SPLITROCK SERVICES INC, 10-Q, 2000-05-15

SPLITROCK SERVICES INC
10-Q, 2000-05-15
COMPUTER INTEGRATED SYSTEMS DESIGN

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------ -----------

COMMISSION FILE NUMBER 000-26827

SPLITROCK SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 76-0529757
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

9012 NEW TRAILS DRIVE, THE WOODLANDS, TEXAS 77381
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

Registrant's telephone number, including area code: (281) 465-1200

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X] No [_]

The number of shares of Common Stock, par value $.001 per share, of the
Registrant outstanding at April 25, 2000 was 100.
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SPLITROCK SERVICES, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

INDEX

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
Part I -- Financial Information

Item 1 -- Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999............ 2

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months
Ended March 31, 2000 and 1999 (unaudited)............................................................... 3

Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 (unaudited)..................................................................... 4

Notes to Condensed Consolidated Financial Statements (unaudited)........................................ 5

Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations........................................................... 8

Item 3 -- Quantitative and Qualitative Disclosures About Market Risk.......................................... 16

Part II -- Other Information

Item 1 -- Legal Proceedings................................................................................... 17

Item 2 -- Changes in Securities and Use of Proceeds........................................................... 18

Item 4 -- Submission of Matters to a Vote of Security Holders................................................. 19

Item 5 -- Other Information................................................................................... 20

Item 6 -- Exhibits and Reports on Form 8-K.................................................................... 20

Signatures..................................................................................................... 21
</TABLE>

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SPLITROCK SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED)
---------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 39,187 $ 92,593
Unrestricted investments -- short term................................................ 80 5,441
Restricted investments -- short term.................................................. 19,102 33,646
Accounts receivable, net.............................................................. 12,276 11,292
Prepaid expenses and other current assets............................................. 2,058 2,975
----------- -----------
Total current assets.................................................. 72,703 145,947
Restricted investments -- long term................................................... 22 140
Property and equipment, net........................................................... 150,393 124,371
Intangibles, net...................................................................... 8,125 8,577
Due from affiliates, net.............................................................. 2,312 --
Other assets.......................................................................... 33,700 22,251
----------- -----------

$ 267,255 $ 301,286
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Current maturities of capital lease obligations................................. $ 16,186 $ 21,089
Accounts payable................................................................ 5,725 2,906
Accrued interest payable........................................................ 6,474 14,141
Accrued liabilities................................................................... 28,588 31,013
Senior notes payable, current portion........................................... 100 --
----------- -----------
Total current liabilities............................................. 57,073 69,149
Senior notes payable ($260,900 face value net of
unamortized discount)........................................................... 258,332 258,387
Capital lease obligations............................................................. 10,252 18,934
----------- -----------
Total liabilities..................................................... 325,657 346,470
Stockholders' deficit:
Common stock, $.001 par value, 1,000 and 150,000,000 shares authorized,
respectively, 100 and 57,030,590 shares issued and outstanding as
of March 31, 2000, and December 31, 1999, respectively..................... -- 57
Common stock warrants................................................................. -- 1,750
Additional paid-in capital............................................................ 150,213 124,461
Accumulated other comprehensive loss.................................................. (144) (180)
Accumulated deficit................................................................... (208,471) (171,272)
----------- -----------
Total stockholders' deficit................................................. (58,402) (45,184)
----------- -----------
$ 267,255 $ 301,286
=========== ===========
</TABLE>

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

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SPLITROCK SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>

THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
--------------- ---------------
<S> <C> <C>

Revenues.................................... $ 35,037 $ 16,352
Operating expenses:
Splitrock network costs.................. 41,155 16,022
Legacy network costs..................... 1,425 13,029
Selling, general and administrative...... 10,012 2,570
Depreciation and amortization............ 12,470 4,635
Other.................................... 872 --
-------- --------
Total operating expenses............... 65,934 36,256
-------- --------
Loss from operations........................ (30,897) (19,904)
Other income (expense):
Interest income.......................... 1,960 2,604
Interest expense......................... (8,262) (8,191)
-------- --------
Net loss.................................... (37,199) (25,491)
-------- --------
Other comprehensive income (loss):
Unrealized income (loss) on securities... 36 (242)
-------- --------

Comprehensive net loss...................... $(37,163) $(25,733)
======== ========
</TABLE>

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

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SPLITROCK SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>

THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
--------------- ---------------
<S> <C> <C>

OPERATING ACTIVITIES:
Net loss..................................................................... $(37,199) $(25,491)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization............................................ 12,470 4,635
Amortization of debt discount and deferred financing costs............... 373 277
Changes in operating assets and liabilities:
Accounts receivable, net................................................. (984) (929)
Prepaid expenses and other current assets................................ 916 161
Accounts payable and accrued liabilities................................. 394 (3,805)
Accrued interest payable................................................. (7,667) (6,900)
-------- --------

Net cash used in operating activities................................ (31,697) (32,052)
-------- --------

INVESTING ACTIVITIES:
Purchases of property and equipment.......................................... (28,066) (15,292)
Liquidation of unrestricted investments...................................... 5,360 32,664
Use of restricted investments, net........................................... 14,698 13,897
Increase in intangible and other assets...................................... (2,340) (1,504)
-------- --------

Net cash (used in) or provided by investing activities............... (10,348) 29,765
-------- --------

FINANCING ACTIVITIES:
Costs to be reimbursed by affiliates, net.................................... (2,312) --
Proceeds (payments of taxes) from exercise of stock options, net............. (366) 99
Principal payments on capital lease obligations.............................. (8,683) (2,777)
-------- --------

Net cash used in financing activities................................ (11,361) (2,678)
-------- --------

NET DECREASE IN CASH AND CASH EQUIVALENTS....................................... (53,406) (4,965)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................................ 92,593 28,330
-------- --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD...................................... $ 39,187 $ 23,365
======== ========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of equipment through a capital contribution...................... $ 24,312 --
Acquisition of property and equipment through capital leases................. 1,220 --

</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

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SPLITROCK SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of
Splitrock Services, Inc. have been prepared in accordance with generally
accepted accounting principles and the Securities and Exchange Commission's
rules and regulations for reporting interim financial information. Certain
amounts previously reported have been reclassified in order to ensure
comparability among the periods reported.

The accompanying unaudited interim condensed consolidated financial
statements reflect all adjustments (consisting of normal recurring adjustments)
which, in the opinion of management, are necessary for a fair presentation of
the results for the interim periods presented. Accordingly, they do not include
all information and notes required by generally accepted accounting principles
for complete financial statements. The results for the interim period ended
March 31, 2000, are not necessarily indicative of results to be expected for the
entire year ending December 31, 2000, or future operating results.

On October 29, 1999 the Company formed Splitrock Leasing, LLC, a wholly owned
subsidiary. The accompanying consolidated financial statements include
operations of Splitrock Leasing, LLC. Significant intercompany accounts and
transactions have been eliminated in these consolidated financial statements.

The consolidated financial statements should be read in conjunction with the
Company's annual audited financials statements for the year ended December 31,
1999 as filed with the Securities and Exchange Commission on Form 10-K.

2. MERGER

On March 30, 2000, the Company was acquired by a wholly owned subsidiary of
McLeodUSA Incorporated ("McLeodUSA") pursuant to the Amended Plan of Merger
dated February 11, 2000. The acquisition of Splitrock Services by McLeodUSA was
effected through two separate but related transactions:

. a holding company reorganization, in which Splitrock Services, Inc. became a
wholly owned subsidiary of its former subsidiary, Splitrock Holdings,
resulting in reductions to the number of authorized shares and the number of
shares issued and outstanding; and

. a merger of Southside Acquisition Corporation, a Delaware corporation and
wholly owned subsidiary of McLeodUSA, with and into Splitrock Holdings in
which Splitrock Holdings was the surviving corporation and became a wholly
owned subsidiary of McLeodUSA.

Pursuant to these transactions, each of the Company's shareholders ultimately
received 0.5347 shares of McLeodUSA Class A common stock in exchange for each
share of Splitrock common stock owned. A substantial portion of the Company's
outstanding stock options became fully vested upon the merger pursuant to a
change of control provision in the Company's stock option plans. At the time of
the merger, each right to purchase a share of the Company's common stock
pursuant to an outstanding option or warrant

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was converted into an option or warrant with a right to purchase 0.5347 of a
share of McLeodUSA Class A common stock.

In connection with the acquisition of the Company's stock by McLeodUSA, the
common stock of Splitrock Services, Inc. was delisted from The Nasdaq Stock
Market.

Push down accounting has not been applied to the Company's financial
statements. Therefore, the net assets of the Company have not been adjusted to
reflect an allocation of the fair value of the McLeodUSA common stock paid by
McLeodUSA in exchange for 100% of the outstanding common stock of the Company.
The fair market values will be recorded on the consolidated financial statements
of McLeodUSA.

Direct costs incurred in connection with the acquisition will be paid and
recorded on the McLeodUSA consolidated financial statements. Such direct costs
paid by the Company are reimbursable by McLeodUSA and have been reflected as
part of the net due from affiliates on the Company's balance sheet. Costs
incurred by the Company to dispose of assets in connection with the plan of
acquisition are reflected in other expenses in the Company's Condensed
Consolidated Statement of Operations.

3. INDEBTEDNESS

The merger constituted a change of control as defined in the Indenture for the
Senior Notes payable. Therefore, the Company was required under the Indenture
to make an offer within 30 days of the change of control to repurchase all of
the Senior Notes properly tendered at a price equal to 101% of the principal
amount plus accrued and unpaid interest to the date of repurchase. On April 12,
2000 the Company mailed the appropriate notice to the holders of the Senior
Notes. The note holders had until May 12, 2000 to exercise their rights under
this notice and have until May 16, 2000 to revoke any such election. Security
holders with a principal amount of $100,000 exercised their option rights under
this notice.

In April 2000, the Company terminated the Credit Agreement signed on January
6, 2000 with Citibank USA, Inc. The conditions precedent to the initial
borrowings under the Credit Agreement were never satisfied.

4. PRODIGY AGREEMENT

In February 2000, the Company revised its agreement with Prodigy to convert
the pricing formula from a subscriber based arrangement to a fixed hourly fee
for usage effective January 1, 2000. As part of this amendment, the term of the
contract was extended to December 31, 2001.

5. COMMITMENTS & CONTINGENCIES

During March 2000, the Company settled its contract dispute with Ericsson,
Inc.

6. RELATED PARTY TRANSACTIONS

On January 6, 2000, Splitrock entered into a Master Services Agreement with
McLeodUSA for Internet dial-access services (the "Master Services Agreement")
and a Letter of Intent to sell bandwidth capacity (the

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"Bandwidth Capacity Letter") to McLeodUSA.

Under the Master Services Agreement, Splitrock agreed to provide wholesale
Internet dial-access services to McLeodUSA over a two year term for a minimum
total of $15 million. As of March 31, 2000 no services had been provided and no
amounts paid under this agreement.

Under the Bandwidth Capacity Letter, it is contemplated that Splitrock will
provide McLeodUSA with DS-3 miles of capacity on Splitrock's fiber network over
a twenty year term for total consideration of $90 million. As of March 31, 2000
a definitive agreement had not been executed.

McLeodUSA has several wholly owned subsidiaries that provide the Company
access line capacity pursuant to written agreements executed prior to merger
discussions. During the quarter ended March 31, 2000 the Company had recorded
expenses of $0.6 million related to these contracts of which $0.2 million
remains unpaid as of March 31, 2000.

On March 31, 2000 a wholly owned subsidiary of McLeodUSA purchased, on behalf
of Splitrock, approximately $24 million of Nortel dial access equipment pursuant
to the Company's purchase commitment agreement with Nortel Networks, Inc.
("Nortel"). In turn, McLeodUSA contributed the equipment to the Company as a
capital contribution. This transaction is recorded on the face of the Company's
Cash Flow Statement as a non-cash acquisition of equipment through a capital
contribution.

7. STOCK WARRANTS

On March 29, 2000, the Company issued 792,235 shares of its common stock
representing the shares underlying the common stock warrants outstanding as of
that date. These shares were issued to the warrant agent to be held in reserve
until the warrants are exercised by the warrant holders. Upon issuance of the
shares, the Company recorded the value of the warrants as common stock and
additional paid in capital. Upon merger these shares converted to McLeodUSA
Class A common stock based on the 0.5347 exchange ratio. In connection with the
merger and conversion, McLeodUSA assumed the Company's obligations under the
Warrant Agreement dated July 24, 1998, as amended. As of March 31, 2000, the
Company had no warrants outstanding.

7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION

FORWARD-LOOKING STATEMENTS

All references to "we", "us", "Splitrock", or "our" refer to Splitrock
Services, Inc. This section contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, which are intended to be covered by safe harbors created thereby.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty, including, without limitation, the changes that may result from the
review and evaluation of business plans by several new executives and as a
recent addition to the McLeodUSA enterprise, our ability to continue building
the Splitrock network, our ability to diversify our services and customers, the
ability to obtain necessary supplies, the ability to make projected capital
expenditures, and the ability to achieve projected quarterly results, as well as
general market conditions, competition, and pricing. All statements, other than
statements of historical facts, included or incorporated by reference in this
report that address activities, events or developments that we expect or
anticipate will or may occur in the future, including such things as future
capital expenditures (including the amount and nature hereof), business strategy
and measures to implement such strategy, competitive strengths, goals, expansion
and growth of Splitrock's business and operations, plans, references to future
success as well as other statements which include words such as "anticipate,"
"believe," "plan," "estimate," "expect," and "intend" and other similar
expressions, constitute forward-looking statements. Although we believe that
the assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and the inclusion of
such information should not be regarded as a representation by us or any other
person that our objectives and plans will be achieved.

Overview

We are a facilities-based provider of advanced data communications services.
The 340 active broadband access POPs comprising our network gave us a physical
presence in all 50 states, and allowed us to target 90% of U.S. businesses and
87% of U.S. households with a local call. We market our services to Internet
service providers, telecommunications carriers and other businesses throughout
the United States. The combination of the flexibility inherent in the design of
our existing broadband access network with our acquisition of significant fiber
optic facilities positions us to deliver a broad range of end-to-end data
communications services on our network, including:

. dial and dedicated Internet access

. Internet access for higher bandwidth services, such as digital subscriber
line and cable modem

. value-added services such as virtual Internet services, virtual private
networks and web hosting

. bandwidth leasing and colocation services.

We were founded in March 1997. In July 1997, we acquired the legacy network
infrastructure of Prodigy Communications Corporation ("Prodigy"), and agreed to
build and operate a nationwide

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communications network and to provide network services for Prodigy customers. By
late 1999, we had successfully completed a state-of-the-art nationwide
communication network and completely decommissioned the Prodigy legacy network
POPs.

In April 1999, we agreed to acquire indefeasible rights to use four dark fiber
strands of the fiber optic network currently under construction by Level 3
Communications, LLC ("Level 3") with an option to acquire up to 12 additional
fibers. The date by which we need to exercise our option to use any of the 12
additional fibers has been extended from April 26, 2000 to June 30, 2000, and
the total planned route miles has been increased from approximately 15,000 route
miles to approximately 16,000 route miles. Segments will be delivered as they
become available, currently anticipated through the first quarter of 2001.
Combining this fiber optic backbone with our broadband access network positions
us to:

. deliver, on our own facilities, a broad array of end-to-end data
communications services at the high level of quality and reliability
increasingly demanded by customers

. reduce significantly our network costs as a percentage of revenues as we
substitute the acquired bandwidth for existing leased circuit arrangements
with various telecommunications carriers

. expand our service offerings by providing bandwidth leasing services on a
stand alone basis or bundled with our other services

. increase the reliability and redundancy of our network

. increase the variety of service options and speeds available to customers

In connection with the fiber optic network deployment, we committed in October
1999 to purchase a minimum of approximately $50 million of fiber optronics
equipment, associated network management systems, and installation services from
Nortel. The equipment and services are expected to be delivered as the dark
fiber network is available for our use.

In July 1998, we raised $261 million through the issuance of our 11 3/4%
senior notes and warrants to purchase common stock, principally to finance
capital expenditures related to the construction and installation of our
broadband access network. In August 1999, we completed our initial public
offering, which resulted in net proceeds of $88.4 million after deducting
commissions and other fees and expenses.

On March 30, 2000, we were acquired by a wholly owned subsidiary of McLeodUSA
pursuant to an Amended Plan of Merger dated February 11, 2000. In connection
with the merger, the Company's common stock was delisted from The Nasdaq Stock
Market.

Revenues

Our current services provided include Internet dial access, Internet dedicated
services, virtual private network services (VPN) and virtual Internet services
(VIS). Internet dial access services represented 99% of our revenues for the
quarter ended March 31, 2000 as compared to 100% of our revenues for the quarter

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ended March 31, 1999.

We are currently building our first web hosting data center in Houston, Texas
to offer web hosting services. We are focusing our current VPN efforts on dial
VPN services for corporations with remote offices or business travel users. In
future periods we expect to expand our VPN offerings to include dedicated access
services such as frame relay and asynchronous transfer mode ("ATM").

Currently, Splitrock provides Internet dial access and related services to
Prodigy, which is one of the largest Internet service providers in the United
States. Splitrock is currently Prodigy's primary provider of dial access
services. Effective January 1, 2000, the Company revised its agreement with
Prodigy to convert the pricing formula from a subscriber based arrangement to a
fixed hourly rate for usage. As part of the amendment, the term of the contract
was extended to December 31, 2001. Revenue from Prodigy declined by 7.9% from
the prior quarter. For the quarter and the month ended March 31, 2000, Prodigy
accounted for 64.4% and 62.0% of our revenue, respectively. For the year ended
December 31, 1999, Prodigy accounted for 85.5% of our revenues. While we expect
revenues from Prodigy to continue to decrease as a percentage of our total
revenues in future periods, we believe that Prodigy will continue to account for
a significant portion of our revenues.

In addition to the revenue derived from Prodigy, four other customers
represented approximately 35% of our revenue in the first quarter of 2000. As
the usage of the existing customer base increases and if our competitors
increase their capacity, we may be forced to change our pricing to be more
competitive. We can not assure you that this will not have a negative impact on
future operating results.

Splitrock Network Costs

Our Splitrock network costs include all expenses incurred in connection with
operating our network. These costs primarily include leased telecommunication
line charges for connecting our POPs to local central offices and for backbone
transmission, personnel expenses, and operating expenses related to network
operations, maintenance, field operations and facility management. Increases in
Splitrock network operating costs relate to the increase in our network
facilities and line charges incurred in connection with the migration of
Prodigy's subscribers to our network and the growth in total subscriber usage.

We are increasing our network operating expenditures to significantly expand
our broadband access network and backbone capacity in anticipation of expected
increases in dial access and other services. We incur expenditures to increase
our capacity to serve customers in advance of entering into new customer
relationships.

During the first quarter of 2000 we acquired our first dark fiber segment from
Level 3 and began installing equipment to utilize that segment of our planned
16,000 route mile fiber optic network. In connection with the construction and
installation of our fiber optic network, operating expenses such as maintenance
and colocation costs will increase prior to the Company recognizing any revenue
from such facilities. However, we expect our network operating costs to
decrease as a percentage of revenues when we are able to substitute our
completed fiber optic backbone network for existing leased circuit arrangements
with various telecommunications carriers.

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Legacy Network Costs

Legacy network costs include all expenses incurred in connection with
operating and decommissioning the Prodigy legacy network, including the AT&T
network, and legacy network costs of servicing the InfiNet legacy network until
we transition the InfiNet traffic to our network.

Legacy network costs declined throughout 1999 and the first quarter of 2000.
The largest component of our legacy network costs were paid to AT&T for usage
incurred on their network (formerly IBM's Global Services Network). We have
migrated all of the traffic from the AT&T network and substantially all of the
traffic from InfiNet's legacy network to our network. We do not expect to incur
any significant legacy network costs in the future.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of personnel and
operating costs relating to executive management, accounting and finance,
information systems, human resources, sales and marketing, customer support,
network planning, development, and administrative employees.

We expect to continue to invest in our sales and marketing programs, our back
office systems and infrastructure to achieve and properly support the intended
expansion of our services and our customer base. We expect to incur these costs
prior to recognizing revenues from these activities.

As of March 31, 2000 our sales and marketing staff totaled 98 professionals,
the majority of whom comprised the direct sales force. We are also utilizing
alternate distribution channels, such as agents, resellers and wholesalers, to
market our services. We cannot assure you that we will be successful in our
marketing plan.

Depreciation and Amortization

Depreciation and amortization expense consists primarily of depreciation of
network equipment. We anticipate that our depreciation and amortization
expenses will increase significantly as we deploy our fiber optic network and
expand the capacity of our broadband dial access network.

Interest Expense

Interest expense represents interest on our 11.75% Senior Notes and interest
at various rates on our capital leases.

Net Losses

We have incurred net losses since our inception in March 1997. We anticipate
that we will continue to incur net losses while we complete the construction and
installation of our fiber optic network and until we significantly increase our
customer and revenue base. The extent to which we continue to incur net

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losses is largely dependent upon the timely deployment of the fiber optic
network, the rate at which we can expand our customer and revenue base and our
ability to maximize use of our nationwide network.

Results of Operations

Three Months Ended March 31, 2000 Compared to Three Months Ended March 31,
1999

Revenues. Revenues for the three months ended March 31, 2000 totaled $35.0
million, an increase of $18.6 million from revenues of $16.4 million for the
three months ended March 31, 1999. This 113.4% net increase was due primarily
to increased Prodigy revenue as a result of their subscriber growth and an
increase in revenue from our expanding customer base, offset somewhat by a price
reduction which became effective January 1, 2000 in connection with our
amendment to the Prodigy contract.

Splitrock Network Costs. Splitrock network costs for the three months ended
March 31, 2000 were $41.2 million compared to $16.0 million for the three months
ended March 31, 1999. This $25.2 million increase was due to the growth in the
size of our network from 190 operational POPs as of March 31, 1999 to 340
operational POPs as of March 31, 2000 and the migration of traffic from the
legacy networks to our network. As a percentage of revenues, Splitrock network
costs increased to 117.5% of revenue for the three months ended March 31, 2000
from 98.0% of revenues for the three months ended March 31, 1999.

Legacy Network Costs. Legacy network costs for the three months ended March
31, 2000 were $1.4 million compared to $13.0 million for the three months ended
March 31, 1999. This $11.6 million or 89.1% decrease was primarily attributable
to a decrease in access charges incurred for use of the AT&T network as traffic
from the legacy networks was migrated to our network. As a percentage of
revenues, legacy network costs decreased to 4.1% of revenue for the three months
ended March 31, 2000 from 79.7% of revenues for the three months ended March 31,
1999.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended March 31, 2000 were $10.0
million compared to $2.6 million for the three months ended March 31, 1999. The
majority of this increase was due to personnel costs incurred in building our
direct sales force beginning in the second quarter of 1999 and the increase in
personnel and facilities to support the growth in the size of our company. As a
percentage of revenues, selling, general and administrative expenses increased
to 28.6% of revenue for the three months ended March 31, 2000 from 15.7% of
revenues for the three months ended March 31, 1999.

Depreciation and Amortization. Depreciation and amortization was $12.5
million for the three months ended March 31, 2000 compared to $4.6 million for
the three months ended March 31, 1999. This increase was due to the increase in
equipment and facilities placed in service between the two periods.

Interest Expense. Interest expense was $8.3 million for the three months
ended March 31, 2000, compared to $8.2 million for the three months ended March
31, 1999.

Interest Income. Interest income relates to the interest earned on
investments of cash on hand in investment grade commercial paper and money
market accounts. Interest income was $2.0 million for the

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three months ended March 31, 2000, compared to $2.6 million for the three months
ended March 31, 1999. This decrease is due to the decrease in the cash balances
between the two periods.

Liquidity and Capital Resources

Our operations have required funding of substantial operating losses and
capital investment for the purchase of communications equipment and the design
and development of our network.

Since our inception, we have satisfied our cash requirements primarily through
the issuance of equity or debt securities. As of March 31, 2000, we had raised
approximately $446.1 million, including:

. $34.9 million through private sales of our equity securities;

. $263.3 million through the issuance of debt;

. $88.4 million in net proceeds from the Company's initial public offering;
and

. $59.5 million in equipment financing primarily from equipment vendors and
leasing companies.

We expect our future liquidity and capital requirements to relate primarily
to:

. the acquisition of rights to use dark fiber;

. capital expenditures;

. operating losses;

. debt service payments; and

. working capital and other corporate purposes.

Net cash used in operating activities was $31.7 million during the three
months ended March 31, 2000. The net cash used in operating activities in this
period was primarily attributable to the Company's net losses. Net cash used in
operating activities was $32.1 million for the three months ended March 31,
1999.

Net cash used in investing activities for the three months ended March 31,
2000 was $10.3 million and consisted primarily of payments of $12.4 million made
to Level 3 to acquire dark fiber, $15.6 million in equipment purchases, and $2.3
million increase in intangible assets, offset by the use of restricted and
unrestricted investments of $20.0 million. Net cash provided by investing
activities during the three months ended March 31, 1999 was $29.8 million. This
consisted primarily of net proceeds of $46.6 million from the liquidation of
restricted and unrestricted investments, offset by $15.3 million used for
purchases of property and equipment, and $1.5 million due to increases in
intangible and other assets.

Net cash used in financing activities for the three months ended March 31,
2000 was $11.4 million,

13
<PAGE>

which was derived primarily from principal payments of $8.7 million on capital
lease obligations, $2.3 million of payments for which we will be reimbursed from
McLeodUSA and $0.4 million of taxes paid, in excess of cash proceeds, related to
employee stock option exercises. Net cash used in financing activities for the
three months ended March 31, 1999 was $2.7 million and consisted primarily of
principal payments on capital leases.

The principal amount of our 11.75% Senior Notes ($260.9 million) is payable in
2008 subject to early redemption upon the occurrence of a change of control,
which would require the Company to tender an offer to repurchase all Senior
Notes at a price equal to 101% of the principal plus accrued interest. The
merger with McLeodUSA constituted a change in control. Therefore, the Company
was required to make an offer, within 30 days of the merger, to repurchase all
of the Senior Notes properly tendered at a price equal to 101% of the principal
amount plus accrued and unpaid interest to the date of repurchase. On April 12,
2000, the Company mailed a notice to the holders of the Senior Notes and they
had until May 12, 2000 to exercise their rights for repurchase and have until
May 16, 2000 to revoke any such election. Security holders with a principal
amount of $100,000 exercised their option rights under this notice. Interest
payments on the notes are due semi annually. The payment in January was funded,
and the July 2000 payment will be funded, by certain of the proceeds, together
with interest thereon, escrowed in connection with the issuance of the 11.75%
Senior Notes which provided for the first four interest payments of the senior
notes. The remaining escrow amount is recorded as part of our restricted
investments at March 31, 2000. Beginning in January 2001, the interest payments
will be funded from our cash and unrestricted investments.

We have agreed to acquire indefeasible rights to use four dark fibers, with an
option to use up to 12 additional fibers, in the fiber optic network under
construction by Level 3. We are required to pay for the dark fiber in segments
as they become available, which is expected to occur through the first quarter
of 2001. The date by which we need to exercise our option to use any of the 12
additional fibers has been extended from April 26, 2000 to June 30, 2000, and
the total planned route miles has been increased from approximately 15,000 route
miles to approximately 16,000 route miles.

Capital expenditures, including purchases under capital lease agreements and
equipment contributed by McLeodUSA, were $53.6 million and $15.3 million for the
three months ended March 31, 2000 and 1999, respectively.

As of March 31, 2000, we estimate that our capital requirements through 2002
will be approximately $385.0 million, including capital expenditures for:

. an indefeasible right to use four strands of dark fiber under our
agreement with Level 3;

. the purchase of fiber optronics equipment to utilize a portion of the
dark fiber acquired;

. the enhancement of our network to provide additional value added
services; and

. the improvement of our network management, billing and other back office
systems.

We are currently reviewing our business plans with new executives leading the
Company and with our parent company. We can not assure you that our current
plans will not change as a result of those

14
<PAGE>

discussions.

As of March 31, 2000, we had an accumulated deficit of $208.5 million, cash
and cash equivalents and unrestricted investments of $39.3 million, and
restricted investments of $19.1 million.

Our current sources of available cash resources are not sufficient to meet our
anticipated cash requirements for the foreseeable future. Our parent company
may have access to funds to support our business plan. However, we can not
assure you that our parent company will have or will provide the funds when
needed. If the parent company does not provide funding, we will seek to obtain
financing through vendor financing, bank financing, strategic relationships or
some combination of the foregoing. The terms of both our and McLeodUSA debt
securities restrict our ability to incur indebtedness and create liens and may
make it more difficult for us to raise capital needed to fully implement our
business plan.

We cannot assure you that the additional financing needed will be available on
terms acceptable to us, or at all. If we are unable to obtain the funds
necessary to finance our expected capital requirements, we may have to revise
our business plans and this may materially and adversely affect our financial
condition and results of operations. Debt financing, if available, may involve
restrictive covenants, the grant of security interests and significant interest
expense.

Effects of New Accounting Standards

Accounting For Derivative Instruments and Hedging Activities

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended , is effective for
fiscal years beginning after June 15, 2000. SFAS No. 133 establishes accounting
and reporting standards for derivative instruments and hedging activities by
requiring that entities recognize all derivatives as either assets or
liabilities at fair market value on the balance sheet. Our management does not
expect the impact of the adoption of SFAS No. 133 to be material to its results
of operations as it does not currently hold any derivative instruments or engage
in hedging activities.

Revenue Recognition

The effective date for Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition" has been delayed and is effective beginning in the second quarter
of 2000. SAB No. 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. Our management believes that
this statement will not have a material effect on results of operations and
financial position of the Company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following discusses our exposure to market risk related to changes in
interest rates, equity prices and foreign currency exchange rates. Market risk
generally represents the risk of loss that may result from the potential change
in the value of a financial instrument as a result of fluctuations in interest
rates and market prices. We have not traded or otherwise bought and sold
derivatives nor do we expect to do so in the future. We also do not invest in
market risk sensitive instruments for trading purposes.

15
<PAGE>

This discussion contains forward-looking statements that are subject to risks
and uncertainties. Actual results could vary materially as a result of a number
of factors including those set forth under "Item 2. Management's Discussion and
Analysis of Financial Condition - Forward Looking Statements."

Interest Rate Risk

We may be exposed to market risk related to changes in interest rates. At
this time, we have not entered into any interest rate risk arrangements, and
while we may enter into interest rate risk hedging arrangements in the future,
we cannot assure you that we will be able to find commercially satisfactory
terms at that time. Our investment policy is to manage our investment portfolio
to preserve principal and liquidity while maximizing the return on the
investment portfolio through the full investment of available funds. We
diversify our marketable securities portfolio by investing in multiple types of
investment-grade securities. Our investment portfolio is primarily invested in
short-term securities with at least an investment grade rating to minimize
interest rate and credit risk as well as to provide for an immediate source of
funds. Although changes in interest rates may affect the fair value of the
investment portfolio and cause unrealized gains or losses, such gains or losses
would not be realized unless the investments are sold.

Our Short-Term Investments. As of March 31, 2000, we had unrestricted short-
term investments of $0.1 million and restricted short-term investments of $19.1
million. These short-term investments are highly liquid investments with
original maturities at the date of purchase of between three and twelve months
and consist primarily of money market funds and high-grade securities such as
corporate notes, municipal securities and U.S. Treasury notes. We value these
investments at fair market value. These investments are subject to interest
rate risk and will fall in value if market interest rates increase. A
hypothetical increase in market interest rates by 10% from levels at March 31,
2000 would cause the fair value of these short-term investments to decline by an
immaterial amount. We have the ability to hold these investments until
maturity, and therefore would not expect the value of these investments to be
affected to any significant degree by the effect of a sudden change in market
interest rates. Declines in interest rates over time will, however, reduce our
interest income, especially from money market funds whose rates change on a
daily basis.

Our Long-Term Investments. As of March 31, 2000, we maintained restricted
long-term investments totaling $22.0 thousand in connection with our 11.75%
Senior Notes due 2008. These long-term investments consist of high-grade
securities such as corporate notes, municipal securities and U.S. Treasury
notes, all of which are considered liquid and available for sale. These
securities will not be held to maturity. A hypothetical increase in market
interest rates by 10% from levels at December 31, 1999 would cause the fair
value of these securities to decline by an immaterial amount.

Outstanding Debt. As of March 31, 2000, the carrying value of our outstanding
senior notes was approximately $258.4 million at a fixed interest rate of
113/4%. In certain circumstances, we may redeem this long-term debt. Because
the interest rates on these instruments are fixed, a hypothetical 10% decrease
in interest rates would not have a material impact on our financial condition,
revenues or operations. Increases in interest rates could, however, increase
the interest expense associated with future borrowings, if any. We do not hedge
against interest rate increases.

16
<PAGE>

Equity Price Risk

We do not own an equity stake or investment in another company or business
entity and therefore we do not believe that we have any direct equity price
risk. We do not hedge against equity price changes.

Foreign Currency Exchange Rate Risk

All of our revenues are realized in dollars and all of our revenues are from
customers in the United States. Therefore, we do not believe that we have any
significant direct foreign currency exchange rate risk. We do not hedge against
foreign currency exchange rate changes.

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During March 2000, we settled the contract dispute with Ericsson Inc. that
was previously disclosed in our annual report on Form 10-K for 1999. The amount
we paid Ericsson did not have a material adverse effect on our business.

The background on the dispute is as follows: we entered into an agreement
with Ericsson, Inc. to construct 99 POP sites on a turnkey basis. By November
1998, the contractor had failed to meet construction milestones under our
agreement. As a result, we had to hire other service providers and suppliers in
addition to supervisory field and office personnel to complete the network on
schedule. We also incurred additional expenses to maintain POP sites on our
legacy network. We received invoices totaling $9.1 million from the contractor
and disputed the amount due. The contractor sought to secure payment of these
invoices. We argued that the amounts the contractor claimed were not owed
because of the contractor's failure to perform under the terms of our agreement
and the offsetting expenses we incurred to complete the work. On November 4,
1999, Ericsson filed a Demand for Arbitration on the "contract dispute" pursuant
to the Commercial Arbitration Rules with the American Arbitration Association.
We filed a counterclaim and vigorously defended the dispute pursuant to state
tort and contract causes of action, including negligent misrepresentation, fraud
in the inducement, breach of contract, failure to timely perform, failure to
perform in a good and workmanlike manner, breach of the duty of good faith,
failure of consideration and failure of essential purpose.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On March 30, 2000, the stockholders of Splitrock and the stockholders of
McLeodUSA approved the merger agreement, dated February 11, 2000, between the
companies. The acquisition of Splitrock Services by McLeodUSA was effected
through two separate but related transactions:

. a holding company reorganization (the "Reorganization"), in which
Splitrock Services became a wholly owned subsidiary of its former
subsidiary, Splitrock Holdings, resulting in changes to the number of
authorized shares to 1,000 shares and the shares issued and outstanding
to 100 shares; and

. a merger (the "Merger") of Southside Acquisition Corporation, a Delaware
corporation and

17
<PAGE>

wholly owned subsidiary of McLeodUSA, with and into Splitrock Holdings in
which Splitrock Holdings was the surviving corporation and became a
wholly owned subsidiary of McLeodUSA.

In the Reorganization, Splitrock Services became a wholly owned subsidiary of
Splitrock Holdings and continued its corporate existence under the laws of the
State of Delaware. At the effective time of the Reorganization, each outstanding
share of Splitrock Service common stock, par value $.001 per share, was
converted into the right to receive one share of Splitrock Holdings common
stock, par value $.001 per share.

In the Merger, Southside merged with and into Splitrock Holdings with
Splitrock Holdings as the surviving corporation. As a result, Splitrock Holdings
became a direct wholly owned subsidiary of McLeodUSA and continued its corporate
existence under the laws of the State of Delaware under the name "Splitrock
Holdings, Inc." Additionally, Splitrock Services, as a direct subsidiary of
Splitrock Holdings, continued its corporate existence under the laws of the
State of Delaware under the name "Splitrock Services, Inc." and became an
indirect wholly owned subsidiary of McLeodUSA. At the effective time of the
Merger, each right to receive one share of Splitrock Holdings Common Stock was
converted into the right to receive 0.5347 of a share of Class A common stock,
par value $.01 per share, of McLeodUSA and cash in lieu of fractional shares.

The merger with McLeodUSA constituted a change in control as defined in the
Indenture for the Senior Notes payable. Therefore, the Company was required
under the Indenture to make an offer, within 30 days of the merger, to
repurchase all of the Senior Notes properly tendered at a price equal to 101% of
the principal amount plus accrued and unpaid interest to the date of repurchase.
On April 12, 2000, the Company mailed a notice to the holders of the Senior
Notes and they had until May 12, 2000 to exercise their rights for repurchase
and have until May 16, 2000 to revoke any such election. Security holders with a
principal amount of $100,000 exercised their option rights under this notice.

In connection with the acquisition of the Company's stock by McLeodUSA, the
common stock of Splitrock Services, Inc. was delisted from The Nasdaq Stock
Market.

18
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On March 30, 2000, our stockholders approved and adopted at a special meeting
of stockholders the merger agreement dated as of February 11, 2000 between us,
Splitrock Holdings, Inc., Southside Acquisition Corporation, Splitrock Merger
Sub, Inc. and McLeodUSA. The following is a tabulation of the voting on the
proposal:

Votes For 39,541,425
Votes Against 800
Votes Withheld 1,934
Broker Non-Votes 0

The number of shares entitled to vote at the meeting were 57,202,170. There
were 39,544,159 shareholders present at the meeting, in person or by proxy.

ITEM 5. OTHER INFORMATION

CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS

(a) PREVIOUS INDEPENDENT ACCOUNTANTS

(i) On May 9, 2000, Splitrock Services, Inc. dismissed
PricewaterhouseCoopers LLP as its independent accountants. The
Registrant's Board of Directors participated in and approved the
decision to change independent accountants.
(ii) The reports of PricewaterhouseCoopers LLP on the financial statements
for the past two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles.
(iii) In connection with its audits for the most two recent fiscal years
and through May 9, 2000, there have been no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of
PricewaterhouseCoopers LLP would have caused them to make reference
thereto in their report on the financial statements for such years.
(iv) During the two most recent fiscal years and through May 9, 2000,
there have been no reportable events (as defined in Regulation S-K
Item 304(a)(1)(v)).
(v) The Registrant has requested that PricewaterhouseCoopers LLP furnish
it with a letter addressed to the SEC stating whether or not it
agrees with the above statements. A copy of such letter, dated May
12, 2000, is filed as Exhibit 16 to this Form 10-Q.

(b) NEW INDEPENDENT ACCOUNTANTS

(i) The Registrant engaged Arthur Andersen LLP as its new independent
accountants as of May 9, 2000. During the two most recent fiscal years and
through May 9, 2000, the Registrant has not

19
<PAGE>

consulted with Arthur Andersen LLP regarding either (i) the application of
accounting principles to a specified transaction, either completed or
proposed; or the type of audit opinion that might be rendered on the
Registrant's financial statements, or (ii) any matter that was either the
subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of
regulation S-K and the related instructions to Item 304 of Regulation S-K,
or a reportable event, as that term is defined in Item 304(a)(1)(v) of
Regulation S-K.

MANAGEMENT CHANGES

Roy A. Wilkens now heads the national Data Network operation of McLeodUSA
Incorporated, which includes Splitrock as its core. Former Splitrock officers
Kwok Li, Chairman, William R. Wilson, President and CEO, J. Robert Fugate,
Executive Vice President and Chief Financial Officer, and Patrick J. McGettigan,
Senior Vice President, Secretary and General Counsel, have departed the company
in connection with the acquisition of Splitrock by McLeodUSA.

Upon consummation of the acquisition, several McLeodUSA personel were elected
officers of Splitrock, including: Clark E. McLeod, Chairman; Roy A. Wilkens,
President and CEO; Stephen C. Gray, Vice President; J. Lyle Patrick, Vice
President and Chief Financial Officer; Joseph H. Ceryanec, Vice President and
Treasurer and Randall Rings, Vice President and Secretary.

Six new executives assembled by Roy Wilkens and named to the Data Network team
are joining us from leading telecommunications companies and share a common
experience: each executive previously worked with Roy Wilkens as part of the
WilTel organization, founded in 1985 and purchased by MCI WorldCom in 1995.

Leading the team as Chief Operating Officer is John Barnett, Jr. The following
Data Network executives join Barnett:

. David Boatner, Sales & Marketing
. Charles Emde, Information Systems
. Lawrence Littlefield, Jr., Finance & Accounting
. Edward Vendley, Human Resources
. Todd Wilkens, Engineering & Operations.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits:

Exhibit Number Description
-------------- -----------

10.21 Amended and Restated Full Service Agreement with
Prodigy Communications dated February 16, 2000 *
10.22 Second Amendment to Cost Sharing National IRU
Agreement with Level 3 Communications, LLC dated
March 30, 2000 *
10.23 Third Amendment to Cost Sharing National IRU
Agreement with Level 3 Communications, LLC dated
March 27, 2000 *
16 Letter from PricewaterhouseCoopers LLP
27.1 Financial data schedule
27.2 Restated financial data schedule

- -------------
* Confidential treatment has been requested. The copy filed as an exhibit omits
the information subject to the confidential treatment request.

(b) Reports on Form 8-K:

On January 19, 2000 we filed a Current Report, which was subsequently amended
on February 22, 2000 in an Amended Current Report, announcing that we entered
into a definitive agreement and plan of merger with McLeodUSA.

On February 18, 2000 we filed a Current Report to report the results of our
fourth quarter of 1999.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

SPLITROCK SERVICES, INC.

Dated: May 15, 2000 By: /s/ J. Lyle Patrick
---------------------- -----------------------------------------
J. Lyle Patrick
Chief Financial Officer

20
<PAGE>

Exhibit Index

Exhibit Number Description
- -------------- -----------

- ----------------
* Confidential treatment has been requested. The copy filed as an exhibit omits
the information subject to the confidential treatment request.

<PAGE>

Exhibit 10.21

AMENDED AND RESTATED
SPLITROCK FULL SERVICE AGREEMENT

BY AND BETWEEN

PRODIGY COMMUNICATIONS CORPORATION

AND

SPLITROCK SERVICES, INC.

DATED AS OF FEBRUARY 16, 2000
<PAGE>

TABLE OF CONTENTS
-----------------

<S> <C>
PART 1 -- GENERAL

1.1 Definitions...................................................

1.2 Agreement Structure...........................................

1.3 Electronic Communications.....................................

1.4 Prices........................................................

1.5 Payment and Taxes.............................................

1.6 Patents and Copyrights........................................

1.7 Limitation of Liability.......................................

1.8 Your Additional Rights........................................

1.9 Changes to and Termination of Services........................

1.10 Geographic Scope..............................................

1.11 Governing Law.................................................

1.12 Notice........................................................

1.13 Term..........................................................

1.14 Financial Covenants...........................................

1.15 Headings......................................................

PART 2 -- RESPONSIBILITIES OF THE PARTIES..................................

2.1 Mutual Responsibilities.......................................

2.2 Our Other Responsibilities....................................

2.3 Your Other Responsibilities...................................

PART 3 -- WARRANTIES.......................................................

3.1 Warranty for Service..........................................

3.2 Items Not Covered by Warranty.................................

PART 4 -- EQUIPMENT PROVIDED BY SPLITROCK..................................

PART 5 -- CONFIDENTIALITY..................................................

PART 6 -- SPLITROCK SERVICES...............................................

6.1 Description...................................................

6.1.1 Dial Access Network...................................

6.1.2 ATM Backbone Network..................................

6.1.3 Regional Servers......................................
</TABLE>

<PAGE>

<TABLE>
<S> <C>
6.1.4 Network Management and Proxy Servers..............................

6.2 Service Level Objectives....................................................

6.2.1 Site Dial Grade of Service (SDGS) Objective.......................

6.2.2 Availability Objectives...........................................

6.2.3 Transit Delay.....................................................

6.3 Our Other Responsibilities..................................................

6.4 Your Other Responsibilities.................................................

6.5 Charges.....................................................................

6.5.1 Monthly Usage Charges (SDGS) Objective............................

6.5.2 Other Monthly Charges.............................................

6.5.3 Payment Terms.....................................................

6.5.4 Global Service Provider...........................................

6.6 Forecasts...................................................................

6.7 Changes and Default.........................................................

6.7.1 Undesirable Conditions............................................

6.7.2 System Wide Failure...............................................

6.7.3 Financial Related Defaults........................................

6.7.4 Default (other than for Sections 6.7.1, 6.7.2 or 6.7.3)...........

6.8 Other Terms.................................................................

6.9 Auditing Procedures.........................................................

6.10 Primary Provider...........................................................

6.11 Additional Services and Products...........................................

6.12 Alternative Dispute Resolution.............................................

PART 7 -- MISCELLANEOUS..................................................................

7.1 Publicity...................................................................

7.2 Amendment...................................................................

7.3 Counterparts................................................................

7.4 Entire Agreement............................................................

APPENDIX A-1.............................................................................
</TABLE>

<PAGE>

EXHIBIT 10.21

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

AMENDED AND RESTATED
SPLITROCK FULL SERVICE AGREEMENT

Preamble

THIS AMENDED AND RESTATED SPLITROCK FULL SERVICE AGREEMENT, dated as of
February 16, 2000 (the "Agreement") is made by and between Prodigy
Communications Corporation ("Prodigy") and Splitrock Services,
Inc.("Splitrock"), a Delaware corporation, and shall become effective as of
January 1, 2000.

WHEREAS, pursuant to that certain Full Service Agreement, dated June 24,
1997, and thereafter amended May 18, 1999, by and between Prodigy and Splitrock,
as amended, the "Full Service Agreement", Splitrock acts as the primary provider
of network services to Prodigy on the terms and conditions set forth therein;

WHEREAS, Prodigy and Splitrock desire to amend and restate the Full Service
Agreement as set forth herein;

References throughout this Agreement to "you" and "your" mean Prodigy; and
references to "we", "us" and "our" mean Splitrock and its assignees. References
throughout this Agreement to "party" or "parties" mean either Prodigy or
Splitrock, as the context requires and unless otherwise defined except that
"third party" means anyone other than a "party". Reference is made to that
certain Definitive Agreement, dated as of June 24, 1997, and that certain
Transition Services Agreement between the parties dated June 24, 1997
("Transition Services Agreement") and that certain Sublease Agreement dated as
of June 24, 1997 ("Sublease Agreement") each by and between Prodigy and
Splitrock.

Agreement

The parties hereto agree that the following provisions of this Agreement shall
be effective at 12:0l am (New York time) July 1, 1997: Part 1, Part 2, Part 5,
and Sections 6.5, 6.10, 6.11 and 6.12 and all other rights and obligations of
the Company and Provider herein shall only become effective as of the end of the
Transition Period (as hereinafter defined).

Part 1 - General
================================================================================

1.1 Definitions
-----------

1
<PAGE>

"Equipment" is a machine, including its features, conversions, upgrades,
elements, or accessories, or any combination of them. The term "Equipment"
includes Splitrock Equipment and any non-Splitrock Equipment we provide to
you, but excludes Programs.

"Materials" are work products (such as programs, program listings,
programming tools, documentation, reports, and drawings) that we may
deliver to you during a project. The term "Materials" does not include
Programs.

"Product" is a Program or Equipment.
"Program" is the following, including features and any whole or partial
copies:

1 machine-readable instructions;
2 a collection of machine-readable data, such as a data base; and
3 related licensed materials, including documentation and listings,
in any form.

The term "Program" includes a Splitrock Program and any non-Splitrock
Program that we may provide to you. The term does not include
licensed internal code or Materials.

"Services" as used herein describes the network services (not to include
satellite) we will provide, as more particularly described in Section 6.1.
In addition, any new service you request or additional service you request,
not already contemplated by this Agreement, and that we agree to provide is
not the subject of this Agreement until the terms, conditions and prices of
such service shall be confirmed in Transaction Documents. In addition,
Services provided to you hereunder shall include reports, surveys and
analysis reasonably required to fulfill the purposes of this Agreement, and
shall not be subject to any additional charge.

"Subscriber" is any user authorized to access basic Prodigy Classic or
basic Prodigy Internet (as they currently exist), regardless of whether
such user actually uses your services in any month or regardless of whether
or not you receive payment from that user.

"Subscriber Count" shall mean the total number of Subscribers, subject to
the limitations in this definitional paragraph. For Prodigy Classic,
multiple User Identifications associated with one Subscriber will count as
one Subscriber in the Subscriber Count. For Prodigy Internet, multiple
User Identifications associated with one Subscriber will count as one
Subscriber in the Subscriber Count, provided only one such User
Identification per Subscriber can access the Service at any one time. A
Subscriber to both Prodigy Classic and Prodigy Internet under the "Prodigy
Combo Plan" will count as one Subscriber in the Subscriber Count. Any
Subscriber who is not capable of accessing the Service shall not be counted
in the Subscriber Count.

"System" is the Services and Products we provide together under this
Agreement that we identify to you as a System, which identification is in
writing.

2
<PAGE>

"Transition Period" is the period from July 1, 1997 until the earlier of
(i) December 31, 1997 or (ii) on the effective date of a notice from
Provider stating that it intends to terminate the Transition Services
Agreement which effective date may only be the last day of a calendar
month.

"User Identification" is a code or codes which enable authorization or
access to programs, data or equipment through a Service.

1.2 Agreement Structure
-------------------

Attachments
-----------

Some Services and Products have terms in addition to those we specify in
this Agreement. We will provide the additional terms in documents called
"Attachments," which are also part of this Agreement.

Transaction Documents
---------------------

For each business transaction, we will provide to you the appropriate
"Transaction Documents" before the transaction occurs that confirm the
details of the transaction, which Transaction Documents shall not be
effective against or in favor of either party, unless and until each party
agrees to each appropriate set of Transition Documents in writing.

Conflicting Terms
-----------------

If there is a conflict among the terms in the various documents, those of
an Attachment prevail over those of this Agreement. The terms of a
Transaction Document prevail over those of both the Attachments and this
Agreement.

Your Order
----------

You may order a Service or Product in writing, including a request written
on paper and delivered to us and a request sent via facsimile to us.

Our Acceptance of Your Order
----------------------------

A Service or Product becomes subject to this Agreement when we accept your
order by sending you a Transaction Document which accepts expressly and
precisely the terms of the order.

Your Acceptance of Additional Terms
-----------------------------------

You accept the additional terms in an Attachment or Transaction Document by
signing it.

3
<PAGE>

1.3 Electronic Communications
-------------------------

You and we may communicate with the other by electronic means for
information purposes only, such as through electronic or Prodigy Mail. Any
electronic communication must be followed by written confirmation or
telecopied in order to be binding on either party. Documents which include
handwritten signatures may be transmitted by telecopier, and shall be
deemed binding without the need for original signatures. Nevertheless,
original signature copies are preferred.

1.4 Prices
------

The following are the bases on which we may require the amount payable for
a Service or Product to be paid, with an example of each:

1. one-time (Service installation charges);

2. recurring (a periodic charge for Services);

3. a combination of both (an initial charge and a monthly license charge
for a Program); or

4. usage (network traffic charges).

We will specify the amount and basis for the particular Service or Product.
If additional Products or Services are added, the prices will be set forth
in a Transaction Document. Except as herein provided specifically, no
additional charges shall be imposed or incurred for Services which we are
obligated to provide under this Agreement.

1.5 Payment and Taxes
-----------------

You shall pay:

1. usage and recurring charges according to Section 6.5.

2. all other charges when or after you incur them.

Amounts due are payable as we specify in the invoice which invoice shall be
consistent with the conflict hierarchy set forth in Section 1.2,
Conflicting Terms, or, with respect to dial up network services, as
provided in Section 6.5. You agree to pay accordingly. You agree to pay
any tax on the Services we provide to you. You are responsible for
personal property taxes for each Product that you purchase and each Program
that you license from the date we ship it to you or otherwise make it
available to you. "Taxes" as used in this

4
<PAGE>

Agreement shall not include any FCC charges or other charges payable to any
government organization other than a taxing authority, all of which we
shall pay.

1.6 Patents and Copyrights
----------------------

For purposes of this Section only, the term "Product" includes Materials
alone or in combination with Products we provide to you as a System.

If a third party claims that a Product we provide to you infringes that
party's patent or copyright, we will defend you against that claim at our
expense and pay all costs, damages, and attorney's fees that a court
finally awards, provided that you:

1. promptly notify us in writing of the claim; and

2. allow us to control, and cooperate with us in, the defense and any
related settlement negotiations. At your option and at your cost, you
may retain counsel to advise you as you work with us.

If such a claim is made or appears likely to be made, we will take
reasonable steps, and you agree to permit us to do so, to enable you to
continue to use the Product, or to modify it, or replace it with one that
is at least functionally equivalent. If we determine that none of these
alternatives is reasonably available, you agree to return the Product to us
on our written request and we may terminate the affected Service at no
further charge to you, in which case we will refund to you the unused
prorata portion of any advance payments for the Service and/or the Product.

YOU AGREE THAT YOUR RIGHTS, AS PROVIDED BY THIS SECTION 1.6, REGARDING ANY
CLAIM OF INFRINGEMENT ARE LIMITED AND THE REMEDIES IN THIS SECTION WILL BE
YOUR SOLE AND EXCLUSIVE REMEDY FOR ANY SUCH CLAIM.

Notice of Infringement
----------------------

All notices of patent or copyright infringement permitted or required by
this Agreement will be in writing and will take effect upon receipt.

Claims for Which We are Not Responsible
---------------------------------------

We have no obligation regarding any claim to the extent it is based on any
of the following:

1. your modification of a Product, or a Program's use with equipment and
programs other than the Equipment and Programs with which the Program
is designed to operate:

5
<PAGE>

2. the combination, operation, or use of a Product with any product,
data, or apparatus that we did not provide unless we had written
notice and acknowledged in writing receipt of notice that the intended
use of the Product was for a use with a product, data, or apparatus we
did not provide; or

3. infringement by a non-Splitrock Product alone, as opposed to its
combination with Products we provide to you as a System.

1.7 Limitation of Liability
-----------------------

Circumstances may arise where, because of a default on our part or other
liability, you are entitled to recover damages from us. In each such
instance, regardless of the basis on which such party is entitled to claim
damages, we are liable only for:

1. payments referred to in our patent and copyright terms described above;

2. bodily injury (including death), and damage to real property and
tangible personal property; and

3. the amount of any other actual loss or damage, in excess of $100,000
or the charges (if recurring or usage, 12 months' charges apply) for
the Service or Product that is the subject of the claim.

This limit also applies to any of our subcontractors, agents and
Program developers. It is the maximum for which we, our
subcontractors, agents and program developers are collectively
responsible.

Items for Which Neither Party is Liable
---------------------------------------

Under no circumstances are either party or its subcontractors, agents or
Program developers liable for any of the following:

1. third-party claims against the other party for losses or damages
(other than those under the first two items listed in 1.7 above)
except for willful acts or acts of gross negligence;

2. loss of, or damage to, records or data except for any actual loss or
damage willfully and intentionally caused by the other party or caused
by gross negligence, subject to the limitation contained in Section
1.7(3) above; or

3. economic consequential damages (including lost profits or savings) or
incidental damages, even if either party is informed of their
possibility.

6
<PAGE>

EACH PARTY AGREES THAT ITS RIGHTS ARE LIMITED BY THIS SECTION 1.7, THAT THE
LIMITATIONS PROVIDED HEREIN ARE FAIR AND EQUITABLE, AND EACH PARTY HEREBY
WAIVES ANY RIGHT OR REMEDY IT MAY HAVE FOR THE RECOVERY OF ANY OTHER
DAMAGES.

1.8 Your Additional Rights
----------------------

You may have additional rights under certain laws (such as consumer laws)
which do not allow the exclusion of implied warranties, or the exclusion or
limitation of certain damages. If these laws apply, our exclusions or
limitations may not apply to you.

1.9 Changes to and Termination of Services
--------------------------------------

If a third party claims that a Product we provide as part of a Service
infringes a patent or copyright, we reserve the right to first substitute a
different Product, or alternatively to terminate the Service effective
immediately.

1.10 Geographic Scope
----------------

All of your rights, all our obligations, and all licenses are valid only in
the United States, including Hawaii and Alaska.

1.11 Governing Law
-------------

This Agreement shall be governed by and interpreted under the laws of, any
action shall be brought in the state or federal courts located in, and any
arbitration proceeding shall be located in, the domicile of the party who
is an initial defendant or the party upon whom an initial demand for
arbitration is served.

1.12 Notice
------

All notices permitted or required by this Agreement will be sent to the
following address and will take effect upon receipt:

Prodigy Communications Corporation
44 S. Broadway
White Plains, New York 10601
Attention: President

Splitrock Services, Inc.
9012 New Trails Drive

7
<PAGE>

The Woodlands, Texas 77381
Attention: President

1.13 Term
----

The initial term of this Agreement shall be for a period of 54 months
("Initial Term") commencing on July 1, 1997 and continuing through December
31, 2001; provided, however, that the term of this Agreement shall be
automatically extended for one year on December 31, 2001 and on each
December 31 thereafter unless either party shall have given written notice
to the other at least one year prior thereto that the term of this
Agreement shall not be so extended.

1.14 Financial Covenants
-------------------

From the date hereof until June 30, 1999, we covenant and agree that we
will:

1. Financial and Other Information

(a) Annual Financial Reports. Furnish you not later than 90 days after
the close of each 1997 and 1998 calendar year a balance sheet as of
December 31, 1997 and December 31, 1998, statements of operations and
statements of cash flows for the period from inception through each
applicable period, and such other comments and financial details as are
usually included in similar financial statements. Such financial
statements shall be prepared in accordance with generally accepted
accounting principles and shall be audited by independent certified public
accountants of recognized standing selected by us and shall contain
unqualified opinions as to the fairness of the statements therein
contained, shall be unqualified in all other respects, and shall not
contain any explanatory language which makes reference to uncertainties
such as: (i) going concern, (ii) litigation or (iii) any other potential
liabilities or impairment of our assets.

(b) Quarterly Financial Statements. Furnish you not later than 45 days
after the close of each calendar quarter through June 30, 1999, beginning
with the quarter commencing July 1, 1997, financial statements containing
our balance sheet as of the end of such period and statements of operations
and cash flows up to the end of such period. These statements shall be
prepared on a basis consistent with our normal accounting practices and the
accuracy of the statements shall be certified as true by our chief
executive or financial officer.

(c) Payables. Furnish you not later than 45 days after the close of each
calendar quarter through June 30, 1999, beginning with the quarter
commencing July 1, 1997, a total of amounts which are due and payable and
have not been paid by their contractual due date, and a list of each
creditor to which payments over $25,000 are due.

8
<PAGE>

(d) Taxes. Pay promptly and within the time that they can be paid without
interest or penalty, all taxes, assessments and similar imposts and charges
of every kind and nature lawfully levied, assessed or imposed upon us,
except to the extent being contested in good faith and furnish you evidence
of such payment on a quarterly basis within 45 days after the close of each
calendar quarter through June 30, 1999.

(e) Liens and Litigation. Through June 30, 1999, furnish you within ten
days of receipt of notice of any lien or lawsuit which is threatened or
pending against us and which involves a claim in excess of $100,000.

(f) Projections. Thirty days after we have received your forecasts
referenced in Section 6.6 hereof for each applicable quarter, we will
provide you with plans and projections for income, expenses, capital
receipt and expenditure, for the immediately succeeding fifteen (15) month
period. Included with the statements to be provided quarterly pursuant to
Section 1.14 (a)-(e) hereof, we shall also provide you with evidence of our
results as compared to past projections, which shall also be certified as
true by our chief executive or financial officer.

2. Insurance. Maintain valid and effective insurance policies that cover
our properties and risks of the business in such types and amounts as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to ours and furnish you not later than 45
days after the close of each calendar quarter through June 30, 1999,
beginning with the quarter commencing July 1, 1997, certificates evidencing
such insurance. After you receive such certificate, you may request that
we obtain additional coverage, consistent with reasonable business
practices, which we shall obtain,.

3. [INTENTIONALLY DELETED]

4. Continuing Annual and Quarterly Reporting. The financial reporting
requirements of subsection 1.(a) and (b) hereof shall continue after June
30, 1999 if, at that time, our cash plus past due accounts receivable from
you less past due accounts payable less debt other than capital leases is
an amount less than $5,000,000.

1.15 Headings The headings contained herein are inserted for convenience of
--------
reference only and are not intended to be part of or to affect the meaning
or interpretation of this Agreement.

Part 2 - Responsibilities of the Parties
================================================================================

2.1 Mutual Responsibilities
-----------------------

9
<PAGE>

You and we agree that under this Agreement:

1. neither party grants the other the right to use its trademarks, trade
names, or other designation in any promotion or publication;

2. all information exchanged by both parties is nonconfidential unless
such information is conspicuously marked as confidential. Part 5 of
this Agreement describes confidentiality and our responsibilities for
handling data and information you transmit using the Services;

3. each party grants the other only the licenses specified. No other
licenses (including licenses under patents) are granted;

4. each party will promptly notify the other if it becomes aware of any
unsafe conditions or hazardous materials to which the other's
personnel would be exposed at any of its facilities;

5. NEITHER PARTY WILL BRING A LEGAL ACTION MORE THAN TWO YEARS AFTER THE
CAUSE OF ACTION AROSE UNLESS SUCH CLAIM IS AS A RESULT OF A THIRD
PARTY CLAIM, IN WHICH EVENT THE TWO YEAR PROVISION SHALL NOT APPLY;
and

6. neither party is responsible for failure to fulfill its obligations
(other than payment obligations) due to causes beyond its reasonable
control, including without limitation, acts of God, war, riots,
blockades, insurrections, labor disputes, lockouts, earthquakes,
fires, storms, lightning, power failures, floods, natural disasters,
accidents, new or changed governmental regulations or laws, or other
similar events beyond the reasonable control of the party relying on
this provision of the Agreement ("Force Majeure").

2.2 Our Other Responsibilities
--------------------------

We will:

1. comply with all applicable laws regulations or conventions including
those related to data privacy, international communications, and
exportation of technical or personal data. You are responsible for
obtaining all necessary governmental regulatory or statutory approvals
for the offering of your services;

2. not assign, or otherwise transfer, this Agreement, or our rights or
obligations under it, or delegate our rights or your obligations,
other than to an affiliate, without your prior written consent which
consent will not be unreasonably withheld, provided, however, that we
will be able, without your consent, to assign any rights and delegate
any duties contained in this Agreement to any entity into which we may
be merged or consolidate or which purchases all or substantially all
of our assets.

10
<PAGE>

3. obtain install and maintain suitable equipment as necessary to provide
the Services to you;

4. fulfill all regular activity and performance reporting and analysis,
including service disruption analysis, periodic audits, and
attend and participate actively in monthly status meetings
which shall be held no less frequently than monthly between the
parties; and

5. be responsible for data, programs or other material that we provide
for use with the Service.

2.3 Your Other Responsibilities
---------------------------

You agree:

1. not to resell any Service, without our prior written consent, and any
attempt to do so is void. We expressly consent to your selling
other versions of your service at the retail level, but you may
not wholesale or resell our Service.

2. not to assign, or otherwise transfer, this Agreement or your rights
under it, or delegate your rights without our prior written
consent, which consent will not be unreasonably withheld,
provided however, that you will be able, without our consent,
to assign this Agreement or to assign any rights or delegate
any duties contained in this Agreement to Prodigy
Communications Limited Partnership (an operating limited
partnership of Prodigy Communication Corporation and SBC
Communications, Inc.) an affiliate of yours.

3. to allow us to install mandatory engineering changes (such as those
required for safety) on Equipment.

4. that you are responsible for the results obtained from the use of the
Services and Products.

5. to provide us with sufficient, and safe access to your facilities for
us to fulfill our obligations during reasonable hours and under
such conditions as you may reasonably impose.

6. to control and be responsible for issuance of User Identifications and
their distribution to Subscribers.

7. to comply with all applicable laws, regulations or conventions
including those related to data privacy, international
communications, and exportation of technical or personal data.
You are responsible for obtaining all necessary governmental,
regulatory, or statutory approvals for your use of the
Services.

11
<PAGE>

8. to provide us terminal access to your network management system so
that we can determine the operating status of each modem and
component.

9. to be responsible for data, programs, or other material that you
provide for use with a Service.

10. that we have no liability to those whom you authorize to access a Service.

11. that we are not responsible for any data, or text, including the
content, and including its accuracy, which is received, routed
or sent as a result of the Services we provide hereunder.

12. that we are free to enter into any agreements with third parties that
are similar or dissimilar to this Agreement without your consent
or approval.

13. to take reasonably necessary actions to reduce network demand,
including without limitation, ensuring that all timed-out
features are fully effective and operating, performing routine
and aggressive audits of network services to eliminate "fraud",
and encouraging Subscribers to read and compose e-mail offline.

14. to terminate all Services related to Prodigy Classic no later than
December 31, 1998. Upon the termination of all such Services,
any and all provisions contained herein relating specifically
to Prodigy Classic, including but not limited to the definition
of a Prodigy Classic Subscriber and the operation and
maintenance of Prodigy Classic related equipment, shall
terminate.

Part 3 - Warranties
================================================================================

3.1 Warranty for Services
---------------------

For each Service, we warrant that we will perform it:

1. in a workmanlike manner consistent with industry standards,

2. according to its current description contained in this Agreement, an
Attachment, or a Transaction Document, and
3. in a manner so that the Service and the network shall be compatible with
your equipment.

OTHER THAN AS EXPRESSLY PROVIDED HEREIN, WE DISCLAIM ALL WARRANTIES,
INCLUDING THE IMPLIED WARRANTY OF

12
<PAGE>

MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT.

3.2 Items Not Covered by Warranty
-----------------------------

We do not warrant uninterrupted or error-free operation of a Service or
Product.

We will specifically identify our Services and Products that have a
warranty, other than as described in this Part 3, and the terms of that
warranty.

Unless we specify otherwise, as set forth in this Agreement, including
Section 3.1, we provide Materials, non-Splitrock Services and non-Splitrock
Products on an "AS IS" basis without any warranty from us. However, non-
Splitrock manufacturers, suppliers, or publishers may provide their own
warranties to you.

Part 4 - Equipment Provided by Splitrock
================================================================================

We may provide Equipment to be installed on your premises for the purpose
of providing a Service. The Equipment is and will remain our asset or that
of our lessor, and will not become a fixture or realty.

Certain Equipment may contain licensed internal code. We will identify
this Equipment to you.

No right, title, or interest in or to the Equipment, or licensed internal
code associated with it, or any related planning information, is conveyed
to you. However, we will use such Equipment to provide Services to you.

Part 5 - Confidentiality
================================================================================

We agree not to disclose your confidential information, including programs
and data transmitted using the Services and usage forecasts as described in
section 6.6, nor shall we disclose your customer's private information,
such as name, address, credit card or other information which may be
transmitted using the Service. However, we have no obligation of
confidentiality relating to your information which is not confidential or
which you do not conspicuously mark as confidential. We acknowledge that
all of your customer information, and information about your individual
customers is confidential. Information that is not confidential includes
information which is:

13
<PAGE>

1. either currently publicly available or becomes publicly available in
the future without our breach of any obligation or responsibility
described in this Agreement;

2. rightfully received by either you or us from a third party, where the
information was received without any obligation of confidentiality
associated with it;

3. already in our possession without an obligation of confidentiality;

4. independently developed by us;

5. approved for disclosure by you; or

6. treated by you as nonconfidential.

We also have no liability for any disclosure of information that occurs as
the result of our delivery of your information, at your direction and to a
recipient you designate, when the delivery is made in the normal course of
Service provision (for example, to an incorrect delivery address provided
by you to us). We may disclose information to the extent required by law,
but will give you as much advance notice of such potential disclosure as
reasonably possible.

Handling of your information
----------------------------

We will handle your information marked confidential in a confidential
manner, and you will not permit our confidentially marked information to be
disclosed.

You are responsible to develop and maintain procedures (apart from the
Services) to protect your information.

We will allow you to audit our security procedures to ensure that they are
reasonable and customary, and will notify you of any material security
breach that affects the Services. You agree that any information regarding
our security systems will be our confidential information.

For the purposes of operation and maintenance, we may use, copy, store, and
distribute internally your information but only to the extent necessary for
such operation and maintenance. We shall have no such rights with respect
to your customer information, or with respect to information about your
customers. We agree not to reverse assemble or reverse compile your
information. We will use reasonable procedures, but we do not guarantee
that these procedures will prevent the loss of, alteration of, or improper
access to, your information. You agree that access to your information
will not prohibit or prevent us from developing or marketing any Service or
Product.

For transmission carried over interexchange carriers' and local exchange
carriers' facilities, we are not responsible for transmission errors, or
corruption or security of data.

14
<PAGE>

Part 6 - Splitrock Services
================================================================================

6.1 Description
-----------

We will provide you network services consisting of the following
components:

1 Dial access network as described in Section 6.1.1
2 ATM backbone network as described in Section 6.1.2
3 Regional Servers connectivity as described in 6.1.3
4 Network Management and Proxy Servers as described in Section 6.1.4

6.1.1 Dial Access Network
-------------------

We will provide to you dial access for data transport for your Subscribers
as described in this Agreement as a "Service". We will provide this
Service to you in all locations in which, on the effective date of this
Agreement, such dial access service already exists. You agree to provide
to us a list of current dial access locations, which list shall be Appendix
"A" to this Agreement. Effective March 15, 2000 or at such time within 60
days thereof as may be agreed upon, the Service provided at dial access
locations identified on Appendix "A-1" will be discontinued.

We may substitute a new site for an existing location upon 30 days prior
notice of change, with 60 days simultaneous usage. You may request new
sites to exceed an 80% coverage, by population, for local dial access; but
we will not be obligated to provide dial access Service in any new dial
access location with usage in any month of less than 5,000 dial hours
unless we review the location for the new site and approve the creation of
a new site at such location, in our sole discretion. We can modify the
site coverage only with your permission, unless the modification is for a
substitution of existing coverage, in which case we do not need your
permission. Any new sites added by us for Services will be available to
you if you choose to use them.

The data traffic dial access Service shall include the receipt of inbound
data dial traffic from your Subscribers and the muting of such traffic to
another Subscriber, to a proxy server, to a regional server, to your data
center at Yorktown or to the selected Internet Network Access Points
("NAP"). We will not support initiating a call to another Subscriber's
telephone.

We shall, in our sole discretion, decide the number of dial ports we
provide to serve each site, as well as the method we use to provide Service
to each site provided the grades and standards of service as set forth in
this Agreement are met. Examples of methods we may use to provide this
Service include:

15
<PAGE>

1 a physical site presence with modem ports; or

2 a virtual presence using call forwarding or a foreign exchange.

All new access equipment provided by us will have speed capacity with
respect to backbone access, and with respect to Subscriber access,
consistent with the service that can and will be provided from that site.
For example, we will not install equipment with a speed higher than the
existing line infrastructure can support, except we acknowledge that we
shall install 56K capable bps modems, although current FCC regulations
prohibit transmission at speeds in excess of 53K bps, and, other conditions
beyond our control may decrease the actual connection speed.

Specifically identified protocols to be supported include Serial Line
Internet protocol (SLIP), Prodigy Link Level Protocol (PLLP), and Point-to-
Point Protocol (PPP).

We shall be responsible for.

1 inbound communication facilities (such as hunt groups, measured business
lines or DID trunks);
2 modem hardware including ports and chassis; and
3 network equipment and communications facilities to transport traffic
from our dial site to other sites, to your data center at Yorktown and
the seven NAPS.

We shall transport the dial data traffic to you via TCP/IP over ATM. We
will not change the terms or conditions of a Service without your approval,
which you agree will not be unreasonably withheld.

6.1.2 ATM Backbone Network
--------------------

The Splitrock ATM backbone network will be operational on or before
December 31, 1997 and will be based on the Yurie LDR200/50 ATM switches or
similar ATM switches. This network is based on ATM switches, supporting
TCP/IP protocol for Prodigy Classic and Prodigy Internet services. Prodigy
Classic transmission which requires SNA will be encapsulated as TCP/IP.
Each dial access site will be upgraded with a LDR200, LDR50 or similar ATM
switch. A backbone transmission facility based on ATM protocol will
interconnect the dial access sites to Yorktown, New York. Since the Yurie
ATM switches use standard ATM protocol, the interconnections can be a
mixture of FT1, T1, T3 and OC-3 or publicly available switched ATM
services.

Effective July 1, 1997 but subject to the Transition Services Agreement, we
shall also provide, maintain and manage sufficient bandwith connections to
Yorktown, New York to support the Service Level Objectives in Section 6.2.
The transmission facilities may be DS-3, OC-3 or other appropriate
transmission services available at the time. The transmission facilities
will be terminated by a LDR200 and Centillion C100 combination or
equivalent provided by us at your Yorktown facility. The transmission
facilities will be diversely routed and fully separated and connect to you
via selected routers. The two

16
<PAGE>

Splitrock C100s will connect to existing Prodigy 6611 or equivalent
routers, which support the Prodigy internal LAN at Yorktown.

The Equipment we provide at Yorktown will be installed on your premises
solely for our use in providing our Services. This Equipment is provided
under the terms specified in the Section "Equipment We Provide."

In addition, at locations selected by us agreed, we will provide
interconnection of the network to the Internet via DS3 to suitable NAPS.
This will provide bandwith between the NAP and Yorktown as well as between
the NAP and the dial up user. We will have the sole right to select the
choice of the NAP provider at each location. You will be responsible for
complying with all protocol requirements for layer 3 and above as set forth
by the NAP providers that we select.

6.1.3 Regional Servers
----------------

You may provide, maintain and manage regional servers at sites determined
by you which are to be geographically dispersed and co-located at our
network hub sites; such equipment is limited to that which may only be
installed in one standard 19" rack per site ("Regional Servers"). You
shall provide, maintain and manage diagnostic equipment, connection
equipment that you may use to connect to us and associated analog phone
lines which you may use to manage your Regional Servers. In addition, you
shall provide the electric power cables and the equipment connection cables
for the equipment you provide, including those cables, required to connect
your equipment to our network equipment. You also agree to comply with all
safety requirements at each site. Each Regional Server will be EtherNet
connected to our network. Neither we nor any other customer of ours shall
use your Regional Servers for any purpose except to support Prodigy Classic
and Prodigy Internet. We shall provide you with access to our sites for
purposes of maintaining, upgrading and servicing these Regional Servers at
no additional cost to you.

You are responsible for separately procuring from us the upstream
connection from the Regional Server. The upstream connection is defined as
the network facilities used to transport traffic from the Regional Server
to locations other than the source dial node

(such as Yorktown or the Internet). Cost for such services will be as
provided in Section 6.5.2 section 2 of this Agreement

The Regional Servers will not be included in the service level objectives,
as provided in Section 6.2.

6.1.4 Network Management and Proxy Servers
------------------------------------

Network Management
------------------

We will maintain TINA until we replace it with a new network management
system which encompasses all TINA functions. You will make available to us
the mainframe

17
<PAGE>

computer resources necessary to run TINA for the purpose of managing the
network at no cost to us. We will provide you read only terminal access to
TINA and any other network management system used by us so that you can
determine the operational status of any modem or network component.

Proxy Servers
-------------

We will assume your existing Unix servers and all hardware and software
maintenance costs as they directly relate to proxy functions. These
servers will be placed at our hub and peering sites. We will also provide
for a fee additional new Unix based servers at hub sites when needed and
requested by you. Unix based servers will not be supported at all POP
sites.

We intend to use Windows NT based servers for the POP sites and for future
hub sites for the proxy server functions.

6.2 Service Level Objectives
------------------------

We will have four service level objectives for both Prodigy Internet and
Prodigy Classic:

1. Site Dial Grade of Service (SDGS) objective of P.01 during the peak or
busiest hours of the day (We will use your algorithms in effect as of
June 23, 1997 for purposes of measuring the SDGS and Grade of Service);

2. Site System Availability (SSA) objective of 99.5%;

3. Overall System Availability (OSA) objective of 99.5%; and

4. Transit Delay (TD) objective average of 100 milliseconds or less 95% of
the time and 150 milliseconds or less 99% of the time, however, TD
objective average for Alaska and Hawaii is 300 milliseconds. (We will
use your algorithms in effect as of June 23, 1997 for purposes of
measuring the TD and Grade of Service)

NOTE: A P.01 Grade of Service means that no more than 1% of calls are
denied access during the peak busy hour of the weekly measured period. A
P.03 Grade of Service means that no more than 3% of calls are denied access
during the peak busy hour of the weekly measured period.

We shall measure each of the objectives, other than SDGS, on a monthly
basis and shall provide you with a report of such measured objectives by
the 10th business day of the following month, unless otherwise agreed
between the parties.

6.2.1 Site Dial Grade of Service (SDGS) Objective
-------------------------------------------

We shall measure and report the weekly Site Dial Grade of Service for each
site. If the SDGS, measured weekly, falls below P.03 for a site in two
consecutive weeks, we shall

18
<PAGE>

have four additional weeks to improve the performance. If, during this four
week period, the measured SDGS is not improved above P.03 with the intent
to meet the P.01 objective, then we shall provide you a credit of $1,500.00
for each four week period thereafter for that site until such time as the
measured SDGS is improved above P.03. Except for your right of termination
as provided for in Section 6.7.1, this is your sole remedy for our failure
to meet the SDGS objective.

Grade of Service reductions which are caused by, related to or extended as
a result of your actions, or Force Majeure shall not be considered in the
estimation of the monthly SDGS.

Should you supply an invalid forecast (see Section "Forecasts"), then the
SDGS objective will not be applicable for that period.

6.2.2 Availability Objectives
-----------------------

The components of the availability objective calculations shall include the
components provided by us. The OSA rate and the SSA rate shall be
represented as a percentage of the time the components are actually
available, as compared to the scheduled time of availability.

The SSA shall be defined as the monthly availability of the Service
components for a single site including the modem and server components at
the site, and network connections from the site to Yorktown. We shall
measure and report the monthly site availability, and deliver such report
to you no later than the 10th business day after the month of testing.

We will measure and report site availability by sending a 56 byte message,
called a sample ping, to the modem chassis and to the servers from a
Splitrock network monitor in Yorktown on a periodic basis, but no less than
every 10 minutes. The ping sampling interval is subject to change over
time but in no event shall it be more than 30 minute intervals. If a
positive response is received to the ping, then the site is considered
available for that ping period. We will issue one retry (or effectively do
the retry using another function) if an initial negative response is
received. If a positive response is received on the retry then the site is
considered available for that ping period. If a negative response is
received from the initial ping and the retry, then the site is considered
unavailable for that ping period.

The SSA rate calculation shall be:

1 the Total Scheduled Minutes of Availability for the site;
2 minus the Total Unscheduled Outage Minutes for the site;
3 divided by the Total Scheduled Minutes of Availability for the site.

(Total Scheduled Minutes of Availability) - (Total Unscheduled Outage
---------------------------------------------------------------------
Minutes)
--------

19
<PAGE>

(Total Scheduled Minutes of Availability)

The Total Scheduled Minutes of Availability for a site is defined as
the total minutes in the measurement time period minus the total minutes of
outages which are not due to unscheduled outages during the measurement
time period.

Total Unscheduled Outage Minutes include outages due to
telecommunication facilities (carrier outages), loss of electrical power,
hardware, operations, software and design problems except for:

1. scheduled network maintenance and scheduled outages;

2. outages caused by, related to, or extended as a result of your
actions; and

3. outages due a Force Majeure event.

If the SSA rate for a specific site, measured monthly, falls below
98.5%, we shall take immediate and necessary action to improve the
performance. If the measured SSA rate for the site is not improved above
98.5% with the intent to meet the 99.5% objective within the next two
months, we shall provide you a credit of $1,500.00 for each month
thereafter for that site until such time as the measured SSA rate is
improved above 99.5%.

Except for your right of termination provided for in Section 6.7.1,
this is your sole remedy for our failure to meet the SSA objective.

The OSA objective is defined as the combined availability of the
Service components, including the modem and server components, and network
connections to Yorktown. The OSA rate shall be an average of all the SSA
rates. We shall measure and report the monthly OSA.

If the OSA rate, measured monthly, falls below 98.7%, we shall take
immediate and necessary action to improve the performance. If the measured
OSA rate is not improved above 98.7% with the intent to meet the 99.5%
objective within the next two months, we shall provide you a credit of
$25,000.00 for each month thereafter until such time as the measured OSA
rate is improved above 98.7%. Except for your right of termination
provided for in Section 6.7.1, this is your sole remedy for our failure to
meet the OSA objective.

We shall be allowed a system-wide weekly maintenance window. The
weekly maintenance window shall occur initially Sunday mornings from 3:15
to 4:45 Eastern time. This initial period may be changed upon your prior
written consent. Additionally, there shall be an allowance for scheduled
outages at each site for us to perform maintenance/upgrade work: allowing
each site two outages annually each up to three hours in duration. We
shall provide you with advance notice of sites scheduled for
upgrade/maintenance activity, and we shall use reasonable efforts to
schedule such upgrade/maintenance activity for a time other than 5 pm to
midnight, local site time.

20
<PAGE>

We shall review anticipated changes in the network maintenance
window with you. You and we shall cooperate to accommodate a necessary
change in the network maintenance window and the business impact on you.

We shall not be precluded from performing unscheduled maintenance as
we may deem necessary. In such instances we will use reasonable efforts to
notify you at least 48 hours in advance. For purposes of the SSA and OSA
rate calculations, these will be considered unscheduled outages.

6.2.3 Transit Delay
-------------

The TD is represented as the actual time for a 56 byte message,
called a sample ping, to travel round trip between two specific routers in
the network under normal prime time conditions.

Using the sample ping referred to in Section 6.2.2, we will measure
the TD on a periodic basis, but no less than every 10 minutes. The ping
sampling interval is subject to change over time but in no event shall
exceed 30 minutes. We will average all the samples in a given month to
determine the overall average TD, and will report that to you.

If we fail to meet the monthly TD objectives, you will notify us in
writing. If we continue to fail to meet the TD objectives for two months,
then we shall provide you a credit of $25,000.00 for each month thereafter
until such time as the measured TD meets the objectives. Except for your
right of termination provided for in Section 6.7.1, this is your sole
remedy for our failure to meet the TD objectives.

In an instance where the monthly forecast for 20% of the sites is
invalid, then the TD objective shall not be applicable for that period.

6.3 Our Other Responsibilities
--------------------------

We will:

1. provide you with a number for your operations group or customer
service group to contact our help desk support, which shall be
available 24 hours a day, 7 days a week, and staffed adequately to
handle all inquiries within 60 seconds of receipt;

2. provide you with standard monthly, or in the case of SDGS weekly,
reports that we produce that are related to the Services provided
under this Agreement, including reports describing the results of the
tests for each of SDGS, SSA, OSA and TD, and reports relative to
availability and traffic statistics within ten days of the end of the
immediately preceding month, which reports will show by site, the
total connect hours, time of peak busy hour per site, average peak
busy hour percentage and distribution of traffic by hour of day;

21
<PAGE>

3. provide you with a monthly report detailing the status of network
upgrades and expansions within ten days of the end of the immediately
preceding month;

4. maintain the components, programs, equipment and materials we provide
under this Agreement; and

5. provide you with read only terminal access to our network management
system so you can verify operational status of all network modems and
components.

6.4 Your Other Responsibilities
---------------------------

You agree:

1. to be responsible for supporting your Subscribers directly through
your help desk. Your operations group or customer service group will
contact our help desk in regard to any reported problems with the
Service being provided by us;

2. to be responsible for ensuring that your software can and will log-off
each Subscriber after no activity by each Subscriber for 30 minutes
("Time Out Function");

3. to be responsible for ensuring that for Prodigy Internet Services your
software will not allow multiple User Identifications associated with
any Prodigy Internet Subscriber to gain simultaneous access to the
Services ("Simultaneous Prohibition Function"); and

4. upon written request by us audit each of the Time Out Function and
Simultaneous Prohibition Function up to five audits per each 12 month
period. Within 15 days of receiving a written audit request you will
delivery a written audit report to us. If the audit shows
noncompliance with the Time Out Function or Simultaneous Prohibition
Function, as the case may be, the Maximum Monthly Usage Charge (as
provided in Section 6.5.1) shall not be applicable to any time period
from the date of the last audit showing compliance until the date you
cure such noncompliance.

6.5 Charges
-------

6.5.1 Monthly Usage Charges
---------------------

With respect to usage, you agree to pay us for the Services based on the
total number of monthly connect hours of your Subscribers using the
Services times the applicable rate per hour in the following schedule (the
"Hourly Usage Charge"), subject to the Minimum Monthly Usage Charge (lower
limit) described below

Hourly Usage Charge Rate Schedule:
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

January 1, 2000 through December 31, 2001 (***) per hour

You will pay us the greater of the applicable Hourly Usage Charge or the
Minimum Monthly Usage Charge.

Minimum Monthly Usage Charge:

$4,000,000 per calendar month for the period from July 1, 1999 through June
30, 2000

$4,500,000 per calendar month for the period from July 1, 2000 through
December 31, 2001

In any month, if the Hourly Usage Charge is not equal to or greater than
the applicable Minimum Monthly Usage Charge, you agree to pay us the
applicable Minimum Monthly Usage Charge as set forth above.

For example (assumption: no other amounts were due)

Hourly Usage Charge:

(***) times total number of Hours
If in January 2000 your actual total connect hours were 15,000,000, the
Hourly Usage Charge for July would be (***) times 15,000,000 = (***)

Minimum Monthly Usage Charge:
The Minimum Monthly Usage Charge you will be required to
pay for Subscriber connect services is set forth in the
paragraph above. January 2000: $4,000,000.

For purposes of determining connect hours, the sequence of a call is as
follows: The dial port goes off hook, modem synchronization, protocol
management, call routed, Prodigy authentication, session live while user
performing tasks, user initiates end of session or the session otherwise
ends, eventually resulting in modem off-line and session termination
(carrier dropped). We will aggregate the total time of all calls, rounded
up by city to the nearest hour. The length of each individual call will be
calculated from the time the port goes off hook to session end (modem off-
line), rounded up to the nearest second.

6.5.2 Other Monthly Charges
---------------------

In addition to the charges provided in Section 6.5.1 above, you agree to
pay us each month for the following, which is dedicated for your exclusive
use and provided you approve of such use in writing:

1. for each NAP connection at a rate of (***) per month for each DS3
connection, at our choice of location, as are necessary for supporting
your Subscribers,
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

2. for all remote and proxy server connections at a rate of (***) per
month for each EtherNet connection at each remote and proxy server
location,

3. for servers which you require in addition to those installed as of the
date hereof, an amount for the acquisition, installation, operation
and maintenance of hardware and software for such server, at our total
cost plus 10% (including applicable sales tax).

4. If you ask us or no later than August 31, 1997 to assume or provide
any network related service obligations, not specifically disclosed in
this Agreement, including its Exhibit and Schedules ("Supplemental
Obligations"), we will assume such Supplemental Obligations in
consideration for payment to us of our total cost plus 10% (including
applicable sale tax); provided that, such cost plus 10% pricing shall
not, be applicable to any increase or variations in Supplemental
Obligations, and the parties shall mutually agree on pricing for any
such increase or variation.

6.5.3 Payment Terms
-------------

Except as provided in the Transition Services Agreement while it is in
effect, you agree to pay us the applicable Minimum Monthly Usage Charge
(plus any other fixed charges) by the end of the calendar month that we
provide the Service, whether or not you receive an invoice for such
charges, and to make payments to us by wire funds transfer or other
mutually agreed to electronic means to an account specified by us. For all
other charges, we shall make reasonable efforts to provide invoices on or
before the tenth day of the month following the monthly period being
invoiced and you agree to pay such invoices within 30 days of the invoice
date. If you do not make payments to us by their applicable due dates, you
agree to pay us a service charge equal to the lesser of 1.5% per month or
the maximum allowable rate under applicable law on each unpaid amount. You
agree to pay charges for all Service usage you or Subscribers incur by any
means, including providing a User Identification to access a Service. You
are responsible for charges and damages resulting from misuse of User
Identifications.

Applicable taxes, such as sales, use or excise taxes are not included in
the above charges, and you will be invoiced for taxes payable by you but
required by law to be collected by us, but taxes shall not include line
access or similar telecommunications based charges. We shall be
responsible for payment of sales, use, property and other taxes on
machines, software, or goods and services used or furnished by us for our
own use in providing the Services to you. All taxes incurred in connection
with our upgrading of the network to ATM switching, or any other upgrade,
whether mandatory or voluntary, shall be our sole responsibility.`

You shall be responsible for sales, use, property and other taxes on
machines, software, or goods and services provided by you.

All pricing for dial access covers speeds up to 56K bps. All pricing of
higher speed Service is subject to negotiation and agreement between the
parties.
<PAGE>

6.5.4 Global Service Provider
-----------------------

1. Sixty days after receiving a written request from Prodigy that it
provide separated billing to satisfy regulatory requirements
implicated by Prodigy's merger with or acquisition by a company that
owns Bell Operating Companies, Splitrock will begin showing separate
line items on the bills that it conveys to Prodigy. The first line
item will be for inter-LATA information services and any underlying
inter-LATA telecommunications that Splitrock may be providing. The
second line item will be for all other services rendered to Prodigy
by Splitrock.

2. Splitrock will determine what proportion of its services are
attributable to inter-LATA information services and any underlying
telecommunications, and will communicate to Prodigy the formula that
Splitrock uses in making that determination so that Prodigy can
reflect that allocation on bills that Prodigy renders to Prodigy's
end user customers.

3. Prodigy may direct Splitrock to offer its inter-LATA information and
underlying telecommunications for resale by a third-party global
service provider, with the understanding that this third-party
global service provider will then bill Prodigy's end users for its
global service provision through Prodigy's billing mechanism. Under
this billing method, the bills that Splitrock renders to the third-
party global service provider will be payable by the global service
provider within three days, and Splitrock may require Prodigy to
purchase such accounts receivables at full face value within four
days after Splitrock renders such bills to the third-party global
service provider.

4. Alternatively, if Prodigy and Splitrock mutually agree, Splitrock
may bill Prodigy's end users for inter-LATA information services and
any underlying telecommunications, using Prodigy as a billing agent
who will direct-bill its end users for such services and remit the
amounts billed to Splitrock. When using this billing method,
Splitrock may in its sole discretion direct Prodigy to purchase at
face value all accounts receivables that will be owed to Splitrock
by Prodigy's customers at the end of each current monthly billing
cycle. Splitrock may require Prodigy to purchase such accounts
receivables within three days after Splitrock renders its bill to
Prodigy for such services. Prodigy may list Splitrock's inter-LATA
charges as a separate line item on a combined monthly bill that
Prodigy sends to end user customers, and may identify Splitrock as a
global service provider providing inter-LATA information services
and underlying telecommunications.

5. Splitrock will independently determine the price for its provision
of inter-LATA information services and underlying
telecommunications; however, the overall amounts that Prodigy pays
Splitrock every month will be the greater of the following two
amounts:
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

a. (***) multiplied by the number of hours of Splitrock's service
used by all Prodigy end user subscribers or Prodigy personnel or
agents of Prodigy, or

b. Four million dollars ($4,000,000.00) for each month ending after
the execution date of this agreement through the month ending on
June 30, 2000, and four and one-half million dollars
($4,500,000.00) for each month thereafter through the month
ending on December 31, 2001.

5. The effects of these provisions are illustrated by the following
example:

18,695,652 Number of hours in hypothetical month

(***) Overall amount that Prodigy must pay to Splitrock
(***) times 18,695,652.

(***) Amount ascribed by Splitrock to inter-LATA
information services and underlying
telecommunications and billed as such to end users,
as a separate line item on bills rendered to end
users by Prodigy or a third-party global service
provider (allocation may vary in Splitrock's sole
discretion)

(***) Amount collected by Prodigy or a third-party global
service provider from end users for inter-LATA
information services and underlying
telecommunications (assumes that (***) of
(***) is non-collectible)

(***) Amount that Prodigy pays Splitrock for its accounts
receivable from end users or a third party global
service provider (i.e., Prodigy absorbs cost of
non-collectibles)

(***) Amount that Prodigy pays Splitrock for all services
other than inter-LATA informations services and
underlying telecommunications ((***) minus (***))

(***) Total amount that Prodigy pays Splitrock for this
hypothetical month's usage ((***) for inter-LATA
information services and underlying
telecommunications plus (***) for other services)

6.6 Forecasts
---------

At the beginning of each quarter, you shall supply us with a rolling 15-
month forecast consistent with your business model:
<PAGE>

1. hours of traffic for each site for each month of the forecast,

2. time of peak busy hour for each site,

3. average peak busy hour percentage for each site for each month of the
forecast,

4. distribution of traffic by hour of day across all sites, and

5. average session length across all sites.

We shall use this information to perform capacity planning for the Services
provided under this Agreement.

For purposes of determining if a forecast is valid or invalid, the fourth,
fifth and sixth month of a forecast shall be recorded and saved and then
compared against the actual. The forecast for the specified month compared
against the actual is valid if the actual peak hours are no more than 15%
greater than the forecasted peak hours. If the actual peak hours are more
than 15% greater than the forecasted peak hours, then the forecast for the
month is invalid and the SDGS objective does not apply for that month. For
any month in which a forecast is invalid, we shall not be responsible for
SDGS or TD objectives for the subject forecast period.

6.7 Changes and Default
-------------------

6.7.1 Undesirable Conditions
----------------------

If any of the following undesirable events occurs for two consecutive
months or four months out of a twelve-month period, you may terminate this
Agreement upon 45 days written notice to us ("Notice of Termination"):

SDGS below P.05 for 30% or more of the sites
SSA below 95% for 30% or more of the sites
OSA below 95%
TD above 250 millisecond monthly average, and 500 milliseconds
monthly average for Alaska and Hawaii.

For SDGS and SSA undesirable condition calculations, a site is
deemed to be meeting its service level objective during any period of time
when the corresponding service level objective is not applicable. For OSA
and TD, an undesirable condition shall not apply during any period of time
when the corresponding service level objective is not applicable.

If you desire to terminate this Agreement because of any of the
foregoing undesirable conditions, you must give us a Notice of Termination
within 30 days of
<PAGE>

receiving the monthly report that gives rise to your right of termination.
If you do not exercise your right of termination within such 30 day period
and in the next month the applicable undesirable condition no longer
exists, then you waive any right of termination for the applicable time
period and this Agreement shall remain in full force and effect.

Upon Notification of Termination, we shall provide reasonable
transition assistance to you, for a period of up to six months, and no
termination adjustment charge or service level credits shall apply, nor
shall any Minimum Monthly Usage Charges apply after the effective date of
termination.

6.7.2 System Wide Failure
-------------------

If 50% of the point of presence sites are failing to provide access or
Services for forty eight consecutive hours, then you have the right to
enter our premises to operate our network assets and direct our employees,
as is necessary to cure such failure, and we shall reimburse you for any
reasonable expense you incur in doing so. We will cooperate with your
efforts in restoring service to the network. You shall also have the right
to terminate in accordance with the termination provisions within Section
6.7.1.

6.7.3 Financial Related Defaults
--------------------------

The occurrence of any of the following events shall constitute an Event of
Default (herein so called) hereunder:

1. If we shall fail to perform any of our obligations and covenants
under Section 1.14; or

2. If you, in good faith, after reviewing any document or report
required to be delivered under Section 1.14, believe that there has
been a material and adverse change in our business operations and
conditions, financial or otherwise, which in your reasonable opinion
will have a materially adverse effect upon the operations, business,
property, assets, financial condition or credit of us or you.

Remedies
--------

Upon the occurrence of an Event of Default in this Section 6.7.3, you shall
have the right, at your option, to initiate an alternative dispute
resolution by the procedures set forth in Section 6.12. If the dispute is
not resolved by mediation, the arbitrators will be instructed to determine
whether or not we, in their judgement, are capable of performing our
obligations under this Agreement. A decision shall be rendered within three
days of the conclusion of mediation or arbitration, as appropriate.

We will respond within three business days to any reasonable request for
information made by the arbitrators.
<PAGE>

If the arbitrators' judgment is that we are not capable of performing our
obligations under this Agreement for the twelve month period after the
arbitrators render their decision, then you shall have the right, in your
sole discretion, to elect either (i) to terminate this Agreement, without
penalty, and to be relieved of the Minimum Monthly Usage Charges, or (ii)
to enter our premises to operate our network assets and direct our
employees to the extent necessary to operate the network until the end of
the Initial Term of this Agreement, and we shall reimburse you for any
reasonable expenses you incur in doing so.

6.7.4 Default (other than for Sections 6.7.1, 6.7.2 or 6.7.3)
-------------------------------------------------------

This Section 6.7.4 applies to defaults, other than for the events described
in Sections 6.7.1, 6.7.2 and 6.7.3.

In the event that either party materially defaults in the performance of
any of its duties or obligations under this Agreement (other than your
failure to make timely payments due to us) and does not substantially cure
such default within 60 days after being given written notice specifying the
default, then the party not in default may, by giving written notice to the
defaulting party, terminate this Agreement (herein termination "for
cause").

In the event you do not make any payment of the Minimum Monthly Usage
Charge or Hourly Usage Charge due to us on the due date, then we may
terminate this Agreement 45 days after we give you written notice of such
default and provided that we did not receive good funds for such overdue
payment within the 45 day time period. In the event that you do not make
any other payment due to us within 30 days of your receipt of an invoice,
and such failure is not remedied within 60 days after we give you written
notice of nonpayment (the "Cure Period") then we may terminate this
Agreement upon the expiration of the Cure Period.

In the event that you are in default (for reasons other than failure to
make timely payments due to us) and we elect to terminate this Agreement,
then you may request an extension of this Agreement of up to six months as
a transition period, provided that we, in our discretion, agree to provide
such an extension.

In the event that you terminate this Agreement because we are in material
default for reasons other than as described in Section 6.7.1 then we will
provide reasonable transition assistance to you, for a period of up to six
months and no termination adjustment charges or service level credits shall
apply.

If you terminate this Agreement (except for cause), or if we terminate this
Agreement for cause, you shall pay us a termination adjustment charge of
$3,000,000 (in addition to the monthly charges through December 31, 2001 as
provided in Section 6.5.1) if terminated during the Initial Term of the
Agreement. Payment is due and payable upon the date termination notice is
given and all other terms and conditions of this Agreement shall
<PAGE>

remain in full force and effect until the end of the Initial Term,
including without limitation, section 6.5.1

6.8 Other Terms
-----------

You will not be allowed to test or repair our dial network, except as
provided in Section 6.7.2., and except to send your own sample pings
similar to that described in Section 6.2.3.

6.9 Auditing Procedures
-------------------

We shall maintain true and accurate accounting records, in accordance
with sound accounting practices, to support the dial connect charges
payable to us by you. We shall, upon 30 days' prior written request, during
normal business hours, but not more frequently than once each calendar
quarter, provide access to the connect hour accounting records associated
only with the provision of the Service for the immediately preceding one-
year period to an independent accounting firm chosen and compensated by you
for the purposes of auditing the accuracy of the calculation of the dial
connect charges. The accounting firm selected shall: be required to sign an
agreement with us protecting our confidential information, perform such
audit on our premises, and such other locations reasonably necessary to
conduct a proper audit, comply with our security procedures, and be
authorized by us to report only the results of such audit and provide us
with a copy of the report.

In the event that the audit shows you owe an amount to us, we will
invoice you for such amount within the next two monthly billing cycles.

In the event that the audit shows a credit due to you, we will process
such credit including the cost of the audit (but such costs shall not
exceed the credit), excluding travel and per diem charges, plus interest at
the prime rate on the entire amount until paid in full within the next two
monthly billing cycles, provided that we do not disagree with the audit
report. If we disagree with the audit report, we may select an independent
accounting firm, compensated by us, to perform an audit on the same
information provided to the firm selected by you. We shall provide you a
copy of the report commissioned by us. In the event that the audit reports
disagree on the credit due to you, the credit due to you will be determined
by averaging the results of the two audit reports.

6.10 Primary Provider
----------------

We shall be your Primary Provider of Services. You shall be free to
make agreements with third parties for Services, provided you shall not
seek or accept any bids for Services to replace our Services in their
totality.
<PAGE>

You shall negotiate with us in good faith for any new service which we
have the ability, capacity and interest to provide. You shall be free to
offer new, experimental and other access including without limitation,
ADSL, cable access, modified cable access including dial up, satellite
access, roaming (e.g. Aimquest), Web TV, access bundled with content of
other applications, agreements with regional bell operating companies or
long distance companies as marketing partners ("Other Business); provided
--------
that, at least thirty days prior to your entering into any agreement or
----
arrangement for Other Business, you will use good faith efforts to deliver
to us on a confidential basis any business plan changes, projections, draft
agreements and other documents describing such Other Business, to the
extent available, and meet with us to discuss such Other Business.

You shall not offer Other Business that would result in a material
increase in our costs unless we both agree on the amount of increased
revenues which will bear a reasonable relationship to such increase in our
costs; provided that, if we cannot agree on the amount of such increased
revenues, we shall have no obligation to provide our Services required for
such Other Business.

6.11 Additional Services and Products
--------------------------------

You may request us to provide you services, products or enhancements
which are not the subject of this Agreement, which include services,
products or enhancements which we provide to other customers. If we
provide such services, products or enhancements, we agree that we will
offer you a price for such services or products which is no higher than the
price we charge any other party for the same services, products or
enhancements; provided, however, that you will not be entitled to receive
this price treatment with respect to any product, service or enhancement
which we have developed for another party, or which we consider to be
proprietary.

If you request us to develop a new product, service or enhancement for
your use and we agree to develop such product or service, then we will
charge you a price which will include a profit to us.

6.12 Alternative Dispute Resolution
------------------------------

In the event of a dispute between you and us arising out of or
relating to this Agreement, or the breach thereof, you and we shall submit
the dispute to nonbinding mediation and shall make a good-faith effort to
resolve the dispute through the mediation process. In the event the
dispute is not resolved through mediation within 30 days following written
notice by one party that it desires to enter into mediation, then such
dispute shall be resolved exclusively and finally by binding arbitration by
three arbitrators who will be appointed and will act as follows:

The party requesting arbitration shall, simultaneously with such
request, appoint one arbitrator and shall notify the other of such
appointment together with such
<PAGE>

arbitrator's acceptance. Within 30 days from the receipt of such notice,
the other party shall appoint another arbitrator and shall notify the
requesting party of such appointment together with the second arbitrators
acceptance. The third arbitrator, who shall act as chairman of the
arbitration panel, shall be appointed by the other two arbitrators within
the following 30 days. In the event either party fails to appoint an
arbitrator or in the event no agreement is reached between the two
arbitrators as to the appointment of the chairman of the arbitration panel
in accordance with the foregoing provisions, such arbitrator or arbitrators
shall be appointed, upon application by the interested party, by the
American Arbitration Association (AAA).

The arbitrators shall apply the arbitration rules of the AAA.

The award of the arbitrators shall be final and shall not be subject
to any appeal or challenge whatsoever. The arbitrators will not be
required to file their award with any body or authority whatsoever. In the
event arbitration proceedings are initiated under this section, pending
such proceedings and until a final award is rendered pursuant thereto, any
subsequent controversy arising between the parties shall be exclusively
submitted for final decision by the arbitrators in the arbitration
proceedings already pending. The arbitrators shall be instructed by the
parties to include an award for reasonable attorneys' fees, arbitrators'
fees, expert witnesses, travel and other costs incurred.

If a dispute arises out of an alleged breach of this Agreement (other
than your failure to make timely payments due to us), then you and we agree
to continue to perform our respective obligations under this Agreement
until an agreement is reached through mediation or the arbitrators render a
decision, whichever is applicable.

Part 7 - Miscellaneous
================================================================================

7.1 Publicity
---------

Each party will (i) consult with the other party before issuing any public
statement with respect to this Amendment and (ii) give the other party a
reasonable opportunity to review and comment upon any such proposed public
statement before it is released.

7.2 Amendment
---------

No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed
by Prodigy and Splitrock.

7.3 Counterparts
------------
<PAGE>

This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all such counterparts shall together
constitute one and the same Second Amendment.

7.4 Entire Agreement
----------------

This Restated and Amended Agreement constitutes the entire agreement and
understanding between the parties except for that certain Indemnity
Agreement dated February 13, 2000, which is incorporated herein by
reference. Any amendments to this Agreement must be in writing and executed
by both parties.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement of the date
first written above.

PRODIGY COMMUNICATION SPLITROCK SERVICES, INC.
CORPORATION

By:_________________________ By:_______________________
Name: Name:
Title: Title:

<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

Exhibit 10.22

SECOND AMENDMENT TO COST SHARING NATIONAL
IRU AGREEMENT

THIS SECOND AMENDMENT TO COST SHARING NATIONAL IRU AGREEMENT ("Amendment")
is made and entered into as of the 30th day of March, 2000 (the "Amendment
Effective Date"), by and between LEVEL 3 COMMUNICATIONS, LLC, a Delaware limited
liability company ("Grantor") and SPLITROCK SERVICES, INC., a Delaware
corporation ("Grantee"). This Amendment modifies and amends that certain Cost
Sharing National IRU Agreement dated April 26, 1999 between Grantor and Grantee
(the "Agreement"). Capitalized terms used but not defined herein shall have
the meanings set forth in the Agreement.

RECITALS
--------

A. Grantee desires to obtain an IRU in fibers within and along new
Segments and additional fibers within and along existing Segments of the Grantor
System.

B. Grantor desires to convey to Grantee an IRU in the fibers specified
herein, subject to and in accordance with the terms and provisions set forth in
this Amendment and the Agreement.

C. Grantee desires to revise the pricing and space amounts that will be
allocated to Grantee by Grantor for the placement of Grantee's electronic and
optronic equipment in the Facilities.

D. Grantor desires to revise the segregated space amounts for the
Facilities as specified herein, subject to and in accordance with the terms and
provisions set forth in this Amendment.

E. Grantor and Grantee desire to revise certain Exhibits of the Agreement.
--------

TERMS OF AMENDMENT
------------------

Accordingly, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Grantor and Grantee hereby agree as follows:

ARTICLE 1
NEW SEGMENTS
------------

1.01 The following Segments are hereby added to the Grantor System, and
Grantor shall deliver an IRU in, and Grantee shall accept and pay for, an IRU in
between (***) Grantee Fibers within and along the following additional Segments
(the estimated Route Miles and Scheduled Completion Dates for each Segment are
also set forth below):

<TABLE>
<CAPTION>
Route Segment City Pairs Estimated Fiber Count Price per Estimated IRU IRU Scheduled
Route Miles mile Contribution Completion Date

- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3b Pittsburgh to Washington D.C 272 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
3d Cleveland to Pittsburgh 162 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
11b Houston to New Orleans 366 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

CONFIDENTIAL DRAFT Page 1
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

1.02 Grantee shall make the following payments with respect to the
additional Initial Fibers set forth in Section 1.01:

a. The IRU Contribution for the additional Initial Fibers shall be
(***) per Route Mile. The IRU Contribution shall be due from Grantee to Grantor
with respect to the additional Initial Fibers in each Segment as follows: (***).

b. The IRU Contribution for the additional Initial Fibers set forth in
Section 1.02(a) is unique to the additional Initial Fibers described in Section
1.01, and the Parties recognize that the IRU Contribution for Fibers requested
by Grantee in other Segments of Grantor's System where there are no Grantee
Fibers shall be subject to negotiation by the Parties.

c. The additional Initial Fibers designated above shall be considered
to be Grantee Fibers under the Agreement.

ARTICLE 2
ADDITIONAL FIBERS
-----------------

2.01 Grantee desires to add fiber to certain Segments ("Additional
Fibers") where Grantee initially was to acquire an IRU in only (***) Initial
Fibers. Grantor shall provide Grantee with an IRU in the Additional Fibers on
the Scheduled Completion Dates specified below, and Grantee shall pay the
"Additional IRU Contribution" for each Segment of Additional Fibers:

<TABLE>
<CAPTION>
Route Segment City Pairs Estimated Additional Additional Estimated IRU Scheduled
Route Miles Fibers IRU Additional IRU Completion Date
Contribution Contribution
per Mile
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
N/A Salt Lake City to Ogden 35 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
12b Ft. Worth to Dallas 30 8 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
12d Ft. Worth to Stratford 424 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

2.02 The Additional IRU Contribution shall be due from Grantee to Grantor
with respect to the Additional Fibers in each Segment as follows: (***). The IRU
Contribution for all other Initial Fibers shall remain the same.

2.03 The Additional Fibers designated above shall be considered to be
Grantee Fibers under the Agreement.

2.04 The Additional IRU Contribution set forth in Section 2.01 is unique
to the Additional Fibers described in Section 2.01, and the Parties recognize
that any IRU Contribution for Fibers requested by Grantee in other Segments
shall be subject to negotiation by the Parties (subject to the pricing for (***)
along the entire System Route as described in Article 4 of the Agreement).

ARTICLE 3
FACILITIES SPACE
----------------
3.01 Section 7.03 of the Agreement shall be deleted and replaced as
follows:

In the event that Grantee elects to obtain segregated space within
Grantor's Facilities, Grantor will, upon the written request of Grantee
(which request must be delivered to Grantor within sixty (60) days after
the Effective Date, or, if new Segments are added to this Agreement
through amendment, within sixty (60) days after the Amendment Effective
Date), provide Grantee during the Term with segregated space in the
Facilities

CONFIDENTIAL DRAFT Page 2
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

along the System Route for placement of Grantee's electronic and optronic
equipment. Grantee shall be provided either approximately 144 square feet
of space, 96 square feet of space, or 48 square feet of space in any
Regeneration Facility or Opamp Facility and approximately 200 square feet
in any Terminal Facility. Grantee shall have two (2) payment options with
respect to segregated space, nonrecurring and recurring.

Nonrecurring Payment. Grantee may elect to pay to Grantor, the following
one-time fees for each Facility to be occupied by Grantee along such
Segment based upon the number of square feet of space to be provided to
Grantee (collectively, the "Facilities Contribution"):

Approximately 200 square feet (Terminal Facilities only): (***)
Approximately 144 square feet: (***)
Approximately 96 square feet: (***)
Approximately 48 square feet: (***)

The Parties recognize that the above-referenced Facilities Contributions
are approximations, and in the event that Grantee obtains segregated space
that has a different actual square footage than such approximations then
Grantee shall pay the exact amount to Grantor based on the following
formulae: (***) per square foot for Regeneration Facilities and Opamp
Facilities; (***) per square foot for Terminal Facilities. The Parties
also recognize that the Facilities Contributions are for raw square
footage only, and do not include the cost of any racks to be installed by
Grantor for Grantee, if any.

Recurring Payment. Grantee may elect to pay the Facilities Contribution on
a monthly basis. The monthly fees shall be paid over (***) for designated
space to be occupied by Grantee throughout the Term, and shall be
calculated as follows:

Regen Facilities (***) per month/per square foot
Opamp Facilities (***) per month/per square foot
Terminal Facilities (***) per month/per square foot

The monthly fees shall be due and payable in advance on the first day of
each month during the (***) term. Grantee shall give written notice to
Grantor of its election to pay the Facilities Contribution.

3.02 The first sentence of Section 7.04 of the Agreement shall be deleted
and replaced as follows:

In the event that Grantee elects to obtain shared space in lieu of the
segregated space described in Section 7.03, Grantor will, upon the written
request of Grantee within sixty (60) days of the Effective Date, or, if new
Segments are added to this Agreement through amendment, within sixty (60)
days after the Amendment Effective Date), provide Grantee during the Term
with shared space in Regeneration Facilities, Opamp Facilities and Terminal
Facilities along the System Route for the placement of Grantee's electronic
and optronic equipment; such space shall be sufficient for the placement of
up to four (4) equipment racks or cabinets (depending upon configuration)
in the Regeneration Facilities and Opamp Facilities and up to eight (8)
equipment racks or cabinets in the Terminal Facilities.

CONFIDENTIAL DRAFT Page 3
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

ARTICLE 4
REVISION TO GRANTOR SYSTEM MAP
------------------------------

The Exhibit "A" attached to the Agreement (Grantor System Map) is hereby
-----------
deleted and in lieu thereof the Exhibit "A" attached hereto (Grantor System Map)
-----------
is hereby substituted and may be further amended by letter agreement between the
Parties, pursuant to Article 25.

ARTICLE 5
---------
REVISION TO GRANTOR INTERCITY ROUTE SCHEDULE
--------------------------------------------

The Exhibit "B" attached to the Agreement (Grantor Intercity Route
-----------
Schedule) is hereby deleted and in lieu thereof the Exhibit "B" attached hereto
-----------
(Grantor Intercity Route Schedule) is hereby substituted and may be further
amended by letter agreement between the Parties, pursuant to Article 25.

ARTICLE 6
REVISION TO CONSTRUCTION SPECIFICATIONS
---------------------------------------

The Exhibit "F" attached to the Agreement (Construction Specifications) is
-----------
hereby deleted and in lieu thereof the Exhibit "F" attached hereto (Construction
-----------
Specifications) is hereby substituted and may be further amended by letter
agreement between the Parties, pursuant to Article 25..

IN WITNESS WHEREOF, Grantor and Grantee have executed this Amendment as of
the date first above written.

LEVEL 3 COMMUNICATIONS, LLC, a
Delaware limited liability company

By /s/ Jon Yount
--------------------------------------------
Title: Vice President
----------------------------------------
Date: March 28, 2000
----------------------------------------

SPLITROCK SERVICES, INC.,
a Delaware corporation

By /s/ Patrick J. McGettigan, Jr.
--------------------------------------------
Title: Senior Vice President
----------------------------------------
Date: February 29, 2000
----------------------------------------

CONFIDENTIAL DRAFT Page 4
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

EXHIBIT "B"
SEGMENTS/CITY PAIRS
-------------------
GRANTOR INTERCITY ROUTE SCHEDULE
--------------------------------

<TABLE>
<CAPTION>
Route Segment City Pairs Estimated Fiber Count Price per Estimated IRU IRU Scheduled
Route Miles mile fee/1/ Completion Date
- -----------------------------------------------------------------------------------------------------------------------------------
NORTHWEST DISTRICT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
4e Las Vegas to Ogden 476 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
Salt Lake City to Ogden/2/ 35 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
13a Sacramento to Portland 643 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
13b Portland to Seattle 193 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
18a Seattle to Boise 550 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
18b Boise to Ogden 395 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
Regional Total 2,257 (***)
- -----------------------------------------------------------------------------------------------------------------------------------
N. CALIFORNIA DISTRICT
- -----------------------------------------------------------------------------------------------------------------------------------
2a San Jose to San Francisco 45 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
2b San Jose to San Luis Obispo 198 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
2c San Luis Obispo to Los Angeles 244 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
2d San Francisco to Oakland 10 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
2e Oakland to Sacramento 85 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
Regional Total 582 (***)
- -----------------------------------------------------------------------------------------------------------------------------------
PHOENIX DISTRICT
- -----------------------------------------------------------------------------------------------------------------------------------
4a1 LA to San Bernardino 67 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
4a2 San Bernardino to Las Vegas 229 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
8 LA to San Diego/3/ 165 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
12a San Diego to Phoenix 355 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
12c Phoenix to Santa Teresa (El Paso) 417 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
Regional Total 1,233 (***)
- -----------------------------------------------------------------------------------------------------------------------------------
DENVER DISTRICT
- -----------------------------------------------------------------------------------------------------------------------------------
4b St. Louis to Chicago 299 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
4c Kansas City to St. Louis 302 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
4d Omaha to Kansas City 215 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
4f Ogden to Denver 603 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
4g Denver to Omaha 554 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
12e Santa Teresa (El Paso) to Stratford 471 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
14a Denver to Stratford 358 4 (***) (***) (***)
- -----------------------------------------------------------------------------------------------------------------------------------
Regional Total 2,802 (***)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Estimated IRU Contribution: IRU fee to be determined by actual route miles
/2/ This segment only broken out due to change in fiber count
/3/ In the original IRU, this segment is broken down into LA to Orange and
Orange to San Diego

CONFIDENTIAL DRAFT Page 5
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5c Dallas to Memphis 514 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
5e Memphis to Nashville 251 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
7 Dallas to Houston 247 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
11b Houston to New Orleans 366 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
11c1 New Orleans to Tallahassee 481 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
12b Ft. Worth to Dallas 30 12 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
12d Stratford to Ft. Worth 424 8 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
19a San Antonio to Houston 218 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
19b San Antonio to Austin 79 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
19c Austin to Ft. Worth 208 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
Regional Tot al 2,818 (***)
- ------------------------------------------------------------------------------------------------------------------------
SOUTHEAST DISTRICT
- ------------------------------------------------------------------------------------------------------------------------
5d Louisville to Cincinnati 126 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
5f Nashville to Louisville 230 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
9b Atlanta to Charlotte 253 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
9d Charlotte to Raleigh 200 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
10a Atlanta to Jacksonville 350 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
10b Orlando to Miami 252 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
10c Jacksonville to Orlando 141 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
11a Tampa to Miami 300 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
11c2 Tallahassee to Tampa/5/ 244 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
17 Nashville to Atlanta 381 8 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
Regional Total 2,477 (***)
- ------------------------------------------------------------------------------------------------------------------------
NORTHEAST DISTRICT
- ------------------------------------------------------------------------------------------------------------------------
1a Newark to New York 16 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
1b Princeton to Newark 42 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
1c Philadelphia to Princeton 61 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
1d Wilmington to Philadelphia 37 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
6a New York to Stamford/6/ 45 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
6b Providence to Boston 49 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
6d Stamford to Hartford 96 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
6e Hartford to Providence 81 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
15a Cleveland to Buffalo 192 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
15b Albany to Boston 175 4 (***) (***) (***)
- ------------------------------------------------------------------------------------------------------------------------
Regional Total 794 (***)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
/4/ In the original IRU, this segment is combined with Tallahassee to Tampa to
form N.O. to Tampa
/5/ In the original IRU, this segment is combined with New Orleans to
Tallahassee to form N.O. to Tampa
/6/ In the original IRU, this segment is broken down into New York to White
Plains and White Plains to Stamford

CONFIDENTIAL DRAFT Page 6
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

<TABLE>
<CAPTION>
NEW YORK DISTRICT
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1e Baltimore to Wilmington 79 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
1f Washington DC to Baltimore 78 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
3a Chicago to Detroit 324 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
3b Pittsburgh to Washington DC 272 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
3c Detroit to Cleveland 190 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
3d Cleveland to Pittsburgh 162 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
5a Chicago to Indianapolis 239 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
5b Indianapolis to Cincinnati 114 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
9a Richmond to Washington DC 120 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
9c Raleigh to Richmond 175 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
Regional Total 1,727 (***)
- ---------------------------------------------------------------------------------------
E. CANADA DISTRICT
- ---------------------------------------------------------------------------------------
15c Toronto to Buffalo 111 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
15d Montreal to Albany 240 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
15e Toronto to Ottawa 260 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
15f Ottawa to Montreal 103 4 (***) (***) (***)
- ---------------------------------------------------------------------------------------
Regional Total 714 (***)
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------

Nationwide Total= 15,467
- ---------------------------------------------------------------------------------------
</TABLE>

CONFIDENTIAL DRAFT Page 7
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

EXHIBIT "F"
CONSTRUCTION SPECIFICATIONS
---------------------------

1.1. General
-------------

The intent of this Exhibit is to delineate the specifications and standards for
construction of the Grantor System. In the event any federal, state, local or
private agency having jurisdiction shall impose higher standards, Grantor will
comply and conform with such higher standards.

1.1.1. Material
----------------
. Steel casings shall be minimum 35,000 PSI.
. Any exposed steel conduit, brackets or hardware (i.e., bridge attachments)
shall be galvanized.
. Hand holes shall have a minimum 20,000 pound loading rating with six to
twelve inches (6 to 12") of cover.
. Manholes shall have a minimum H-20 loading rating.
. Fiber optic cable shall be single-armored.
. HDPE SDR 11 conduits shall be used for plowing and HDPE SDR 9 conduits shall
be installed in rock areas.

1.1.2. Minimum Depths
----------------------
. Minimum cover required in the placement of conduit shall be forty-two inches
(42"), except in the following instances:

. In drainage ditches, the Grantor System shall be placed with a minimum cover
of forty-two inches (42") below the clean out elevation; unless the
controlling authority requires additional depth in which case the greatest
depth will be maintained.

. Where the Grantor System crosses railroads, the Grantor System shall be
placed at a minimum depth of sixty inches (60") below the base of rail or
sixty inches (60") below the paralleling drainage ditches, whichever is
greater.

. Unless otherwise specified, where the Grantor System crosses gullies,
ditches, streams, rivers, creeks, canals, and washes, the Grantor System will
be placed at a minimum cover of forty-eight inches (48") below the bottom of
the waterway unless the controlling authority requires additional depth in
which case the greatest depth will be maintained. In navigable waterways, the
Grantor System shall be placed a minimum of twenty feet (20') below the
bottom of the waterway, or as detailed on the drawings or directed by the
contractor.

. Where the Grantor System crosses existing facilities, including pipes,
cables, or other structures, the Grantor System will be placed to maintain a
minimum of twelve inches (12") clearance under the existing facility or a
minimum clearance as required by the governing authorities or facility owner,
whichever is greater. In the event that the top of sub-surface existing
facility is greater than seventy-two inches (72") below grade, the Grantor
System may be placed over the object while maintaining the twelve-inch (12")
clearance if such action is not in conflict with permits and in accordance
with the requirements of governing authorities and ROW owners. In all cases,
the Grantor System shall be placed a minimum of forty-two inches (42") below
grade.

When rock is encountered at grade, the rock shall be excavated to
---------------------------------
provide duct system cover of eighteen inches (18"). The Grantor System
shall be installed by one of the following methods:

CONFIDENTIAL DRAFT Page 8
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

. The Grantor System shall be installed on a two-inch (2") bed of select
backfill and covered in a one and one-half (1-1/2) sack concrete mix eight
inches (8") thick. The remainder of the trench shall be backfilled per the
requirements of Section 13.

. The Grantor System shall be installed on a two-inch (2") bed of select
backfill and then covered by select backfill to two inches (2") above the
Grantor System. A one-quarter-inch (1/4") steel plate will cap the select
backfill and the remainder of the trench backfilled per the requirements of
Section 13.

. The Grantor System shall be installed in a steel casing. The remainder of the
trench shall be backfilled per the requirements of Section 13.

When rock is encountered at six inches (6") or less below grade, the
---------------------------------------------------------------
rock shall be excavated a minimum of eight inches (8") deep from the top
of the rock, maintaining a minimum cover of eighteen inches (18") below
grade. The Grantor System shall be installed by one of the following
three (3) methods:

. The Grantor System shall be installed on a two-inch (2") bed of select
backfill and covered in a one and one half (1-1/2) sack concrete mix eight
inches (8") thick. The remainder of the trench shall be backfilled per the
requirements of Section 13.

. The Grantor System shall by installed on a two-inch (2") bed of select
backfill and then covered by select backfill to two inches (2") above the
Grantor System. A one-quarter-inch (1/4") steel plate will cap the backfill.
The remainder of the trench shall be backfilled per the requirements of
Section 13.

. The Grantor System shall be installed in a steel casing. The remainder of the
trench shall be backfilled per the requirements of Section 13.

When rock is encountered more than six inches (6") but less than thirty
-----------------------------------------------------------------------
inches (30") below grade, the rock shall be excavated a minimum of eight
------------------------
inches (8") deep from the top of the rock, maintaining a minimum cover
of eighteen inches (18") below grade. The Grantor System shall be
installed by one of the following four (4) methods:

. The Grantor System shall be installed in a steel casing. The remainder of the
trench shall be backfilled per the requirements of Section 13.

. The rock shall be excavated eighteen inches (18") deep from the surface of
the rock or to forty-two inches (42") of cover whichever requires less
excavation. No further protection will be required other than a two-inch (2")
bed of select backfill and then covered by select backfill to four inches
(4") above the Grantor System.

When rock is encountered thirty inches (30") or more below grade, the
----------------------------------------------------------------
rock shall be excavated eight inches (8") deep from the top of the rock,
or forty- two inches (42") of cover whichever requires less excavation.
The Grantor System shall be installed by the following method:

CONFIDENTIAL DRAFT Page 9
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

. The Grantor System shall be installed on a two-inch (2") bed of select
backfill and then covered by select backfill to two inches (2") above the
Grantor System. The remainder of the trench shall be backfilled per the
requirements of Section 13.

. In the case of the use/conversion of existing steel pipelines or salvaged
conduit systems, the existing depths shall be considered adequate.

1.1.3. Buried Cable Warning Tape
---------------------------------

All conduit will be installed with buried cable warning tape except where
existing steel pipelines or salvaged conduit systems are used. The warning tape
shall generally be placed at a depth of 12 inches (12") below grade and directly
above the conduit.

1.1.4. Conduit Construction
----------------------------

. Conduits may be placed by means of trenching, plowing, jack and bore, or
directional bore. Conduit will generally be placed on a level grade parallel
to the surface, with only gradual changes in grade elevation.

. Steel conduit will be joined with threaded collars, Zap-Lok or welding.

. When directional bore methods are used, the bore depth with steel casing
shall be a minimum of five feet (5') below base of rail and five feet (5')
below natural ground. For depths greater than ten feet (10') below base of
rail and five feet (5') below natural ground, a single HDPE SDR 11 casing may
be used in lieu of a steel casing. Approved mini-directional wet bores shall
be installed a minimum depth of ten feet (10') below the toe of ballast
section and a minimum of five feet (5') feet below natural ground line,
pursuant to the following parameters:

. All bores are to be either Duct or HDPE-casing bores with the exception of
those where the ROW owner specifies steel.

All Duct bores (bores without casing) with the exception of common driveway
---------------------------------------------------------------------------
crossings shall use SDR 9 Duct. Driveway bores and cased bores may use SDR 11
-----------------------------------------------------------------------------
Duct.
-----

. All conduits placed on DOT bridges will be bullet-proof fiberglass where
allowed by the authority and all other bridges galvanized steel conduit shall
be installed.

. All conduits placed on bridges shall have expansion joint placed at each
structural (bridge) expansion joint or at least every one hundred feet
(100'), whichever is the shorter distance.

1.1.5. Innerduct Installation
------------------------------

. HDPE innerducts, where utilized, shall be one and one-quarter inches (1-
1/4").
. HDPE innerduct(s), where utilized, shall be encased by a HDPE or steel
conduit.
. HDPE innerduct(s) shall extend beyond the end of all conduits a minimum of 18
inches (18").

1.1.6. Cable Installation
--------------------------

. The fiber optic cable shall be installed using a powered pulling winch and
hydraulic powered assist pulling wheels. The maximum pulling force to be
applied to the fiber optic cable shall be 600 pounds.

. Bends of small radii (less then 20 times the outside diameter of the cable)
and twists that may damage the cable shall be avoided during cable placement.

CONFIDENTIAL DRAFT Page 10
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

. The cable shall be lubricated and placed in accordance with the cable
manufacturer specifications.
. A pulling swivel break-away rated at 600 pounds shall be used at all times.
. All splices will be contained in a hand hole or manhole.
. A minimum of thirteen feet (13') of slack cable will be left in all
intermediate hand holes or manholes.
. A minimum of fifty feet (50') of slack cable from each cable end will be left
in all splice locations.
. A minimum of one hundred feet (100') of slack cable will be left in all
Regeneration and ILA Facilities.

1.1.7 Manholes and Hand holes
------------------------------
. Hand holes and Manholes placed in traveled surface streets be HS-20 loading
rated and shall have locking lids.
. Hand holes shall be placed in all other areas and be installed with a minimum
of six inches (6") of soil covering the lid.

1.1.8. Cable Markers (Warning Signs)
-------------------------------------

Cable markers (with the same information as buried cable warning tape) shall be
installed at all changes in cable running line directions, waterways, subsurface
utilities, hand holes and at both sides of street, highway, bridge or railroad
crossings. At no time shall any markers be spaced more than one thousand feet
(1000') feet apart. Markers shall be positioned so that they can be seen from
the location of the cable and generally set facing perpendicular to the cable
running line.

1.1.9. Compliance
------------------

All work will be done in strict accordance with federal, state, local and
applicable private rules and laws regarding safety and environmental issues,
including those set forth by OSHA and the EPA. In addition, all work and the
resulting fiber system will comply with the current requirements of all
governing entities (FCC, NEC, DEC, and other national, state, and local codes).

1.1.10. As-Built Drawings
--------------------------

. As-built drawings will contain a minimum of the following:

. Information showing the location of running line, relative to permanent land
marks, including but not limited to, railroad mileposts, boundary crossings
and utility crossings.

. Manhole and hand hole locations.
. Conduit information (type, length, expansion joints, etc.).
. Notation of all deviations from specifications (depth, etc.).
. ROW detail (type, centerline distances, boundaries, waterways, road
crossings, known utilities and obstacles).
. Cable marker locations and stationing.
. Fiber Optic Cable Data (type, manufacturer, reel Ids, sequentials, slack
coils, splice points, etc.).
. Regeneration and Optical Amplifier Facility locations and floor plans.
. Drawings will be updated with actual field data during and after
construction.
. Metro area scale shall not exceed 1 inch = 200 feet.
. Rural area scale shall not exceed 1 inch = 500 feet.

CONFIDENTIAL DRAFT Page 11
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

. As-built drawings will be provided within 90 days after the Acceptance Date,
in both hard copy and electronic format. Updates to the as-built drawings
will be provided within 60 days of completion of change.

1.1.11. Aerial Construction
----------------------------

. Subject to Section 7.01 of the IRU Agreement, aerial construction methods
will only be in local loop construction and in those circumstances where
buried construction techniques are impractical due to environmental
conditions, schedule or economic considerations, right-of-way issues or code
restrictions. Aerial construction on utility structures using optical
groundwire or all dielectric self-support methods may be used.

. Aerial design standards and construction techniques will conform with
industry-accepted practices for aerial fiber option cable systems. All aerial
plant must comply with applicable national (i.e., NEC, NESC, etc.), state and
local codes.The fiber optic cable placed on an aerial system shall be armored
and designed for aerial applications.

. The cable will be placed in accordance with manufacturer specifications.
Cable tension will be monitored during placement. Cable rollers will be
placed at a maximum interval of thirty-five feet (35'). Cable expansion loops
will be placed at ever pole. Cable identification/warning tags will be placed
at every pole. All cable splices will be buried in hand holes or manholes.

. Cable sheath to suspension strand bonds and grounding will be performed at
the first and last pole of the system and at .25 mile intervals.

. Fiber optic cable at all riser poles will be protected with galvanized steel
U-guard from twelve inches (12") below grade to a point twenty four inches
(24") below the suspension strand. Conduit sweeps will be used to transition
from the U-guard to either a hand hole or manhole.

. All aerial plant will be designed and constructed with 10M EHS (Class A
galvanized) suspension strand unless otherwise dictated by the pole owners or
field conditions. The fiber optic cable will be double lashed to the
suspension strand using 45 mil stainless lashing wire.

. Span length shall account for storm loading (wind and ice) in accordance with
zones outlined in NESC code. Sags and tensions will be calculated in
accordance with industry accepted practices and account for strand size, span
length, ambient temperature at placement, and loading. The suspension strand
will be transformed with a strand dynamometer. A catenary suspension system
may be used if the system exceeds maximum span length specifications.

. Prior to attachment to any existing pole line, the system will be inspected
for compliance with applicable codes and standards, as well as the physical
condition of the poles and existing hardware. Any make-ready work will be
reviewed with the pole owner and specifically addressed prior to
construction.

. If a pole line needs to be constructed, the preferred poles will be Class 4
(40 feet) and Class 5 (35 feet). Use of the preferred poles will make it
unnecessary to calculate pole loading (horizontal, vertical and bending
moments) in most field conditions. Some unusual conditions may require the
use of a stronger class pole. Depth of placement will be dictated by soil
conditions, slope of terrain and length of pole. Poles will be guyed in
accordance with industry-accepted standards. All pole attachment hardware
will be galvanized steel.

. Aerial cable will be placed below power attachments and above all other
attachments unless otherwise dictated by the pole owner. Pole contact
clearances and locations will be dictated by current NESC code and the
presence of existing attachments; however, the following minimum objective
clearances will apply:

CONFIDENTIAL DRAFT Page 12
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

. Power line-forty inches (40") (below).
. Non-current carrying power line-thirty inches (30").
. Telephone, CATV and other signal lines-twelve inches (12") (below).

. Vertical clearances for crossings or parallel lines will be dictated by
current NESC code; however, the objective clearance for most objects (roads,
alleys, etc.) is eighteen feet (18') (at 100 degree F) with the exception of
railroad tracks and waterways which have an objective of 27 feet (27') (at
100 degree F).

CONFIDENTIAL DRAFT Page 13
SECOND AMENDMENT TO NATIONAL COST SHARING IRU AGREEMENT

<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission

Exhibit 10.23

THIRD AMENDMENT TO COST SHARING NATIONAL
IRU AGREEMENT

THIS THIRD AMENDMENT TO COST SHARING NATIONAL IRU AGREEMENT ("Amendment")
is made and entered into as of the 27th day of March 2000, by and between LEVEL
3 COMMUNICATIONS, LLC, a Delaware limited liability company ("Grantor") and
SPLITROCK SERVICES, INC., a Delaware corporation ("Grantee"). This Amendment
modifies and amends that certain Cost Sharing National IRU Agreement dated April
26, 1999 between Grantor and Grantee (the "Agreement"). Capitalized terms used
but not defined herein shall have the meanings set forth in the Agreement.

RECITALS
--------

A. Grantee desires to obtain an IRU in fibers within and along segments of
Grantor's lateral segments and metropolitan fiber-optic networks to connect
certain Segment End Points to Grantee Points of Presence.

B. Grantor desires to convey to Grantee an IRU in the additional fibers
specified herein, subject to and in accordance with the terms and provisions set
forth in this Amendment and the Agreement.

TERMS OF AMENDMENT
------------------

Accordingly, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Grantor and Grantee hereby agree as follows:

ARTICLE 1
METROPOLITAN SEGMENTS
---------------------

1.01 The Segments described in Exhibit "A," attached hereto, are hereby
----------
added to the Grantor System, and Grantor shall deliver an IRU in, and Grantee
shall accept and pay for, an IRU in the Grantee Fibers within and along such
Segments (the "Metropolitan Grantee Fibers"). Maps of the Segments are provided
in Exhibit "A-1," attached hereto.
------------

1.02 Grantee shall make the following payments with respect to the
Metropolitan Grantee Fibers.

a. The IRU Contribution for the Metropolitan Grantee Fibers of (***) shall
be allocated on a Segment by Segment basis, as identified in Exhibit "A". The
----------
IRU Contribution shall be due from Grantee to Grantor with respect to the
Metropolitan Grantee Fibers in each Segment as follows: (***).

b. The IRU Contribution for the Metropolitan Grantee Fibers set forth in
Section 1.02(a) is unique to the Segments described herein, and the Parties
recognize that any IRU

PAGE1
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission

Contribution for additional Fibers requested by Grantee
in other metropolitan Segments shall be subject to negotiation by the Parties.

1.03 Unless otherwise provided herein, for the purposes of the Agreement,
the Metropolitan Grantee Fibers shall be treated as Grantee Fibers.
Specifically, the Parties recognize that the Monthly Charge shall apply to the
Metropolitan Grantee Fibers.

1.04 Grantee shall have the Option for the Metropolitan Grantee Fibers to
extend the IRU in additional fibers as provided in Section 3.02 of the
Agreement.

1.05 The construction specifications for the Metropolitan Grantee Fibers
are attached hereto as Exhibit "C."
----------

1.06 The fiber, conduit, and cable vault specifications for the
Metropolitan Grantee Fibers are attached hereto as Exhibit "D."
----------

1.07 The fiber testing procedures for the Metropolitan Grantee Fibers are
attached hereto as Exhibit "E."
----------

ARTICLE 2
LATERAL SEGMENTS
----------------

2.01 Grantor shall construct and install the lateral segments described in

Exhibit "B," attached hereto, for Grantee in the metropolitan markets containing
- ----------
the Metropolitan Grantee Fibers (the "Lateral Segments"). The estimated costs
for constructing and installing the Lateral Segments are summarized in the
tables contained in Exhibit "B." Grantee shall be solely responsible for
----------
reimbursement of all of Grantor's Costs, subject to the agreed upon split, in
constructing and installing the Lateral Segments, regardless of whether the
actual Costs are above or below the estimates contained in Exhibit "B."
----------
Grantor's Costs shall be documented by Grantor in commercially reasonable detail
and shall be submitted to Grantee in the form of invoices with supporting
documentation.

2.02 Grantee shall reimburse Grantor for the Costs of the construction and
installation of the Lateral Segments within fifteen (15) days after receipt of
an invoice therefor, subject to Grantee's rights to dispute such Costs.

2.03 The Parties may add Lateral Segments by letter agreement between the
Parties, pursuant to Article 25.

PAGE2
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission

IN WITNESS WHEREOF, Grantor and Grantee have executed this Amendment
as of the date first above written.

LEVEL 3 COMMUNICATIONS, LLC, a
Delaware limited liability company

By/s/Jon Yount
------------------------------------------
Title: Vice President
------------------------------------------
Date: March 29, 2000
------------------------------------------

SPLITROCK SERVICES, INC.,
a Delaware corporation

By /s/ Patrick J. McGettigan, Jr.
------------------------------------------
Title: Senior Vice President
------------------------------------------
Date: February 29, 2000
------------------------------------------

PAGE3
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission

Exhibit "A"
Metropolitan Grantee Fibers
---------------------------

<TABLE>
<CAPTION>
Route Segment Estimated Fiber Price Per
Route Miles Count Mile
- ----------------------------------------------------------------------------------------------
# From Point To Point
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------

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

<S> <C> <C> <C> <C> <C>
Cambridge Loop 11.35 4 (***)
- ----------------------------------------------------------------------------------------------
A-1 Gateway Bent & 3rd 4
- ----------------------------------------------------------------------------------------------
B-8 Bent & 3rd Cambridge and 3rd 4
- ----------------------------------------------------------------------------------------------
B-7 Cambridge & 3rd Cambridge & Fulkerson 4
- ----------------------------------------------------------------------------------------------
B1-1 Cambridge & Fulkerson Bent & Fulkerson 4
- ----------------------------------------------------------------------------------------------
A-18 Bent & Fulkerson Gateway 4
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------

LOOP A & C - NYC 9.4 4 (***)
- ----------------------------------------------------------------------------------------------
A-1 17th Street & 3rd Ave Park Row & St James 4
- ----------------------------------------------------------------------------------------------
A-2 Park Row & St James Fulton & Water 4
- -----------------------------------------------------------------------------------------------
A-3 Fulton & Water Fulton & Gold 4
- -----------------------------------------------------------------------------------------------
A-6 Barclay & Church 15th St alley & 9th Ave 4
- -----------------------------------------------------------------------------------------------
A-7 15th St alley & 9th Gateway (111 8th) 4
Ave
- -----------------------------------------------------------------------------------------------
B-8 Gateway (111 8th) 17th St & 3rd Ave 4
- -----------------------------------------------------------------------------------------------
C-1 Gateway (100 William) Maiden & Water 4
- -----------------------------------------------------------------------------------------------
C-2 Maiden & Water West & Battery Place 4
- -----------------------------------------------------------------------------------------------
C-3 West & Battery Place Barclay & Church 4
- ------------------------------------------------------------------------------------------------
C-4 Fulton & Gold Gateway (100 William) 4
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------

LOOP A - Dallas - Inner Loop 21.7 10 (***)
- ------------------------------------------------------------------------------------------------
A-1 Gateway Viceroy & I-35 10
- ------------------------------------------------------------------------------------------------
A-2 Viceroy & I-35 Hwy 12 & Hillcrest 10
- ------------------------------------------------------------------------------------------------
A-3 Hwy 12 & Hillcrest Irving & Oak Lawn 10
- ------------------------------------------------------------------------------------------------
A-4 Irving & Oak Lawn Oak Lawn & Lemmon 10
- ------------------------------------------------------------------------------------------------
A-5 Oak Lawn & Lemmon Oak Lawn & Maple 10
- ------------------------------------------------------------------------------------------------
A-6 Oak Lawn & Maple Irving & Inwood 10
- ------------------------------------------------------------------------------------------------
A-7 Irving & Inwood Gateway 10
- ------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------
TOTALS 32.4
- ------------------------------------------------------------------------------------------------
</TABLE>

NOTE: The Grantee Fibers shall terminate in the nearest underground utility box
at each of the sub-segment end points identified above.

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission

Exhibit "A"
Metropolitan Grantee Fibers
---------------------------

<TABLE>
<CAPTION>
Route Segment (***) IRU (***) IRU Total IRU Scheduled
Contribution Contribution Contribution Completion Date
- ----------------------------------------------------------------------------------------------------------------------------------
# From Point To Point
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------

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

<S> <C> <C> <C> <C> <C> <C>
Cambridge Loop (***) (***) (***) (***)
- ----------------------------------------------------------------------------------------------------------------------------------
A-1 Gateway Bent & 3rd
- ----------------------------------------------------------------------------------------------------------------------------------
B-8 Bent & 3rd Cambridge and 3rd
- ----------------------------------------------------------------------------------------------------------------------------------
B-7 Cambridge & 3rd Cambridge & Fulkerson
- ----------------------------------------------------------------------------------------------------------------------------------
B1-1 Cambridge & Fulkerson Bent & Fulkerson
- ----------------------------------------------------------------------------------------------------------------------------------
A-18 Bent & Fulkerson Gateway
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------

LOOP A & C - NYC (***) (***) (***) (***)
- ----------------------------------------------------------------------------------------------------------------------------------
A-1 17th Street & 3rd Ave Park Row & St James
- ----------------------------------------------------------------------------------------------------------------------------------
A-2 Park Row & St James Fulton & Water
- ----------------------------------------------------------------------------------------------------------------------------------
A-3 Fulton & Water Fulton & Gold
- ----------------------------------------------------------------------------------------------------------------------------------
A-6 Barclay & Church 15th St alley & 9th Ave
- ----------------------------------------------------------------------------------------------------------------------------------
A-7 15th St alley & 9th Gateway (111 8th)
Ave
- ----------------------------------------------------------------------------------------------------------------------------------
B-8 Gateway (111 8th) 17th St & 3rd Ave
- ----------------------------------------------------------------------------------------------------------------------------------
C-1 Gateway (100 William) Maiden & Water
- ----------------------------------------------------------------------------------------------------------------------------------
C-2 Maiden & Water West & Battery Place
- ----------------------------------------------------------------------------------------------------------------------------------
C-3 West & Battery Place Barclay & Church
- ----------------------------------------------------------------------------------------------------------------------------------
C-4 Fulton & Gold Gateway (100 William)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------

LOOP A - Dallas - Inner Loop (***) (***) (***) (***)
- ----------------------------------------------------------------------------------------------------------------------------------
A-1 Gateway Viceroy & I-35
- ----------------------------------------------------------------------------------------------------------------------------------
A-2 Viceroy & I-35 Hwy 12 & Hillcrest
- ----------------------------------------------------------------------------------------------------------------------------------
A-3 Hwy 12 & Hillcrest Irving & Oak Lawn
- ----------------------------------------------------------------------------------------------------------------------------------
A-4 Irving & Oak Lawn Oak Lawn & Lemmon
- ----------------------------------------------------------------------------------------------------------------------------------
A-5 Oak Lawn & Lemmon Oak Lawn & Maple
- ----------------------------------------------------------------------------------------------------------------------------------
A-6 Oak Lawn & Maple Irving & Inwood
- ----------------------------------------------------------------------------------------------------------------------------------
A-7 Irving & Inwood Gateway
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS (***) (***) (***)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE: The Grantee Fibers shall terminate in the nearest underground utility box
at each of the sub-segment end points identified above.

PAGE4
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission

Exhibit "B"
Lateral Segments
----------------

175 Bent Street, Cambridge, MA
Estimated total cost: (***)
Estimated split cost: (***)

345 Courtland Street, Atlanta, GA
Estimated total cost: (***)
Estimated split cost: (***)

Assumes Grantor is on floor 2 and Grantee is on floor 3. Assumes 40 LF of new
riser to be built by Grantor and 440 LF total distance from Grantor OSX to
Grantee FTP.

601 E. 18th Street, Suite 1900, Denver, CO
Estimated total cost: (***)
Estimated split cost: (***)

Assumes Grantor is on floor 1 and Grantee is on floor 1. Assumes 200 LF of new
riser to be built by Grantor and 250 LF total distance from Grantor OSX to
Grantee FTP.

818 West 7th Street, Los Angeles, CA
Estimated total cost: (***)
Estimated split cost: (***)

Assumes Grantor is on floor 11 and Grantee is on floor 4. Assumes 0 LF of new
riser to be built by Grantor and 440 LF total distance from Grantor OSX to
Grantee FTP.

1950 Stemmons Freeway, Suite 2015, Dallas, TX
Estimated total cost: (***)
Estimated split cost: (***)

Assumes Grantor is on floor 5 and Grantee is on floor 2. Assumes 1380 LF of new
riser to be built by Grantor and average of 690 LF total distance from Grantor
OSX to Grantee FTP.

General Comments on Lateral Segments:

1. The estimated costs above are for the following items as noted in respective
sections; Single Laterals, Diverse Laterals, Building Risers, Building
Distribution, Fiber Installation, POP Splicing, Miscellaneous Items. Items
not listed above have not been costed.
2. Unless otherwise noted, costs do not include any costs associated with
leasing backbone duct or fiber leased or sold in the backbone.
3. If provided, costs for racks, power and alarms do not include the cost of
any electronics.
4. Building laterals have been estimated to the closest point(s) on the local
loop backbone. Creation of logical loops or fiber rings has not been
considered.
5. These costs assume the shortest; most direct route from the current or
planned backbone at this time. Changes in lateral distances due to
subsequent and necessary backbone or lateral reroutes for any reason have
not been factored.
6. These costs assume there are no moratoriums, extraordinary restrictions,
route changes, franchise requirements or out of the ordinary construction
conditions. Any of these factors will impact costs. It is also assumed there
will be no right-of-way restrictions or associated costs.
7. Building access will need to be gained to validate estimated costs.

PAGE5
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

Exhibit "C"
Metropolitan (Local Loop) Network Construction Specifications
-------------------------------------------------------------

The intent of this Exhibit is to delineate the general specifications and
standards for construction of the Grantor System within the metropolitan
networks. In the event any federal, state, local or private agency having
jurisdiction shall impose higher standards, Grantor will comply and conform to
such higher standards. Grantor may deviate from the specifications and standards
described below in those instances where either (i) strict compliance is
impractical due to physical (including environmental) conditions, right-of-way
issues or code restrictions, or (ii) Grantor has acquired a portion of the
Grantor System from a third party.

1. Minimum Depths
------------------
. Minimum cover required in the placement of conduit shall be 42 inches, except
in the following instances:
. The minimum cover in borrow ditches adjacent to roads, highways,
railroads, and interstate shall be 48 inches below the clean-out line
or existing grade, whichever is greater.
. The minimum cover across streams, river washes and other waterways
shall be 48 inches below the clean-out line or existing grade,
whichever is greater.
. Where conduit crosses railroads, the conduit shall be placed at a
minimum depth of 60 inches below the base of rail or below the
paralleling drainage ditch, whichever is greater.
. At locations where conduit crosses other subsurface utilities or
other structures, the conduit shall be installed to provide a minimum
of 12 inches of vertical clearance under the foreign object while
maintaining a minimum cover of 42 inches.
. In rock, the conduit shall be placed either: (a) 8 inches deep in
rock with 36 inches minimum cover; (b) 8 inches deep in rock with a
concrete cap and 30 inches minimum cover; (c) 8 inches deep in rock
with a 1/4 inch steel plate cover and 24 inches minimum cover or (d)
in steel pipe placed on top of the rock with 18 inches minimum cover,
whichever requires the least rock excavation. HDPE conduit will be
back-filled with 2 inches of select materials (bedding) and 4 inches
of select cover in rock areas.
. In the case of the use/conversion of conduit systems purchased or
leased from third parties or salvaged conduit systems, the existing
depths shall be considered adequate.

2. Cable Marking Tape
----------------------

. Cable marking tape shall be installed above all direct buried conduit,
generally at a minimum of 12 inches below top of rough grade. Conduit
installed by means other than direct burial as well as salvaged conduit
systems or conduit systems purchased from third parties will not have cable
marking tape installed.

PAGE6
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

3. Conduit Construction
------------------------

. Steel conduit will be joined with threaded collars, welding or other industry
accepted methods.

. Railroad crossings will be encased in HDPE or steel conduit.

. All underground crossings of navigable waterways will be placed in either
HDPE or steel conduit at a minimum depth of 20 feet below the bottom of the
waterway.

. All conduits placed on DOT bridges will be bulletproof fiberglass or
galvanized steel.

. All conduits placed on bridges shall have expansion joints placed at each
structural (bridge) expansion joint or at least every 100 feet, whichever is
the shorter distance.

4. Cable Installation
----------------------
. The maximum pulling force to be applied to the fiber optic cable shall be 600
pounds.

. A pulling swivel breakaway rated at 600 pounds shall be used at all times
when pulling fiber optic cable.

. Bends of small radii (less then 20 times the outside diameter of the cable)
and twists that may damage the cable shall be avoided during cable placement.

. The cable shall be lubricated and placed in accordance with the cable
manufacturer specifications.

. All splices will be contained in a cable vault or hand hole.

. A minimum of 60 feet of slack cable will be left in all intermediate cable
vaults or hand holes.

. A minimum of 50 feet of slack cable from each cable end (100 feet total) will
be left in all splice locations.

5. Cable Vaults and Hand Holes
-------------------------------
. Cable vaults will be placed as required by local conditions and at
approximately every 3000 feet in rural areas and 500 feet in urban areas.

. Cable vaults and hand holes placed in traveled surface streets shall be a
minimum HS-20 loading rated.

. Cable vaults and hand holes not installed in traveled surface streets shall
be a minimum HS-10 loading rated.

6. Proofing of Conduits
------------------------
. Upon completion of conduit installed, conduit shall be proofed to verify
continuity and integrity of the conduit system.

. Proofing shall be accomplished by pulling or blowing a mandrel. The outside
diameter of the mandrel or pig shall be a minimum of 80 percent of the inside
diameter of the conduit.

PAGE7
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

7. Compliance
--------------

. All work will be done in accordance with federal, state, local and applicable
private rules and laws regarding safety and environmental issues, including
those set forth by OSHA and the EPA. In addition, all work and the resulting
fiber system will comply with the current requirements of all governing
entities (FCC, NEC, DEC, and other national, state, and local codes).

8. As-Built Drawings
---------------------
. As-built drawings for conduit sales will contain a minimum of the following:
. Information showing the location of running line, relative to
permanent landmarks.

. Cable vault and hand hole locations.

. Conduit information (type, length, etc.).

. Notation of all deviations from specifications (depth, etc.).

. ROW detail (type, centerline distances, boundaries, waterways, road
crossings, known utilities and obstacles).

. Fiber optic cable data (type, manufacturer, reel IDs, sequentials,
slack coils, splice points, etc.).

. Drawings will be updated with actual field data during and after
construction.

. Metro area scale shall not exceed 1 inch = 200 feet.

. Rural area scale shall not exceed 1 inch = 500 feet.

. All deviations from specification (depth, etc.).

. As-built drawings will be provided within 90 days after the
Acceptance Date in electronic format.

. As-built drawings for fiber sales will contain a minimum of the following:

. Maps depicting which streets the Grantee fiber route travels.

. Grantee logical loop configurations and fiber assignments per loop.

. Fiber assignments to all buildings Grantor provides connectivity for
Grantee.

. As-built drawings will be provided within 90 days after the
Acceptance Date in electronic format.

PAGE8
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

Exhibit "D"
-----------
Fiber and Conduit Specifications
--------------------------------

The intent of this Exhibit is to delineate the specifications for the Grantee
Fibers and the conduit housing the Cable. Deviations from these specifications
may occur if Grantor acquires a portion of the Grantor System from a third party
pursuant to the Agreement.

Fiber
- -----

In the metropolitan segments, single mode fiber will be used. In any case where
the routes for Grantor's long-haul and metropolitan networks converge, Grantor
shall have the right to elect to install either non-zero dispersion-shifted
optical fiber or single mode fiber. Grantor may substitute alternative fibers
if and only if such alternative fibers have performance specifications which are
at least equal to the specifications set forth below.

Non-Zero Dispersion -Shifted Optical Fiber
- ------------------------------------------
. Attenuation at 1550 nm = 0.25 dB/km max
. Attenuation at 1625 nm = 0.25 dB/km max
. Total Dispersion = 2.0 - 6.0 ps/nm-km for 1530 nm to 1565nm
4.5 - 11.2 ps/nm-km for 1565nm to 1625nm
. Effective Area (Aeff) = 72 /\m2, typical
. Polarization Mode Dispersion = 0.20 ps max per fiber, typical 0.08 ps link
value
. Mode Field Diameter = 9.20 to 10.00 m at 1550 nm
. Cladding Diameter = 125.0 +- 1.0 m
. Core/Clad Concentricity less than = 0.5 m

Single Mode Fiber
- -----------------

. Attenuation at 1310 nm = 0.40 dB/km max
. Attenuation at 1550 nm = 0.30 dB/km max
. Zero Dispersion wavelength = 1312nm typical
. Wavelength cutoff less than 1260nm typical
. Dispersion slope = less than .0902ps typical
. Polarization Mode dispersion = 0.20 ps max per fiber, 0.10 ps link value
. Mode Field Diameter = 9.2+- 0.4 m at 1310 nm & 10.4 +-0.8 at 1550 nm
. Cladding Diameter = 125.0 +- 1.0 m
. Core/Clad Concentricity less than =0.5 m

Conduit
- -------

. OSP Conduit SDR 11
. 1-1/4" (inside diameter)
. High density polyethylene (HDPE) duct
. Tensile yield 3200 psi
. Flexural modulus 110,000 psi
. Smoothwall inside & outer
. Empty (no rope or tape)
. Unlubricated

PAGE9
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

Exhibit "E"
METROPOLITAN (LOCAL LOOP) NETWORK FIBER ACCEPTANCE TESTING PROCEDURES
----------------------------------------------------------------------
AND STANDARDS
-------------

The intent of this Exhibit is to identify the fiber acceptances testing

procedures and standards used within the Grantor's metropolitan networks.

Deviations from these specifications may occur if Grantor acquires a portion of

the Grantor System from a third party pursuant to the Agreement.

1. All splices shall be fusion spliced. Mechanical splices are only allowed
during temporary restoration and will be replaced with fusion splices.
2. Fibers shall be terminated with Ultra SC-PC connectors (typical return loss
of 0.50 dB).
3. After end-to-end connectivity on the fibers has been completed, bi-
directional OTDR span and power meter testing will be completed. Grantor
shall perform tests after the fiber cable is installed and the splicing
enclosures have been completed and are in their final resting configuration
with the cable vault or hand hole covers closed. This ensures that no micro
or macro bending problems with the cable or fiber strands will contribute to
the loss/attenuation measurements.
4. Power meter tests shall be completed to verify and insure that no fibers have
been crossed at any of the splice points within the network. Grantor shall
test and record power level readings on all fiber strands in both directions
of transmission (bi-directionally) using the 1310 & 1550 nm wavelengths.
5. All OTDR and power meter tests shall be completed as follows:
a. All OTDR traces shall be taken from both ends of a section (between
adjacent Locations) and recorded using the 1310 & 1550 nm wavelength.
Loss/attenuation measurements for each splice point from both directions
shall be taken and recorded.
b. The end-to-end loss value as measured with an industry-accepted laser
source and power meter should have an attenuation rating of less than or
equal to the following:
(1) At 1310 nm: (0.40 dB/km x km of cable) + (number of connectors x
0.50) + (0.10 x number of splices).
(2) At 1550 nm: (0.30 dB/km x km of cable) + (number of connectors x
0.50) + (0.10 x number of splices).
c. Grantor's loss/attenuation objective for each fiber optic splice is 0.10
dB when measured in one direction with an OTDR test set (excluding
connector loss, which is typically 0.50 dB per mated connector pair). If
after three attempts this parameter is not met, the splice will be marked
as Out-Of-Spec (OOS) and the splice will remain provided the average
loss/attenuation value of all splices on an individual fiber basis shall
not exceed 0.10 dB for the entire ring or subsystem.
d. For bi-directional OTDR testing, the distance from Location "A" and
Location "Z" shall be recorded for each splice point. The loss/attenuation
at each splice point shall be recorded at both wavelengths (1310 nm & 1550
nm) in each direction. Grantor shall then average the two readings to
obtain the final average splice loss/attenuation for each splice point of
each fiber strand within the fiber optic cable.
e. Each fiber strand color must be recorded along with its buffer tube color
or the ribbon color. The laser source transmit power level using the 1310
& 1550 nm wavelengths will always be recorded together with the receive
power level reading at the receiving end of the test.

PAGE10
<PAGE>

NOTE: Redacted portions have been marked with (***). The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.

6. OTDR traces will be taken and splice loss measurements recorded. Grantor
will store OTDR traces on electronic media. Loss measurements will be
recorded using an industry-accepted laser source and a power meter. Copies
of all data sheets and tables and one set of diskettes with all traces will
be available to Grantee.
7. Following emergency restoral, Grantor personnel shall perform span test
documenting end-to-end attenuation measurement of each fiber and will be
completed in both directions at 1310 & 1550 nm wavelengths. Upon permanent
repair, new splice loss readings should be no greater than the original
splice loss specifications.

PAGE11

<PAGE>

Exhibit 16

[PWC logo]

PricewaterhouseCoopers LLP
1201 Louisiana St., Ste. 2900
Houston, TX 77002-5678

May 12, 2000

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Commissioners:

We have read the statements made by Splitrock Services, Inc. (copy attached),
which we understand will be filed with the Commission, pursuant to Regulation S-
K Item 304(a)(1), as part of the Company's Form 10-Q report dated May 12, 2000.
We agree with the statements concerning our Firm in such Form 10-Q.

Very truly yours,

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

<PAGE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited condensed consolidated financial statements of Splitrock Services,
Inc. for the three months ended March 31, 2000 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 39,187
<SECURITIES> 80
<RECEIVABLES> 15,755
<ALLOWANCES> 3,479
<INVENTORY> 0
<CURRENT-ASSETS> 72,703
<PP&E> 185,479
<DEPRECIATION> 35,086
<TOTAL-ASSETS> 267,255
<CURRENT-LIABILITIES> 57,073
<BONDS> 258,332
0
0
<COMMON> 0
<OTHER-SE> (58,402)
<TOTAL-LIABILITY-AND-EQUITY> 267,255
<SALES> 35,037
<TOTAL-REVENUES> 35,037
<CGS> 42,580
<TOTAL-COSTS> 65,934
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,262
<INCOME-PRETAX> (37,199)
<INCOME-TAX> 0
<INCOME-CONTINUING> (37,199)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,199)
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>

<PAGE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
consolidated financial statements of Splitrock Services, Inc. for the year ended
December 31, 1999 and is qualified in its entirety by reference to such
financial statements included in the Company's Form 10-K for the year ended
December 31, 1999.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 92,593
<SECURITIES> 5,441
<RECEIVABLES> 12,695
<ALLOWANCES> 1,403
<INVENTORY> 0
<CURRENT-ASSETS> 145,947
<PP&E> 156,591
<DEPRECIATION> 32,220
<TOTAL-ASSETS> 301,286
<CURRENT-LIABILITIES> 69,149
<BONDS> 258,387
0
0
<COMMON> 57
<OTHER-SE> (45,241)
<TOTAL-LIABILITY-AND-EQUITY> 301,286
<SALES> 89,556
<TOTAL-REVENUES> 89,556
<CGS> 119,302
<TOTAL-COSTS> 168,010
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,581
<INCOME-PRETAX> (103,321)
<INCOME-TAX> 0
<INCOME-CONTINUING> (103,321)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (103,321)
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>