METROMEDIA FIBER NETWORK INC, 424B3, 1999-11-15

METROMEDIA FIBER NETWORK INC
424B3, 1999-11-15
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

Previous: METROMEDIA FIBER NETWORK INC, 424B4, 1999-11-15

Next: METROMEDIA FIBER NETWORK INC, 424B5, 1999-11-15

<PAGE>
P R O S P E C T U S S U P P L E M E N T
(TO PROSPECTUS DATED OCTOBER 28, 1999)

As filed pursuant to Rule 424(b)(3)
Registration No. 333-89087

[LOGO]

10,000,000 SHARES

METROMEDIA FIBER NETWORK, INC.

CLASS A COMMON STOCK

---------

This prospectus supplement relates to an aggregate of up to 10,000,000
shares (or 11,500,000 shares if the over-allotment option described in the trust
prospectus described below is exercised in full) of our class A common stock,
par value $.01 per share, beneficially owned by the selling stockholders
identified in this prospectus supplement under the heading "Selling
Stockholders," which may be delivered by DECS Trust VI to holders of DECS
securities of the trust. We will receive no portion of the proceeds from the
sale of the shares of class A common stock offered through this prospectus
supplement or from the sale of the DECS securities. The DECS securities are
being sold by the trust in an offering described in the separate prospectus of
that trust. This prospectus supplement relates only to the shares of our
class A common stock that may be delivered upon exchange of the DECS securities.
We take no responsibility for any information included in or omitted from the
trust prospectus. The trust prospectus does not constitute a part of, and is not
incorporated by reference into, this prospectus supplement or the accompanying
prospectus.

The shares of our class A common stock are quoted on The Nasdaq Stock
Market's National Market under the symbol "MFNX." On November 11, 1999, the last
reported sales price for our class A common stock as reported by Nasdaq was
$39 1/4 per share.

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

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE S-12 OF THIS PROSPECTUS SUPPLEMENT
AND PAGE 3 OF THE ACCOMPANYING PROSPECTUS.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.

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

The date of this prospectus supplement is November 12, 1999.
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS SUPPLEMENT.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PROSPECTUS SUPPLEMENT
About This Prospectus Supplement............................ S-3
Summary..................................................... S-4
Risk Factors................................................ S-12
Special Note Regarding Forward-Looking Statements........... S-23
Price Range of Class A Common Stock......................... S-25
Dividend Policy............................................. S-25
Use of Proceeds............................................. S-25
Capitalization.............................................. S-26
Selected Consolidated Financial Data........................ S-27
Unaudited Pro Forma Condensed Combining Financial
Information............................................... S-29
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. S-33
Business.................................................... S-41
Management.................................................. S-61
Certain Relationships and Related Transactions.............. S-70
Proposed Transactions....................................... S-71
Security Ownership.......................................... S-74
Selling Stockholders........................................ S-76
Description of Material Indebtedness........................ S-77
Certain United States Federal Tax Consequences to Non-United
States Holders of Class A Common Stock.................... S-79
Plan of Distribution........................................ S-82
Shares Eligible for Future Sale............................. S-83
Validity of the Securities.................................. S-84
Experts..................................................... S-84
Where You Can Find More Information......................... S-84
Incorporation of Information We File With the SEC........... S-85
Index to Consolidated Financial Statements.................. F-1

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

S-2
<PAGE>
ABOUT THIS PROSPECTUS SUPPLEMENT

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

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

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

S-3
<PAGE>
SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS INCORPORATED BY
REFERENCE. BECAUSE IT IS A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION
THAT YOU SHOULD CONSIDER BEFORE INVESTING. YOU SHOULD READ THE ENTIRE PROSPECTUS
SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS INCORPORATED BY
REFERENCE CAREFULLY, INCLUDING THE SECTION ENTITLED "RISK FACTORS" AND THE
FINANCIAL STATEMENTS AND RELATED NOTES TO THOSE STATEMENTS INCLUDED IN THIS
PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS
INCORPORATED BY REFERENCE. EXCEPT AS OTHERWISE REQUIRED BY THE CONTEXT,
REFERENCES IN THIS PROSPECTUS SUPPLEMENT TO "WE" OR "US" REFER TO THE COMBINED
BUSINESS OF METROMEDIA FIBER NETWORK, INC. AND ALL OF ITS SUBSIDIARIES. THE TERM
"YOU" REFERS TO PROSPECTIVE INVESTORS IN THE SHARES.

THE COMPANY

GENERAL

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

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

RECENT EVENTS

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

INVESTMENT BY BELL ATLANTIC. On October 7, 1999, we entered into a
securities purchase agreement with Bell Atlantic Investments, Inc. (referred to
as "Bell Atlantic"), under which Bell Atlantic would purchase up to
approximately 25.6 million newly issued shares of our class A common stock at a
purchase price of $28.00 per share and a convertible subordinated note of
approximately $975.3 million, which is convertible into shares of our class
A common stock at a conversion price of $34.00 per share. We expect this
transaction, which is subject to customary closing conditions, to be completed
by the end of the first quarter of 2000. Assuming the issuance of the
25.6 million shares of class A common

S-4
<PAGE>
stock and conversion of the convertible subordinated note, this investment would
represent 19.9% of our outstanding shares. Bell Atlantic has also agreed to pay
us $550 million over the next three years in exchange for delivery of fiber
optic facilities over the next five years. The proceeds from these two
transactions will be used to fund the expansion of our network.

NETWORK

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

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

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

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

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

S-5
<PAGE>
CUSTOMERS

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

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

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

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

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

- paging, cellular and PCS companies;

- cable companies;

- ISPs; and

- Web hosting and e-commerce companies.

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

MARKET OPPORTUNITY

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

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

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

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

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

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

S-6
<PAGE>
BUSINESS STRATEGY

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

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

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

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

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

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

REPLICATE SUCCESSFUL BUSINESS MODEL IN NEW MARKETS

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

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

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

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

CREATE A LOW COST POSITION

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

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

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

S-7
<PAGE>
strategic relationships, such as our joint build arrangement with Viatel in
Europe, to cost effectively expand our network footprint.

EXPAND PRODUCT AND SERVICE OFFERINGS TO UTILIZE DARK FIBER NETWORK CAPACITY

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

INSTALL TECHNOLOGICALLY ADVANCED NETWORKS AND INTERNET SERVICE EXCHANGES

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

BUILD ON MANAGEMENT EXPERIENCE AND METROMEDIA COMPANY RELATIONSHIP

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

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

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

PROPOSED OFFERINGS

Concurrently with this offering described in this prospectus supplement, we
intend to issue $750 million of 10% Senior Notes due 2009 and [EURO]250 million
of 10% Senior Notes due 2009, under an indenture between us and The Bank of New
York, as trustee. These notes will mature on December 15, 2009. Interest on the
Dollar notes will accrue at 10% per annum and interest on the Euro notes will
accrue at 10% per annum. In each case, interest will be payable semiannually in
arrears on June 15 and December 15 of each year.

S-8
<PAGE>
In addition, concurrently with this offering, some of the selling
stockholders intend to sell 4,895,000 shares of class A common stock (excluding
the over-allotment option). Each share of class A common stock will be sold at
$39 7/16 per share resulting in $193,046,563 aggregate gross proceeds to those
selling stockholders. We will receive no portion of the proceeds from this sale
of the shares of class A common stock. Following consummation of the future sale
of shares of class A common stock described in this prospectus supplement and
the sale of shares of class A common stock by some of the selling stockholders
referred to in this paragraph, the selling stockholders will continue to
beneficially own approximately 85% of the shares of common stock owned before
consummation of these offerings.

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

RISK FACTORS

You should consider carefully the information set forth in the section
entitled "Risk Factors" beginning on page S-12 of this prospectus supplement and
on page 3 of the accompanying prospectus and all the other information provided
to you in this prospectus supplement, the accompanying prospectus and the
documents incorporated by reference in deciding whether to invest in the shares.

S-9
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA

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

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

- the proposed offering of our senior notes due 2009, which offering is
expected to concurrently close with the offering described in this
prospectus supplement, as if it had been consummated on September 30,
1999; and

- the proposed offering of the senior notes due 2009 and the purchase by
Bell Atlantic of shares of our class A common stock and the convertible
subordinated note, which purchase has not yet been consummated and is
subject to customary closing conditions, as if they had been consummated
on September 30, 1999.

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

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

S-10
<PAGE>

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

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

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

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

S-11
<PAGE>
RISK FACTORS

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

RISK FACTORS RELATING TO OUR BUSINESS

WE HAVE A LIMITED HISTORY OF OPERATIONS

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

WE EXPECT TO CONTINUE TO INCUR NET LOSSES

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

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

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

LARGE AMOUNT OF DEBT

We have, and will continue to have after the proposed offering of senior
notes due 2009, which offering is expected to close concurrently with the
offering described in this prospectus supplement, substantial debt and debt
service requirements. Following the proposed offering of the senior notes due
2009, we will have total debt of approximately $1.7 billion. In addition, the
purchase by Bell Atlantic of a convertible subordinated note will increase our
total debt to approximately $2.7 billion. As the indentures governing our debt
allow us to borrow additional amounts in certain cases to finance the
construction and improvement of our networks, we intend to explore market
conditions in order to obtain additional financing, including additional
long-term fixed-rate financing or senior revolving credit facilities.

CONSEQUENCES OF DEBT

Our substantial debt has important consequences, including:

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

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

S-12
<PAGE>
- our leverage could limit our ability to capitalize on significant business
opportunities and our flexibility to react to changes in general economic
conditions, competitive pressures and adverse changes in government
regulation.

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

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

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

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

- any delays in implementing any strategic projects;

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

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

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

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

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

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

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

S-13
<PAGE>
recording $10.7 million in revenues for the quarter ended September 30, 1999
rather than $32.7 million that would have been recorded prior to this change.
Please refer to "Management's Discussion and Analysis of Financial Condition and
Results of Operations--General."

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

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

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

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

- we may lose key personnel; and

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

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

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

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

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

S-14
<PAGE>
our operations would be materially and adversely affected. We cannot predict
whether providing services to governments will evolve into a significant market
because governments usually already control existing rights-of-way and often
build their own communications infrastructure. We will need to strengthen our
marketing efforts and increase our staff to handle future marketing and sales
requirements. If we fail to obtain significant, widespread commercial and public
acceptance of our networks and access to sufficient buildings our visibility in
the telecommunications market could be jeopardized. We cannot assure you that we
will be able to secure customers for the commercial use of our proposed networks
or access to such buildings in each market. In addition, the market for co-
location and Internet services, which are offered by AboveNet, is new and
evolving. We cannot assure you that AboveNet's services will achieve widespread
acceptance in this new market. Further, AboveNet's success depends in large part
on growth in the use of the Internet. The growth of the Internet is highly
uncertain and depends on a variety of factors.

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

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

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

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

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

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

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

- conditions in the telecommunications and Internet markets;

- regulatory developments;

- credit availability from banks or other lenders;

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

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

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

S-15
<PAGE>
COMPETITORS OFFER SERVICES SIMILAR TO OURS IN OUR CURRENT OR PLANNED MARKETS
WHICH WOULD AFFECT OUR RESULTS OF OPERATIONS

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

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

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

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

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

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

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

U.S. Federal telecommunications law imposes legal requirements on common
carriers who engage in interstate or foreign communication by wire or radio, and
on telecommunications carriers. Should

S-16
<PAGE>
these regulations be applied to us, they may have a material adverse impact on
our business and results of operation. If providing dark fiber facilities or
related services provided by us were deemed to be a telecommunications service,
then regulations, both Federal and state, applicable to telecommunications
carriers might apply to us. This could subject the revenues we received from
facility leases in interstate commerce to assessment by the Federal
Communications Commission Universal Service Fund and the offering of those
facilities or services would be subject to common carrier regulation. In
addition, our customers and, in the case of Bell Atlantic, one of our potential
shareholders, are local exchange carriers or long distance carriers, subject to
regulation by Federal Communications Commission. Our business may be affected by
regulations applicable to these telecommunications carriers. For example, the
Federal Communications Commission has recently taken steps, and may take further
steps, to reduce the access charges, the fees paid by long distance carriers to
local exchange carriers for originating and terminating long distance calls on
the incumbent local exchange carriers' local networks, and to give the local
exchange carriers greater flexibility in setting these charges. While we cannot
predict the precise effect reduction in access charge will have on our
operations, the reduction will likely make it more attractive for long distance
carriers to use local exchange carriers facilities, rather than our fiber optic
telecommunications network. A recent decision by the Federal Communications
Commission to require unbundling of incumbent local exchange carriers' dark
fiber could decrease the demand for our dark fiber by allowing our potential
customers to obtain dark fiber from incumbent local exchange carriers at
cost-based rates, and thereby have an adverse effect on the results of our
operations.

STATES LEGISLATION AFFECTS OUR PRICING POLICIES AND OUR COSTS

Our offering of transmission services, which is different from dark fiber
capacity, may be subject to regulation in each state to the extent that these
services are offered for intrastate use, and this regulation may have an adverse
effect on the results of our operations. We cannot assure you that these
regulations, if any as well as future regulatory, judicial, or legislative
action will not have a material adverse effect on us. In particular, state
regulators have the authority to determine both the rates we will pay to
incumbent local exchange carriers for certain interconnection arrangements such
as physical collocation, and the prices that incumbent local exchange carriers
will be able to charge our potential customers for services and facilities that
compete with our services. We will also incur costs in order to comply with
regulatory requirements such as the filing of tariffs, submission of periodic
financial and operational reports to regulators, and payment of regulatory fees
and assessments, including contributions to state universal service funds. In
some jurisdictions, our pricing flexibility for intrastate services may be
limited because of regulation, although our direct competitors will be subject
to similar restrictions.

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

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

S-17
<PAGE>
THE REGULATORY FRAMEWORK FOR OUR INTERNATIONAL OPERATIONS IS EXTENSIVE AND
CONSTANTLY CHANGING, ADDING UNCERTAINTIES TO OUR PLANNED EXPANSION INTO
FOREIGN COUNTRIES

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

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

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

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

We must obtain additional rights-of-way and other permits from railroads,
utilities, state highway authorities, local governments and transit authorities
to install underground conduit for the expansion of our intracity networks,
intercity networks and international networks. We cannot assure you that we will
be successful in obtaining and maintaining these right-of-way agreements or
obtaining these agreements on acceptable terms. Some of these agreements may be
short-term or revocable at will, and we cannot assure you that we will continue
to have access to existing rights-of-way after they have expired or terminated.
If any of these agreements were terminated or could not be renewed and we were
forced to remove our fiberoptic cable from under the streets or abandon our
networks, the termination could have a material adverse effect on our
operations. In addition, landowners have asserted that railroad companies and
others to whom they granted easements to their properties are not entitled as a
result of these easements to grant rights of way to telecommunications
providers. If these disputes are resolved in the landowners' favor, we could be
obligated to make substantial lease payments to these landowners for the lease
of these rights of way. More specifically, our New York/ New Jersey network
relies upon, and our planned expansions into Long Island and Westchester County

S-18
<PAGE>
will rely upon, right-of-way agreements with Bell Atlantic Corporation and our
subsidiary, Empire City Subway Company (Ltd.). The current agreements may be
terminated at any time without cause with three months notice. In case of
termination, we may be required to remove our fiber optic cable from the
conduits or poles of Bell Atlantic. This termination would have a material
adverse effect on our operations.

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

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

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

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

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

- longer payment cycles;

- problems in collecting accounts receivable;

- fluctuations in currency exchange rates;

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

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

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

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

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

- the difficulty of identifying appropriate acquisition candidates;

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

- the potential disruption of our ongoing business;

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

S-19
<PAGE>
- the inability of management to capitalize on the opportunities presented
by acquisitions, investments, strategic alliances or related efforts;

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

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

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

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

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

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

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

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

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

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

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

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

S-20
<PAGE>
ABOVENET DEPENDS ON THE GROWTH AND PERFORMANCE OF THE INTERNET

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

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

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

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

Metromedia Company and one of its general partners currently own 100% of our
class B common stock, which currently represents approximately 63% of the total
voting power and also is entitled to elect 75% of the members of our board of
directors. Accordingly, Metromedia Company is able to control the board of
directors and all stockholder decisions and, in general, to determine the
outcome of any corporate transaction or other matter submitted to the
stockholders for approval, including mergers, consolidations and the sale of all
or substantially all of our assets, without the consent of our other
stockholders. In addition, Metromedia Company has the power to prevent or cause
a change in control of our company.

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

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

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

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

Many computer systems and software products will not function properly in
the year 2000 and beyond due to a once-common programming standard that
represents years using two digits. This problem is often referred to as the year
2000 problem. It is possible that our currently installed computer systems,
software products or other information technology systems, including imbedded

S-21
<PAGE>
technology, or those of our suppliers, contractors, or major systems developers
working either alone or in conjunction with other softwares or systems, will not
properly function in the year 2000 because of the year 2000 problem. If we or
our customers, suppliers, contractors, and major systems developers are unable
to address their year 2000 issues in a timely manner, a material adverse effect
on our results of operations and financial condition could result. We are
currently working to evaluate and resolve the potential impact of the year 2000
on our processing of date-sensitive information and network systems. We have
contacted all our significant suppliers, contractors and major systems
developers to determine our vulnerability to their year 2000 situations. We
cannot assure you that the year 2000 problem will only have a minimal cost
impact or that other companies will convert their systems on a timely basis and
that their failure will not have an adverse effect on our systems.

RISK FACTORS RELATING TO OUR CLASS A COMMON STOCK

THE STOCK PRICE OF OUR CLASS A COMMON STOCK MAY BE VOLATILE

The market price of our class A common stock is subject to fluctuations in
response to various factors and events, including the liquidity of the market
for the class A common stock, variations in our quarterly operating results,
regulatory or other changes, both domestic and international, affecting the
telecommunications and Internet-related industries generally or us specifically,
announcements of business developments by us or our competitors, changes in
operating results and changes in general market conditions.

SHARES ELIGIBLE FOR FUTURE SALE MAY HAVE A POTENTIAL ADVERSE EFFECT ON OUR STOCK
PRICE

Sales of a substantial number of shares of our class A common stock in the
public market, or the perception that sales may occur, could adversely effect
prevailing market prices for the class A common stock and our ability to raise
capital in the future. As of October 26, 1999, there were 198,999,336 shares of
class A common stock outstanding and 33,769,272 shares of class B common stock
(which are convertible into class A common stock on a one-for-one basis)
outstanding. All of the shares of class B common stock are currently owned by
persons who are affiliates. In addition, as of October 26, 1999, 50,866,379
shares of class A common stock are issuable upon the exercise of outstanding
options and warrants.

On October 7, 1999, we entered into a securities purchase agreement with
Bell Atlantic under which Bell Atlantic would purchase up to 25.6 million newly
issued shares of our class A common stock at a purchase price of $28.00 per
share and a convertible subordinated note of approximately $975.3 million, which
is convertible into shares of our class A common stock at a conversion price of
$34.00 per share. We expect this transaction, which is subject to customary
closing conditions, to be completed by the end of the first quarter of 2000.

Concurrently with this offering, some of our stockholders intend to sell
4,895,000 shares of class A common stock (excluding the over-allotment option).
See "Proposed Transactions."

No prediction can be made as to the effect, if any, that sales of shares of
class A common stock or the availability of those shares for sale will have on
the market prices prevailing from time to time. Nevertheless, the possibility
that substantial amounts of class A common stock, including those shares into
which the class B common stock is convertible, may be sold in the public market
may adversely affect prevailing market prices for the class A common stock and
impair our ability to raise equity capital in the future.

WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS

We anticipate that all of our earnings in the foreseeable future, if any,
will be retained to finance the continued growth and expansion of our business
and have no current intention to pay cash dividends on our class A common stock.
See "Dividend Policy."

S-22
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

- general economic and business conditions;

- competition in the telecommunications industry;

- industry capacity;

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

- management of growth;

- dependence on senior management;

- brand awareness;

- general risks of the telecommunications industries;

- development risks;

- risks relating to the availability of financing;

- the existence or absence of adverse publicity;

- changes in business strategy or development plans;

- availability, terms and deployment of capital;

- business abilities and judgment of personnel;

- availability of qualified personnel;

- labor and employee benefit costs;

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

- construction schedules;

- costs and other effects of legal and administrative proceedings;

- changes in marketing and technology; and

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

These factors and the risk factors referred to above could cause actual
results or outcomes to differ materially from those expressed in any
forward-looking statements made by us. You should not place undue reliance on
any such forward-looking statements. Further, any forward-looking statement

S-23
<PAGE>
speaks only as of the date on which it is made and we undertake no obligation to
update any forward-looking statement or statements to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time, and it
is not possible for us to predict which will arise. In addition, we cannot
assess the impact of each factor on our business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.

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

S-24
<PAGE>
PRICE RANGE OF CLASS A COMMON STOCK

Our class A common stock is quoted on The Nasdaq Stock Market's National
Market under the symbol "MFNX." The following table sets forth for the periods
indicated the high and low sale prices of the class A common stock as reported
by Nasdaq for the fiscal periods indicated. All share prices give effect to our
stock splits.

<TABLE>
<CAPTION>
HIGH LOW
------------------- -------------------
<S> <C> <C>
1997

Fourth Quarter............................................ 3 3/32 1 3/4

1998

First Quarter............................................. 5 7/16 1 59/64

Second Quarter............................................ 5 29/32 3 3/16

Third Quarter............................................. 9 1/16 4 7/32

Fourth Quarter............................................ 19 1/16 5 7/8

1999

First Quarter............................................. 28 5/8 16 7/8

Second Quarter............................................ 47 9/16 26 9/16

Third Quarter............................................. 41 1/4 21 1/8

Fourth Quarter (through November 11, 1999)................ 39 7/8 23 3/4
</TABLE>

On November 11, 1999, the last reported sale price of the class A common
stock as reported by Nasdaq was $39 1/4. As of October 25, 1999, there were
approximately 361 holders of record of the class A common stock.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our class A common
stock and do not expect to do so in the foreseeable future. We anticipate that
all future earnings, if any, generated from operations will be retained to
finance the expansion and continued development of our business. Any future
determination with respect to the payment of dividends will be within the sole
discretion of our board of directors and will depend upon, among other things,
our earnings, capital requirements, the terms of our then existing indebtedness,
applicable requirements of the Delaware General Corporation Law, general
economic conditions and other factors considered relevant by the our board of
directors.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the shares of class
A common stock by the selling stockholders.

S-25
<PAGE>
CAPITALIZATION

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

- on a historical basis;

- on a pro forma basis to reflect the proposed offering of the senior notes
due 2009, which offering is expected to concurrently close with the
offering described in the prospectus supplement, as if it had been
consummated on September 30, 1999; and

- on a pro forma basis to reflect the proposed offering of the senior notes
due 2009 and the purchase by Bell Atlantic of shares of our class A common
stock and the convertible subordinated note, which has not yet been
consummated and is subject to customary closing conditions, as if they had
been consummated on September 30, 1999.

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

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

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

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

S-26
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

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

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

- the proposed offering of the senior notes due 2009, which offering is
expected to close concurrently with the offering described in this
prospectus supplement, as if it had been consummated on September 30,
1999; and

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

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

S-27
<PAGE>
"Business," the consolidated financial statements and the related notes of our
company, AboveNet and Palo Alto Internet Exchange and the other financial data
appearing in this prospectus supplement.

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

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

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

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

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

S-28
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION

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

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

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

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

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

ACCOUNTING TREATMENT

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

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

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

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

S-29
<PAGE>
METROMEDIA FIBER NETWORK, INC.

PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS

(UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999

(IN THOUSANDS, EXCEPT PER SHARE DATA)

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

(SEE THE ACCOMPANYING NOTES ON PAGE S-32)

S-30
<PAGE>
METROMEDIA FIBER NETWORK, INC.

PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS

(UNAUDITED)

FOR THE YEAR ENDED DECEMBER 31, 1998

(IN THOUSANDS, EXCEPT PER SHARE DATA)

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

(SEE THE ACCOMPANYING NOTES ON PAGE S-32)

S-31
<PAGE>
METROMEDIA FIBER NETWORK, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION

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

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

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

(4) Reflects the elimination of merger related expenses.

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

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

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

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

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

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

(9) Reflects the adjustment of the tax provision.

S-32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

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

GENERAL

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

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

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

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

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

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

Most of our contracts for the provision of dark fiber are accounted for as
operating leases under which we recognize recurring monthly revenues. For
certain other contracts we recognize revenue

S-33
<PAGE>
under the percentage of completion method for the provision of dark fiber.
Effective June 30, 1999, the Financial Accounting Standards Board issued FASB
Interpretation No. 43 "Real Estate Sales" ("FIN 43"), which requires that sales
or leases of integral equipment be accounted for in accordance with real estate
accounting rules. We believe that the staff of the Securities and Exchange
Commission requires the classification of dark fiber cables in the ground as
integral equipment as defined in FIN 43. Accounting for dark fiber leases as
defined by FIN 43 does not change any of the economics of the contracts. It
requires us, however, to recognize the revenue from certain leases as operating
leases over the term of the contract as opposed to the prior method of
recognizing revenue during the period over which we deliver the fiber. As a
result, this change in accounting treatment reduces the revenue and income that
we recognize in the earlier years of the contract and spreads it out over the
life of the contract regardless of when the cash was received or the delivery of
the fiber took place.

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

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

STOCK SPLITS

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

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

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 1998.

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

S-34
<PAGE>
COST OF SALES. Cost of sales was $24.4 million for the nine months ended
September 30, 1999, a 157% increase over cost of sales of $9.5 million for the
first nine months of 1998. Cost of sales increased for the nine months ended
September 30, 1999 compared with the same period in 1998 due to costs associated
with the commencement of service to customers, as well as higher fixed costs
associated with the operation and maintenance of our network. Costs of sales as
percentages of revenue for the first nine months of 1999 and 1998 were 49% and
46% respectively, increasing as a result of the higher fixed costs related to
the operation and maintenance of the Company's network. Cost of sales was also
impacted as a direct result of the aforementioned accounting change, effective
June 30, 1999, whereby we are required to recognize revenue on certain dark
fiber leases over the term of the contract rather than under the percentage of
completion method. Under the prior accounting method, cost of sales would have
been $31.4 million for the nine months ended September 30, 1999. As a percentage
of revenues, for the nine months ended September 30, 1999, cost of sales would
have been 44%, rather than the 49% reported.

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

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

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

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

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

S-35
<PAGE>
INTEREST INCOME. Interest income was $19.1 million during the nine months
ended September 30, 1999 compared with $5.0 million during the comparable 1998
period, an increase of $14.1 million or 282%. Interest income increased as a
result of the investment of certain of the proceeds from the issuance and sale
of our 10% senior notes in November 1998.

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

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

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

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

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

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

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

CONSULTING AND EMPLOYMENT INCENTIVES EXPENSE. Consulting and employment
incentives expense for 1998 were $0.2 million compared with $19.2 million for
1997. Consulting and employment incentives expense incurred in 1997 reflects the
value of stock options issued to key employees, officers and

S-36
<PAGE>
directors in order to attract or retain their services. For 1998, the amount
recorded reflects amortization for the unvested component of options issued in
1997 to key employees.

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

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

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

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

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

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

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

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

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

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

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

CONSULTING AND EMPLOYMENT INCENTIVES EXPENSE. Consulting and employment
incentives expense for 1997 was $19.2 million or 419% greater than consulting
and employment incentives expenses of

S-37
<PAGE>
$3.7 million in 1996. The 1997 expense represents the value of stock options
issued to key employees, officers, directors and consultants in order to attract
or retain their services. The amount recorded in 1996 reflects the expense
associated with issuance of stock and warrants to consultants in consideration
for services rendered.

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

We expect that the Bell Atlantic transaction, which is subject to customary
closing conditions, will close by the end of the first quarter of 2000 and
generate net proceeds of approximately $1.7 billion. In addition, Bell Atlantic
has agreed to purchase a minimum of $550 million of fiber optic facilities
payable over the next three years. Concurrent with the DECS offering, we intend
to issue and sell approximately $1.0 billion principal amount of senior notes
due 2009.

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

We anticipate that we will continue to incur net operating losses as we
expand and complete our existing networks, construct additional networks and
market our services to an expanding customer base. We anticipate spending
approximately $3.4 billion through the year ending December 31, 2001 on the
build-out of our fiber optic networks and Internet service exchanges in 50 major
markets in the United States and in 17 major international markets. We believe
that the net proceeds from the

S-38
<PAGE>
investment by Bell Atlantic, the net proceeds from the proposed issuance and
sale of senior notes due 2009, cash on hand, certain vendor financing and cash
generated by operations (including advance customer payments), will enable us to
fully fund the planned build-out of our networks and our other working capital
needs through the year ended December 31, 2001. The indentures governing our
debt obligations permit us to incur additional indebtedness to finance the
engineering, construction, installation, acquisition, lease, development or
improvement of telecommunications assets. As a result, we may also consider from
time to time private or public sales of additional equity or debt securities,
entering into other credit facilities and financings, depending upon market
conditions, in order to finance the continued build-out of our network. We
cannot assure you that we will be able to successfully consummate any such
financing on acceptable terms or at all.

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

YEAR 2000 SYSTEM MODIFICATIONS

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

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

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

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

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

S-39
<PAGE>
If our customers, suppliers, contractors or major systems developers are
unable to resolve Year 2000 processing issues in a timely manner, a material
adverse effect on our results of operations and financial condition could
result.

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

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

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

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

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

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

S-40
<PAGE>
BUSINESS

GENERAL

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

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

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

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

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

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

S-41
<PAGE>
Our targeted customers include a broad range of companies such as:

- ILECs;

- CLECs;

- long distance companies/IXCs;

- paging, cellular and PCS companies;

- cable companies;

- ISPs; and

- Web hosting and e-commerce companies.

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

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

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

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

S-42
<PAGE>
company (the "Metromedia Investment"). As a result, Metromedia Company and its
partners own all of our outstanding shares of class B common stock, par value
$.01 per share. Our class B common stock is entitled to 10 votes per share and
to vote separately to elect at least 75% of the members of the Board of
Directors. As of September 30, 1999, Metromedia Company and its partners own and
control approximately 63% of the outstanding voting power of our company.

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

BUSINESS STRATEGY

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

- Lease broadband communications infrastructure on a fixed cost basis

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

- Allow customers to bypass the ILECs and CLECs

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

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

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

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

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

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

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

- Provide scalable services for customers seeking lower broadband
transmission capacity

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

S-43
<PAGE>
- Target Internet connectivity customers who require reliable, secure and
cost effective connectivity to the internet to drive their electronic
commerce and other mission critical business Internet applications

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

REPLICATE SUCCESSFUL BUSINESS MODEL IN NEW MARKETS

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

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

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

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

CREATE A LOW COST POSITION

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

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

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

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

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

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

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

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

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

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

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

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

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

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

S-44
<PAGE>
INSTALL TECHNOLOGICALLY ADVANCED NETWORKS AND INTERNET SERVICE EXCHANGES

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

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

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

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

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

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

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

BUILD ON MANAGEMENT EXPERIENCE AND METROMEDIA COMPANY RELATIONSHIP

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

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

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

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

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

BUILD-OUT OF NETWORKS

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

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

S-45
<PAGE>
We have entered into a forty year agreement with a subsidiary of Racal, a
United Kingdom manufacturer of electronics and other equipment and a provider of
telecommunications services, to create ION, a joint venture in which we hold a
50% equity interest. ION has obtained transatlantic fiber optic cable rights on
Gemini and AC-1 which link our New York network to London, England. Through ION,
we are able to offer our customers seamless broadband transatlantic
communications services between New York and London. Under the ION joint venture
agreement, each party may contribute additional capital as agreed by the
parties. In May 1998, ION was awarded a 25 year term contract in excess of $25
million from a leading provider of undersea cable capacity to provide inland
capacity services from such provider's undersea cable landing stations in the
U.K. and the U.S.

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

THE ABOVENET INTERNET SERVICE EXCHANGE

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

INTERNET CONNECTIVITY

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

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

Our Internet connectivity services are also designed to reduce latency and
to enhance network performance. Our engineering personnel continuously monitor
traffic patterns and congestion points throughout the Internet and dynamically
reroute traffic flows to improve end-user response times. We

S-46
<PAGE>
also enhance network performance by maintaining what we believe is among the
largest number of direct public and private network peering interconnections in
the industry. For customers seeking a direct communications link to the site of
another customer that is located at the same ISX, we offer highly secure, fast
and efficient cross-connections.

CO-LOCATION SERVICES

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

MANAGEMENT SERVICES AND TOOLS

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

INTERNATIONAL INTERNET SERVICE EXCHANGES

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

TECHNOLOGY

Our networks consist of fiber optic communications networks which allow for
high speed, high quality transmission of voice, data and video. Fiber optic
systems use laser-generated light to transmit

S-47
<PAGE>
voice, data and video in digital formats through ultra-thin strands of glass.
Fiber optic systems are generally characterized by large circuit capacity, good
sound quality, resistance to external signal interference and direct interface
to digital switching equipment or digital microwave systems. We plan to install
backbone fiber optic cables containing up to 864 fiber optic strands, which have
significantly greater bandwidth than traditional analog copper cables. Using
current electronic transmitting devices, a single pair of glass fibers used by
our network can transmit up to 8.6 gigabits of data per second or the equivalent
of approximately 129,000 simultaneous voice conversations, which is
substantially more than traditional analog copper cable installed in many
current communications networks. We believe that continuing developments in
compression technology and multiplexing equipment will increase the capacity of
each fiber optic strand, thereby providing more bandwidth carrying capacity at
relatively low incremental costs. Our network is capable of using the highest
commercially available capacity transmission (OC-192) and thereby can handle
advanced, capacity-intensive data applications such as voice over Internet
Protocol, video teleconferencing, Frame Relay, ATM, multimedia and Internet-
related applications. In our intra-city networks, we offer end-to-end fiber
optic capacity, capable of utilizing SONET capable ring architecture, which has
the ability to route customer traffic in either direction around its ring design
thereby assuring that fiber cuts do not interrupt service to customers on our
networks. Our networks are also capable of supporting dense wave division
multiplexing (often referred to as "DWDM"). Currently, a state-of-the-art
network operating system continuously monitors and maintains quality control of
networks on a 24-hour basis, alerts us of any degradation or loss of fiber
capacity and pinpoints the location of such degradation. This network operating
system also enables us to repair or replace impaired fiber without any loss of
service. In addition, the monitoring system automatically reroutes traffic in
the event of a catastrophic break in the system, enabling us to ensure that our
customers obtain continuous service.

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

FRANCHISE, LICENSE AND RELATED AGREEMENTS

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

SALES AND MARKETING

Our sales and marketing strategy includes:

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

- focusing on high dollar volume corporate and government customers;

S-48
<PAGE>
- emphasizing the cost advantages which will allow us to lease our fiber
optic infrastructure at fixed prices which represent potentially
significant savings for our large volume carrier and corporate customers
relative to their present build or buy alternatives;

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

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

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

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

COMPETITION

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

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

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

S-49
<PAGE>
Some communications carriers and local cable companies have extensive
networks in place that could be upgraded to fiber optic cable, as well as
numerous personnel and substantial resources to undertake the requisite
construction to so equip their networks. To the extent that communications
carriers and local cable companies decide to equip their networks with fiber
optic cable, they are potential direct competitors provided that these
competitors are willing to offer this capacity to all of their customers.

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

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

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

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

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

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

REGULATION

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

FEDERAL

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

S-50
<PAGE>
Telecommunications Act of 1996 (the "Communications Act"), and the FCC
regulations implementing and interpreting the Communications Act.

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

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

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

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

S-51
<PAGE>
1996 Telecom Act, ILECs must, among other things: (i) allow interconnection at
any technically feasible point and provide service equal in quality to that
provided to others, (ii) provide unbundled access to network elements, and (iii)
provide access to their poles, ducts, conduits and other rights-of-way. Our
rights as a CLEC may not extend to cover our dark fiber business (unless our
dark fiber business is considered a telecommunications service). Accordingly, an
ILEC may refuse to interconnect with (or provide the collocation described
below) us other than in connection with our transmission services business.

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

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

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

S-52
<PAGE>
owning more than ten percent of us until the long-distance prohibitions no
longer apply to Bell Atlantic and its affiliates.

STATE

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

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

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

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

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

S-53
<PAGE>
Bell Atlantic recently filed an application with the FCC to provide long
distance service in New York on the grounds that it provides access and
interconnection to its network facilities for the network facilities of one or
more unaffiliated competing providers of telecommunications services. The FCC
has until the end of 1999 to approve the application. We hope that Bell Atlantic
will be a significant customer of ours when it enters the long distance market.

LOCAL

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

FEDERAL REGULATION OF INTERNATIONAL SERVICE

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

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

The FCC has also made significant changes to other aspects of its
international regulatory regime that facilitate our international operations.
For example, it has approved the provisions of switched

S-54
<PAGE>
services over private lines ("ISR") interconnected with the public switched
network between the United States and 22 other countries, including the UK and
Germany. Recently, the FCC took steps to streamline the application process for
authority to provide international services, relaxing further the rules for
almost all international services to almost all countries (with China, Taiwan,
Russia, Saudi Arabia, the notable exceptions). The FCC continues to refine its
international service rules to promote competition, reflect and encourage
liberalization in foreign countries, and reduce accounting rates toward cost. We
are unable to predict how the FCC will resolve the various pending international
policy issues and the effect of such resolutions on us.

REGULATION OF INTERNATIONAL OPERATIONS

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

THE EUROPEAN UNION

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

S-55
<PAGE>
UNITED KINGDOM

The Telecommunications Act of 1984 (the "U.K. Act") provides a licensing and
regulatory framework for telecommunications activities in the United Kingdom.
The Secretary of State for Trade and Industry at the Department of Trade and
Industry (the "Secretary of Trade") is responsible for granting licenses under
the U.K. Act and for overseeing telecommunications policy, while the Director
General of Telecommunications (the "Director General") and his office (the
Office of Telecommunications ("OFTEL")) are responsible, among other things, for
enforcing the terms of such licenses. Operators wishing to use their own
facilities to provide international services were until recently required to
obtain an International Facilities License ("IFL"). An IFL authorized the
running of telecommunication systems within the U.K. and permitted the licensee
to connect U.K. systems to overseas systems, and to offer international
services. ION obtained an IFL on December 9, 1998.

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

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

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

S-56
<PAGE>
on how these provisions of the Act are implemented, it may give us and our
competitors greater ability to challenge anti-competitive behavior in the U.K.
telecommunications market.

GERMANY

The German Telecommunications Act of July 25, 1996 (the "German
Telecommunications Act") liberalized all telecommunications activities. Under
the German Telecommunications Act, voice telephony was liberalized as of January
1, 1998. The German Telecommunications Act has been complemented by several
Ordinances. The most significant Ordinances concern license fees, rate
regulation, interconnection, universal service, frequencies and customer
protection. Under the German regulatory scheme, licenses can be granted within
four license classes. A license is required for operation of transmission lines
that extend beyond the limits of a property and that are used to provide
telecommunications services for the general public. The licenses required for
the operation of transmission lines are divided into 3 infrastructure license
classes: mobile telecommunications (license class 1); satellite (license class
2); and telecommunications services for the general public (license class 3).
The provision of dark fiber does not require a license. Beside the
infrastructure licenses, an additional license is required for provision of
voice telephony services on the basis of self-operated telecommunications
networks (license class 4). A class 4 license does not include the right to
operate transmission lines. According to the License Fees Ordinance, a
nationwide class 4 license costs a one-time fee of DM 3,000,000. The costs for a
territorial class 3 license will be determined by the Regulierungsbehorde fur
Telekommunikation und Post (the "RegTP") and is dependent on the population and
the geographical area covered by the territorial class 3 license. A nationwide
territorial class 3 license costs DM 10,600,000. The Administrative Court of
Cologne held in a preliminary ruling that there is a high probability that the
license fees are excessive and that therefore the Ordinance might be void. The
RegTP does not invoice any license fees at the present time in view of the
pending administrative court procedure. Since we have not yet received a license
fee order, it is presently unclear what the amount of our license fee will be.
Licensees that operate transmission lines crossing the boundary of a property
have the right to install transmission lines on, in and above public roads,
squares, bridges and public waterways without payment; however, when installing
transmission lines a planning agreement must be obtained from the relevant
authorities.

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

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

S-57
<PAGE>
The rates of Deutsche Telekom's services in conjunction with interconnection
and special network access are subject to regulatory approval; this approval is
typically granted for a limited period of time. The current approval expires on
December 31, 1999. It is uncertain which interconnection rates will apply to the
next year.

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

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

OTHER COUNTRIES

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

EMPLOYEES

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

PROPERTIES

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

AboveNet's executive and administrative offices are located at 50 West San
Fernando Street, San Jose, California. We lease this space (approximately 19,850
square feet) under an agreement that expires in February 2008. Palo Alto
Internet Exchange's executive and administrative offices are located at 285
Hamilton Avenue, Palo Alto, California (approximately 5,130 square feet) under
an agreement that expires in January 2007. In addition, AboveNet and Palo Alto
Internet Exchange lease various co-

S-58
<PAGE>
location facilities in California, Virginia and New York that range from 10,000
to 29,000 square feet under agreements that expire within the next 10 to 20
years.

LEGAL PROCEEDINGS

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

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

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

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

S-59
<PAGE>
negligent misrepresentation. In March 1998, we entered into a settlement
agreement with the Katz Entities which, among others, settled and resulted in
the dismissal of the Katz Litigation.

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

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

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

S-60
<PAGE>
MANAGEMENT

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

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

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

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

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

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

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

S-61
<PAGE>
Region at Asante Technologies Inc. Mr. Tanzi was employed in various capacities
from November 1979 through October 1993 at Digital Equipment Corporation.

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

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

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

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

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

SHERMAN TUAN, the founder of AboveNet, has served as a Director of our
company since September 1999. Mr. Tuan has served as Chief Executive Officer and
a Director of AboveNet since 1996, and President until January 1998. Mr. Tuan
served as chairman of the board of AboveNet from

S-62
<PAGE>
August 1998 to September 1999. Mr. Tuan was president of InterNex Information
Services, Inc., an Internet infrastructure provider, from November 1994 to
October 1995 and from February 1994 to November 1995, was president of Tiara
Computer, Inc., a network equipment manufacturer, which merged with InterNex
Information Services, Inc. in November 1994. From January 1992 to June 1993,
Mr. Tuan was vice president of worldwide sales and marketing of Primus
Technologies, Inc., a provider of problem resolution and knowledge management
software, and president of Celerite Graphics, Inc., a manufacturer of video
chips. Mr. Tuan received an electrical engineering degree from Feng-Chia
University in Taiwan.

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

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

BOARD OF DIRECTORS

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

COMPENSATION OF DIRECTORS

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

Non-Employee Directors are entitled to receive options to purchase 40,000
shares of our class A common stock under our 1997 Incentive Stock Plan. Options
to purchase 40,000 shares of class A

S-63
<PAGE>
common stock will be granted annually on the day of each annual stockholder
meeting. Each outside director is eligible to receive options to purchase a
maximum of 100,000 shares of class A common stock under the plan. Under the 1997
Incentive Stock Plan, each Non-Employee Director who was a director of our
company on October 28, 1997 was granted an option to purchase 40,000 shares of
our common stock at an exercise price of $2.00, the price of the class A common
stock on the date of the Initial Public Offering.

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

EXECUTIVE COMPENSATION

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

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

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

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

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

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

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

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

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

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

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

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

S-64
<PAGE>
(6) Includes options to purchase 300,000 shares of class A common stock at an
exercise price of $5.25 per share that will become exercisable ratably over
a four year period commencing August 31, 1999.

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

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

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

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

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

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

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

EMPLOYMENT AGREEMENTS

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

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

Except in the case of disability, we may terminate Mr. Garofalo's employment
only for cause, upon which termination Mr. Garofalo will have no right to
receive any compensation or benefit from us. If the agreement is terminated
without cause, or if Mr. Garofalo terminates employment for good reason,

S-65
<PAGE>
we will be obligated to pay Mr. Garofalo an amount equal to the greater of
(i) his monthly base salary as then in effect multiplied by the number of months
remaining in term of his employment as of such termination date and (ii)
$1,000,000. "Good reason" includes:

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

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

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

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

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

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

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

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

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

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

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

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

S-66
<PAGE>
- a sale of all or substantially all of the ownership interests or assets of
our company, or a merger or consolidation of our company with any other
corporation or entity;

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

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

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

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

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

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

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

Except in the case of disability or a change of control, we may terminate
Mr. Benedetto's employment only for cause, upon which termination Mr. Benedetto
will have no right to receive any

S-67
<PAGE>
compensation or benefit from us. If Mr. Benedetto's employment is terminated for
any reason other than for cause, or in the event that there is a change of
control of our company and Mr. Benedetto is requested, in connection with such
change of control, to perform his duties under this agreement on a regular,
full-time basis at a location further than 75 miles from Mr. Benedetto's current
principal office location, Mr. Benedetto, in his sole and absolute discretion,
may deem this agreement to be terminated by us without cause. Upon such
termination, Mr. Benedetto will be entitled to receive his base salary for the
remaining term of his employment agreement, all previously earned and accrued
entitlements and benefits from us and our employee benefit plans, and an amount
equal to 25% of Mr. Benedetto's base salary.

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

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

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

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

1997 AND 1998 INCENTIVE STOCK PLANS

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

The exercise price of all ISOs is the fair market value of the class A
common stock on the date of grant (or 110% of such fair market value with
respect to ISOs granted to persons who own stock possessing more than 10% of the
voting rights of our company's capital stock), and the exercise price

S-68
<PAGE>
of all NQSOs is determined by the Compensation Committee, although the initial
awards will be made at fair market value of the class A common stock on the date
of grant. Stock Options vest and become exercisable over a period of years, as
determined by the Compensation Committee, and have a term not to exceed ten
years.

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

INDEMNIFICATION AGREEMENTS

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

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

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

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

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

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

S-69
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

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

- a change in control of our company occurs; or

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

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

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

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

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

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

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

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

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

MANAGEMENT AGREEMENT. We are a party to the management agreement under
which Metromedia Company provides us with consultation and advisory services
relating to legal matters, insurance, personnel and other corporate policies,
cash management, internal audit and finance, taxes, benefit plans and other
services as we may reasonably request. The management agreement terminates on
December 31 of each year, and is automatically renewed for successive one year
terms unless either party terminates upon 60 days prior written notice. We are
also obligated to reimburse Metromedia Company all its out-of-pocket costs and
expenses incurred and advances paid by Metromedia Company in connection with the
management agreement. In this agreement, we have agreed to indemnify

S-70
<PAGE>
Metromedia Company and hold it harmless from and against any and all damages,
liabilities, losses, claims, actions, suits, proceedings, fees, costs or
expenses, including reasonable attorneys' fees and other costs and expenses
incident to any suit, proceeding or investigation of any kind imposed on,
incurred by or asserted against Metromedia Company in connection with the
management agreement. In 1997, Metromedia Company received no money for its
out-of-pocket costs and expenses or for interest on advances extended by it to
us under the management agreement. For the year ended December 31, 1998, we
incurred $500,000 to Metromedia Company under this agreement. The management fee
for 1999 under the agreement is $1,000,000, payable quarterly at a rate of
$250,000.

PROPOSED TRANSACTIONS

OFFERING OF OUR SENIOR NOTES DUE 2009

GENERAL. Concurrently with the offering described in this prospectus
supplement, we intend to issue $750 million of 10% Senior Notes due 2009 and
[EURO]250 million of 10% Senior Notes due 2009, under an indenture between us
and The Bank of New York, as trustee.

PRINCIPAL, MATURITY AND INTEREST. These notes will mature on December 15,
2009. Interest on the Dollar notes will accrue at 10% per annum and interest on
the Euro notes will accrue at 10% per annum. In each case, interest will be
payable semiannually in arrears on June 15 and December 15 of each year.

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

REDEMPTION. These notes will be redeemable on or after December 15, 2004,
at our option, in whole or in part, at the following redemption prices
(expressed as percentages of principal amount) described below plus accrued
interest, if redeemed during the twelve-month period beginning on December 15 of
the years indicated below:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>

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

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

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

2007 and thereafter......................................... 100.000%
</TABLE>

In addition, at any time prior to December 15, 2002, we will be permitted to
redeem up to 35% of the original aggregate principal amount of each of the
Dollar notes and the Euro notes, determined separately, with the net proceeds of
a sale of common equity at a redemption price equal to 110% of the principal
amount, in the case of the Dollar notes redeemed, and 110% of the principal
amount, in the case of the Euro notes redeemed, in each case, plus accrued
interest, provided that at least 65% of the original aggregate principal amount
of each of the Dollar notes and the Euro notes, determined separately, remains
outstanding after the redemption and we use the net cash proceeds of any public
equity offerings resulting in gross proceeds of at least $100 million. Except in
connection with a change of control or an asset sale (as those terms are defined
in the indentures relating to these notes) of our company, we will not be
required to make mandatory redemption or sinking fund payments with respect to
these notes.

COVENANTS. The indenture relating to these notes will restrict, among other
things, our ability to incur additional indebtedness, pay dividends or make
certain other restricted payments, incur certain liens, sell, assign, transfer,
lease, convey or otherwise dispose of substantially all of our assets or enter

S-71
<PAGE>
into certain transactions with affiliates. The indenture relating to these notes
will permit, under certain circumstances, our subsidiaries to be deemed
unrestricted subsidiaries and thus not subject to the restrictions of the
indenture.

EVENTS OF DEFAULT. The indenture relating to these notes will contain
standard events of default, including:

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

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

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

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

- certain events of our subsidiaries

SALE OF CLASS A COMMON STOCK BY THE SELLING STOCKHOLDERS

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

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

PROPOSED INVESTMENT BY BELL ATLANTIC

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

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

- approvals from various regulatory authorities;

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

- other customary closing conditions.

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

As a condition to closing, we have agreed to enter into a stockholders'
agreement with Bell Atlantic, together with Metromedia Company, Mr. John W.
Kluge and Mr. Stuart Subotnick. Under the

S-72
<PAGE>
stockholders agreement, except under certain circumstances, Bell Atlantic will
agree to a "standstill" provision under which it will agree not to acquire more
that 22% of our common stock and will not participate in certain acquisition
proposals, tender offers, proxy solicitations or similar transactions with
respect to us without the consent of our board of directors for a period of ten
years. The parties to the stockholders agreement will also agree to a number of
restrictions on their respective abilities to sell the shares of our common
stock which they own during a period of two years following closing of the
transactions contemplated by the securities purchase agreement. In addition, the
stockholders agreement will provide for certain tag-along rights and rights of
first refusal among the parties. Metromedia Company and Messrs. Kluge and
Subotnick will agree to vote all of their shares of class B common stock (which
constitute approximately 63% of the voting power of our common stock) in favor
of the issuance of the shares and the convertible subordinated note in the
aggregate in excess of 19.9% of the number of shares of our common stock
outstanding at the closing. Bell Atlantic will also have the right to have an
observer at meetings of our board of directors, and after converting the
convertible subordinated note into shares of class A common stock, Bell Atlantic
will have the right to appoint two directors to our board of directors.

S-73
<PAGE>
SECURITY OWNERSHIP

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

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

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

* less than 1.0%

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

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

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

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

S-74
<PAGE>
(5) Based solely on the Schedule 13G, dated February 16, 1999 filed by FMR
Corp., Edward C. Johnson III and Abigail P. Johnson. FMR's address is 82
Devonshire Street, Boston, Massachusetts 02109.

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

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

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

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

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

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

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

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

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

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

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

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

S-75
<PAGE>
SELLING STOCKHOLDERS

Some of the shares of our class A common stock, or cash in lieu of class A
common stock, may be delivered to DECS Trust VI by the selling stockholders
under prepaid forward contracts relating to the DECS securities. The following
table shows the selling stockholders' beneficial ownership of our common stock
as of the date of this prospectus supplement, the maximum number of shares the
selling stockholders may be required to deliver to the trust under the
applicable contracts, and the selling stockholders' beneficial ownership of our
common stock after the offering assuming that each of them satisfies his, her or
its obligations under the applicable contracts with shares of class A common
stock and not cash. Except as indicated in the footnotes to the table, the
persons named in the table have sole voting and investment power with respect to
shares of common stock shown as beneficially owned by them. The address of the
selling stockholders is One North Lexington Avenue, White Plains, New York
10601, unless otherwise indicated.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK(1)
--------------------------------------------------------------------- ---------------------------
MAXIMUM TO BE
NUMBER OWNED
DELIVERABLE TO AFTER
THE TRUST DELIVERY UNDER OWNED
OWNED BEFORE UNDER THE THE BEFORE THE
THE OFFERING CONTRACTS(2) CONTRACTS(3) OFFERING
--------------------------- -------------- ---------------------- ---------------------------
SELLING STOCKHOLDERS NUMBER % NUMBER NUMBER % NUMBER %
- -------------------- ------------- -------- -------------- ----------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen A. Garofalo.. 45,495,512(4) 22.5 4,844,000 40,651,512 20.1 -- --

Metromedia
Company(5)......... -- -- -- -- -- 31,462,048 93.2

John W. Kluge........ 2,028,000(6) 1.0 -- 2,028,000 1.0 31,462,048(6) 93.2

Stuart Subotnick..... 2,028,000(6) 1.0 -- 2,028,000 1.0 33,769,272(6) 100.0

<CAPTION>
CLASS B COMMON STOCK(1)
-----------------------------------------
MAXIMUM
NUMBER TO BE
DELIVERABLE TO OWNED
THE TRUST AFTER
UNDER THE DELIVERY UNDER THE
CONTRACTS(2) CONTRACTS(3)
-------------- ------------------------
SELLING STOCKHOLDERS NUMBER NUMBER %
- -------------------- -------------- ------------- --------
<S> <C> <C> <C>
Stephen A. Garofalo.. -- -- --
Metromedia
Company(5)......... 4,880,000 26,582,048 92.9
John W. Kluge........ 4,880,000(7) 26,582,048(7) 92.9
Stuart Subotnick..... 5,156,000(7) 28,613,272(7) 100.0
</TABLE>

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

* less than 1%

(1) The shares of class B common stock are convertible into shares of class A
common stock at the rate of one share of class A common stock for each share
of class B common stock. The selling stockholders who hold shares of class B
common stock will convert the shares to be sold on November 15, 2002 (or
February 15, 2003 if the exchange date is extended) into shares of class A
common stock immediately prior to the delivery of the shares to the holders
of the DECS securities of the trust.

(2) Assumes over-allotment option described in the trust prospectus is not
exercised. In the event the over-allotment option is exercised, the maximum
aggregate number of shares deliverable to the trust would be 11,500,000
shares.

(3) Assumes maximum number of shares of class A common stock, in lieu of cash,
are delivered to DECS Trust VI under the prepaid forward contracts.

(4) Includes presently exercisable options to purchase 3,042,000 shares of
class A common stock at an exercise price of $0.245 per share of which
options to purchase 2,882,000 shares are held by the Stephen A. Garofalo
1999 Annuity Trust No. 1 and options to purchase 160,000 shares are held by
the Stephen A. Garofalo 1999 Annuity Trust No. 2. Mr. Garofalo is the
trustee of both trusts. Mr. Garofalo intends to sell 1,156,000 shares of
class A common stock in the concurrent offering by certain of our selling
stockholders.

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

(6) Consists of 2,028,000 presently exercisable options to purchase shares of
class A common stock at an exercise price of $0.245 per share held by each
of Mr. Kluge and Mr. Subotnick. Mr. Kluge's address is 215 East 67th Street,
New York, NY 10021 and Mr. Subotnick's address is 215 East 67th Street, New
York, NY 10021. Mr. Kluge and Mr. Subotnick intend to sell 143,000 and
575,000 shares of class A common stock, respectively, in the concurrent
offering by certain of our selling stockholders.

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

Each of the selling stockholders, except Metromedia Company, is a director
and/or executive officer of our company. The general partners of Metromedia
Company serve as our directors. See "Management."

S-76
<PAGE>
DESCRIPTION OF MATERIAL INDEBTEDNESS

DESCRIPTION OF OUR 10% SENIOR NOTES DUE 2008

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

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

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

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

<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003........................................................ 105.000%
2004........................................................ 103.333%
2005........................................................ 101.667%
2006 and thereafter......................................... 100.000%
</TABLE>

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

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

S-77
<PAGE>
EVENTS OF DEFAULT. The indenture relating to the 10% Senior Notes due 2008
contains standard events of default, including:

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

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

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

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

- certain events of our subsidiaries.

S-78
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF CLASS A COMMON STOCK

GENERAL

The following general discussion summarizes certain of the material U.S.
federal income and estate tax consequences of the ownership and disposition of
our class A common stock applicable to a non-U.S. holder (as described below).
This discussion is based on provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), existing, temporary and proposed regulations promulgated
under the Code and administrative and judicial interpretations of the Code, all
as in effect or proposed on the date of this prospectus supplement and all of
which are subject to change, possibly with retroactive effect, or different
interpretations. This discussion assumes that our class A common stock is held
as a capital asset within the meaning of section 1221 of the Code. This
discussion does not address all aspects of U.S. federal income and estate
taxation and does not address any foreign, state or local tax consequences.
Furthermore, this discussion does not consider any specific facts or
circumstances that may apply to a particular non-U.S. holder and does not
address all aspects of U.S. federal income tax law that may be relevant to
non-U.S. holders that may be subject to special treatment under that tax law,
such as insurance companies, tax-exempt organizations, financial institutions,
broker-dealers or certain U.S. expatriates.

For purposes of this discussion, the term "U.S. holder" means a holder that
is:

- a citizen or resident of the United States;

- a corporation or other entity taxable as a corporation created or
organized in or under the laws of the United States or any of its
political subdivisions;

- an estate the income of which is subject to U.S. federal income taxation
regardless of its source;

- a trust if a U.S. court is able to exercise primary supervision over
administration of the trust and one or more U.S. persons have authority to
control all substantial decisions of the trust; or

- otherwise subject to United States federal income tax on a net income
basis in respect of our class A common stock.

In the case of a partnership that is a holder of class A common stock, any
partner described in any of the points above is also a U.S. holder. A "non-U.S.
holder" is a holder, including any partner in a partnership, that holds our
class A common stock and that is not a U.S. holder.

DIVIDENDS

In general, the gross amount of dividends paid to a non-U.S. holder that are
not effectively connected with a U.S. trade or business of the non-U.S. holder
will be subject to U.S. federal withholding tax at a 30% rate, or some lower
rate as may be specified by an applicable tax treaty. To receive a reduced
treaty rate, the non-U.S. holder must furnish the Company or its paying agent a
duly completed Internal Revenue Service ("IRS") Form 1001 or IRS Form W-8BEN (or
substitute form) certifying to its qualification for that rate.

Dividends that are effectively connected with the conduct of a trade or
business within the United States or, if a tax treaty applies, are attributable
to a U.S. permanent establishment of the non-U.S. holder, are exempt from U.S.
federal withholding tax, provided that the non-U.S. holder furnishes us or our
paying agent a duly completed IRS Form 4224 or IRS Form W-8ECI (or substitute
form) certifying to that fact. Effectively connected dividends are subject to
U.S. federal income tax on a net income basis at the same graduated rates
applicable to U.S. persons. In the case of a non-U.S. holder that is a
corporation, effectively connected income may, in certain circumstances, be
subject to an additional

S-79
<PAGE>
"branch profits tax" at a 30% rate or a lower rate as may be specified by an
applicable income tax treaty.

A non-U.S. holder that is eligible for a reduced rate of withholding tax
pursuant to a tax treaty may obtain a refund of any excess amounts withheld by
filing an appropriate claim for refund with the IRS.

DISPOSITION OF CLASS A COMMON STOCK

Generally, subject to the special rules applicable to U.S. real property
holding companies discussed below, a non-U.S. holder will not be subject to U.S.
federal income tax on any gain recognized on the disposition of our class A
common stock unless:

- the gain is effectively connected with a trade or business carried on by
the non-U.S. holder within the United States, or, alternatively, if a tax
treaty applies, the gain is attributable to a U.S. permanent establishment
maintained by that non-U.S. holder, in which case that gain will be
subject to tax at the rates and in the manner applicable to U.S. persons,
and, if the holder is a corporation, the branch profits tax may also
apply; or

- the class A common stock is disposed of by an individual non-U.S. holder
who holds the class A common stock as a capital asset and is present in
the United States for 183 or more days in the taxable year of the
disposition and certain other conditions are met, in which case that gain
will be subject to a flat 30% tax, which may be offset by United States
source capital losses even though the individual is not considered a
resident of the United States.

Non-U.S. holders should consult applicable tax treaties, which may exempt
from U.S. taxation gains realized upon the disposition of common stock in
certain cases.

Notwithstanding the above, because of our present ownership and anticipated
acquisition of substantial interests in real property assets in the United
States, it is possible that we may presently be, or may become, a U.S. real
property holding company. If we were to be treated as a U.S. real property
holding company, a non-U.S. holder who owns more than 5% of our class A common
stock may be subject to U.S. federal income taxation on any gain realized from
the sale or exchange of that stock, unless an exemption is provided under an
applicable tax treaty.

FEDERAL ESTATE TAX

Class A common stock held by an individual non-U.S. holder at the time of
death will be included in the holder's gross estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Under U.S. Treasury regulations, we must report annually to the IRS and to
each non-U.S. holder the amount of dividends paid to and the tax withheld from,
that holder, regardless of whether any tax was actually withheld or whether
withholding was required. This information may also be made available to the tax
authorities in the non-U.S. holder's country of residence.

Backup withholding, which generally is a withholding tax imposed at a rate
of 31% on certain payments to persons that fail to furnish the information
required under the U.S. information reporting and backup withholding rules,
generally will not apply to:

- dividends paid to non-U.S. holders that are subject to the U.S.
withholding tax, whether at 30% or a reduced treaty rate; or

S-80
<PAGE>
- dividends paid to non-U.S. holders at an address outside the United States
on or prior to December 31, 2000 unless the payor has actual knowledge
that the payee is a U.S. person.

In the case of a non-U.S. holder that sells class A common stock to or
through a U.S. office of a broker, the broker must backup withhold at a rate of
31% and report the sale to the IRS, unless the holder certifies its non-U.S.
status under penalties of perjury or otherwise establishes an exemption. In the
case of a non-U.S. holder that sells class A common stock to or through the
foreign office of a U.S. broker, or a foreign broker with certain types of
relationships to the United States, the broker must report the sale to the IRS
(but not backup withhold) unless the broker has documentary evidence in its
files that the seller is a non-U.S. holder or certain other conditions are met,
or the holder otherwise establishes an exemption. A non-U.S. holder will
generally not be subject to information reporting or backup withholding if that
non-U.S. holder sells the class A common stock to or through a foreign office of
a non-U.S. broker.

Backup withholding is not an additional tax. Any amount withheld under the
backup withholding rules from a payment to a holder is allowable as a credit
against the holder's U.S. federal income tax liability, provided the required
information or appropriate claim for refund is filed with the IRS.

Recently promulgated U.S. Treasury regulations effective for payments made
after December 31, 2000 eliminate the general, current legal presumption that
dividends paid to an address in a foreign country are paid to a resident of that
country. In addition, these regulations impose certain certification and
documentation requirements on non-U.S. holders claiming the benefit, under a tax
treaty, of a reduced withholding rate on dividends.

THE FOREGOING DISCUSSION IS A SUMMARY OF CERTAIN U.S. FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR OTHER DISPOSITION OF THE
CLASS A COMMON STOCK BY NON-U.S. HOLDERS. ACCORDINGLY, HOLDERS ARE URGED TO
CONSULT WITH THEIR TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF CLASS A COMMON STOCK
INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN OR
OTHER TAXING JURISDICTION.

S-81
<PAGE>
PLAN OF DISTRIBUTION

Under the prepaid forward contracts, DECS Trust VI has agreed, subject to
the terms and conditions set forth in those contracts, to purchase from the
selling stockholders named in this prospectus supplement a number of shares of
class A common stock equal to the total number of DECS to be purchased by the
underwriters from the trust under an underwriting agreement (including any DECS
to be purchased by the underwriters upon exercise of an over-allotment option
plus the number of DECS purchased by Salomon Smith Barney Inc., who sponsored
the formation of the trust, in connection with the organization of the trust)
among Salomon Smith Barney Inc., Credit Suisse First Boston Corporation,
Deutsche Bank Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated. Under the terms of the prepaid forward contracts, each selling
stockholder will deliver to the trust at an exchange date a number of shares of
class A common stock (or, at the option of each selling stockholder, the cash
equivalent of those shares) and/or any other consideration permitted or required
by the terms of the prepaid forward contracts, that are expected to have the
same value as the shares of class A common stock delivered under the DECS.

In connection with the DECS offering, the underwriters may over-allot, or
engage in syndicate covering transactions, stabilizing transactions and penalty
bids. Over-allotment involves syndicate sales of DECS or class A common stock in
excess of the number of DECS to be purchased by the underwriters in this
offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the DECS or class A common stock in the open
market after the distribution has been completed in order to cover syndicate
short positions. Stabilizing transactions consist of certain bids or purchases
of DECS or class A common stock made for the purpose of preventing or retarding
a decline in the market price of the DECS or class A common stock while the
offering is in progress. Penalty bids permit the underwriters to reclaim a
selling concession from a syndicate member when one of the underwriters, in
covering syndicate short positions or making stabilizing purchases, repurchases
DECS or class A common stock originally sold by the syndicate member. These
activities may cause the price of DECS or class A common stock to be higher than
the price that otherwise would exist in the open market in the absence of these
transactions. These transactions may be effected on the Nasdaq National Market
or in the over-the-counter market, or otherwise and, if commenced, may be
discontinued at any time.

In addition, in connection with the DECS offering, certain of the
underwriters (and selling group members) may engage in passive market making
transactions in the DECS or class A common stock on The Nasdaq National Market,
prior to the pricing and completion of the DECS offering. Passive market making
consists of displaying bids on The Nasdaq National Market no higher than the bid
prices of independent market makers and making purchases at prices no higher
than those independent bids and effected in response to order flow. Net
purchases by a passive market on each day are limited to a specified percentage
of the passive market maker's average daily trading volume in the class A common
stock during a specified period and must be discontinued when that limit is
reached. Passive market making may cause the price of the class A common stock
to be higher than the price that otherwise would exist in the open market in the
absence of these transactions. If passive market making is commenced, it may be
discontinued at any time.

The underwriters have performed certain investment banking and advisory
services for us from time to time for which they have received customary fees
and expenses. The underwriters may, from time to time, engage in transactions
with and perform services for us in the ordinary course of its business.

Subject to certain exceptions, we, our executive officers and the selling
stockholders have agreed that, for a period of 90 days from the date of this
prospectus supplement, we will not, without the prior written consent of Salomon
Smith Barney Inc., as representative of the underwriters, offer, sell,

S-82
<PAGE>
contract to sell, or otherwise dispose of, any shares of class A common stock or
any securities convertible into, or exercisable or exchangeable for, class A
common stock. Salomon Smith Barney Inc. in its sole discretion may release any
of the securities subject to these lock-up agreements at any time without
notice. However, this agreement will not restrict our ability and the ability of
selling stockholders to take any of the actions listed above in connection with
the offering by the trust of the DECS or any delivery of shares of class A
common stock under the terms of the DECS.

We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments the underwriters may be required to make in
respect of those liabilities.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial amount of class A common stock in the public market,
or the perception that sales may occur, could adversely affect the market price
of the class A common stock prevailing from time to time in the public market
and could impair our ability to raise additional capital through the sale of our
equity securities in the future.

In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of acquisition of restricted securities from us or
any of our "affiliates", as that term is defined under the Securities Act, the
holder is entitled to sell within any three-month period a number of shares of
class A common stock that does not exceed the greater of 1% of the
then-outstanding shares of the class A common stock or the average weekly
trading volume of shares of class A common stock on all exchanges and reported
through the automated quotation system of a registered security association
during the four calendar weeks preceding the date on which notice of the sale is
filed with the Securities and Exchange Commission. Sales under Rule 144 are also
subject to certain restrictions on the manner of sales, notices, requirements
and the availability of current public information about the company. If two
years have elapsed since the date of acquisition of restricted shares from us or
from any "affiliate" of the company, and the holder thereof is deemed not to
have been an affiliate of the company at any time during the 90 days preceding a
sale, such person would be entitled to sell such class A common stock in the
public market under Rule 144(k) without regard to the volume limitations, manner
of sale provisions, public information requirements or notice requirements.

Assuming the over-allotment option described in the trust prospectus is not
exercised, up to 10,000,000 shares of class A common stock may be delivered in
2002 (or later if the contract is extended) to DECS Trust VI under the prepaid
forward purchase contracts. In addition, if all of the selling stockholders
elect to deliver shares under the contracts (assuming the over-allotment option
described in the trust prospectus is not exercised) up to 5,156,000 shares of
class B common stock may be converted on a one-for-one basis into shares of
class A common stock. The selling stockholders are currently affiliates of our
company.

The shares of class A common stock delivered under this prospectus
supplement will be freely tradeable without restriction or further registration
under the Securities Act by persons other than our "affiliates" within the
meaning of Rule 144. The holders of restricted shares generally will be entitled
to sell these shares in the public securities market without registration under
the Securities Act to the extent permitted by Rule 144 or any exemption under
the Securities Act.

We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-8, covering the shares of common stock issuable upon
exercise of certain officer's options and the shares of class A common stock
underlying options granted under the 1997 Incentive Stock Plan and the 1998
Incentive Stock Plan. The shares of class A common stock so registered and
acquired under the 1997 Incentive Stock Plan and the 1998 Incentive Stock Plan
will be available for sale by non-Affiliates in the public securities market
without limitation and by affiliates, subject to the volume limitations of Rule
144.

S-83
<PAGE>
Certain persons have registration rights agreements with us and/or warrant
agreements with us to purchase shares of class A common stock. As a result, the
number of shares eligible for future sale and the availability of those shares
in the public securities market may be effected by the exercise of these
registration rights and warrants and by additional shares of class A common
stock that are entitled to "piggyback" registration rights and may be included
in any such registration. See "Risk Factors-Shares Eligible for Future Sale may
have a Potential Adverse Effect on Our Stock price."

VALIDITY OF THE SECURITIES

Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York, will pass upon
certain legal matter for us in connection with the offering of the shares.

EXPERTS

The consolidated financial statements of Metromedia Fiber Network, Inc. at
December 31, 1997 and 1998 and for each of the years in the three-year period
ended December 31, 1998, appearing in this prospectus supplement, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere in this prospectus supplement and are included in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.

AboveNet's financial statements as of June 30, 1998 and 1999 and for each of
the three years in the period ended June 30, 1999 included and incorporated by
reference in this prospectus supplement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is included and
incorporated by reference herein, and have been so included and incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.

The Combined Statement of Assets to be Acquired and Liabilities to be
Assumed of Palo Alto Internet Exchange as of December 26, 1998 and December 27,
1997 and the related Combined Statement of Revenues and Direct Expenses for the
period June 12, 1998 through December 26, 1998, the period December 28, 1997
through June 12, 1998 and the fiscal years ended December 27, 1997 and
December 29, 1996 appearing in this prospectus supplement, have been included in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounts.

WHERE YOU CAN FIND MORE INFORMATION

We are currently subject to the periodic reporting and other informational
requirements of the Exchange Act. The reports and other information that we
filed with the Securities and Exchange Commission can be inspected and copied at
prescribed rates at the public reference facilities maintained by the Securities
and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and will also be available for inspection and copying at
the regional offices of the Securities and Exchange Commission located at 7
World Trade Center, Suite 1300, New York, New York 10048 and the Citicorp Center
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may
obtain information on the operation of the public reference facilities by
calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities
and Exchange Commission also maintains an Internet Web Site at
http://www.sec.gov that contains reports, proxy and information statements and
other information. You can also obtain copies of such materials from us upon
request.

S-84
<PAGE>
INCORPORATION OF INFORMATION WE FILE WITH THE SEC

The following documents and other materials, which have been filed by us
with the Securities and Exchange Commission, are incorporated herein and
specifically made a part of this prospectus supplement by this reference:

- our Annual Report on Form 10-K for the fiscal year ended December 31,
1998;

- our Quarterly Report on Form 10-Q for the three months ended March 31,
1999;

- our Quarterly Report on Form 10-Q for the six months ended June 30, 1999;

- our Quarterly Report on Form 10-Q for the nine months ended September 30,
1999;

- our Current Report on Form 8-K dated June 30, 1999;

- our Current Report on Form 8-K dated September 10, 1999, as amended by our
Current Report on Form 8-K/A dated October 14, 1999 as further amended by
our Current Report on Form 8-K/A dated October 26, 1999;

- the "Risk Factors--Risk Factors Applicable to AboveNet" and "Business of
AboveNet" sections contained in our Registration Statement on Form S-4
dated August 5, 1999 (File No. 333-84541); and

- our Current Report on Form 8-K filed on October 18, 1999.

In addition, all documents filed with the Securities and Exchange Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act
of 1934 by us subsequent to the date of this prospectus supplement shall be
deemed to be incorporated by reference into this prospectus supplement and to be
a part hereof from the date of filing of such documents with the Securities and
Exchange Commission. Any statement contained in this prospectus supplement or in
a document incorporated or deemed to be incorporated by reference in this
prospectus supplement shall be deemed to be modified or superseded for purposes
of this prospectus supplement to the extent that a statement contained in this
prospectus supplement or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus
supplement.

Statements contained in this prospectus supplement or in any document
incorporated by reference in this prospectus supplement as to the contents of
any contract or other document referred to herein or therein are not necessarily
complete, and in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the documents incorporated by
reference, each such statement being qualified in all respects by such
reference.

This prospectus supplement incorporates documents by reference that are not
presented herein or delivered herewith. Copies of such documents, other than
exhibits to such documents that are not specifically incorporated by reference
herein, are available without charge to any person to whom this prospectus
supplement is delivered, upon written or oral request to: Metromedia Fiber
Network, Inc., c/o Metromedia Company, One Meadowlands Plaza, East Rutherford,
NJ 07073; Attention: General Counsel; tel: (201) 531-8000.

S-85
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
METROMEDIA FIBER NETWORK, INC. AND SUBSIDIARIES:

Report of Independent Auditors.............................. F-2

Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-3

Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996............................ F-4

Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996............................ F-5

Consolidated Statements of Changes in Stockholders' Equity
(Deficiency) for the years ended December 31, 1998, 1997 and
1996........................................................ F-6

Notes to Consolidated Financial Statements.................. F-7

Consolidated Statements of Operations for the nine months
ended
September 30, 1998 and 1999 (unaudited)..................... F-25

Consolidated Balance Sheet as of September 30, 1999
(unaudited)............................................... F-26

Consolidated Statements of Cash Flows for the nine months
ended
September 30, 1998 and 1999 (unaudited)..................... F-27

Notes to Consolidated Financial Statements.................. F-28

ABOVENET COMMUNICATIONS INC.:

Independent Auditors' Report................................ F-38

Consolidated Balance Sheets as of June 30, 1998 and 1999.... F-39

Consolidated Statements of Operations for the Years Ended
June 30, 1997, 1998 and 1999.............................. F-40

Consolidated Statements of Stockholders' Equity for the
Years Ended
June 30, 1997, 1998 and 1999.............................. F-41

Consolidated Statements of Cash Flows for the Years Ended
June 30, 1997, 1998 and 1999.............................. F-42

Notes to Consolidated Financial Statements.................. F-43

PALO ALTO INTERNET EXCHANGE:

Independent Accountants' Reports............................ F-59

Combined Statements of Assets to be Acquired and Liabilities
to be Assumed as of March 27, 1999 (unaudited), December
26, 1998 and December 27, 1997............................ F-61

Combined Statement of Revenues and Direct Expenses for the
Quarters Ended March 27, 1999 and March 26, 1998
(unaudited), period from June 12, 1998 through December
26, 1998, period from December 28, 1997 through June 11,
1998 and the Fiscal Years Ended December 27, 1997 and
December 29, 1996......................................... F-62

Notes to Combined Statements of Assets to be Acquired and
Liabilities to be Assumed and Combined Statements of
Revenues and Direct Expenses.............................. F-63
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of
Metromedia Fiber Network, Inc.

We have audited the accompanying consolidated balance sheets of Metromedia
Fiber Network, Inc. and Subsidiaries (the "Company") as of December 31, 1998 and
1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1998. Our audits also included the financial statement schedule listed in
the index at Item 14(a). These consolidated financial statements and schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and schedule based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Metromedia Fiber Network, Inc. and Subsidiaries as of December 31, 1998 and
1997, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

<TABLE>
<S> <C> <C>
/s/ ERNST & YOUNG LLP
</TABLE>

New York, New York
March 4, 1999, except for paragraph 16 of note 2,
as to which the date is May 19, 1999

F-2
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN 000'S, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $569,319 $138,846
Pledged securities, current portion....................... 61,384 --
Accounts receivable....................................... 30,910 837
Prepaid expenses and other current assets................... 4,210 874
-------- --------
Total current assets.................................. 665,823 140,557
Fiber optic transmission network and related equipment,
net....................................................... 244,276 24,934
Property and equipment, net................................. 2,716 759
Pledged securities.......................................... 30,512 --
Investment in/advance to joint venture...................... 4,156 56
Other assets................................................ 26,934 1,072
-------- --------
Total assets.......................................... $974,417 $167,378
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 6,106 $ 3,072
Accrued liabilities....................................... 96,512 3,271
Deferred revenue, current portion......................... 8,100 1,184
Capital lease obligations, current portion................ 55 --
-------- --------
Total current liabilities............................. 110,773 7,527
Senior notes payable........................................ 650,000 --
Capital lease obligations................................... 22,675 --
Deferred revenue............................................ 33,455 10,311
Commitments and contingencies (see notes)
Stockholders' equity:
Class A common stock, $.01 par value; 360,000,000 shares
authorized; 155,210,220 and 149,793,136 shares issued
and outstanding, respectively........................... 1,552 1,498
Class B common stock, $.01 par value; 40,000,000 shares
authorized; 33,769,272 shares issued and outstanding.... 338 338
Additional paid-in capital................................ 197,861 190,927
Accumulated deficit....................................... (42,237) (43,223)
-------- --------
Total stockholders' equity............................ 157,514 149,540
-------- --------
Total liabilities and stockholders' equity............ $974,417 $167,378
======== ========
</TABLE>

See accompanying notes

F-3
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN 000'S, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenue..................................................... $36,436 $ 2,524 $ 236

Expenses:

Cost of sales............................................. 13,937 3,572 699
Selling, general and administrative....................... 14,712 6,303 2,070
Consulting and employment incentives...................... 248 19,218 3,652
Settlement agreement...................................... 3,400 -- --
Depreciation and amortization............................. 1,532 757 613
------- -------- --------
Income (loss) from operations............................... 2,607 (27,326) (6,798)
Interest income........................................... 8,788 1,808 --
Interest expense (including financing costs).............. (6,861) (741) (3,561)
Loss from joint venture................................... (146) -- --
------- -------- --------
Income (loss) before income taxes........................... 4,388 (26,259) (10,359)
Income taxes.............................................. 3,402 -- --
------- -------- --------
Net income (loss)........................................... $ 986 $(26,259) $(10,359)
======= ======== ========
Net income (loss) per share, basic.......................... $ 0.01 $ (0.28) $ (0.14)
======= ======== ========
Net income per share, diluted............................... $ 0.01 N/A N/A
======= ======== ========
Weighted average number of shares outstanding, basic........ 186,990 94,894 71,716
======= ======== ========
Weighted average number of shares outstanding, diluted...... 219,524 N/A N/A
======= ======== ========
</TABLE>

See accompanying notes.

F-4
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN 000'S)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ 986 $(26,259) $(10,359)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 1,532 757 613
Stock options and warrants issued for services.......... 248 19,439 5,395
Warrants issued for settlement agreement................ 3,000 -- --
Deferred taxes.......................................... 2,707
Reserve for note receivable............................. -- 338 --
Loss from joint venture................................. 146 -- --
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable..................................... (30,073) (656) 2
Accounts payable and accrued expenses................... 13,449 (12) 758
Deferred revenue........................................ 30,060 10,387 833
Other................................................... (4,070) (1,806) 12
-------- -------- --------
Net cash provided by (used in) operating activities......... 17,985 2,188 (2,746)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures on fiber optic transmission network and
related equipment......................................... (114,849) (19,206) (974)
Deposit payments............................................ (4,675) (87) --
Investment in / advance to joint venture.................... (4,246) (56) --
Purchase of pledged securities.............................. (91,896) -- --
Capital expenditures on property and equipment.............. (2,305) (318) (95)
-------- -------- --------
Net cash used in investing activities..................... (217,971) (19,667) (1,069)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock...................... 1,038 133,975 123
Proceeds from issuance of preferred stock and warrants...... -- 32,500 2,025
Dividends paid on preferred stock........................... -- (77) --
Repayments of notes payable- private placement.............. -- (1,408) 25
Repayments of notes payable................................. -- (5,950) (3,350)
Proceeds from notes payables, net........................... 630,000 -- 5,450
Payments of capital lease obligations....................... (579) -- --
Purchase of common stock.................................... -- (1,140) --
Purchase of preferred stock................................. -- (2,039) --
-------- -------- --------
Net cash provided by financing activities................. 630,459 155,861 4,273
-------- -------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 430,473 138,382 458
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD............... 138,846 464 6
CASH AND CASH EQUIVALENTS-END OF PERIOD..................... $569,319 $138,846 $ 464
Supplemental information:
Interest paid........................................... $ 219 $ 1,145 $ 996
======== ======== ========
Income taxes paid....................................... $ 3,760 $ -- $ --
======== ======== ========
Supplemental disclosure of significant non-cash investing
activities:
Capital lease obligations............................... $ 23,309 $ -- $ --
======== ======== ========
Accrued capital expenditures............................ $ 82,916 $ -- $ --
======== ======== ========
</TABLE>

See accompanying notes

F-5
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
SERIES A & B ------------------- -------------------
PREFERRED STOCK COMMON STOCK CLASS CLASS
------------------- ------------------- A B
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995....... -- -- 49,920 $ 499 -- $ -- -- $ --
Issuance of common stock and
warrants for services rendered... -- -- 21,305 213 -- -- -- --
Issuance of common stock and
warrants related to debt
financing activities............. -- -- 6,870 69 -- -- -- --
Issuance of common stock in
connection with the exercise of
warrants......................... -- -- 1,525 15 -- -- -- --
Sale of common stock and
warrants......................... -- -- 392 4 -- -- -- --
Sale of preferred stock with
warrants......................... 300 30 -- -- -- -- -- --
Net loss for the year.............. -- -- -- -- -- -- -- --
---- --- ------- ----- ------- ------ ------ ----
Balance at December 31, 1996....... 300 30 80,012 800 -- -- -- --
Issuance of common stock in
connection with the exercise of
warrants......................... -- -- 1,216 12 -- -- -- --
Issuance of options to employees... -- -- -- -- -- -- -- --
Issuance of warrants in connection
with debt extension.............. -- -- -- -- -- -- -- --
Dividends on preferred stock....... -- -- -- -- -- -- -- --
Repurchase and retirement of Series
A preferred stock and warrants... (300) (30) -- -- -- -- -- --
Repurchase and retirement of common
stock and warrants............... -- -- (4,707) (47) -- -- -- --
Sale of Series B preferred stock... 16 -- -- -- -- -- -- --
Net proceeds from initial Public
Offering......................... -- -- -- -- 72,863 729 -- --
Conversion of Common Stock to
Series A Common Stock............ -- -- (76,521) (765) 76,520 765 -- --
Conversion of Series B Preferred
Stock to Series A & B Common
Stock............................ (16) -- -- -- 314 3 33,769 338
Sale of Series A Common Stock for
warrant.......................... -- -- -- -- 96 1 -- --
Net loss for the year.............. -- -- -- -- -- -- -- --
---- --- ------- ----- ------- ------ ------ ----
Balance at December 31, 1997....... -- -- -- -- 149,793 1,498 33,769 338
Issuance of options to employees... -- -- -- -- -- -- -- --
Issuance of warrants in connection
with settlement agreement........ -- -- -- -- -- -- -- --
Issuance of common stock in
connection with the exercise of
warrants......................... -- -- -- -- 4,317 43 -- --
Issuance of common stock in
connection with the exercise of
stock options.................... -- -- -- -- 1,100 11 -- --
Net income for the year............ -- -- -- -- -- -- -- --
Income tax benefit from exercises
of employee stock options........ -- -- -- -- -- -- -- --
---- --- ------- ----- ------- ------ ------ ----
Balance at December 31, 1998....... -- -- -- $ -- 155,210 $1,552 33,769 $338
==== === ======= ===== ======= ====== ====== ====

ADDITIONAL
PAID-IN ACCUMULATED
CAPITAL DEFICIT TOTAL
---------- ------------ --------
<S> <C> <C> <C>
Balance at December 31, 1995....... $ (454) $ (5,381) (5,336)
Issuance of common stock and
warrants for services rendered... 4,702 -- 4,915
Issuance of common stock and
warrants related to debt
financing activities............. 1,703 -- 1,772
Issuance of common stock in
connection with the exercise of
warrants......................... (15) -- --
Sale of common stock and
warrants......................... 120 -- 124
Sale of preferred stock with
warrants......................... 1,995 -- 2,025
Net loss for the year.............. -- (10,359) (10,359)
-------- -------- --------
Balance at December 31, 1996....... 8,051 (15,740) (6,859)
Issuance of common stock in
connection with the exercise of
warrants......................... (2) -- 10
Issuance of options to employees... 19,218 -- 19,218
Issuance of warrants in connection
with debt extension.............. 220 -- 220
Dividends on preferred stock....... -- (77) (77)
Repurchase and retirement of Series
A preferred stock and warrants... (1,996) (13) (2,039)
Repurchase and retirement of common
stock and warrants............... 42 (1,134) (1,139)
Sale of Series B preferred stock... 32,500 -- 32,500
Net proceeds from initial Public
Offering......................... 133,150 -- 133,879
Conversion of Common Stock to
Series A Common Stock............ -- -- --
Conversion of Series B Preferred
Stock to Series A & B Common
Stock............................ (341) -- --
Sale of Series A Common Stock for
warrant.......................... 85 -- 86
Net loss for the year.............. -- (26,259) (26,259)
-------- -------- --------
Balance at December 31, 1997....... 190,927 (43,223) 149,540
Issuance of options to employees... 248 -- 248
Issuance of warrants in connection
with settlement agreement........ 3,000 -- 3,000
Issuance of common stock in
connection with the exercise of
warrants......................... 118 -- 161
Issuance of common stock in
connection with the exercise of
stock options.................... 861 -- 872
Net income for the year............ -- 986 986
Income tax benefit from exercises
of employee stock options........ 2,707 -- 2,707
-------- -------- --------
Balance at December 31, 1998....... $197,861 $(42,237) $157,514
======== ======== ========
</TABLE>

F-6
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BUSINESS OPERATIONS AND LINE OF BUSINESS

The Company is a facilities-based provider of a technologically advanced,
high-bandwidth, fiber optic communications infrastructure to communications
carriers and corporate/government customers in the United States. The Company
focuses its operations on domestic intracity fiber optic networks in clusters of
the 15 largest cities, based on population, throughout the United States.

The Company operates high-bandwidth fiber optic communications networks in
New York and Philadelphia. The Company also is engineering and constructing
networks in Washington, D.C., Chicago, San Francisco and Boston. The Company is
designing networks in Atlanta, Dallas, Houston, Seattle and Los Angeles.

The Company has also built or obtained intercity fiber optic capacity that
links certain of its intracity networks. The Company has under construction a
250-route mile network from New York to Washington, D.C. The Company has also
obtained rights for fiber optic capacity with other facilities-providers and
obtained fiber optic capacity linking certain of the metropolitan areas (New
York-Chicago, New York-Boston, Chicago-Seattle-Portland) in which it plans to
construct intracity networks, except in Portland.

In addition, the Company has entered into a joint venture with a United
Kingdom telecommunications company to connect its New York network to London.
The Company has formed a joint venture to construct a high-bandwidth fiber optic
network connecting 13 major cities in Germany and obtain certain additional
fiber optic capacity in Western Europe.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant inter-company balances and transactions
have been eliminated in consolidation. The investment in a 50% owned joint
venture with a United Kingdom telecommunications company is accounted for by the
equity method. Certain balances in the consolidated financial statements have
been restated to conform to the current period presentation.

MANAGEMENT ESTIMATES

The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results may differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts for cash, accounts receivable, accounts payable and
accrued liabilities approximate their fair value. The fair value of long-term
debt is determined based on quoted market rates or the cash flows from such
financial instruments discounted at the Company's estimated current interest
rate to enter similar financial instruments. At December 31, 1998, the fair
value of the Company's fixed rate long-term debt for the 10% Senior Notes due in
2008, was $650 million. The recorded amounts for all other long-term debt of the
Company approximates fair values.

F-7
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS

For purposes of the consolidated financial statements, the Company considers
all highly liquid investments with an original maturity of three months or less
when purchased to be cash equivalents.

PLEDGED SECURITIES

In connection with the sale of 10% Senior Notes (see Note 9), a portion of
the net proceeds was utilized to purchase a portfolio consisting of U.S.
government securities, which mature at dates sufficient to provide for payment
in full of interest on the 10% Senior Notes through May 15, 2000. The pledged
securities are stated at cost, adjusted for premium amortization and accrued
interest. The fair value of the pledged securities approximates the carrying
value.

ACCOUNTS RECEIVABLE

Accounts receivable includes trade receivables and costs and estimated
earnings in excess of billings for those contracts where the Company utilizes
the percentage of completion method for recognizing revenue.

FIBER OPTIC TRANSMISSION NETWORK AND RELATED EQUIPMENT

The fiber optic transmission network and related equipment are stated at
cost. Costs in connection with the installation and expansion of the network are
capitalized. Depreciation is computed using the straight-line method through the
life of either the franchise agreement or right of way for the related network.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.

OTHER ASSETS

Other assets include debt issuance costs, franchise agreements and deposits.
Those costs, which are amortizable, are amortized on a straight-line basis over
a period ranging from ten to fifteen years.

LONG-LIVED ASSETS

The Company reviews for the impairment of long-lived assets and certain
identifiable intangibles whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company has
identified no such impairment indicators.

INCOME TAXES

In accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," the Company recognizes deferred income taxes
for the tax consequences in future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each year end,
based on enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when

F-8
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
necessary to reduce deferred tax assets to the amount that is "more likely than
not" to be realized. The provision for income taxes is the tax payable for the
period and the change, during the period, in deferred tax assets and
liabilities.

RECAPITALIZATIONS

In April 1997, the Company increased its authorized common stock of $.01 par
value to 60,000,000 shares; in addition, authorized preferred stock with a par
value of $.01 was increased to 2,000,000 shares. On April 29, 1997, the Company
effected a 3-for-one stock split of its outstanding shares of common stock.

In September 1997, the Company effected a .507-for-one reverse stock split
of its common stock.

On October 28, 1997, the total authorized number of shares of common stock
of the Company was increased to 200 million shares, par value $0.01 per share,
of which 180 million shares were designated Class A common stock and 20 million
shares were designated Class B common stock.

On August 28, 1998, the Company completed a two-for-one stock split of the
Company's Class A and Class B Common Stock in the form of a 100 percent stock
dividend to all shareholders of record as of the close of business on August 7,
1998. In addition, on December 22, 1998, the Company completed another
two-for-one stock split of the Company's Class A and Class B Common Stock in the
form of a 100 percent stock dividend to all shareholders of record as of the
close of business on December 8, 1998.

On May 19, 1999, the Company completed a two-for-one stock split of the
Company's Class A Common Stock and Class B Common Stock in the form of a 100
percent stock dividend.

The accompanying financial statements give retroactive effect to the above
recapitalizations.

RECOGNITION OF REVENUE

The Company recognizes revenue on telecommunications services ratably over
the term of the applicable lease agreements with customers. Amounts billed in
advance of the service provided are recorded as deferred revenue. The Company
also provides installation services for its customers, and as these services
typically are completed within a year, the Company records the revenues and
related costs for these services under the completed contract method. In
addition, the Company occasionally grants Indefeasible Rights of Use ("IRU's")
to portions of its network. For those grants occurring prior to completion of
the portion of the network granted, the Company recognizes revenue on these
telecommunication services using the percentage of completion method. Under the
percentage of completion method, progress is generally measured on performance
milestones relating to the contract where such milestones fairly reflect the
progress toward contract completion. Network construction costs include all
direct material and labor costs and those indirect costs related to contract
performance. General and administrative costs are charged to expense as
incurred. If necessary, the estimated loss on an uncompleted contract is
expensed in the period in which it is identified. Contract costs are estimated
using allocations of the total cost of constructing the specific phase of the
network. Revisions to estimated profits on contracts are recognized in the
period that they become known.

F-9
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK OPTIONS

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company applies APB Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations in
accounting for its stock options.

CONSULTING AND EMPLOYMENT INCENTIVES

The amounts represent the value of common stock, warrants and options issued
to consultants, officers, employees and directors of the Company as incentive to
provide services to the Company. The 1997 amounts represent the value of options
to purchase 24,762,600 shares of the Company's common stock issued in 1997 to
officers, employees and directors of the Company. The options have been valued
in accordance with APB Opinion No. 25 at the difference between the exercise
price of the options and the fair market value of the Company's common stock at
the date of grant.

EARNINGS PER SHARE

In accordance with the Financial Accounting Standards Board's ("FASB")
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share," basic earnings per share is computed based upon the weighted average
number of common shares outstanding during the periods. Diluted earnings per
share is computed based upon the weighted average number of common shares
outstanding plus the assumed issuance of common stock equivalents computed in
accordance with the treasury stock method.

DEFERRED REVENUE

Deferred revenue represents prepayments received from customers for future
use of the Company's fiber optic network as well as prepayment for installation
services, which have not yet been provided. Lease payments are structured as
either prepayments or monthly recurring charges. Prepayments are accounted for
as deferred revenues and recognized over the term of the respective customer
lease agreement. At December 31, 1998, the Company had received prepaid lease
payments in excess of revenue recognized totaling $41.6 million.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the FASB released SFAS No. 130 "Reporting Comprehensive
Income," governing the reporting and display of comprehensive income and its
components. This statement is effective for financial statements issued for
periods beginning after December 15, 1997. The Company adopted this standard as
required in fiscal 1998 in its Statement of Changes in Stockholders' Equity
(Deficiency).

In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 redefines how operating
segments are determined and requires disclosure of certain financial and
descriptive information about a company's operating segments. In 1998 the
Company adopted SFAS No. 131. The Company currently operates in one business
segment.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments and hedging activities. This standard is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999. The

F-10
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company does not expect the adoption of SFAS No. 133 to have an impact on its
results of operations, financial position or cash flows.

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consists of the following (in 000's):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Trade accounts receivable................................... $ 560 $837
Costs and earnings in excess of billings.................... 30,134 --
Other....................................................... 216 --
------- ----
$30,910 $837
======= ====
</TABLE>

At December 31, 1998, three customers accounted for 43%, 40% and 14%,
respectively, of the Company's combined accounts receivable.

NOTE 4: FIBER OPTIC TRANSMISSION NETWORK AND RELATED EQUIPMENT

Fiber optic transmission network and related equipment consists of the
following (in 000's):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Material-fiber optic cable............................... $ 23,436 $ 1,133
Engineering and layout costs............................. 7,101 3,322
Fiber optic cable installation costs..................... 16,639 1,869
Other.................................................... 4,242 2,019
Construction in progress................................. 195,256 17,835
-------- -------
246,674 26,178
Less: accumulated depreciation........................... (2,398) (1,244)
-------- -------
$244,276 $24,934
======== =======
</TABLE>

Construction in progress includes amounts incurred in the Company's
expansion of its network. These amounts include fiber optic cable and other
materials, engineering and other layout costs, fiber optic cable installation
costs and other network assets held under capital leases. Construction in
progress also includes payments for rights of way for the underlying sections of
the network build.

F-11
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5: PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1998 1997 USEFUL LIFE
-------- -------- -----------
<S> <C> <C> <C>
Leasehold improvements........................... $ 614 $538 174 months
Furniture, equipment and software................ 2,581 352 5 years
------ ----
3,195 890
Less: accumulated depreciation and
amortization................................... (479) (131)
------ ----
$2,716 $759
====== ====
</TABLE>

NOTE 6: INVESTMENT IN/ADVANCES TO JOINT VENTURE

The Company has a joint venture agreement with Racal Telecommunications,
Inc. ("Racal"), that provides broad-based transatlantic communication services
between New York and London. As of December 31, 1997, neither party had made a
capital contribution. The balance of the investment at December 31, 1997
represents advances made to the joint venture by the Company. During 1998, each
party made capital contributions of $4.3 million. The Company and Racal may each
be required to contribute additional capital as needed for their respective 50%
interests. The Company accounts for its investment using the equity method. For
1998, the Company recorded a $146,000 loss from the joint venture based on its
50% interest in the joint venture. Included within the Company's accounts
receivable is $70,000 for administrative services provided to the joint venture
which were not reimbursed as of December 31, 1998.

NOTE 7: GERMAN NETWORK BUILD

In February, 1999, the Company entered into a joint venture with Viatel,
Inc. and Carrier 1 Holdings, Ltd. to jointly build a national fiber optic
telecommunications network in Germany. Upon completion of construction, the
joint venture will be dissolved and the Company will own its own separate German
broadband network. In connection with the terms of this agreement, the Company
made a deposit payment of $4.7 million, during the third quarter of 1998. Upon
signing a definitive agreement, the Company provided an irrevocable standby
letter of credit in the amount of $64 million as security for the construction
costs of the network, which, in addition to the deposit payment made, covers the
Company's portion of the estimated construction costs.

NOTE 8: RELATED PARTY TRANSACTIONS

The Company is a party to a management agreement under which the Company's
controlling shareholder, Metromedia Company, provides consultation and advisory
services relating to legal matters, insurance, personnel and other corporate
policies, cash management, internal audit and finance, taxes, benefit plans and
other services as are reasonably requested. The management agreement terminates
on December 31, of each year, and is automatically renewed for successive one-
year terms unless either party terminates upon 60 days prior written notice. The
1998 management fee under the agreement was $500,000 per year, payable quarterly
at a rate of $125,000. The Company is also obligated to reimburse Metromedia
Company for all its out-of-pocket costs and expenses incurred and advances paid
by Metromedia Company in connection with the management agreement. In 1997,

F-12
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8: RELATED PARTY TRANSACTIONS (CONTINUED)
Metromedia Company received no money for its out-of-pocket costs and expenses or
for interest on advances extended by it to the Company under the management
agreement.

In March and June 1997, the Company entered into two one-year leases for
office space with an affiliate. Subsequent to June 1997, the affiliate sold this
property. For the year ended December 31, 1997, office rent expenses for these
leases amounted to approximately $110,000.

NOTE 9: SETTLEMENT AGREEMENTS

In February 1996, the Company entered into a settlement agreement with a
former officer regarding the termination of his employment. This agreement
provided for the Company to make payments to the officer totaling $1,003,000,
including interest. The former officer's services effectively terminated prior
to December 31, 1995. Accordingly, as of December 31, 1995, the Company recorded
$876,146 as a liability in accordance with the terms of the settlement
agreement. The settlement agreement also reaffirmed an option previously issued
to this former officer on May 1, 1995, which entitles the holder to purchase
415,766 shares of the Company's common stock at $0.003 per share through
February 1, 1999. In 1997 the Company repurchased and retired the warrants held
by this former officer. On November 14, 1996, the Company amended the above
referenced settlement agreement with the former officer, whereby a consultant to
the Company agreed to purchase common stock of the company from the former
officer and certain of his affiliates in exchange for $640,000 and the complete
satisfaction of the aforementioned liability.

On February 11, 1997, the Company entered into an agreement with a
consultant/director. Pursuant to the agreement the Company agreed to pay the
consultant/director a fee of $250,000 in full and complete payment for all
services provided to the Company by the consultant/director and for any fees or
compensation due to the consultant/director resulting from any prior agreements
with the Company, and the consultant/director agreed to release the Company from
any claims against the Company.

F-13
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9: SETTLEMENT AGREEMENTS (CONTINUED)

In March 1998, the Company entered into a settlement agreement with Howard
Katz, Realprop Capital Corporation and Evelyn Katz, among others, which settled
and resulted in the dismissal of litigation for which the Company was a
defendant in KATZ, ET AL. V. NATIONAL FIBER NETWORK, INC., ET AL., No. 97 Civ.
2764 (JGK) (the "Katz Litigation").

NOTE 10: NOTES PAYABLE

On November 25, 1998, the Company issued and sold $650.0 million of 10%
Senior Notes due November 15, 2008. The net proceeds of the 10% Senior Notes
were approximately $630.0 million, after deducting offering costs, which are
included in other long-term assets. Interest on the 10% Senior Notes is payable
semi-annually in arrears on May 15 and November 15 of each year, commencing May
15, 1999. Approximately $91.5 million of the net proceeds was utilized to
purchase certain pledged securities, the proceeds of which, together with
interest earned on such securities, will be used to satisfy the Company's
semi-annual interest obligations through May 15, 2000. The 10% Senior Notes are
subject to redemption at the option of the Company, in whole or in part, at any
time on or after November 15, 2003, at specified redemption prices. In addition,
prior to November 15, 2001, the Company may use the net cash proceeds from
certain specified equity transactions to redeem up to 35% of the 10% Senior
Notes at specified redemption prices.

The indentures pursuant to which the 10% Senior Notes are issued contain
certain covenants that, among other matters, limit the ability of the Company
and its subsidiaries to incur additional indebtedness, issue stock in
subsidiaries, pay dividends or make other distributions, repurchase equity
interests or subordinated indebtedness, engage in sale and leaseback
transactions, create certain liens, enter into certain transactions with
affiliates, sell assets, and enter into certain mergers and consolidations.

In the event of a change in control of the Company as defined in the
indentures, holders of the 10% Senior Notes will have the right to require the
Company to purchase their Notes, in whole or in part, at a price equal to 101%
of the stated principal amount thereof, plus accrued and unpaid interest, if
any, thereon to the date of purchase. The 10% Senior Notes are senior unsecured
obligations of the Company, and are subordinated to all current and future
indebtedness of the Company's subsidiaries, including trade payables.

NOTE 11: EQUITY TRANSACTIONS

COMMON STOCK

On November 3, 1997, the Company completed the initial public offering (the
"IPO") of 72,864,000 shares of its Class A common stock, at an offering price of
$2 per share. The net proceeds to the Company from the IPO, after deducting
expenses of the IPO, were approximately $133.9 million.

In addition, on October 28, 1997, a total of 76,519,520 shares of the common
stock of the Company owned by stockholders prior to the IPO were exchanged for
an equal number of shares of Class A common stock. The Company also reserved for
issuance 34,083,888 shares of Class A common stock for conversion of the
Class B common stock.

On October 28, 1996, a shareholder granted to the Company's Chairman of the
Board an option to purchase 3,199,112 shares of common stock of the company for
an aggregate exercise price of

F-14
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11: EQUITY TRANSACTIONS (CONTINUED)
$500,000. By letter dated December 3, 1996, the option was amended to reduce the
number of option shares to 2,590,712 shares. The Chairman thereafter assigned
the option to the Company. On February 11, 1997, the Company exercised the
option by payment of $500,000.

On April 15, 1996, the Company entered into a stock purchase agreement with
Vento & Company of New York, LLC ("VCNY"). Pursuant to this agreement, the
Company issued 12,168,000 shares of common stock to VCNY as consideration for
services provided by VCNY. The Company estimated the value of the stock issued
approximated $2,760,000.

Concurrent with the execution of the aforementioned stock purchase
agreement, the parties entered into a consulting agreement. The term of the
agreement was from April 15, 1996 to April 15, 2001. Under the terms of the
agreement, VCNY was to provide guidance and advice with respect to the
management of the day-to-day operations of the Company's fiber optic
transmission network. In consideration for such services, the Company reimbursed
VCNY for all reasonable personnel and travel costs incurred by VCNY with respect
to the performance of these services. On October 9, 1996, the Company entered
into a settlement agreement with the Company's former chief executive officer
and VCNY regarding the termination of such officer's employment and services
provided by VCNY. The agreement provided for VCNY to deliver a total of
12,168,000 shares of common stock in exchange for payments made by the Company.
The payments were not made and the sale of the shares and the Company's
obligation to buy the shares was deemed null and void.

In September 1996, the Company sold 87,472 shares of common stock to three
individuals for total proceeds of $23,500.

In August 1996, the Company issued 1,460,160 shares of common stock for
consulting services. The Company recorded a non-cash charge of $334,800 for such
issuance.

In July 1996, the Company issued 97,344 shares of common stock as
consideration for consulting services. The Company recorded a non-cash charge of
$21,200 for such issuance. In addition, the Company issued 1,204,632 shares to
three employees for services rendered. The transaction was later rescinded and
the shares were returned to the Company.

In June 1996, the Company sold a total of 304,200 shares of common stock to
two individuals for total proceeds of $100,000. Concurrent with the issuance of
these shares, the Company issued warrants to these shareholders entitling the
holders to purchase a total of 304,200 shares at $0.33 per share for a
three-year period.

On January 12, 1996, the Company entered into an agreement with its legal
counsel to issue common stock as additional consideration for legal services
provided. Pursuant to this agreement, as amended, the Company issued a total of
3,928,840 shares of its common stock. Management has estimated the value of the
3,928,840 shares issued to be $907,301 and has recorded a non-cash charge in
connection with such issuance.

PREFERRED STOCK

On April 30, 1997, the Company sold an aggregate of 67,226,600 shares of
Series B convertible preferred stock, par value $0.01 per share (the "Series B
preferred stock"), to Metromedia Company and affiliates ("Metromedia") for an
aggregate purchase price of $32.5 million (the "Metromedia

F-15
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11: EQUITY TRANSACTIONS (CONTINUED)
Investment"). Each share of the Series B preferred stock was convertible into
507 shares of the Company's common stock. On October 28, 1997, the Series B
convertible preferred shares were converted into 34,083,888 shares of Class B
common stock. Further, on October 28,1997, a total of 314,616 shares of Class B
common stock outstanding were converted into an equivalent number of shares of
Class A common stock.

A portion of the proceeds from the Metromedia Investment was used to repay
the Metromedia Loan, discussed below, and accrued interest thereon ($4,058,127),
repay other short-term indebtedness ($3,485,000), and redeem (for $2,115,000)
all of the outstanding shares of the Company's preferred stock (the "Series A
preferred stock") and related warrants.

Through April 30, 1997, Metromedia loaned the Company an aggregate of
$4,000,000 (the "Metromedia Loan"). A portion of the proceeds from the
Metromedia Loan was used to purchase 4,707,760 shares of the Company's common
stock and warrants to purchase 1,663,064 shares of its common stock.

No shares of the Company's Series A preferred stock or Series B preferred
stock remained outstanding at December 31, 1997. Both the Series A and Series B
preferred stock of the Company have been eliminated pursuant to actions by the
Board of Directors.

STOCK WARRANTS

A. In 1996, the Company entered into an agreement with a Customer for
exclusive usage rights for fibers on portions of its network. In connection with
this agreement, the Company borrowed $4.9 million from the customer. On
April 30, 1997, the Company amended this agreement to satisfy the obligations of
the above-referenced note by providing (i) additional leased fiber miles,
(ii) a cash payment of $1,370,000 and (iii) a warrant to purchase common stock
of the Company. In July 1998, the agreement was amended to include additional
fiber miles on the Company's network and for cancellation of the warrants.

B. From October 1995 through February 1996, the Company issued and sold a
private offering of $858,000 of convertible subordinated notes. Concurrent with
the issuance of these notes, warrants were issued by the Company to the
noteholders to purchase 1,044,016 shares of common stock at $1.00 per share
through November 2000. In 1996 and 1997, in exchange for the extension of the
due dates of the notes, the Company issued warrants to purchase 1,318,084 shares
of its common stock at $1.00 per share and recorded a charge of $111,306 and
$220,036 in 1996 an 1997, respectively. In 1997, the Company repaid the
outstanding balance of these notes plus all accrued interest. As of
December 31, 1998, 1,564,032 of such warrants have been exercised.

C. In September 1996, the Company entered into a loan agreement with a
finance company for $550,000. The loan bore interest at 10% per annum and was
repaid in 1997. As an incentive for the loan, the Company issued to the finance
company warrants to purchase 754,416 shares of common stock at an exercise price
of $0.74. The warrants are exercisable through September 1999. In 1996, the
Company recorded a non-cash charge of $13,640 in connection with the issuance of
the warrants. All of the warrants have been exercised.

D. In August 1995, the Company initiated a $600,000 private offering of
subordinated notes which bore interest at an annual rate of 15% and were repaid
in 1997. With the issuance of the notes,

F-16
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11: EQUITY TRANSACTIONS (CONTINUED)
warrants were issued to the noteholders. In April 1996, the Company issued a
total of 474,872 shares of the Company's common stock in exchange for the
surrender and cancellation of the warrants and a three-month extension of the
maturity date of the notes. In 1996, the Company recorded a non-cash charge of
$107,322 in connection with such issuance.

E. In April 1995, the Company entered into a loan agreement with a customer
for $500,000 bearing interest at 11% per annum. In July 1997, the note was
repaid in full. In connection with this loan, the Company issued the customer a
warrant entitling the holder to purchase a total of 5,353,336 shares of the
Company's common stock. In February 1997, this warrant was exchanged for a new
warrant to purchase 3,650,400 shares of the Company's common stock at $0.61 per
share. The new warrant expires on February 13, 2000. As of December 31, 1998,
none of the warrants have been exercised.

F. On December 13, 1996, the Company issued and sold to a private investor,
for an aggregate cash consideration of $2,025,000, (i) 1,200,000 shares of 10%
cumulative convertible preferred stock (the "Series A preferred stock") bearing
dividends at a rate of $.17 per share per annum, (ii) warrants to purchase
912,600 shares of Class A common stock at an exercise price of $0.62 per share
and (iii) a contingent stock subscription warrant to purchase a number of shares
of Class A common stock (such number to be determined based on certain future
events) at an exercise price of $0.005 per share. In connection with the
Metromedia Investment, the private investor allowed the Series A preferred stock
and the contingent warrants to be redeemed at an aggregate redemption price of
$2,115,000 (which includes accrued but unpaid dividends on the Series A
preferred stock) and the number of shares underlying the private investor's
warrants to be increased from 912,600 to 1,825,200. In January 1998, the private
investor made a cashless exercise of all its warrants and the number of its
shares issuable upon exercise was reduced by the number of shares at the closing
on the day of exercise having a value equal to the aggregate exercise price.
Accordingly, the Company issued the private investor 1,382,120 common shares for
all its warrants.

G. In June 1996, the Company granted 1,216,800 common stock purchase
warrants to the Company's legal counsel exercisable at $.01 per share for a
period of four years as additional consideration for legal services provided.
The Company recorded a non-cash charge of $200,000 for such issuance. As of
December 31, 1998, all of the warrants have been exercised.

As of December 31, 1998, in the aggregate, the Company had reserved
approximately 4,456,100 shares of its Class A common stock for exercise of
outstanding warrants.

STOCK OPTIONS

In 1997, the Company granted to certain officers, employees and directors
options to purchase up to 24,761,888 shares of its Class A common stock. The
options have exercise prices between $0.25 and $0.96 per share and expire in
2007. The Company recorded a non-cash charge of $19,218,591 for such issuance.

On October 28, 1997, the Stockholders of the Company approved the Metromedia
Fiber Network, Inc. 1997 Incentive Stock Plan ("1997 Option Plan"). The 1997
Option Plan authorized the award of up to 8,000,000 options to acquire Class A
common stock of the Company to directors, officers and employees of the Company
and others who are deemed to provide substantial and important services

F-17
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11: EQUITY TRANSACTIONS (CONTINUED)
to the Company. In 1997, options to purchase 4,900,000 shares of the Company's
Class A common stock were granted at an exercise price of $2.00 per share, the
market price at the date of grant. In 1998, options to purchase 3,400,000 shares
of the Company's Class A common stock were granted at exercise prices ranging
from $1.94 to $4.30 per share, the market price at the date of grant. Of these
grants, 1,115,000 were canceled and 235,000 were exercised as of December 31,
1998.

On May 18, 1998, the Stockholders of the Company approved the Metromedia
Fiber Network, Inc. 1998 Incentive Stock Plan ("1998 Option Plan"). The 1998
Option Plan authorized the award of up to 20,000,000 options to acquire Class A
common stock of the Company to directors, officers and employees of the Company
and others who are deemed to provide substantial and important services to the
Company. Options to purchase 6,918,000 shares of the Company's Class A common
stock were granted at exercise prices ranging from $3.64 to $13.25 per share,
the market prices at the dates of grant.

The compensation committee of the Company's Board of Directors is
responsible for determining the type of award, when and to whom awards are
granted, the number of shares and terms of the awards and the exercise price.
The options are exercisable for a period not to exceed ten years from the date
of the grant. Vesting periods range from immediate vesting to four years.

The following table summarizes the stock option transactions for the two
years ended December 31, 1998:

<TABLE>
<CAPTION>
NUMBER OF
OPTIONS EXERCISE PPRICES
-------------- ----------------
<S> <C> <C>
Granted prior to December 31, 1997.......................... 29,661,888 $0.25 to $ 2.00
----------
Balance outstanding at December 31, 1997.................... 29,661,888 0.25 to 2.00
----------
Granted..................................................... 10,318,000 1.94 to 13.25
Excercised.................................................. 1,100,048 0.25 to 3.74
Cancelled................................................... 1,135,000 0.25 to 4.30
----------
Balance outstanding at December 31, 1998.................... 37,744,840 0.25 to 13.25
==========
Exercisable at:

December 31, 1997........................................... 24,482,344 0.25 to 0.96
==========
December 31, 1998........................................... 24,881,840 0.25 to 2.00
==========
</TABLE>

F-18
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11: EQUITY TRANSACTIONS (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS GRANTED OPTIONS EXERCISABLE
------------------------------------- ----------------------
WEIGHTED WEIGHTED
RANGES OF NUMBER AVERAGE AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISE
YEAR OF GRANT PRICES AT 12/31/98 LIFE (YEARS) PRICE AT 12/31/98 PRICE
- ------------- --------------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
1997.................. $0.25 to $ 2.00 27,596,840 8.40 $0.49 24,881,840 $0.33
1998.................. 1.94 to 13.25 10,148,000 9.42 4.88 -- --
---------- ---- ----- ---------- -----
37,744,840 8.67 $1.67 24,881,840 $0.33
========== ==== ===== ========== =====
</TABLE>

Pro forma information regarding net income and earnings per share is
required by Statement of Financial Standards No. 123, "Accounting for
Stock-Based Compensation", and has been determined as if the Company had
accounted for its employees' stock options under the fair value method provided
by that Statement. The fair value of the options was estimated at the date of
grant using the Black-Scholes option pricing model with the following
assumptions for vested and non-vested options:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
Risk-free interest yield............................ 5.53-6.56% 5.73-6.56%
Volatility factor................................... .499 .369
Dividend yield...................................... -- --
Average life........................................ 5 years 5 years
</TABLE>

The Black-Scholes options valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility.

Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options. The
Company's pro forma information is as follows (000's):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Pro forma net loss applicable to common stock............. $ (864) $(28,043)
Pro forma net loss per share applicable to common stock,
basic................................................... $(0.01) $ (0.30)
</TABLE>

F-19
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12: SIGNIFICANT CUSTOMERS

During the years ended December 31, 1998 and 1997 one customer accounted for
40% and 21%, respectively of the Company's total revenue. During the years ended
December 31, 1998 and 1997 another customer accounted for 35% and 15%,
respectively of the Company's total revenue. During the years ended
December 31, 1998 a third customer accounted for 12% of the Company's total
revenue.

NOTE 13: INCOME TAXES

Income tax expense (benefit) for the years ended December 31, 1998, 1997 and
1996 is as follows (in thousands):

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CURRENT
Federal.............................................. $4,513 $ -- $ --
State and local...................................... 2,720 -- --
------ ---- ----
7,233 -- --
------ ---- ----
DEFERRED
Federal.............................................. (2,375) -- --
State and local...................................... (1,456) -- --
------ ---- ----
(3,831) -- --
------ ---- ----
$3,402 $ -- $ --
====== ==== ====
</TABLE>

Total income tax expense (benefit) differed from the amounts computed by
applying the federal statutory income tax rate (35%) to earnings (loss) before
income tax expense (benefit) as a result of the following items for the years
ended December 31, 1998, 1997 and 1996 (in thousands):

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
U.S. statutory rate applied to pre-tax income (loss)... $1,492 $ -- $ --
State and local taxes, net of federal tax benefit...... 834 -- --
Non deductible expenses................................ 1,118 -- --
Valuation allowance.................................... -- -- --
Others, net............................................ (42) -- --
------ ---- ----
$3,402 $ -- $ --
====== ==== ====
</TABLE>

F-20
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13: INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1998 and
1997 are as follows (in thousands):

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
DEFERRED TAX ASSETS
Deferred revenue.............................. $ 19,923 $ 5,173 $ 499
Employee benefits............................. 9,893 10,074 1,425
Cost of sales of IRU's and sales type
leases...................................... 5,599 573 --
Net operating losses.......................... -- 1,125 3,668
Others........................................ 2,522 1,465 1,047
-------- -------- -------
$ 37,937 $ 18,410 $ 6,639
-------- -------- -------
Valuation allowance........................... (18,309) (18,309) (6,579)
-------- -------- -------
19,628 101 60

DEFERRED TAX (LIABILITIES)
Capitalized leases............................ (14,782) -- --
Depreciation and amortization................. (1,003) (89) (48)
Other......................................... (12) (12) (12)
-------- -------- -------
(15,797) (101) (60)
-------- -------- -------
Net deferred asset............................ $ 3,831 $ -- $ --
======== ======== =======
</TABLE>

A portion of the deferred tax asset has been reserved since it is not
certain that future taxable income will be realized in the carryforward period
or in year of asset turnaround.

There was no provision for federal or state income taxes for the years ended
December 31, 1997 and 1996. At December 31, 1998, the Company expects to have
fully utilized its net operating losses

NOTE 14: 401(K) PLAN

In 1998, the Company implemented a 401(k) Plan (the "Plan") which permits
employees to make contributions to the Plan on a pre-tax salary reduction basis
in accordance with the Internal Revenue Code. All full-time employees are
eligible to participate at the beginning of the quarter following three months
of service. Eligible employees may contribute up to 15% of their annual
compensation. The Company matches 50% of the employees first 6% of
contributions. The Company contributed $78,000 for 1998 as these matching
contributions. The company bore the nominal administrative cost of the plan
during 1998.

F-21
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15: RECONCILIATION OF EARNINGS PER SHARE (IN THOUSANDS):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net income (loss)............................. $ 986 $(26,259) $(10,359)
Deduct dividend on preferred shares........... -- 77 --
-------- -------- --------
Net loss applicable to common stock........... 986 (26,336) (10,359)
======== ======== ========
Shares
Weighted average number of common shares
outstanding--basic.......................... 186,990 94,894 71,716
Net income (loss) per common share--basic..... $ 0.01 $ (0.28) $ (0.14)
======== ======== ========
Weighted average number of common shares
outstanding--basic.......................... 186,990 94,894 71,716
Assuming conversion of warrants and options
outstanding................................. 32,534 -- --
-------- -------- --------
Weighted average number of common shares
outstanding--diluted........................ 219,524 94,894 71,716
======== ======== ========
Net income (loss) per common share--diluted... $ 0.01 N/A N/A
======== ======== ========
</TABLE>

NOTE 16: COMMITMENTS AND CONTINGENCIES

NETWORK CONSTRUCTION PROJECTS

In 1998, the Company commenced construction of various networks outside of
the New York Metropolitan area. The Company's commitment to purchase materials
and contracts for the construction of fiber optic network systems was
approximately $70 million as of December 31, 1998.

FRANCHISE, LICENSE, RIGHT-OF WAY AGREEMENTS AND OPERATING AND CAPITAL LEASES

The Company has entered into various franchise and license agreements with
municipalities and utility-related companies to, in most instances, install,
operate, repair, maintain and replace cable, wire, fiber or other transmission
media and the related equipment and facilities. The terms for these agreements
vary in length, with various renewal and termination provisions. The Company
charges the portions of these agreements incurred to construction-in-progress
until the related portion of the network is completed. The fees charged to
operations in connection with these agreements were approximately $1,673,000,
$607,000 and $459,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.

In addition, the company leases office and operation facilities and various
equipment, which expire at various times through March 31, 2010. Rent expense
charged to operations was approximately $958,000, $268,000 and $158,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.

The Company has entered into capital lease agreements for certain network
assets and for certain rights-of-ways. Total assets acquired under capital
leases were approximately $27,876,000 at

F-22
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16: COMMITMENTS AND CONTINGENCIES (CONTINUED)
December 31, 1998. The capital leases are held as construction-in-progress until
the related portion of the network is completed.

Approximate minimum payments under the aforementioned agreements are (in
thousands):

<TABLE>
<CAPTION>
FRANCHISE,
LICENSE AND
RIGHT-OF-WAY CAPITAL OPERATING
AGREEMENTS LEASES LEASES
------------ -------- ---------
<S> <C> <C> <C>
For the year ended December 31,
1999.......................................... $ 1,018 $ 1,551 $ 1,994
2000.......................................... 1,121 1,797 2,032
2001.......................................... 1,121 1,859 2,054
2002.......................................... 971 1,923 2,050
2003.......................................... 661 1,991 1,532
Thereafter.................................... 7,922 42,972 7,339
------- ------- -------
Total minimum lease payments.................. $12,814 52,093 $17,001
======= =======
Less amounts representing interest............ 29,363
-------
Present value of future minimum lease
payments.................................... 22,730
Less amounts due in one year.................. 55
-------
$22,675
=======
</TABLE>

EMPLOYMENT AGREEMENTS

The Company has executed employment contracts for future services, for up to
five years, with certain senior executives for whom the Company has a minimum
commitment aggregating approximately $3.4 million at December 31, 1998. This
amount is not included in the consolidated financial statements at December 31,
1998.

LITIGATION

On or about October 20, 1997, Vento & Company of New York, LLC commenced an
action against Metromedia Fiber Network, Stephen A. Garofalo, Peter Silverman,
the law firm of Silverman, Collura, Chernis & Balzano, P.C., Peter Sahagen,
Sahagen Consulting Group of Florida (collectively, the "Sahagen Defendants") and
Robert Kramer, Birdie Capital Corp., Lawrence Black, Sterling Capital LLC,
Penrush Limited, Needham Capital Group, Arthur Asch, Michael Asch and Ronald
Kuzon (the "Kramer Defendants") in the United States District Court for the
Southern District of New York (No. 97 CIV 7751). On or about May 29, 1998, Vento
& Company filed an amended complaint. In its complaint, as amended, Vento &
Company alleges four causes of action in connection with its sale of 900,000
shares (not adjusted for subsequent stock splits) of Class A Common Stock to
Peter Sahagen and the Kramer Defendants on January 13, 1997. The four causes of
action include: (i) violation of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated under such Act; (ii) fraud and fraudulent
concealment; (iii) breach of fiduciary duty; and (iv) negligent
misrepresentation and omission. On the first and second causes of action, Vento
& Company is seeking, among other things, rescission of the Vento & Company
sale, or alternatively, damages in an

F-23
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16: COMMITMENTS AND CONTINGENCIES (CONTINUED)
amount which we cannot currently ascertain but believe to be in excess of $36
million, together with interest. On the third and fourth causes of action, Vento
& Company is seeking damages in an amount which we cannot currently ascertain
but believe to be in excess of $36 million, together with interest. Vento &
Company is also seeking punitive damages in the amount of $50 million,
reasonable legal fees and the cost of this action. All the defendants, including
Metromedia Fiber Network and Stephen A. Garofalo, have moved to dismiss Vento
and Company's amended complaint.

On or about June 12, 1998, Claudio E. Contardi commenced an action against
Peter Sahagen, Sahagen Consulting Group of Florida and Metromedia Fiber Network
in the United States District Court for the Southern District of New York (No.
98 CIV 4140). Mr. Contardi alleges a cause of action for, among other things,
breach of a finder's fee agreement entered into between Mr. Sahagen and
Mr. Contardi on or about November 14, 1996 and breach of an implied covenant of
good faith and fair dealing contained in the finder's fee agreement.
Mr. Contardi is seeking, among other things, a number of shares of Metromedia
Fiber Network which we cannot currently ascertain but believe to be
approximately 225,000 shares (calculated as of the date on which the complaint
was filed and not adjusted for subsequent stock splits) or damages in an amount
which we cannot currently ascertain but believe to be approximately $4.9 million
(calculated as of the date on which the complaint was filed) and all costs and
expenses incurred by him in this action. We have filed an answer to the
complaint and has raised affirmative defenses.

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

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

F-24
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(IN 000'S, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Revenue..................................................... $ 49,397 $20,840
Expenses:
Cost of sales............................................. 24,414 9,499
Selling, general and administrative....................... 27,369 9,811
Consulting and employment incentives...................... -- 248
Settlement agreement...................................... -- 3,400
Depreciation and amortization............................. 15,645 738
-------- -------
Income (loss) from operations............................... (18,031) (2,856)
Other income (expenses):
Interest income........................................... 19,127 5,028
Interest expense.......................................... (44,911) (16)
Loss from joint venture................................... (475) (264)
-------- -------
Income (loss) before income taxes........................... (44,290) 1,892
Income taxes................................................ -- 825
======== =======
Net income (loss)........................................... $(44,290) $ 1,067
======== =======
Net income (loss) per share, basic.......................... $ (0.23) $ 0.01
======== =======
Net income (loss) per share, diluted........................ N/A $ 0.00
======== =======
Weighted average number of shares outstanding, basic........ 190,639 186,392
======== =======
Weighted average number of shares outstanding, diluted...... N/A 217,208
======== =======
</TABLE>

See accompanying notes

F-25
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (UNAUDITED)

(IN 000'S, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 352,900
Marketable securities..................................... 29,628
Pledged securities, current portion....................... 63,864
Accounts receivable....................................... 105,934
Prepaid expenses and other current assets................. 6,311
----------
Total current assets.................................... 558,637
Fiber optic transmission network and related equipment,
net....................................................... 557,662
Property and equipment, net................................. 7,136
Pledged securities.......................................... --
Restricted cash............................................. 94,234
Investment in/advances to joint ventures.................... 20,014
Intangible assets, net...................................... 1,648,059
Other assets................................................ 32,659
----------
Total assets............................................ $2,918,401
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 31,680
Accrued liabilities....................................... 112,382
Notes payable, current portion............................ 5,607
Deferred revenue, current portion......................... 15,863
Capital lease obligations, current portion................ 569
----------
Total current liabilities............................... 166,101
Senior notes payable........................................ 650,000
Notes payable............................................... 14,720
Capital lease obligations................................... 24,316
Deferred revenue............................................ 83,271
Commitments and contingencies (see notes)
Stockholders' equity:
Preferred stock, $.01 par value; 20,000,000 shares
authorized;
none issued and outstanding............................. --
Class A common stock, $.01 par value; 2,404,031,241 shares
authorized;
198,822,053 and 155,210,220 shares issued and
outstanding, respectively............................... 1,988
Class B common stock, $.01 par value; 522,254,782 shares
authorized;
33,769,272 shares issued and outstanding................ 338
Additional paid-in capital................................ 2,065,316
Accumulated deficit....................................... (86,526)
Cumulative comprehensive loss............................. (1,123)
----------
Total stockholders' equity.............................. 1,979,993
----------
Total liabilities and stockholders' equity.............. $2,918,401
==========
</TABLE>

See accompanying notes

F-26
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN 000'S)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1999 1998
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $ (44,290) $ 1,067
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 15,645 738
Amortization of deferred financing costs.................. 1,503 --
Options issued for settlement agreement................... -- 3,000
Stocks, options and warrants issued for services.......... 401 248
Reserve for note receivable............................... -- 156
Loss from joint ventures.................................. 329 264
CHANGE IN OPERATING ASSETS AND LIABILITIES (NET OF
ACQUISITIONS):
Accounts receivable....................................... (61,465) (17,221)
Accounts payable and accrued liabilities.................. 52,350 3,442
Deferred revenue.......................................... 50,765 26,920
Other..................................................... (8,925) (1,749)
--------- --------
Net cash provided by operating activities................. 6,313 16,865
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities........................... (29,628) --
Capital expenditures on fiber optic network,
telecommunications and related equipment.................. (229,104) (71,739)
Deposit..................................................... -- (4,675)
Restricted cash secured by letters of credit................ (63,014) --
Investment in / advances to joint ventures.................. (3,359) (2,745)
Capital expenditures on property and equiptment............. (3,284) (1,109)
Cash acquired through AboveNet acquisition.................. 142,092 --
CSD acquisition (net of cash acquired)...................... (24,966) --
--------- --------
Net cash used in investing activities..................... (211,263) (80,268)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock...................... 3,559 892
Payments of CSD pre-acquisition debt........................ (15,028) --
--------- --------
Net cash provided by (used in) financing activities....... (11,469) 892
--------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (216,419) (62,511)
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD............... 569,319 138,846
--------- --------
CASH AND CASH EQUIVALENTS-END OF PERIOD..................... $ 352,900 $ 76,335
========= ========
Supplemental information:
Interest paid............................................. $ 31,375 $ 16
========= ========
Income taxes paid......................................... $ 2,771 $ 3,080
========= ========
Supplemental disclosure of significant non-cash investing
activites:
Capital lease obligations................................. $ 908 $ 19,742
========= ========
Accrued capital expenditures.............................. $ 65,629 $ 32,743
========= ========
</TABLE>

See accompanying notes

F-27
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS OPERATIONS AND LINE OF BUSINESS

Metromedia Fiber Network, Inc. and its subsidiaries (collectively, "the
Company") provides dedicated fiber optic infrastructure and high-bandwidth
Internet connectivity for its communications intensive customers. The Company is
a facilities-based provider of technologically advanced, high-bandwidth, fiber
optic communications infrastructure to communications carriers and corporate and
government customers in the United States and Europe. Through its acquisition of
AboveNet Communications, Inc. ("AboveNet"), the Company also provides "one-hop"
connectivity that enables mission critical Internet applications to thrive, as
well as high-bandwidth infrastructure, including managed co-location services.

The Company currently has operations in, or under construction in, eleven
Tier I cities throughout the United States and seven selected international
markets. The Company intends to expand its presence to include approximately 50
Tier I and Tier II markets in the United States and 17 major international
markets.

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

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

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

Subsequent to the quarter, on October 7, 1999, the Company entered into a
securities purchase agreement with Bell Atlantic Investments, Inc. ("Bell
Atlantic"), under which Bell Atlantic would purchase up to approximately 25.6
million newly issued shares of its class A common stock at a purchase price of
$28.00 per share and a convertible subordinated note of approximately $975.3
million, which is convertible into shares of its class A common stock at a
conversion price of $34.00 per share. The Company expects this transaction,
which is subject to customary closing conditions, to be completed by the end of
the first quarter of 2000. Assuming the issuance of the 25.6 million shares of
class A common stock and conversion of the convertible subordinated note, this
investment would represent 19.9% of the Company's outstanding shares. Bell
Atlantic has also agreed to pay the Company $550 million over the next three
years in exchange for delivery of fiber optic facilities over

F-28
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the next five years. The proceeds from these two transactions will be used to
fund the expansion of the Company's network.

Most of the Company's contracts for the provision of dark fiber are
accounted as operating leases under which it recognizes recurring monthly
revenues. For certain other contracts the Company recognizes revenue under the
percentage of completion method for the provision of dark fiber. Effective
June 30, 1999, the Financial Accounting Standards Board issued FASB
Interpretation No. 43 "Real Estate Sales" ("FIN 43") which requires that sales
or leases of integral equipment be accounted for in accordance with real estate
accounting rules. The Company believes that the staff of the Securities and
Exchange Commission requires the classification of dark fiber cables in the
ground as integral equipment as defined in FIN 43. Accounting for dark fiber
leases as defined by FIN 43 does not change any of the economics of the
contracts. It requires the Company, however, to recognize the revenue from
certain leases as operating leases over the term of the contract as opposed to
the prior method of recognizing revenue during the period over which the Company
delivers the fiber. As a result, this change in accounting treatment reduces the
revenue and income that the Company recognizes in the earlier years of the
contract and spreads it out over the life of the contract regardless of when the
cash was received or the delivery of the fiber took place.

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

The Company implemented FIN 43 real estate accounting for certain of its
leases entered into after June 30, 1999, and has not restated any amounts for
contracts executed prior to such date. As a result, although there was no change
to the economics of the contracts or the timing of the cash to be received by
the Company, the impact of the change in accounting resulted in the Company
recording $10.7 million in revenue for the quarter ended September 30, 1999
rather than $32.7 million that would have been recorded had this change not been
made. Without this change in accounting, the Company would have also recorded
earnings before interest, taxes, depreciation and amortization of $2.6 million
rather than a loss before interest, taxes, depreciation and amortization of
$12.4 million for the three months ended September 30, 1999 due to this change.

BASIS OF PRESENTATION

The interim unaudited consolidated financial statements in this Report have
been prepared in accordance with the United States Securities and Exchange
Commission's Regulation S-X and consequently do not include all disclosures
required under generally accepted accounting principles. The interim unaudited
consolidated financial statements should be read in conjunction with the audited
Consolidated Financial Statements of the Company and accompanying Notes for the
year ended December 31, 1998, contained in the Company's Annual Report on Form
10-K for the year then ended. The Form 10-K includes information with respect to
the Company's significant accounting and financial reporting policies and other
pertinent information. The Company believes that all adjustments of a normal
recurring nature that are necessary for a fair presentation of the results of
the interim

F-29
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
periods presented in this report have been made. Certain balances have been
reclassified to conform to the current period presentation.

STOCK SPLITS

On August 28, 1998, December 22, 1998 and May 19, 1999 the Company completed
two-for-one stock splits of the Company's class A and class B common stock in
the form of 100 percent stock dividends to all stockholders of record as of
certain specified dates. All share and per share information, contained herein,
give retroactive effect for all of the stock splits.

RECOGNITION OF REVENUE

The Company recognizes revenue on telecommunications services ratably over
the term of the applicable lease agreements with customers. Amounts billed in
advance of the service provided are recorded as deferred revenue. In addition,
the Company occasionally enters into sales-type leases for portions of its
network. For those leases entered into prior to completion of the portion of the
network and under contracts entered into before June 30, 1999, the Company
recognizes revenue using the percentage of completion method.

Under the percentage of completion method, progress is generally measured on
performance milestones relating to the contract where such milestones fairly
reflect the progress toward contract completion. Network construction costs
include all direct material and labor costs and those indirect costs related to
contract performance. General and administrative costs are charged to expense as
incurred. If necessary, the estimated loss on an uncompleted contract is
expensed in the period in which it is identified. Contract costs are estimated
using allocations of the total cost of constructing the specific phase of the
network. Revisions to estimated profits on contracts are recognized in the
period that they become known.

For sales-type leases for portions of its network entered into prior to the
completion of the portion of the network and after June 30, 1999, the Company
follows the aforementioned FIN 43 real estate accounting rules. Although there
was no change to the economics of the contracts or the timing of the cash to be
received by the Company, the impact of the change in accounting resulted in the
Company recording $10.7 million in revenues for the quarter ended September 30,
1999 rather than the $32.7 million amount that would have been recorded if this
change had not been imposed.

The Company also provides installation services for its customers, and as
these services typically are completed within a short time period, the Company
records the revenues and related costs for these services under the completed
contract method.

FOREIGN CURRENCY TRANSLATION

For translation of the financial statements of its recently formed German
operations, the Company has determined that the local currency is the functional
currency. Assets and liabilities of foreign operations are translated at the
period-end exchange rates and income statement items are translated at average
exchange rates for the period. The resulting adjustments are made directly to
the Cumulative Translation Adjustment component of Stockholders' Equity. Foreign
currency transactions are recorded at the exchange rate prevailing on the
transaction date.

F-30
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MARKETABLE SECURITIES

For purposes of the consolidated financial statements, the Company considers
all highly liquid investments with a maturity of greater than three months from
the financial statement date to be marketable securities.

COMPREHENSIVE INCOME (LOSS)

In 1998, the Company adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130") Reporting Comprehensive Income (Loss). This statement
establishes rules for the reporting of comprehensive income and its components.
Comprehensive income (loss) consists of net income (loss) and foreign currency
translation adjustments. The comprehensive loss for the three and nine months
ended September 30, 1999 was $28.2 million and $45.4 million, respectively,
compared with comprehensive income of $3.1 million and $1.1 million,
respectively, for the comparable periods in 1998.

2. FIBER OPTIC TRANSMISSION NETWORK AND RELATED EQUIPMENT

Fiber optic transmission network and related equipment consist of the
following (in 000's):

<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
Material-fiber optic cable.................................. $ 91,563
Engineering and layout costs................................ 7,338
Fiber optic cable installation costs........................ 100,285
Telecommunications equipment and other...................... 59,638
Construction in progress.................................... 315,519
--------
574,343
Less: accumulated depreciation.............................. (16,681)
--------
557,662
========
</TABLE>

Construction in progress includes amounts incurred in the Company's
expansion of its network or build-out of its facilities. These amounts include
fiber optic cable and other materials, engineering and other layout costs, fiber
optic cable installation costs and other network assets held under capital
leases. Construction in progress also includes payments for rights of way for
the underlying sections of the network build.

3. INVESTMENT IN/ADVANCES TO JOINT VENTURES

The Company has a joint venture agreement with Racal Telecommunications,
Inc. ("Racal") that provides broad-based transatlantic communication services
between New York and London. During 1998, each party made capital contributions
of $4.3 million. The Company and Racal may each be required to contribute
additional capital as needed for their respective 50% interests. The Company
accounts for its investment using the equity method. For the three and nine
months ended September 30, 1999, the Company recorded a loss of $82,000 and a
loss of $475,000, respectively, from

F-31
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. INVESTMENT IN/ADVANCES TO JOINT VENTURES (CONTINUED)
the joint venture based on its 50% interest in the joint venture compared with
losses of $13,000 and $264,000, respectively, for the comparable periods in
1998.

In March 1999, as part of its international expansion strategy, the
Company's AboveNet subsidiary entered into agreements to form joint ventures in
Austria, Germany ("AboveNet GmbH"), and the United Kingdom to provide managed
co-location and Internet connectivity solution for mission critical Internet
operations. The Company has invested a total of $5.5 million, which is included
in deposits and other assets at September 30, 1999. In addition, the Company has
agreed to provide $2.0 million of additional financing to these joint ventures
and, if required, up to $2.0 million in a convertible loan note(s).

For an initial equity contribution of $1.9 million, the Company will own 45%
of a joint venture in Germany, Carrierhaus GmbH. AboveNet GmbH will own 5% of
the joint venture. Carrierhaus GmbH will own and operate buildings in Frankfurt,
Germany. For an equity contribution of $22.5 million, the Company will own
87.42% of a second joint venture, Worldswitch GmbH, which will lease facilities
from Carrierhaus GmbH. Worldswitch GmbH will complete improvements to the
buildings, including build-out of co-location facilities, and lease managed
co-location space to AboveNet GmbH and other third parties. Approximately $7.5
million was paid as an initial equity contribution with the remainder of the
$22.5 million to be contributed over the following 14 to 20 months. These
AboveNet joint ventures are accounted for using the equity method.

4. ACQUISITIONS

On September 8, 1999, the Company acquired all of the outstanding common
stock of AboveNet for a total purchase price, paid in Company class A common
stock, of approximately $1.9 billion. The holders of AboveNet common stock,
stock options and warrants received 1.175 shares of the Company's class A common
stock, stock options and warrants, respectively. AboveNet has its primary
operations in San Jose, California and is a leading provider of
facilities-based, managed services for customer-owned Web servers and related
equipment, known as co-location, and high performance Internet connectivity
solutions for electronic commerce and other business critical Internet
operations. The acquisition has been accounted for by the purchase method and,
accordingly, the results of operations of AboveNet have been included in the
Company's consolidated financial statements from September 9, 1999. The purchase
price has been preliminarily allocated based on estimated fair values as of the
date of acquisition pending final determination of certain tangible and
intangible assets. In addition, in connection with the acquisition, the Company
issued a letter of credit, secured by the Company's restricted cash in the
amount of $25 million, to further secure a credit facility of AboveNet.

On March 11, 1999, the Company acquired all the outstanding common stock of
Communication Systems Development, Inc. ("CSD") for $25 million in cash. CSD has
its primary operations in Dallas, Texas and is engaged in the engineering and
construction of fiber optic networks. The acquisition has been accounted for by
the purchase method and, accordingly, the results of operations of CSD have been
included in the Company's consolidated financial statements from March 11, 1999.
The purchase price has been preliminarily allocated based on estimated fair
values as of the date of acquisition pending final determination of certain
tangible and intangible assets.

On June 21, 1999, AboveNet acquired certain assets and assumed certain
liabilities of the Palo Alto Internet Exchange ("PAIX") from Compaq Computer
Corporation ("Compaq") for a total

F-32
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. ACQUISITIONS (CONTINUED)
purchase price of $76.4 million consisting of $70 million in cash, certain
future ongoing services to be provided by AboveNet to Compaq, with a value
estimated to be $5.0 million, and acquisition related costs of $1.4 million.
PAIX is a high-level switching and peering point for global and Internet service
providers and content providers. The acquisition has been recorded using the
purchase method of accounting.

The following unaudited pro forma financial information presents the
combined results of operations of the Company and the above acquisitions as if
the acquisitions had occurred as of the beginning of 1999 and 1998, after giving
effect to certain adjustments, including amortization of goodwill, additional
depreciation expense and related income tax effects. The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had the entities constituted a single entity during such periods.
The amounts are presented in thousands, except per share amounts.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1999 1998
--------- --------
<S> <C> <C>
Revenue................................................ $ 70,641 $ 28,339
========= ========
Net Income/(Loss)...................................... $(128,204) $(64,628)
========= ========
Income/(Loss) per share, basic......................... $ (0.56) $ (0.28)
========= ========
</TABLE>

5. GERMAN NETWORK BUILD

In February 1999, the Company entered into a joint venture with Viatel, Inc.
and Carrier 1 Holdings, Ltd. to jointly build a national fiber optic
telecommunications network in Germany. Upon completion of construction, the
joint venture will be dissolved and the Company will own its own separate German
broadband network. In connection with the terms of this agreement, the Company
made a deposit payment of $4.7 million during the third quarter of 1998. Upon
signing a definitive agreement, the Company provided irrevocable standby letters
of credit in the amount of approximately DM110 million (approximately $63
million) as security for the construction costs of the network, which, in
addition to the deposit payment made, covers the Company's portion of the
estimated construction costs of the network. As of September 30, 1999, the
Company had restricted cash of approximately $38 million to secure the remaining
value of the irrevocable standby letters of credit.

6. RELATED PARTY TRANSACTIONS

The Company is party to a management agreement under which the Company's
controlling shareholder, Metromedia Company, provides consultation and advisory
services relating to legal matters, insurance, personnel and other corporate
policies, cash management, internal audit and finance, taxes, benefit plans and
other services as are reasonably requested. The management agreement terminates
on December 31 of each year, and is automatically renewed for successive one-
year terms unless either party terminates upon 60 days prior written notice. The
1998 management fee under the agreement was $500,000 per year, payable quarterly
at a rate of $125,000. The 1999 management fee under the agreement is $1,000,000
per year, payable quarterly at a rate of $250,000. The Company is also obligated
to reimburse Metromedia Company for all its out-of-pocket costs,

F-33
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. RELATED PARTY TRANSACTIONS (CONTINUED)
expenses incurred and advances paid by Metromedia Company in connection with the
management agreement.

7. SETTLEMENT AGREEMENT

In March 1998, the Company entered into a settlement agreement with Howard
Katz, Realprop Capital Corporation and Evelyn Katz, among others, which settled
and resulted in the dismissal of litigation in which the Company was a defendant
in KATZ, ET AL. V. NATIONAL FIBER NETWORK, INC., ET AL., No. 97 Civ. 2764 (JGK).

8. NOTES PAYABLE

On November 25, 1998, the Company issued and sold $650.0 million of 10%
Senior Notes due November 15, 2008. The net proceeds of the 10% Senior Notes
were approximately $630.0 million, after deducting offering costs, which are
included in other long-term assets. Interest on the 10% Senior Notes is payable
semi-annually in arrears on May 15 and November 15 of each year, commencing May
15, 1999. Approximately $91.5 million of the net proceeds was utilized to
purchase certain pledged securities the proceeds of which, together with
interest earned on such securities, will be used to satisfy the Company's
semi-annual interest obligations through May 15, 2000. The 10% Senior Notes are
subject to redemption at the option of the Company, in whole or in part, at any
time on or after November 15, 2003, at specified redemption prices. In addition,
prior to November 15, 2001, the Company may use the net cash proceeds from
certain specified equity transactions to redeem up to 35% of the 10% Senior
Notes at specified redemption prices.

The indenture pursuant to which the 10% Senior Notes are issued contains
certain covenants that, among other matters, limit the ability of the Company
and its subsidiaries to incur additional indebtedness, issue stock in
subsidiaries, pay dividends or make other distributions, repurchase equity
interests or subordinated indebtedness, engage in sale and leaseback
transactions, create liens, enter into transactions with affiliates, sell
assets, and enter into mergers and consolidations.

The Company made an interest payment on May 15, 1999. As a result, the value
of pledged securities to satisfy the Company's semi-annual interest obligation
through May 15, 2000 was reduced to approximately $64 million.

9. EQUITY TRANSACTIONS

AUTHORIZED CAPITAL

On May 18, 1999, the stockholders of the Company approved an amendment to
its Certificate of Incorporation to increase the authorized number of shares of
its capital stock to 2,946,286,022 shares

F-34
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. EQUITY TRANSACTIONS (CONTINUED)
consisting of (a) 2,404,031,240 shares of class A common stock, (b) 522,254,782
shares of class B common stock, and (c) 20,000,000 shares of preferred stock.

STOCK SPLITS

As discussed in Note 1, on August 28, 1998, December 22, 1998 and May 19,
1999 the Company completed two-for-one stock splits of the Company's class A and
class B common stock in the form of 100 percent stock dividends to all
stockholders of record as of certain specified dates. The accompanying financial
statements give retroactive effect to the stock dividends.

As of September 30, 1999, adjusted for the effect of the stock dividends,
the Company had 198,822,053 class A common shares outstanding and 33,769,272
class B common shares outstanding.

STOCK WARRANTS

(a) On December 13, 1996, the Company issued and sold to a private investor,
for an aggregate cash consideration of $2,025,000, (i) 1,200,000 shares of 10%
cumulative convertible preferred stock (the "Series A preferred stock") bearing
dividends at a rate of $.17 per share per annum, (ii) warrants to purchase
912,600 shares of class A common stock at an exercise price of $.62 per share
and (iii) a contingent stock subscription warrant to purchase a number of shares
of class A common stock (such number to be determined based on certain future
events) at an exercise price of $0.01 per share. In connection with the
investment in the Company by Metromedia Company, the private investor allowed
the Series A preferred stock and the contingent warrants to be redeemed at an
aggregate redemption price of $2,115,000 (which includes accrued but unpaid
dividends on the Series A preferred stock) and the number of shares underlying
the private investor's warrants to be increased from 912,600 to 1,825,200. In
January 1998, the private investor made a cashless exercise of all its warrants
and the number of its shares issuable upon exercise was reduced by the number of
shares at the closing on the day of exercise having a value equal to the
aggregate exercise price. Accordingly, the Company issued the private investor
1,382,120 shares of class A common stock for all its warrants.

(b) In April 1995, the Company entered into a loan agreement with a customer
for $500,000 bearing interest at 11% per annum. In July 1997, the note was
repaid in full. In connection with this loan, the Company issued the customer a
warrant entitling the holder to purchase a total of 5,353,336 shares of the
Company's common stock. In February 1997, this warrant was exchanged for a new
warrant to purchase 3,650,400 shares of the Company's common stock at $0.60 per
share. In February 1999, in accordance with an anti-dilution provision in the
warrant, the Company increased the warrant to include the right to purchase an
additional 331,882 shares of the Company's class A common stock at $0.56 per
share and repriced the existing warrant to the same $0.56 per share. As of
March 31, 1999, none of the warrants have been exercised. The warrant expires on
February 13, 2000.

ABOVENET TRANSACTION

On September 8, 1999, the Company completed its acquisition of AboveNet for
an aggregate consideration of approximately $1.9 billion. In connection with the
acquisition, the company issued (i) 41,652,675 shares of its class A common
stock at an exchange ratio of 1.175 shares of the Company's common stock for
each share of AboveNet common stock; (ii) 5,355,723 options to

F-35
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. EQUITY TRANSACTIONS (CONTINUED)
purchase the Company's class A common stock at an average exercise price of
$19.23; and 417,163 warrants to purchase the Company's class A common stock at
an average exercise price of $7.75.

10. CONTINGENCIES

On or about October 20, 1997, Vento & Company of New York, LLC commenced an
action against the Company, Stephen A. Garofalo, Peter Silverman, the law firm
of Silverman, Collura, Chernis & Balzano, P.C., Peter Sahagen, Sahagen
Consulting Group of Florida, Robert Kramer, Birdie Capital Corp., Lawrence
Black, Sterling Capital LLC, Penrush Limited, Needham Capital Group, Arthur
Asch, Michael Asch and Ronald Kuzon in the United States District Court for the
Southern District of New York, No. 97 CIV 7751(JGK). On or about May 29, 1998,
Vento & Company filed an amended complaint. On or about July 1, 1999, Vento &
Company filed a second amended complaint. In its complaint, as amended, Vento &
Company alleges seven causes of action in connection with its sale of 900,000
shares, not adjusted for subsequent stock splits, of the Company's class A
common stock to Mr. Sahagen and some of the defendants on January 13, 1997.
These seven causes of action include: (i) violation of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated under such Act; (ii)
fraud and fraudulent concealment; (iii) breach of fiduciary duty (but not
against the Company); (iv) negligent misrepresentation and omission; and (v)
breach of contract. Vento & Company is seeking, among other things, recission of
the Vento & Company sale, or alternatively, damages in an amount not currently
ascertainable but Vento & Company contends to be in excess of $460 million,
together with interest thereon. Vento & Company is also seeking unspecified
punitive damages, reasonable legal fees and the costs of this action. All the
defendants, including the Company and its Chairman, have moved for summary
judgment of Vento & Company's second amended complaint.

On or about June 12, 1998, Claudio E. Contardi commenced an action against
Peter Sahagen, Sahagen Consulting Group of Florida and the Company in the United
States District Court for the Southern District of New York, No. 98 CIV
4140(JGK). Mr. Contardi alleges a cause of action for, among other things,
breach of a finder's fee agreement entered into between Mr. Sahagen and Mr.
Contardi on or about November 14, 1996 and breach of an implied covenant of good
faith and fair dealing contained in the finder's fee agreement. Mr. Contardi is
seeking, among other things, a number of our shares of class A common stock
which we cannot currently ascertain but believe to be approximately 112,500
shares (calculated as of the date on which the complaint was filed without
taking into account subsequent stock splits) or damages in an amount which we
cannot currently ascertain but believe to be approximately $4.9 million
(calculated as of the date on which the complaint was filed) and all costs and
expenses incurred by him in this action. The Company has filed an answer to the
complaint and has raised affirmative defenses. The Company has moved for summary
judgement on the complaint.

The Company intends to vigorously defend both these actions because the
Company believes that it acted appropriately in connection with the matters at
issue in these two cases. However, the Company cannot assure you that it will
not determine that the advantages of entering into a settlement outweigh the
risk and expense of protracted litigation or that ultimately the Company will be
successful in defending against these allegations. If the Company is
unsuccessful in defending against these allegations, an award of the magnitude
being sought in the Vento & Company litigation would have a material adverse
effect on our financial condition and results of operations.

F-36
<PAGE>
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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

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

11. SUBSEQUENT EVENT

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

F-37
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
AboveNet Communications Inc.:

We have audited the accompanying consolidated balance sheets of AboveNet
Communications Inc. as of June 30, 1998 and 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of AboveNet Communications Inc. as of
June 30, 1998 and 1999 and the results of its operations and its cash flows for
each of the three years in the period ended June 30, 1999 in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP
San Jose, California

July 28, 1999
(September 8, 1999 as to Note 17)

F-38
<PAGE>
ABOVENET COMMUNICATIONS INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1998 1999
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 8,141,200 $209,126,300
Short-term investments.................................... -- 11,744,200
Accounts receivable, net of reserve for doubtful accounts
of $60,000 and $388,300, respectively................... 357,000 3,355,000
Prepaid expenses and other current assets................. 269,600 3,850,400
----------- ------------
Total current assets.................................. 8,767,800 228,075,900
Property and equipment, net................................. 4,436,100 46,590,900
Rights to use fiber optic capacity.......................... -- 12,904,500
Intangible assets........................................... -- 69,474,100
Restricted cash............................................. 300,000 21,475,900
Deposits and other assets................................... 189,400 5,377,400
----------- ------------
Total assets................................................ $13,693,300 $383,898,700
=========== ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 2,301,300 $ 13,593,300
Remaining obligation for rights to use fiber optic
capacity................................................ -- 800,000
Accrued liabilities....................................... 619,900 1,322,600
Unearned revenue.......................................... 309,400 2,510,700
Current portion of long-term obligations.................. 476,000 5,984,800
----------- ------------
Total current liabilities............................. 3,706,600 24,211,400
Convertible notes payable and advances...................... 8,000,000 --
Unearned revenue............................................ -- 4,375,000
Other long-term obligations................................. 1,325,300 21,588,600
Commitments and contingencies (Notes 4, 5 and 12)
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares
authorized;
shares issued and outstanding--none..................... -- --
Convertible preferred stock, $0.001 par value:
Series A; shares issued and outstanding: 2,050,000 and
none, respectively.................................... 410,000 --
Series B; shares issued and outstanding: 3,263,792 and
none, respectively.................................... 2,323,100 --
Series C; shares issued and outstanding: 4,006,000 and
none, respectively.................................... 3,873,400 --
Series D; no shares issued and outstanding.............. -- --
Series E; no shares issued and outstanding.............. -- --
Common stock, $0.001 par value, 60,000,000 shares
authorized; shares issued and outstanding: 728,696 and
34,548,308, respectively................................ 38,900 363,218,000
Common stock options...................................... 1,861,500 4,413,800
Deferred stock compensation............................... (540,100) (47,800)
Accumulated deficit....................................... (7,305,400) (33,860,300)
----------- ------------
Total stockholders' equity............................ 661,400 333,723,700
----------- ------------
Total liabilities and stockholders' equity.................. $13,693,300 $383,898,700
=========== ============
</TABLE>

See notes to consolidated financial statements.

F-39
<PAGE>
ABOVENET COMMUNICATIONS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Revenues.............................................. $ 551,600 $ 3,436,400 $ 13,967,800
----------- ----------- ------------
Costs and expenses:
Data communications and telecommunications.......... 558,600 2,199,800 12,649,700
Network operations.................................. 416,700 1,571,800 6,084,300
Sales and marketing................................. 382,600 1,618,700 11,251,300
General and administrative.......................... 433,700 1,621,500 6,610,900
Depreciation and amortization....................... 132,700 475,500 3,412,600
Stock-based compensation expense.................... -- 1,276,400 1,688,700
Joint venture termination fee....................... 431,100 -- --
----------- ----------- ------------
Total costs and expenses.......................... 2,355,400 8,763,700 41,697,500
Loss from operations.................................. (1,803,800) (5,327,300) (27,729,700)
Interest expense...................................... (7,400) (160,800) (1,573,100)
Interest and other income............................. 8,400 63,100 2,947,900
----------- ----------- ------------
Loss before equity interest in affiliates............. (1,802,800) (5,425,000) (26,354,900)
Equity interest in losses of affiliates............... -- -- (200,000)
----------- ----------- ------------
Net loss.............................................. $(1,802,800) $(5,425,000) $(26,554,900)
=========== =========== ============
Basic and diluted loss per share...................... $ (4.58) $ (10.34) $ (1.60)
=========== =========== ============
Shares used in basic and diluted loss per share....... 393,236 524,608 16,643,027
=========== =========== ============
</TABLE>

See notes to consolidated financial statements.

F-40
<PAGE>
ABOVENET COMMUNICATIONS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED JUNE 30, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK COMMON DEFERRED
-------------------------- ------------------------- STOCK STOCK ACCUMULATED
SHARES AMOUNT SHARES AMOUNT OPTIONS COMPENSATION DEFICIT
----------- ------------ ---------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, July 1, 1996.......... -- $ -- 250,000 $ 5,000 $ -- $ -- $ (77,600)
Issuance of common stock........ 125,000 2,500
Issuance of Series A convertible
preferred stock............... 2,050,000 410,000
Exercise of common stock
options....................... 31,250 600
Issuance of Series B convertible
preferred stock............... 1,000,000 600,000
Issuance of Series B convertible
preferred stock in conjunction
with acquisition of DSK, Inc.
(Note 11)..................... 1,000,000 600,000
Net loss........................ (1,802,800)
----------- ------------ ---------- ------------ ---------- ----------- ------------
BALANCES, June 30, 1997......... 4,050,000 1,610,000 406,250 8,100 -- -- (1,880,400)
Exercise of common stock
options....................... 322,446 30,800
Issuance of warrants in
connection with issuance of
debt.......................... 112,000 45,000
Issuance of Series B convertible
preferred stock............... 1,263,792 1,011,100
Issuance of Series C convertible
preferred stock............... 4,006,000 3,873,400
Compensatory stock
arrangements.................. 1,816,500 (1,816,500)
Amortization of deferred stock
compensation.................. 1,276,400
Net loss........................ (5,425,000)
----------- ------------ ---------- ------------ ---------- ----------- ------------
BALANCES, June 30, 1998......... 9,319,792 6,606,500 728,696 38,900 1,861,500 (540,100) (7,305,400)
Issuance of Series D convertible
preferred stock............... 4,230,756 10,771,000
Issuance of Series E convertible
preferred stock............... 817,550 3,846,400
Exercise of Series B warrants... 209,400 --
Conversion of convertible
preferred stock to common
stock......................... (14,577,498) (21,223,900) 14,577,498 21,223,900
Issuance of common stock upon
initial public offering....... 11,500,000 67,822,000
Issuance of common stock upon
public offering............... 6,850,356 273,421,500
Exercise of common stock options
and warrants.................. 842,440 439,200
Issuance of common stock under
employee stock purchase
plan.......................... 49,318 272,500
Issuance of warrants in
connection with issuance of
debt and leases............... 1,355,900
Compensatory stock
arrangements.................. 1,196,400 (1,196,400)
Amortization of deferred stock
compensation.................. 1,688,700
Net loss........................ (26,554,900)
----------- ------------ ---------- ------------ ---------- ----------- ------------
BALANCES, June 30, 1999......... -- $ -- 34,548,308 $363,218,000 $4,413,800 $ (47,800) $(33,860,300)
=========== ============ ========== ============ ========== =========== ============

SHAREHOLDERS'
EQUITY
-------------
<S> <C>
BALANCES, July 1, 1996.......... $ (72,600)
Issuance of common stock........ 2,500
Issuance of Series A convertible
preferred stock............... 410,000
Exercise of common stock
options....................... 600
Issuance of Series B convertible
preferred stock............... 600,000
Issuance of Series B convertible
preferred stock in conjunction
with acquisition of DSK, Inc.
(Note 11)..................... 600,000
Net loss........................ (1,802,800)
------------
BALANCES, June 30, 1997......... (262,300)
Exercise of common stock
options....................... 30,800
Issuance of warrants in
connection with issuance of
debt.......................... 157,000
Issuance of Series B convertible
preferred stock............... 1,011,100
Issuance of Series C convertible
preferred stock............... 3,873,400
Compensatory stock
arrangements.................. --
Amortization of deferred stock
compensation.................. 1,276,400
Net loss........................ (5,425,000)
------------
BALANCES, June 30, 1998......... 661,400
Issuance of Series D convertible
preferred stock............... 10,771,000
Issuance of Series E convertible
preferred stock............... 3,846,400
Exercise of Series B warrants... --
Conversion of convertible
preferred stock to common
stock......................... --
Issuance of common stock upon
initial public offering....... 67,822,000
Issuance of common stock upon
public offering............... 273,421,500
Exercise of common stock options
and warrants.................. 439,200
Issuance of common stock under
employee stock purchase
plan.......................... 272,500
Issuance of warrants in
connection with issuance of
debt and leases............... 1,355,900
Compensatory stock
arrangements.................. --
Amortization of deferred stock
compensation.................. 1,688,700
Net loss........................ (26,554,900)
------------
BALANCES, June 30, 1999......... $333,723,700
============
</TABLE>

See notes to consolidated financial statements.

F-41
<PAGE>
ABOVENET COMMUNICATIONS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,802,800) $(5,425,000) $(26,554,900)
Adjustments to reconcile net loss to net cash used in
operating activities:
Equity interest in losses of affiliates................. -- -- 200,000
Depreciation and amortization........................... 132,700 475,500 3,412,600
Stock-based compensation expense........................ -- 1,276,400 1,688,700
Noncash interest expense................................ -- 133,200 117,000
Joint venture termination fee........................... 431,100 -- --
Changes in assets and liabilities:
Accounts receivable................................... (29,100) (315,900) (2,728,000)
Prepaid expenses and other current assets............. -- (269,600) (3,577,800)
Restricted cash....................................... -- (300,000) (21,175,900)
Accounts payable...................................... 298,900 1,989,300 11,292,000
Accrued liabilities................................... 109,700 510,200 702,700
Unearned revenue...................................... 85,000 224,400 1,313,300
Deferred rent......................................... 30,400 18,200 156,100
----------- ----------- ------------
Net cash used in operating activities............... (744,100) (1,683,300) (35,154,200)
----------- ----------- ------------
Cash flows from investing activities:
Purchase of short-term investments........................ -- -- (11,744,200)
Cash paid for rights to use fiber optic capacity.......... -- -- (7,480,000)
Purchase of property and equipment........................ (474,500) (3,666,000) (37,426,300)
Increase in deposits and other assets..................... (32,700) (111,700) (1,519,000)
Investments in affiliates................................. -- -- (2,630,100)
Cash paid for acquisition................................. -- -- (71,420,200)
----------- ----------- ------------
Net cash used in investing activities............... (507,200) (3,777,700) (132,219,800)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from notes payable and advances.................. 739,900 13,395,000 23,722,300
Debt repayments........................................... -- (70,000) (3,297,100)
Capital lease repayments.................................. (49,600) (84,700) (638,700)
Proceeds from issuance of common stock.................... 3,100 30,800 341,955,200
Proceeds from issuance of convertible preferred stock..... 800,000 -- 6,617,400
----------- ----------- ------------
Net cash provided by financing activities........... 1,493,400 13,271,100 368,359,100
----------- ----------- ------------
Net increase in cash and equivalents........................ 242,100 7,810,100 200,985,100
Cash and equivalents, beginning of period................... 89,000 331,100 8,141,200
----------- ----------- ------------
Cash and equivalents, end of period......................... $ 331,100 $ 8,141,200 $209,126,300
=========== =========== ============
Supplemental cash flow information--cash paid for
interest.................................................. $ 7,400 $ 27,600 $ 1,456,100
=========== =========== ============
Noncash investing and financing activities:
Remaining obligation for rights to use fiber optic
capacity................................................ $ -- $ -- $ 800,000
=========== =========== ============
Acquisition of equipment under capital lease.............. $ 206,200 $ 479,200 $ 5,829,500
=========== =========== ============
Acquisition of leasehold improvements in conjunction with
DSK, Inc. acquisition................................... $ 168,900 $ -- $ --
=========== =========== ============
Exchange of notes, advances, accrued interest and warrants
for convertible preferred stock......................... $ 210,000 $ 4,884,500 $ 8,000,000
=========== =========== ============
Conversion of preferred stock into common stock........... $ -- $ -- $ 21,223,900
=========== =========== ============
Issuance of warrants in connection with issuance of debt
and leases.............................................. $ -- $ 45,000 $ 1,355,900
=========== =========== ============
</TABLE>

See notes to consolidated financial statements.

F-42
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION--AboveNet Communications Inc. (the "Company"), was formed on
March 8, 1996 (inception). The Company provides facilities-based, managed
services for customer-owned Web servers and related equipment, known as
co-location, and high performance Internet connectivity solutions for electronic
commerce and other business critical Internet operations.

PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the Company and its subsidiaries. All significant intercompany transactions and
amounts are eliminated in consolidation. Minority investments in joint ventures
are accounted for under the equity method of accounting, under which the Company
records in income its proportionate share of the earnings or losses of the joint
ventures.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CONCENTRATION OF CREDIT RISK--Financial instruments that potentially subject
the Company to concentration of credit risk consist of trade receivables.
However, the Company's credit risk is mitigated by its credit evaluation process
and the reasonably short collection terms. The Company does not require
collateral or other security to support accounts receivable and maintains
reserves for potential credit losses.

CASH AND EQUIVALENTS--The Company considers all highly liquid investments
with maturities of ninety days or less when purchased by the Company to be cash
equivalents.

SHORT-TERM INVESTMENTS--Short term investments consist of treasury bills
with a maturity greater than 90 days but less than twelve months. The Company's
short-term investments are classified as available-for-sale. The investments are
carried at cost, which approximated fair value at June 30, 1999. Material
unrealized gains or losses would be reported as a separate component of
stockholders' equity. No investments were sold in the periods presented.

PROPERTY AND EQUIPMENT--Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of three to five years. Leasehold improvements and assets acquired
under capital lease are amortized over the shorter of the lease term or the
useful lives of the improvement.

RIGHTS TO USE FIBER OPTIC CAPACITY--Indefeasible rights to use (IRU)
capacity on fiber optic cable systems are stated at cost. Amortization will be
recognized over the shorter of the term of the IRU or its useful life beginning
when such capacity becomes available to the Company.

INTANGIBLE ASSETS--Goodwill is amortized on a straight-line basis over its
estimated life of ten years.

RESTRICTED CASH--Restricted cash consists of certificates of deposit which
are restricted from use pursuant to certain lease agreements.

REVENUE RECOGNITION--Revenue consists primarily of service revenue which is
recognized in the period in which the services are provided. The services
primarily include bandwidth and space requirement charges which are recognized
monthly as well as installation fees which are recognized as

F-43
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

revenue in the period of installation. Unearned revenue consists of customer
advances and the value assigned to certain ongoing services to be rendered to
Compaq Computer Corporation in connection with the acquisition of the Palo Alto
Internet Exchange ("PAIX") (see Note 2). Unearned revenue is recognized in the
period in which the services are rendered.

INCOME TAXES--Deferred tax liabilities are recognized for future taxable
amounts, and deferred tax assets are recognized for future deductions, net of a
valuation allowance to reduce net deferred tax assets to amounts that are more
likely than not to be realized.

STOCK-BASED COMPENSATION--The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF--The
Company evaluates its long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets or intangibles may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.

NET INCOME (LOSS) PER SHARE--Basic income (loss) per share excludes dilution
and is computed by dividing net income (loss) by the weighted-average number of
common shares outstanding, less shares subject to repurchase by the Company, for
the period. Diluted income (loss) per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Common share equivalents are excluded
from the computation in loss periods as their effect would be antidilutive.

RECLASSIFICATIONS--Certain prior period amounts have been reclassified to
conform to the current period presentation. Such reclassifications had no effect
on stockholders' equity (deficiency) or net loss.

RECENTLY ISSUED ACCOUNTING STANDARDS--In June 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 130, REPORTING COMPREHENSIVE INCOME, which requires an enterprise to report,
by major components and as a single total, the change in the Company's net
assets during the period from nonowner sources. The Company adopted SFAS
No. 130 in fiscal 1999. For all periods presented, comprehensive loss was equal
to the Company's net loss.

Additionally, in June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which establishes annual and
interim reporting standards for an enterprise's business segments and related
disclosures about the enterprise's products, services, geographic areas and
major customers. The Company adopted this statement in fiscal 1999. The Company
has determined that it operates in one reporting segment.

In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued SOP 98-1, ACCOUNTING FOR THE
COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1
provides guidance for an enterprise on accounting for the costs of computer
software developed or obtained for internal use. SOP 98-1 is effective for the
Company in

F-44
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

fiscal 2000. The Company anticipates that accounting for transactions under SOP
98-1 will not have a material impact on its financial position or results of
operations.

In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which defines derivatives, requires that all
derivatives be carried at fair value, and provides for hedge accounting when
certain conditions are met. SFAS No. 133 is effective for the Company in fiscal
2001. Although the Company has not fully assessed the implications of SFAS
No. 133, the Company does not believe adoption of this statement will have a
material impact on its financial position or results of operations.

2. ACQUISITION OF PALO ALTO INTERNET EXCHANGE

On June 21, 1999, the Company consummated the acquisition of certain assets
and the assumption of certain liabilities of the Palo Alto Internet Exchange
("PAIX"), a business within the Technology and Corporate Development and
Operations Management Services business units of Compaq Computer Corporation
("Compaq"). The total purchase price of $76.4 million consisted of
$70.0 million in cash, certain future ongoing services to be provided by the
Company to Compaq, with a value currently estimated to be $5.0 million, and
acquisition-related costs of $1.4 million. PAIX is a high-level switching and
peering point for global and regional Internet service providers and content
providers.

The acquisition has been recorded using the purchase method of accounting.
The excess of the aggregate purchase price over the fair market value of net
assets acquired of $69.7 million was recognized as goodwill and is being
amortized over 10 years. Amortization of goodwill for fiscal 1999 was $190,000.
At June 30, 1999, the Company made a preliminary allocation of the purchase
price. The Company will record adjustments to the purchase price allocation as
deemed necessary.

The operating results of PAIX have been included in the Company's
consolidated financial statements since the date of acquisition. Had the
acquisition of PAIX occurred on July 1, 1997 the unaudited proforma revenue, net
loss applicable to common stockholders and related basic and diluted loss per
share for the years ended June 30, 1998 and 1999 would have been: $6.6 million
and $19.7 million; $23.8 million and $44.4 million, and $45.45 per share and
$2.66 per share, respectively. These results, which are based on various
assumptions, are not necessarily indicative of what would have occurred had the
acquisition been consummated on July 1, 1997.

A reconciliation of the cash and noncash aspects of the above transaction is
as follows:

<TABLE>
<S> <C>
Tangible and intangible assets acquired..................... $76,683,200
Liabilities assumed......................................... (263,000)
Liabilities incurred in connection with purchase............ (5,000,000)
-----------
Net cash paid for acquisition............................... $71,420,200
===========
</TABLE>

F-45
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

3. PROPERTY AND EQUIPMENT, NET

Property and equipment at June 30 are comprised of the following:

<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
Property and equipment at cost:
Telecommunication equipment....................... $2,295,300 $10,255,500
Leasehold improvements (primarily
co-location facilities)......................... 224,700 20,385,900
Office equipment.................................. 186,500 1,262,000
Construction in progress.......................... 2,389,400 18,224,900
---------- -----------
Total............................................... 5,095,900 50,128,300
Less accumulated depreciation and amortization...... (659,800) (3,537,400)
---------- -----------
Property and equipment, net......................... $4,436,100 $46,590,900
========== ===========
</TABLE>

Construction in progress primarily relates to costs incurred during the
expansion of the Company's facilities.

4. INDEFEASIBLE RIGHTS TO USE FIBER OPTIC CAPACITY

During fiscal 1999, the Company entered into a series of agreements
providing for the acquisition of an indefeasible right to use capacity on a
fiber optic cable system between the U.S. and the United Kingdom for
$8.3 million, $7.5 million of which has been paid as of June 30, 1999. The terms
of these agreements are 25 years.

In fiscal 1999, the Company entered into a series of agreements to lease
fiber optic cable systems between Washington D.C. and New York City. These
leases were initiated in the fourth quarter of fiscal 1999 and require annual
payments of $630,000 for 20 years. The leases are accounted for as capital
leases and had a net book value of $4.6 million at June 30, 1999.

5. JOINT VENTURES

In March 1999, as part of its international expansion strategy, the Company
entered into agreements to form joint ventures in Austria, Germany ("AboveNet
GmbH"), and the United Kingdom to provide managed co-location and Internet
connectivity solutions for mission critical Internet operations. The Company
invested a total of $2.4 million in fiscal 1999, which is included in deposits
and other assets at June 30, 1999. In addition, the Company has agreed to
provide up to $2 million of additional financing to certain of these joint
ventures, if required, and to arrange or provide for an additional $4.5 million
contingent upon the joint ventures raising an equivalent amount from third
parties. These joint ventures are accounted for under the equity method of
accounting.

In July 1999, the Company agreed to enter into two additional joint ventures
in Germany. The first joint venture will own real property in Frankfurt,
Germany. For an equity contribution of approximately $2 million, the Company
will own 45% and AboveNet GmbH will own 5% of this joint venture. The second
joint venture will lease the real property from the aforementioned joint
venture. It will complete improvements to the property and will manage the
property. This entity will lease managed co-location space to AboveNet GmbH and
provide leased space to other third parties. The Company will own 87.42% of this
second joint venture in exchange for equity contributions which will total

F-46
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

approximately $23 million, of which approximately $8 million will be paid as an
initial equity contribution, with the remainder to be contributed over the
following 18 to 24 months.

6. CONVERTIBLE NOTES PAYABLE AND ADVANCES

In June 1997, the Company received $739,900 in cash advances from certain
individuals, including stockholders and employees. In July and August 1997, the
Company received an additional $250,000 in cash advances. In August 1997, the
advances were converted into notes payable of $989,900 and warrants to acquire
989,906 shares of Series B convertible preferred stock at $1.00 per share. The
notes generally bore an annual interest rate of 10%. The related warrants were
valued at $112,000, or $0.12 per share, and were recorded as noncash interest
expense in fiscal 1998.

On December 31, 1997, the Company entered into exchange agreements with the
note holders. Pursuant to the exchange agreements, the above notes, accrued
interest of $21,200 and the related warrants were exchanged for (i) 1,263,792
shares of Series B convertible preferred stock and (ii) warrants to acquire
247,472 shares of Series B convertible preferred stock at $1.00 per share.

During fiscal 1998, the Company received $3,873,400 of cash advances from
certain potential investors. In May 1998, these advances were converted into
4,006,000 shares of Series C convertible preferred stock.

On June 30, 1998, in anticipation of the Company's pending sale of preferred
stock, the Company received $8 million in cash, of which $1 million represented
a noninterest-bearing cash advance and $7 million represented convertible notes
payable. The notes bore interest at 6%, were due on July 15, 1998 and were
convertible into Series D convertible preferred stock at $2.60 per share. On
July 15, 1998, the convertible notes and advance were converted into Series D
convertible preferred stock (see Note 9).

F-47
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

7. OTHER LONG-TERM OBLIGATIONS

Long-term obligations at June 30 consist of:

<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
Credit facility..................................... $1,201,600 $21,626,800
Capital lease facility.............................. 551,100 5,741,900
Deferred rent....................................... 48,600 204,700
---------- -----------
Total obligations................................... 1,801,300 27,573,400
Less current portion of long-term obligations....... (476,000) (5,984,800)
---------- -----------
Long-term obligations............................... $1,325,300 $21,588,600
========== ===========
</TABLE>

CREDIT FACILITY

At June 30, 1999, the Company had $21.6 million outstanding under its credit
facility (the "Credit Facility"), with no additional borrowings available as of
June 30, 1999. Borrowings outstanding under the Credit Facility are payable in
42 monthly installments, bear interest at rates ranging from 13.3% to 15.1% and
are collateralized by the equipment and leasehold improvements purchased with
the proceeds of the borrowing. At June 30, 1999, the outstanding borrowings on
the Credit Facility are due as follows: fiscal 2000, $5,480,000; fiscal 2001,
$6,286,600; fiscal 2002, $6,874,200; and fiscal 2003, $2,986,000.

CAPITAL LEASE FACILITY

At June 30, 1999, the Company had $820,000 available on a $2.5 million
facility under which the Company leases certain equipment under capital leases.
Leases outstanding at June 30, 1999 expire on various dates through fiscal 2019
(see Note 12).

8. INCOME TAXES

The Company's deferred income tax assets at June 30 are comprised of the
following:

<TABLE>
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
Net deferred tax assets:
Net operating loss carryforwards................ $ 1,871,700 $ 10,755,900
Stock compensation expense on nonqualified stock
options....................................... 485,300 1,067,000
Accruals deductible in different periods........ 114,700 935,200
Depreciation and amortization................... (65,200) (231,600)
----------- ------------
2,406,500 12,526,500
Valuation allowance............................... (2,406,500) (12,526,500)
----------- ------------
Total............................................. $ -- $ --
=========== ============
</TABLE>

F-48
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

The Company's effective rate differs from the federal statutory tax rate for
the years ended June 30, 1997, 1998 and 1999 as follows:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Federal statutory tax rate.............................. 35.0% 35.0% 35.0%
State taxes, net of federal benefit..................... 3.0 3.0 2.9
Joint venture termination fee........................... (9.1) -- --
Other................................................... (0.1) (0.3) (0.4)
Valuation allowance..................................... (28.8) (37.7) (37.5)
----- ----- -----
Effective tax rate...................................... --% --% --%
===== ===== =====
</TABLE>

The Company has no income tax provision due to its history of operating
losses. Due to the uncertainty surrounding the realization of the benefits of
its favorable tax attributes in future tax returns, the Company has fully
reserved its net deferred tax assets as of June 30, 1997,1998 and 1999.

At June 30, 1999, the Company had net operating loss carryforwards of
approximately $28.4 million for federal and $14.2 million for state income tax
purposes. These carryforwards begin to expire in 2003 for state and 2010 for
federal purposes. Additionally, Section 382 of the Internal Revenue Code and the
applicable California law impose annual limitations on the use of net operating
loss carryforwards if there is a change in ownership, as defined, within any
three-year period. The utilization of certain net operating loss carryforwards
may be limited due to the Company's capital stock transactions.

9. STOCKHOLDERS' EQUITY

STOCK SPLITS

During November 1998, the Company reincorporated in the State of Delaware
and effected a stock exchange of one share of common stock and preferred stock
for every two and one-half shares of common stock and preferred stock,
respectively, of its California predecessor entity. The Company also effected
another reverse stock split during November 1998 whereby one share of common and
preferred stock was issued for every 1.6 shares of common stock and preferred
stock. All share and per share amounts in these financial statements have been
adjusted to give effect to these reverse stock splits.

On May 7, 1999, the Company distributed a two-for-one stock split effected
as a stock dividend. All share or per share amounts in the consolidated
financial statements have been adjusted to give effect to this stock split.

INITIAL PUBLIC OFFERING

On December 10, 1998, the Company sold 10,000,000 shares of common stock in
an underwritten public offering and on December 30, 1998 sold an additional
1,500,000 shares through the exercise of the underwriters' over-allotment option
for net proceeds of approximately $67,822,000.

STOCK OFFERING

On April 30, 1999, the Company sold 5,650,356 shares of its common stock in
an underwritten public offering at a price of $42.50 per share and on May 5,
1999 sold an additional 1,200,000 shares

F-49
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

through the exercise of the underwriters' overallotment option for net proceeds
to the Company of approximately $273,421,500.

CONVERTIBLE PREFERRED STOCK AND WARRANTS

In fiscal 1997, the Company issued 2,050,000 shares of Series A convertible
preferred stock for cash of $200,000 and the conversion of advances of $210,000.
Also in fiscal 1997, the Company issued 1,000,000 shares of Series B convertible
preferred stock in connection with the acquisition of DSK, Inc. (see Note 11)
and issued 1,000,000 shares of Series B convertible preferred stock for cash of
$600,000. In fiscal 1998, the Company issued 1,263,792 shares of Series B
convertible preferred stock and 4,006,000 shares of Series C convertible
preferred stock upon conversions of notes, advances, and accrued interest of
$1,011,100 and $3,873,400, respectively (see Note 6). In fiscal 1999, the
Company issued 4,230,756 shares of Series D convertible preferred stock for cash
of $2,771,000 (net of costs of $229,000) and the conversion of notes and
advances of $8,000,000. During the same period, the Company issued 817,550
shares of Series E convertible preferred stock for cash of $3,846,400 (net of
costs of $223,600).

As discussed in Note 6, pursuant to certain exchange agreements entered into
on December 31, 1997, the Company issued warrants to acquire 247,472 shares of
Series B convertible preferred stock at $1.00 per share. Also, during fiscal
1998, the Company issued a warrant to purchase 2,500 shares of Series D
convertible preferred stock at an exercise price of $2.00 per share in
connection with a revolving line of credit from a bank that expired in
May 1999.

Simultaneously with the closing of the initial public offering, all
14,368,098 shares of the Company's preferred stock were converted into common
stock on a share for share basis. Additionally, all of the holders of warrants
to purchase 247,472 shares of Series B convertible preferred stock exercised
such warrants through a net issuance provision and were issued 209,400 shares of
common stock. Also in connection with the initial public offering, the warrant
to acquire 2,500 shares of Series D convertible preferred stock was converted
into a warrant to purchase an equivalent number of common shares at an exercise
price of $2.00 per share.

COMMON STOCK RESERVED FOR FUTURE ISSUANCE

At June 30, 1999, the Company has reserved the following shares of common
stock for issuance in connection with:

<TABLE>
<S> <C>
Warrants issued and outstanding............................. 350,036
Options issued and outstanding.............................. 5,057,606
Options available under stock option plans.................. 1,108,547
Shares available under 1998 Purchase Plan................... 263,182
---------
Total....................................................... 6,779,371
=========
</TABLE>

COMMON STOCK SUBJECT TO REPURCHASE

Upon the exercise of certain unvested employee stock options, the Company
issued to the employees common stock which is subject to repurchase by the
Company at the original exercise price of the stock option. This right lapses
over the original vesting period. At June 30, 1999, 66,661 shares were subject
to repurchase.

F-50
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

STOCK OPTION PLANS

Under the Company's stock option plans (collectively, the "Plans") a total
of 5,656,712 nonstatutory and incentive common stock options are authorized for
issuance. Nonstatutory stock options may be granted to employees, outside
directors and consultants, and incentive stock options may only be granted to
employees. The Plans provide for the granting of incentive stock options at not
less than 100% of the fair market value of the underlying stock at the grant
date. Nonstatutory stock options may be granted at not less than 85% of the fair
market value of the underlying stock at the date of grant. Options granted to
employees generally vest over four years and expire ten years from the date of
the grant. In addition, upon change in control, all options granted under
certain plans shall immediately vest.

The plans provide that each nonemployee director who is elected to the
Company's board of directors will automatically be granted a nonstatutory stock
option to purchase 18,750 shares of common stock at an exercise price equal to
the fair value of the common stock on the grant date. These grants vest ratably
over three years. An additional option to purchase 6,250 shares of common stock
will be granted to the nonemployee director each year thereafter with an
exercise price equal to the fair market value of the common stock on that date.
These grants vest after one year of service.

EMPLOYEE STOCK PURCHASE PLAN

On December 10, 1998, the Company adopted the 1998 Employee Stock Purchase
Plan (the "1998 Purchase Plan"). Under the 1998 Purchase Plan, eligible
employees are allowed to have salary withholdings of up to 15% of their base
compensation to purchase shares of common stock at a price equal to 85% of the
lower of the market value of the stock at the beginning or end of defined
purchase periods. The initial purchase period commenced on December 10, 1998.
The Company has reserved 312,500 shares of common stock for issuance under this
plan. As of June 30, 1999, 49,318 shares have been issued under the 1998
Purchase Plan.

NONPLAN OPTION GRANT

In connection with its hiring of the Company's President and Chief Operating
Officer in November 1997, the Company granted to this officer options to
purchase 350,000 shares of common stock with an exercise price of $0.20 per
share. The option was immediately exercisable with respect to 20% of the option
shares with the balance exercisable in equal monthly installments over the next
36 months of employment with the Company. However, vesting accelerated upon the
closing of the Company's underwritten public offering. In addition, the option
grant contained an antidilution clause which guaranteed that, prior to any
underwritten initial public offering of the Company's common stock, the number
of shares under the option grant would always be equal to 5% of its outstanding
common stock on a fully diluted basis less 36,666 shares. As a result of various
sales of equity securities and option grants since the initial grant in
November 1997, the officer was issued options to purchase an additional 638,850
shares of common stock at an exercise price of $0.20 per share during fiscal
1999. In connection with this award, the Company recognized $362,100 and
$1,087,200 in stock-based compensation expense during fiscal 1998 and 1999,
respectively.

OPTIONS AND WARRANTS GRANTED TO NONEMPLOYEES

The Company has granted options and warrants to nonemployees for services
performed and to be performed after the date of grant. In connection with these
awards, the Company recognized $310,100

F-51
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

and $601,500 in stock-based compensation expense during fiscal 1998 and 1999,
respectively. At June 30, 1999, options to purchase 85,000 shares of common
stock at an exercise price of $42.53 were unearned by certain nonemployees.
These options vest over three years and have a term of three years. At June 30,
1999, all services relating to all other nonemployee awards have been rendered
and the related options and warrants were fully exercisable.

In connection with the Company's formation of its European joint ventures in
March 1999, the Company agreed that it will grant options to purchase up to
600,000 shares of common stock to employees of the joint ventures upon the joint
ventures meeting certain performance criteria of over the next four years. The
exercise price for these options would be based on the fair market value of the
Company's common stock at the date of grant.

In connection with the Credit Facility (see Note 7), in fiscal 1998, the
Company issued warrants to purchase 45,000 shares of common stock at a
weighted-average exercise price of $2.31 per share. The fair value of these
warrants is being recognized as interest expense through June 30, 1999. During
fiscal 1999, in connection with an amendment to the Credit Facility, the Company
issued warrants to purchase 67,032 shares of common stock which have a
weighted-average exercise price of $18.72 per share and a term of five years.
The estimated fair value of these warrants of $787,600 is included in deposits
and other assets at June 30, 1999 and is being amortized to interest expense
over the repayment period.

In connection with the signing of a new facility lease (See Note 12) in
fiscal 1999, the Company issued the lessor a warrant to purchase 200,000 shares
of its common stock at $5.00 per share. The estimated fair value of this warrant
of $609,100 is included in deposits and other assets at June 30, 1999 and will
be amortized to expense over the lease period.

At June 30, 1998, warrants to purchase 64,686 shares of common stock at a
weighted-average exercise price of $2.10 per share were outstanding; such
warrants expire in 2003. All of these warrants were issued during the year ended
June 30, 1998 and had an estimated weighted-average fair value of $1.23 per
share at the date of grant. During fiscal 1999, warrants to purchase 302,662
shares of common stock at a weighted-average exercise price of $7.99 were issued
and had an estimated weighted-average fair value of $4.72 per share at date of
grant. At June 30, 1999, warrants to purchase 350,036 shares of common stock at
a weighted-average exercise price of $7.17 per share were outstanding.

OPTION REPRICING

On December 1, 1998, the Company repriced 928,850 options previously granted
at $6.00 to $8.00 per share to fair value at that date of $5.00 per share.

F-52
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

Stock option activity is summarized as follows:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
---------------------
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
---------- --------
<S> <C> <C>
Balance, July 1, 1996 (137,500 shares vested at a
weighted average exercise price of $0.02 per share)... 1,140,000 $ 0.02

Granted................................................. 450,000 0.07
Exercised............................................... (31,250) 0.02
Canceled................................................ (388,750) 0.02
----------
Balance, June 30, 1997 (219,374 shares vested at a
weighted average exercise price of $0.02 per share)... 1,170,000 0.03

Granted................................................. 1,142,612 0.59
Exercised............................................... (322,446) 0.10
Canceled................................................ (32,334) 0.31
----------
Balance, June 30, 1998 (734,270 shares vested at a
weighted average exercise price of $0.19 per share)... 1,957,832 0.34

Granted................................................. 5,058,100 15.61
Exercised............................................... (822,908) 0.50
Canceled................................................ (1,135,418) 6.35
----------
Balance, June 30, 1999.................................. 5,057,606 $14.24
==========
</TABLE>

The following table summarizes information as of June 30, 1999 concerning
currently outstanding and vested options:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS VESTED
------------------------------------- --------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE OF SHARES PRICE
- ----------------------- ----------- ------------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
$ 0.02 - $ 0.60 1,621,374 8.3 $ 0.17 1,185,423 $ 0.19
2.00 - 2.60 276,628 8.5 2.29 45,397 2.12
4.00 - 6.50 1,337,654 9.2 5.17 337,103 5.36
12.25 - 41.06 1,595,550 9.7 33.34 690,668 36.47
42.53 - $75.13 226,400 9.5 48.55 7,500 46.63
--------- --- -------- --------- --------
5,057,606 9.1 $ 14.24 2,266,091 $ 12.21
========= === ======== ========= ========
</TABLE>

At June 30, 1999, 1,108,547 shares remained available for future grant.

F-53
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999

ADDITIONAL STOCK PLAN INFORMATION

As discussed in Note 1, the Company accounts for its stock-based awards to
employees using the intrinsic value method in accordance with APB Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and its related
interpretations.

SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires the
disclosure of pro forma net income (loss) and net income (loss) per share had
the Company adopted the fair value method since the Company's inception. Under
SFAS No. 123, the fair value of stock-based awards to employees is calculated
through the use of option pricing models, even though such models were developed
to estimate the fair value of freely tradable, fully transferable options
without vesting restrictions, which significantly differ from the Company's
stock option awards. These models also require subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly
affect the calculated values.

The Company's calculations for employee grants were made using the minimum
value method for grants prior to September 8, 1998 and the fair value method for
grants after that date with the following weighted average assumptions: expected
life, one year following vesting; risk free interest rate of 6%; and no
dividends during the expected term. In addition, volatility of 70% was used for
grants valued under the fair value method. The Company's calculations are based
on a multiple award valuation approach and forfeitures are recognized as they
occur. If the computed values of the Company's stock-based awards to employees
had been amortized to expense over the vesting period of the awards as specified
under SFAS No. 123, net loss would have been $1,803,800 ($4.59 per basic and
diluted share), $5,111,000 ($9.75 per basic and diluted share) and $37,202,000
($2.24 per basic and diluted share) for the years ended June 30, 1997, 1998 and
1999, respectively.

The number and estimated weighted-average grant date value per option for
employee and nonemployee awards during the year are as follows:

<TABLE>
<CAPTION>
1997 1998 1999
-------- ---------- ----------
<S> <C> <C> <C>
Employee options:
Number of shares......................... -- 1,003,250 4,957,600
Estimated weighted average value......... $ -- $ 0.10 $ 5.98
Nonemployee options:
Number of shares......................... 450,000 139,362 100,500
Estimated weighted average value......... $ 0.02 $ 0.08 $ 20.43
</TABLE>

F-54
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999.

10. NET LOSS PER SHARE

The following is a reconciliation of the numerators and denominators used in
computing basic and diluted net loss per share at June 30:

<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss (numerator), basic and
diluted............................. $(1,802,800) $(5,425,000) $(26,554,900)
=========== =========== ============
Shares (denominator):
Weighted average common shares
Outstanding....................... 393,236 530,224 16,675,822
Weighted average common shares
Outstanding subject to
repurchase........................ -- (5,616) (32,795)
----------- ----------- ------------
Shares used in computation, basic and
diluted............................. 393,236 524,608 16,643,027
=========== =========== ============
Net loss per share, basic and
diluted............................. $ (4.58) $ (10.34) $ (1.60)
=========== =========== ============
</TABLE>

For the above mentioned periods, the Company had securities outstanding
which could potentially dilute basic net income per share in the future, but
were excluded in the computation of diluted net loss per share in the periods
presented, as their effect would have been antidilutive. At June 30, 1999,
outstanding potentially dilutive securities consist of 66,661 outstanding shares
of common stock subject to repurchase, and options and warrants to purchase
5,407,642 shares of common stock.

11. JOINT VENTURE TERMINATION FEE

In fiscal 1996, the Company entered into a joint venture agreement (the
"Agreement") with DSK, Inc. ("DSK") to cooperatively market and develop the
Company's services. The Company paid $33,700 to DSK during the year ended
June 30, 1997 related to the Agreement.

In April 1997, the Company terminated the Agreement and hired the majority
stockholders of DSK as either employees or consultants by issuing 1,000,000
fully vested shares of the Series B preferred stock with a fair value of $0.60
per share, or $600,000, for the outstanding shares of common stock of DSK. The
Company recorded the transaction by allocating the value of the shares issued to
property and equipment (at DSK's net book value of $168,900, which approximated
fair value), with the balance of $431,100 reflected as a joint venture
termination fee.

Additionally, in April 1997, the Company granted to certain of the former
owners of DSK options to purchase a total of 250,000 shares of its common stock
at $0.06 per share for real estate consulting services to be performed. In
June 1998, the Company accelerated the vesting of all the DSK options awarded.
In conjunction with this award, the Company recognized $604,200 of stock-based
compensation expense during fiscal 1998.

F-55
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999.

12. COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases its facilities under noncancelable operating leases.
These leases expire on various dates through fiscal 2002. Minimum future lease
payments under noncancelable operating and capital leases as of June 30, 1999
are summarized as follows:

<TABLE>
<CAPTION>
YEARS ENDING CAPITAL OPERATING
JUNE 30, LEASES LEASES
- ------------ ----------- -----------
<S> <C> <C>
2000...................................................... $ 1,320,600 $ 3,903,200
2001...................................................... 1,282,100 4,108,000
2002...................................................... 921,500 4,215,100
2003...................................................... 630,000 4,305,600
2004...................................................... 630,000 4,341,700
Thereafter.................................................. 9,060,000 47,604,800
----------- -----------
Total minimum lease payments................................ $13,844,200 $68,478,400
=========== ===========
Less amount representing interest at rates ranging from
13.253% to 14.68%......................................... (8,102,300)
-----------
Present value of minimum lease payments..................... 5,741,900
Less current portion........................................ (569,200)
-----------
Long-term portion........................................... $ 5,172,700
===========
</TABLE>

Rent expense under operating leases for the years ended June 30, 1997, 1998
and 1999 was $444,900, $917,000 and $1.3 million, respectively.

Effective in fiscal 2000, the Company has committed to lease additional
facilities. The lease is for a minimum term of 20 years with annual rental
payments increasing from approximately $3 million to $4 million over the lease
term.

On June 29, 1999, the Company entered into an agreement to purchase
approximately nine acres of land in Fairfax County, Virginia, for $7,750,000
which is expected to close in fiscal 2000. The Company intends to open a
facility on the site in fiscal 2001.

See Note 4 regarding the Company's agreements to lease fiber optic cable
systems.

PURCHASE COMMITMENTS

The Company has entered into noncancelable commitments to purchase property
and equipment related to the expansion of its operations facilities. As of
June 30, 1999, approximately $48 million was committed for purchases under these
agreements through fiscal 2000.

TELECOMMUNICATIONS AND PEERING ARRANGEMENTS

The Company has guaranteed to pay certain monthly usage levels or fees with
various communications or interconnect providers. Minimum payments under these
agreements at June 30, 1999 are approximately $24.8 million in fiscal 2000;
$24.7 million in fiscal 2001; $23.1 million in fiscal 2002; $14.4 million in
fiscal 2003; $13.7 million in fiscal 2004; and $8.6 million in fiscal 2005.

F-56
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999.

The Company is a party to numerous peering agreements with other internet
providers to allow for the exchange of internet traffic. These agreements do not
have fee commitments and generally have a one year term with automatic renewals.
The Company does not record any revenue or expense associated with these
non-cash transactions as such transactions do not represent the culmination of
the earnings process and the fair value of such transactions are not reasonably
determinable.

LEGAL MATTERS

On June 29, 1999, an alleged stockholder of AboveNet filed a lawsuit in the
Court of Chancery of the State of Delaware. The plaintiff, who purports to
represent a class of all AboveNet stockholders, challenges the terms of the
merger between AboveNet and Metromedia Fiber Network, Inc. ("Metromedia") (see
Note 17). Four other vitually identical complaints have also been filed in the
Delaware Court of Chancery. None of these four complaints has been served.
AboveNet believes these lawsuits are without merit and intends to defend itself
vigorously, and accordingly, management does not expect that the outcome of
these cases will have a material effect on the Company's financial position or
results of operations.

13. RELATED PARTY TRANSACTIONS

A member of the Board of Directors is the president of an entity which is
the co-manager of the Company's primary facilities. Rent expense in fiscal 1997,
1998 and 1999 for these facilities was $16,400, $265,200 and $1,073,200,
respectively. The Company believes that its lease arrangements were on an arm's
length basis.

During fiscal 1999, the same entity was granted a warrant to purchase
200,000 shares of common stock in connection with the signing of a new facility
lease (see Note 9). The estimated fair value of the warrant when granted was
$609,100.

14. MAJOR CUSTOMERS

For the year ended June 30, 1999, no one customer accounted for more than
10% of revenues. One customer accounted for 14% and 12% of revenues in fiscal
1998 and 1997, respectively.

At June 30, 1999, one customer accounted for approximately 10% of trade
receivables. At June 30, 1998, two customers accounted for approximately 22% and
13% of trade receivables.

15. GEOGRAPHIC DATA

During the year ended June 30, 1999, the Company generated approximately 14%
of its revenues from customers domiciled in countries other than the United
States, primarily in Asia. For the years ended June 30, 1998 and 1997,
substantially all of the Company's revenues were derived from domestic
customers.

16. 401(K) PLAN

In May 1998, the Company began a 401(k) plan (the Plan) that covers all
employees who meet the Plan's eligibility requirements. Eligible employees can
contribute up to 15% of their salary, subject to certain IRS limitations. The
Company's contributions related to fiscal 1998 and 1999 were zero and $168,100,
respectively.

F-57
<PAGE>
ABOVENET COMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1997, 1998 AND 1999.

17. SUBSEQUENT EVENTS

In August 1999, the Company entered into an additional agreement for the
acquisition of an indefeasible right to use additional capacity on a fiber optic
cable system between the U.S. and the United Kingdom for a 25-year period. The
agreement commits the Company to pay approximately $15.8 million in a series of
installments through October 1999.

On September 8, 1999, the Company completed a merger with Metromedia Fiber
Network, Inc. ("MFN"). Under the terms of the agreement, AboveNet stockholders
received 1.175 shares of MFN Class A common stock for each AboveNet share owned.
Additionally, upon completion of the merger, all outstanding stock options
granted prior to June 18, 1999 became immediately vested.

F-58
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Compaq Computer Corporation

We have audited the accompanying Combined Statement of Assets to be Acquired
and Liabilities to be Assumed of Palo Alto Internet Exchange (the "Business") as
of December 26, 1998 and the related Combined Statement of Revenues and Direct
Expenses for the period June 12, 1998 through December 26, 1998. These
statements are the responsibility of the Business' and Compaq Computer
Corporation's management. Our responsibility is to express an opinion on these
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statements. We believe that
our audit provides a reasonable basis for our opinion.

The accompanying statements were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in the Current Report on Form 8-K of AboveNet Communications Inc.) as
described in Note 2 and are not intended to be a complete presentation of the
Business' financial position or results of operations.

In our opinion, the statements referred to above present fairly, in all
material respects, the assets to be acquired and liabilities to be assumed as of
December 26, 1998 and the revenues and direct expenses described in Note 2 of
the Business for the period June 12, 1998 through December 26, 1998, in
conformity with generally accepted accounting principles.

PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts
June 15, 1999

F-59
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Compaq Computer Corporation

We have audited the accompanying Combined Statement of Assets to be Acquired
and Liabilities to be Assumed of Palo Alto Internet Exchange (the "Business") as
of December 27, 1997 and the related Combined Statement of Revenues and Direct
Expenses for the period December 28, 1997 through June 11, 1998 and the fiscal
years ended December 27, 1997 and December 29, 1996. These statements are the
responsibility of the Business' and Compaq Computer Corporation's management.
Our responsibility is to express an opinion on these statements based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statements. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the statements referred to above present fairly, in all
material respects, the assets to be acquired and liabilities to be assumed as of
December 27, 1997 and the revenues and direct expenses described in Note 2 of
the Business for the period December 28, 1997 through June 11, 1998 and the
fiscal years ended December 27, 1997 and December 29, 1996, in conformity with
generally accepted accounting principles.

PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts
June 15, 1999

F-60
<PAGE>
PALO ALTO INTERNET EXCHANGE

COMBINED STATEMENT OF ASSETS TO BE ACQUIRED AND LIABILITIES TO BE ASSUMED

(IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 27,
1999 DECEMBER 26, DECEMBER 27,
(UNAUDITED) 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
ASSETS TO BE ACQUIRED:
Unbilled accounts receivable........... $ 102 $ 18 $ 14
Prepaid expenses....................... 29 2 1
Property and equipment, net............ 3,405 3,088 2,750
Intangible assets, net................. 32,863 33,756 --
------- ------- ------
Total assets to be acquired........ $36,399 $36,864 $2,765
======= ======= ======
LIABILITIES TO BE ASSUMED:
Unearned service revenue............... 166 200 106
------- ------- ------
Total liabilities to be assumed.... 166 200 106
------- ------- ------
Net assets to be acquired........ $36,233 $36,664 $2,659
======= ======= ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-61
<PAGE>
PALO ALTO INTERNET EXCHANGE

COMBINED STATEMENT OF REVENUES AND DIRECT EXPENSES

(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
QUARTER QUARTER JUNE 12, 1998 PERIOD FROM FISCAL FISCAL
ENDED ENDED THROUGH DECEMBER 28, YEAR ENDED YEAR ENDED
MARCH 27, MARCH 26, DECEMBER 26, 1997 THROUGH DECEMBER 27, DECEMBER 29,
1999 1998 1998 JUNE 11, 1998 1997 1996
--------- --------- ------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Service revenues....................... $1,534 $ 892 $ 2,630 $1,732 $ 1,895 $ 155
------ ----- ------- ------ ------- -------
Direct expenses:
Cost of revenues..................... 616 817 1,548 1,440 2,579 537
Research and development............. -- 4 9 8 54 599
Selling, general and administrative
expenses........................... 131 83 191 242 700 121
Amortization of intangible assets.... 893 -- 1,944 -- -- --
------ ----- ------- ------ ------- -------
Total direct expenses............ 1,640 904 3,692 1,690 3,333 1,257
------ ----- ------- ------ ------- -------
Excess (shortfall) of revenues
over direct expenses......... $ (106) $ (12) $(1,062) $ 42 $(1,438) $(1,102)
====== ===== ======= ====== ======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-62
<PAGE>
PALO ALTO INTERNET EXCHANGE

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED
AND LIABILITIES TO BE ASSUMED AND
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES

(AMOUNTS IN THOUSANDS)

1. DESCRIPTION OF BUSINESS:

The Palo Alto Internet Exchange ("PAIX" or the "Business") is a business
within the Technology & Corporate Development and Operations Management Services
business units of Compaq Computer Corporation ("Compaq," formerly Digital
Equipment Corporation, "Digital," collectively the "Company"). The Business is a
high-level switching and peering point for global and regional Internet Service
Providers ("ISP") and content providers. The Business features a data center to
provide global services to PAIX customers for transmission of data in
high-volume over the worldwide Internet network. The Business utilizes a highly
redundant fiber-based infrastructure owned by multiple data carriers, including
the 30-mile fiber ring owned by the City of Palo Alto. The Business was started
in 1993 as a research project within the Company and commenced meaningful
operations during fiscal year 1996. The business is engaged primarily in
providing Internet interconnectivity solutions and related services in support
of mission critical Internet operations of its customers.

2. BASIS OF PRESENTATION:

The accompanying Combined Statement of Assets to be Acquired and Liabilities
to be Assumed and Combined Statement of Revenues and Direct Expenses ("the
financial statements") have been prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission for inclusion in
the Current Report on Form 8-K of AboveNet Communications, Inc. ("AboveNet").
The Combined Statement of Assets to be Acquired and Liabilities to be Assumed
includes the Business' assets to be sold to and liabilities to be assumed by
AboveNet, in accordance with the Asset Purchase Agreement dated May 21, 1999
(the "Agreement"). Compaq and AboveNet also entered into certain service
contracts and other arrangements that are described in the Agreement. These
arrangements include, but are not limited to, access to the Internet, favorable
pricing terms on such future services, and non-relocation and non-compete
arrangements. The terms of such contracts and other arrangements range from one
to 20 years. The assets to be acquired and liabilities to be assumed include
unbilled accounts receivable, prepaid expenses, property and equipment,
intangibles and unearned service revenue. The Combined Statement of Revenues and
Direct Expenses includes only those revenues and expenses directly related to
the Business to be sold. The financial statements exclude any other activity and
related expense that are not directly attributable to the Business, such as
corporate general and administrative costs, income taxes and interest expense.

The financial statements of the Business are derived from the historic books
and records of Digital through June 11, 1998. As a result of the acquisition of
Digital by Compaq on June 11, 1998, the financial statements of the Business
after the acquisition date are derived from the historic books and records of
Compaq.

As mentioned above, indirect costs allocated to the Business from the
Company, such as certain corporate general and administrative costs, have been
excluded from the financial statements on the basis that such costs are not
direct costs of the Business. However, in determining the Business' direct
expenses, certain allocations were made for expenses incurred by the Company, as
appropriate, that are directly attributed to the services provided to the
Business. These allocations relate primarily to engineering support in
connection with the delivery of services, facility and other occupancy costs,
and other general and administrative functions performed directly on behalf and
for the benefit of the

F-63
<PAGE>
PALO ALTO INTERNET EXCHANGE

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED
AND LIABILITIES TO BE ASSUMED AND
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED)

(AMOUNTS IN THOUSANDS)

2. BASIS OF PRESENTATION: (CONTINUED)
Business. Costs for such services have been reflected in the financial
statements on the basis of activity or utilization, estimated support provided
to the Business, or other methods management believe to be reasonable.

Cost of revenues primarily consists of costs relating to facility rent, data
communications and telecommunication expenses, service delivery and engineering
support personnel and depreciation expense.

The financial statements have been prepared in accordance with the Company's
accounting policies and generally accepted accounting principles. However, these
statements do not purport to represent the costs and expenses which may be
incurred by an unaffiliated company to achieve similar results. In addition, the
financial statements do not purport to represent the financial position of the
Business.

FISCAL YEAR

For purposes of these financial statements the fiscal year of PAIX is a
fifty-two week period ending the Saturday nearest the last day of December.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
direct expenses, and related disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.

PROPERTY AND EQUIPMENT

Building improvements, computer, telecommunications, and office equipment
and construction-in-progress are stated at cost less depreciation, which is
computed using the straight-line method. Expenditures for improvements which
substantially extend the useful life or increase the capacity of an asset are
capitalized. Ordinary repairs and maintenance are expensed as incurred.
Estimated useful lives for purposes of computing depreciation expense range from
two to 10 years.

INTANGIBLE ASSETS

Intangible assets, which consist of goodwill and customer lists related to
the acquisition of Digital by Compaq, are amortized on a straight-line basis
over 10 years.

REVENUE

Service revenue relating to Internet and colocation service contracts are
recognized over the contract period the services are provided. The Business
recognizes installation and certain other service fees as revenue on a per event
basis. Unearned service revenue represents the unearned portion of prepaid
service from Internet and colocation service contracts with customers. Such
amounts are amortized to revenue over the contract period, which ranges from one
year to three years. The

F-64
<PAGE>
PALO ALTO INTERNET EXCHANGE

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED
AND LIABILITIES TO BE ASSUMED AND
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED)

(AMOUNTS IN THOUSANDS)

2. BASIS OF PRESENTATION: (CONTINUED)
Business provides for estimated future losses on Internet and colocation service
contracts, to the extent such losses are probable and estimable.

RESEARCH AND DEVELOPMENT

Research and development costs of the Business are charged to expense in the
period incurred.

LONG-LIVED ASSETS

The Business reviews for the impairment of long-lived assets whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount.

CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

The Business sells to customers primarily in the Internet and
Telecommunications industries and customers are primarily located in the United
States. The Company performs ongoing credit evaluations of its customers'
financial condition and maintains adequate provisions for uncollectible amounts
when necessary.

For the periods in the fiscal year ended December 26, 1998, and for the
years ended December 27, 1997 and December 29, 1996, PAIX generated more than
10% of its total revenue from the following customers:

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
UUNet...................................................... 12% 19% 35%
BBN\GTE Internetworking.................................... -- -- 14%
Epoch...................................................... -- -- 31%
Genuity.................................................... -- -- 11%
</TABLE>

As of December 26, 1998 and December 27, 1997, customers which comprised 10%
or more of accounts receivable were as follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
UUNet....................................................... 23% 25%
Epoch....................................................... -- 20%
</TABLE>

UNAUDITED INTERIM FINANCIAL INFORMATION

The interim financial information for the quarters ended March 27, 1999 and
March 26, 1998 is unaudited and has been prepared on the same basis as the
audited financial statements. In the opinion of management, such unaudited
information includes all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the interim information.
Results for the

F-65
<PAGE>
PALO ALTO INTERNET EXCHANGE

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED
AND LIABILITIES TO BE ASSUMED AND
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED)

(AMOUNTS IN THOUSANDS)

2. BASIS OF PRESENTATION: (CONTINUED)
three months ended March 27, 1999 are not necessarily indicative of results to
be expected for the year ending December 31, 1999.

3. PROPERTY AND EQUIPMENT:

Major classifications of property and equipment consisted of the following:

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 26, DECEMBER 27,
USEFUL LIVES 1998 1997
--------------- ------------ ------------
<S> <C> <C> <C>
Building improvements............... 10 years $2,479 $2,450
Computer equipment.................. 2-3 years 52 87
Office equipment.................... 10 years 6 --
Electrical and telecommunications
equipment......................... 3 years 251 388
Construction in progress............ -- 521 112
------ ------
Less: accumulated depreciation...... (221) (287)
------ ------
$3,088 $2,750
====== ======
</TABLE>

Depreciation expense was approximately $221, $184, $286 and $1 for the
period June 12, 1998 through December 26, 1998, the period December 28, 1997
through June 11, 1998, and the fiscal years ended December 27, 1997 and
December 29, 1996, respectively.

4. INTANGIBLE ASSETS:

Intangible assets consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 26, JUNE 11,
1998 1998
------------ --------
<S> <C> <C>
Goodwill............................................... $27,400 $27,400
Customer lists......................................... 8,300 8,300
Less: accumulated amortization......................... (1,944) --
------- -------
$33,756 $35,700
======= =======
</TABLE>

On June 11, 1998, Compaq consummated its acquisition of Digital and
allocated its purchase price to the assets acquired and liabilities assumed
based on Compaq's estimates of fair value. The fair value assigned to intangible
assets acquired was based on a valuation prepared by an independent third-party
appraisal company and included goodwill and customer lists related to the
Business.

5. COMMITMENTS AND CONTINGENCIES:

The Company, on behalf of the Business, has entered into service contracts
with customers and telecommunications vendors to provide services.

F-66
<PAGE>
PALO ALTO INTERNET EXCHANGE

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED
AND LIABILITIES TO BE ASSUMED AND
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED)

(AMOUNTS IN THOUSANDS)

5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
In some instances, the Company provides limited warranties to customers in
connection with Internet and colocation service contracts. To date, costs
incurred in connection with such warranties have been immaterial.

6. LEGAL MATTERS:

The Company is involved in lawsuits, claims, investigations, and proceedings
which are being handled and defended in the ordinary course of business. There
are no such matters pending that the Company and its General Counsel expect to
be material in relation to the Business and no amounts have been accrued in the
financial statements for such matters.

7. RELATED PARTY TRANSACTIONS:

As described in Note 2, the Company incurred expenses for services performed
directly on behalf and for the benefit of the Business. Costs for such services
have been reflected in the accompanying Statement of Revenues and Direct
Expenses on the basis of activity or utilization, estimated support provided to
the Business, or other methods management believe to be reasonable. The cost of
such services is presented as cost of revenue, research and development and
general and administrative.

The Business has no external borrowings and there has been no allocation of
the Company's consolidated borrowings and related interest expense in the
financial statements.

The Business recognized revenue from AboveNet of $66, $36, $22 and $0 for
the period June 12, 1998 through December 26, 1998, the period December 28, 1997
through June 11, 1998, and the fiscal years ended December 27, 1997 and
December 29, 1996, respectively. Accounts receivable from AboveNet are $11 and
$4 at December 26, 1998 and December 27, 1997, respectively.

F-67
<PAGE>
P R O S P E C T U S

[LOGO]
--------------

From time to time, we may sell any of the following securities:

- Debt Securities

- Preferred Stock

- Class A Common Stock

- Warrants

We will provide the specific terms of these securities in one or more
supplements to this prospectus. You should read this prospectus and any
prospectus supplement carefully before you invest.

Our class A common stock is traded over-the-counter on The Nasdaq Stock
Market's National Market under the trading symbol "MFNX." The applicable
prospectus supplement will contain information, where applicable, as to any
other listing on The Nasdaq Stock Market's National Market or any securities
exchange of the securities covered by the prospectus supplement.

In addition, up to 21,505,376 shares of class A common stock being
registered may be offered by certain selling stockholders. For additional
information on the methods of sale, you should refer to the section entitled
"Plan of Distribution."

The securities may be sold directly by us or, in case of class A common
stock, may be sold by selling stockholders, to investors, through agents
designated from time to time or to or through underwriters or dealers. See "Plan
of Distribution." If any underwriters are involved in the sale of any securities
in respect of which this prospectus is being delivered, the names of such
underwriters and any applicable commissions or discounts will be set forth in a
prospectus supplement. The net proceeds we expect to receive from such sale also
will be set forth in a prospectus supplement. We would not receive any of the
proceeds from the sale of class A common stock by selling stockholders.

This prospectus may not be used to offer or sell any securities unless
accompanied by a prospectus supplement. We urge you to read carefully this
prospectus and the accompanying prospectus supplement, which will describe the
specific terms of the securities being offered to you, before you make your
investment decision.

INVESTING IN THE SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 3.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS
PROSPECTUS OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is October 28, 1999.
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
RISK FACTORS................................................ 3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 10
ABOUT THIS PROSPECTUS....................................... 11
BUSINESS.................................................... 11
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS................................................. 12
USE OF PROCEEDS............................................. 12
DESCRIPTION OF DEBT SECURITIES.............................. 13
DESCRIPTION OF CAPITAL STOCK................................ 22
DESCRIPTION OF WARRANTS..................................... 28
SELLING STOCKHOLDERS........................................ 29
PLAN OF DISTRIBUTION........................................ 29
VALIDITY OF SECURITIES...................................... 30
EXPERTS..................................................... 30
WHERE YOU CAN FIND MORE INFORMATION......................... 31
INCORPORATION OF INFORMATION WE FILE WITH THE SEC........... 31
</TABLE>

2
<PAGE>
RISK FACTORS

WE HAVE A LIMITED HISTORY OF OPERATIONS

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

WE EXPECT TO CONTINUE TO INCUR NET LOSSES

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

We have substantial debt and debt service requirements. Our substantial debt
has important consequences, including:

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

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

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

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

3
<PAGE>
WE CANNOT ASSURE YOU THAT WE WILL SUCCESSFULLY COMPLETE THE CONSTRUCTION OF OUR
NETWORKS

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

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

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

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

4
<PAGE>
WE MAY BE UNABLE TO RAISE THE ADDITIONAL FINANCING NECESSARY TO COMPLETE THE
CONSTRUCTION OF OUR NETWORKS, WHICH WOULD ADVERSELY AFFECT OUR LONG-TERM
BUSINESS STRATEGY

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

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

5
<PAGE>
REGULATION OF THE TELECOMMUNICATIONS INDUSTRY MAY LIMIT THE DEVELOPMENT OF OUR
NETWORKS AND AFFECT OUR COMPETITIVE POSITION

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

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

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

STATE LEGISLATION AFFECTS OUR PRICING POLICIES AND OUR COSTS

Our offering of transmission services, which is different from dark fiber
capacity, may be subject to regulation in each state to the extent that these
services are offered for intrastate use, and this regulation may have an adverse
effect on the results of our operations. We cannot assure you that these
regulations, if any, as well as future regulatory, judicial, or legislative
action will not have a material adverse effect on us. In particular, state
regulators have the authority to determine both the rates we will pay to
incumbent local exchange carriers for certain interconnection arrangements such
as physical collocation, and the prices that incumbent local exchange carriers
will be able to charge our potential customers for services and facilities that
compete with our services. We will also incur costs in order to comply with
regulatory requirements such as the filing of tariffs, submission of periodic
financial and operational reports to regulators, and payment of regulatory fees
and assessments including contributions to state universal service funds. In
some jurisdictions, our pricing flexibility for intrastate services may be
limited because of regulation, although our direct competitors will be subject
to similar restrictions.

6
<PAGE>
LOCAL GOVERNMENTS' CONTROL OVER RIGHTS-OF-WAY CAN LIMIT THE DEVELOPMENT OF
OUR NETWORKS

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

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

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

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

7
<PAGE>
to whom they granted easements to their properties are not entitled as a result
of these easements to grant rights of way to telecommunications providers. If
these disputes are resolved in the landowners' favor, we could be obligated to
make substantial lease payments to these landowners for the lease of these
rights of way. More specifically, our New York/New Jersey network relies upon,
and our planned expansions into Long Island and Westchester County will rely
upon, right-of-way agreements with Bell Atlantic Corporation and our subsidiary,
Empire City Subway Company (Ltd.). The current agreements may be terminated at
any time without cause with three months notice. In case of termination, we may
be required to remove our fiber optic cable from the conduits or poles of Bell
Atlantic. This termination would have a material adverse effect on our
operations.

RAPID TECHNOLOGICAL CHANGES COULD AFFECT THE CONTINUED USE OF OUR SERVICES AND
OUR RESULTS OF OPERATIONS

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

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

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

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

- longer payment cycles;

- problems in collecting accounts receivable;

- fluctuations in currency exchange rates;

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

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

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

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

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

- the difficulty of identifying appropriate acquisition candidates;

8
<PAGE>
- the difficulty of assimilating the operations of the respective entities;

- the potential disruption of our ongoing business;

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

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

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

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

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

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

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

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

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

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

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

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

The legal landscape that governs AboveNet has yet to be interpreted or
enforced. Regulatory issues for AboveNet's industry include property ownership,
copyrights and other intellectual property issues, taxation, libel, obscenity
and personal privacy. AboveNet's business may be adversely affected by the
adoption and interpretation of any future or currently existing laws and
regulations. AboveNet has no patented technology and relies on a combination of
copyright, trademark, service mark and trade secret laws and contractual
restrictions to establish and protect certain proprietary rights in its
technology. Despite AboveNet's design and implementation of a variety of network
security measures, unauthorized access, computer viruses, accidental or
intentional action and other disruptions could occur. In addition, we may incur
significant costs to prevent breaches in AboveNet's security or to alleviate
problems caused by those breaches. The law relating to the liability of online
services companies and Internet access providers for information carried on or
disseminated through their networks is currently unsettled. It is possible that
claims could be made against online services companies, co-location companies
and Internet access providers. We may need to implement measures to reduce our
exposure to this potential liability.

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

Metromedia Company and one of its general partners currently own 100% of our
class B common stock, which currently represents approximately 63% of our total
voting power and also is entitled to elect 75% of the members of our board of
directors. Accordingly, Metromedia Company is able to control the

9
<PAGE>
board of directors and all stockholder decisions and, in general, to determine
the outcome of any corporate transaction or other matter submitted to the
stockholders for approval, including mergers, consolidations and the sale of all
or substantially all of our assets, without the consent of other stockholders.
In addition, Metromedia Company has the power to prevent or cause a change in
control of our company.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Any statements in this prospectus about our expectations, belief, plans,
objectives, assumptions or future events or performance are not historical facts
and are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These statements are often, but not always, made
through the use of words or phrases such as "will likely result," "expect,"
"will continue," "anticipate," "estimate," "intend," "plan," "projection,"
"would" and "outlook." Accordingly, these statements involve estimates,
assumptions and uncertainties which could cause actual results to differ
materially from those expressed in them. Any forward-looking statements are
qualified in their entirety by reference to the factors discussed throughout
this document. The following cautionary statements identify important factors
that could cause our actual results to differ materially from those projected in
the forward-looking statements made in this document. Among the key factors that
have a direct bearing on our results of operation are:

- general economic and business conditions;

- the existence or absence of adverse publicity;

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

- changes in marketing and technology;

- changes in political, social and economic conditions, especially with
respect to our foreign operations;

- competition in the telecommunications industry;

- industry capacity;

- general risks of the telecommunications industries;

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

- changes in business strategy or development plans;

- management of growth;

- availability, terms and deployment of capital;

- construction schedules;

- costs and other effects of legal and administrative proceedings;

- dependence on senior management;

- business abilities and judgments of personnel;

- availability of qualified personnel; and

- labor and employee benefit costs.

10
<PAGE>
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for us to
predict which will arise. In addition, we cannot assess the impact of each
factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.

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

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may,
over the next two years, sell any combination of the securities described in
this prospectus in one or more offerings up to a total dollar amount of
$1,500,000,000. In addition, the selling stockholders may, over the next two
years, sell up to 21,505,376 shares of class A common stock.

This prospectus provides you with a general description of the securities we
or the selling stockholders may offer. Each time we or the selling stockholders
sell securities, we will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus supplement
may also add, update or change information contained in this prospectus. You
should read both this prospectus and any prospectus supplement together with
additional information described immediately below under the heading "Where You
Can Find More Information."

BUSINESS

We are a facilities-based provider of technologically advanced,
high-bandwidth, fiber optic communications infrastructure to carrier and
corporate/government customers in the United States and Europe. We have
installed and intend to install local intracity networks that will consist of in
excess of 2.9 million fiber miles, which is equal to the number of strands of
fiber in a length of fiber optic cable multiplied by the length of the cable in
miles, covering approximately 6,941 route miles, which is equal to the number of
miles spanned by fiber optic cable calculated without including physically
overlapping segments of cable, in 50 metropolitan markets in the United States
and Europe.

We focus on leasing or otherwise making available for use our broadband
communications infrastructure to two main customer groups: communications
carriers and corporate/governmental customers. In addition, through our
subsidiary AboveNet Communications Inc., we are providing facilities-based,
managed services for customer-owned webservers and related equipment, known as
co-location, and high performance Internet connectivity solutions for electronic
commerce and other business critical Internet operations. AboveNet has developed
a network architecture based upon strategically located facilities. These
facilities, known as Internet service exchanges, allow Internet content
providers direct access to Internet service providers.

Our company was founded in 1993 and is a Delaware corporation and its
executive offices are located at One North Lexington Avenue, White Plains, NY
10601.

11
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

The following table sets forth our consolidated ratio of earnings to fixed
charges, the deficiency of our consolidated earnings to cover fixed charges, our
consolidated ratio of earnings to combined fixed charges and preferred stock
dividends and the deficiency of our consolidated earnings to cover combined
fixed charges and preferred stock dividends for the periods indicated. We have
no preferred stock outstanding as of October 14, 1999.

<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED ENDED
DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated ratio of earnings to
fixed charges................... -- -- -- -- 1.61 -- --
Deficiency of consolidated
earnings to cover fixed
charges......................... $874 $4,319 $10,359 $26,259 -- $2,056 $12,278
Consolidated ratio of earnings to
combined fixed charges and
preferred stock dividends....... -- -- -- -- 1.61 -- --
Deficiency of consolidated
earnings to cover combined fixed
charges and preferred stock
dividends....................... $874 $4,319 $10,359 $26,259 -- $2,056 $12,278
</TABLE>

For purposes of computing the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends, earnings
represent income (loss) before income taxes and fixed charges. Fixed charges
consist of interest expense, the interest component of operating leases and
amortization of deferred financing costs.

USE OF PROCEEDS

We will use the net proceeds from our sale of the securities for the
development, engineering, construction, installation, acquisition, lease,
development or improvement of our telecommunications assets and for our general
corporate purposes, which may include, repaying indebtedness, making additions
to our working capital, funding future acquisitions or for any other purpose we
describe in the applicable prospectus supplement.

We will not receive any of the proceeds from the sale of class A common
stock or other securities that may be sold by selling stockholders.

12
<PAGE>
DESCRIPTION OF DEBT SECURITIES

The following is a summary of the general terms of the debt securities. We
will file a prospectus supplement that may contain additional terms when we
issue debt securities. The terms presented here, together with the terms in a
related prospectus supplement, which could be different from the terms described
below, will be a description of the material terms of the debt securities. You
should also read the indenture. We have filed the indenture with the SEC as an
exhibit to the registration statement of which this prospectus is a part. All
capitalized terms have the meanings specified in the Indenture. The terms and
provisions of the debt securities below will most likely be modified by the
documents that set forth the specific terms of the debt securities issued.

We may issue, from time to time, debt securities, in one or more series,
that will consist of either our senior debt ("Senior Debt Securities"), our
senior subordinated debt ("Senior Subordinated Debt Securities"), our
subordinated debt ("Subordinated Debt Securities") or our junior subordinated
debt ("Junior Subordinated Debt Securities" and, together with the Senior
Subordinated Debt Securities and the Subordinated Debt Securities, the
"Subordinated Securities"). The debt securities we offer will be issued under an
indenture between us and the trustee. Debt securities, whether senior, senior
subordinated, subordinated or junior subordinated, may be issued as convertible
debt securities or exchangeable debt securities.

GENERAL TERMS OF THE INDENTURE

The indenture does not limit the amount of debt securities that we may
issue. It provides that we may issue debt securities up to the principal amount
that we may authorize and may be in any currency or currency unit that we may
designate. The terms of the indenture do not contain any covenants or other
provisions designed to give holders of any debt securities protection against
changes in our operations, financial condition or transactions involving us, but
such provisions may be included in the documents that set forth the specific
terms of the debt securities.

We may issue the debt securities issued under the indenture as "discount
securities," which means they may be sold at a discount below their stated
principal amount. These debt securities, as well as other debt securities that
are not issued at a discount, may, for United States federal income tax
purposes, be treated as if they were issued with "original issue discount"
("OID") because of interest payment and other characteristics. Special United
States federal income tax considerations applicable to debt securities issued
with original issue discount will be described in more detail in any applicable
prospectus supplement.

The applicable prospectus supplement for a series of debt securities that we
issue will describe, among other things, the following terms of the offered debt
securities:

- the title;

- any limit on the aggregate principal amount;

- whether issued in fully registered form without coupons or in a form
registered as to principal only with coupons or in bearer form with
coupons;

- whether issued in the form of one or more global securities and whether
all or a portion of the principal amount of the debt securities is
represented thereby;

- the price or prices at which the debt securities will be issued;

- the date or dates on which principal is payable;

- the place or places where and the manner in which principal, premium or
interest will be payable and the place or places where the debt
securities may be presented for transfer and, if applicable, conversion
or exchange;

13
<PAGE>
- interest rates, and the dates from which interest, if any, will accrue,
and the dates when interest is payable and the maturity;

- the right, if any, to extend the interest payment periods and the
duration of the extensions;

- our rights or obligations to redeem or purchase the debt securities;

- any sinking fund provisions;

- conversion or exchange provisions, if any, including conversion or
exchange prices or rates and adjustments thereto;

- the currency or currencies of payment of principal or interest;

- the terms applicable to any debt securities issued at a discount from
their stated principal amount;

- the terms, if any, under which any debt securities will rank junior to
any of our other debt;

- if the amount of payments of principal or interest is to be determined by
reference to an index or formula, or based on a coin or currency other
than that in which the debt securities are stated to be payable, the
manner in which these amounts are determined and the calculation agent,
if any, with respect thereto;

- if other than the entire principal amount of the debt securities when
issued, the portion of the principal amount payable upon acceleration of
maturity as a result of a default on our obligations;

- if applicable, covenants affording holders of debt protection against
changes in our operations, financial condition or transactions involving
us;

- if other than dollars, the coin, currency or currencies in which the
series of debt securities are denominated; and

- any other specific terms of any debt securities.

The applicable prospectus supplement will present United States federal
income tax considerations for holders of any debt securities and the securities
exchange or quotation system on which any debt securities are listed or quoted.

SENIOR DEBT SECURITIES

Payment of the principal of, premium, if any, and interest on Senior Debt
Securities will rank on a parity with all of our other unsecured and
unsubordinated debt.

SENIOR SUBORDINATED DEBT SECURITIES

Payment of the principal of, premium, if any, and interest on Senior
Subordinated Debt Securities will be junior in right of payment to the prior
payment in full of all of our unsubordinated debt, including Senior Debt
Securities. We will state in the applicable prospectus supplement relating to
any Senior Subordinated Debt Securities the subordination terms of the
securities as well as the aggregate amount of outstanding debt, as of the most
recent practicable date, that by its terms would be senior to the Senior
Subordinated Debt Securities. We will also state in such prospectus supplement
limitations, if any, on issuance of additional senior debt.

SUBORDINATED DEBT SECURITIES

Payment of the principal of, premium, if any, and interest on Subordinated
Debt Securities will be subordinated and junior in right of payment to the prior
payment in full of all of our senior debt, including

14
<PAGE>
our senior subordinated debt. We will state in the applicable prospectus
supplement relating to any Subordinated Debt Securities the subordination terms
of the securities as well as the aggregate amount of outstanding indebtedness,
as of the most recent practicable date, that by its terms would be senior to the
Subordinated Debt Securities. We will also state in such prospectus supplement
limitations, if any, on issuance of additional senior indebtedness.

JUNIOR SUBORDINATED DEBT SECURITIES

Payment of the principal of, premium, if any, and interest on Junior
Subordinated Debt Securities will be subordinated and junior in right of payment
to the prior payment in full of all of our senior, senior subordinated and
subordinated debt. We will state in the applicable prospectus supplement
relating to any Junior Subordinated Debt Securities the subordination terms of
the securities as well as the aggregate amount of outstanding debt, as of the
most recent practicable date, that by its terms would be senior to the Junior
Subordinated Debt Securities. We will also state in such prospectus supplement
limitations, if any, on issuance of additional senior indebtedness.

CONVERSION OR EXCHANGE RIGHTS

Debt securities may be convertible into or exchangeable for shares of our
equity securities or equity securities of our subsidiaries or affiliates. The
terms and conditions of conversion or exchange will be stated in the applicable
prospectus supplement. The terms will include, among others, the following:

- the conversion or exchange price;

- the conversion or exchange period;

- provisions regarding the convertibility or exchangeability of the debt
securities, including who may convert or exchange;

- events requiring adjustment to the conversion or exchange price;

- provisions affecting conversion or exchange in the event of our
redemption of the debt securities; and

- any anti-dilution provisions, if applicable.

EVENTS OF DEFAULT

Unless otherwise provided for in the prospectus supplement, the term "Event
of Default," when used in the indenture, unless otherwise indicated, means any
of the following:

- failure to pay interest for 30 days after the date payment is due and
payable; provided that if we extend an interest payment period in
accordance with the terms of the debt securities, the extension will not
be a failure to pay interest;

- failure to pay principal or premium, if any, on any debt security when
due, either at maturity, upon any redemption, by declaration or
otherwise;

- failure to make sinking fund payments when due;

- failure to perform other covenants for 60 days after notice that
performance was required;

- events in bankruptcy, insolvency or reorganization of our company; or

- any other Event of Default provided in the applicable resolution of our
Board or the supplemental indenture under which we issue a series of debt
securities.

An Event of Default for a particular series of debt securities does not
necessarily constitute an Event of Default for any other series of debt
securities issued under the indenture. IF AN EVENT OF DEFAULT RELATING

15
<PAGE>
TO THE PAYMENT OF INTEREST, PRINCIPAL OR ANY SINKING FUND INSTALLMENT INVOLVING
ANY SERIES OF DEBT SECURITIES HAS OCCURRED AND IS CONTINUING, THE TRUSTEE OR THE
HOLDERS OF NOT LESS THAN 25% IN AGGREGATE PRINCIPAL AMOUNT OF THE DEBT
SECURITIES OF EACH AFFECTED SERIES MAY DECLARE THE ENTIRE PRINCIPAL OF ALL THE
DEBT SECURITIES OF THAT SERIES TO BE DUE AND PAYABLE IMMEDIATELY.

If an Event of Default relating to the performance of other covenants occurs
and is continuing for a period of 60 days after notice of such, or if any other
Event of Default occurs and is continuing involving all of the series of Senior
Debt Securities, then the trustee or the holders of not less than 25% in
aggregate principal amount of all of the series of Senior Debt Securities may
declare the entire principal amount of all of the series of Senior Debt
Securities due and payable immediately.

Similarly, if an Event of Default relating to the performance of other
covenants occurs and is continuing for a period of 60 days after notice of such,
or if any other Event of Default occurs and is continuing involving all of the
series of Subordinated Securities, then the trustee or the holders of not less
than 25% in aggregate principal amount of all of the series of Subordinated
Securities may declare the entire principal amount of all of the series of
Subordinated Securities due and payable immediately.

If, however, the Event of Default relating to the performance of other
covenants or any other Event of Default that has occurred and is continuing is
for less than all of the series of Senior Debt Securities or Subordinated
Securities, as the case may be, then, the trustee or the holders of not less
than 25% in aggregate principal amount of each affected series of the Senior
Debt Securities or the Subordinated Securities, as the case may be, may declare
the entire principal amount of all debt securities of such affected series due
and payable immediately. The holders of not less than a majority, or any
applicable supermajority, in aggregate principal amount of the debt securities
of a series may, after satisfying conditions, rescind and annul any of the
above-described declarations and consequences involving the series.

If an Event of Default relating to events in bankruptcy, insolvency or
reorganization of our company occurs and is continuing, then the principal
amount of all of the debt securities outstanding, and any accrued interest, will
automatically become due and payable immediately, without any declaration or
other act by the trustee or any holder.

The indenture imposes limitations on suits brought by holders of debt
securities against us. Except for actions for payment of overdue principal or
interest, no holder of debt securities of any series may institute any action
against us under the indenture unless:

- the holder has previously given to the trustee written notice of default
and continuance of such default,

- the holders of at least 25% in principal amount of the outstanding debt
securities of the affected series have requested that the trustee
institute the action,

- the requesting holders have offered the trustee reasonable indemnity for
expenses and liabilities that may be incurred by bringing the action,

- the trustee has not instituted the action within 60 days of the request,
and

- the trustee has not received inconsistent direction by the holders of a
majority in principal amount of the outstanding debt securities of the
series.

We will be required to file annually with the trustee a certificate, signed
by an officer of our company, stating whether or not the officer knows of any
default by us in the performance, observance or fulfillment of any condition or
covenant of the indenture.

16
<PAGE>
REGISTERED GLOBAL SECURITIES

We may issue the debt securities of a series in whole or in part in the form
of one or more fully registered global securities. We will deposit any
registered global securities with a depositary or with a nominee for a
depositary identified in the applicable prospectus supplement and registered in
the name of such depositary or nominee. In such case, we will issue one or more
registered global securities denominated in an amount equal to the aggregate
principal amount of all of the debt securities of the series to be issued and
represented by such registered global security or securities.

Unless and until it is exchanged in whole or in part for debt securities in
definitive registered form, a registered global security may not be transferred
except as a whole:

- by the depositary for such registered global security to its nominee,

- by a nominee of the depositary to the depositary or another nominee of
the depositary, or

- by the depositary or its nominee to a successor of the depositary or a
nominee of the successor.

The prospectus supplement relating to a series of debt securities will
describe the specific terms of the depositary arrangement involving any portion
of the series represented by a registered global security.

We anticipate that the following provisions will apply to all depositary
arrangements for debt securities:

- ownership of beneficial interests in a registered global security will be
limited to persons that have accounts with the depositary for such
registered global security, these persons being referred to as
"participants," or persons that may hold interests through participants;

- upon the issuance of a registered global security, the depositary for the
registered global security will credit, on its book-entry registration
and transfer system, the participants' accounts with the respective
principal amounts of the debt securities represented by the registered
global security beneficially owned by the participants;

- any dealers, underwriters, or agents participating in the distribution of
the debt securities will designate the accounts to be credited; and

- ownership of beneficial interest in such registered global security will
be shown on, and the transfer of such ownership interest will be effected
only through, records maintained by the depositary for such registered
global security for interests of participants, and on the records of
participants for interests of persons holding through participants.

The laws of some states may require that specified purchasers of securities
take physical delivery of the securities in definitive form. These laws may
limit the ability of those persons to own, transfer or pledge beneficial
interests in registered global securities.

So long as the depositary for a registered global security, or its nominee,
is the registered owner of such registered global security, the depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the debt securities represented by the registered global security for all
purposes under the indenture. Except as stated below, owners of beneficial
interests in a registered global security:

- will not be entitled to have the debt securities represented by a
registered global security registered in their names,

- will not receive or be entitled to receive physical delivery of the debt
securities in the definitive form, and

- will not be considered the owners or holders of the debt securities under
the Indenture.

17
<PAGE>
Accordingly, each person owning a beneficial interest in a registered global
security must rely on the procedures of the depositary for the registered global
security and, if the person is not a participant, on the procedures of a
participant through which the person owns its interest, to exercise any rights
of a holder under the indenture.

We understand that under existing industry practices, if we request any
action of holders or if an owner of a beneficial interest in a registered global
security desires to give or take any action that a holder is entitled to give or
take under the indenture, the depositary for the registered global security
would authorize the participants holding the relevant beneficial interests to
give or take the action, and the participants would authorize beneficial owners
owning through the participants to give or take the action or would otherwise
act upon the instructions of beneficial owners holding through them.

We will make payments of principal and premium, if any, and interest, if
any, on debt securities represented by a registered global security registered
in the name of a depositary or its nominee to the depositary or its nominee, as
the case may be, as the registered owners of the registered global security.
None of our company, the trustee or any other agent of our company or the
trustee will be responsible or liable for any aspect of the records relating to,
or payments made on account of, beneficial ownership interests in the registered
global security or for maintaining, supervising or reviewing any records
relating to the beneficial ownership interests.

We expect that the depositary for any debt securities represented by a
registered global security, upon receipt of any payments of principal and
premium, if any, and interest, if any, in respect of the registered global
security, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the registered
global security as shown on the records of the depositary. We also expect that
standing customer instructions and customary practices will govern payments by
participants to owners of beneficial interests in the registered global security
held through the participants, as is now the case with the securities held for
the accounts of customers in bearer form or registered in "street name." We also
expect that any of these payments will be the responsibility of the
participants.

If the depositary for any debt securities represented by a registered global
security is at any time unwilling or unable to continue as depositary or stops
being a clearing agency registered under the Exchange Act, we will appoint an
eligible successor depositary. If we fail to appoint an eligible successor
depositary within 90 days, we will issue the debt securities in definitive form
in exchange for the registered global security. In addition, we may at any time
and in our sole discretion decide not to have any of the debt securities of a
series represented by one or more registered global securities. In that event,we
will issue debt securities of the series in a definitive form in exchange for
all of the registered global securities representing the debt securities. The
trustee will register any debt securities issued in definitive form in exchange
for a registered global security in the name or names as the depositary, based
upon instructions from its participants, shall instruct the trustee.

We may also issue bearer debt securities of a series in the form of one or
more global securities, referred to as "bearer global securities." We will
deposit these securities with a common depositary for Euroclear System and
CedelBank, SOCIETE ANONYME, or with a nominee for the depositary identified in
the prospectus supplement relating to the series. The prospectus supplement
relating to a series of debt securities represented by a bearer global security
will describe the applicable terms and procedures. These will include the
specific terms of the depositary arrangement and any specific procedures for the
issuance of debt securities in definitive form in exchange for a bearer global
security, in proportion to the series represented by a bearer global security.

DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE

We can discharge or defease our obligations under the indenture as stated
below or as provided in the prospectus supplement.

18
<PAGE>
Unless otherwise provided in the applicable prospectus supplement, we may
discharge obligations to holders of any series of debt securities that have not
already been delivered to the trustee for cancellation and that have either
become due and payable or are by their terms to become due and payable, or are
scheduled for redemption, within one year. We may effect a discharge by
irrevocably depositing with the trustee cash or U.S. government obligations, as
trust funds, in an amount certified to be enough to pay when due, whether at
maturity, upon redemption or otherwise, the principal of, premium, if any, and
interest on the debt securities and any mandatory sinking fund payments.

Unless otherwise provided in the applicable prospectus supplement, we may
also discharge any and all of our obligations to holders of any series of debt
securities at any time ("defeasance"). We may also be released from the
obligations imposed by any covenants of any outstanding series of debt
securities and provisions of the indenture, and we may omit to comply with those
covenants without creating an event of default under the trust declaration
("covenant defeasance"). We may effect defeasance and covenant defeasance only
if, among other things:

- we irrevocably deposit with the trustee cash or U.S. government
obligations, as trust funds, in an amount certified to be enough to pay
at maturity, or upon redemption, the principal, premium, if any, and
interest on all outstanding debt securities of the series;

- we deliver to the trustee an opinion of counsel from a nationally
recognized law firm to the effect that (i) in the case of covenant
defeasance, the holders of the series of debt securities will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such defeasance, and will be subject to tax in the same manner
and at the same times as if no covenant defeasance had occurred and
(ii) in the case of defeasance, either we have received from, or there
has been published by, the Internal Revenue Service a ruling or there has
been a change in applicable U.S. federal income tax law, and based
thereon, the holders of the series of debt securities will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of
such defeasance, and will be subject to tax in the same manner as if no
defeasance had occurred; and

- in the case of subordinated debt securities, no event or condition shall
exist that, based on the subordination provisions applicable to the
series, would prevent us from making payments of principal of, premium,
if any, and interest on any of the applicable subordinated debt
securities at the date of the irrevocable deposit referred to above or at
any time during the period ending on the 91st day after the deposit date.

Although we may discharge or decrease our obligations under the indenture as
described in the two preceding paragraphs, we may not avoid, among other things,
our duty to register the transfer or exchange of any series of debt securities,
to replace any temporary, mutilated, destroyed, lost or stolen series of debt
securities or to maintain an office or agency in respect of any series of debt
securities.

MODIFICATION OF THE INDENTURE

Except as provided in the prospectus supplement, the indenture provides that
we and the trustee may enter into supplemental indentures without the consent of
the holders of debt securities to:

- secure any debt securities,

- evidence the assumption by a successor corporation of our obligations,

- add covenants for the protection of the holders of debt securities,

- cure any ambiguity or correct any inconsistency in the Indenture,

- establish the forms or terms of debt securities of any series, and

- evidence and provide for the acceptance of appointment by a successor
trustee.

19
<PAGE>
The indenture also provides that we and the trustee may, with the consent of
the holders of not less than a majority in aggregate principal amount of debt
securities of all series of Senior Debt Securities or of Subordinated
Securities, as the case may be, then outstanding and affected, voting as one
class, add any provisions to, or change in any manner, eliminate or modify in
any way the provisions of, the indenture or modify in any manner the rights of
the holders of the debt securities. We and the trustee may not, however, without
the consent of the holder of each outstanding debt security affected thereby:

- extend the final maturity of any debt security;

- reduce the principal amount or premium, if any;

- reduce the rate or extend the time of payment of interest;

- reduce any amount payable on redemption;

- change the currency in which the principal, unless otherwise provided for
a series, premium, if any, or interest is payable;

- reduce the amount of the principal of any debt security issued with an
original issue discount that is payable upon acceleration or provable in
bankruptcy;

- impair the right to institute suit for the enforcement of any payment on
any debt security when due; or

- reduce the percentage of holders of debt securities of any series whose
consent is required for any modification of the indenture.

CONCERNING THE TRUSTEE

The indenture provides that there may be more than one trustee under the
indenture, each for one or more series of debt securities. If there are
different trustees for different series of debt securities, each trustee will be
a trustee of a Trust under the indenture separate and apart from the trust
administered by any other trustee under the indenture. Except as otherwise
indicated in this prospectus or any prospectus supplement, any action permitted
to be taken by a trustee may be taken by such trustee only on the one or more
series of debt securities for which it is the trustee under the indenture. Any
trustee under the indenture may resign or be removed from one or more series of
debt securities. All payments of principal of, premium, if any, and interest on,
and all registration, transfer, exchange, authentication and delivery of, the
debt securities of a series will be effected by the trustee for such series at
an office designated by such trustee in New York, New York.

If the trustee becomes a creditor of our company, the indenture places
limitations on the right of the trustee to obtain payment of claims or to
realize on property received in respect of any such claim as security or
otherwise. The trustee may engage in other transactions. If it acquires any
conflicting interest relating to any duties concerning the debt securities,
however, it must eliminate the conflict or resign as trustee.

The holders of a majority in aggregate principal amount of any series of
debt securities then outstanding will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy available to
the trustee concerning the applicable series of debt securities, provided that
the direction:

- would not conflict with any rule of law or with the indenture,

- would not be unduly prejudicial to the rights of another holder of the
debt securities, and

- would not involve any trustee in personal liability.

20
<PAGE>
The indenture provides that in case an Event of Default shall occur, not be
cured and be known to any trustee, the trustee must use the same degree of care
as a prudent person would use in the conduct of his or her own affairs in the
exercise of the Trust's power. The trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
of the holders of the debt securities, unless they shall have offered to the
trustee security and indemnity satisfactory to the trustee.

NO INDIVIDUAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS OR DIRECTORS

The indenture provides that no incorporator and no past, present or future
shareholder, officer or director of our company or any successor corporation in
their capacity as such shall have any individual liability for any of our
obligations, covenants or agreements under the debt securities or the indenture.

GOVERNING LAW

The indenture and the debt securities will be governed by, and construed in
accordance with, the laws of the State of New York.

21
<PAGE>
DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 2,404,031,240 shares of class A
common stock, par value $.01 per share, 522,254,782 shares of class B common
stock, par value $.01 per share, and 20,000,000 shares of preferred stock, par
value $.01 per share. As of October 4, 1999 there were 198,835,335 shares of
class A common stock outstanding, 33,769,272 shares of class B common stock
outstanding and no shares of preferred stock outstanding.

COMMON STOCK

The shares of class A common stock and class B common stock are identical in
all respects, except for different voting rights described below and conversion
rights and restrictions on transfer applicable only to the class B common stock
that we also describe below.

VOTING RIGHTS. The holders of class A common stock are entitled to one vote
per share. Holders of class B common stock are entitled to ten votes per share.
Holders of all classes of common stock are entitled to vote together as a single
class on all matters presented to our stockholders for their vote or approval
except for the election and the removal of directors and as otherwise required
by applicable law. With respect to the election of directors, our amended and
restated certificate of incorporation provides that holders of class B common
stock vote as a separate class to elect at least 75% of the members of our
board.

Directors may be removed, with or without cause, only by the holders of the
class of common stock or series of preferred stock that, as of the date such
removal is effected, would be entitled to elect such director at the next annual
meeting of stockholders. Vacancies in a directorship may be filled only by

- the remaining directors elected by holders of each class of common stock
or series of preferred stock that elected such director and as of the date
such vacancy is filled, would be entitled to elect such director at the
next annual meeting of the stockholders; or

- if there are no such remaining directors, then by the vote of the holders
of the class or classes of common stock or series of preferred stock,
that, as of the date such vacancy is filled, would be entitled to elect
such director at the next annual meeting of stockholders, voting as a
separate class at a meeting, special or otherwise, of the holders of
common stock of such class or series of preferred stock.

DIVIDENDS. Holders of class A common stock and the class B common stock are
entitled to receive dividends at the same rate if, as and when such dividends
are declared by our board out of assets legally available therefor after payment
of dividends required to be paid on shares of outstanding preferred stock. We
may not make any dividend or distribution to any holder of any class of common
stock unless simultaneously with such dividend or distribution we make the same
dividend or distribution with respect to each outstanding share of common stock
regardless of class. In the case of a dividend or other distribution payable in
shares of class of common stock, including distributions pursuant to stock
splits or divisions of common stock, only shares of class A common stock may be
distributed with respect to class A common stock and only shares of class B
common stock may be distributed with respect to class B common stock. Whenever a
dividend or distribution, including distributions pursuant to stock splits or
divisions of the common stock, is payable in shares of a class of common stock,
the number of shares of each class of common stock payable per share of such
class of common stock will be equal in number. In the case of dividends or other
distributions consisting of our other voting securities or of voting securities
of any corporation which is our wholly-owned subsidiary, we will declare and pay
such dividends in two separate classes of such voting securities, identical in
all respects except that:

- the voting rights of each security issued to the holders of class A common
stock will be one-tenth of the voting rights of each security issued to
holders of class B common stock;

22
<PAGE>
- such security issued to holders of class B common stock will convert into
the security issued to the holders of class A common stock into class A
common stock and will have the same restrictions on transfer and ownership
applicable to the transfer and ownership of the class B common stock; and

- with respect only to dividends or other distributions of voting securities
of any corporation which is our wholly owned subsidiary, the respective
voting rights of each such security issued to holders of the class A
common stock and class B common stock with respect to election of
directors shall otherwise be as comparable as is practicable to those of
the class A common stock and class B common stock.

In the case of dividends or other distributions consisting of securities
convertible into, or exchangeable for, our voting securities or of voting
securities of any corporation which is our wholly owned subsidiary, we will
provide that such convertible or exchangeable securities and the underlying
securities be identical in all respects (including, without limitation, the
conversion or exchange rate) except that the underlying securities may have the
same difference as they would have if we issued voting securities of our wholly
owned subsidiary rather than issuing securities convertible into or exchangeable
for, such securities. We do not anticipate paying cash dividends in the
foreseeable future.

RESTRICTIONS ON ADDITIONAL ISSUANCES AND TRANSFER. We may not issue or sell
any shares of class B common stock or any securities (including, without
limitation, any rights, options, warrants or other securities) convertible into,
or exchangeable or exercisable for, shares of class B common stock to any person
or entity other than to Metromedia Company, John W. Kluge and Stuart Subotnick,
their affiliates, relatives and other permitted holders that are controlled by
these persons. Additionally, shares of class B common stock may not be
transferred, whether by sale, assignment, gift, bequest, appointment or
otherwise, to a person other than to a permitted holder. Notwithstanding the
foregoing:

- any permitted holder may pledge his, her or its shares of class B common
stock to a financial institution pursuant to a bona fide pledge of such
shares as collateral security for indebtedness due to the pledgee as long
as such shares remain subject to the transfer restrictions and that, in
the event of foreclosure or other similar action by the pledgee, such
pledged shares of class B common stock may only be transferred to a
permitted holder or converted into shares of class A common stock, as the
pledgee may elect; and

- the foregoing transfer restrictions do not apply in the case of a merger,
consolidation or business combination of us with or into another
corporation in which all of the outstanding shares of common stock and
preferred stock regardless of class are purchased by the acquiror.

CONVERSION. Class A common stock has no conversion rights. Shares of
class B common stock are convertible into class A common stock, in whole or in
part, at any time and from time to time at the option of the holders, on the
basis of one share of class A common stock for each share of class B common
stock converted. Additionally, at such time as a person ceased to be a permitted
holder, any share of class B common stock held by such person at such time shall
convert into a share of class A common stock. We agree that:

- we will at all times reserve and keep available out of our authorized but
unissued shares of class A common stock, such number of shares of class A
common stock issuable upon the conversion of all outstanding shares of
class B common stock;

- we will cause any shares of class A common stock issuable upon conversion
of a share of class B common stock that require registration with or
approval of any governmental authority under federal or state law before
such shares may be issued upon conversion to be so registered or approved;
and

23
<PAGE>
- we will use our best efforts to list the shares of class A common stock
required to be delivered upon conversion prior to such delivery upon such
national securities exchange upon which the outstanding class A common
stock is listed at the time of such delivery.

RECLASSIFICATION AND MERGER. In the event of a reclassification or other
similar transaction as a result of which the shares of class A common stock are
converted into another security, then a holder of class B common stock will be
entitled to receive upon conversion the amount of such other securities that the
holder would have received if the conversion occurred immediately prior to the
record date of such reclassification or other similar transaction. No
adjustments in respect of dividends will be made upon the conversion of any
share of class B common stock. If a share is converted subsequent to the record
date for the payment of a dividend or other distribution on shares of class B
common stock but prior to such payment, then the registered holder of such share
at the close of business on such record date will be entitled to receive the
dividend or other distribution payable on such date regardless of the conversion
thereof or our default in payment of the dividend due on such date.

In the event we enter into any consolidation, merger, combination or other
transaction in which shares of common stock are exchanged for or changed into
other stock or securities, cash and/or any other property, then, and in such
event, the shares of each class of common stock will be exchanged for or changed
into either:

- the same amount of stock, securities, cash and/or any other property, as
the case may be, into which or for which each share of any other class of
common stock is exchanged for or changed into shares of capital stock,
such shares so exchanged for or changed into may differ only to the extent
that the class A common stock and the class B common stock differ as
provided in our amended and restated certificate of incorporation; or

- if holders of each class of common stock are to receive different
distributions of stock, securities, cash and/or any other property, an
amount of stock, securities, cash and/or property per share having a value
as determined by an independent investment banking firm of national
reputation selected by the board of directors, equal to the value per
share into which or for which each share of any other class of common
stock is exchanged or changed.

LIQUIDATION. In the event of our liquidation, after payment of our debts
and other liabilities and after making provision for the holders of preferred
stock, if any, our remaining assets will be distributable ratably among the
holders of the class A common stock and class B common stock treated as a single
class.

OTHER PROVISIONS. Except as described below, the holders of the class A
common stock and class B common stock are not entitled to preemptive rights.
None of the class A common stock or class B common stock may be subdivided or
combined in any manner unless the other classes are subdivided or combined in
the same proportion. We may not make any offering of options, rights or warrants
to subscribe for shares of class B common stock. If we make an offering of
options, rights or warrants to subscribe for shares of any other class or
classes of capital stock (other than class B common stock) to all holders of a
class of common stock, then we are required to simultaneously make an identical
offering to all holders of the other classes of common stock other than to any
class the holders of which, voting as a separate class, agrees that such
offerings need not be made to such class. All such options, rights or warrants
offerings will offer the respective holders of class A common stock and class B
common stock the right to subscribe at the same rate per share. All outstanding
shares of common stock are, and all shares of common stock offered hereby when
issued will be upon payment therefor, validly issued, fully paid and
nonassessable.

24
<PAGE>
PREFERRED STOCK

The board has the authority, without any further action by our stockholders
to issue from time to time shares of preferred stock in one or more series and
to fix the designations, preferences, rights, qualifications, limitations and
restrictions thereof, including voting rights, dividend rights, dividend rates,
conversion rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series. The issuance of
preferred stock with voting rights could have an adverse effect on the voting
power of holders of common stock by increasing the number of outstanding shares
having voting rights. In addition, if the board authorizes preferred stock with
conversion rights, the number of shares of common stock outstanding could
potentially be increased up to the authorized amount. The issuance of preferred
stock could decrease the amount of earnings and assets available for
distribution to holders of common stock. Any such issuance could also have the
effect of delaying, deterring or preventing a change in control of the company
and may adversely affect the rights of holders of common stock.

CERTIFICATE OF INCORPORATION AND BY-LAWS

Stockholders' rights and related matters are governed by the Delaware
General Corporation Law, and our certificate of incorporation and the by-laws.
Certain provisions of our certificate of incorporation and by-laws, which are
summarized below, may have the effect, either alone or in combination with each
other, of discouraging or making more difficult a tender offer or takeover
attempt that is opposed by our board of directors but that a stockholder might
consider to be in its best interest. Such provisions may also adversely affect
prevailing market prices for the common stock. We believe that such provisions
are necessary to enable us to develop our business in a manner that will foster
our long-term growth without disruption caused by the threat of a takeover not
deemed by our board of directors to be in our best interests and those of our
stockholders.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS

Our by-laws establish advance notice procedures for stockholder proposals
and the nomination, other than by or at the direction of the board of directors,
of candidates for election as directors. These procedures provide that the
notice of stockholder proposals and stockholder nominations for the election of
directors at an annual meeting must be in writing and received by our secretary
at least 60 days but not more than 90 days prior to the scheduled date of the
annual meeting. However, if public disclosure of our annual meeting date is made
less than 70 days before the annual meeting, notice by a stockholder will be
considered timely if it is delivered not later than the 10th day following the
earlier of (i) the day on which public disclosure of the date of the annual
meeting was made or (ii) the day on which such notice of the date of the meeting
was mailed. The notice of nominations for the election of directors must set
forth certain information concerning the stockholder giving the notice and each
nominee.

By requiring advance notice of nominations by stockholders, these procedures
will afford our board of directors an opportunity to consider the qualifications
of the proposed nominees and, to the extent deemed necessary or desirable by the
board of directors, to inform stockholders about these qualifications. By
requiring advance notice of other proposed business, these procedures will
provide our board of directors with an opportunity to inform stockholders of any
business proposed to be conducted at a meeting, together with any
recommendations as to the board of directors' position on action to be taken on
such business. This should allow stockholders to better decide whether to attend
a meeting or to grant a proxy for the disposition of any such business.

DILUTION

Our certificate of incorporation provides that our board of directors is
authorized to create and issue, whether or not in connection with the issuance
and sale of any of its stock or other securities or property, rights entitling
the holders to purchase from us shares of stock or other securities of us or of
any other

25
<PAGE>
corporation. Our board of directors is authorized to issue these rights even
though the creation and issuance of these rights could have the effect of
discouraging third parties from seeking, or impairing their right to seek, to:

(1) acquire a significant portion of our outstanding securities;

(2) engage in any transaction which might result in a change of control of
the corporation; or

(3) enter into any agreement, arrangement or understanding with another
party to accomplish these transactions or for the purpose of acquiring,
holding, voting or disposing of any of our securities.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

Section 203 of the Delaware General Corporation Law prohibits certain
transactions between a Delaware corporation and an "interested stockholder",
which is defined as a person who, together with any affiliates and/or associates
of such person, beneficially owns, directly or indirectly, 15% or more of the
outstanding voting shares of a Delaware corporation. This provision prohibits
certain business combinations between an interested stockholder and a
corporation for a period of three years after the date the interested
stockholder acquired its stock, unless:

- the business combination is approved by the corporation's board of
directors prior to the date the interested stockholder acquired shares;

- the interested stockholder acquired at least 85% of the voting stock of
the corporation in the transaction in which it became an interested
stockholder; or

- the business combination is approved by a majority of the board of
directors and by the affirmative vote of two-thirds of the outstanding
voting stock owned by disinterested stockholders at an annual or special
meeting.

A business combination is defined broadly to include mergers,
consolidations, sales or other dispositions of assets having an aggregate value
of 10% or more of the consolidated assets of the corporation, and certain
transactions that would increase the interested stockholder's proportionate
share ownership in the corporation. A Delaware corporation, under a provision in
its certificate of incorporation or by-laws, may elect not to be governed by
Section 203 of the Delaware General Corporation Law. We are subject to the
restrictions imposed by Section 203.

Under certain circumstances, Section 203 makes it more difficult for a
person who could be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. Our certificate of incorporation does not exclude us from the
restrictions imposed under Section 203 of the Delaware General Corporation Law.
It is anticipated that the provisions of Section 203 of the Delaware General
Corporation Law may encourage companies interested in acquiring us to negotiate
in advance with the board of directors, since the stockholder approval
requirement would be avoided if a majority of the directors then in office
approves, prior to the date on which a stockholder becomes an interested
stockholder, either the business combination or the transaction which results in
the stockholder becoming an interested stockholder. Mr. Stephen Garafalo and
Metromedia Company are interested stockholders under the Delaware General
Corporation Law. However since their acquisition of our securities was approved
in advance by our board, they would not be prohibited from engaging in a
business transaction with us.

26
<PAGE>
LIMITATIONS OF DIRECTORS' LIABILITY

Our certificate of incorporation provides that none of our directors will be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director except for liability:

- for any breach of the director's duty of loyalty to us or our
stockholders,

- for acts of omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,

- under Section 174 of the Delaware General Corporation Law, or

- for any transaction from which the director derived an improper personal
benefit.

The effect of these provisions will be to eliminate our rights and our
stockholders (through stockholders' derivatives suits on behalf of us) to
recover monetary damages against a director for breach of fiduciary duty as a
director (including breaches resulting from grossly negligent behavior), except
in the situations described above. These provisions will not limit the liability
of directors under federal securities laws and will not affect the availability
of equitable remedies such as an injunction or rescission based upon a
director's breach of his duty of care.

TRANSFER AGENT

The Transfer Agent and Registrar for our class A common stock is ChaseMellon
Shareholder Services, L.L.C.

27
<PAGE>
DESCRIPTION OF WARRANTS

We may issue warrants for the purchase of debt securities, preferred stock
or common stock. Warrants may be issued independently or together with debt
securities, preferred stock or common stock offered by any prospectus supplement
and may be attached to or separate from any such offered securities. Each series
of warrants will be issued under a separate warrant agreement to be entered into
between us and a bank or trust company, as warrant agent. The warrant agent will
act solely as our agent in connection with the warrants and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of warrants. The following summary of certain provisions of
the warrants does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the provisions of the warrant agreement that will
be filed with the SEC in connection with the offering of such warrants.

DEBT WARRANTS

The prospectus supplement relating to a particular issue of debt warrants
will describe the terms of the debt warrants, including the following: (a) the
title of the debt warrants; (b) the offering price for the debt warrants, if
any; (c) the aggregate number of the debt warrants; (d) the designation and
terms of the debt securities purchasable upon exercise of the debt warrants;
(e) if applicable, the designation and terms of the debt securities with which
the debt warrants are issued and the number of such debt warrants issued with
each debt security; (f) if applicable, the date from and after which the debt
warrants and any debt securities issued therewith will be separately
transferable; (g) the principal amount of debt securities purchasable upon
exercise of a debt warrant and the price at which the principal amount of debt
securities may be purchased upon exercise (which price may be payable in cash,
securities, or other property); (h) the date on which the right to exercise the
debt warrants shall commence and the date on which the right shall expire;
(i) if applicable, the minimum or maximum amount of the debt warrants that may
be exercised at any one time; (j) whether the debt warrants represented by the
debt warrant certificates or debt securities that may be issued upon exercise of
the debt warrants will be issued in registered or bearer form; (k) information
with respect to book-entry procedures, if any; (1) the currency or currency
units in which the offering price, if any, and the exercise price are payable;
(m) if applicable, a discussion of material United States federal income tax
considerations; (n) the antidilution provisions of the debt warrants, if any;
(o) the redemption or call provisions, if any, applicable to such debt warrants;
and (p) any additional terms of the debt warrants, including terms, procedures,
and limitations relating to the exchange and exercise of the debt warrants.

STOCK WARRANTS

The prospectus supplement relating to any particular issue of preferred
stock warrants or common stock warrants will describe the terms of the warrants,
including the following: (a) the title of the warrants; (b) the offering price
for the warrants, if any; (c) the aggregate number of the warrants; (d) the
designation and terms of the common stock or preferred stock purchasable upon
exercise of the warrants; (e) if applicable, the designation and terms of the
offered securities with which the warrants are issued and the number of the
warrants issued with each such offered security; (f) if applicable, the date
from and after which the warrants and any offered securities issued therewith
will be separately transferable; (g) the number of shares of common stock or
preferred stock purchasable upon exercise of a warrant and the price at which
the shares may be purchased upon exercise; (h) the date on which the right to
exercise the warrants shall commence and the date on which the right shall
expire; (i) if applicable, the minimum or maximum amount of the warrants that
may be exercised at any one time; (j) the currency or currency units in which
the offering price, if any, and the exercise price are payable, (k) if
applicable, a discussion of material United States federal income tax
considerations; (l) the antidilution provisions of the warrants, if any;
(m) the redemption or call provisions, if any, applicable to such warrants; and
(n) any additional terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.

28
<PAGE>
SELLING STOCKHOLDERS

The selling stockholders may be our directors, executive officers, former
directors, employees or certain holders of our common stock, including
Metromedia Company and its general partners. The prospectus supplement for any
offering of the common stock by selling stockholders will include the following
information:

- the names of the selling stockholders;

- the nature of any position, office, or other material relationship which
the selling stockholder has had within the last three years with us or any
of our predecessors or affiliates;

- the number of shares held by each of the selling stockholders before the
offering;

- the percentage of the common stock held by each of the selling
stockholders after the offering; and

- the number of shares of the common stock offered by each of the selling
stockholders.

PLAN OF DISTRIBUTION

The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed from time
to time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. Each prospectus
supplement will describe the method of distribution of the securities offered
therein.

We are also registering shares of our class A common stock on behalf of the
selling stockholders. We and any selling stockholders may sell securities
directly, through agents designated from time to time, through underwriting
syndicates led by one or more managing underwriters or through one or more
underwriters acting alone. The selling stockholders may also distribute
securities through one or more special purpose entities, which may enter into
forward purchase arrangements with selling stockholders and distribute their own
securities. In connection with an offering of securities of such a special
purpose entity, the selling stockholders may also enter into securities loan
agreements with the underwriters of the entity's securities in order to
facilitate such underwriters' market-making activities in the entity's
securities. Each prospectus supplement will describe the terms of the securities
to which the prospectus supplement relates, the names of the selling
stockholders and the number of shares of class A common stock to be sold by
each, the name or names of any underwriters or agents with whom we or the
selling stockholders, or both, have entered into arrangements with respect to
the sale of the securities, the public offering or purchase price of the
securities and the net proceeds we or the selling stockholders will receive from
the sale. In addition, each prospectus supplement will describe any underwriting
discounts and other items constituting underwriters' compensation, any discounts
and commissions allowed or paid to dealers, if any, any commissions allowed or
paid to agents, and the securities exchange or exchanges, if any, on which the
securities will be listed. Dealer trading may take place in certain of the
securities, including securities not listed on any securities exchange.

If so indicated in the applicable prospectus supplement, we or the selling
stockholders, or both, will authorize underwriters or agents to solicit offers
by certain institutions to purchase securities from us or the selling
stockholders, or both, pursuant to delayed delivery contracts providing for
payment and delivery at a future date. Institutions with which the contracts may
be made include, among others:

- commercial and savings banks;

- insurance companies;

- pension funds;

- investment companies; and

- educational and charitable institutions.

29
<PAGE>
In all cases, the institutions must be approved by us or the selling
stockholders, or both. Unless otherwise set forth in the applicable prospectus
supplement, the obligations of any purchaser under any contract will not be
subject to any conditions except that (i) the purchase of the securities will
not at the time of delivery be prohibited under the laws of the jurisdiction to
which the purchaser is subject and (ii) if the securities are also being sold to
underwriters acting as principals for their own account, the underwriters will
have purchased the securities not sold for delayed delivery. The underwriters
and such other persons will not have any responsibility in respect of the
validity or performance of such contracts.

Any selling stockholder, underwriter or agent participating in the
distribution of the securities may be deemed to be an underwriter, as that term
is defined in the Securities Act, of the securities so offered and sold and any
discounts or commissions received by them, and any profit realized by them on
the same or resale of the securities may be deemed to be underwriting discounts
and commissions under the Securities Act.

Certain of any such underwriters and agents including their associates, may
be customers of, engage in transactions with and perform services for us and our
subsidiaries in the ordinary course of business. One or more of our affiliates
may from time to time act as an agent or underwriter in connection with the sale
of the securities to the extent permitted by applicable law. The participation
of any such affiliate in the offer and sale of the securities will comply with
Rule 2720 of the Conduct Rules of the National Association of Securities
Dealers, Inc. regarding the offer and sale of securities of an affiliate.

Under agreements which may be entered into by us, the underwriters, dealers
and agents who participate in the distribution of securities may be entitled to
indemnification by us against or contribution toward some liabilities, including
liabilities under the Securities Act.

Except as indicated in the applicable prospectus supplement, the securities
are not expected to be listed on a securities exchange, except for the class A
common stock, which is listed on The Nasdaq Stock Market's National Market, and
any underwriters or dealers will not be obligated to make a market in
securities. We cannot predict the activity or liquidity of any trading in the
securities.

We will not receive any proceeds from the sale of shares of class A common
stock or any other securities by the selling stockholders. We will, however,
bear certain expenses in connection with the registration of the securities
being offered under this prospectus by the selling stockholders, including all
costs incident to the offering and sale of the securities to the public other
than any commissions and discounts of underwriters, dealers or agents and any
transfer taxes.

VALIDITY OF SECURITIES

The validity of the securities offered hereby will be passed upon for us by
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York, and certain
matters may be passed upon for the underwriters or agents, if any, by Skadden,
Arps, Slate, Meagher & Flom LLP, Los Angeles, California. Skadden, Arps, Slate,
Meagher & Flom LLP has represented us on other unrelated matters.

EXPERTS

The consolidated financial statements of Metromedia Fiber Network, Inc.
appearing in Metromedia Fiber Network, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1998, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.

30
<PAGE>
incorporated by reference herein, and have been so included and incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.

The Combined Statement of Assets to be Acquired and Liabilities to be
Assumed of Palo Alto Internet Exchange as of December 26, 1998 and December 27,
1997 and the related Combined Statement of Revenues and Direct Expenses for the
period June 12, 1998 through December 26, 1998, the period December 28, 1997
through June 12, 1998 and the fiscal years ended December 27, 1997 and
December 29, 1996, that are incorporated by reference in this prospectus by
reference to the Registration Statement on Form S-4 (Registration
No. 333-84541) of Metromedia Fiber Network, Inc. filed with the Securities and
Exchange Commission on August 4, 1999, have been so incorporated in reliance on
the reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at the SEC's following public reference
facilities:

<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>

You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information on
the operations of the public reference facilities. Our SEC filings are also
available at the offices of The Nasdaq Stock Market at 1735 K Street, N.W.,
Washington, D.C. 20006.

INCORPORATION OF INFORMATION WE FILE WITH THE SEC

The SEC allows us to "incorporate by reference" the information we file with
them, which means: incorporated documents are considered part of this
prospectus; we can disclose important information to you by referring you to
those documents; and information that we file with the SEC will automatically
update and supersede this incorporated information.

We incorporate by reference the documents listed below which were filed with
the SEC under the Securities Exchange Act of 1934:

- Our Annual Report on Form 10-K for the year ended on December 31, 1998;

- Our Quarterly Report on Form 10-Q for the three months ended March 31,
1999;

- Our Quarterly Report on Form 10-Q for the six months ended June 30, 1999;

- Our Current Report on Form 8-K dated June 30, 1999;

- Our Current Report on Form 8-K dated September 10, 1999, as amended by our
Current Report on Form 8-K/A dated October 14, 1999 and as further amended
by our Current Report on Form 8-K/A dated October 26, 1999;

- Our Current Report on Form 8-K dated October 18, 1999;

31
<PAGE>
- The "Risk Factors--Risk Factors Applicable to AboveNet" and "Business of
AboveNet" sections and the financial statements of Palo Alto Internet
Exchange contained in our Registration Statement on Form S-4 dated
August 5, 1999 (File No. 333-84541); and

- The description of our class A common stock contained in our Registration
Statement on Form 8-A, filed on October 17, 1997.

We also incorporate by reference each of the following documents that we
will file with the SEC after the date of the initial filing of the registration
statement and prior to the time we sell all of the securities offered by this
prospectus:

- Reports filed under Section 13(a) and (c) of the Exchange Act;

- Definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent shareholders meeting; and

- Any reports filed under Section 15(d) of the Exchange Act.

You can obtain any of the filings incorporated by reference in this document
through us, or from the SEC through the SEC's web site or at the addresses
listed above. Documents incorporated by reference are available from us without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this prospectus. You can
obtain documents incorporated by reference in this prospectus by requesting them
in writing or by telephone from us at the following address:

Metromedia Fiber Network, Inc.
One North Lexington Avenue
White Plains, New York 10601
Attention: Investor Relations
Telephone: (914) 421-6700

If you request any incorporated documents from us, we will mail them to you
by first class mail, or another equally prompt means, within one business day
after we receive your request.

32
<PAGE>
- ------------------------------------
- ------------------------------------

10,000,000 SHARES

METROMEDIA FIBER NETWORK, INC.

CLASS A COMMON STOCK

[LOGO]

---------

P R O S P E C T U S S U P P L E M E N T
NOVEMBER 12, 1999
---------

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