that decrease the LEC obligation to provide
number portability or increase the CLEC obligation to pay for number
portability, changes to the Number Portability Order could decrease the
Company's ability to offer service in competition with the incumbent LECs.

On August 8, 1996 the FCC released its First Report and Order and Second
Report and Order and Memorandum Opinion and Order promulgating rules and
regulations to implement Congress' statutory directive concerning the
interconnection of CLEC and incumbent LEC networks and incumbent LEC pricing
of unbundled elements (the "Local Competition Orders"). The Local Competition
Orders adopt a national framework for interconnection but leave to the
individual states the task of implementing the FCC's rules. Because
implementation of the Local Competition Orders will be at the state level, it
is uncertain how these new requirements will affect the Company. The Local
Competition Orders indicate that the FCC intends to take up access charge
reform as early as the fourth quarter of 1996 with new rules in place as early
as the first quarter of 1997. To the extent that the Local Competition Orders
reduce the ability of incumbent LECs to impose non-cost-based access charges
on IXCs, the Company's competitive advantage in providing customers with
access services will decrease. However, to the extent that CLECs are able to
interconnect with incumbent LEC networks on favorable terms, the Company's
ability to provide competitive local exchange services will increase. The
Local Competition Orders are subject to Petitions for Reconsideration filed at
the FCC and Petitions for Review filed at the United States Court of Appeals.
Additionally, the Eighth Circuit has granted a stay of the pricing and "most
favored nation" provisions of the First Report and Order. The pricing
provisions establish price ceilings and default prices for interconnection
elements, and the "most favored nation" provision allows carriers to request
the incumbent LEC to make available to them on the same terms and conditions,
any interconnection, service or network element contained in an approved
agreement to which the incumbent LEC is a party. The stay is limited to
certain FCC rules. None of the provisions of the Telecommunications Act has
been stayed. On November 1, 1996, the Eighth Circuit modified the stay to
execute certain non-pricing portions of the rules that primarily relate to
wireless telecommunications providers. The court will hear oral argument on
January 17, 1997, and a decision is likely in the Spring of 1997. To the
extent that the outcome of these petitions results in new rules, the Company's
ability to provide competitive local exchange services could be impaired.

Although the Number Portability Order, the Local Competition Orders and the
underlying statutory requirements are intended to benefit new entrants in the
local exchange market, such as the Operating Companies, it is uncertain how
effective these requirements will be until state regulators begin to implement
the FCC's requirements. In particular, if CLECs are unable to obtain favorable
agreements with the incumbent LEC regarding call termination and resale of
incumbent LEC facilities and services through negotiation with the incumbent
LEC or arbitration at state public utility commissions, there is a diminished
likelihood that an Operating Company will be successful in its local exchange
market. In addition, the ability of CLECs to resell incumbent LEC services
obtained at wholesale rates may permit some CLECs to compete with the
Operating Companies without investing in facilities.

Moreover, these requirements place burdens on an Operating Company when it
provides switched local exchange services that will benefit potential
competitors. In particular, the obligation to offer services for resale means
that a company can resell the Operating Company's services without investing
in facilities, although unlike incumbent LECs, the Operating Companies are not
required to offer services for resale at discounted rates. Similarly, the
obligation to provide access to rights-of-way is of limited benefit to the
Operating Companies, which already have such access through their Local
Partners, but benefits other potential competitors to a far greater degree.

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LEC Entry into New Markets

The Company's principal competitor in each market it enters is the incumbent
LEC. See "Competition." Prior to enactment of the Telecommunications Act,
incumbent LECs generally were prohibited from providing cable television
service pursuant to the "telco/cable cross-ownership prohibition" contained in
the Communications Act of 1934, although the prohibition had been stayed by
several courts and was not being enforced by the FCC. In addition, the RBOCs
generally were prohibited by the MFJ (as defined) from providing interLATA
(i.e., long distance) services within the region in which they provide local
exchange service.

The Telecommunications Act repeals the telco/cable cross-ownership
prohibition and permits incumbent LECs to provide cable television service.
Prior to the Telecommunications Act repeal, some LECs were investing in fiber
optic networks on a limited basis through the FCCs "video dialtone" regulatory
regime. With the telco/cable cross ownership prohibition removed, incumbent
LECs are more likely to invest in fiber optic networks because those
facilities will be able to generate a revenue stream previously unavailable on
a widespread basis to the incumbent LECs. While incumbent LEC entry into the
video market may be the motivating factor for construction of new facilities,
these facilities also can be used by an incumbent LEC to provide services that
compete with the Company's networks.

The Telecommunications Act also eliminates the prospective effect of the MFJ
and establishes procedures under which an RBOC can enter the market for
interLATA services within its telephone service area. Before an RBOC can enter
the interLATA market, it must enter into a state-approved interconnection
agreement with a company that provides local exchange service to business and
residential customers predominantly over its own facilities. Alternatively, if
no such competitor requests interconnection, the RBOC can request authority to
provide interLATA services if it offers interconnection under state-approved
terms and conditions. The interconnection offered or provided by the RBOC must
comply with a "competitive checklist" that is comparable to the
interconnection requirements discussed above. See "--Access and
Interconnection with LEC Facilities."

The ability of the RBOCs to provide interLATA services enables them to
provide customers with a full range of local and long distance
telecommunications services. The provision of interLATA services by RBOCs is
expected to reduce the market share of the major long distance carriers, who
are the Company's networks' primary customers. Consequently, the entry of the
RBOCs into the long distance market may have adverse consequences on the
ability to generate revenues from the IXCs.

Relaxation of Regulation

A long-term goal of the Telecommunications Act is to increase competition
for telecommunications services, thereby reducing the need for regulation of
these services. To this end, the Telecommunications Act requires the FCC to
streamline its regulation of incumbent LECs and permits the FCC to forbear
from regulating particular classes of telecommunications services or
providers. Since the Company is a non-dominant carrier and, therefore, is not
heavily regulated by the FCC, the potential for regulatory forbearance likely
will be more beneficial to the incumbent LECs than the Company in the long
run.

Pursuant to the forbearance provisions of the Telecommunications Act, the
Company has filed a petition requesting that the FCC reinstate its forbearance
policy with regard to tariff filing requirements for competitive providers of
interstate access services, such as the Company. See "--Federal Regulation."
This would relieve the Company of its biggest existing federal regulatory
burden. The FCC has not set a timetable for action on the Company's petition.

The Telecommunications Act eliminates the requirement that LECs obtain FCC
authorization before constructing new facilities for interstate services. The
Telecommunications Act also limits the FCC's ability to review LEC tariff
filings. These changes will increase the speed with which incumbent LECs are
able to introduce new service offerings and new pricing of existing services,
thereby increasing the incumbent LECs' ability to compete with the Company.

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Preservation of Universal Service

One of the primary goals of the original Communications Act of 1934 was to
extend telephone service to all the citizens of the United States. This goal
has been achieved largely by keeping the rates for basic local exchange
service at a reasonable level. It was traditionally thought that incumbent
LECs were able to keep basic residential rates reasonable by subsidizing them
with revenues from business and IXC customers, and by subsidizing rural
service at the expense of urban customers. The existence and level of these
subsidies has been widely disputed in recent years because they are so
difficult to quantify.

The Telecommunications Act continues the goal of advancing and preserving
universal service by requiring the FCC to establish an explicit mechanism for
subsidizing service to those who might otherwise drop off the public switched
network. Although the details will be determined by the FCC, all carriers will
be required to contribute and carriers that serve eligible customers will be
able to receive subsidies. In addition, subsidies likely will be available for
companies that provide service to schools, libraries and hospitals.

On November 8, 1996, the Federal-State Joint Board on universal service
adopted a recommended decision that proposed a new regime for funding
universal telephone service and for distributing universal service subsidies.
The recommended decision is subject to public comment and may be changed
between now and May 8, 1997, when the FCC is required to adopt a final order
on universal service. If the recommended decision is adopted, there will be
specific subsidies for high cost areas and carriers, for low income consumers
and for advanced services for schools and libraries. The total amount of the
new subsidies is expected to range from $5 to $14 billion annually. Under the
proposal adopted by the joint board, any carrier that provided all of the
services that fall within the definition of "universal service" would be
eligible to receive subsidies, as would any entity that provided advanced
services or infrastructure used by schools and libraries. Funding for these
subsidies would come from surcharges imposed on all telecommunications
carriers, but the exact formula for the subsidies has not been determined. In
addition to the federal universal service plan, it is likely that most or all
states will adopt their own universal service support mechanisms.

Depending on how the FCC implements its statutory mandate, this subsidy
mechanism may provide an additional source of revenue to those LECs willing
and able to provide service to markets that are less desirable, either because
of the high cost of providing service or the limited revenues that might be
available. This could be advantageous to the Company or it could be beneficial
to the Company's competitors, depending on the geographic areas and type of
customers for which subsidies are available. For example, if distributions are
limited to companies that provide service to residential customers, the
Company may contribute more than it receives from the universal service fund
due to its focus on business customers.

FEDERAL REGULATION

Through a series of regulatory proceedings, the FCC has established
different levels of regulation for "dominant carriers" and "non-dominant
carriers." Only incumbent LECs are classified as dominant; all other providers
of domestic interstate services, including the Operating Companies, are
classified as non-dominant carriers. As non-dominant carriers, the Operating
Companies are subject to relatively limited regulation by the FCC. The
Operating Companies must offer interstate services at just and reasonable
rates in a manner that is not unreasonably discriminatory, subject to the
complaint provisions of the Communications Act of 1934, as amended.

Presently, the Operating Companies are required to file tariffs listing the
terms, conditions and rates for their services. The FCC's policy of forbearing
from requiring non-dominant carriers to file tariffs was rejected by the U.S.
Supreme Court and its policy of permitting carriers to file tariffs listing a
range of rates for each service was rejected by the U.S. Court of Appeals for
District of Columbia Circuit. Under the Telecommunications Act, the FCC has
authority to reinstate its forbearance policy for non-dominant carriers. The
Company has filed a forbearance petition requesting the FCC to take this
action with regard to competitive providers of interstate access services, but
there can be no assurance that it will do so. On October 29, 1996, the FCC
adopted an order

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in its proceeding concerning regulatory requirements for non-dominant
carriers. The order makes no mention of CAPs or of the Company's forbearance
petition and has no effect on providers of interstate access services such as
the Company.

The FCC has adopted rules requiring incumbent LECs to provide "collocation"
to CAPs for the purpose of interconnecting their competing networks. These
rules enable the Operating Companies to carry a portion of a customer's
interstate traffic to an IXC even if the customer is not located on the
Company's network. The Company has requested collocation in some, but not all,
of its markets. The incumbent LECs have proposed interconnection rates that
are being investigated by the FCC to determine whether they are excessive. If
the FCC orders the incumbent LECs to reduce these rates, collocation will be a
more attractive option for CLECs. Under the Local Competition Orders,
incumbent LECs will be required to provide both virtual collocation and actual
collocation at their switching offices.

Under the Telecommunications Act, an Operating Company may become subject to
additional federal regulatory obligations when it provides local exchange
service in a market. All LECs, including CLECs, must make their services
available for resale by other carriers, provide nondiscriminatory access to
rights-of-way, offer reciprocal compensation for termination of traffic and
provide dialing parity and telephone number portability. In addition, the
Telecommunications Act requires all telecommunications carriers to contribute
to the universal service mechanism established by the FCC and to ensure that
their services are accessible to and usable by persons with disabilities.

Because the states have not yet implemented the FCC's rules under the
Telecommunications Act, it is uncertain how burdensome these requirements will
be for the Company and the Operating Companies. The obligation to provide
services for resale by others potentially limits any competitive advantage
held by the Company by virtue of its state-of-the-art facilities because other
carriers, including the incumbent LEC and the IXCs, can simply resell the
Operating Companies' services. Similarly, the obligation to provide access to
rights-of-way benefits certain competitors more than the Company, which
already has such access through its Local Partners. Most of the other
obligations impose costs on the Operating Companies that also will be borne by
competing carriers so the competitive implication of these requirements should
not be significant if they are implemented fairly.

As part of its decision requiring incumbent LECs to provide virtual
collocation, the FCC also granted incumbent LECs flexibility to reduce their
rates for interstate access services in markets where a CAP is collocated.
This flexibility includes the ability to offer volume and term discounts and
to de-average access rates in different "zones" in a state based on the level
of traffic. In addition, the FCC has granted two incumbent LECs further
flexibility in their most competitive markets and the FCC could grant in the
future similar waivers in markets served by the Operating Companies. The FCC
also is considering granting incumbent LECs additional pricing flexibility in
its pending proceeding regarding incumbent LEC price caps. With the passage of
the Telecommunications Act and the anticipated increase in the level of
competition faced by incumbent LECs, the FCC could grant incumbent LECs
substantial pricing flexibility with regard to interstate access services. It
is also anticipated that the prices incumbent LECs charge for access services
will be substantially reduced as a result of the FCC's reform of the current
access charge regime and the adoption of universal service rules. A Federal-
State Joint Board mandated by the Telecommunications Act made recommendations
regarding universal service on November 8, 1996, and new universal service
rules must be in place by May 8, 1997. The Local Competition Orders indicate
that the FCC intends to take up access charge reform as early as the fourth
quarter of 1996 with new rules in place as early as the first quarter of 1997.
To the extent these regulatory initiatives enable or require incumbent LECs to
offer selectively reduced rates for access services, the rates the Operating
Companies may charge for access services will be constrained. The Operating
Companies' rates also will be constrained by the fact that competitors other
than the incumbent LECs are subject to the same streamlined regulatory regime
as the Operating Companies and can price their services to meet competition.

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STATE REGULATION

Most state public utility commissions require companies that wish to provide
intrastate common carrier services to be certified to provide such services.
These certifications generally require a showing that the carrier has adequate
financial, managerial and technical resources to offer the proposed services
in a manner consistent with the public interest.

Operating Companies have been certificated to provide telecommunications
services in Florida, Kansas, Kentucky, New Jersey, New York, Pennsylvania,
Tennessee, Vermont and Virginia. The New Jersey Operating Company currently
has an application for initial operating authority pending before the New
Jersey Board of Public Utilities. The certificates in New York, Florida and
Tennessee permit the Operating Companies to provide a full range of local
telecommunications services, including basic local exchange service. In light
of the Telecommunications Act, the Operating Companies will request removal of
any restrictions that now exist on its certificates in the remaining states
and anticipate that requests will be granted. See "--Telecommunications Act of
1996--Removal of Entry Barriers." In addition, the Telecommunications Act will
enable the Company to enter new states providing a full range of local
services upon certification. In certain states, each of the Company, its
subsidiaries and the Operating Companies may be subject to additional state
regulatory requirements, including tariff filing requirements, in order to
begin offering the telecommunications services for which such entities have
been certificated. Many states also may have additional regulatory
requirements such as reporting and customer service requirements and universal
service contributions.

In addition to obtaining certification, an Operating Company must negotiate
terms of interconnection with the incumbent LEC before it can begin providing
switched services. Most states in which the Company operates have not adopted
rules governing the interconnection of competing networks although certain
states, such as New York, have recently approved voluntary interconnection
agreements which may set a pattern for arbitrated agreements. Under the
Telecommunications Act, the FCC has adopted interconnection requirements. See
"--Telecommunications Act of 1996--Access and Interconnection with LEC
Facilities." These rules establish guidelines for the states to follow when
reviewing interconnection agreements and should greatly facilitate the
negotiation of interconnection agreements, although it is anticipated that
some incumbent LECs may remain reluctant to comply with interconnection
requests, thereby delaying an Operating Company's ability to provide switched
services. State regulators are generally responsible for resolving any
disputes that cannot be resolved through negotiation between carriers.

The Operating Companies are not presently subject to price regulation or
rate of return regulation in any state, although there can be no assurance
this will not change when the Operating Companies begin providing switched
services in some states. In most states, an Operating Company is required to
file tariffs setting forth the terms, conditions and prices for intrastate
services. In some states, an Operating Company's tariff lists a rate range or
sets prices on an individual case basis.

Several states have allowed incumbent LECs rate and tariff flexibility,
particularly for services deemed subject to competition. This pricing
flexibility increases the ability of the incumbent LEC to compete with an
Operating Company and constrains the rates an Operating Company may charge for
its services. In light of the additional competition that is expected to
result from the Telecommunications Act, states may grant incumbent LECs
additional pricing flexibility. At the same time, some incumbent LECs may
request increases in local exchange rates to offset revenue losses due to
competition.

An investor who acquires ten percent or more of the Company's outstanding
voting securities may have to obtain approval of the Vermont PSB to own ten
percent or more of such securities because such ownership might be deemed to
constitute an indirect controlling interest in the Vermont Operating Company.
See "Risk Factors--Anti-Takeover Provisions and Change of Control
Considerations."

51
<PAGE>

LOCAL GOVERNMENT AUTHORIZATIONS

An Operating Company may be required to obtain from municipal authorities
street opening and construction permits, or operating franchises, to install
and expand its fiber optic networks in certain cities. In some cities, the
Local Partners or subcontractors may already possess the requisite
authorizations to construct or expand the Company's networks. An Operating
Company or its Local Partners also must obtain a license to attach facilities
to utility poles in order to build and expand facilities. Because utilities
that are owned by a cooperative or municipality are not subject to federal
pole attachment regulation, there are no assurances that an Operating Company
or its Local Partners will be able to obtain pole attachments from these
utilities at reasonable rates, terms and conditions.

In some of the areas where the Operating Companies provide service, their
Local Partners pay license or franchise fees based on a percent of gross
revenue. In addition, in areas where the Company does not use facilities
constructed by a Local Partner, the Operating Company may be required to pay
such fees. There are no assurances that certain municipalities that do not
currently impose fees will not seek to impose fees in the future, nor is there
any assurance that, following the expiration of existing franchises, fees will
remain at their current levels. In many markets, other companies providing
local telecommunications services, particularly the incumbent LECs, currently
are excused from paying license or franchise fees or pay fees that are
materially lower than those required to be paid by the Operating Company or
Local Partner. The Telecommunications Act requires municipalities to charge
nondiscriminatory fees to all telecommunications providers, but it is
uncertain how quickly this requirement will be implemented by particular
municipalities in which the Company operates or plans to operate or whether it
will be implemented without a legal challenge initiated by the Company or
another CLEC.

If any of the existing Local Partner Agreements or Fiber Lease Agreements
held by a Local Partner or an Operating Company for a particular market were
terminated prior to its expiration date and the Local Partner or Operating
Company were forced to remove its fiber optic cables from the streets or
abandon its network in place, even with compensation, such termination could
have a material adverse effect on the Company.

52
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
John Rigas.................. 71 Chairman and Director
James P. Rigas.............. 38 Vice Chairman, Chief Executive Officer and
Director
Michael J. Rigas............ 42 Vice Chairman and Director
Timothy J. Rigas............ 40 Vice Chairman, Chief Financial Officer,
Treasurer and Director
Daniel R. Milliard.......... 49 President, Chief Operating Officer,
Secretary and Director
Charles R. Drenning......... 51 Senior Vice President, Engineering
Operations and Director
Paul D. Fajerski............ 47 Senior Vice President, Marketing and Sales
and Director
Randolph S. Fowler.......... 45 Senior Vice President, Business Development
and Regulatory Affairs and Director
</TABLE>

The bylaws of the Company provide that the Board of Directors shall consist
of a minimum of seven and a maximum of 21 directors, such number to be
determined from time to time by the Board of Directors. The Board of Directors
currently consists of eight members. All directors hold office until the next
annual meeting of stockholders or until their successors have been elected and
qualified. Executive officers serve at the discretion of the Board of
Directors.

John Rigas is the Chairman of the Board of the Company. He also is the
founder, Chairman, Chief Executive Officer and President of Adelphia. Mr.
Rigas has owned and operated cable television systems since 1952. Among his
business and community service activities, Mr. Rigas is Chairman of the Board
of Directors of Citizens Bank Corp., Inc., Coudersport, Pennsylvania and a
member of the Board of Directors of the Charles Cole Memorial Hospital. He is
a director of the National Cable Television Association and a member of its
Pioneer Association and a past President of the Pennsylvania Cable Television
Association. He is also a member of the Board of Directors of C-SPAN and the
Cable Advertising Bureau, and is a Trustee of St. Bonaventure University. He
graduated from Rensselaer Polytechnic Institute with a B.S. in Management
Engineering in 1950.

John Rigas is the father of Michael J. Rigas, Timothy J. Rigas and James P.
Rigas, each of whom currently serves as a director and executive officer of
the Company.

James P. Rigas is Vice Chairman, Chief Executive Officer and a Director of
the Company, Executive Vice President, Strategic Planning and a Director of
Adelphia and a Vice President and Director of Adelphia's other subsidiaries.
He has been with Adelphia since 1986. Mr. Rigas graduated from Harvard
University (magna cum laude) in 1980 and received a Juris Doctor degree and an
M.A. degree in Economics from Stanford University in 1984. From June 1984 to
February 1986, he was a consultant with Bain & Co., a management consulting
firm.

Michael J. Rigas is Vice Chairman and a Director of the Company, Executive
Vice President, Operations and a Director of Adelphia and a Vice President and
Director of Adelphia's other subsidiaries. He has been with Adelphia since
1981. From 1979 to 1981, he worked for Webster, Chamberlain & Bean, a
Washington, D.C. law firm. Mr. Rigas graduated from Harvard University (magna
cum laude) in 1976 and received his Juris Doctor degree from Harvard Law
School in 1979.

Timothy J. Rigas is Vice Chairman, Chief Financial Officer, Treasurer and a
Director of the Company, Executive Vice President, Chief Accounting Officer,
Treasurer and a Director of Adelphia, and a Vice President and Director of
Adelphia's other subsidiaries. He has been with Adelphia since 1979. Mr. Rigas
graduated from the University of Pennsylvania, Wharton School, with a B.S.
degree in Economics (cum laude) in 1978.

53
<PAGE>

Daniel R. Milliard is President, Chief Operating Officer, Secretary and a
Director of the Company, and Senior Vice President and Secretary and a
Director of Adelphia and its other subsidiaries. Mr. Milliard currently spends
substantially all of his time on concerns of the Company. He has been with
Adelphia since 1982. He served as outside general counsel to Adelphia's
predecessors from 1979 to 1982. Mr. Milliard graduated from American
University in 1970 with a B.S. degree in Business Administration. He received
an M.A. degree in Business from Central Missouri State University in 1971,
where he was an Instructor in the Department of Finance, School of Business
and Economics, from 1971-73, and received his Juris Doctor degree from the
University of Tulsa School of Law in 1976. He is a member of the Board of
Directors of Citizens Bank Corp., Inc. in Coudersport, Pennsylvania and is
President of the Board of Directors of the Charles Cole Memorial Hospital.

Charles R. Drenning has served as Senior Vice President, Engineering
Operations effective October 1996, and has been a Director of the Company
since October 1991. Prior to joining Hyperion as Vice President, Engineering
Operations in October 1991, Mr. Drenning was a District Sales manager for Penn
Access Corporation. In addition, he has over 22 years experience with AT&T and
the Bell System, where he served in a number of executive level positions in
sales and marketing, accounting, data processing, research and development,
and strategic planning. Mr. Drenning began his career with AT&T as a member of
the technical staff of Bell Laboratories in Columbus, Ohio. His seven years of
research work at the laboratories included both hardware and software
development for central office switching equipment. Mr. Drenning holds a B.S.
in Electrical Engineering and an M.S. in Computer Information Science from
Ohio State University. He is a member of the Pennsylvania Technical Institute
and IEEE.

Paul D. Fajerski has served as Senior Vice President, Marketing and Sales
effective October 1996, and has been a Director of the Company since October
1991. Prior to joining Hyperion as Vice President, Marketing and Sales in
October 1991, Mr. Fajerski was a District Sales Manager for Penn Access
Corporation, a competitive access provider in Pittsburgh, Pennsylvania. In
addition, he has over 13 years experience with AT&T and the Bell System where
he served in a number of executive level positions in sales and marketing. Mr.
Fajerski holds a B.S. in Business Administration from the College of
Steubenville.

Randolph S. Fowler has served as Senior Vice President, Business Development
and Regulatory Affairs effective October 1996, and has been a Director of the
Company since October 1991. Prior to joining Hyperion as Vice President,
Business Development and Regulatory Affairs in October 1991, Mr. Fowler was
Vice President of Marketing for Penn Access Corporation, a competitive access
provider in Pittsburgh, Pennsylvania. He previously served for four years as
Director of Technology Transfer and Commercial Use of Space in two NASA-
sponsored technology transfer programs. In addition, he has over 17 years
experience with AT&T and the Bell System, where he served in a number of
executive level positions in sales and marketing, operations, human resources,
business controls, and strategy development. Mr. Fowler holds a B.S. in
Business Administration from the University of Pittsburgh. He has developed
and taught courses in Marketing, Network Management, and Regulation for the
University of Pittsburgh's Graduate Program in Telecommunications.

In addition to the above, Edward E. Babcock, an officer and Vice President,
Finance of the Company, serves as Chief Accounting Officer.

54
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding compensation
paid by the Company for services rendered during the Company's last three
fiscal years ending March 31, 1996 to the Company's President and the other
most highly compensated executive officers whose total annual salary and bonus
exceeds $100,000.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION(A) FISCAL YEAR SALARY BONUS ALL OTHER COMPENSATION
- ------------------------------ ----------- -------- ------- ----------------------
<S> <C> <C> <C> <C>
Daniel R. Milliard(b)..... 1996 $207,474 $ -- $5,250(c)
President and Secretary 1995 187,412 -- 5,350(c)
1994 183,484 -- 5,250(c)
Charles R. Drenning....... 1996 $139,982 $25,000 $ --
Vice President 1995 128,254 17,345 --
1994 105,379 21,250 --
Paul D. Fajerski.......... 1996 $139,982 $25,000 $ --
Vice President 1995 128,254 17,345 --
1994 105,379 21,250 --
Randolph S. Fowler........ 1996 $139,982 $25,000 $ --
Vice President 1995 128,254 17,345 --
1994 105,379 21,250 --
</TABLE>
- --------

(a) James P. Rigas, Michael J. Rigas and Timothy J. Rigas are not employed by
the Company, and the Company does not reimburse Adelphia for any services
they provide to the Company.

(b) Daniel R. Milliard is not employed by the Company, but is compensated by
Adelphia for his services to the Company pursuant to an employment
agreement with Adelphia. The Company currently reimburses Adelphia for Mr.
Milliard's base salary, insurance premium payments and other benefits paid
by Adelphia. However, the Company expects to enter into an employment
agreement with Mr. Milliard. See "--Employment Contracts."

(c) Fiscal 1996, 1995 and 1994 amounts include (i) life insurance premiums
paid during each respective fiscal year pursuant to the employment
agreement of Daniel R. Milliard with Adelphia, in the premium payment
amounts of $4,500 during Fiscal 1996, $4,600 during Fiscal 1995, and
$4,500, during Fiscal 1994, on policies owned by Mr. Milliard and (ii)
$750 in matching contributions for Mr. Milliard under Adelphia's 401(k)
savings plan for each of Fiscal 1996, 1995 and 1994.

BOARD COMMITTEES

The Special Nominating Committee of the Board of Directors was established
in October 1996 and consists of the following members: John J. Rigas, Michael
J. Rigas and Daniel R. Milliard (with Timothy J. Rigas and James P. Rigas as
alternates). The Special Nominating Committee is empowered to expand the
number of seats on the Board of Directors from eight to up to 12 at any time
prior to the next annual meeting of the stockholders of the Company, and to
fill the vacancies created thereby.

DIRECTOR COMPENSATION

The directors do not currently receive any compensation for services
rendered to the Company in their capacities as directors.

LONG-TERM COMPENSATION PLAN

The Company's 1996 Long-Term Compensation Plan (the "1996 Plan") provides
for the grant of options which qualify as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), options which do not so qualify, share awards (with or without
restrictions on vesting), stock appreciation rights and stock equivalent or
phantom units. The number of shares of Class A

55
<PAGE>

Common Stock available for the issuance of such options, awards, rights and
phantom stock units under the 1996 Plan initially will be 1,750,000. Such
number is to increase each year by a number of shares equal to one percent
(1%) of outstanding shares of all classes of Common Stock, up to a maximum of
2,500,000 shares. Options, awards and units may be granted under the 1996 Plan
to directors, officers, employees and consultants. The purposes of the 1996
Plan are to encourage ownership of the Class A Common Stock by directors,
executive officers, employees and consultants; to induce them to remain
employed or involved with the Company; and to provide additional incentive for
such persons to promote the success of the Company. Any shares subject to the
Plan in excess of 1,000,000 shares will require the consent of the Management
Stockholders (as defined below) under the Plan. No stock options, stock
awards, stock appreciation rights or phantom stock units have been granted
under the Plan.

EMPLOYMENT CONTRACTS

The Company and Mr. Milliard are expected to enter into an employment
agreement which will provide for his employment as President and Chief
Operating Officer of the Company. The agreement is expected to include the
following provisions: (i) a base salary of at least $230,000, to be increased
from time to time to be comparable to salaries paid by comparable companies
for comparable positions, (ii) an annual cash bonus, subject to achievement of
certain benchmarks, of up to 50% of base salary, (iii) stock options to be
granted currently to purchase up to 100,000 shares of Class A Common Stock at
an exercise price of 50% of fair market value, stock options to purchase
75,000 shares of Class A Common Stock at an exercise price equal to the fair
market value of the Class A Common Stock on the closing date of an initial
public offering of the Company's Class A Common Stock, stock options to
purchase 25,000 shares of Class A Common Stock at fair market value granted on
the first day of each of the next four fiscal years, commencing April 1, 1997
and the ability to receive, upon attainment of certain benchmarks, stock
options to purchase 25,000 shares of Class A Common Stock at fair market value
during fiscal 1997 and the next four fiscal years, (iv) a current cash bonus
of $75,000, a portion of which will be used to repay outstanding loans to
Adelphia and (v) certain employee benefits. It is expected that all such stock
options would be granted under the 1996 Plan. The initial term of the proposed
employment agreement expires on March 31, 2001, unless terminated earlier for
cause (as defined therein) or due to death or disability. The agreement also
is expected to provide that upon a change-in-control (as defined therein) of
the Company, the obligations under the agreement, if not assumed, would be
cancelled in exchange for a payment by the Company equal to its then fair
value. In the event of a change-in-control of the Company and Adelphia in
which no party assumes the Company's obligations under the agreement, Mr.
Milliard would receive a lump sum payment from the Company equal to two times
his annual base salary then in effect. The employment agreement will also
contain provisions with respect to confidentiality, non-competition and non-
solicitation of customers, suppliers and employees. Mr. Milliard will continue
to serve as a senior vice president and secretary of Adelphia, although he
will receive no additional compensation for serving in such capacities. The
execution of such employment agreement will be subject to the final
negotiation of definitive terms thereof between the Company and Mr. Milliard
and there can be no assurance that the final terms of the agreement will not
materially vary from those set forth above.

Each of Messrs. Drenning, Fajerski and Fowler (the "Management
Stockholders") have employment agreements with the Company which expire on
October 20, 1998. The employment agreements provide for base salary, bonuses
and benefits, and contain noncompetition and nondisclosure provisions. The
employment agreements also provide for base pay and bonuses to be paid to each
Management Stockholder that are comparable to industry average base pay and
bonuses paid by comparable companies for comparable positions.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Board of Directors currently does not, and during Fiscal 1996
did not, have a Compensation Committee. Consequently, all Directors have
participated in deliberations concerning executive officer compensation,
including decisions relative to their own compensation. See "Certain
Relationships and Transactions."

56
<PAGE>

CERTAIN RELATIONSHIPS AND TRANSACTIONS

The Company was founded in October 1991. From the Company's inception
through March 31, 1996, Adelphia, which owns 89% of the Company's outstanding
Common Stock prior to the Offerings, provided all the equity capital to the
Company and also made loans and advances totaling approximately $50.9 million.
The Company repaid $25 million of such indebtedness to Adelphia from the
proceeds of the offering of Senior Notes and Warrants on April 15, 1996, on
which date the remaining $25.9 million, including accrued interest and fees of
approximately $1.2 million for the period January 1, 1996 through April 15,
1996, was evidenced by the Adelphia Note, an unsecured subordinated note due
April 16, 2003 that accrues interest at an annual rate of 16.5% and is
subordinated to the Senior Notes. Interest on the Adelphia Note is payable
quarterly in cash, through the issuance of identical subordinated notes or in
any combination thereof, at the option of the Company. Interest (excluding
fees relating to amounts borrowed) accrued on the indebtedness to Adelphia at
an annual rate of 11.3% prior to April 15, 1996. Proceeds from the Senior
Notes and Warrants were also used to repay amounts related to capital
expenditures, working capital requirements, operating losses and pro-rata
investments in joint ventures totaling $12.8 million incurred during the
period from January 1, 1996 to April 15, 1996. These amounts had been funded
during the same time period through advances from Adelphia.

Messrs. Drenning, Fajerski and Fowler together hold 11% of the Company's
outstanding Common Stock, and are parties to a shareholder agreement, as
amended ("Shareholder Agreement") with Adelphia. The Shareholder Agreement
provides, among other things, (i) that upon the earlier of (a) the termination
of employment of any Management Stockholder or (b) after October 7, 1998, such
Management Stockholder may put his shares to Adelphia for fair market value,
unless such put rights are terminated as a result of the registration of the
Company's Common Stock under the Securities Act; (ii) for Adelphia to vote its
shares in the Company to elect each Management Stockholder to the Board of
Directors of the Company; and (iii) for certain buy/sell and termination
rights and duties among Adelphia and the Management Stockholders. The
Shareholder Agreement terminates automatically upon the date when the
Company's Common Stock is registered under the 1933 Act or 1934 Act and the
Management Stockholders have the opportunity to sell their shares pursuant to
the registration rights agreement discussed below.

The Company has also entered into Term Loan and Stock Pledge Agreements
("Loan Agreements") with each of the Management Stockholders. Pursuant to the
Loan Agreements, each Management Stockholder has borrowed $1 million from the
Company. Each of these loans accrues interest at the average rate at which the
Company can invest cash on a short-term basis, is secured by a pledge of the
borrower's Common Stock in the Company, and matures upon the earlier of (i)
October 8, 1998 or (ii) the date when the Company's Common Stock is registered
under the 1933 Act and the Management Stockholders have the right to sell
their shares pursuant to the registration rights agreement discussed below.
Each Loan Agreement also provides that any interest accruing on a loan from
the date six months after the date of such loan shall be offset by a bonus
payment which shall be paid when principal and interest thereon are due and
which shall include additional amounts to pay income taxes applicable to such
bonus payment.

The Company and the Management Stockholders have entered into a registration
rights agreement whereby the Company has agreed to provide the Management
Stockholders with one collective demand registration right relating to the
Common Stock owned by them or certain permitted transferees. Such demand
registration right may be exercised beginning six months after the completion
of an initial public offering of the Class A Common Stock of the Company and
terminated upon the earlier of (i) the sale or disposition of all of such
Common Stock or (ii) the date on which all such shares of Common Stock become
freely tradeable pursuant to Rule 144.

The Company and Adelphia have entered into a registration rights agreement
whereby the Company has agreed to provide Adelphia and certain permitted
transferees with two demand registration rights per year under certain
conditions, including that any such demand be with respect to shares with a
minimum of $10 million in market value, and with certain piggyback
registration rights in future public offerings of the Common Stock. Adelphia's
demand registration rights terminate at such time as Adelphia ceases to hold
at least $10 million in market value of Common Stock.

57
<PAGE>

The Company, Adelphia and the Management Stockholders have agreed, effective
until January 1, 1998, that upon or following the consummation of an initial
public offering of the Class A Common Stock of the Company, (i) the
Shareholder Agreement and Loan Agreements will terminate, (ii) the Management
Stockholders will each repay the $1 million borrowed from the Company pursuant
to the Loan Agreements with the proceeds from margin loans secured by Common
Stock owned by such Management Stockholders, and (iii) the Company will pay to
the Management Stockholders bonus payments in the amount of interest accruing
on the margin loans for certain periods following such public offering and any
additional amounts necessary to pay income taxes applicable to such bonus
payments.

During Fiscal 1994, 1995, 1996 and the six months ended September 30, 1996,
the Company incurred charges from Adelphia of $0.5, $0.5, $0.4 and $0.2
million, respectively, for the provision to the Company of shared corporate
overhead services in areas such as personnel, payroll, management information
services, shared use of office, aircraft and network facilities and support
equipment. The Company expects that charges for the provision of similar
services by Adelphia to the Company, or by the Company to Adelphia, will
continue to be incurred or charged by the Company in the future. The
transactions related to the provision of these services have been based on
allocation of Adelphia's costs incurred for these services, and do not
necessarily represent the cost to the Company had these services been provided
on an arm's length basis. During Fiscal 1995, 1996 and the six months ended
September 30, 1996, the Company paid Adelphia or certain of Adelphia's
affiliates, fiber lease payments of $0.3, $1.0 and $0.6 million, respectively.

Effective September 30, 1996, the Vermont Operating Company purchased from
Adelphia approximately 280 miles of SONET ring fiber backbone presently used
by the Vermont Operating Company for $5.4 million, Adelphia's historical cost
for such assets, subject to post-closing adjustments.

58
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth the beneficial ownership of the Company's
Class A Common Stock and Class B Common Stock by (i) each person known by the
Company to be a beneficial owner of more than 5% of either the Class A Common
Stock or Class B Common Stock, (ii) the directors and executive officers and
(iii) all directors and executive officers as a group.

<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK TOTAL TOTAL
OWNED PRIOR TO OWNED PRIOR TO COMMON STOCK COMMON STOCK
AND AFTER AND AFTER OWNED PRIOR TO OWNED AFTER
ISSUANCE OF ISSUANCE OF ISSUANCE OF ISSUANCE OF
WARRANT SHARES WARRANT SHARES WARRANT SHARES (%) WARRANT SHARES (%)
-------------- -------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Adelphia Communications
Corporation (a)(b)..... (b) 8,900,020 89.00 83.87
Charles R. Drenning (c). (b) 366,660 3.67 3.45
Paul D. Fajerski (c).... (b) 366,660 3.67 3.45
Randolph S. Fowler (c).. (b) 366,660 3.67 3.45
All executive officers
and directors as a
group (eight
persons)(a)............ (b) 10,000,000(d) 100.00 94.22
</TABLE>
- --------

(a) The business address of Adelphia Communications Corporation is the same as
that of the Company. In their capacity as executive officers of Adelphia,
the following persons share or may be deemed to share voting and
dispositive power over the shares of Common Stock owned by Adelphia,
subject to the discretion of the Board of Directors of Adelphia: John J.
Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas and Daniel R.
Milliard.

(b) Each share of Class B Common Stock is convertible at any time at the
option of the holder into an equal number of shares of Class A Common
Stock. Holders of Class A Common Stock are entitled to one vote per share
and holders of Class B Common Stock are entitled to 10 votes per share on
all matters submitted to a vote of stockholders. See "Description of
Capital Stock."

(c) The business address of each such holder is 2570 Boyce Plaza, Pittsburgh,
Pennsylvania 15241. Includes with respect to (i) Mr. Drenning, an
aggregate of 80,000 shares of Class B Common Stock held in trust for the
benefit of Mr. Drenning's children for which his spouse serves as co-
trustee and as to which shares Mr. Drenning has neither the power to
dispose nor the power to vote; and (ii) Mr. Fajerski, an aggregate of
80,000 shares held in trust for the benefit of Mr. Fajerski's children for
which his spouse serves as co-trustee and as to which shares Mr. Fajerski
has neither the power to dispose nor the power to vote.

(d) Includes 8,900,020 shares of Class B Common Stock held by Adelphia, for
which the following executive officers and directors of the Company share
or may be deemed to share voting and dispositive power over the shares,
subject to the discretion of the Board of Directors of Adelphia: John J.
Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas and Daniel R.
Milliard.

59
<PAGE>

DESCRIPTION OF THE CAPITAL STOCK

The following description of the capital stock of Hyperion and certain
provisions of Hyperion's Certificate of Incorporation and Bylaws is a summary
and is qualified in its entirety by Hyperion's Certificate of Incorporation
and Bylaws, which documents are filed as exhibits to the Registration
Statement of which this Prospectus is a part and are incorporated herein by
reference.

Hyperion's authorized capital stock consists of 300,000,000 shares of Class
A Common Stock, par value $.01 per share, 150,000,000 shares of Class B Common
Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock, par
value $0.01 per share.

COMMON STOCK

Shares of Class A Common Stock and Class B Common Stock are substantially
identical, except that holders of Class A Common Stock are entitled to one
vote per share and holders of Class B Common Stock are entitled to 10 votes
per share on all matters submitted to a vote of stockholders.

Class A Common Stock

The holders of Class A Common Stock are entitled to one vote per share on
all matters to be voted on by the stockholders. Subject to preferences that
may be applicable to any outstanding Preferred Stock, the holders of Class A
Common Stock and Class B Common Stock are entitled to receive dividends
ratably, if any such dividends are declared, from time to time by the Board of
Directors out of funds legally available therefor. Stock dividends declared on
Class A Common Stock shall be in shares of Class A Common Stock, and stock
dividends on Class B Common Stock shall be in shares of Class B Common Stock.
In the event of a liquidation, dissolution or winding up of the Company, the
holders of Class A Common Stock and Class B Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
rights of the holders of the Preferred Stock then outstanding. There are no
redemption or sinking fund provisions available to the Class A Common Stock.
All outstanding shares of Common Stock are fully paid and non-assessable.

Class B Common Stock

The holders of Class B Common Stock are entitled to ten votes per share on
all matters to be voted on by the stockholders. Each share of Class B Common
Stock is convertible at the option of the holder into one share of Class A
Common Stock. In all other respects, the provisions of the Class B Common
Stock are identical to those of the Class A Common Stock.

Neither the holders of Class A Common Stock nor the holders of Class B
Common Stock have cumulative voting rights.

PREFERRED STOCK

The Board of Directors will be authorized, subject to any limitations
prescribed by law, without further stockholder approval, to issue from time to
time such shares of Preferred Stock, in one or more classes or series. Each
class or series of Preferred Stock shall have such number of shares,
designations, preferences, voting powers, qualifications and special or
relative rights or privileges as shall be determined by the Board of
Directors, which may include, among others, dividend rights, voting rights,
redemption and sinking fund provisions, liquidation preferences, conversion
rights and preemptive rights. The ownership and control of the Company by the
holders of Common Stock would be diluted if the Company were to issue
Preferred Stock that had voting rights or that was convertible into Common
Stock. In addition, the holders of Preferred Stock issued by the Company would
be entitled by law to vote on certain transactions such as a merger or
consolidation, and thus the issuance of Preferred Stock could dilute the
voting rights of the holders of Common Stock on such issues.

60
<PAGE>

The Company currently has no shares of Preferred Stock outstanding. At
present, the Company has no plans to issue any shares of Preferred Stock.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
DELAWARE LAW

Delaware General Corporation Law

Although the Company's Certificate of Incorporation currently provides that
the Company is not subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), the Company could become subject to Section 203 through
stockholder action in the future. Section 203, subject to certain exceptions,
prohibits a Delaware corporation, the voting stock of which is generally
publicly traded (i.e., listed on a national securities exchange or authorized
for quotation on an inter-dealer quotation system of a registered national
securities association) or held of record by more than 2,000 stockholders,
from engaging in any "business combination" with any "interested stockholder"
for a period of three years following the time that such stockholder became an
interested stockholder, unless (i) prior to such time, the Board of Directors
of the corporation approved either such business combination or the
transaction which resulted in such stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in such
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time such transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (y) by persons who are
directors and also officers and (z) by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
(iii) at or subsequent to such time, such business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation; (iii) subject to
certain exceptions, any transaction which results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transactions involving the corporation beneficially
owned by the interested stockholder; or (v) the receipt by the interested
stockholder of the benefit of any loans, advances, guarantees, pledges or
other financial benefits provided by or through the corporation. In general,
Section 203 defines an interested stockholder as any entity or person
beneficially owning (or within the past three years having owned) 15% or more
of the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.

Certificate of Incorporation

In addition to the voting rights of the Class A and Class B Common Stock
described above, the Company's Certificate of Incorporation, as amended, by
means of a "blank check preferred" provision authorizes the Board of
Directors, at any time, to divide any or all of the shares of Preferred Stock
into one or more series and to fix and determine the number of shares and the
designation of such series so as to distinguish it from the shares of all
other series. Further, the Board of Directors, when issuing a series of
Preferred Stock, may fix and determine the voting rights, designations,
preferences, qualifications, privileges, limitations, options, conversion
rights, restrictions and other special or relative rights of the Preferred
Stock of such series.

This blank check preferred provision gives the Board of Directors
flexibility in dealing with methods of raising capital and responding to
possible hostile takeover attempts. The provision may have the effect of
making it more difficult for a third party to acquire the Company, discourage
a third party from attempting to acquire the Company or deter a third party
from paying a premium to acquire a majority of the outstanding voting stock of
the Company. Additionally, depending on the rights and preferences of any
series of Preferred Stock issued and outstanding, the issuance of Preferred
Stock may adversely affect the voting and other rights of the holders of the
Common Stock, including the possibility of the loss of voting control to
others.

61
<PAGE>

DIVIDEND RESTRICTIONS

The terms of the Indenture for the Senior Notes contain restrictions on the
ability of the Company to pay dividends on the Common Stock. The payment of
dividends on the Common Stock is also subject to the preferences that may be
applicable to any then outstanding Preferred Stock.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is the Company. The
Transfer Agent and Registrar for the Warrants is Bank of Montreal Trust
Company, New York, New York.

DESCRIPTION OF WARRANTS

The Warrants were issued pursuant to the Warrant Agreement between the
Company and Bank of Montreal Trust Company, as warrant agent (the "Warrant
Agent") on April 15, 1996 as part of a private placement by the Company of
329,000 units consisting of $329.0 million aggregate principal amount at
maturity of Senior Notes and Warrants to purchase an aggregate of 613,427
shares of common stock of the Company (which, in accordance with the
Recapitalization Event, has been reclassified as Class B Common Stock). The
following summary of certain provisions of the Warrant Agreement and the
Warrants does not purport to be complete and is qualified in its entirety by
reference to the Warrant Agreement and the Warrants, including the definitions
therein of certain terms. As used in this section, the term "Company" refers
only to Hyperion Telecommunications, Inc. and not to its subsidiaries.

GENERAL

Each Warrant, when exercised, will entitle the holder thereof to purchase
1.8645 Warrant Shares at the Exercise Price of $0.01 per share. The Exercise
Price and the number of Warrant Shares issuable on exercise of a Warrant are
both subject to adjustment in certain cases referred to below. The Warrants
are exercisable at any time on or after the earlier to occur of (i) May 1,
1997 and (ii) in the event a Change of Control occurs, the date the Company
mails notice thereof to holders of the Senior Notes and to the holders of the
Warrants, Warrant Shares and any other securities issued or issuable with
respect thereto. Unless exercised, the Warrants will automatically expire on
April 1, 2001, the Expiration Date. The Warrants will entitle the holders
thereof to purchase in the aggregate approximately 5.78% of the outstanding
Class B Common Stock of the Company on a fully-diluted basis as of the date of
issuance of the Warrants. The Company will give notice of expiration not less
than 90 and not more than 120 days prior to the Expiration Date to the
registered holders of the then outstanding Warrants. If the Company fails to
give such notice, the Warrants will not expire until 90 days after the Company
gives such notice. In no event will holders be entitled to any damages or
other remedy for the Company's failure to give such notice other than any such
extension.

The Warrants may be exercised by surrendering to the Company the Warrant
certificates evidencing such Warrants, if any, with the accompanying form of
election to purchase, properly completed and executed, and upon payment of the
Exercise Price. Payment of the Exercise Price may be made in cash or by
certified or official bank check, payable to the order of the Company, or by
surrender of additional Warrants. Upon surrender of the Warrant certificate
and payment of the Exercise Price, the Warrant Agent will deliver or cause to
be delivered, to or upon the written order of such holder, stock certificates
representing the number of whole Warrant Shares or other securities or
property to which such holder is entitled under the Warrants and Warrant
Agreement, including without limitation any cash payment to adjust for
fractional interests in Warrant Shares issuable upon such exercise of
Warrants. If less than all of the Warrants evidenced by a Warrant certificate
are exercised, a new Warrant certificate will be issued for the remaining
number of Warrants.

No fractional Warrant Share will be issued upon exercise of the Warrants. If
any fraction of a Warrant Share would, except for the foregoing provision, be
issuable on the exercise of any Warrants (or specified portion

62
<PAGE>

thereof), the Company must pay to the holder an amount in cash equal to the
then current market price per
Warrant Share, as determined on the day immediately preceding the date the
Warrant is exercised, multiplied by such fraction, computed to the nearest
whole cent.

Certificates for Warrants will be issued in registered form only, and no
service charge will be made for registration of transfer or exchange upon
surrender of any Warrant certificate at the office of the Warrant Agent
maintained for that purpose. The Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration or transfer or exchange of Warrant
certificates.

The holders of the Warrants have no right to vote on matters submitted to
the stockholders of the Company and have no right to receive cash dividends.
The holders of the Warrants are not entitled to share in the assets of the
Company in the event of the liquidation, dissolution or winding up of the
Company's affairs.

ADJUSTMENTS

The number and kind of Warrant Shares purchasable upon the exercise of the
Warrants and the Exercise Price both will be subject to adjustment in certain
events including: (i) the payment by the Company of dividends (or other
distributions) on Common Stock of the Company payable in Common Stock of the
Company or other shares of the Company's capital stock, (ii) subdivisions,
combinations and reclassifications of Common Stock of the Company, (iii) the
issuance to all holders of Common Stock of the Company of rights, options or
warrants that entitled them to subscribe for Common Stock of the Company, or
of securities convertible into or exchangeable for shares of Common Stock of
the Company, in either case for a consideration per share of Common Stock
which is less than the current market price per share (as defined) of Common
Stock of the Company and (iv) the distribution to all holders of Common Stock
of the Company of any of the Company's assets, debt securities or any rights
or warrants to purchase securities (excluding those rights and warrants
referred to in clause (iii) above and excluding cash dividends or other cash
distributions from current or retained earnings).

No adjustment in the Exercise Price will be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Exercise Price, provided, however, that any adjustment which is not made will
be carried forward and taken into account in any subsequent adjustment.

In case of certain consolidations or mergers of the Company, or the sale of
all or substantially all of the assets of the Company to another corporation,
each Warrant shall thereafter be exercisable for the right to receive the kind
and amount of shares of stock or other securities or property to which such
holder would have been entitled as a result of such consolidation, merger or
sale had the Warrants been exercised immediately prior thereto.

RESERVATION OF SHARES

The Company has authorized and reserved for issuance and will at all times
reserve and keep available such number of shares of Class B Common Stock as
will be issuable upon the exercise of all outstanding Warrants. Such shares of
Class B Common Stock, when paid for and issued, will be duly and validly
issued, fully paid and non-assessable, free of preemptive rights and free from
all taxes, liens, charges and security interests with respect to the issued
thereof.

AMENDMENT

From time to time, the Company and the Warrant Agent, without consent of the
holders of the Warrants, may amend or supplement the Warrant Agreement for
certain purposes, including curing defects or inconsistencies or making
changes that do not materially adversely affect the rights of any holder. Any
amendment or supplement to the Warrant Agreement that has a material adverse
effect on the interests of the holders of the Warrants requires the written
consent of the holders of a majority of the then outstanding Warrants.

63
<PAGE>

The consent of each holder of the Warrants affected is required for any
amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares purchasable
upon exercise of Warrants
would be decreased (other than pursuant to adjustments provided in the Warrant
Agreement as generally described above).

REPORTS

Whether or not required by the rules and regulation of the Commission, so
long as any of the Warrants remain outstanding, the Company shall cause copies
of (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" and, with
respect to the annual information only, a report thereon by the Company's
certified independent accountants; (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; and (iii) on a quarterly basis, certain
financial information and operating data with respect to each Subsidiary and
Joint Venture engaged in a Telecommunications Business in the form specified
by Section E of the Indenture with respect to the Senior Notes to be filed
with the Warrant Agent and the Commission and mailed to the holders at their
addresses appearing in the register of Warrants maintained by the Warrant
Agent.

BOOK-ENTRY, DELIVERY AND FORM

Except as set forth in the next paragraph, the Warrants to be resold as set
forth herein have been issued in the form of one Global Warrant. The Global
Warrant has been deposited with, or on behalf of, the Depositary and
registered in the name of the Global Warrant Holder.

Warrants that were issued as described below under "Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer to a qualified institutional
buyer of Certificated Securities initially issued to a purchaser of the
Warrants who does not hold its interest in the Warrants (a "Non-Global
Purchaser"), such Certificated Securities may, unless the Global Warrant has
previously been exchanged for Certificated Securities, be exchanged for an
interest in the Global Warrant representing the amount of warrants being
transferred

The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.

CERTIFICATED SECURITIES

Subject to certain conditions, any Person having a beneficial interest in
the Global Warrant may, upon request to the Trustee, exchange such beneficial
interest for Warrants in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such Person or Persons (or
the nominee of any thereof). All such certificated Senior Notes would be
subject to the legend requirements described herein under "Notice of
Investors." In addition, if (i) the Company notifies the Trustee in writing
that the Depositary is no longer willing or able to act as a depositary and
the Company is unable to locate a qualified successor within 90 days or (ii)
the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of Warrants in the form of Certificated Securities under
the Indenture, then, upon surrender by the Global Warrant Holder of its Global
Warrant,

64
<PAGE>

Warrants in such form will be issued to each Person that the Global Warrant
Holder and the Depositary identify as being the beneficial owner of the
related Warrants.

Neither the Company nor the Trustee will be liable for any delay by the
Global Warrant Holder or the Depositary in identifying the beneficial owners
of Warrants and the Company and the Trustee may conclusively rely on, and will
be protected in relying on, instructions from the Global Warrant Holder or the
Depositary for all purposes.

THE SELLING SECURITYHOLDERS

The following table sets forth, as of December 2, 1996 certain information
regarding the Selling Securityholders' ownership of the Company's Common Stock
and of the Warrants. No Selling Securityholder has held any position, office
or had any other material relationship with the Company, its predecessors or
affiliates during the past three years. To the knowledge of the Company,
except as disclosed in the table below, the selling Securityholders did not
own, nor have any rights to acquire, any other shares of Common Stock as of
the date of this Prospectus.

<TABLE>
<CAPTION>
COMMON STOCK WARRANTS
- ---------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
BENEFICIALLY BENEFICIALLY
BENEFICIALLY OWNED BENEFICIALLY OWNED OWNED
NAME OF SELLING OWNED PRIOR TO OFFERED AFTER THIS PRIOR TO THIS OFFERED AFTER THIS
SECURITYHOLDER THIS OFFERING FOR SALE OFFERING OFFERING FOR SALE OFFERING
- -------------------------------------------- -------------------
PERCENT PERCENT
OF TOTAL OF TOTAL
NUMBER OUT- NUMBER OUT-
OF STANDING OF STANDING
SHARES SHARES WARRANTS WARRANTS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B. B. Sneed 932 0.01 932 0 500 0.15 500 0
Beneficial Standard Life
High Yield 3,729 0.04 3,729 0 2,000 0.61 2,000 0
Cede & Co. 343,888 3.24 343,888 0 184,440 56.06 184,440 0
Fidelity Investments 44,729 0.42 44,279 0 23,990 7.29 23,990 0
Harriet Rothkopf 1993
Annuity Trust dated
7/24/93 37 0.00 37 0 20 0.01 20 0
Illinois Municipal Re-
tirement Fund 10,292 0.10 10,292 0 5,520 1.68 5,520 0
Investors Fiduciary
Service, Inc. 745 0.01 745 0 400 0.12 400 0
Judith Sidney 93 0.00 93 0 50 0.02 50 0
Lincoln National Putnam
Mst Fund 372 0.00 372 0 200 0.06 200 0
Lutheran Brotherhood
Research Corp. 44,748 0.42 44,748 0 24,000 7.29 24,000 0
ManUSA New Money High
Yield Fund 7,458 0.07 7,458 0 4,000 1.22 4,000 0
Massachusetts Mutual
Life
Insurance 466 0.00 466 0 250 0.08 250 0
Mellon Bank Account Set
Up Unit 10,720 0.10 10,720 0 5,750 1.75 5,750 0
Northstar Advantage High
Total Return Fund 19,017 0.18 19,017 0 10,200 3.10 10,200 0
Northstar Multisector
Fund 279 0.00 279 0 150 0.05 150 0
Northstar Yield Bond
Fund 279 0.00 279 0 150 0.05 150 0
PCM Diversified Income
Trust 932 0.01 932 0 500 0.15 500 0
PCM Global Assets Allo-
cation 792 0.01 792 0 425 0.13 425 0
PCM High Yield Fund 8,828 0.08 8,828 0 4,735 1.44 4,735 0
Penn Capital Management 55 0.00 55 0 30 0.01 30 0
Prospect Street High
Income Portfolio 932 0.01 932 0 500 0.15 500 0
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

65
<PAGE>

<TABLE>
<CAPTION>
COMMON STOCK WARRANTS
- -----------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
BENEFICIALLY BENEFICIALLY
BENEFICIALLY OWNED BENEFICIALLY OWNED OWNED
NAME OF SELLING OWNED PRIOR TO OFFERED AFTER THIS PRIOR TO THIS OFFERED AFTER THIS
SECURITYHOLDER THIS OFFERING FOR SALE OFFERING OFFERING FOR SALE OFFERING
- ----------------------------------------------- --------------------
PERCENT PERCENT
OF TOTAL OF TOTAL
NUMBER OUT- NUMBER OUT-
OF STANDING OF STANDING
SHARES SHARES WARRANTS WARRANTS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prudential High Yield
Fund 41,019 0.39 41,019 0 22,000 6.69 22,000 0
Putnam Asset Allocation
Fund 1,678 0.02 1,678 0 900 0.27 900 0
Putnam Asset Allocation
Fund 186 0.00 186 0 100 0.03 100 0
Putnam Convertible
Opportunities 466 0.00 466 0 250 0.08 250 0
Putnam Diverse Income
Fund 17,088 0.16 17,088 0 9,165 2.79 9,165 0
Putnam Equity Income
Fund 83 0.00 83 0 45 0.01 45 0
Putnam High Income Con-
vertible Fund 466 0.00 466 0 250 0.08 250 0
Putnam High Yield Advan-
tage 6,124 0.06 6,124 0 3,285 1.00 3,285 0
Putnam High Yield Fund 29,748 0.28 29,748 0 15,955 4.85 15,955 0
Putnam Managed High-
Yield Trust 503 0.00 503 0 270 0.08 270 0
Putnam Master Income
Fund 1,752 0.02 1,752 0 940 0.29 940 0
Putnam Master Intermedi-
ate
Income 1,435 0.01 1,435 0 770 0.23 770 0
Putnam Premier Income
Fund 5,248 0.05 5,248 0 2,815 0.86 2,815 0
Putnam Short Term In-
vestment Grade Bond
Fund 745 0.01 745 0 400 0.12 400 0
Richard S. Trutanic IRA 27 0.00 27 0 15 0.00 15 0
Richard S. Trutanic IRA
Rollover 27 0.00 27 0 15 0.00 15 0
Richard S. Trutanic SEP
IRA 27 0.00 27 0 15 0.00 15 0
Sunamerica Asset Manage-
ment High Income Fund 7,458 0.07 7,458 0 4,000 1.22 4,000 0
TOTAL 613,427/1/ 5.78% 613,427 0 329,000 100% 329,000 0
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

/1Total/shares reflects the number of shares which may be issued upon exercise
of all outstanding warrants. The actual number of Warrant Shares may be
lower since the Warrant Agreement provides for rounding to the next lowest
whole number upon any given exercise of Warrants; fractional shares will not
be issued by the Company.

The Warrants owned by the Selling Securityholders represent all of the
Warrants covered by the Registration Statement. Many of the Selling
Securityholders acquired their Warrants in April 1996, pursuant to the private
placement by the Company of units, each unit consisting of a $1,000 principal
amount at maturity of Senior Notes and one Warrant. In September 1996, the
Senior Notes were exchanged for 13% Series B Senior Discount Notes due 2003
(the "Series B Notes"). The Series B Notes and the Warrants may be separately
traded. Cede & Co. holds Warrants on behalf of certain beneficial owners of
the Warrants. It is contemplated that this Prospectus will be supplemented
from time to time to include information with respect to such Selling
Securityholders.

PLAN OF DISTRIBUTION

The Warrants or the Warrant Shares may be offered by the Selling
Securityholders (including beneficial owners holding such securities through
Cede & Co. as provided above) in transactions in the over-the-counter-market
at prices obtainable at the time of sale or in privately negotiated
transactions at prices determined by negotiation. The Selling Securityholders
may effect such transactions by selling the Warrants or the Warrant Shares to
or through securities broker-dealers, and such broker-dealers may receive
compensation in

66
<PAGE>

the form of discounts, concessions or commissions from the Selling
Securityholders and/or the purchasers of the Warrants or the Warrant Shares
for whom such broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions). Additionally, agents or dealers may
acquire Warrants, Warrant Shares or interests therein as a pledgee and may,
from time to time, effect distributions of the Warrants, Warrant Shares or
interests in such capacity.

The Selling Securityholders, the brokers and dealers through whom sales of
the Warrants or Warrant Shares are made and any agent or dealer who
distributes Warrants or Warrant Shares acquired as pledgee may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and profit on any resale of the Warrants or
Warrant Shares as principal might be deemed to be underwriting discounts and
commissions under the Securities Act.

This Prospectus may also be used by the Company in connection with the
issuance from time to time of the Warrant Shares.

LEGAL MATTERS

The validity of the Warrants and Warrant Shares will be passed upon on
behalf of the Company by Buchanan Ingersoll Professional Corporation,
Pittsburgh, Pennsylvania.

EXPERTS

The financial statements as of March 31, 1995 and 1996 and for each of the
three years in the period ended March 31, 1996 included in this prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein (which report expresses an unqualified opinion
and includes an explanatory paragraph referring to a change in the method of
accounting for income taxes), and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.

67
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

<TABLE>
<S> <C>
Independent Auditors' Report............................................... F-2
Consolidated Balance Sheets, March 31, 1995 and 1996, and (Unaudited)
September 30, 1996........................................................ F-3
Consolidated Statements of Operations, Years Ended March 31, 1994, 1995 and
1996, and (Unaudited) Six Months Ended September 30, 1995 and 1996........ F-4
Consolidated Statements of Stockholders' Equity (Deficiency), Years Ended
March 31, 1994, 1995 and 1996, and (Unaudited) Six Months Ended
September 30, 1996........................................................ F-5
Consolidated Statements of Cash Flows, Years Ended March 31, 1994, 1995 and
1996, and (Unaudited) Six Months Ended September 30, 1995 and 1996........ F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

Hyperion Telecommunications, Inc.:

We have audited the accompanying consolidated balance sheets of Hyperion
Telecommunications, Inc. and subsidiaries as of March 31, 1995 and 1996 and
the related consolidated statements of operations, stockholders' equity
(deficiency) and cash flows for each of the three years in the period ended
March 31, 1996. 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 Hyperion Telecommunications,
Inc. and subsidiaries at March 31, 1995 and 1996 and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1996 in conformity with generally accepted accounting
principles.

As discussed in Note 8 to the consolidated financial statements, effective
April 1, 1993, the Company changed its method of accounting for income taxes.

DELOITTE & TOUCHE LLP

/s/ Deloitte & Touche LLP

Pittsburgh, Pennsylvania

June 28, 1996 (October 3, 1996 as to Notes 4 and 5, the

sixth paragraph of Note 6 and the last paragraph of Note 7)

F-2
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
MARCH 31,
---------------- SEPTEMBER 30,
1995 1996 1996
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS:
- -------
Current assets:
Cash and cash equivalents.................... $ -- $ -- $110,595
Other current assets......................... 511 282 532
Due from affiliates--net..................... 1,799 -- --
------- ------- --------
Total current assets....................... 2,310 282 111,127
Investments.................................... 12,564 21,087 28,120
Property, plant and equipment--net............. 7,538 12,561 30,857
Other assets--net.............................. 712 1,045 7,218
Deferred income taxes--net..................... 88 294 414
------- ------- --------
Total...................................... $23,212 $35,269 $177,736
======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY):
- ------------------------------------
Current liabilities:
Accounts payable............................. $ 1,169 $ 2,529 $ 1,953
Due to affiliates--net....................... -- 8,707 167
Other current liabilities.................... 205 501 859
------- ------- --------
Total current liabilities.................. 1,374 11,737 2,979
13% Senior Discount Notes due 2003............. -- -- 174,570
Note payable--Adelphia......................... 35,541 50,855 25,855
Other debt..................................... -- -- 1,274
------- ------- --------
Total liabilities.......................... 36,915 62,592 204,678
------- ------- --------
Commitments and contingencies (Note 6)
Stockholders' equity (deficiency):
Class A Common Stock, $0.01 par value,
300,000,000 shares authorized and 0 shares
outstanding................................. -- -- --
Class B Common Stock, $0.01 par value,
150,000,000 shares authorized, 10,000,000
shares outstanding.......................... 100 100 100
Class B Common Stock Warrants................ -- -- 11,087
Loans to Stockholders........................ -- -- (3,000)
Accumulated deficit.......................... (13,803) (27,423) (35,129)
------- ------- --------
Total stockholders' equity (deficiency).... (13,703) (27,323) (26,942)
------- ------- --------
Total...................................... $23,212 $35,269 $177,736
======= ======= ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED MARCH 31, ENDED SEPTEMBER 30,
-------------------------- ---------------------
1994 1995 1996 1995 1996
------- ------- -------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.................... $ 417 $ 1,729 $ 3,322 $ 1,298 $ 2,277
------- ------- -------- --------- ----------
Operating expenses:
Network operations........ 330 1,382 2,690 1,241 1,587
Selling, general and
administrative............ 2,045 2,524 3,084 1,365 2,191
Depreciation and
amortization.............. 189 463 1,184 528 1,581
------- ------- -------- --------- ----------
Total................... 2,564 4,369 6,958 3,134 5,359
------- ------- -------- --------- ----------
Operating loss.............. (2,147) (2,640) (3,636) (1,836) (3,082)
Other income (expense):
Gain on sale of
investment................ -- -- -- -- 8,405
Interest income........... 17 39 199 26 3,129
Interest expense and fees. (2,164) (3,321) (6,088) (2,700) (13,277)
------- ------- -------- --------- ----------
Loss before income taxes,
equity in net loss of joint
ventures and cumulative
effect of change in
accounting principle....... (4,294) (5,922) (9,525) (4,510) (4,825)
Income tax benefit.......... 55 29 197 78 117
------- ------- -------- --------- ----------
Loss before equity in net
loss of joint ventures and
cumulative effect of change
in accounting principle.... (4,239) (5,893) (9,328) (4,432) (4,708)
Equity in net loss of joint
ventures.................... (528) (1,799) (4,292) (1,642) (2,998)
------- ------- -------- --------- ----------
Loss before cumulative
effect of change in
accounting principle....... (4,767) (7,692) (13,620) (6,074) (7,706)
Cumulative effect of change
in accounting for income
taxes...................... 42 -- -- -- --
------- ------- -------- --------- ----------
Net loss.................... $(4,725) $(7,692) $(13,620) $ (6,074) $ (7,706)
======= ======= ======== ========= ==========
Loss per weighted average
share of common stock
before cumulative effect of
change in accounting
principle.................. $ (0.48) $ (0.77) $ (1.36) $ (0.61) $ (0.73)
Cumulative effect per
weighted average share of
common stock of change in
accounting for income
taxes...................... 0.01 -- -- -- --
------- ------- -------- --------- ----------
Net loss per weighted
average share of common
stock...................... $ (0.47) $ (0.77) $ (1.36) $ (0.61) $ (0.73)
======= ======= ======== ========= ==========
Weighted average shares of
common stock outstanding.... 10,000 10,000 10,000 10,000 10,576
======= ======= ======== ========= ==========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
CLASS B
CLASS A CLASS B COMMON
COMMON COMMON STOCK LOANS TO ACCUMULATED STOCKHOLDERS'
STOCK STOCK WARRANTS STOCKHOLDERS DEFICIT EQUITY (DEFICIENCY)
------- ------- -------- ------------ ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1993. $-- $100 $ -- $ -- $ (1,386) $ (1,286)
Net loss.............. -- -- -- -- (4,725) (4,725)
---- ---- ------- ------- -------- --------
Balance, March 31, 1994. -- 100 -- -- (6,111) (6,011)
Net loss.............. -- -- -- -- (7,692) (7,692)
---- ---- ------- ------- -------- --------
Balance, March 31, 1995 -- 100 -- -- (13,803) (13,703)
Net loss.............. -- -- -- -- (13,620) (13,620)
---- ---- ------- ------- -------- --------
Balance, March 31, 1996. -- 100 -- -- (27,423) (27,323)
Proceeds from issuance
of Class B Common
Stock warrants (unau-
dited)............... -- -- 11,087 -- -- 11,087
Loans to stockholders'
(unaudited).......... -- -- -- (3,000) -- (3,000)
Net income (unau-
dited)............... -- -- -- -- $ (7,706) $ (7,706)
---- ---- ------- ------- -------- --------
Balance, September 30,
1996 (unaudited)....... $-- $100 $11,087 $(3,000) $(35,129) $(26,942)
==== ==== ======= ======= ======== ========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED MARCH 31, ENDED SEPTEMBER 30,
--------------------------- ---------------------
1994 1995 1996 1995 1996
------- -------- -------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss................. $(4,725) $ (7,692) $(13,620) $ (6,074) $ (7,706)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation........... 183 397 1,061 456 848
Amortization........... 6 66 123 72 733
Equity in net loss of
joint ventures........ 528 1,799 4,292 1,642 2,998
Non-cash interest
expense............... 2,164 3,321 6,088 2,700 10,865
Cumulative effect of
accounting change..... (42) -- -- -- --
Deferred income taxes.. (9) (37) (206) -- (120)
Gain on sale of
investment............ -- -- -- -- (8,405)
Changes in operating
assets and
liabilities:
Other assets--net.... (535) (550) (227) 59 (719)
Accounts payable..... 223 499 1,360 (292) (653)
Other liabilities--
net................. 86 67 296 85 67
------- -------- -------- --------- ----------
Net cash used in operating
activities................ (2,121) (2,130) (833) (1,352) (2,092)
------- -------- -------- --------- ----------
Cash flows from investing
activities:
Net cash used for
acquisition............ -- -- -- -- (5,040)
Expenditures for
property, plant and
equipment.............. (3,097) (2,850) (6,084) (3,316) (10,680)
Proceeds from sale of
investment............. -- -- -- -- 11,618
Investments in joint
ventures............... (5,510) (7,526) (12,815) (4,763) (13,991)
------- -------- -------- --------- ----------
Cash used in investing
activities................ (8,607) (10,376) (18,899) (8,079) (18,093)
------- -------- -------- --------- ----------
Cash flows from financing
activities:
Proceeds from debt...... -- -- -- -- 163,705
Proceeds from issuance
of Class B Common Stock
warrants............... -- -- -- -- 11,087
Costs associated with
debt financing......... -- -- -- -- (6,374)
Loans to stockholders... -- -- -- -- (3,000)
Borrowings on (repayment
of) note payable--
Adelphia............... 12,990 12,252 9,226 8,097 (25,000)
Advances (to) from
related parties........ (2,381) 254 10,506 1,334 (9,638)
------- -------- -------- --------- ----------
Net cash provided by
financing activities...... 10,609 12,506 19,732 9,431 130,780
------- -------- -------- --------- ----------
Net (decrease) increase in
cash and cash equivalents. (119) -- -- -- 110,595
Cash and cash equivalents
beginning of period....... 119 -- -- -- --
------- -------- -------- --------- ----------
Cash and cash equivalents
end of period............. $ -- $ -- $ -- $ -- $ 110,595
======= ======== ======== ========= ==========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 1994, 1995, 1996 AND THE SIX MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 (INFORMATION AS TO THE SIX MONTHS ENDED SEPTEMBER
30, 1995 AND 1996 IS UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
(1)THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business

The consolidated financial statements include the accounts of Hyperion
Telecommunications, Inc. and its wholly owned subsidiaries (the "Company").
All significant intercompany accounts and transactions have been eliminated in
consolidation. The Company was formed in 1991 and is an 89% owned subsidiary
of Adelphia Communications Corporation ("Adelphia"). The remaining 11% is
owned by certain key Company officers.

The Company provides telecommunications service through its subsidiaries and
joint ventures, in which it has less than a majority equity interest. The
Company's efforts have been directed primarily toward becoming an owner and
manager of competitive local exchange carrier ("CLEC") business
telecommunications services in selected mid-sized cities. The Company
generally partners with a local cable television or utility company, whose
fiber facilities are located in the market areas, to build competitive access
fiber optic networks. The Company then operates the networks for a management
fee. Each network provides local special access, carrier-to-carrier, and
point-to-point telecommunications services to major businesses and government
customers. The Company's revenues are derived from a combination of direct
business telecommunication services provided by its subsidiaries and
management fees from its unconsolidated joint ventures.

Joint ventures in which the Company does not have a majority interest are
accounted for under the equity method of accounting.

Unaudited Interim Information

In the opinion of management, the accompanying unaudited interim financial
information as of September 30, 1996 and for the six months ended September
30, 1995 and 1996 contains all adjustments, consisting of only normal
recurring accruals necessary for a fair presentation of the data as of such
date and for such periods. This information does not include all footnotes
which would be required for complete financial statements prepared in
accordance with generally accepted accounting principles. The results of
operations for the six months ended September 30, 1996 are not necessarily
indicative of the results to be expected for the year ending March 31, 1997.

Cash and cash equivalents

Cash and cash equivalents generally consist of highly liquid instruments
with an initial maturity date of three months or less.

Property, Plant and Equipment

Property, plant and equipment is stated at cost less accumulated
depreciation. Costs capitalized include amounts directly associated with
network engineering, design and construction.

Provision for depreciation of property, plant and equipment is computed
using the straight-line method over the estimated useful lives of the assets
beginning in the month the asset is available for use or is acquired.

The estimated useful lives of the Company's principal classes of property,
plant and equipment are as follows:

<TABLE>
<S> <C>
Telecommunications networks...................................... 10-20 years
Network monitoring equipment..................................... 5-10 years
Other............................................................ 3-10 years
</TABLE>

F-7
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

Revenue Recognition

The Company recognizes revenues related to management and network monitoring
of the joint ventures in the month that the related services are provided. The
Company recognizes revenue from telecommunications services in the month the
related service is provided. Revenues on billings to customers for services in
advance of providing such services are deferred and recognized when earned.

Loss Per Common Share

The computation of loss per common share is based upon the weighted average
number of common shares outstanding. All references in the accompanying
consolidated financial statements to the number of shares of common stock have
been retroactively restated to reflect the stock split (See Note 5).

Income Taxes

Deferred income taxes are recognized for the tax effects of temporary
differences between financial statement and income tax bases of assets and
liabilities and for loss carryforwards for which income tax benefits are
expected to be realized in future years. A valuation allowance is established
to reduce deferred tax assets to the net amount that management believes will
more likely than not be realized. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date.

Other Assets

Costs incurred in developing new networks or expanding existing networks,
including network design, negotiating rights-of-way and obtaining
legal/regulatory authorizations are deferred and amortized over five years.
Pre-operating costs represent certain nondevelopment costs incurred during the
pre-operating phase of a newly constructed network and are amortized over
five-year periods commencing with the start of operations.

Asset Impairments

The Company reviews the carrying value of its long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying value of these assets may not be recoverable. Measurement of any
impairment would include a comparison of estimated future operating cash flows
anticipated to be generated during the remaining life of the assets with their
net carrying value. An impairment loss would be recognized as the amount by
which the carrying value of the assets exceeds their fair value.

Financial Instruments

Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of accounts receivable. Concentration of
credit risk with respect to accounts receivable is limited due to the
dispersion of the Company's customer base among different entities and
geographic areas. The carrying value of the Note Payable--Adelphia (see Note
4) at March 31, 1995 and 1996 approximates its fair value based upon the terms
of the note in comparison with other similar instruments.

F-8
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

Use of Estimates in the Preparation of Financial Statements

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.

Reclassification

For the fiscal years ended March 31, 1994, 1995 and 1996, certain amounts
have been reclassified to conform with the September 30, 1996 presentation.

(2)PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
---------------
SEPTEMBER 30,
1995 1996 1996
------ ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Telecommunications networks................ $1,704 $ 6,312 $ 7,327
Network monitoring equipment............... 3,244 5,267 13,384
Construction in process.................... 2,910 2,245 13,009
Other...................................... 270 388 596
------ ------- -------
8,128 14,212 34,316
Less accumulated depreciation.............. (590) (1,651) (3,459)
------ ------- -------
Total.................................... $7,538 $12,561 $30,857
====== ======= =======
</TABLE>

(3)INVESTMENTS

The equity method of accounting is used to account for investments in joint
ventures in which the Company owns less than a majority interest. Under this
method, the Company's initial investment is recorded at cost and subsequently
adjusted for the amount of its equity in the net income or losses of its joint
ventures. Dividends or other distributions are recorded as a reduction of the
Company's investment. Investments in joint ventures accounted for using the
equity method reflect the Company's equity in their underlying net assets.

F-9
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

(3)INVESTMENTS, CONTINUED

The Company's nonconsolidated investments are as follows:
<TABLE>
<CAPTION>
MARCH 31,
----------------
OWNERSHIP SEPTEMBER 30,
PERCENTAGE 1995 1996 1996
---------- ------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
EQUITY BASIS INVESTMENTS:
Continental Fiber Technologies
(Jacksonville)...................... 20% $ 1,467 $ 4,701 $ 6,443
Multimedia Hyperion
Telecommunications (Wichita)........ 49.9% 1,445 2,620 2,832
Louisville Lightwave................ 50% 531 996 3,032(1)
NewChannels Hyperion
Telecommunications (Albany)......... 50% 924 999 924
NewChannels Hyperion
Telecommunications (Binghamton)..... 20% 355 504 504
NHT Partnership (Buffalo)........... 40% 1,369 2,457 3,737
NewChannels Hyperion
Telecommunications (Syracuse)....... 50% 2,957 3,140 3,215
Hyperion of Harrisburg.............. 50% 701 1,600 2,169
Hyperion of Tennessee (Nashville)... 25% 695 1,345 --(2)
Alternet of Virginia (Richmond)..... 37% 1,633 3,406 6,012
New Jersey Fiber Technologies (New
Brunswick).......................... 19.7% 9 956 1,586
TCG of South Florida................ 15.7% 2,981 4,679 --
PECO-Hyperion (Philadelphia) ....... 50% -- -- 4,650
Other .............................. Various 18 497 752
------- ------- -------
15,085 27,900 35,856
Cumulative equity in net losses..... (2,521) (6,813) (7,736)
------- ------- -------
Total Investments................... $12,564 $21,087 $28,120
======= ======= =======
</TABLE>

(1) As discussed in Note 6, the Company has committed to make additional
capital contributions of approximately $1,000 relating to the increase in
its ownership percentage.

(2) As discussed in Note 6, the Company increased its ownership in this
partnership on August 1, 1996, and accordingly, has consolidated this
investment effective August 1, 1996.

Summarized unaudited combined financial information for the Company's
investments being accounted for using the equity method of accounting
excluding TCG of South Florida and Hyperion of Tennessee as of and for the
years ended March 31, 1994, 1995, 1996, and the six months ended September 30,
1995 and 1996 is as follows:

<TABLE>
<CAPTION>
MARCH 31,
------------------------
SEPTEMBER 30,
1994 1995 1996 1996
------- ------- -------- -------------
<S> <C> <C> <C> <C>
Current assets........................ $ 3,373 $ 4,385 $ 3,262 $ 11,098
Non-current assets.................... 16,071 36,472 74,055 112,714
Current liabilities................... 1,908 5,323 6,043 11,118
Non-current liabilities............... 3,291 9,808 17,718 31,868
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, SEPTEMBER 30,
------------------------- ------------------
1994 1995 1996 1995 1996
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues...................... $ 956 $ 2,818 $ 6,497 $ 2,830 $ 5,275
Net loss...................... (1,753) (3,454) (8,414) (3,129) (7,460)
</TABLE>

F-10
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

(3) INVESTMENTS, CONTINUED

On May 16, 1996, the Company sold its 15.7% interest in TCG of South Florida
to a third party for approximately $11,618 cash resulting in a pre-tax gain of
approximately $8,400. Amounts related to TCG of South Florida included in the
Company's investments and equity in net loss of joint ventures as of and for
the year ended March 31, 1996 were $3,422 and $778, respectively. The
Company's equity in net loss of joint ventures included a loss of $221 for TCG
of South Florida for the six months ended September 30, 1996.

(4)FINANCING ARRANGEMENTS

Note Payable--Adelphia

The Company has an unsecured credit arrangement with Adelphia which had no
repayment terms prior to April 15, 1996. On April 15, 1996, $25,000 of the
proceeds from the sale of the 13% Senior Discount Notes and Class B Common
Stock Warrants discussed below were used to repay a portion of this
obligation. Interest expense and fees on this credit arrangement were based
upon the weighted average cost of unsecured borrowings of Adelphia during the
corresponding periods.

Interest at 11.28% per annum plus fees was charged on the Note Payable--
Adelphia for the years ended March 31, 1994, 1995 and 1996. The total amount
of interest converted to note principal at March 31, 1996 and September 30,
1996 is $9,007.

Effective April 15, 1996, the remaining balance due on the Note Payable--
Adelphia is evidenced by an unsecured subordinated note due April 16, 2003.
This obligation bears interest at 16.5% per annum with interest payable
quarterly in cash; by issuing additional subordinated notes; or a combination
of cash and additional subordinated notes, all of which is at the Company's
option.

13% Senior Discount Notes and Warrants

On April 15, 1996, the Company issued $329,000 of 13% Senior Discount Notes
(the "Senior Notes") due April 15, 2003 and 329,000 warrants to purchase an
aggregate of 613,427 shares of its common stock. Proceeds to the Company, net
of discounts, commissions, and other transaction costs were approximately
$168,600. Such net proceeds were used to pay $25,000 of the Note Payable--
Adelphia discussed above, to make loans of $3,000 to certain key Company
officers (see Note 5) and to fund the Company's capital expenditures, working
capital requirements, operating losses and its pro-rata investments in joint
ventures. Use of proceeds from the Senior Notes also included the repayment of
amounts related to capital expenditures, working capital requirements, operating
losses and pro-rata investments in joint ventures totaling $12,800 incurred
during the period from January 1, 1996 to April 15, 1996. These amounts had been
funded during the same time period through advances from Adelphia.

Prior to April 15, 2001, interest on the Senior Notes is not payable in
cash, but is added to principal. Thereafter, interest is payable semi-annually
commencing October 15, 2001. The Senior Notes are unsecured and are senior to
the Note Payable--Adelphia and all future subordinated indebtedness. On or
before April 15, 1999 and subject to certain restrictions, the Company may
redeem, at its option, up to 25% of the aggregate principal amount of the
Senior Notes at a price of 113% of the Accreted Value (as defined in the
Indenture). On or after April 15, 2001, the Company may redeem, at its option,
all or a portion of the Senior Notes at 106.5% which declines to par in 2002,
plus accrued interest.

F-11
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 1994, 1995, 1966 AND THE SIX MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 (INFORMATION AS TO THE SIX MONTHS ENDED SEPTEMBER
30, 1995 AND 1996 IS UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)

(4) FINANCING ARRANGEMENTS, CONTINUED

The holders of the Senior Notes may put the Senior Notes to the Company at
any time at a price of 101% upon the occurrence of a Change of Control (as
defined in the Indenture). In addition, the Company will be required to offer
to purchase Senior Notes at a price of 100% with the proceeds of certain asset
sales (as defined in the Indenture).

The Indenture stipulates, among other things, limitations on additional
borrowings, issuance of equity instruments, payment of dividends and other
distributions, repurchase of equity interests or subordinated debt, sale--
leaseback transactions, liens, transactions with affiliates, sales of Company
assets, mergers and consolidations.

In accordance with a registration rights agreement, the Company filed a
registration statement offering to exchange the Senior Notes for Series B
Senior Discount Notes registered under the Securities Act of 1933, as amended
(the "Securities Act"). Terms of the Series B Senior Discount Notes are
substantially the same as the Senior Notes. The above exchange was consummated
within the time periods stipulated in the agreement. The Company's filing
became effective as of August 12, 1996 and the Company did not incur any
liquidated damages.

The Class B Common Stock Warrants are exercisable at $.01 per share upon the
earlier of May 1, 1997 or a Change of Control. Unless exercised, the Class B
Common Stock Warrants expire on April 1, 2001. The number of shares and the
exercise price for which a warrant is exercisable are subject to adjustment
under certain circumstances. In accordance with a registration rights
agreement, the Company has agreed to file shelf registration statements under
the Securities Act covering the Warrants and the Warrant Shares. Under certain
circumstances, if the shelf registrations are not effective within the time
period specified in the agreement, the Company must pay liquidated damages to
the holders of the Warrants or Warrant Shares ranging from $.0025 to $.0125
per week per Warrant or per Warrant Share then issuable based on the amount of
additional time required to accomplish the shelf registrations.

If the Senior Notes and Class B Common Stock Warrants had been issued on
April 1, 1995, interest expense would have been approximately $27,796 for the
year ended March 31, 1996.

(5)STOCKHOLDERS' EQUITY

The Class B Common Stock of the Company held by Adelphia and certain key
Company officers (the "Officers") is subject to sale and transfer restriction
provisions. These provisions state that none of the Officers may transfer any
shares unless they have offered to sell such shares to Adelphia (or the other
remaining Officers if Adelphia declines) at a price per share equal to the
terms of the proposed third party sale or exchange.

In accordance with a shareholder agreement, upon termination of employment
or at any time after October 7, 1996, the Officers could have required
Adelphia to purchase all their outstanding Class B shares (the "Officers'
Option"). At any time after October 7, 2001, Adelphia could have required the
Officers to sell all of their outstanding Class B shares to Adelphia (the
"Adelphia Option"). The price per share shall be equal to the fair market
value of the shares as determined by a nationally recognized financial advisor
selected by Adelphia and the Officers.

F-12
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

(5) STOCKHOLDERS' EQUITY, CONTINUED

On March 19, 1996, such shareholder agreement was amended primarily to (i)
grant the Officers certain registration rights regarding their Class B Common
Stock; (ii) extend the Officers' Option date until after October 7, 1998;
(iii) extend the Adelphia Option date until after October 7, 2003 and (iv)
provide for aggregate loans to the Officers of $3,000 from the proceeds
received from the private placement of the Senior Notes and Class B Common
Stock Warrants discussed in Note 4. Such loans, including accrued interest at
a rate equal to the rate which the Company is able to invest cash on a short-
term basis, are secured by a pledge of each Officer's Class B Common Stock in
the Company and are payable to the Company on the earlier of October 8, 1998
or the date of the registration of an equity security of the Company as
described below. Also, an amount equal to the interest that accrues on such
loans from the date six months after the date the loans are made until due and
payable will be satisfied through additional compensation to the Officers. The
shareholder agreement is terminated upon the registration of an equity
security of the Company under the Securities Act or the Securities Exchange
Act of 1934, as amended, which equity security is of the same class as the
equity security held by the Officers.

On October 3, 1996, the Board of Directors of the Company approved charter
amendments to (i) increase the Company's authorized shares from 30,000,000
shares of Common Stock to 150,000,000 shares of Class B Common Stock, (ii)
authorize 300,000,000 shares of a second class of common stock (Class A Common
Stock), and (iii) reclassify each previously authorized and outstanding share
of Common Stock as Class B Common Stock. Holders of the Class A Common Stock
and Class B Common Stock vote as a single class on all matters submitted to a
vote of the stockholders, with each share of Class A Common Stock entitled to
one vote and each share of Class B Common Stock entitled to ten votes. In
addition, each share of Class B Common Stock is automatically convertible into
one share of Class A Common Stock. In the event a cash dividend is paid, the
holders of the Class A Common Stock and the Class B Common Stock will be paid
an equal amount.

On March 19, 1996, the Board of Directors of the Company approved a ten
thousand-for-one stock split of its Class B Common Stock and the reduction of
the par value from $1.00 per share to $.01 per share. All references in the
accompanying consolidated financial statements to the number of shares of
common stock and the par value have been retroactively restated to reflect
this stock split and par value reduction. In addition, on March 19, 1996, the
Board of Directors approved charter amendments to increase the Company's
authorized shares of common stock from 1,000 shares to 30,000,000 shares and
authorized 5,000,000 shares of preferred stock with terms of such preferred
stock to be determined by the Board of Directors of the Company. No preferred
stock has been issued by the Company.

On October 3, 1996, the Board of Directors and stockholders of the Company
approved the Company's 1996 Long-Term Compensation Plan (the "1996 Plan"). The
1996 Plan provides for the grant of (i) options which qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended, (ii) options which do not so qualify, (iii) share awards
(with or without restrictions on vesting), (iv) stock appreciation rights and
(v) stock equivalent or phantom units. The number of shares of Class A Common
Stock available for issuance initially will be 1,750,000. Such number is to
increase each year by (1%) of outstanding shares of all classes of the
Company's Common Stock, up to a maximum of 2,500,000 shares. Options, awards
and units may be granted under the 1996 Plan to directors, officers, employees
and consultants. The 1996 Plan provides that incentive stock options must be
granted with an exercise price of not less than the fair market value of the
underlying Common Stock on the date of grant. Options outstanding under the
Plan may be exercised by paying the exercise price per share through various
alternative settlement methods. No stock options, stock awards, stock
appreciation rights or phantom stock units have been granted under the Plan.

F-13
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

The Company rents office space, node space and fiber under leases with terms
which are generally less than one year or under agreements that are generally
cancelable on short notice. Total rental expense under all operating leases
aggregated $65, $478 and $1,210 for the years ended March 31, 1994, 1995 and
1996, respectively.

The minimum future lease obligations under the noncancelable operating
leases as of March 31, 1996 are approximately:

<TABLE>
<CAPTION>
PERIOD ENDING MARCH 31,
-----------------------
<S> <C>
1997................................................. $140
1998................................................. 14
1999................................................. 13
2000................................................. 4
2001................................................. 4
Thereafter........................................... --
</TABLE>

Under certain investment agreements, the Company has committed to make
specific capital contributions to the joint ventures. Total capital
commitments to be made as a result of these agreements at March 31, 1996 was
$2,299. Total capital commitments to be made as of September 30, 1996
increased to $11,055 due to additional commitments related to the PECO-
Hyperion (Philadelphia) investment.

Certain investors in two of the joint ventures have the right after a
specified period of time to sell their interest to the Company. Under one
agreement, the sales price represents the investor's aggregate capital
contribution less distributions plus interest accrued at the prime rate. The
Company's obligation under this commitment at March 31 and September 30, 1996
was approximately $2,946 and $3,297, respectively. The sales price under the
second agreement is equal to the fair market value of such investor's
interest.

The Company has agreed that it will make all required capital contributions
to Louisville Lightwave that are necessary to increase its ownership to 50%.
As of September 30, 1996, the Company expects these capital contributions will
aggregate approximately $1,000.

On August 1, 1996, the Company purchased additional general and limited
partnership interests in Hyperion of Tennessee for approximately $5,000, which
increases the Company's ownership of Hyperion of Tennessee to 95%. The
following unaudited financial information of the Company for the year ended
March 31, 1996 assumes that this acquisition had occurred on April 1, 1995:

<TABLE>
<S> <C>
Revenues $ 3,963
Net loss before extraordinary items 15,239
Net loss 15,239
Net loss per weighted average share of common
stock $1.52
</TABLE>

F-14
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

(6) COMMITMENTS AND CONTINGENCIES, CONTINUED

The Company has entered into employment agreements with certain key Company
officers, the terms of which expire on October 20, 1998, as amended. The
employment agreements provide for base salary, benefits and bonuses payable if
specified management goals are attained. In addition, the employment
agreements contain noncompetition and nondisclosure provisions.

The President of the Company has an employment agreement with Adelphia where
he is a vice president and secretary. His agreement provides for base salary,
benefits and insurance premium payments. The Company reimburses Adelphia for
such payments.

The Company's operations and the operations of its joint ventures may be
adversely affected by changes and developments in governmental regulation,
competitive forces and technology. The telecommunications industry is subject
to extensive regulation at the federal, state and local levels. On February 8,
1996, President Clinton signed the Telecommunications Act of 1996 (the
"Telecommunications Act"), the most comprehensive reform of the nation's
telecommunications laws since the Communications Act of 1934.

The more significant provisions of the Telecommunications Act and certain
of its possible effects are as follows:

The Telecommunications Act removes legal barriers of entry in local
telephone markets. This provision should enable the Company to provide a
full range of services in any state while potentially increasing the level
of competition the Company faces in all its markets.

The Telecommunications Act requires incumbent Local Exchange Company's
("LECs") to "interconnect" with competitors which will provide access to
certain networks under reasonable rates, terms and conditions. It is
uncertain how effective these requirements will be or their impact on the
Company until the FCC completes its rulemaking proceedings requiring the
LECs to provide telephone number portability, dialing parity, reciprocal
compensation, resale, access to rights-of-way and unbundling of network
services.

The Telecommunications Act establishes procedures for LEC and Bell
Operating Company ("BOC") entry into new markets, including long distance
and cable television service. The Company's management believes LECs are
now more likely to invest in fiber optic networks and enter the video
market which will generate a revenue stream previously unavailable to them.
These facilities can then also be used to provide services that compete
with the Company. By allowing the BOC to enter the long distance market,
this may reduce the market share of the major long distance carriers (the
Company's joint ventures' primary customers) and have adverse consequences
on the Company's joint ventures' ability to generate revenues from the long
distance carriers.

The Telecommunications Act eliminates the requirement that LECs obtain FCC
authorization before constructing new facilities for interstate services
and limits the FCC's ability to review LEC tariff filings. The changes will
increase the speed with which the LECs are able to introduce new service
offerings and new pricing of existing services, thereby increasing the
LEC's ability to compete with the Company.

The Telecommunications Act requires the FCC to establish an explicit
mechanism for subsidizing service to markets that are less desirable,
either because of the high cost of providing service or the limited
revenues that might be available. This could be advantageous to the Company
or it could be beneficial to the Company's competitors depending on the
geographic areas and the type of customers for which subsidies are
available.

F-15
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

(6) COMMITMENTS AND CONTINGENCIES, CONTINUED

On July 2, 1996 the FCC released its First Report and Order and Further Notice
of Proposed Rulemaking promulgating rules and regulations to implement
Congress' statutory directive concerning number portability (the "Number
Portability Order"). The FCC ordered all LECs to begin phased development of a
long-term service provider portability method in the 100 largest Metropolitan
Statistical Areas ("MSAs") no later than October 1, 1997, and to complete
deployment in those MSAs by December 31, 1998. Number portability must be
provided in those areas by all LECs to all requesting telecommunications
carriers. As new carriers are at a competitive disadvantage without telephone
number portability, the Company believes the Number Portability Order should
enhance the Company's ability to offer service in competition with the
incumbent LECs, but it is uncertain how effective these regulations will be in
promoting number portability. The Number Portability Order does not address
how the costs of implementing long-term service portability will be recovered.
This issue is subject to an additional comment period and is not expected to
be decided until 1997.

A number of parties have filed appeals from the FCC's August 8, 1996 First
Report and Order. These appeals have been consolidated in the United States
Court of Appeals for the Eighth Circuit. On October 15, 1996 the Eighth
Circuit issued an order which stayed the effectiveness of key provisions of
the First Report and Order. The court's decision suspended virtually all of
the pricing rules established by the FCC, which include the rules requiring
incumbent LECs to provide unbundled network elements and interconnection based
upon a pricing methodology set by the FCC, as well as the default of proxy
prices established by the FCC for network elements, interconnection, and
resale at wholesale rates of incumbent LEC services. The court's decision also
suspended the regulation which entitles any competitor to obtain from an
incumbent LEC any interconnection term or unbundled element price at the same
rates, terms, and conditions as those elements or services are available to
any other competitor. Nothing in the court order prevents negotiations and
arbitrations from continuing, and, despite the stay, a majority of the
arbitration decisions thus far adopted by the state commissions appear to be
consistent with the FCC's pricing rules. The court has scheduled arguments on
the appeal cases in January 1997, with no decision expected for several months
thereafter.

On November 7, 1996, as required by the Telecommunications Act, a Federal-
State Joint Board adopted recommendations to the FCC looking toward the
adoption of new universal service support mechanisms. As a telecommunications
service provider, the Company is a potential contributor to a federal
universal service support mechanism and would be a potential recipient of
funds from such a mechanism. The Company has not yet determined the impact of
such a mechanism.

F-16
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

The following table summarizes the transactions with related parties which
are included in the Company's consolidated financial statements:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, SEPTEMBER 30,
-------------------- -------------
1994 1995 1996 1995 1996
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Management fees........................ $ 261 $1,045 $1,950 $ 677 $1,224
Network monitoring fees................ 51 217 446 204 310
Special access fees.................... -- 189 651 351 360
------ ------ ------ ------ ------
Total.................................. $ 312 $1,451 $3,047 $1,232 $1,894
====== ====== ====== ====== ======
EXPENSES:
Interest expense and fees.............. $2,164 $3,321 $6,088 $1,591 $2,369
Allocated corporate costs.............. 473 511 417 197 238
Fiber leases........................... -- 303 1,022 509 522
------ ------ ------ ------ ------
Total.................................. $2,637 $4,135 $7,527 $2,297 $3,129
====== ====== ====== ====== ======
</TABLE>

Management fees from related parties represent fees received by the Company
from its unconsolidated joint ventures for the performance of financial,
legal, regulatory and other administrative services.

Network monitoring fees represent fees received by the Company for technical
support for the monitoring of each individual joint venture's
telecommunications system.

Special access fees represent amounts charged to joint ventures for use of
the network of a wholly owned subsidiary of the Company.

Interest expense and fees relate to the Note Payable--Adelphia (See Note 4).

Allocated corporate costs represent costs incurred by Adelphia on behalf of
the Company for the administration and operation of the Company. These costs
include charges for office space, corporate aircraft and shared services such
as finance activities, information systems, computer services, human
resources, and taxation. Such costs were estimated by Adelphia and do not
necessarily represent the actual costs required for these services.

Fiber lease expense represents amounts paid to various subsidiaries of
Adelphia for the utilization of existing cable television plant for
development and operation of the consolidated operating networks.

Interest income charged on certain affiliate receivable balances with joint
ventures was $0, $65, $199, $26 and $38 for the periods ended March 31, 1994,
1995, and 1996 and the six months ended September 30, 1995 and 1996,
respectively.

On September 30, 1996, the Company purchased from Adelphia for approximately
$5,446, certain fiber that had previously been leased from Adelphia.

F-17
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

The Company and its corporate subsidiaries adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
effective April 1, 1993. The cumulative effect of adopting SFAS No. 109 at
April 1, 1993 was to decrease net loss by $42 for the year ended March 31,
1994. Adoption of SFAS No. 109 had no other effect on net loss for the year
ended March 31, 1994.

Adelphia and its corporate subsidiaries (including the Company) file a
consolidated federal income tax return. For financial reporting purposes,
current and deferred income tax assets and liabilities are computed on a
separate company basis. The valuation allowance is adjusted for benefits
associated with filing a consolidated income tax return, similar to provisions
of the Internal Revenue Code. At March 31, 1996, the Company had net operating
loss carryforwards for federal income tax purposes of $23,100 expiring through
2011.

Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes and
(b) operating loss carryforwards.

Temporary differences and carryforwards that give rise to deferred tax
assets and liabilities are as follows:

<TABLE>
<CAPTION>
MARCH 31,
-----------------
1995 1996
------- --------
<S> <C> <C>
DEFERRED TAX ASSETS:
Differences between book and tax basis of intangible
assets................................................. $ 404 $ 119
Net operating loss carryforwards........................ 4,823 9,302
Investment in Partnerships.............................. 327 1,401
Other................................................... 27 134
------- --------
Total.................................................. 5,581 10,956
Valuation allowance..................................... (5,295) (10,459)
------- --------
Total.................................................. 286 497
------- --------
DEFERRED TAX LIABILITIES:
Differences between book and tax basis of property,
plant and equipment.................................... 198 203
------- --------
Net deferred tax asset................................... $ 88 $ 294
======= ========
</TABLE>

The net change in the total valuation allowance for the years ended March
31, 1995 and 1996 was an increase of $3,111 and $5,164, respectively.

Income tax benefit for the years ended March 31, 1994, 1995 and 1996 is as
follows:

<TABLE>
<CAPTION>
MARCH 31,
---------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current....................................................... $46 $(8) $ (9)
Deferred...................................................... 9 37 206
--- --- ----
Total......................................................... $55 $29 $197
=== === ====
</TABLE>

F-18
<PAGE>

HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

(8)INCOME TAXES, CONTINUED

A reconciliation of the statutory federal income tax rate and the Company's
effective income tax rate is as follows:

<TABLE>
<CAPTION>
MARCH 31,
-------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate........................ 35.0% 35.0% 35.0%
Change in valuation allowance............................ (42.0) (39.0) (34.6)
State taxes, net of federal benefit and other............ 8.1 4.4 1.0
----- ----- -----
Income tax benefit....................................... 1.1% .4% 1.4%
===== ===== =====
</TABLE>

F-19
<PAGE>

APPENDIX A

GLOSSARY

Access Charges--The fees paid by long distance carriers to LECs for
originating and terminating long distance calls over the LECs' local networks.

ATM (Asynchronous Transfer Mode)--A recently commercialized switching and
transmission technology that is one of a general class of packet technologies
that relay traffic by way of an address contained within the first five bits
of a standard fifty-three bit-long packet or cell. ATM-based packet transport
was specifically developed to allow switching and transmission of mixed voice,
data and video (sometimes referred to as "multi-media" information) at varying
rates. The ATM format can be used by many different information systems,
including LANs.

Broadband--Broadband communications systems can transmit large quantities of
voice, data and video by way of digital or analog signals. Examples of
broadband communication systems include DS-3 fiber optic systems, which can
transmit 672 simultaneous voice conversations, or a broadcast television
station signal, that transmits high resolution audio and video signals into
the home. Broadband connectivity is also an essential element for interactive
multimedia applications.

CAP (Competitive Access Provider)--A company that provides its customers
with an alternative to the incumbent local telephone company for local
transport of private line, special access and interstate transport of switched
access telecommunications services. CAPs are also referred to in the industry
as alternative local telecommunications service providers (ALTs), metropolitan
area network providers (MANs) and alternative access vendors (AAVs).

Central Offices or LEC-COs--The switching centers or central switching
facilities of the LECs or CLECs.

Centrex--Centrex is a service that offers features similar to those of a
Private Branch Exchange (PBX), except the equipment is located at the
carrier's premises and not at the premises of the customer. These features
include direct dialing within a given phone system, direct dialing of incoming
calls, and automatic identification of outbound calls. This is a value-added
service that LECs and CLECs can provide to a wide range of customers who do
not have the size or the funds to support their own on-site PBX.

CLEC (Competitive Local Exchange Carrier)--A CAP that also provides switched
local telecommunications services.

Collocation--The ability of a CAP, IXC or end user to connect its network to
a LEC-COs. Physical collocation occurs when a CAP places its network
connection equipment inside the LEC-COs. Virtual collocation is an alternative
to physical collocation pursuant to which the LEC permits a CAP to connect its
network to the LEC-COs on comparable terms, even though the CAP's network
connection equipment is not physically located inside the central offices.

Dedicated Lines--Telecommunications lines dedicated or reserved for use
exclusively by particular customers along predetermined routes (in contrast to
telecommunications lines within the public switched network).

Digital--A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary code digits 0 and 1. Digital transmission and switching technologies
employ a sequence of these pulses to represent information as opposed to the
continuously variable analog signal. Digital transmission and switching
technologies offer a threefold improvement in speed and capacity over analog
techniques, allowing much more efficient and cost-effective transmission of
voice, video and data.

A-1
<PAGE>

Dialing Parity--Dialing parity exists when a customer calling to or from the
network of a CLEC is not required to dial any more digits than for a
comparable call originating and terminating on the incumbent LEC's network.

Diverse Access Routing--A telecommunications network configuration in which
signals are transported simultaneously along two different paths so that if
one cable is cut, traffic can continue in the other direction without
interruption to its destination. The Company's networks generally provide
diverse access routing.

DS-0, DS-1, DS-3--Standard telecommunications industry digital signal
formats, which are distinguishable by bit rate (the number of binary digits (0
and 1) transmitted per second). DS-0 service has a bit rate of up to 64
kilobits per second. DS-1 service has a bit rate of 1.544 megabits per second
and DS-3 service has a bit rate of 45 megabits per second.

FCC--Federal Communications Commission

Fiber Mile--The number of route miles installed (excluding pending
installations) along a telecommunications path multiplied by the number of
fibers along that path. See the definition of "route mile" below.

Fiber Optics--Fiber optic cable is the medium of choice for the
telecommunications and cable industries. Fiber is immune to electrical
interference and environmental factors that affect copper wiring and satellite
transmission. Fiber optic technology involves sending laser light pulses
across glass strands in order to transmit digital information. A strand of
fiber optic cable is as thick as a human hair yet is said to have more
bandwidth capacity than copper cable the size of a telephone pole.

Fiber Optic Ring Network--Most CAPs have built their networks in ring
configurations in order to ensure that, if one segment of a network is damaged
or cut, the traffic is simply re-routed and sent to its destination in the
opposite direction. The Company uses a "self-healing" optical fiber ring
architecture known as SONET.

Frame Relay--Frame relay is a high speed data packet switching service used
to transmit data between computers. Frame relay supports data units of
variable lengths at access speeds ranging from 56 kilobits to 1.5 megabits.
This service is appropriate for connecting LANs, but is not appropriate for
voice and video applications due to the variable delays which can occur. Frame
relay was designed to operate at higher speeds on modern fiber optic networks.

Frame Relay Service--Data communications service that functions as a fast
packet transport service of variable length data packets between customer
designated locations and supports the establishment of software defined
logical connections and circuits that act as private facilities on a public
platform.

Hubs--Collection centers located centrally in an area where
telecommunications traffic can be aggregated at a central point for transport
and distribution.

Interconnection Decisions--Rulings by the FCC announced in September 1992
and August 1993, which require the RBOCs and most other LECs to provide
interconnection in LEC-COs to any CAP, IXC or end user seeking such
interconnection for the provision of interstate special access and switched
access transport services.

InterLATA Calls--InterLATA calls are calls that pass from one LATA to
another. Typically, these calls are referred to as long distance calls. The
Telecommunications Act establishes procedures under which the RBOCs can
receive authority to provide interLATA services.

A-2
<PAGE>

IntraLATA Calls--IntraLATA calls, also known as short haul calls, are those
calls that originate and terminate within the same LATA. All states allow
intraLATA competition, but dialing parity still does not exist in most states
and very little LEC intraLATA revenue has been won by competitors.

IXC (Interexchange or Long Distance Carriers)--Usually referred to as long
distance carriers. There are many facilities-based IXCs, including AT&T, MCI,
WorldCom and Sprint, as well as a few CAPs that provide interexchange service.

Kilobit--One thousand bits of information. The information-carrying capacity
(i.e., bandwidth of a circuit may be measured in "kilobits per second.")

LANs (Local Area Networks)--The interconnection of computers for the purpose
of sharing files, programs and various devices such as work stations, printers
and high-speed modems. LANs may include dedicated computers or file servers
that provide a centralized source of shared files and programs.

LATAs--The geographically defined Local Access and Transport Areas in which
LECs are authorized by the MFJ to provide local exchange services. These LATAs
roughly reflect the population density of their respective states (for example
California has 11 LATAs while Wyoming has one). There are 164 LATAs in the
United States.

LEC (Local Exchange Carrier)--A company providing local telephone services.

LEC-CO--Local Exchange Carrier's Central Office.

Local Exchange Areas--A geographic area determined by the appropriate state
regulatory authority in which local calls generally are transmitted without
toll charges to the calling or called party.

Megabit--One million bits of information. The information-carrying capacity
(i.e., bandwidth) of a circuit may be measured in "megabits per second."

MFJ (Modified Final Judgment)--The MFJ was a consent decree entered into in
1982 between AT&T and the Department of Justice which forced the breakup of
the old Bell System through the divestiture of the seven separate Regional
Bell Operating Companies (RBOCs) from AT&T. Divestiture resulted in two
distinct segments of the telecommunications service market: local and long
distance. This laid the groundwork for intense competition in the long
distance industry, but essentially created seven separate regionally-based
local exchange service monopolies. The Telecommunications Act removes most MFJ
restrictions on a prospective basis from AT&T and the RBOCs.

Network Systems Integration--Involves the creation of a turnkey
telecommunications network including (i) route and site selection and
obtaining rights of way and legal authorizations to install the network; (ii)
design and engineering of the system, including technology and vendor
assessment and selection, determining fiber optic circuit capacity, and
establishing reliability/flexibility standards; and (iii) project and
construction management, including contract negotiations, purchasing and
logistics, installation as well as testing and construction management.

Number Portability--The ability of an end user to change local exchange
carriers while retaining the same telephone number.

Off-Net--A customer that is not physically connected to one of the Company's
networks but who is accessed through interconnection with a LEC network.

On-Net--A customer that is physically connected to one of the Company's
networks.

Overlash--An aerial cable construction technique that involves the
attachment of a new cable to an existing cable by placing the new cable beside
the existing cable, and lashing (or binding) the two cables together by means
of a lashing wire that is wrapped around both cables. This technique allows
for the addition of new cable facilities utilizing existing pole attachments
without the requirement for additional space on the pole.

A-3
<PAGE>

PCS (Personal Communications Service)--A type of wireless telephone system
that uses light, inexpensive handheld sets and communicates via low power
antennas.

PBX--A Private Branch Exchange is a switching system within an office
building which allows calls from outside to be routed directly to the
individual or through a central number. A PBX also allows for calling within
an office by way of four digit extensions. Centrex is a service which can
simulate this service from an outside switching source, thereby eliminating
the need for a large capital expenditure on a PBX.

Physical Collocation--Physical Collocation occurs when a CAP places its own
network connection equipment inside the LEC-CO. The Telecommunications Act
gives the FCC authority to mandate physical collocation. See Virtual
Collocation.

POPs (Points of Presence)--Locations where an IXC has installed transmission
equipment in a service area that serves as, or relays calls to, a network
switching center of that IXC.

Private Line--A private, dedicated telecommunications connection between
different end user locations (excluding IXC POPs).

Private Line Data Interconnect Service--A data transport service utilizing
data products and private line facilities that are packaged together with data
products.

Public Switched Network--That portion of a LEC's network available to all
users generally on a shared basis (i.e., not dedicated to a particular user).

Public Utility Commission--A state regulatory body which regulates
utilities, including telephone companies providing intrastate services. In
some states this regulatory body may have a different name, such as public
service commission.

RBOCs (Regional Bell Operating Companies)--The seven local telephone
companies established by the MFJ. The RBOCs were prohibited from providing
interLATA services and from manufacturing telecommunications equipment under
the MFJ, but the Telecommunications Act of 1996 establishes procedures for
lifting these restrictions.

Reciprocal Compensation--The compensation paid by a local carrier for
termination of a local call on the network of a competing carrier which is
obligated to pay a comparable charge to terminate traffic on the network of
the first carrier. Reciprocal compensation is distinct from the one way access
charges by which the IXCs compensate LEC's for originating or terminating
traffic.

Redundant Electronics--A telecommunications facility using two separate
electronic devices to transmit a telecommunications signal so that if one
device malfunctions, the signal may continue without interruption.

Remote Modules (or Remote Switching Modules)--Telephone switching units that
are attached to a host switch (usually via DS1 lines) in a different
geographic location. Remote modules provide the capability of offering
switching functionality to areas that will not economically support a host
switch.

Rights of Way--Rights of certain entities (usually utility, cable TV or
telephone companies and local government agencies) to "pass over" or place
facilities on, over, or underneath property. This includes the ability to
place cable on poles, in conduit, and to bury cable underground.

Route Miles--The number of miles of the telecommunications path in which
fiber optic cables are installed as it would appear on a network map.

Second and Third Tier Markets--Metropolitan markets in the United States
with population bases ranging from 250,000 to two million.

Special Access Services--The lease of private, dedicated telecommunications
lines or "circuits" along the network of a LEC or a CAP, which lines or
circuits run to or from the IXC POPs. Examples of special access services are
telecommunications lines running between POPs of a single IXC, from one IXC
POP to the POP of another IXC or from an end user to its IXC POP. Special
access services do not require the use of switches.

A-4
<PAGE>

SONET (Synchronous Optical Network)--SONET is the electronics and network
architecture which enable transmission of voice, video and data (multimedia)
at very high speeds. This state-of-the-art self-healing ring network offers
advantages over older linear networks in that a cut line or equipment failure
can be overcome by re-routing calls within the network. If the line is cut,
the traffic is simply reversed and sent to its destination around the other
side of the ring.

Switch--A sophisticated computer that accepts instructions from a caller in
the form of a telephone number. Like an address on an envelope, the numbers
tell the switch where to route the call. The switch opens or closes circuits
or selects the paths or circuits to be used for transmission of information.
Switching is a process of interconnecting circuits to form a transmission path
between users. Switches allow local telecommunications service providers to
connect calls directly to their destination, while providing advanced features
and recording connection information for future billing.

Switched Access Transport Services--Transportation of switched traffic along
dedicated lines between the LEC central offices and IXC POPs.

Switched Services--Services which utilize a switch, as opposed to dedicated
services which are non-switched. These services are the greatest source of
revenue for carriers.

Switched Traffic--Telecommunications traffic along a switched network.

Virtual Collocation--Virtual collocation is an alternative to physical
collocation in which the CAPs connect their equipment to the LECs facilities
from a remote location and request that the LEC install the necessary
electronics in its central office which is then leased by the LEC to the CAP
for charges which are generally higher than the charges for physical
collocation. However, the CAP avoids payment of the initial capital costs for
the leased facilities which the CAP must incur under physical collocation.

Voice Grade Equivalent Circuit--One DS-0. One voice grade equivalent circuit
is equal to 64 kilobits of bandwidth per second.

A-5
<PAGE>

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE HYPERION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HYPERION SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.

-----------

TABLE OF CONTENTS

Page
<TABLE>
<S> <C>
Available Information....................................................... 1
Prospectus Summary.......................................................... 2
Risk Factors................................................................ 12
Use of Proceeds............................................................. 17
Capitalization.............................................................. 17
Dividend Policy............................................................. 17
Selected Consolidated Financial and
Operating Data............................................................. 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................................................. 20
Business.................................................................... 30
Competition................................................................. 45
Regulation.................................................................. 46
Management.................................................................. 54
Certain Relationships and Transactions...................................... 58
Principal Stockholders...................................................... 60
Description of the Capital Stock............................................ 61
Description of the Warrants................................................. 63
The Selling Securityholders................................................. 66
Plan of Distribution........................................................ 67
Legal Matters............................................................... 68
Experts..................................................................... 68
Index to Financial Statements............................................... F-1
Glossary.................................................................... A-1
</TABLE>

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

LOGO

329,000 WARRANTS TO PURCHASE AN

AGGREGATE OF 613,427 SHARES OF CLASS B COMMON STOCK AND 613,427 SHARES OF
CLASS B COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANTS

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

PROSPECTUS
---------------

, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is an estimate of expenses which will be incurred in
connection with the issuance and distribution of the securities being
registered.

<TABLE>
<CAPTION>
PAYABLE BY
THE COMPANY
-----------
<S> <C>
SEC filing fee................................................ $ 100
Legal fees and expenses....................................... 30,000
Accounting fees and expenses.................................. 4,500
Miscellaneous expense......................................... 5,400
-------
Total....................................................... $40,000
=======
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law provides in general that
a corporation may indemnify its directors, officers, employees or agents
against expenditures (including judgments, fines, amounts paid in settlement
and attorneys' fees) made by them in connection with certain lawsuits to which
they may be made parties by reason of their being directors, officers,
employees or agents and shall so indemnify such persons against expenses
(including attorneys' fees) if they have been successful on the merits or
otherwise. The bylaws of Hyperion provide for indemnification of the officers
and directors of Hyperion to the full extent permissible under Delaware law.

Hyperion's Certificate of Incorporation also provides, pursuant to Section
102(b)(7) of the Delaware General Corporation Law, that directors of Hyperion
shall not be personally liable to Hyperion or its stockholders for monetary
damages for breach of fiduciary duty as a director for acts or omissions,
provided that directors shall nonetheless be liable for breaches of the duty
of loyalty, bad faith, intentional misconduct, knowing violations of law,
unlawful distributions to stockholders, or transactions from which a director
derived an improper personal benefit.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On April 15, 1996, the Company issued 329,000 Units consisting of $329.0
million aggregate principal amount at maturity of 13% Senior Discount Notes
due April 15, 2003 (the "Senior Notes") and 329,000 Warrants to purchase an
aggregate of 613,427 shares of common stock (the "Warrants") in a private
placement to institutional investors pursuant to the exemptions from
registration under Section 4(2) of the 1933 Act and Rule 144A. Gross proceeds
were approximately $175.3 million and net proceeds to the Company were
approximately $168.6 million after discounts and commissions of approximately
$6.1 million and other transactions costs. The initial purchasers for the Unit
placement were Bear, Stearns & Co. Inc., Chase Securities Inc. and NationsBanc
Capital Markets, Inc.

II-1
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION REFERENCE
- ----------- ----------- ---------
<S> <C> <C>
2.1 Purchase Agreement effective as of May Incorporated herein by reference is
13, 1996 between Teleport Exhibit 2.1 to Registration Statement
Communications Group Inc. and Hyperion No. 333-06957 on Form S-4.
Telecommunications of Florida, Inc.
3.1 Certificate of Incorporation of Filed herewith.
Registrant, together with all
amendments thereto.
3.2 Bylaws of Registrant. Filed herewith.
4.1 Indenture, dated as of April 15, 1996, Incorporated herein by reference is
between the Registrant and Bank of Exhibit 4.1 to Registration Statement
Montreal Trust Company. No. 333-06957 on Form S-4.
4.2 First Supplemental Indenture, dated as Previously filed.
of September 11, 1996, between, the
Registrant and Bank of Montreal Trust
Company
4.3 Form of 13% Senior Discount Note. Previously filed.
4.4 Registration Rights Agreement dated as Incorporated herein by reference is
of April 15, 1996, between the Exhibit 4.3 to Registration Statement
Registrant and the Initial Purchasers. No. 333-06957 on Form S-4.
4.5 Subordinated Note dated April 15, 1996 Incorporated herein by reference is
by the Company in favor of Adelphia. Exhibit 4.4 to Registration Statement
No. 333-06957 on Form S-4.
5.1 Opinion of Buchanan Ingersoll Filed herewith.
Professional Corporation.
10.1 Purchase Agreement dated as of April Incorporated herein by reference is
10, 1996 between the Registrant and Exhibit 1.1 to Registration Statement
Bear, Stearns & Co. Inc., Chase No. 333-06957 on Form S-4.
Securities Inc. and NationsBanc
Capital Markets, Inc. (collectively,
the "Initial Purchasers").
10.2 Employment Agreement between the Incorporated herein by reference is
Registrant and Charles R. Drenning. Exhibit 10.1 to Registration Statement
No. 333-06957 on Form S-4.
10.3 Employment Agreement between the Incorporated herein by reference is
Registrant and Paul D. Fajerski. Exhibit 10.2 to Registration Statement
No. 333-06957 on Form S-4.
10.4 Employment Agreement between the Incorporated herein by reference is
Registrant and Randolph S. Fowler. Exhibit 10.3 to Registration Statement
No. 333-06957 on Form S-4.
10.5 Employment Agreement dated July 1, Incorporated herein by reference is
1986 between Adelphia and Daniel R. Exhibit
Milliard. 10.5 to Adelphia's Registration
Statement No. 33-6974 on Form S-1.
10.6 Pre-Incorporation and Shareholder Incorporated herein by reference is
Restrictive Agreement between Exhibit 10.5 to Registration Statement
Adelphia, Paul D. Fajerski, Charles R. No. 333-06957 on Form S-4.
Drenning and Randolph S. Fowler.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION REFERENCE
----------- ----------- ---------
<C> <S> <C>
10.7 Term Loan Note dated May 10, 1996 Incorporated herein by reference is
between Charles R. Drenning in favor Exhibit 10.6 to Registration Statement
of Registrant in the amount of No. 333-06957 on Form S-4.
$1,000,000.
10.8 Term Loan Note dated May 10, 1996 Incorporated herein by reference is
between Paul D. Fajerski in favor of Exhibit 10.7 to Registration Statement
Registrant in the amount of No. 333-06957 on Form S-4.
$1,000,000.
10.9 Term Loan Note dated May 10, 1996 Incorporated herein by reference is
between Randolph S. Fowler in favor of Exhibit 10.8 to Registration Statement
Registrant in the amount of No. 333-06957 on Form S-4.
$1,000,000.
10.10 Term Loan and Stock Pledge Agreement Incorporated herein by reference is
dated May 10, 1996 between the Exhibit 10.9 to Registration Statement
Registrant and Charles R. Drenning. No. 333-06957 on Form S-4.
10.11 Term Loan and Stock Pledge Agreement Incorporated herein by reference is
dated May 10, 1996 between the Exhibit 10.10 to Registration
Registrant and Paul D. Fajerski. Statement No. 333-06957 on Form S-4.
10.12 Term Loan and Stock Pledge Agreement Incorporated herein by reference is
dated May 10, 1996 between the Exhibit 10.11 to Registration
Registrant and Randolph S. Fowler. Statement No. 333-06957 on Form S-4.
10.13 Letter Agreement dated March 19, 1996 Incorporated herein by reference is
between the Registrant, Charles R. Exhibit 10.12 to Registration
Drenning, Paul D. Fajerski, Randolph Statement No. 333-06957 on Form S-4.
S. Fowler and Adelphia.
10.14 Warrant Agreement dated as of April Incorporated herein by reference is
15, 1996, by and among Hyperion Exhibit 10.13 to Registration
Telecommunications, Inc. and Bank of Statement No. 333-06957 on Form S-4.
Montreal Trust Comapny.
10.15 Warrant Registration Rights Agreement Incorporated herein by reference is
dated as of April 15, 1996, by and Exhibit 10.14 to Registration
among Hyperion Telecommunications, Statement No. 333-06957 on Form S-4.
Inc. and the Initial Purchasers.
10.16 Form of Management Agreement. Incorporated herein by reference is
Exhibit 10.15 to Registration
Statement No. 333-06957 on Form S-4.
10.17 1996 Long-Term Compensation Plan. Incorporated herein by reference is
Exhibit 10.17 to Registration
Statement No. 333-13663 on Form S-1.
10.18 Registration Rights Agreement among Incorporated herein by reference is
Charles R. Drenning, Paul D. Fajerski, Exhibit 10.18 to Registration
Randolph S. Fowler, Adelphia Statement No. 333-13663 on Form S-1.
Communications Corporation and the
Company.
10.19 Registration Rights Agreement between Incorporated herein by reference is
Adelphia Communications Corporation Exhibit 10.19 to Registration
and the Company. Statement No. 333-13663 on Form S-1.
21.1 Subsidiaries of the Registrant. Incorporated herein by reference is
Exhibit 21.1 to Registration Statement
No. 333-06957 on Form S-4.
23.1 Consent of Buchanan Ingersoll Filed herewith.
Professional Corporation (contained in
its opinion filed as Exhibit 5.1
hereto).
23.2 Consent of Deloitte & Touche LLP. Filed herewith.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION REFERENCE
----------- ----------- ---------
<C> <S> <C>
24.1 Power of Attorney (appearing on Previously filed.
Signature Page).
27.1 Financial Data Schedule. Incorporated herein by reference is
Exhibit 27.01 to Registrant's Form 10-
Q for the Quarter ended September 30,
1996.
</TABLE>

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.

The Registrant hereby undertakes to respond to requests for information that
is incorporated by reference into the prospectus pursuant to Item 4, 10(b),
11, or 13 of this form, within one business day of receipt of such request,
and to send the incorporated documents by first-class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the
date of responding to the request.

The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at such time shall be
deemed to be the initial bona fide offering thereof.

(2) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

Provided, however, that paragraphs (3)(i) and (3)(ii) above do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.

(3) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(4) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Coudersport, Commonwealth of Pennsylvania, on the 27th day of December, 1996.

HYPERION TELECOMMUNICATIONS, INC.

/s/ Daniel R. Milliard
By: ________________________________

Daniel R. Milliard President and
Chief Operating Officer

Pursuant to the requirements of the Securities Act, this Amendment to this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE

Chairman and Director
* December 27 ,
- ------------------------- 1996
John J. Rigas

* Vice Chairman and Director December 27,
- ------------------------- 1996
Michael J. Rigas

* Vice Chairman, Treasurer, December 27,
- ------------------------- Chief Financial Officer and 1996
Timothy J. Rigas Director

* Vice Chairman, Chief Executive December 27,
- ------------------------- Officer and Director 1996
James P. Rigas

* President, Secretary, Chief December 27,
- ------------------------- Operating Officer and Director 1996
Daniel R. Milliard

* Senior Vice President and December 27,
- ------------------------- Director 1996
Charles R. Drenning

* Senior Vice President and December 27,
- ------------------------- Director 1996
Paul D. Fajerski

* Senior Vice President and December 27,
- ------------------------- Director 1996
Randolph S. Fowler

* Vice President and Chief December 27,
- ------------------------- Accounting Officer 1996
Edward E. Babcock

*/s/ Daniel R. Milliard

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

Daniel R. Milliard, as attorney-in-fact

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
2.1 Purchase Agreement effective as of May 13, 1996 between
Teleport Communications Group Inc. and Hyperion
Telecommunications of Florida, Inc.
**3.1 Certificate of Incorporation of Registrant, together with
all amendments thereto.
**3.2 Bylaws of Registrant.
4.1 Indenture, dated as of April 15, 1996, between the
Registrant and Bank of Montreal Trust Company.
*4.2 First Supplemental Indenture, dated as of September 11,
1996, between, the Registrant and Bank of Montreal Trust
Company
*4.3 Form of 13% Senior Discount Note.
4.4 Registration Rights Agreement dated as of April 15, 1996,
between the Registrant and the Initial Purchasers.
4.5 Subordinated Note dated April 15, 1996 by the Company in
favor of Adelphia.
**5.1 Opinion of Buchanan Ingersoll Professional Corporation.
10.1 Purchase Agreement dated as of April 10, 1996 between the
Registrant and Bear, Stearns & Co. Inc., Chase Securities
Inc. and NationsBanc Capital Markets, Inc. (collectively,
the "Initial Purchasers").
10.2 Employment Agreement between the Registrant and Charles R.
Drenning.
10.3 Employment Agreement between the Registrant and Paul D.
Fajerski.
10.4 Employment Agreement between the Registrant and Randolph S.
Fowler.
10.5 Employment Agreement dated July 1, 1986 between Adelphia
and Daniel R. Milliard.
10.6 Pre-Incorporation and Shareholder Restrictive Agreement
between Adelphia, Paul D. Fajerski, Charles R. Drenning and
Randolph S. Fowler.
10.7 Term Loan Note dated May 10, 1996 between Charles R.
Drenning in favor of Registrant in the amount of
$1,000,000.
10.8 Term Loan Note dated May 10, 1996 between Paul D. Fajerski
in favor of Registrant in the amount of $1,000,000.
10.9 Term Loan Note dated May 10, 1996 between Randolph S.
Fowler in favor of Registrant in the amount of $1,000,000.
10.10 Term Loan and Stock Pledge Agreement dated May 10, 1996
between the Registrant and Charles R. Drenning.
10.11 Term Loan and Stock Pledge Agreement dated May 10, 1996
between the Registrant and Paul D. Fajerski.
10.12 Term Loan and Stock Pledge Agreement dated May 10, 1996
between the Registrant and Randolph S. Fowler.
10.13 Letter Agreement dated March 19, 1996 between the
Registrant, Charles R. Drenning, Paul D. Fajerski, Randolph
S. Fowler and Adelphia.
10.14 Warrant Agreement dated as of April 15, 1996, by and among
Hyperion Telecommunications, Inc. and Bank of Montreal
Trust Comapny.
10.15 Warrant Registration Rights Agreement dated as of April 15,
1996, by and among Hyperion Telecommunications, Inc. and
the Initial Purchasers.
10.16 Form of Management Agreement.
10.17 1996 Long-Term Compensation Plan.
10.18 Registration Rights Agreement among Charles R. Drenning,
Paul D. Fajerski, Randolph S. Fowler, Adelphia
Communications Corporation and the Company.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
10.19 Registration Rights Agreement between Adelphia
Communications Corporation and the Company.
21.1 Subsidiaries of the Registrant.
**23.1 Consent of Buchanan Ingersoll Professional Corporation
(contained in its opinion filed as Exhibit 5.1 hereto).
**23.2 Consent of Deloitte & Touche LLP.
*24.1 Power of Attorney (appearing on Signature Page).
27.1 Financial Data Schedule.
</TABLE>
- --------

*Previously filed.

**Filed herewith.

<PAGE>

Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HYPERION TELECOMMUNICATIONS, INC.
(Original Certificate of Incorporation filed October 9, 1991)

HYPERION TELECOMMUNICATIONS, INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "Law"), does hereby certify:

A. That the Board of Directors of the Corporation adopted a resolution
setting forth the Amended and Restated Certificate of Incorporation set forth
below, declaring it advisable and submitting it to the stockholders entitled to
vote in respect thereof for their consideration of such Amended and Restated
Certificate of Incorporation.

B. The holders of a majority of the outstanding stock entitled to vote
thereon voted in favor of the adoption of the Amended and Restated Certificate
of Incorporation as set forth below.

C. That the original Certificate of Incorporation of the Corporation, as
amended, is hereby superseded in its entirety by the Amended and Restated
Certificate of Incorporation set forth below.

D. That the Amended and Restated Certificate of Incorporation of the
Corporation set forth below as been duly adopted in accordance with Sections 242
and 245 of the Law.

ARTICLE I

The name of the corporation is Hyperion Telecommunications, Inc.

ARTICLE II

The address of its registered office in the State of Delaware is 1013
Centre Road, City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Prentice Hall Corporation System, Inc.

ARTICLE III

The nature of the business or purpose to be conducted or promoted is: to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.

ARTICLE IV

The total number of shares of capital stock of all classes which the
Corporation shall have authority to issue is 455,000,000 shares which shall be
divided as follows: (i) 300,000,000 shares
<PAGE>

of the Class A Common Stock, par value $0.01 per share (the "Class A Common
Stock"); (ii) 150,000,000 shares of the Class B Common Stock, par value $0.01
per share (the "Class B Common Stock") (collectively the Class A Common Stock
and the Class B Common Stock is referred to herein as the "Common Stock"); and
(iii) 5,000,000 shares of the Preferred Stock, par value $0.01 per share (the
"Preferred Stock"). The designations and the powers, preferences, and relative,
participating, optional or other rights of the capital stock and the
qualifications, limitations or restrictions thereof are as follows:

Each share of common stock of the Corporation, par value $0.01 per share,
outstanding immediately prior to the filing of this Amended and Restated
Certificate of Incorporation ("Original Common Stock") shall, upon the filing of
this Amended and Restated Certificate of Incorporation, and without any action
required by the holder be converted into one (1) share of Class B Common Stock.
On or after the date of the filing of this Amended and Restated Certificate of
Incorporation, and in any event within 10 days after receipt of notice, by mail,
postage prepaid from the Corporation of the occurrence of such event, each
holder of record of shares of Original Common Stock shall surrender such
holder's certificates evidencing such shares at the principal office of the
Corporation or at such other place as the Corporation shall designate, and shall
thereupon be entitled to receive certificates representing the number of shares
of Class B Common Stock, as applicable, into which such shares of Original
Common Stock have been converted. Upon the filing of this Amended and Restated
Certificate of Incorporation, each holder of record of Original Common Stock
shall be deemed to be the holder of record of the Class B Common Stock, as
applicable, issuable upon such conversion, notwithstanding that the certificates
representing such shares of Original Common Stock have not been surrendered at
the office of the Corporation, that notice from the corporation shall not have
been received by any holder of record of shares of Original Common Stock, or
that the certificates evidencing such shares of Class B Common Stock, as
applicable, shall not then be actually delivered to such holder.

A. COMMON STOCK PROVISIONS

(1) Voting Rights. Holders of the Class A Common Stock and holders of
--------------
the Class B Common Stock shall have the following voting rights:

(a) Except as required by law, the holders of the Class A Common
Stock and the holders of the Class B Common Stock shall in all matters vote
together as a single class, provided that the holders of shares of the
Class A Common Stock shall have one vote per share and the holders of
shares of the Class B Common Stock shall have ten votes per share. If any
series of Preferred Stock is issued or any new series of capital stock is
authorized in the future, any voting rights granted to such stock shall not
exceed ten votes per share in connection with any matter and will not limit
the voting rights of the Class A Common Stock or the Class B Common Stock.

-2-
<PAGE>

(b) There shall be no cumulative voting of any shares of either
class of Common Stock.

(2) Conversion Rights.
------------------

(a) Shares of Class B Common Stock shall be convertible, at the
option of the respective holders thereof, at any time, and from time to
time, into fully paid and nonassessable shares of the Class A Common Stock
on the basis of one share of the Class A Common Stock for each share of the
Class B Common Stock. Any holder of shares of the Class B Common Stock may
elect to convert any or all of such shares at one time or at various times,
in such holder's discretion.

(b) No payment or adjustment with respect to dividends on shares
of the Class A Common Stock or on the Class B Common Stock shall be made in
connection with any conversion of shares of the Class B Common Stock into
shares of Class A Common Stock; provided, however, that if any shares of
the Class B Common Stock shall be converted subsequent to the record date
for the payment of a stock or cash dividend or other distribution on the
shares of the Class B Common Stock but prior to such payment, the stock or
cash dividend or other distribution shall be paid on the Class B Common
Stock to the registered holder of such shares as of the close of business
on the record date as if no conversion has been made.

(c) The holders of a certificate or certificates for the Class B
Common Stock, in order to effect the conversion of shares represented
thereby, shall surrender the certificate or certificates to the corporation
or to the transfer agent for the shares of the Class A Common Stock, with
(i) a written notice to the Corporation stating that such holder elects to
convert such share or shares and stating the name and addresses in which
each certificate for the shares of the Class A Common Stock issued upon
such conversion is to be issued and (ii) any transfer tax stamps or funds
therefor required to be paid in connection with the transfer. If the shares
of the Class A Common Stock issuable upon conversion are to be issued in a
name other than that in which the shares of the Class B Common Stock to be
converted are registered, the certificate or certificates shall be duly
endorsed for the transfer or accompanied by a duly executed stock transfer
power.

Upon the surrender of the certificate or certificates, the Corporation
shall issue and deliver or cause to be issued and delivered to the person
entitled thereto a certificate or certificates for the number of full
shares of the Class A Common Stock issuable upon conversion. The
conversion shall be deemed to have been effected on the date of the
surrender of the certificate or certificates of shares of the Class B
Common Stock, and the person in whose name the certificate or

-3-
<PAGE>

certificates of the shares of the Class A Common Stock issuable upon
conversion are to be issued shall be deemed to be the holder of record of
the shares as of that date.

(d) If there should be any capital reorganization or any
reclassification of the Class A Common Stock, the shares of the Class B
Common Stock shall thereafter have the right to be converted into the
number of shares of stock or other securities or property of the
Corporation to which outstanding shares of the Class A Common Stock would
have been entitled upon the effective date of the reorganization or
reclassification. The Board of Directors shall make an appropriate
adjustment in the application of the provision of this paragraph (d) with
respect to the conversion rights of the holders of the shares of the Class
B Common Stock after the reorganization or reclassification, to the end
that the provision shall be applicable, as nearly as reasonably may be, in
respect to any shares or other securities or property thereafter issuable
or deliverable upon the conversion of shares of the Class B Common Stock.
The provision of this paragraph shall not apply to a reorganization or
reclassification involving merely a subdivision or combination of
outstanding shares of the Class A Common Stock, which shall be governed by
paragraph (f) hereof.

(e) The Corporation shall at all times have authorized but
unissued, or in its treasury, a number of shares of the Class A Common
Stock sufficient for the conversion of all shares of the Class B Common
Stock from time to time outstanding.

(f) If the shares of the Class A Common Stock or the Class B
Common Stock at any time outstanding shall, by reclassification or
otherwise, be subdivided into a greater number of shares or combined in to
a lesser number of shares, the shares of the Class B Common Stock or the
Class A Common Stock, respectively, then outstanding shall, at the same
time, be subdivided or combined, as the case may be, on the same basis.

(g) The Corporation covenants that if any shares of the Class A
Common Stock, required to be reserved for purposes of conversion hereunder,
require registration with or approval of any governmental authority under
any federal or state law before such shares may be issued upon conversion,
the corporation will cause such shares to be duly registered or approved.

(3) Dividend Rights. Whenever there shall have been paid, or declared
---------------
and set aside for payment, to the holders of shares of any class of stock
having preference over the Common Stock as to the payment of dividends, the
full amount of dividends and of sinking fund or retirement payments, if
any, to which such

-4-
<PAGE>

holders are respectively entitled in preference to the Common Stock, then
the holders of record of the Class A Common Stock and the Class B Common
Stock, and any class or series of stock entitled to participate therewith
as to dividends, shall be entitled to receive dividends, when, as, and if
declared by the Board of Directors, out of any assets legally available for
the payment of dividends thereon, provided that no dividend may be declared
and paid to the holders of the Class A Common Stock unless at the same time
the Board of Directors shall also declare and pay to the holders of the
Class B Common Stock a per share dividend equal to and, subject to the next
sentence, in the same form as the dividend declared and paid to the holders
of the Class A Common Stock, and vice versa. Common Stock dividends
declared on the Class A Common Stock shall be payable in the Class A Common
Stock; Common Stock dividends declared on the Class B Common Stock shall be
payable in the Class B Common Stock.

(4) Liquidation Rights. In the event of any dissolution, liquidation
------------------
or winding up of the Corporation, whether voluntary or involuntary, the
holders of record of the Class A Common Stock then outstanding and the
holders of record of the Class B Common Stock then outstanding, and all
holders of any class or series of stock entitled to participate therewith,
in whole or in part, as to distribution of assets, shall become entitled to
participate equally on a per share basis in the distribution of any assets
of the Corporation remaining after the Corporation shall have paid or
provided for payment of all debts and liabilities of the Corporation, and
shall have paid, or set aside of repayment, to the holders of any class of
stock having preference over the Common Stock in the event of dissolution,
liquidation or winding up, the full preferential amounts (if any) to which
they are entitled.

B. PREFERRED STOCK PROVISIONS.

The Board of Directors is hereby expressly authorized, at any time or
from time to time, to divide any or all of the shares of the Preferred
Stock into one or more series, and in the resolution or resolutions
establishing a particular series, before issuance of any of the shares
thereof, to fix and determine the number of shares and the designation of
such series, so as to distinguish it from the shares of all other series
and to fix and determine the voting rights (which may be full, limited,
multiple or fractional or none), designations, preferences, qualifications,
privileges, limitations, options, conversion rights, restrictions and other
special or relative rights of the Preferred Stock of such series, to the
fullest extent now or hereafter permitted by the laws of the State of
Delaware; provided, however that neither the terms of the class nor any
--------- -------
such series shall be established by the Board of Directors without the
approval of the holders of the series of the Preferred Stock then
outstanding, voting separately as a class, if such approval would then be

-5-
<PAGE>

required by law to authorize a class or series of stock having such terms,
and until such approval shall have been obtained the class or any such
series of Preferred Stock shall not be deemed to be authorized. The Board
of Directors may in its discretion, at any time or from time to time, issue
or cause to be issued all or any part of the authorized and unissued shares
of the Preferred Stock, issue or cause to be issued all or any part of the
authorized and unissued shares of the Preferred Stock for consideration of
such character and value as the Board of Directors shall from time to time
fix or determine.

ARTICLE V

The Corporation is to have perpetual existence.

ARTICLE VI

A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director for any act or omission; provided, however, that the
foregoing shall not eliminate or limit the liability of a director (a) for any
breach of the director's duty or loyalty to the Corporation or its stockholders,
(b) for any act or omission not in good faith or which involves intentional
misconduct or a knowing violation of law, (c) under Section 174 of the General
Corporation Law of the State of Delaware, or (d) for any transaction from which
the director derived an improper personal benefit. Any repeal or modification
of this article by the stockholders of the Corporation shall be prospective
only, and shall not adversely affect any limitation on the personal liability of
a director of the Corporation existing at the time of such repeal or
modification.

ARTICLE VII

In furtherance and not in limitation of the powers conferred by the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation is expressly authorized to make, alter, or repeal the Bylaws of the
Corporation.

ARTICLE VIII

Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the Corporation.

ARTICLE IX

The certificate of incorporation of the Corporation, as herein amended,
shall constitute a restatement of and shall supersede the Certificate of
Incorporation of the Corporation, as previously amended.

-6-
<PAGE>
ARTICLE X

Section 203 of the General Corporation Law of Delaware, as amended, shall
not apply to the Corporation.

-7-
<PAGE>

IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by the undersigned authorized officer
effective as of October 9, 1996.

HYPERION TELECOMMUNICATIONS, INC.

/s/ James P. Rigas
By:_______________________________________

Chief Executive Officer
Title:____________________________________

-8-

<PAGE>

Exhibit 3.2

AMENDED AND RESTATED
BYLAWS
of
HYPERION TELECOMMUNICATIONS, INC.

1. Offices
-------

Hyperion Telecommunications, Inc. (hereinafter the "Corporation") may
have offices and places of business at such places, within or without the State
of Delaware, as the Board of Directors may from time to time determine or the
business of the Corporation may require.

2. Meeting of Stockholders
-----------------------
2.1 Place of Meetings.
------------------

All meetings of the stockholders for the election of directors shall
be held at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may
be held at such time and place, within or without the State of Delaware, as
shall be stated in the notice of the meeting or in a duly executed waiver
thereof.

2.2 Annual Meeting.
---------------

Annual meetings of stockholders shall be held in September at date and
time designated by the Board of Directors or at such other date and time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting or in a duly executed waiver thereof.

2.3 Special Meetings.
-----------------

Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the Certificate of Incorporation,
may be called by the Chief Executive Officer, the President or a majority of the
Board of Directors and shall be called by the President or Secretary at the
request in writing of stockholders owning not less than one-half of the entire
capital stock of the Corporation issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
<PAGE>

2.4 Notice.
-------

Written notice of each meeting of stockholders shall be given in the
manner prescribed in Article IV of these Bylaws which shall state the place,
date and hour of the meeting and, in the case of a special meeting, shall state
the purpose or purposes for which the meeting is called. In the case of a
meeting to vote on a proposed merger or consolidation, such notice shall state
the purpose of the meeting and shall contain a copy of the agreement or brief
summary thereof and, in the case of a meeting to vote on a proposed sale, lease
or exchange of all of the Corporation's assets, such notice shall specify that
such a resolution shall be considered. Such notice shall be given to each
stockholder of record entitled to vote at the meeting not less than ten (10) nor
more than sixty (60) days prior to the meeting, except that where the matter to
be acted on is a merger or consolidation of the Corporation or a sale, lease or
exchange of all or substantially all of its assets, such notice shall be given
not less than twenty (20) nor more than sixty (60) days prior to such meeting.
If mailed, notice is given when deposited in the United States mail, postage
prepaid, directed to the stockholder at his address as it appears on the records
of the corporation.

2.5 Business.
---------
Business transacted at any special meeting of stockholders shall be
limited to the purpose or purposes stated in the notice.

2.6 Quorum and Adjournment.
-----------------------

Except as otherwise provided by statute or the Certificate of
Incorporation, the holders of a majority of the shares of the Corporation issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at each meeting of stockholders but in no event shall a
quorum consist of less than one-third of the shares entitled to vote at the
meeting. If a quorum shall not be present at the time fixed for any meeting,
the stockholders present, in person or by proxy, and entitled to vote thereat
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present. At such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.

2.7 Voting.
-------

Unless otherwise provided in the Certificate of Incorporation and
subject to the provisions of Article VI, Section 4 of these Bylaws, each
stockholder shall be entitled to one vote, in person or by proxy, for each share
of capital stock held by such stockholder. If the Certificate of Incorporation
provides for more or less than one vote for any share, on any matter, every
reference

-2-
<PAGE>

in these Bylaws to a majority or other proportion of stock shall refer
to such majority or other proportion of the votes of such stock.

2.8 Vote Required.
--------------

When a quorum is present at any meeting, in all matters other than the
election of directors, the vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote on the subject
matter shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or of the
Certificate of Incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors.

2.9 Voting Lists.
-------------

The officer who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.

2.10 Proxy.
------

Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy, but no such proxy
shall be voted or acted upon after three (3) years from its date, unless the
proxy provides for a longer period.

A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.

2.11 Consents.
---------

Any action required or permitted to be taken at any annual or special
meeting of the stockholders may be taken without a meeting, without prior notice
and a vote, if a consent or

-3-
<PAGE>

consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered office in Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. Where corporate
action is taken in such manner by less than unanimous written consent, prompt
written notice of the taking of such action shall be given to all stockholders
who have not consented in writing thereto.

Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered in the manner required by statute to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.

3. Directors
---------
3.1 Board of Directors.
-------------------

The business and affairs of the Corporation shall be managed by or
under the direction of its Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things, except as
provided in the Certificate of Incorporation.

3.2 Number; Election and Tenure.
----------------------------

The number of directors which shall constitute the whole Board shall
be not less than seven (7) nor more than twenty-one (21). Thereafter, within
the limits above specified, the number of directors shall be determined by
resolution of the Board of Directors. The directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 3 of this
Article, and each director elected shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. Any director
may resign at any time upon written notice to the Corporation. Directors need
not be stockholders.

3.3 Vacancies.
----------

Vacancies in the Board of Directors and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then

-4-
<PAGE>

in office, although less than quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual election and until
their successors are duly elected and shall qualify, or until his earlier
resignation or removal. If at any time, by reason of death or resignation or
other cause, the Corporation should have no directors in office, then any
officer or any stockholder or an executor, administrator, trustee or guardian of
a stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders in
accordance with the provisions of the Certificate of Incorporation or the Bylaws
or may apply to the Court of Chancery for a decree summarily ordering an
election as provided by statute.

If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.

3.4 Meetings.
---------
The Board of Directors of the Corporation may hold its meetings, and
have an office or offices, within or without the State of Delaware.

3.5 First Meeting.
--------------

The first meeting of each newly elected Board of Directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected Board of Directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.

3.6 Notice.
-------

Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board. A special meeting of the Board may be called by the Chief Executive
Officer, President or any Executive Vice President Chairman and a special
meeting shall be called by the President on the written request of two
directors. Notice of each special meeting of the Board of Directors, specifying
the place, day and hour of the meeting, shall be given in the manner prescribed
in Article IV of these Bylaws and in this Section 3.6, either

-5-
<PAGE>

personally or by mail, by courier, telecopy, telex or telegram to each director,
at the address or the telex number supplied by the director to the Corporation
for the purpose of notice, at least 24 hours before the time set for the
meeting. Neither the business to be transacted at, nor the purpose of any
meeting of the Board, need be specified in the notice of the meeting.

3.7 Quorum and Voting.
------------------

Except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation, a majority of the total number of directors shall
constitute a quorum for the transaction of business. The vote of the majority
of the directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors.

Members of the Board or members of any committee designated by the
Board may participate in meetings of the Board or of such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
such meeting shall constitute presence in person at such meeting.

3.8 Consents.
---------

Unless otherwise restricted by the Certificate of Incorporation, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.

3.9 Committees.
-----------

The Board of Directors may, by resolution passed by a majority of the
whole Board, designate one or more committees, each committee to consist of one
or more directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, to the
extent provided in the resolution, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
Bylaws of the Corporation; and, unless the resolution, Bylaws or Certificate of
Incorporation provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. In the absence or
disqualification of any member of such committee or committees, the member or
members

-6-
<PAGE>

thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Such committee or committees shall have such name or names
as may be determined from time to time by resolution adopted by the Board of
Directors.

3.10 Committee Rules.
----------------

Unless the Board of Directors otherwise provides, each committee
designated by the Board may adopt, amend and repeal rules for conducting its
business. In the absence of a provision by the Board or a provision in the
rules of a committee to the contrary, a majority of the entire authorized number
of members of such committee shall constitute a quorum for the transaction of
business, the vote of a majority of the members present at a meeting at the time
of such vote if a quorum is then present shall be the act of such committee, and
in other respects each committee shall conduct its business in the same manner
as the Board conducts its business pursuant to this Article III of these Bylaws.

3.11 Committee Minutes.
------------------
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.

3.12 Compensation of Directors.
--------------------------

The directors as such, and as members of any standing or special
committee, may receive such compensation for their services as may be fixed from
time to time by resolution of the Board. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.

The directors may be paid their expenses, if any, for attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
director. Members of special or standing committees may be allowed like
compensation for attending committee meetings.

3.13 Removal of Directors.
---------------------
Any director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors.

-7-
<PAGE>

4. Notices
-------
4.1 Form of Notice.
---------------

Whenever, under the provisions of the Delaware General Corporation Law
or of the Certificate of Incorporation or of these Bylaws, notice is required to
be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by first class or
express mail, addressed to such director or stockholder, at his address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail, except that, in the case of directors,
notice sent by first class mail shall be deemed to have been given forty-eight
hours after being deposited in the United States mail. Whenever, under these
Bylaws, notice may be given by telegraph, courier or telex, notice shall be
deemed to have been given when deposited with a telegraph office or courier
service for delivery or, in the case of telex, when dispatched.

4.2 Waiver of Notice.
-----------------

Whenever notice is required to be given under any provisions of the
Delaware General Corporation Law or the Certificate of Incorporation or these
Bylaws, a written waiver, signed by the person or persons entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation or the Bylaws.

5. Officers
--------
5.1 Selection of Officers.
----------------------

The officers of the Corporation shall be chosen by the directors and
shall consist of a president and secretary, and it may, if it so determines,
elect from among its members a Chairman of the Board and one or more Vice
Chairmen of the Board, who shall have the power of a vice president. The Board
of Directors may also choose a treasurer, one or more executive vice presidents,
one or more vice presidents, one or more assistant secretaries and such other
officers as the Board may deem desirable or appropriate and may give any of them
such further designations or alternate titles as it considers desirable. Any
number of offices may be held by the same person, unless the Certificate of
Incorporation or these Bylaws otherwise provide. A failure to elect officers
shall not dissolve or otherwise affect the Corporation.

-8-
<PAGE>

5.2 Term of Office, Removal and Vacancies.
--------------------------------------

Each officer of the Corporation shall hold his office until his
successor is elected and qualifies or until his earlier resignation or removal.
Any officer may resign at any time upon written notice to the Corporation. Any
officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring by death, resignation, removal or otherwise, in any office of
the Corporation, shall be filled by the Board of Directors.

5.3 Compensation.
-------------

The salaries of the officers of the Corporation may be fixed by the
Board of Directors.

5.4 Bond.
-----

The Corporation may secure the fidelity of any or all of its officers
or agents by bond or otherwise.

5.5 Chairman of the Board.
----------------------

The Chairman of the Board shall preside at all meetings of the Board
of Directors and of the stockholders at which he is present and shall have and
may exercise such powers as may, from time to time, be assigned to him by the
Board and as may be provided by law.

5.6 Chief Executive Officer.
------------------------

The Chief Executive Officer shall have primary responsibility for
strategic and long-range planning and direction of the business and finances of
the Corporation, shall oversee the management of the business of the
Corporation, and in addition shall perform all the duties incident to the office
of Chief Executive Officer as may be assigned to such person by the Board of
Directors. He shall have the power to appoint and remove such subordinate
officers and agents other than those actually appointed or elected by the Board
of Directors as the business of the Corporation may require.

5.7 The President.
--------------

The President shall be the Chief Operating Officer of the Corporation,
shall have general and active responsibility for the management of the business
and affairs of the Corporation, shall see that all orders and resolutions of the
Board of Directors are carried into effect and shall perform all such duties as
are assigned to such person by the Board of Directors. He shall have the power
to appoint and remove such subordinate officers and agents other than

-9-
<PAGE>

those actually appointed or elected by the Board of Directors as the business of
the Corporation may require.

5.8 Executive Vice President.
-------------------------

Each Executive Vice President, if any, shall perform such duties as
shall be assigned to him by the Board of Directors or President, and, in the
absence or disability of the President, the most senior in rank of the Executive
Vice Presidents shall perform the duties of the President.

5.9 Vice President.
---------------

Each Vice President, if any, shall perform such duties as shall be
assigned to him by the Board of Directors or President and, to the extent
not so assigned, as generally pertain to such office, subject to the control of
the Board of Directors.

5.10 Secretary.
----------

The Secretary shall attend all meetings of the Board of Directors and
all meetings of the stockholders and record all the proceedings of the meetings
of the Board of Directors and the stockholders in a book to be kept for that
purpose and shall perform like duties for the standing committees when required.
He shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or President. He shall be
the custodian of the seal of the Corporation and he, or an assistant secretary,
shall have authority to affix the same to any instrument requiring it, and when
so affixed, it may be attested by his signature or by the signature of such
assistant secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing by
his signature.

5.11 Assistant Secretary.
--------------------

The Assistant Secretary, if any, or assistant secretaries, if more
than one, shall perform the duties of the secretary in his or her absence and
shall perform such other duties as the Board of Directors, the President or the
Secretary may from time to time designate.

5.12 Treasurer.
----------

The Treasurer shall have custody of the corporate funds and securities
and shall keep, or cause to be kept, full and accurate amounts of receipts and
disbursements in books kept for that purpose. He shall deposit all monies, and
other valuable effects, in the name and to the credit of the Corporation, in
such depository as the Board of Directors shall designate. As directed by the
Board of Directors or the President, he shall disburse monies of the
Corporation, taking proper vouchers for such disbursements and shall render to
the President and directors an account

-10-
<PAGE>

of all his transactions as Treasurer and of the financial condition of the
Corporation. In addition, he shall perform all the usual duties incident to the
office of Treasurer.

5.13 Other Officers.
---------------

Any other officers of the Corporation shall have such powers and
duties in managing the Corporation as shall be stated in a resolution of the
Board of Directors which is not inconsistent with these Bylaws and, to the
extent not so stated, as generally pertain to their respective offices, subject
to the control of the Board. The Board of Directors may require any officer,
agent or employee to give security for the faithful performance of his duties.

6. Certificates of Stock and Transfers
-----------------------------------
6.1 Certificates of Stock; Uncertificated Shares.
---------------------------------------------

The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors may provide by resolution or resolutions
that some or all of any or all classes or series of its stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the Corporation by, the President or any Vice
President, and countersigned by the Secretary or any Assistant Secretary or the
Treasurer, representing the number of shares registered in certificate form.
Any or all the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.

6.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificate
-------------------------------------------------------------------------
or Uncertificated Shares.
-------------------------

The Board of Directors may issue a new certificate of stock or
uncertificated shares in place of any certificate therefore issued by it,
alleged to have been lost, stolen or destroyed, and the Corporation may require
the owner of the lost, stolen or destroyed certificate, or his legal
representative to give the Corporation a bond sufficient to indemnify it against
any claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate or
uncertificated shares.

-11-
<PAGE>

6.3 Record Date.
------------

In order that the Corporation may determine the stockholders entitled
to notice of, or to vote at, any meeting of stockholders or at any adjournment
thereof in respect of which a new record date is not fixed, or to consent to
corporate action without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and which
date shall not be more than sixty (60) nor less than ten (10) days before the
date of any such meeting, nor more than ten (10) days after the date on which
the date fixing the record date for the consent of stockholders without a
meeting is adopted by the Board of Directors, nor more than sixty (60) days
prior to any other such action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.

6.4 Registered Stockholders.
------------------------

The Corporation shall be entitled to recognize the exclusive right of
a person registered on its books as of any record date fixed or determined
pursuant to Section 3 of this Article as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, regardless of whether it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Delaware.

7. General Provisions
------------------
7.1 Dividends.
----------

Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the Corporation's
capital stock, subject to the provisions of the Certificate of Incorporation.

7.2 Liability of Directors as to Dividends or Stock Redemption.
-----------------------------------------------------------

A member of the board of directors, or a member of any committee
designated by the board of directors, shall be fully protected in relying in
good faith upon the records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
officers or employees, or committees of the Board of Directors, or by

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<PAGE>

any other person as to matters the director reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation, as to the value and amount
of the assets, liabilities and/or net profits of the Corporation, or any other
facts pertinent to the existence and amount of surplus or other funds from which
dividends might properly be declared and paid, or with which the Corporation's
stock might properly be purchased or redeemed.

7.3 Reserve for Dividends.
----------------------

Before declaring any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.

7.4 Annual Statement.
-----------------

The Board of Directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.

7.5 Signing Checks, Notes, etc.
---------------------------

All checks or other orders for the payment of money and all notes or
other instruments evidencing indebtedness of the Corporation shall be signed on
its behalf by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate, or, if not so designated, by
the President or any Vice President of the Company.

7.6 Fiscal Year.
------------

The fiscal year of the Corporation shall end on March 31 of each year
or as otherwise determined by resolution of the Board of Directors.

7.7 Seal.
-----

The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.

7.8 Voting of Securities of Other Corporations.
-------------------------------------------

In the event that the Corporation shall, at any time or from time to
time, own and have power to vote any securities (including but not limited to
shares of stock or partnership

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<PAGE>

interests) of any other issuer, they shall be voted by such person or persons,
to such extent and in such manner, as may be determined by the Board of
Directors or, if not so determined, by any duly elected officer of the
Corporation.

8. Indemnification
---------------
8.1 Indemnification.
----------------

Except as otherwise provided below, each person who was or is made a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding") and whether or not
by or in the right of the Corporation or otherwise, by reason of the fact that
he or she, or a person of whom he or she is the heir, executor or administrator,
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as director or officer or trustee of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director or
officer or trustee, or in any other capacity while serving as a director or
officer or trustee, shall be indemnified and held harmless by the Corporation to
the fullest extent permitted by law, as the same exist or may hereinafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
are permitted the corporation to provide prior to such amendment), against all
reasonable expenses, including attorneys' fees, and any liability and loss,
including judgments, fines, ERISA excise taxes or penalties and amounts paid or
to be paid in settlement, incurred or paid by such person in connection
therewith, and such indemnification shall continue as to a person who has ceased
to be a director or officer or trustee; provided, however, that except as
provided in paragraph (b) hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of the final disposition thereof;
provided, however, that to the extent required by the law, the payment of such
expenses incurred by an officer or director in advance of the final disposition
of a proceeding shall be made only upon receipt of an undertaking, by or on
behalf of such person, to repay all amounts so advanced if it shall ultimately
be determined that he or she is not entitled to be indemnified under this
section or otherwise. The right to indemnification and advancement of expenses
provided herein shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors and
administrators of such person.

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<PAGE>

8.2 Right to Claimant to Bring Suit.
--------------------------------

If a claim under Section 1 of this Article is not paid in full by the
Corporation within thirty (30) days after a written claim has been received by
the Corporation, the claimant may, at any time thereafter, bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim.

8.3 Non-Exclusivity of Rights.
--------------------------

The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of a final disposition conferred in this
Article VIII shall not be exclusive of any other rights to which those seeking
indemnification or advancement of expenses hereunder may be entitled under any
bylaw, agreement, vote of stockholders or directors or otherwise, both as to
action in his official capacity and as to action in any other capacity while
holding that office.

8.4 Funding.
--------

The Corporation may create a fund of any nature, which may, but need
not be, under the control of a trustee, or otherwise secure or insure in any
manner its indemnification obligations, whether arising under or pursuant to
this bylaw or otherwise.

9. Amendments
----------

These Bylaws may be altered, amended or repealed, and new Bylaws may
be adopted, by the stockholders, or by the Board of Directors when such power is
conferred upon the Board of Directors by the Certificate of Incorporation.

Dated: October 8, 1996

-15-

<PAGE>

EXHIBIT 5.01

Buchanan Ingersoll Professional Corporation
One Oxford Centre
301 Grant Street, 20th Floor
Pittsburgh, PA 15219

December 20, 1996

Hyperion Telecommunications, Inc.
5 West Third Street
Coudersport, PA 16915

Dear Sirs:

We have acted as counsel to Hyperion Telecommunications, Inc., a Delaware
corporation (the "Company"), in connection with the issuance of warrants
for the purchase of Class B Common Stock of the Company (the "Warrants"),
and with respect to the proposed issuance of shares of Class B Common Stock
upon exercise of the Warrants (the "Warrant Shares").

In connection with the registered resale of the Warrants and the proposed
issuance of Warrant Shares, we have examined the Certificate of Incorporation
of the Company, as amended, the Bylaws of the Company, the relevant corporate
proceedings of the Company, the draft Registration Statement on Form S-1
covering the proposed resale of the Warrants and the issuance of the Warrant
Shares (the "Registration Statement"), including the Prospectus filed as
a part of the Registration Statement, the Warrant Agreement dated April
15, 1996 with respect to the Warrants (the "Warrant Agreement"), and such
other documents, records, certificates of public officials, statutes and
decisions as we considered necessary to express the opinions contained herein.
In the examination of such documents, we have assumed the genuiness of all
signatures and the authenticity of all documents submitted to us as originals
and the conformity to the original documents of all documents submitted
to us as certified or photostatic copies.

We understand that the Warrant Shares are to be available for resale
by such holders, all in the manner described in the Prospectus which is
a part of the Registration Statement.

Based on the foregoing, we are of the opinion that:

1. The issuance of the Warrant Shares upon exercise of the Warrants
in accordance with the terms of the Warrant Agreement have been
duly authorized by proper corporate action of the Company.

2. When the Registration Statement shall have been declared effective
by order of the Securities and Exchange Commission and the Warrant
Shares have been duly issued upon exercise of the Warrants in
accordance with the terms of the Warrant
<PAGE>

Hyperion Telecommunications, Inc.
December 20, 1996
Page 2

Agreement, such Warrant Shares will be validly issued and will constitute
binding obligations of the Company, subject, as to enforcement, (i)
to any applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws relating to or affecting creditors' rights and remedies
generally and (ii) to general principles of judicial discretion and
equity, including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to any reference to us in the Prospectus which
is part hereof.

Sincerely,

BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION

By: /s/ Carl E. Rothenberger, Jr.
Carl E. Rothenberger, Jr.

<PAGE>

EXHIBIT NO. 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 1 to Registration Statement
No. 333-12619 of Hyperion Telecommunications, Inc. of our report dated June
28, 1996 (October 3, 1996 as to Notes 4 and 5, the sixth paragraph of Note
6 and the last paragraph of Note 7) (which expresses an unqualified opinion
and includes an explanatory paragraph referring to a change in the method
of accounting for income taxes), appearing in the Prospectus, which is a
part of this Registration Statement, and to the reference to us under the
heading "Experts" in such Prospectus.

Pittsburgh, Pennsylvania
December 27, 1996