CTC COMMUNICATIONS CORP, S-1/A, 1999-06-21

CTC COMMUNICATIONS CORP
S-1/A, 1999-06-21
TELEPHONE INTERCONNECT SYSTEMS

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<PAGE>

As filed with the Securities and Exchange Commission on June 21, 1999

Registration No. 333-77709
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

AMENDMENT NO. 1

TO
Form S-1
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933

CTC COMMUNICATIONS CORP.
(Exact Name of Registrant as Specified in Its Charter)

MASSACHUSETTS 4812 04-2731202
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction Classification Code Number) Identification No.)
of Incorporation or
Organization)

CTC Communications Corp.

220 Bear Hill Road
Waltham, Massachusetts 02451
Telephone: (781) 466-8080
(Address, including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)

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

Robert J. Fabbricatore
Chief Executive Officer
CTC Communications Corp.

220 Bear Hill Road
Waltham, Massachusetts 02451
Telephone: (781) 466-8080
(Name, Address including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)

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

Copies to:
Mary E. Weber, Esq. John D. Watson, Jr., Esq.
Ropes & Gray Latham & Watkins
One International Place 1001 Pennsylvania Avenue, N.W., Suite
Boston, Massachusetts 02110-2624 1300
(617) 951-7000 Washington, D.C. 20004

------------ (202) 637-2200

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.

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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_] 333-

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_] 333-

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]

CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed
Proposed Maximum
Amount Maximum Aggregate Amount of
Title of Each Class of to be Offering Price Offering Registration
Securities to be Registered Registered(1) Per Share(2) Price(2) Fee(3)
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<S> <C> <C> <C> <C>
Common Stock, $.01 Par
Value................. 4,025,000 shs. $16.719 $67,293,975 $18,708
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</TABLE>

(1) Includes 525,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any. See "Underwriting."

(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended,
based on the average of the high and low prices for the common stock of CTC
Communications Corp. on June 17, 1999.

(3) $15,236 of this amount was paid on May 4, 1999.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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- --------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PROSPECTUS Subject to Completion, dated June 18, 1999

3,500,000 Shares

[CTC Logo Appears Here]

CTC Communications Corp.

Common Stock

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CTC is offering 3,200,000 shares, and selling stockholders are offering
300,000 shares. CTC will not receive any of the proceeds from shares
sold by the selling stockholders.

The shares are listed on The Nasdaq National Market under the symbol
"CPTL." The last reported sale price of our shares on June 17,
1999 was $16.563 per share.

Investing in the shares involves risks. See "Risk Factors" on page 6.

<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public Offering Price............................................... $ $
Underwriting Discounts and Commissions.............................. $ $
Proceeds to CTC..................................................... $ $
Proceeds to Selling Stockholders.................................... $ $
</TABLE>

CTC has granted the underwriters a 30-day option to purchase up to 525,000
additional shares on the same terms and conditions as set forth above solely to
cover over-allotments, if any.

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

Lehman Brothers expects to deliver the shares on or about , 1999.

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<TABLE>
<S> <C>
Lehman Brothers Credit Suisse First Boston
</TABLE>

, 1999.
<PAGE>

Inside Front Cover

[A map of the Northeastern United States showing the first phase of CTC's
network. The title of the map is "CTC's Phase I Integrated Communications
Network and Branch Locations." The Map depicts CTC's core hub sites, hub sites,
Network Operations Centers/Data centers, leased capacity connections and sales
branch offices. There is a legend and CTC's logo at the bottom right of the
page.]

<PAGE>

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Table of Contents
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Page
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Prospectus Summary....................................................... 1

Risk Factors............................................................. 6

Use of Proceeds.......................................................... 13

Price Range of Common Stock and Dividend Policy.......................... 13

Capitalization........................................................... 14

Selected Financial Data.................................................. 15

Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16

Business................................................................. 22

Management............................................................... 35

</TABLE>

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Page
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Principal and Selling Stockholders......................................... 40

Certain Relationships and Related Transactions............................. 42

Description of Senior Secured Facilities................................... 42

Holding Company Reorganization............................................. 44

Description of Capital Stock............................................... 45

Underwriting............................................................... 49

Legal Matters.............................................................. 51

Experts.................................................................... 51

Where You Can Find More Information........................................ 51

Financial Statements....................................................... F-1

</TABLE>

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

You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
<PAGE>

Prospectus Summary

This summary only highlights information contained elsewhere in this
prospectus. You should read the entire prospectus carefully. Unless we indicate
otherwise, information in this prospectus assumes the underwriters will not
exercise their over-allotment option.

Overview of Our Business

We are currently moving to a facilities-based platform by deploying a state-
of-the-art, all packet-switched network. Our network is based on an advanced
transmission protocol used on the internet, and asynchronous transfer mode, or
ATM, architecture, which is used for transmitting data, voice and video signals
over virtual circuits. The first phase of our network includes 22 Cisco Systems
advanced data switches and two fully redundant network operations centers. We
are interconnecting these facilities with leased transmission capacity over
fiber optic cable strands from Level 3 Communications and NorthEast Optic
Network. Cisco has reviewed and approved our network design and has designated
our network as a Cisco Powered Network.(TM) In May 1999, we began testing of
our network with some of our customers. By late summer, we expect to begin
providing, and billing for, commercial service to a limited number of customers
on our network.

We became an integrated communications provider in January 1998. Prior to
that, we were the largest independent sales agent for NYNEX Corp. (now Bell
Atlantic), based on agency revenues. At the end of 1997, before leaving the
Bell Atlantic agency program, we were managing relationships for approximately
7,000 customers, representing over 280,000 local access lines and over $200
million in annual local telecommunications spending. As of March 31, 1999,
after only 15 months as an integrated communications provider, we were serving
over 9,000 customers and had over 142,000 access lines and equivalent circuits,
or ALEs, in service. For the quarter ended March 31, 1999, we generated
approximately $24.6 million of revenues, or $98.4 million on an annualized
basis.

We intend to access customer locations from our network through our
PowerPathSM services. These will include a variety of high capacity, or
broadband, technologies including leased high capacity wireline circuits, or T-
1s, digital subscriber line, or DSL, service, wireless technologies and fiber
optic facilities, as available. We will offer dedicated long distance and data
services over our network. We believe that these services represent over 50% of
our target customers' fixed line telecommunications spending. The balance
represents local dial tone services which we currently obtain from other
carriers. We plan to incorporate local dial tone service into our packet-
switching architecture as the technology matures.

We have substantial expertise selling complex data circuits, including frame
relay, point-to-point dedicated high capacity data links, integrated services
digital network, or ISDN, ATM and dedicated internet services. Over the last
five years, we sold digital data services to more than 7,000 customer sites and
designed and implemented more than 600 wide area networks, or WANs. As of March
31, 1999, data services represented approximately 20% of our total ALEs in
service.

1
<PAGE>

Our Market Opportunity

The market potential for integrated communications services is large and
growing. According to FCC data, in 1997, the total market for U.S. retail
telecommunications services was approximately $187 billion. Data services,
including internet, frame relay and ATM services, represent one of the fastest
growing segments of the telecommunications market. Industry reports by
International Data Corporation estimate that from 1997 to 2002, annual internet
services revenues will increase from $7.5 billion to $29.7 billion and annual
frame relay and ATM services revenues will increase from $2.9 billion to $7.6
billion. We are deploying our data-centric network to capitalize on this market
opportunity.

Our target market, the Northeastern and Mid-Atlantic region, represents an
attractive opportunity for us because it has a high concentration of
telecommunications traffic. According to FCC data, New York State and New
England had an estimated 7.3 million local business access lines as of December
31, 1997, which generated retail telecommunications revenues of approximately
$24.4 billion in 1997. When we expand our business in the remaining portions of
the New York-Washington, D.C. corridor, we will increase our addressable market
by an estimated 8.4 million local business access lines as of December 31,
1997, which generated approximately $26.3 billion in retail telecommunications
revenues in 1997. We estimate our target customers represent nearly 50% of the
total business access lines in our target markets.

Our Competitive Strengths

Our goal is to be the leading integrated communications provider for medium
and larger-sized business customers in our target markets. We believe that the
following competitive strengths position us well to achieve this goal:

. Over 15 years of telecommunications marketing, sales and service
experience.

. Over 250 experienced sales people and network consultants providing
personalized sales and customer care.

. A capital-efficient and scalable, all packet-switched network, capable
of providing advanced data services.

. Significant experience designing and selling sophisticated data
services.

. A broad range of voice and data services incorporated on a single bill.

. Comprehensive, fully integrated billing and operational support systems,
or OSS.

. The ability to expand using our proven operating model for branch
offices, sales process, customer service and personnel training.

Holding Company Reorganization

Shortly after the closing of this offering, we expect to complete a
reorganization into a holding company structure. We are a Massachusetts
corporation. In the reorganization, we will become a wholly owned subsidiary of
CTC Communications Group, Inc., a Delaware corporation. CTC Communications
Group was formed by us for this purpose and has no other business. All of our
issued and outstanding common and preferred stock, including the common stock
offered by this prospectus, will be converted into the same number of shares of
common and preferred stock of CTC Communications Group.

--------

Our principal executive offices are located at 220 Bear Hill Road, Waltham,
Massachusetts 02451, our telephone number is (800) 883-6000 and our internet
website address on the world wide web is www.ctcnet.com. The contents of our
website are not part of this prospectus. In this prospectus we refer to CTC
Communications Corp. and its subsidiary collectively as "CTC," "we" and "us."

2
<PAGE>

The Offering
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Common stock offered ............... 3,200,000 shares by CTC

<TABLE>
<S> <C>
300,000 shares by the selling stockholders
------------
3,500,000 shares
============
</TABLE>

Common stock to be outstanding
after the offering.................. 13,876,974 shares

Over-allotment option............... 525,000 shares

Use of proceeds..................... To repay indebtedness, $3.0 million
as of June 17, 1999, under our
credit facility with Toronto
Dominion and for general corporate
purposes, including capital
expenditures, working capital and
operating losses associated with
the continued deployment of our
network, further penetration of our
existing region and expansion into
new markets throughout the New
York--Washington, D.C. corridor.

Nasdaq National Market symbol....... CPTL
<TABLE>
<S> <C>
</TABLE>

The shares of common stock to be outstanding after the offering are stated
as of June 17, 1999. The shares of common stock to be outstanding exclude:

. 3,659,548 shares of common stock issuable upon exercise of stock options
at exercise prices between $1.10 and $20.00 per share;

. 1,288,071 shares of common stock issuable upon exercise of warrants at
exercise prices between $6.75 and $11.81 per share, warrants to purchase
300,000 of these shares being exercised by selling stockholders to
obtain the shares they are offering; and

. 1,480,063 shares of common stock issuable at that date upon conversion
of Series A redeemable convertible preferred stock, or Series A
preferred stock. See "Capitalization," "Management," and "Description of
Capital Stock."

3
<PAGE>

Summary Financial Data

You should read the following summary financial data together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the related notes included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
Fiscal Year ended March 31,
----------------------------
1997 1998 1999
------------------ ---------
(dollars in thousands)
<S> <C> <C> <C>
Statement of Operations Data
Agency revenues................................. $ 29,195 $ 24,775 $ --
Telecommunications revenues..................... 11,095 16,172 70,964
-------- -------- ---------
Total revenues................................. 40,290 40,947 70,964
Cost of telecommunications revenues............. 8,709 14,038 61,866
Selling, general and administrative expenses.... 23,820 31,492 57,663
Income (loss) from operations................... 7,761 (4,583) (48,565)
Net income (loss)............................... 4,683 (2,884) (51,996)
Other Financial Data
Gross profit.................................... n/m n/m $ 9,098
EBITDA (loss)................................... $ 8,519 $ (2,992) $ (42,760)
Capital expenditures............................ 1,222 6,109 36,041
Net cash (used in) provided by operating
activities..................................... 3,572 (7,951) (33,254)
Net cash used in investing activities........... 1,222 4,765 6,282
Net cash provided by financing activities....... 114 8,479 39,622
</TABLE>

Gross profit is not meaningful, n/m, for the fiscal year ended March 31,
1998 and prior periods because our revenues for these periods consisted
primarily of agency commissions, and costs associated with agency revenues were
included primarily in selling, general and administrative expenses. EBITDA
consists of income (loss) before interest, income taxes, depreciation and
amortization. We have provided EBITDA because it is a measure of financial
performance commonly used in the telecommunications industry. Other companies
may calculate it differently from us. EBITDA is not a measurement of financial
performance under generally accepted accounting principles, or GAAP. We do not
believe you should consider EBITDA as an alternative to net income (loss) as a
measure of results of operations or to GAAP-based cash flow data as a measure
of liquidity. Capital expenditures consists of additions to property and
equipment acquired for cash or under notes payable and capital leases.

<TABLE>
<CAPTION>
As of March 31, 1999
----------------------
Historical As Adjusted
---------- -----------
(dollars in thousands)
<S> <C> <C>
Balance Sheet Data
Cash and cash equivalents................................ $ 2,254 $ 51,741
Total assets............................................. 69,402 118,889
Total long-term debt, including current portion.......... 66,857 66,857
Series A redeemable convertible preferred stock.......... 12,949 12,949
Stockholders' equity (deficit)........................... (39,500) 9,987
</TABLE>

The as adjusted balance sheet data reflects our receipt of net proceeds of
this offering of $49,486,512 based upon an assumed public offering price of
$16.563 per share, after deducting underwriting discounts and commissions and
estimated offering expenses.

4
<PAGE>

Summary Quarterly Financial and Operating Data

The following table sets forth certain financial and operating data for the
five quarters since becoming an integrated communications provider. The
financial information is from our unaudited financial statements. You should
read this information in conjunction with the financial statements and related
notes included elsewhere in this prospectus. The operating results for any
quarter are not necessarily indicative of results for any future period.

Access lines and equivalent circuits, or ALEs, represent the sum of the
number of voice circuits in service plus the data telecommunications
transmission capacity purchased by our customers divided by 64kbps, the
capacity necessary to carry one voice channel.

<TABLE>
<CAPTION>
Fiscal Quarter ended
--------------------------------------------------------
March 31, June 30, September 30, December 31, March 31,
1998 1998 1998 1998 1999
--------- -------- ------------- ------------ ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Telecommunications revenues............ $ 6,288 $12,836 $ 14,516 $ 19,025 $ 24,587
Cost of telecommunications revenues.... 5,944 11,614 12,383 16,429 21,440
Selling, general and administrative
expenses.............................. 10,122 9,495 13,001 14,304 20,863
Loss from operations................... (9,778) (8,273) (10,869) (11,708) (17,716)
Net loss............................... (6,008) (7,931) (10,984) (11,997) (21,084)
Other Financial Data
Gross profit........................... $ 344 $ 1,222 $ 2,133 $ 2,596 $ 3,147
EBITDA (loss)(/1/)..................... (9,110) (7,688) (9,732) (9,694) (15,646)
Capital expenditures................... 1,552 1,015 4,850 18,647 11,529
Net cash used in operating activities.. (5,251) (7,446) (11,330) (2,779) (11,699)
Net cash provided by financing
activities............................ 6,527 11,669 12,972 14,780 201
Operating Data
Net ALEs provisioned in the quarter.... 17,637 22,548 24,209 38,878 38,935
Cumulative ALEs in service at quarter
end .................................. 17,637 40,185 64,394 103,272 142,207
</TABLE>

(1) Excluding expenses and charges of $7.3 million relating to the litigation
and settlement with Bell Atlantic, EBITDA (loss) would have been $(8.4)
million for the fiscal quarter ended March 31, 1999. See "Business--Legal
Proceedings."

5
<PAGE>

Risk Factors

Investing in our common stock involves risk. You should carefully consider
the risks and uncertainties described below before deciding to purchase common
stock. These risks and uncertainties are not the only ones we face or which may
adversely affect our business. If any of the following risks or uncertainties
actually occur, our business, financial condition or results of operations
could be materially adversely affected. In this event, the trading price of our
common stock could decline, and you could lose all or part of your investment.

Our prospects are difficult to evaluate because most of our revenues prior to
January 1998 resulted from a business strategy we are no longer pursuing.

Although we have sold integrated telecommunications services for over 15
years, we only began offering local services under our own brand name in
January 1998. We sold local telephone services as an agent for Bell Atlantic
until December 1997. Because at that time we terminated our agency relationship
with Bell Atlantic, we no longer receive agency revenues. Therefore, we can
only provide you limited historical operating and financial information about
our current business strategy for you to evaluate.

We expect to incur negative cash flows and operating losses for a significant
period of time.

For the fiscal year ended March 31, 1999, we incurred operating losses of
approximately $48.6 million, net losses of approximately $52.0 million and
negative cash flow from operating and investing activities of approximately
$39.5 million. Our expenses have increased significantly, and we expect our
expenses to continue to increase as we deploy our network and implement our
business plan. Accordingly, we expect to incur significant operating losses,
net losses and negative cash flow during the next several years. We cannot
assure you that we will achieve and sustain profitability or positive net cash
flow.

We cannot assure you that we will successfully execute our strategy.

If we fail to execute our strategy in a timely or effective manner we may be
unable to successfully compete in our markets. Our business strategy is complex
and requires that we successfully complete many tasks, a number of which we
must be complete simultaneously, including:

. deploying, operating and maintaining our network;

. attracting and retaining customers, management and key employees;

. expanding our sales presence in existing and new markets;

. developing and providing enhanced data services; and

. ultimately, incorporating local dial tone into our network.

If we are unable to effectively implement or coordinate the implementation
of these multiple tasks effectively, our business is likely to suffer.

Implementing a facilities-based strategy is subject to technological and other
uncertainties.

The design of our network has not been widely deployed. The network may not
provide the functionality that we expect. We also cannot be sure that we will
be able to incorporate local dial tone capabilities into our network, and
without this capability we will not be able to provide on our network all of
our target customers' fixed line telecommunications services. Our ability to
provide enhanced connectivity to our network and to provide local dial tone
services will require the negotiation of interconnection agreements with
incumbent local exchange carriers. This can take considerable time, effort and
expense, and these agreements are subject to federal, state and local
regulation. We may not be able to effectively negotiate necessary
interconnection agreements. Also, we cannot be sure that our customers will
choose to purchase any or all of their telecommunications services over our
network.

6
<PAGE>

We may not properly or timely deploy, operate and maintain our own network.

Currently we are not providing any commercial services over our network. We
are still deploying the initial phase of our network and we have limited
experience operating and maintaining telecommunications networks. We cannot
assure you that we will effectively deploy, operate or maintain our network. We
may not be able to deploy our network within the time frame we expect, and once
the network is deployed we may encounter unanticipated difficulties in
operating and maintaining it.

Our high leverage creates financial and operating risk that could limit the
growth of our business.

We have a significant amount of indebtedness. As of March 31, 1999, we had
approximately $66.9 million of total indebtedness outstanding. We expect to
seek substantial additional debt financing to fund our business plan. Our high
leverage could have important consequences to us, including,

. limiting our ability to obtain necessary financing for future working
capital, capital expenditures, debt service requirements or other
purposes;

. limiting our flexibility in planning for, or reacting to, changes in our
business;

. placing us at a competitive disadvantage to competitors with less
leverage;

. increasing our vulnerability in the event of a downturn in our business
or the economy generally;

. requiring that we use a substantial portion of our cash flow from
operations for the payment of principal and interest on our indebtedness
and not for other purposes.

We will need to refinance our existing indebtedness and may not generate
sufficient cash flow from operations to pay future indebtedness.

We expect we will not generate sufficient cash flow from operations to repay
our existing credit and vendor facilities, and it is likely that we will need
to refinance this indebtedness when it comes due. Also, we cannot assure you
that our business will generate sufficient cash flow from operations or that
alternative sources of cash flow will be available to us in amounts sufficient
to pay other future indebtedness or to fund our other needs. We will need to
generate cash in the future to make scheduled payments on and refinance our
indebtedness and to fund planned capital expenditures, operating losses and our
other needs. Our ability to generate cash will greatly depend on:

. our completing the buildout of our network timely and cost-effectively;

. the acceptance by the market of, and the demand for, our services; and

. our future operating performance.

Each of these elements may be affected by various factors that we cannot
control, including industry, general economic, financial, competitive,
legislative, regulatory and other factors. If we cannot generate sufficient
cash flow from operations, we may need to refinance all or some of our
indebtedness, sell assets, delay capital expenditures or sell additional
capital stock. If we sell additional capital stock, your interest in us will be
diluted. We cannot assure you that we will be able to refinance any of our
indebtedness on reasonable terms, or at all. We also cannot assure you that we
will be able to effect any other needed action on satisfactory terms, or at
all.

We may be unable to obtain the additional capital we will require to fund our
operations and finance our growth on terms acceptable to us or at all.

We will need significant additional capital to fund our business plan. We
expect to seek additional financing to further fund our business plan as soon
as practicable. The timing of these efforts will depend on market conditions.
We cannot assure you that additional funding will be available to us when we
need it or at all. If we are unable to obtain financing when we need it, we may
delay or abandon our development and expansion plans. That could have a
material adverse effect on our business, results of operations and financial

7
<PAGE>

condition. The actual timing and amount of our capital requirements may be
materially affected by various factors, including the timing and actual cost of
the network, the timing and cost of our expansion into new markets, the extent
of competition and pricing of telecommunications services by others in our
markets, the demand by customers for our services, technological change and
potential acquisitions.

Our market is highly competitive, and we may not be able to compete
effectively; many of our competitors have greater resources and more
experience.

We operate in a highly competitive environment. We have no significant
market share in any market in which we operate. We will face substantial and
growing competition from a variety of data transport, data networking and
telephony service providers. We will face competition for the provision of
integrated telecommunications services as well for the individual service
components that comprise our integrated services. The number of competitors
able to provide integrated telecommunication services has increased as a result
of regulatory changes and industry consolidation. We expect that the incumbent
local exchange carriers ultimately will also be able to provide integrated
services. Many of our competitors are larger and better capitalized than we
are. Also, many of our competitors are incumbent providers with long standing
relationships with their customers and greater name recognition. See
"Business--Competition."

The failure of our information systems to produce accurate and prompt billing
and to process customer orders could materially adversely affect our business.

The accurate and prompt billing of our customers is essential to our
operations and future profitability. The deployment of our network will place
additional demands on our information systems. We are continuing to upgrade our
information systems, but we cannot assure you that our information systems will
perform how we expect. Also, if our business grows as we plan, we cannot assure
you that our information systems will be sufficient to provide us with accurate
and efficient billing and other necessary processing capabilities. We may not
identify all of our information and processing needs (including issues related
to the Year 2000), and the upgrade we are implementing may encounter unexpected
difficulties. We cannot assure you that our ongoing information systems upgrade
will not cause any disruption in our information systems or that the upgraded
systems will continue to provide us with the necessary functionality. Any of
these could materially adversely affect our business, results of operations and
financial condition. See "Business--Our Information Systems."

If we do not receive timely and accurate call data records from our suppliers,
our billing and collection activities could be adversely affected.

Our billing and collection activities are dependent upon our suppliers
providing us accurate call data records. If we do not receive accurate call
data records in a timely manner, our business, results of operations and
financial condition could be materially adversely affected. In addition, we pay
our suppliers according to our calculation of the charges based upon invoices
and computer tape records provided by these suppliers. Disputes may arise
between us and our suppliers because these records may not always reflect
current rates and volumes. If we do not pay disputed amounts, a supplier may
consider us to be in arrears in our payments until the amount in dispute is
resolved. We cannot assure you that disputes with suppliers will not arise or
that such disputes will be resolved in our favor.

Our ability to serve our customers depends upon the reliability of the
networks, services and equipment of third party providers.

We only began testing our network in May 1999. We depend almost entirely on
facilities-based carriers for the switching and transmission of customer
traffic. After we complete deploying our network, we will still rely to some
extent on others for switching and transmission of customer traffic. We will
also rely on others for fiber optic backbone transmission facilities, including
Level 3 Communications and NorthEast Optic Network, for our network. We cannot
be sure that any third party switching or transmission facilities will be
available when needed or on acceptable terms.

8
<PAGE>

Although we can exercise direct control of the customer care and support we
provide, most of the services we currently offer are provided by others. These
services are subject to physical damage, power loss, capacity limitations,
software defects, breaches of security and other factors which may cause
interruptions in service or reduced capacity for our customers. These problems,
although not within our control, could adversely affect customer confidence and
damage our reputation.

We have engaged a network services integrator to design, engineer and manage
the buildout of our network in our existing markets. If the network integrator
is not able to perform these functions, we may experience delays or additional
costs in providing services and building the network. The failure of our
network equipment to operate as anticipated or the inability of equipment
suppliers, including Cisco, to timely supply such equipment could materially
and adversely affect our business, results of operations and financial
condition.

Our operating results could be adversely affected by increases in customer
attrition rates.

We cannot assure you that our customers will continue to purchase local,
long distance, data or other services from us. Because we have been operating
as an integrated communications provider for a short time, our customer
attrition rate is difficult to evaluate. We could lose customers as a result of
national advertising campaigns, telemarketing programs and customer incentives
provided by major competitors as well as for other reasons not in our control.
Increases in customer attrition rates could have a material adverse effect on
our business, results of operations and financial condition.

If we fail to manage our growth, our business could be impaired.

We are pursuing a business plan that will result in rapid growth and
expansion of our operations if we are successful. This rapid growth would place
significant additional demands upon our current management and other resources.
Our success will depend on our ability to manage our growth. To accomplish this
we will have to train, motivate and manage an increasing number of employees.
We will also need to continually enhance our information systems. Our failure
to manage growth effectively could have a material adverse effect on our
business, results of operations and financial condition.

Our success will depend on a limited number of key personnel who could be
difficult to replace as well as on our ability to hire other skilled personnel.

We believe that our continued success will depend upon the abilities and
continued efforts of our management, particularly members of our senior
management team. The loss of the services of any of these individuals could
have a material adverse effect on our business, results of operations and
financial condition. Our success will also depend upon our ability to identify,
hire and retain additional highly skilled sales, service and technical
personnel. Demand for qualified personnel with telecommunications experience is
high and competition for their services is intense. We cannot be sure that we
will be able to attract and retain the additional employees we need to
implement our business strategy. Our inability to hire and retain such
personnel could have a material adverse effect on our business, results of
operations and financial condition.

Changes to the regulations applicable to our business could increase our costs
and limit our operations.

We are subject to federal, state, and local regulation of our local, long
distance, and data services. See "Business-Government Regulation." With the
passage of the Telecommunications Act in 1996, the regulation of our services
has been subject to numerous administrative proceedings at the federal and
state level, litigation in federal and state courts, and legislation in federal
and state legislatures. We cannot predict the outcome of the various
proceedings, litigation, and legislation or whether and to what extent they may
adversely affect our business or operations. We believe the current trend
toward relaxed regulatory oversight and competition will benefit us. Our
competitors, however, may benefit from this trend to a greater extent than we
will. If that occurs, our business may be adversely affected.

9
<PAGE>

Rapid technological changes in the telecommunications industry could render our
services obsolete faster than we expect or could require us to spend more to
develop our network than we currently anticipate.

The telecommunications industry is subject to rapid and significant changes
in technology. We cannot predict the effect that changes in technology will
have on our business. Any changes could have a material adverse effect on our
business, operating results and financial condition. Advances in technology
could lead to more entities becoming facilities-based integrated communications
providers. We believe that our long-term success will increasingly depend on
our ability to offer advanced services and to anticipate or adapt to evolving
industry standards. We cannot be sure that:

. we will be able to offer the services our customers require;

. our services will not be economically or technically outmoded by current
or future competitive technologies;

. our network or our information systems will not become obsolete;

. we will have sufficient resources to develop or acquire new technologies
or introduce new services that we need to effectively compete; or

. the cost of the network will decline as rapidly as the costs of our
competitors' infrastructures.

We may incur significant costs and our business could suffer if our systems and
network, or the systems of our suppliers and vendors, do not properly process
date information after December 31, 1999.

Currently, many computer systems and software products are coded to accept
only two digit, rather than four digit, entries in the date code field. Date-
sensitive software or hardware coded in this manner may not be able to
distinguish a year that begins with a "20" instead of a "19," and programs that
perform arithmetic operations, make comparisons or sort date fields may not
yield correct results with the input of a Year 2000 date. This Year 2000
problem could cause miscalculations or system failures that could affect our
operations. We cannot assure you that we have successfully identified all Year
2000 problems with our information systems and network. We also cannot assure
you that we will be able to implement any necessary corrective actions in a
timely manner. Our failure to successfully identify and remediate Year 2000
problems in critical systems could have a material adverse effect on our
business, results of operations and financial condition. Also, if the systems
of other companies that provide us services or with whom our systems
interconnect are not Year 2000 compliant, our business, operating results and
financial condition could be materially adversely affected. The Year 2000 issue
is discussed at greater length in "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000 Compliance."

We may pursue acquisitions which would create risks to our business.

We may pursue strategic acquisitions as we expand. We currently have no
definitive agreement with respect to any acquisition. Acquisitions may increase
our risks because we may:

. experience difficulties integrating acquired operations and personnel
into our operations;

. disrupt our ongoing business;

. divert resources and management time;

. be unable to maintain uniform standards, controls, procedures and
policies; and

. enter markets or businesses in which we have little or no experience.

We cannot assure you that we will be able to obtain any additional financing
needed to finance potential acquisitions. If we do make any acquisition, the
acquired business might not perform as we expected.

10
<PAGE>

Our existing principal stockholders, executive officers and directors control
a substantial amount of our voting shares and will be able to significantly
influence any matter requiring shareholder approval.

After this offering, our officers and directors and parties related to them
will control approximately 35.3% of the voting power of our outstanding
capital stock. Robert J. Fabbricatore, our Chairman and Chief Executive
Officer, will control approximately 17.7% of our voting power. Therefore, the
officers and directors will be able to significantly influence any matter
requiring shareholder approval. In addition, Mr. Fabbricatore and some of his
affiliates have agreed to vote shares they control to elect to our board up to
two persons designated by the holders of a majority of our Series A preferred
stock.

We may default under our credit facilities if stockholders exercise appraisal
rights or if we do not consummate the holding company reorganization.

In connection with the holding company reorganization, all of our
stockholders, including holders of the shares offered by this prospectus, will
have appraisal rights under Massachusetts law. If we consummate the
reorganization and any stockholders exercise appraisal rights, CTC
Communications Group would be required by law to pay them in cash the
appraised value of their shares. Our senior secured credit facility with
Goldman Sachs and Fleet requires us to consummate the reorganization, but
prohibits us from making payments to stockholders who exercise appraisal
rights. Our vendor facility with Cisco Capital also prohibits these payments.
If any stockholders are entitled to appraisal rights after the special
meeting, we may ask our lenders to waive their requirement that we consummate
the reorganization or to permit us to make any required payments to
stockholders. We cannot predict whether stockholders will exercise appraisal
rights, the amount of any payments which could be required to be made and, on
what, if any, terms, we could obtain needed consents. If we default under our
credit facilities, our lenders could require us to repay their loans. We
cannot assure you that we will be able to refinance their loans on reasonable
terms, or at all.

Fluctuations in our operating results could adversely affect the price of our
common stock.

Our annual and quarterly revenue and results may fluctuate as a result of a
number of factors, including:

. variations in the rate of timing of customer orders,

. variations in our provisioning of new customer services,

. the speed at which we expand our network and market presence,

. the rate at which customers cancel services, or churn,

. costs of third party services purchased by us, and

. competitive factors, including pricing and demand for competing
services.

Also, our revenue and results may not meet the expectations of securities
analysts and our stockholders. As a result of such fluctuation or such failure
to meet expectations, the price of our common stock could be materially
adversely affected.

Our stock price is likely to be volatile.

The trading price of our common stock is likely to be volatile. The stock
market in general, and the market for technology and telecommunications
companies in particular, has experienced extreme volatility. This volatility
has often been unrelated to the operating performance of particular companies.
Other factors that could cause the market price of our common stock to
fluctuate substantially include:

. announcements of developments related to our business, or that of our
competitors, our industry group or our customers;

. fluctuations in our results of operations;

. hiring or departure of key personnel;

11
<PAGE>

. a shortfall in our results compared to analysts' expectations and
changes in analysts' recommendations or projections;

. sales of substantial amounts of our equity securities into the
marketplace;

. regulatory developments affecting the telecommunications industry or
data services; and

. general conditions in the telecommunications industry or the economy as
a whole.

The market price of our common stock could be affected by the substantial
number of shares that are eligible for future sale.

After this offering is completed, 13,876,974 shares of common stock will be
issued and outstanding, assuming no exercise of the underwriters' over-
allotment option. We cannot be sure what effect, if any, future sales of shares
or the availability of shares for future sale will have on the market price of
the common stock. The market price of our common stock could drop due to sales
of a large number of shares in the market after this offering or the perception
that sales of large numbers of shares could occur. These factors could also
make it more difficult to raise funds through future offerings of common stock.
Over 90% of the shares of common stock outstanding immediately after this
offering will be freely tradeable under the Securities Act, subject to
compliance with Rule 144 under the Securities Act. On the consummation of our
reorganization all of CTC Communications Group's shares will be freely
tradeable, subject to compliance with Rules 144 and 145. In connection with
this offering, our officers and directors and some of our stockholders will be
required not to sell any shares of common stock for a period of 90 days after
the date of this prospectus without the written consent of Lehman Brothers Inc.

We have anti-takeover defenses that could delay or prevent an acquisition and
could adversely affect the price of our common stock.

The telecommunications industry has experienced significant consolidation in
recent years. However, provisions of our articles of organization and bylaws
and Massachusetts law, and, after our reorganization into a holding company
structure, CTC Communications Group's certificate of incorporation and bylaws
and the provisions of Delaware law, could make it more difficult for a third
party to acquire control of CTC even if a change in control would be beneficial
to our stockholders. These provisions may negatively affect the price of our
common stock and may discourage third parties from bidding for CTC. In
addition, our board of directors may issue, without stockholder approval,
shares of preferred stock with terms set by the board. In addition to delaying
or preventing an acquisition, the issuance of a substantial number of preferred
shares could depress the price of the common stock. See "Description of Capital
Stock--Preferred Stock."

Forward looking statements are inherently uncertain.

Certain statements about us and our industry under the captions "Prospectus
Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business" and
elsewhere in this prospectus are "forward-looking statements." These forward-
looking statements include, but are not limited to, statements about our plans,
objectives, expectations, intentions and assumptions and other statements in
this prospectus that are not historical facts. When we use the words
"estimate," "project," "believe," "anticipate," "intend," "plan," "expect" and
similar expressions in this prospectus, we generally intend to identify
forward-looking statements. Because these forward-looking statements involve
risks and uncertainties, including those described in this "Risk Factors"
section, actual results could differ materially from those expressed or implied
by these forward-looking statements. We caution you not to place undue reliance
on these forward-looking statements. These forward-looking statements speak
only as of the date of this prospectus. We do not undertake any obligation to
publicly release any revisions to these forward-looking statements to reflect
new information, future events or otherwise.

12
<PAGE>

Use of Proceeds

We will receive net proceeds of approximately $49.5 million from our sale
of 3,200,000 shares of common stock at an assumed public offering price of
$16.563 per share, after deducting the underwriting discounts and commissions
and our estimated offering expenses. This amount would be approximately $57.7
million if the underwriters fully exercise their over-allotment option. We
intend to use these proceeds to repay all of our outstanding indebtedness
under our credit facility with Toronto Dominion and for general corporate
purposes including capital expenditures, working capital and operating losses
associated with the continued deployment of our network, further penetration
of our existing region and expansion into new markets throughout the New
York--Washington, D.C. corridor. We will not receive any proceeds from the
sale of shares by the selling stockholders, although we expect to receive
approximately $2 million in payment of the exercise price of warrants which
the selling stockholders will exercise to acquire the shares they are expected
to sell. As of June 17, 1999, we had borrowed $3.0 million under our credit
facility with Toronto Dominion. Advances under this facility bear interest at
11.99%. This facility matures on June 15, 2000. We used advances under this
facility for general corporate purposes. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

We intend to use the net proceeds remaining after the repayment of
indebtedness to Toronto Dominion to either temporarily repay the revolving
portion of our senior secured credit facility or temporarily invest the
remaining net proceeds in short-term, interest bearing, investment grade
securities. Advances under our senior secured credit facility bear interest at
1.75% over the prime rate. The credit facility matures on September 1, 2001.
We used advances under this credit facility for general corporate purposes.
See "Description of Senior Credit Facilities."

Price Range of Common Stock

Our common stock is listed on The Nasdaq National Market under the symbol
"CPTL." Following is the range of high and low trading prices on The Nasdaq
National Market for the common stock for the periods indicated.

<TABLE>
<CAPTION>
Price Range
-------------
High Low
------ ------
<S> <C> <C>
Calendar Year 1997
Second Quarter.............................................. $10.00 $ 6.88
Third Quarter............................................... $ 9.75 $ 7.06
Fourth Quarter.............................................. $15.94 $ 8.00
Calendar Year 1998
First Quarter............................................... $14.94 $ 5.13
Second Quarter.............................................. $ 9.88 $ 6.50
Third Quarter............................................... $ 8.50 $ 4.75
Fourth Quarter.............................................. $ 9.00 $ 4.00
Calendar Year 1999
First Quarter............................................... $17.50 $ 8.38
Second Quarter (through June 17, 1999)...................... $24.00 $12.19
</TABLE>

The last sale price of the common stock on The Nasdaq National Market on
June 17, 1999 was $16.563.

Dividend Policy

We have never paid cash dividends on our common stock and we have no plans
to do so in the foreseeable future. We intend to retain earnings, if any, to
develop and expand our business. In addition, the terms of the credit and
vendor facilities and the Series A preferred stock restrict our ability to pay
cash dividends on our common stock. We also expect the terms of agreements
governing any future indebtedness to restrict our ability to pay cash
dividends.

13
<PAGE>

Capitalization

The following table sets forth our capitalization as of March 31, 1999 on an
actual basis and as adjusted to reflect our sale of 3,200,000 shares of common
stock offered hereby at an assumed public offering price of $16.563 per share,
and after deducting underwriting discounts and commissions and estimated
offering expenses. This information should be read in conjunction with our
financial statements and notes appearing elsewhere in this prospectus. The "As
Adjusted" column does not take into account the exercise of warrants by the
selling stockholders in connection with this offering. See "Use of Proceeds"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
As of March 31, 1999
-------------------------
As
Actual Adjusted
----------- ------------
(dollars in thousands)
<S> <C> <C>
Cash and cash equivalents............................. $ 2,254 $ 51,741
=========== ===========
Long-term debt, including current portion:
Notes payable....................................... $ 55,623 $ 55,623
Obligations under capital leases.................... 11,234 11,234
----------- -----------
Total long-term debt.............................. 66,857 66,857
Series A redeemable convertible preferred stock....... 12,949 12,949
Stockholders' equity (deficit):
Common stock(/1/)................................... 104 136
Additional paid-in capital.......................... 7,175 56,630
Deferred compensation............................... (213) (213)
Retained earnings (deficit)......................... (46,535) (46,535)
----------- -----------
Subtotal.......................................... (39,469) 10,018
Amounts due from stockholders....................... (31) (31)
----------- -----------
Total stockholders' equity (deficit).............. (39,500) 9,987
----------- -----------
Total capitalization............................ $ 40,306 $ 89,793
=========== ===========
</TABLE>
- --------

(1) Consists of common stock, $.01 par value per share: 25,000,000 shares
authorized, 10,352,513 outstanding at March 31, 1999 and 13,552,513
outstanding, as adjusted. Does not include 3,615,809 shares of common stock
issuable upon exercise of outstanding stock options at exercise prices
between $1.10 and $20.00 per share; 1,453,262 shares of common stock
issuable upon conversion of the Series A preferred stock or 1,288,071
shares of common stock issuable upon the exercise of outstanding warrants
at exercise prices between $6.75 and $11.81 per share.

14
<PAGE>

Selected Financial Data

The following selected financial data for the five years ended March 31,
1999 are derived from our financial statements which have been audited by Ernst
& Young LLP, independent auditors. You should read the following financial data
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our financial statements and the related notes.

All earnings per share and weighted average share information included in
the accompanying financial statements have been restated to reflect the five-
for-four stock split effected in fiscal year ended March 31, 1995, and the
three-for-two stock split and the two-for-one stock split effected in fiscal
year ended March 31, 1996.

<TABLE>
<CAPTION>
Fiscal Year ended March 31,
-------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(dollars in thousands, except per share information)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data
Agency revenues......... $ 18,898 $ 25,492 $ 29,195 $ 24,775 $ --
Telecommunications
revenues............... 3,038 5,383 11,095 16,172 70,964
---------- ---------- ---------- ---------- ----------
Total revenues......... 21,936 30,875 40,290 40,947 70,964
Cost of
telecommunications
revenue................ 2,451 4,242 8,709 14,038 61,866
Selling, general and
administrative
expenses............... 17,319 20,009 23,820 31,492 57,663
Income (loss) from
operations............. 2,166 6,624 7,761 (4,583) (48,565)
Net income (loss)....... 1,472 4,094 4,683 (2,884) (51,996)
Income (loss) per share
Basic.................. 0.18 0.43 0.49 (0.29) (5.24)
Diluted................ 0.17 0.38 0.43 (0.29) (5.24)
Other Financial Data
Gross profit............ n/m n/m n/m n/m $ 9,098
EBITDA (loss)........... $ 2,932 $ 7,295 $ 8,519 $ (2,992) (42,760)
Capital expenditures.... 599 759 1,222 6,109 36,041
Net cash (used in)
provided by operating
activities............. 1,580 2,192 3,572 (7,951) (33,254)
Net cash used in
investing activities... 599 759 1,222 4,765 6,282
Net cash provided by
financing activities... 171 119 114 8,479 39,622
</TABLE>

<TABLE>
<CAPTION>
As of March 31,
--------------------------------------
1995 1996 1997 1998 1999
------ ------- ------- ------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
Cash and cash equivalents............. $2,391 $ 3,942 $ 6,406 $ 2,168 $ 2,254
Total assets.......................... 7,726 12,509 20,186 30,967 69,402
Total long-term debt, including
current portion ..................... -- -- -- 9,673 66,857
Series A redeemable convertible
preferred stock...................... -- -- -- -- 12,949
Stockholders' equity (deficit)........ 5,526 9,495 14,292 11,580 (39,500)
</TABLE>

Gross profit is not meaningful, n/m, for the fiscal year ended March 31,
1998 and prior periods because our revenues for these periods consisted
primarily of agency commissions, and costs associated with agency revenues were
included primarily in selling, general and administrative expenses. EBITDA
consists of income (loss) before interest, income taxes, depreciation and
amortization. We have provided EBITDA because it is a measure of financial
performance commonly used in the telecommunications industry. Other companies
may calculate it differently from us. EBITDA is not a measurement of financial
performance under generally accepted accounting principles. We believe you
should not consider EBITDA as an alternative to net income (loss) as a measure
of results of operations or to GAAP-based cash flow data as a measure of
liquidity. Capital expenditures consists of additions to property and equipment
acquired for cash or under notes payable and capital leases.

15
<PAGE>

Management's Discussion and Analysis of

Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the
"Selected Financial Data" and the financial statements and notes included
elsewhere in this prospectus.

Overview

Historically, we have generated agency revenues and telecommunications
revenues. Agency revenues consist of commissions we earned as an agent of Bell
Atlantic and other Regional Bell Operating Companies, and long distance
providers. Telecommunications revenues are generated by our sale of local, long
distance, frame relay, internet access and other communications services. For
the fiscal year ended March 31, 1998, agency commissions accounted for
approximately 60% of our revenues, with telecommunications revenues accounting
for the other 40%. As a result of our transition to an integrated
communications provider strategy in January 1998, agency commissions earned
after December 31, 1997 are not material.

Our financial information for the fiscal year ended March 31, 1999 reflects
a full year of operations as an integrated communications provider. Our
financial information for fiscal years ended on or before March 31, 1998
primarily reflects our operations as an agent for Bell Atlantic. Because of our
transition to an integrated communications provider strategy and our network
buildout, most of the financial information for these periods does not reflect
our current business and is not comparable to results for subsequent periods.

Results of Operations

Fiscal Year Ended March 31, 1999 Compared to Fiscal Year Ended March 31, 1998.

Total revenues for the fiscal year ended March 31, 1999 were $70,964,000, an
increase of 73% from $40,947,000 for the preceding fiscal year. As an
integrated communications provider, revenues for fiscal 1999 reflect our direct
sales of local telecommunication services in addition to our direct sales of
other telecommunications services. Revenue for fiscal 1998 reflect agency
commissions on local telecommunications services for the period April 1, 1997
through December 31, 1997 as well as our direct sales of other
telecommunications services for the entire fiscal year.

A common basis for measurement of an integrated communications provider's
progress is the growth in access lines and equivalent circuits, or ALEs. During
the quarter ended March 31, 1999, voice and data ALEs in service increased by
38,935, or approximately 38%, from the quarter ended December 31, 1998. This
brought our total ALEs in service to 142,207 at the end of our first 15 months
as an integrated communications provider. Data ALEs increased by approximately
45% from the quarter ended December 31, 1998 to 28,502, or 20% of total ALEs in
service, as of March 31, 1999. Data ALEs at March 31, 1999 include 6,720 ALEs
purchased by other carriers including internet service providers.

Costs of telecommunications revenues increased to $61,866,000 for fiscal
1999 from $14,038,000 for fiscal 1998 as a result of our decision to provide
local services directly instead of providing local services on an agency basis.
However, as a percentage of telecommunications revenue, costs of
telecommunications revenues remained at 87% for fiscal 1999 and 1998.

Selling, general and administrative expenses increased 83% to $57,663,000 in
fiscal 1999 from $31,492,000 for fiscal 1998. This increase was primarily due
to the increased number of service and technical employees hired and other
expenses incurred in connection with becoming an integrated communications
provider. Also contributing to the increase were approximately $9,301,000 of
expenses and charges relating to the litigation and settlement with Bell
Atlantic. See "Business--Legal Proceedings." Selling, general and
administrative expenses also increased for fiscal 1999 due to increased
depreciation and amortization expenses of $5,728,000 associated with the
investments we made in equipment and software for our network.

16
<PAGE>

Interest and other expense increased to $4,957,000 for the fiscal year ended
March 31, 1999, as compared to interest and other income of $213,000 for the
fiscal year ended March 31, 1998. The increase is due to increased borrowings
to fund our operating losses and the deployment of our network, the fees
associated with our credit and vendor financing facilities and the amortization
of the interest expense associated with warrants issued in connection with
financings.

The benefit for income taxes, which is limited to refunds available on a
loss carryback basis, has been recognized ratably as a percentage of our
estimated pre-tax loss over each of the four quarters of the fiscal year. The
effective rate of the benefit varied with changes in management's estimates.

Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31, 1997

The results for the fiscal year ended March 31, 1998 reflect our decision to
leave the Bell Atlantic agency program in December 1997 and our commencement of
operations as an integrated communications provider. This decision adversely
affected revenues and expenses to a certain extent in the third quarter as we
prepared for this transition and significantly affected revenues in the fourth
quarter after the transition had been effected. Total revenues of $40,947,000
for fiscal 1998 were essentially flat as compared to $40,290,000 for the fiscal
year ended March 31, 1997. Agency revenues decreased 15% to $24,775,000 for
fiscal 1998 from $29,195,000 in fiscal 1997, primarily as a result of fourth
quarter revenues of only $194,000, as compared to $8,354,000 for the same
period of fiscal 1997. This decrease reflects the fact that we left the Bell
Atlantic agency program in December 1997, and thus no Bell Atlantic agency
revenues were reported in the fourth quarter of fiscal 1998. Telecommunications
revenues increased 46% to $16,172,000 for fiscal 1998 from $11,095,000 for
fiscal 1997. This increase reflects the increased sales of long distance,
internet access, and frame relay data services as well as the commencement of
our sale of local telecommunications services as an integrated communications
provider in the fourth quarter of fiscal 1998. Although local
telecommunications sales increased during the fourth quarter, they were
significantly less than we expected as a result of the imposition of the
temporary restraining order in connection with the Bell Atlantic litigation
initiated in February 1998, which required us to sell these local services only
to new customers, resulting in a longer sales cycle. This temporary restraining
order was dissolved in August 1998.

Costs of telecommunications revenues increased 61% to $14,039,000 for fiscal
1998 from $8,709,000 for fiscal 1997. As a percentage of telecommunications
revenues, cost of telecommunications revenues was 87% for fiscal 1998 as
compared to 78% for fiscal 1997. This overall increase was due primarily to
increased sales of telecommunications services and increased costs for those
services sold. Due largely to the initiation of local telecommunications sales
in the fourth fiscal quarter, cost of telecommunications revenues for this
period increased 127% to $5,944,000 from $2,615,000 for the same period in
fiscal 1997. These increases as a percentage of revenues were attributable to
fixed costs associated with the sale of local telecommunications services,
lower long distance rates extended to customers in advance of rate decreases
from one of our long distance suppliers, increased costs associated with adding
new customers and services and costs associated with phasing out our debit card
program.

Selling, general and administrative expenses increased 32% to $31,492,000 in
fiscal 1998 from $23,820,000 in fiscal 1997. This increase was a result of the
increased number of sales and service employees hired in connection with the
transition to an integrated communications provider, increased payments of
commission and bonuses, increased corporate and administrative expenses,
increased depreciation associated with greater capital expenditures, expenses
related to new branch openings and a $1,200,000 charge for estimated costs
attributable to our litigation with Bell Atlantic.

17
<PAGE>

Quarterly Financial and Operating Information

The following table sets forth certain financial and operating data for the
five quarters since we became an integrated communications provider. This
financial information is from our unaudited financial statements. You should
read this information in conjunction with the financial statements and related
notes included elsewhere in this prospectus. The operating results for any
quarter are not necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
Fiscal Quarter ended
--------------------------------------------------------
March 31, June 30, September 30, December 31, March 31,
1998 1998 1998 1998 1999
--------- -------- ------------- ------------ ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data
Telecommunications reve-
nues................... $ 6,288 $12,836 $ 14,516 $ 19,025 $ 24,587
Cost of telecommunica-
tions revenues......... 5,944 11,614 12,383 16,429 21,440
Selling, general and ad-
ministrative expenses.. 10,122 9,495 13,001 14,304 20,863
Loss from operations.... (9,778) (8,273) (10,869) (11,708) (17,716)
Net loss................ (6,008) (7,931) (10,984) (11,997) (21,084)
Other Financial Data
Gross profit............ $ 344 $ 1,222 $ 2,133 $ 2,596 $ 3,147
EBITDA (loss)(/1/)...... (9,110) (7,688) (9,732) (9,694) (15,646)
Capital expenditures.... 1,552 1,015 4,850 18,647 11,529
Net cash (used in)
provided by operating
activities............. (5,251) (7,446) (11,330) (2,779) (11,699)
Net cash provided by fi-
nancing activities..... 6,527 11,669 12,972 14,780 201
Operating Data
Net ALEs provisioned in
the quarter............ 17,637 22,548 24,209 38,878 38,935
Cumulative ALEs in
service at quarter
end.................... 17,637 40,185 64,394 103,272 142,207
</TABLE>

Liquidity and Capital Resources

Prior to March 1998, we had funded our working capital and operating
expenditures primarily from cash flows from operations. Commencing in April
1998, we have funded our transition to an integrated communications provider,
expansion of our sales branches, operating losses and the deployment of our
network by raising additional equity capital and through bank, vendor and lease
financing.

In April 1998, we completed a $12.0 million private placement of Series A
redeemable convertible preferred stock and warrants to Spectrum Equity
Investors II, L.P. We also received a commitment on June 30, 1998 from Spectrum
to purchase, at our option, an additional $5.0 million of preferred stock on
the same terms and conditions as the Series A preferred stock. This option
expires on June 30, 1999.

On September 1, 1998, we entered into a senior secured credit facility with
Goldman Sachs Credit Partners and Fleet National Bank. Under the terms of this
senior secured credit facility, the lenders have provided a three-year credit
facility to us consisting of revolving loans in the aggregate amount of up to
$75.0 million. Under our senior secured credit facility we may borrow $15.0
million unconditionally and an additional $60.0 million based on trailing 120
days accounts receivable collections, reducing to trailing 90 days accounts
receivable collections by March 31, 2000. As of March 31, 1999, we had
availability of $45.2 million under this senior secured credit facility, of
which we had borrowed approximately $36.1 million.

On October 14, 1998, we entered into an agreement with Cisco Capital for up
to $25.0 million of vendor financing. Under the terms of the agreement, we have
agreed to a three-year, $25.0 million volume purchase

18
<PAGE>

commitment of Cisco equipment and services and Cisco Capital has agreed to
advance funds as these purchases occur. Up to $10.0 million of the vendor
facility can be utilized for costs associated with the integration of Cisco
equipment and related peripherals. Under the terms of the vendor facility, we
are required to pay interest on funds advanced under the facility at an annual
rate of 12.5%. As of March 31, 1999, we had borrowed $15.4 million under the
vendor facility.

Since September 30, 1998, we have entered into various lease and vendor
financing agreements which provide for the acquisition of up to $16.2 million
of equipment and software. As of March 31, 1999, the aggregate amount borrowed
under these agreements was approximately $14.0 million.

In order to provide liquidity, we entered into a loan agreement dated as of
March 15, 1999 with Toronto Dominion (Texas), Inc. to provide an unsecured
standby credit facility for up to $30.0 million for capital expenditures and
other general corporate purposes. As of June 17, 1999, we had borrowed $3.0
million under this facility. This facility will terminate upon the closing of
this offering. Under this facility, $10.0 million is immediately available and
the remaining $20.0 million will become available if we raise an additional
$5.0 million of proceeds from the issuance of equity. We currently intend, and
are able, to call the Spectrum commitment described above if before June 30,
1999, we have not received a replacement equity commitment or a waiver of the
$5.0 million equity requirement from Toronto Dominion.

As we continue to deploy our network, further penetrate our existing region
and expand into new markets throughout the Boston--Washington, D.C. corridor,
we will need significant additional capital. We believe that the proceeds of
this offering, together with cash on hand and the amounts we expect to be
available under our bank, lease and vendor financing arrangements, will be
sufficient to fund our capital requirements for at least the next 12 months.
During this period we will seek to raise additional capital through the
issuance of debt and possibly equity securities, the timing of which will
depend on market conditions, and which could occur in the near future. We may
also seek to raise additional capital through further equity offerings, vendor
financing, equipment lease financing and bank loans.

We cannot assure you that additional financing will be available on terms
acceptable to us when we need it. The agreements governing our existing
indebtedness limit our ability to obtain debt financing. If we are unable to
obtain financing when we need it, we may delay or abandon our development and
expansion plans. That could have a material adverse effect on our business,
results of operations and financial condition. The actual timing and amount of
our capital requirements may be materially affected by various factors,
including the timing and actual cost of the network, the timing and cost of our
expansion into new markets, the extent of competition and pricing of
telecommunications services by others in our markets, the demand by customers
for our services, technological change and potential acquisitions.

On February 24, 1999, we settled a lawsuit against Bell Atlantic Corp. Under
the terms of the settlement agreement we received cash and will receive other
consideration to satisfy claims of commissions we earned while we were an agent
for Bell Atlantic. Both parties have agreed to keep the specific terms of the
settlement confidential. We do not expect to incur any additional material
costs related to this matter subsequent to March 31, 1999.

Working capital deficit at March 31, 1999 was $6,486,000 compared to a
working capital surplus of $11,342,000 at March 31, 1998, a decrease of
$17,828,000. This decrease is due primarily to the increase in accounts payable
and accrued expenses associated with our transition to an integrated
communications provider. We will fund this deficit through borrowings under our
credit facilities, which are long term liabilities. Cash balances at March 31,
1999 and March 31, 1998 totaled approximately $2,254,000 and $2,168,000,
respectively.

19
<PAGE>

Quantitative and Qualitative Disclosures about Market Risk

Our exposure to financial market risk, including changes in interest rates,
relates primarily to outstanding debt obligations. We utilize our senior
secured credit facility to fund a substantial portion of our capital
requirements. This facility bears interest at a variable interest rate, which
is subject to market changes. We have not entered into any interest rate swap
agreements, or other instruments to minimize our exposure to interest rate
increases but will investigate such options should changes in market conditions
occur. We have not had any derivative instruments in the past and do not plan
to in the future, other than possibly to reduce our interest rate exposure as
described above.

Year 2000 Compliance

Our State of Readiness

We have evaluated the effect of the Year 2000 problem on our information
systems. We are implementing plans to permit our systems and applications to
effectively process information in order to support ongoing operations in the
Year 2000 and beyond. We believe our information technology systems and non-
information systems will be Year 2000 compliant by the end of 1999.

In connection with the deployment of our new network, we have designed a new
database architecture for our computer systems which we expect will be Year
2000 compliant. We expect installation of the network and related network
control software to be completed in the summer of 1999. We expect installation
of our new information systems related to our new network to be completed in
the third or fourth quarter of 1999. We began testing our network and these new
systems when we first began installation, and we expect testing to continue. We
are also upgrading our current information systems to be Year 2000 compliant in
case we have not completed installing our new systems by the end of 1999.
Approximately 40% of our existing information systems are now Year 2000
compliant. We expect to complete this upgrade in the third or fourth quarter of
1999. While we expect that all significant information systems will be Year
2000 compliant in the third or fourth quarter of 1999, we cannot assure you
that all Year 2000 problems in the new system will be identified or that the
necessary corrective actions will be completed in a timely manner. We also
expect our non-information systems to be Year 2000 compliant in the third or
fourth quarter of 1999.

We have requested certification from our significant vendors and suppliers
demonstrating their Year 2000 compliance. Approximately 80% of vendors and
suppliers have delivered these certifications. We will continue to seek
additional certifications. However, we cannot assure you that we will receive
any addition certifications. Generally, these certifications state that our
vendors and suppliers are Year 2000 compliant but do not require any
affirmation action if these certifications are inaccurate. We intend to
continue to identify critical vendors and suppliers and communicate with them
about their plans and progress in addressing Year 2000 problems. We cannot
assure you that the systems of these vendors and suppliers will be timely
converted. We also cannot assure you that any failure of their systems to be
Year 2000 compliant will not adversely affect our operations.

Our Costs of Year 2000 Remediation

We have incurred approximately $120,000 in costs to date related
specifically to Year 2000 issues and expect to incur an additional
approximately $380,000 in costs through the end of 1999. However, we cannot
assure you that the costs associated with Year 2000 problems will not be
greater than we anticipate.

Our Year 2000 Risk

Based on the efforts described above, we currently believe that our systems
will be Year 2000 compliant in a timely manner. We have completed the process
of identifying Year 2000 issues in our information systems and non-information
systems and expect to complete any remediation efforts in the third and fourth
quarters of 1999.

We cannot assure you that our operations and financial results will not be
affected by Year 2000 problems. We may experience interruptions in service and
not receive billing information in a timely manner if either our

20
<PAGE>

systems or those of our vendors or suppliers are not Year 2000 compliant in a
timely manner. It is possible that we could experience other serious Year 2000
difficulties that we cannot presently predict.

Our Contingency Plans

We have begun upgrading our current information systems as part of our
contingency plans in case our new systems are not installed before the end of
1999. In addition, we intend to seek to identify alternative service providers
in case our current providers are unable to adequately deliver services in the
Year 2000. If it becomes necessary for us to implement a contingency plan, the
plan may not avoid a material Year 2000 issue.

21
<PAGE>

Business

Overview

We are a rapidly growing integrated communications provider, or ICP, with 15
years of telecommunications marketing, sales and service experience. We offer
voice and data services to predominantly medium and larger-sized business
customers who seek greater telecommunications transmission capacity, integrated
telecommunications solutions and improved levels of service. We have a large,
experienced sales force consisting of 163 sales people supported by 100 network
consultants. Our sales force is located close to our customers in 25 sales
branches primarily in New England and New York State. We are currently moving
to a facilities-based platform by deploying a state-of-the-art, all packet-
switched network based on internet protocol and ATM, architecture. In May 1999,
we began testing of our network with some of our customers. By late summer, we
expect to begin providing, and billing for, commercial service to a limited
number of customers on our network.

We became an integrated communications provider in January 1998. Prior to
that, we were the largest sales agent for NYNEX Corp. (now Bell Atlantic),
based on agency revenues. At the end of 1997, before leaving the Bell Atlantic
agency program, we were managing relationships for approximately 7,000
customers, representing over 280,000 local access lines and over $200 million
in annual local telecommunications spending. As of March 31, 1999, after only
15 months as an integrated communications provider, we were serving over 9,000
customers and had over 142,000 access lines and equivalent circuits, or ALEs,
in service. For the quarter ended March 31, 1999, we generated approximately
$24.6 million of revenues, or $98.4 million on an annualized basis.

Our Market Opportunity

The market potential for integrated communications services is large and
growing. According to FCC data, in 1997, the total market for U.S. retail
telecommunications services was approximately $187 billion. Data services,
including internet, frame relay and ATM services, represent one of the fastest
growing segments of the telecommunications market. Industry reports by
International Data Corporation estimate that from 1997 to 2002, annual internet
services revenues will increase from $7.5 billion to $29.7 billion and annual
frame relay and ATM services revenue will increase from $2.9 billion to $7.6
billion. We are deploying our data-centric network to capitalize on this market
opportunity.

Our target market, the Northeastern and Mid-Atlantic region, represents an
attractive opportunity for us because it has a high concentration of
telecommunications traffic. According to FCC data, New York and New England had
an estimated 7.3 million local business access lines as of December 31, 1997,
which generated retail telecommunications revenues of approximately $24.4
billion in 1997. When we expand our business in the remaining portions of the
New York-Washington, D.C. corridor, we will increase our addressable market by
an estimated 8.4 million local business access lines as of December 31, 1997,
which generated approximately $26.3 billion in retail telecommunications
revenues in 1997. We are currently targeting the medium and large-sized
business segment of our markets. We estimate this segment represents nearly 50%
of the total business access lines in our target markets.

Our Competitive Strengths

. Over 15 years of telecommunications marketing, sales and service
experience. We have sold local telecommunications services as an agent
since 1984 and have sold long distance and data services under our own
brand name since 1994. During this period, we successfully introduced
integrated services digital network, or ISDN, frame relay, ATM and other
new services in response to technological change. Collectively, our
nine-person senior management team has nearly 200 years of
telecommunications experience. Six members of this team have worked
together at CTC for more than 10 years.

22
<PAGE>

. Over 250 experienced sales people and network consultants providing
personalized sales and customer care. Our sales and service teams
consist of a sales executive and a network consultant assigned to each
customer. This provides a single, responsive point of contact for all of
our customers' service and billing inquiries. Our sales and service
teams seek to develop a long-term relationship with customers. We
believe that our focus on customer care and our integration of sales and
service create higher levels of customer satisfaction. We expect this
will lead to better referral and retention rates.

. A capital-efficient and scalable, all packet-switched network, capable
of providing advanced data services. We believe that our state-of-the-
art packet-switched network strategy is superior to a circuit-switched
strategy for several reasons:

. our network requires approximately 50-60% less capital and
significantly less time to deploy than a circuit-switched network;

. our network is based on open architecture standards and will allow
us to adapt to future technological developments and network
innovations;

. we believe our network will enable us to provide a more advanced and
differentiated service offering than other local exchange carriers
can provide over their legacy voice switches; and

. we believe our network will be significantly more cost efficient for
ongoing operations and maintenance.

. Significant experience designing and selling sophisticated data
services. We have substantial expertise designing, selling and
implementing sophisticated data services including frame relay, point-
to-point dedicated high capacity data links, ISDN, ATM and dedicated
internet services. Over the last five years, we have sold digital data
services to more than 7,000 customer sites, designed and implemented
more than 600 wide area data networks and assisted customers in
transitioning from point-to-point networks to more advanced frame relay
and ATM networks.

. A broad range of voice and data services incorporated on a single
bill. We currently provide local, long distance, data and internet
services and intend to provide additional enhanced data services in the
future following deployment of our network. We also provide our
customers with the convenience of a single bill for all of their
telecommunications services. We believe that our ability to deliver a
single source solution to our target market is a key element in building
our customer base. We also believe this will allow us to increase our
share of customers' telecommunications billings and will promote
customer retention.

. Comprehensive, fully integrated billing and operational support systems,
or OSS. Over the past decade we have used our extensive experience with
the provisioning systems used by incumbent local exchange carriers to
develop our comprehensive information systems. Our systems fully
integrate and automate all aspects of our business, including marketing,
provisioning, finance, facilities management, billing and customer
service. This integration facilitates accurate and timely customer care
and billing. The system also allows us to provide our customers with a
single, integrated bill for multiple services. Our customers can
download information about their accounts directly to their own systems
through online, near real-time access via the internet. Our information
systems electronically interface with most of our major suppliers. In
late 1998, we became one of the first competitive local exchange
carriers to complete a full electronic data interchange interface with
Bell Atlantic. This allows our systems to connect directly with those of
Bell Atlantic. We believe that our information systems are a primary
reason for our success in provisioning a high volume of access lines
during our first five quarters as an integrated communications provider.

. The ability to expand using our proven operating model for branch
offices, sales process, customer service and personnel training. Over
the last five years, we have developed a successful and replicable
approach to branch expansion. We believe that our standardized approach
to opening new branches, our uniform approach to sales and service and
our extensive training of new hires will

23
<PAGE>

enable us to expand without compromising our solutions-oriented,
customer-centric culture. New branch offices are fully integrated with
our information systems from the outset. This allows our corporate
headquarters to maintain control of quality and productivity across our
branch offices while enabling each branch office to operate as an
autonomous local sales and service organization.

Our Services

We offer the following services:

. Local Telephone Services. We offer connections between customers'
telecommunications equipment and the local telephone network, which we
currently lease from the incumbent local exchange carriers. For large
customers or customers with specific requirements, we integrate
customer-owned private branch exchange, or PBX, systems with analog or
digital trunks. We also provide all associated call processing features
as well as dedicated private lines for both voice and data applications.

. Long Distance Telephone Services. We offer a full range of domestic and
international long distance services, including "1+" outbound calling,
inbound toll free service, standard and customized calling plans. We
also offer related services such as calling cards, operator assistance
and conference calling.

. High Speed Data Services. We offer a wide array of dedicated and
switched high speed digital data services. Dedicated services include
digital data services, DS-1 and DS-3, and, Fiber Distributed Data
Interface products. Switched or virtual digital services include ISDN,
frame relay and ATM products.

. Internet Services. We offer dedicated high speed internet access and
services via digital data services, frame relay and high speed digital
transmission links such as T-1 and T-3. In addition, we offer switched
digital access to the internet via ISDN. We provide the necessary
communications hardware, configuration support and other support
services on a 24-hour, 7-day a week basis.

. Wholesale Services to Internet Service Providers. We provide a full
array of local services to internet service providers, or ISPs,
including telephone numbers and switched and dedicated access to the
internet.

. Future Service Offerings. Following deployment of the network, we may
offer the following additional services: web hosting, e-commerce, data
security and storage, application services, systems integration,
consulting and network monitoring services, customized virtual private
networks and other data, voice and enhanced network products.

Our Integrated Communications Network

We began deploying the first phase of our state-of-the-art, packet-switched
network in January 1999. We believe our network will enable us to improve
margins, enhance network and service quality and broaden our range of product
offerings. The network is an advanced network, using Cisco BPX(R) and MGX(TM)
wide-area switches. Our network will deliver enhanced access services such as
traditional dedicated services, frame relay, internet protocol, video and
circuit emulation transport services. We believe that our network will
ultimately enable us to deliver voice and data services across a single multi-
service dedicated connection. We also expect our network to lower customers'
overall telecommunications costs and stimulate demand for new high capacity
services.

The first phase of our network includes 22 Cisco advanced data switches and
two network operation centers. Our primary network operations center is located
in our Waltham, Massachusetts technology center. Our fully redundant back-up
network operations center is located in Springfield, Massachusetts. We are
interconnecting our facilities with leased transmission capacity over fiber
optic cable strands from Level 3

24
<PAGE>

Communications and NorthEast Optic Network. Initially, we have obtained high
capacity OC-3 circuits between our switches providing multiple, redundant
connections. The initial transmission infrastructure will consist of fiber
optic rings with automatic re-routing in either direction covering the
southern, western and eastern New England regions. This SONET technology
permits full circuit redundancy and route diversity.

The network will also allow us to take advantage of available technology
such as dense wave digital multiplexing, or DWDM, to meet increasing customer
demands for reliable, high capacity voice, data and video connectivity. We have
also arranged to co-locate our switching hubs in Level 3 Communications and
NorthEast Optic Network facilities along selected fiber routes. We expect to
work with Cisco to test various new Cisco technologies in our Waltham
technology center. We expect this to better position us as an early adopter of
developing Cisco technology.

We intend to access customer locations from our network through our
PowerPathSM services. These will include a variety of high capacity, or
broadband, technologies, including leased T-1s, DSL service, wireless
technologies and fiber optic facilities, as available. Initially, we will offer
dedicated long distance and data services over our network. We believe that
these services represent over 50% of our target customers' fixed line
telecommunications spending. The balance represents local dial tone services
which we currently obtain from other carriers. We plan to incorporate local
dial tone service into our packet-switching architecture as that technology
matures.

Our network strategy to incorporate local dial tone functionality at a later
stage will allow us to simplify the transitioning of existing customers on-net
because a disconnection from the incumbent local exchange carrier and
reconnection to our network will not be required. To transition our customers
on-net, we will simply be required to reprogram our customer's PBX and/or wide
area network routers to direct long distance and data traffic to our network.
This strategy will also allow our customers to retain their existing phone
numbers as well as have the built-in redundancy of the separate physical
connection to the incumbent local exchange carrier. At a later stage, using
telephone number portability which we expect to be available throughout our
territory, we will be able to more easily transition our customers' local dial
tone service onto our network.

The network will include the following data services: point-to-point private
line, frame relay, ATM, internet access, virtual private network services for
on-net data traffic and network-to-network interface points to other data
carrier networks and internet service providers. The network will initially
include the following voice services: dedicated long distance and corporate
intranet services. We expect that the network will handle the full range of
voice services when we integrate local dial tone capabilities into our network.

Sales and Customer Care

We market telecommunications services by developing long-term business
relationships with our customers and offering them comprehensive management of
their telecommunications requirements. Each of our customers is assigned a
local dedicated team consisting of a sales executive and a network consultant.
This team provides a single point of contact for our customer's needs. This
team works together with the customer to design, implement and maintain an
integrated telecommunications solution. This team also reviews and updates the
customer's services on a regular basis. We believe that providing localized,
high quality customer care promotes continued sales of new services and reduces
customer churn.

Sales and Service Infrastructure. Our branches are currently staffed with
over 300 individuals, representing approximately 80% of our employees. As of
June 17, 1999, there were 163 sales executives, 100 network consultants, 26
branch/regional managers and 16 service managers located in 25 sales branches
serving markets in Connecticut, Maine, Maryland, Massachusetts, New Hampshire,
New York, Rhode Island and Vermont.

Customer Sales and Service Model. At their first meeting with a prospective
customer, our sales executives analyze the customer's current
telecommunications usage and costs. Sales executives then outline the range of
services and potential savings we offer and make recommendations to optimize
the customer's current network. Sales executives also discuss the benefits of
our comprehensive customer care program and

25
<PAGE>

develop account telemanagement plans designed to balance network expense and
utility. Sales executives and network consultants continue to review the
customer's telecommunications usage and requirements and update the customer's
suite of services and network design. We believe the relationship-intensive
approach of assigning sales executives and network consultants to each customer
account results in high customer satisfaction and retention rates.

Our sales executives regularly participate in training programs on subjects
such as solution-oriented sales, comprehensive customer care, network design
and other technical features of our services. We seek to motivate and retain
our sales executives through extensive training and a commission structure that
supports our relationship oriented sales and service policies.

Customer Care. Our network consultants are trained in our service offerings
and are responsible for customer care. Network consultants are located in each
of our sales branches and are assigned directly to individual customer accounts
in direct support of the sales executives. Our localized, multi-step customer
care process provides an ongoing and comprehensive service program to our
customers. This process ranges from long-term consultative planning to day-to-
day handling of service issues.

Our customer care program is designed to provide prompt action in response
to customer inquiries and complaints. The local sales branches are staffed 11
hours a day, 5 days a week. At other times, incoming calls automatically roll
over to a central customer care center which is staffed 24 hours a day, 7 days
a week. We believe that our network consultants are motivated to provide the
highest level of customer care because a significant portion of their
compensation is based on customer retention and satisfaction.

Our Information Systems

Our information systems include five central applications which fully
integrate our sales and account management, customer care, provisioning,
billing and financial processes. Automation of each of these processes is
designed for high transaction volumes, accurate throughput, timely
installation, accurate billing feeds and quality customer service. Data entered
in one application is generally exported into all other applications. Each
branch office is served by a LAN connected via frame relay to the central
processor. Our employees have online access to our information systems from
their branch desktops or docking stations.

We also have an electronic interface to most of our major suppliers. When a
sales executive places an order for one of these suppliers, our information
systems electronically direct it to the appropriate supplier and monitors any
delays in provisioning the order. Once the order is provisioned, our
information systems automatically remove it from the in-process order file,
update the customer's service inventory and network configuration, initiate
billing, post the sales executive's commission and update our financial
reports.

Our information systems include the following applications:

. Account and Sales Management. Our account management application is the
hub of our information systems. It stores all of our customer-related
information, such as location detail, contact information, transaction
history and account profile. Our account management application also
automatically exports data to our customized sales application. Our
sales application is a fully-integrated database that provides sales
personnel with access to information for pricing services, customized
sales proposals, customer correspondence, sales performance, referencing
methods and procedures, service descriptions, competitive information
and historical profiles of our current and prospective customers. These
historical profiles include details of installed services, recent
transactions and billing history. Our sales system can be used both on-
and off-line. All entries made while off-line are automatically updated
to the central processor and all relevant data is simultaneously
exported to the other central applications each time a salesperson
connects to the network.

. Customer Care. Our network consultants use our account care application
to review installed services, make additions, changes and deletions to
accounts, initiate and track repair and service work

26
<PAGE>

and review past billing for any customer. This closed loop application
provides automatic follow up and records all transactions in a customer
history file. Service orders and repair requests input in our account
care application are automatically exported into our provisioning
application.

. Provisioning. We generally direct customer orders through our
provisioning application electronically to our major suppliers. We track
these orders through our account care application from initiation
through completion. If any delay in provisioning occurs, the proactive
nature of this application alerts the sales executive or network
consultants who can take corrective action and notify the customer of
the delay. Once the order has been filled the information is
automatically fed to our billing application.

. Billing and Customer Interface. Our billing application allows us to
provide our customers a single bill for all the services we provide. Our
billing application also allows the customer to review historic bill
detail, perform customized usage analyses and download information
directly to their own accounting applications. Using a secure Web-based
application called IntelliVIEW(TM), our customers have near real-time
online access to our billing application. Using IntelliVIEW, our
customers are able to review and analyze their bills and related
information. Customer billing statements are also available on CD ROM,
diskette or paper. Paper statements generated by our billing application
offer our customers different telemanagement formats.

. Financial. Data from our billing application is automatically exported
to our financial application. Our financial application tracks and
prepares reports on sales activity, commissions, branch operations,
branch profitability and cash flows. The financial application also
compiles this data for our periodic financial reports. In addition, this
application provides internal controls for revenue tracking and costing.
The integrated nature of our information systems allows us to operate
each branch as a separate profit and loss center.

We are actively upgrading our information systems to a three-tiered
client/server architecture in order to support our network. We have selected
Oracle's relational database for the first tier, which is our data repository
and warehouse. We will vertically integrate our second tier business
applications described above with the data repository using a messaging
product from TIBCO Corporation. Third tier users, such as customers, vendors,
partners and internal users, will access the second tier business applications
using either UNIX, Windows 95 or standard browsers. We expect that this three-
tiered architecture will allow us to grow and expand our business, replace and
upgrade business applications without impacting other applications and provide
us with reliable data.

Competition

Bell Atlantic is a competitor for local and data services, and, we expect
based on regulatory developments, eventually will be a competitor for long
distance services as well. Major competitors in our markets in the provision
of integrated telecommunications solutions include WinStar Communications,
Inc. and Teligent, Inc. Network Plus is a competitor in our market for the
provision of long distance and, to some extent, local services. Competitors
for our data services also include AT&T Local (Teleport) and MCI Worldcom
(Brooks Fiber and MFS). Our competitors for long distance services include all
the major long distance carriers such as AT&T, MCI Worldcom and Sprint.

In addition, the continuing trend toward business combinations and
alliances in the telecommunications industry may create significant new
competitors. Examples of some of these alliances include: Bell Atlantic's
proposed acquisition of GTE, SBC's proposed merger with Ameritech, AT&T's
acquisition of TCI and

27
<PAGE>

proposed acquisition of Media One, US West's proposed merger with Global
Crossing, Global Crossing's proposed acquisition of Frontier Corp., Qwest's
proposed acquisition of US West and Frontier Corp. and SBC's acquisition of
SNET. Many of these combined entities have or will have resources far greater
than ours. These combined entities may provide a bundled package of
telecommunications products that is in direct competition with our products.
These combined entities may be capable of offering these products sooner and at
more competitive rates than we can.

Competition for Provision of Integrated Telecommunications Services. The
number of competitors able to provide integrated telecommunications services
has increased because of the current regulatory trend toward fostering
competition and the continued consolidation of telecommunications service
providers. Many facilities-based integrated service providers and long distance
carriers have committed substantial resources to building their own networks or
to purchasing carriers with complementary facilities. Through these strategies,
a facilities-based provider can offer single source local, long distance and
data services similar to those that we will offer. The alternative strategies
available to these competitors may provide them with greater flexibility and a
lower cost structure.

Once the Regional Bell Operating Companies, or RBOCs, are allowed to offer
in-region long distance services under the terms of Section 271 of the
Telecommunications Act, they will be in a position to offer local and long
distance services similar to the services we offer. No RBOC is currently
permitted to provide long distance services for calls originating in their
region. We cannot assure you that this will continue to be the case. The FCC
must approve RBOC provision of in-region interLATA long distance services and
can only do so upon finding that the RBOC has complied with the 14-point
checklist outlined in Section 271 of the Telecommunications Act. This 14-point
checklist is designed to ensure that RBOC competitors have the ability to
provide local telephone services in competition with the RBOC. The FCC has not
yet found that any RBOC has complied with the 14-point checklist.

Although the Telecommunications Act and other federal and state regulatory
initiatives will provide us with new business opportunities, as competition
increases regulators are likely to provide the incumbent local exchange
carriers with more pricing flexibility. Our revenues may be adversely affected
if the incumbent local exchange carriers elect to lower their rates and sustain
these lower rates over time. We believe that we may be able to offset the
effect of lower rates by offering new services to our target customers, but we
cannot assure you that this will occur. In addition, if future regulatory
decisions give incumbent local exchange carriers increased pricing flexibility
or other regulatory relief, such decisions could have a material adverse effect
on our business.

Competition for Provision of Local Exchange Services. In the local exchange
market, incumbent local exchange carriers, including RBOCs, continue to hold
near-monopoly positions. We also face competition or prospective competition
from one or more integrated service providers, and from other competitive
providers, including non-facilities-based providers. Many of these competitors
are larger and better capitalized than we are. Some carriers have entered into
interconnection agreements with incumbent local exchange carriers and either
have begun, or in the near future likely will begin, offering local exchange
service in each of our markets. Further, as of February 8, 1999, the largest
long distance carriers were permitted to bundle local and long distance
services. This removes one of our competitive advantages. Other entities that
currently offer or are potentially capable of offering switched services
include cable television companies, electric utilities, other long distance
carriers, microwave carriers, and large customers who build private networks.

Wireless telephone system operators are also competitors in the provision of
local services. Cellular, personal communications service, and other commercial
mobile radio services providers may offer wireless services to fixed locations,
rather than just to mobile customers. This ability to provide fixed as well as
mobile services will enable wireless providers to offer wireless local loop
service and other services to fixed locations (e.g., office and apartment
buildings) in direct competition with us and other providers of traditional
fixed telephone service. In addition, the FCC recently auctioned substantial
blocks of spectrum for fixed use including local exchange services. We expect
exploitation of this spectrum to increase competition in the local market.

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The World Trade Organization recently concluded an agreement that could
result in additional competitors entering the U.S. local and long-distance
markets. Under the WTO agreement, the United States committed to open
telecommunications markets to foreign-owned carriers. The FCC has adopted
streamlined procedures for processing market entry applications from foreign
carriers, making it easier for such carriers to compete in the U.S. We cannot
predict whether foreign-owned carriers will enter our markets as a result of
the WTO agreement.

Competition for Provision of Long Distance Services. The long distance
market is significantly more competitive than the local exchange market. In the
long distance market numerous entities compete for the same customers. In
addition, customers frequently change long distance providers in response to
lower rates or promotional incentives by competitors. This results in a high
average rate of customer loss, or churn, in the long distance market. Prices in
the long distance market have declined significantly in recent years and are
expected to continue to decline. Competition in this market will further
increase once RBOCs are permitted to offer interLATA long distance services.

Data and Internet Services. The market for high speed data services and
access to the internet is highly competitive. We expect competition in this
market to continue to intensify. Our competitors in this market will include
internet service providers and other telecommunications companies, including
large interexchange carriers and RBOCs. Many of these competitors have greater
financial, technological and marketing resources than those available to us.
Recently, various RBOCs have filed petitions with the FCC requesting regulatory
relief in connection with the provision of their own data services, including
DSL services. In response to these petitions, the FCC issued a decision that
data services generally are telecommunications services that, when provided by
incumbent local exchange carriers, are subject to the unbundling, resale, and
other independent local exchange carrier obligations prescribed in Section 251
of the Telecommunications Act. Petitions have been filed with the FCC asking
them to reconsider this decision. The FCC also has initiated a proceeding to
determine whether independent local exchange carriers will be able to escape
their Section 251 obligations by providing data services through "truly"
separate affiliates, whether the FCC will require incumbent local exchange
carriers to unbundle their DSL equipment and resell DSL services, and whether
the FCC will grant RBOCs interLATA relief for the provision of data services.
We cannot predict the effect that this proceeding will have on our ability to
obtain facilities and services from incumbent local exchange carriers and on
the competition that we will face from incumbent local exchange carriers in the
data services market.

Government Regulation

The local and long distance telephony services and, to a lesser extent, the
data services we provide are regulated by federal, state, and, to some extent,
local government authorities. The FCC has jurisdiction over all
telecommunications common carriers to the extent they provide interstate or
international communications services. Each state regulatory commission has
jurisdiction over the same carriers with respect to the provision of intrastate
communications services. Local governments sometimes impose franchise or
licensing requirements on telecommunications carriers and regulate construction
activities involving public rights-of-way. Changes to the regulations imposed
by any of these regulators could have a material adverse effect on our
business, operating results and financial condition.

In recent years, the regulation of the telecommunications industry has been
in a state of flux as the United States Congress and various state legislatures
have passed laws seeking to foster greater competition in telecommunications
markets. The FCC and state utility commissions have adopted many new rules to
implement this legislation and encourage competition. These changes, which are
still incomplete, have created new opportunities and challenges for us and our
competitors. The following summary of regulatory developments and legislation
is not intended to describe all present and proposed federal, state and local
regulations and legislation affecting the telecommunications industry. Some of
these and other existing federal and state regulations are the subject of
judicial proceedings, legislative hearings and administrative proposals which
could change, in varying degree, the manner in which this industry operates. We
cannot predict the outcome of these proceedings, or their impact on the
telecommunications industry at this time.

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<PAGE>

Federal Regulation

We are currently not subject to price cap or rate of return regulation at
the federal level and are not currently required to obtain FCC authorization
for the installation, acquisition or operation of our domestic interexchange
network facilities. However, we must comply with the requirements of common
carriage under the Communications Act. We are subject to the general
requirement that our charges and terms for our telecommunications services be
"just and reasonable" and that we not make any "unjust or unreasonable
discrimination" in our charges or terms. The FCC has jurisdiction to act upon
complaints against any common carrier for failure to comply with its statutory
obligations.

Comprehensive amendments to the Communications Act were made by the
Telecommunications Act, which was signed into law on February 8, 1996. The
Telecommunications Act effected changes in regulation at both the federal and
state levels that affect virtually every segment of the telecommunications
industry. The stated purpose of the Telecommunications Act is to promote
competition in all areas of telecommunications. While it may take years for the
industry to feel the full impact of the Telecommunications Act, it is already
clear that the legislation provides us with new opportunities and challenges.

The Telecommunications Act greatly expands the interconnection requirements
on the incumbent local exchange carriers. The Telecommunications Act requires
the incumbent local exchange carriers to:

. provide physical collocation, which allows companies such as us and
other competitive local exchange carriers to install and maintain their
own network termination equipment in incumbent local exchange carriers;
central offices, and virtual collocation only if requested or if
physical collocation is demonstrated to be technically infeasible;

. unbundle components of their local service networks so that other
providers of local service can compete for a wide range of local
services customers; and

. establish "wholesale" rates for their services to promote resale by
competitive local exchange carriers.

In addition, all local exchange carriers must:

. establish number portability, which will allow a customer to retain its
existing phone number if it switches from the local exchange carrier to
a competitive local service provider;

. provide nondiscriminatory access to telephone poles, ducts, conduits and
rights-of-way.

. compensate other local exchange carriers on a reciprocal basis for
traffic originated on one local exchange carrier and terminated on the
other local exchange carrier.

The FCC is charged with establishing national guidelines to implement
certain portions of the Telecommunications Act. The FCC issued its
interconnection order on August 8, 1996. On July 18, 1997, however, the United
States Court of Appeals for the Eighth Circuit issued a decision vacating the
FCC's pricing rules, as well as certain other portions of the FCC's
interconnection rules, on the grounds that the FCC had improperly intruded into
matters reserved for state jurisdiction. On January 25, 1999, the Supreme Court
largely reversed the Eighth Circuit's order, holding that the FCC has general
jurisdiction to implement the local competition provisions of the
Telecommunications Act. In so doing, the Supreme Court stated that the FCC has
authority to set pricing guidelines for unbundled network elements, to prevent
incumbent local exchange carriers from disaggregating existing combinations of
network elements, and to establish "pick and choose" rules regarding
interconnection agreements. "Pick and choose" rules would permit a carrier
seeking interconnection to "pick and choose" among the terms of service from
other interconnection agreements between the incumbent local exchange carriers
and other competitive local exchange carriers. This action reestablishes the
validity of many of the FCC rules vacated by the Eighth Circuit. Although the
Supreme Court affirmed the FCC's authority to develop pricing guidelines, the
Supreme Court did not evaluate the specific pricing methodology adopted by the
FCC and has remanded the case to the Eighth Circuit for further consideration.
Thus, while the Supreme Court resolved many issues, including the FCC's
jurisdictional

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<PAGE>

authority, other issues remain subject to further consideration by the courts
and the FCC. We cannot predict the ultimate disposition of those matters. We
also cannot predict the possible impact of this decision on existing
interconnection agreements between incumbent local exchange carriers and
competitive local exchange carriers or on agreements that may be negotiated in
the future.

Although most of the FCC rules that the Supreme Court was considering were
upheld, the Court vacated the FCC's rule that identifies the unbundled network
elements that incumbent local exchange carriers must provide to competitive
local exchange carriers. The FCC recently initiated a new proceeding to
reexamine whether it will identify which unbundled network elements incumbent
local exchange carriers must provide, and, if so, how to identify those
elements. It is unclear how the FCC will decide this issue or the effect that
the FCC's decision will have on our business or operations.

The FCC recently adopted new rules designed to make it easier and less
expensive for competitive local exchange carriers to obtain collocation at
incumbent local exchange carrier central offices by, among other things,
restricting the incumbent local exchange carriers' ability to prevent certain
types of equipment from being collocated and requiring incumbent local exchange
carriers to offer alternative collocation arrangements to competitive local
exchange carriers. The FCC also initiated a new proceeding to address line
sharing, which, if implemented, would allow competitive local exchange carriers
to offer data services over the same line that a consumer uses for voice
services without the competitive local exchange carrier having to provide the
voice service. While we expect that the FCC's new collocation rules will be
beneficial to us, we cannot be certain that these new rules will be implemented
in a favorable manner. Moreover, incumbent local exchange carriers or other
parties may ask the FCC to reconsider some or all of its new collocation rules,
or may appeal these rules in federal court. We cannot predict the outcome of
these actions or the effect they may have on our business.

Under the Communications Act, incumbent local exchange carriers have an
obligation to negotiate with us in good faith to enter into interconnection
agreements. We will need interconnection agreements to provide enhanced
connectivity to our network and to provide local dial tone services. If we
cannot reach agreement, either side may petition the applicable state
commission to arbitrate remaining disagreements. These arbitration proceedings
can last up to 9 months. Moreover, state commission approval of any
interconnection agreement resulting from negotiation or arbitration is
required, and any party may appeal an adverse decision by the state commission
to federal district court. The potential cost in resources and delay from this
process could harm our ability to compete in certain markets, and there is no
guarantee that a state commission would resolve disputes, including pricing
disputes in our favor. Moreover, as explained above, the FCC rules governing
pricing standards for access to the networks of the traditional telephone
companies are currently being challenged in federal court. If the courts
overturn the FCC's pricing rules, the FCC may adopt a new pricing methodology
that would require us to pay a higher price to traditional telephone companies
for interconnection. This could have a detrimental effect on our business.

The Telecommunications Act permits RBOCs to provide long distance services
outside their local service regions immediately, and will permit them to
provide in-region long distance service upon demonstrating to the FCC and state
regulatory agencies that they have adhered to the Telecommunication Act's 14-
point competitive checklist. Some RBOCs have filed applications with various
state public utility commissions and the FCC seeking approval to offer in-
region interLATA service. Some states have denied these applications while
others have approved them. However, to date, the FCC has denied each of the
RBOC's applications brought before it because it found that the RBOC had not
sufficiently made its local network available to competitors. We anticipate
that a number of RBOCs will file additional applications in 1999.

In May 1997, the FCC released an order establishing a significantly expanded
universal service regime to subsidize the cost of telecommunications service to
high cost areas, as well as to low-income customers and qualifying schools,
libraries, and rural health care providers. Providers of interstate
telecommunications services, like us, as well as certain other entities, must
pay for these programs. We are also eligible to receive funding from these
programs if we meet certain requirements, but we are not currently planning to
do so. Our share of the payments into these subsidy funds will be based on our
share of certain defined

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telecommunications end-user revenues. Currently, the FCC is assessing such
payments on the basis of a provider's revenue for the previous year. Various
states are also in the process of implementing their own universal service
programs. We are currently unable to quantify the amount of subsidy payments
that we will be required to make and the effect that these required payments
will have on our financial condition. Moreover, the FCC's universal service
rules remain subject to judicial appeal and further FCC review. Additional
changes to the universal service program could increase our costs.

On November 1, 1996, the FCC issued an order that required nondominant
interexchange carriers, like us, to cease filing tariffs for our domestic
interexchange services. The order required mandatory detariffing and gave
carriers nine months to withdraw federal tariffs and move to contractual
relationships with their customers. This order subsequently was stayed by a
federal appeals court, and it is unclear at this time whether the detariffing
order will be implemented. In June 1997, the FCC issued another order stating
that non-dominant local exchange carriers, like us, could withdraw their
tariffs for interstate access services provided to long distance carriers. The
FCC continues to require that carriers obtain authority to provide service
between the United States and foreign points and file tariffs for international
service. If the FCC's orders become effective, nondominant interstate services
providers will no longer be able to rely on the filing of tariffs with the FCC
as a means of providing notice to customers of prices, terms and conditions
under which they offer their interstate services. If we cancel our FCC tariffs
as a result of the FCC's orders, we will need to implement replacement
contracts which could result in substantial administrative expenses.

In March 1999, the FCC adopted further rules that, while still maintaining
mandatory detariffing, nonetheless require long distance carriers to make
specific public disclosures on the carriers' Internet websites of their rates,
terms and conditions for domestic interstate services. The effective date for
these rules is also delayed until a court decision on the appeal of the FCC's
detariffing order.

Recently, the FCC has determined that both dedicated access and dial-up
calls from a customer to an Internet service provider are interstate, not
local, calls, and, therefore, are subject to the FCC's jurisdiction. The FCC
has initiated a proceeding to determine the effect that this regulatory
classification will have on the obligation of a local exchange carrier to pay
reciprocal compensation for dial-up calls to internet service providers that
originate on one local exchange carrier network and terminate on another local
exchange carrier network. Moreover, several states are considering this issue,
and one state has held that local exchange carriers do not need to pay
reciprocal compensation for calls terminating at internet service providers. In
addition, one RBOC has petitioned the FCC for a ruling that telephone-to-
telephone calls made over the Internet are subject to regulation as a
telecommunications service under the Communications Act. Although the FCC has
suggested that such Internet-based telephone-to-telephone calls may be
considered a telecommunications service, it has not reached a final decision on
that issue. We cannot predict the effect that the FCC's resolution of these
issues will have on our business.

In August 1997, the FCC issued rules transferring responsibility for
administering and assigning local telephone numbers from the RBOCs and a few
other local exchange carriers to a neutral entity in each geographic region in
the United States. In August 1996, the FCC issued new numbering regulations
that prohibit states from creating new area codes that could unfairly hinder
competitive local exchange carriers by requiring their customers to use 10
digit dialing while existing independent local exchange carrier customers use 7
digit dialing. These regulations also prohibit incumbent local exchange
carriers which are still administering central office numbers pending selection
of the neutral administrator from charging "code opening" fees to competitors
unless they charge the same fee to all carriers including themselves. In
addition, each carrier is required to contribute to the cost of numbering
administration through a formula based on net telecommunications revenues. In
July 1996, the FCC released rules requiring all local exchange carriers to have
the capability to permit both residential and business consumers to retain
their telephone numbers when switching from one local service provider to
another, known as "number portability." In May 1999, the FCC initiated a
proceeding to address the problem of the declining availability of area codes
and phone numbers. We cannot predict the outcome or the effects of the FCC's
resolution of this issue.

A customer's choice of local or long distance telecommunications company is
encoded in a customer record, which is used to route the customer's calls so
that the customer is served and billed by the desired

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<PAGE>

company. A user may change service providers at any time, but the FCC and some
states regulate this process and require that specific procedures be followed.
When these procedures are not followed, particularly if the change is
unauthorized or fraudulent, the process is known as "slamming." Slamming is
such a significant problem that it was addressed in detail by Congress in the
Telecommunications Act, by some state legislatures, and by the FCC in recent
orders. The FCC has levied substantial fines for slamming. The risk of
financial damage and business reputation from slamming is significant. Even one
slamming complaint could cause extensive litigation expenses for us. The FCC
recently decided to apply its slamming rules (which originally covered only
long distance) to local service as well.

State Regulation

To the extent that we provide telecommunications services which originate
and terminate in the same state, we are subject to the jurisdiction of that
state's public service commission. As our local service business and product
lines expand, we will offer more intrastate service and become increasingly
subject to state regulation. The Telecommunications Act maintains the authority
of individual state utility commissions to preside over rate and other
proceedings, as discussed above, and impose their own regulation of local
exchange and interexchange services so long as such regulation is not
inconsistent with the requirements of the Telecommunications Act. For instance,
states may impose tariff and filing requirements, consumer protection measures
and obligations to contribute to universal service, and other funds.

We are subject to requirements in some states to obtain prior approval for,
or notify the state commission of, any transfers of control, sales of assets,
corporate reorganizations, issuances of stock or debt instruments and related
transactions. Although we believe such authorizations could be obtained in due
course, there can be no assurance that the FCC or state commissions would grant
us authority to complete any of these transactions.

We have state regulatory authority to provide competitive local exchange
services and interexchange services in nine states. We also have state
regulatory authority to provide interexchange services in approximately 31
additional states. In some states, in which we have or have had de minimis
intrastate interexchange revenues, we have not obtained authorization to
provide such interexchange services or have allowed such authorization to
lapse. We have either subsequently obtained, or are in the process of applying
to obtain, the appropriate authorization in these states.

The Telecommunications Act generally preempts state statutes and regulations
that restrict the provision of competitive local services. States, however, may
still restrict competition in some rural areas. As a result of this preemption,
we will be free to provide the full range of local, long distance, and data
services in any state. While this action greatly increases our potential for
growth, it also increases the amount of competition to which we may be subject.

Local Government Regulation

We may be required to obtain from municipal authorities street opening and
construction permits to install our facilities in some cities. In some of the
areas where we provide service, we are subject to municipal franchise
requirements requiring us to pay license or franchise fees either on a
percentage of gross revenue, flat fee or other basis. The Telecommunications
Act requires municipalities to charge nondiscriminatory fees to all
telecommunications providers, but it is uncertain how quickly this requirement
will be implemented by particular municipalities in which we operate or plan to
operate or whether it will be implemented without a legal challenge.

Properties

Our headquarters and technology center are located in leased space in
Waltham, Massachusetts. We have a back-up network operations center in
Springfield, Massachusetts. We also lease offices in eight states. Although we
believe that our leased facilities are adequate at this time, we expect to
lease a significant number of additional sales facilities in connection with
our planned expansion in existing markets and into new markets.

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<PAGE>

Legal Proceedings

In December 1997, we terminated our agency contract and filed suit against
Bell Atlantic for, among other things, breach of contract, including the
failure of Bell Atlantic's retail division to pay agency commissions owed to
us. This litigation was settled on February 24, 1999. Under the terms of the
settlement, we will receive cash and other consideration. Both parties have
agreed to keep the specific terms of the settlement confidential.

Employees

As of June 17, 1999, we employed 394 persons. None of our employees are
represented by a collective bargaining agreement.

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Management

Executive Officers, Directors and Significant Employees

Our executive officers and directors, and their ages as of June 17, 1999,
are as follows:

<TABLE>
<CAPTION>
Name Age Current Office Held
---- --- -------------------
<C> <C> <S>
Robert J. Fabbricatore.. 56 Chairman and Chief Executive Officer
Steven P. Milton........ 45 President and Chief Operating Officer
John D. Pittenger....... 45 Executive Vice President, Chief Financial Officer
and Treasurer
David E. Mahan.......... 57 Vice President--Marketing and Strategic Planning
Michael H. Donnellan.... 45 Vice President--Operations
Thomas Fabbricatore..... 40 Vice President--Marketing
Anthony D. Vermette..... 38 Vice President--Sales
Frederick Kunzi......... 47 Vice President and Chief Technology Officer
Jeffrey C. Lavin........ 43 Vice President--Corporate Development
Katherine D. Courage.... 41 Director
Henry Hermann........... 57 Director
Kevin J. Maroni......... 36 Director
J. Richard Murphy....... 55 Director
Robert A. Nicholson..... 31 Director
Carl Redfield........... 51 Director
Richard J. Santagati.... 55 Director
Ralph C. Sillari........ 44 Director
Ralph S. Troupe......... 38 Director
</TABLE>

Robert J. Fabbricatore, a founder of CTC and a director since its inception
in 1980, became Chairman of the Board of Directors in March 1983 and served as
President from October 1993 to August 1995. Robert J. Fabbricatore is the
brother of Thomas Fabbricatore, Vice President--Marketing.

Steven P. Milton has been employed by CTC since 1984 and has served as
President and Chief Operating Officer since August 1995. Prior to that, he held
various positions within CTC including Branch Manager, District Manager,
Regional Manager and Vice President--Sales and Marketing.

John D. Pittenger has served as Chief Financial Officer since April 14,
1999, as Executive Vice President--Finance and Administration since April 1998
and as Treasurer and Clerk of CTC since August 1989. Mr. Pittenger served as
Vice President--Finance from 1991 until April 1998, and as Chief Financial
Officer from 1989 to April 1998.

David E. Mahan joined CTC in October 1995 as Vice President--Marketing and
Strategic Planning. Prior to joining CTC, Mr. Mahan held a number of senior
management level positions with NYNEX, including Vice President--Sales Channel
Management from 1993 to 1995.

Michael H. Donnellan has been employed by CTC since 1988 in a number of
positions. He was named Vice President--Operations in 1995.

Thomas Fabbricatore joined CTC in 1982. He was named Vice President--
Regulatory and Electronic Media in 1991, and was named Vice President--
Marketing in November 1998. Thomas Fabbricatore is the brother of Robert J.
Fabbricatore.

Anthony D. Vermette has been employed by CTC in a variety of positions since
1987. Mr. Vermette was named Vice President--Sales in 1996.

Frederick Kunzi joined CTC as a Vice President and Chief Technology Officer
in September 1998. Mr. Kunzi has over 25 years experience in information
technology. From 1985 to September 1998, he was employed by Digital Equipment
Corporation, most recently as Senior Manager, Global Network Services where he
was responsible for Digital's worldwide enterprise network infrastructure.

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<PAGE>

Jeffrey C. Lavin joined CTC in June 1998 as Vice President--Corporate
Development. Mr. Lavin has 19 years of sales and operational management
experience in the telecommunications industry. From December 1996 to May 1998,
Mr. Lavin was Vice President of Sales, Americas/Asia Pacific for NovaSoft
Systems, Inc., a software development corporation. From 1979 to 1996, Mr. Lavin
was employed by Comlink Incorporated, a communication network integrator, most
recently as Senior Vice President. Following the acquisition of Comlink in 1996
by Williams Communications, Mr. Lavin served as Vice President and General
Manager of Network Systems Integration.

Katherine D. Courage became a director of CTC in April 1999. Ms. Courage is
a Managing Director in the Global Telecommunications and Media Group in the
Investment Banking Department of Credit Suisse First Boston, one of the
underwriters of this offering. Prior to joining Credit Suisse First Boston in
September 1996, Ms. Courage worked at Salomon Brothers Inc for ten years where
she was a managing director in the Global Telecommunications Group. Ms. Courage
also worked at Merrill Lynch & Co. in the corporate finance department. Ms.
Courage currently serves as a director of NorthEast Optic Network, Inc. and
Lightpath Technologies, Inc.

Henry Hermann became a director of CTC in September 1996. Since November
1997, he has operated Hermann Companies, a financial services company. Mr.
Hermann is registered as an Investment Advisor with the State of Texas, a
Chartered Financial Analyst and, as an independent contractor, offers general
securities through SWS Financial. In 1997, he was employed by Kuhns Brothers &
Company, Inc., as a principal and Executive Vice President. For the previous
nine years, he was employed by WR Lazard, Laidlaw and Luther, Inc., a
securities brokerage firm, as Vice President, Securities Analyst and Portfolio
Manager. Mr. Hermann has been an NASD Board of Arbitrators Member since 1991.

Kevin J. Maroni became a director of CTC in April 1998 as one of the two
designees of the Series A preferred stockholders. Mr. Maroni is a general
partner of Spectrum which he joined in 1994. Spectrum is a leading private
equity fund which manages $1 billion of capital for investment in the
communications and media industries. Prior to joining Spectrum, he worked at
Time Warner Telecommunications and Harvard Management Company. Mr. Maroni is a
director of PathNet, Inc., Formus Communications, Inc., WNP Communications,
Inc. and American Cellular Corp.

J. Richard Murphy became a director of CTC in August 1995. Mr. Murphy has
been the director of the Corporate Advisory Group of Moody, Cavanaugh and
Company, LLP, a North Andover, Massachusetts public accounting firm, since
April 1996. Mr. Murphy was an officer, director and principal stockholder from
1990 to 1995 of Arlington Data Corporation, a systems integration company
located in Amesbury, Massachusetts; from 1992 to 1996 of Arlington Data
Consultants, Inc., a company engaged in the installation and maintenance of
computer systems and hardware; and from 1994 to 1996 of Computer Emporium,
Inc., a company engaged in processing parking violations for municipalities. In
June 1996, Arlington Data Corporation filed for bankruptcy under Chapter 11 of
the U.S. Bankruptcy Code.

Robert A. Nicholson is one of the two designees of the Series A preferred
stockholders and became a director of CTC in November 1998. Mr. Nicholson
joined Spectrum in 1995 as a Vice President and became a partner in July 1998.
From 1990 to 1993, Mr. Nicholson was an Associate Consultant and then
Consultant at Bain & Company, a leading strategy consulting firm, where he was
responsible for strategy and operations projects in the communications
industry. Mr. Nicholson currently serves as a Director of Navitar
Communications Group, Inc., a Canadian competitive local exchange carrier.

Carl Redfield became a director of CTC in January 1999. He has been Senior
Vice President, Manufacturing and Logistics of Cisco since February 1997. From
September 1993 to February 1997 he was Vice President of Manufacturing. Mr.
Redfield also is a director of VA Research Inc. and Paragon Electronics Inc.

Richard J. Santagati became a director of CTC in September 1991. He has been
the President of Merrimack College in North Andover, Massachusetts since 1994.
From March 1992 to February 1994,

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<PAGE>

Mr. Santagati was the Chairman of the Board, Chief Executive Officer and
President of Artel Communications Corp., a publicly held data communications
firm located in Hudson, Massachusetts. Mr. Santagati also serves as a director
of Celerity Solutions, Inc., a software company.

Ralph C. Sillari became a director of CTC in October 1997. Since 1991, Mr.
Sillari has been employed by Fleet National Bank where he is currently an
Executive Vice President in the Business and Entrepreneurial Services Division.

Ralph S. Troupe became a director of CTC in May 1999. Since January 1993,
Mr. Troupe has been employed by International Network Services, where he is
currently Vice President of North American Field Operations, East.

We currently have ten members on our board of directors: three Class I
Directors (Messrs. Hermann, Sillari and Redfield), three Class II Directors
(Messrs. Murphy and Santagati and Ms. Courage) and four Class III Directors
(Messrs. Fabbricatore, Maroni, Nicholson and Troupe). The terms of the Class I,
Class II and Class III directors expire upon the election and qualification of
their successors at the annual meetings of stockholders held following the end
of fiscal years 2001, 1999 and 2000, respectively.

Director Compensation

Non-employee directors receive an annual retainer of $10,000. On February
17, 1999, we granted Messrs. Sillari, Murphy and Hermann options to purchase
10,000 shares of our common stock. We also granted Messrs. Nicholson, Maroni
and Santagati options to purchase 20,000 shares of our common stock. All of the
above options were at a purchase price of $10.125 per share. At the same time
we granted Robert Fabbricatore options to purchase 50,000 shares of our common
stock at a purchase price of $11.1375, 50,000 shares at a purchase price of
$15.00 per share and 50,000 shares at a purchase price of $20.00 per share. On
January 19, 1999, we granted Mr. Redfield an option to purchase 40,000 shares
of our common stock at a purchase price of $11.25 per share. On April 5, 1999,
we granted Ms. Courage an option to purchase 40,000 shares of our common stock
at a purchase price of $12.375 per share. On May 5, 1999, we granted Mr. Troupe
an option to purchase 25,000 shares of common stock at a purchase price of
$18.875 per share.

Committees of the Board of Directors

Our board of directors has established an audit committee, a compensation
committee and a nominating committee.

The audit committee consists of Messrs. Murphy and Hermann. The audit
committee is responsible for reviewing the internal accounting controls of CTC,
meeting and conferring with our independent auditors and reviewing the results
of the accountants' auditing engagement.

The compensation committee consists of Messrs. Maroni, Santagati and Murphy.
The compensation committee establishes compensation and benefits for our senior
executives. The committee also determines the number and terms of stock options
granted to employees, directors and consultants under our stock option plans.

The nominating committee consists of Messrs. Santagati, Murphy and Sillari.
The nominating committee recommends candidates for nomination to the board of
directors. The committee also reviews and makes recommendations regarding
compensation for non-employee directors.

Voting Agreement

Pursuant to a voting agreement between Robert J. Fabbricatore and some of
his affiliates and Spectrum, Mr. Fabbricatore and these affiliates agreed to
vote at each annual or special meeting at which directors of CTC are to be
elected all of the shares of common stock held by them in favor of two persons
designated by a

37
<PAGE>

majority of the outstanding shares of Series A preferred stock as nominees for
directors, subject to certain limitations based on the number of shares of
Series A preferred stock outstanding at any time. As of June 17, 1999, Spectrum
owned 657,555 of the 666,666 shares, or 98.6%, of the Series A preferred stock
outstanding. Kevin J. Maroni and Robert A. Nicholson, partners of Spectrum and
designees of the Series A preferred stockholders, are Class III directors of
CTC.

Executive Compensation

The following table provides summary information concerning compensation of
our Chief Executive Officer and each of the four other most highly paid
executive officers (the "Named Executive Officers") during the fiscal year
ended March 31, 1999:

Summary Compensation Table

<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------- ---------------------------
Fiscal Securities
Year Ended Annual Underlying All Other
March 31, Salary Bonus Options (#)(1) Compensation
---------- ---------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Robert J.
Fabbricatore,.......... 1999 $ 240,000 $ 78,000 150,000 $20,900(/2/)
Chairman and Chief 1998 240,000 60,000 150,000 19,550(/2/)
Executive Officer 1997 240,000 60,000 -- 18,075(/2/)
Steven C. Jones,........ 1999 150,000 75,000 -- 3,375(/3/)
Executive Vice President, 1998 12,500 -- 300,000 --
Chief Financial Officer 1997 -- -- -- --
and Director of
Corporate
Development(/4/)
Steven P. Milton,....... 1999 150,000 54,500 100,000 5,625(/3/)
President and Chief.... 1998 100,000 40,000 150,000 4,200(/3/)
Operating Officer...... 1997 100,000 40,000 -- 4,075(/3/)

David E. Mahan,......... 1999 110,000 52,000 20,000 4,440(/3/)
Vice President-- 1998 100,000 40,000 260,000 4,075(/3/)
Marketing and Strategic 1997 100,000 40,000 -- 4,075(/3/)
Planning

John D. Pittenger,...... 1999 100,000 62,000 36,000 4,860(/3/)
Executive Vice 1998 90,000 36,000 80,000 3,900(/3/)
President-- 1997 86,100 34,000 -- 3,437(/3/)
Finance and
Administration,
Treasurer and Clerk
</TABLE>
- --------
(1) On March 20, 1998 we repriced all previously granted options that had an
exercise price in excess of $7.19 per share. The 1998 information includes
75,000, 75,000, 130,000 and 40,000 shares underlying options previously
granted to Messrs. Fabbricatore, Milton, Mahan and Pittenger that were
canceled as a result of the repricing.
(2) Includes 50% matching contributions in the amounts of $4,800, $4,750 and
$4,500 in 1999, 1998 and 1997 to the CTC Communications Corp. 401(k)
Savings Plan. Also included is the actuarial benefit on the "split-dollar"
life insurance policy for the benefit of Mr. Fabbricatore in the amounts of
$16,100, $14,800 and $13,575 in 1999, 1998 and 1997.
(3) Includes 50% matching contributions to the CTC Communications Corp. 401(k)
Savings Plan.
(4) Mr. Jones began working for CTC on February 27, 1998 and resigned on April
21, 1999. Does not include $135,879 of severance benefits that we paid to
Mr. Jones after March 31, 1999.

38
<PAGE>

Option Grants in Last Fiscal Year

The following table sets forth the aggregate number of stock options granted
to each of the Named Executive Officers during the fiscal year ended March 31,
1999. Options are exercisable for our common stock. No options were granted to
Mr. Jones in the last fiscal year.

<TABLE>
<CAPTION>
Potential Realizable
Number of Percent of Value at Assumed
Securities Total Options Annual Rate of
Underlying Granted to Exercise Stock Price
Options Employees in Price Expiration Appreciation for
Granted (#) Fiscal Year ($/Share) Date Option Term
----------- ------------- --------- ---------- ----------------------
5% 10%
---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Fabbricatore.. 50,000 4.2% 20.00 2/17/2003 (353,882) (184,679)
50,000 4.2% 15.00 2/17/2003 (103,882) 65,321
50,000 4.2% 11.138 2/17/2003 89,243 258,446
Steven P. Milton........ 33,000 3% 20.00 2/17/2003 (233,562) (122,996)
33,000 3% 15.00 2/17/2003 (68,562) 43,112
34,000 3% 10.125 2/17/2003 95,110 210,168
David E. Mahan.......... 20,000 2% 10.125 2/17/2003 55,947 123,628
John D. Pittenger....... 36,000 3% 10.125 2/17/2003 100,705 222,531
</TABLE>

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The following table sets forth information concerning the exercise of
options by the Named Executive Officers during the fiscal year ended March 31,
1999 and the March 31, 1999 aggregate value of unexercised options held by each
of the Named Executive Officers.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options
Options at Fiscal at Fiscal Year End ($)
Year-End (#)(1) (1)(2)
Shares ----------------------- -----------------------
acquired on Value Exercisable/ Exercisable/
exercise(#) Realized ($) Unexercisable Unexercisable
----------- ------------ ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Fabbricatore.. -- -- 89,806 168,750 445,384 266,625
Steven C. Jones(/3/).... -- -- 150,000 150,000 796,875 796,875
Steven P. Milton........ -- -- 79,750 131,250 501,482 312,019
David E. Mahan.......... -- -- 100,000 100,000 605,265 474,645
John D. Pittenger....... -- -- 58,000 57,000 420,096 216,360
</TABLE>
- --------
(1) All shares and amounts, as necessary, have been adjusted to reflect the 25%
common stock dividend effected in March 1995, the three-for-two stock split
effected in July 1995 and the two-for-one stock split effected in October
1995.
(2) Assumes a fair market value of the Common Stock at March 31, 1999 of
$12.375 per share.

(3) In connection with Mr. Jones' resignation in April 1999, we vested an
additional 37,500 options and extended the exercise period of his vested
options until April 21, 2004.

39
<PAGE>

Principal and Selling Stockholders

Common Stock

The following table sets forth information as of June 17, 1999 with respect
to the beneficial ownership of our common stock by:

. each person known by us to beneficially own more than 5% of the
outstanding shares of our common stock;

. our directors and our Named Executive Officers;

. all executive officers and directors as a group; and

. each selling stockholder.

Fleet National Bank is selling 100,000 shares of common stock in the
offering and Goldman, Sachs & Co. is selling 200,000 shares of common stock in
the offering.

The following table assumes the issuance of 300,000 shares of common stock
on exercise of warrants which selling stockholders have indicated to us they
will exercise in order to acquire the shares they are selling in this offering.
Based on the information furnished by the beneficial owners of the common stock
listed below, we believe that each such stockholder exercises sole voting and
investment power with respect to the shares beneficially owned.

<TABLE>
<CAPTION>
Beneficial Ownership
--------------------
Before the After the
Name Number Offering Offering
---- --------- ---------- ---------
<S> <C> <C> <C>
Robert J. Fabbricatore(/1/)...................... 2,830,870 27.0% 20.2%
Spectrum Equity Investors II, L.P.(/2/).......... 1,646,902 13.7% 10.6%
Kevin J. Maroni(/2/)(/3/)........................ 1,646,902 13.7% 10.6%
Robert A. Nicholson(/2/)(/4/).................... 1,652,994 13.7% 10.6%
Fleet National Bank(5)........................... 311,812 2.9% 1.5%
Goldman, Sachs & Co.(/6/)........................ 662,600 6.0% 3.2%
Henry Hermann(/7/)............................... 225,755 2.2% 1.6%
Richard J. Santagati(/8/)........................ 96,000 * *
Carl Redfield(/9/)............................... 24,000 * *
J. Richard Murphy(/10/).......................... 25,167 * *
Ralph C. Sillari(/11/)........................... 6,334 * *
Katherine D. Courage(/12/)....................... 10,000 * *
Steven P. Milton(/13/)........................... 489,432 4.7% 3.5%
David E. Mahan(/14/)............................. 187,100 1.8% 1.3%
John D. Pittenger(/15/).......................... 263,588 2.5% 1.9%
Steven C. Jones(/16/)............................ 237,500 2.2% 1.7%
Ralph S. Troupe(/17/)............................ 6,250 * *
All directors and executive
officers as a group (13 persons)(/18/).......... 6,378,536 53.4% 41.6%
</TABLE>
- --------
* Less than 1%.

(1) Includes 62,498 shares owned by Mr. Fabbricatore as trustee of a trust for
his children and 1,133,239 shares as a general partner of a family
partnership; also includes 108,556 shares issuable upon exercise of
options exercisable within 60 days of June 17, 1999. Mr. Fabbricatore's
address is c/o CTC Communications Corp., 360 Second Avenue, Waltham,
Massachusetts 02451.

(2) Includes 187,066 shares issuable upon the exercise of warrants exercisable
within 60 days of June 17, 1999 and 1,480,063 shares issuable upon
conversion of Series A preferred stock as of June 17, 1999. As partners of
Spectrum Equity Investors II, L.P., Mr. Maroni, Mr. Nicholson, William
Collatos and Brion B. Applegate may be deemed to be beneficial owners of
the shares owned by Spectrum. The address of Spectrum and its partners is
One International Place, 29th Floor, Boston, Massachusetts 02110.

40
<PAGE>

(3) Includes 5,000 shares issuable to Mr. Maroni upon the exercise of options
exercisable within 60 days of June 17, 1999.

(4) Includes 83 shares issuable to Mr. Nicholson upon the exercise of warrants
and 5,000 shares issuable upon the exercise of options exercisable within
60 days of June 17, 1999, and 926 shares issuable upon conversion of
Series A preferred stock as of June 17, 1999.

(5) Consists of 311,812 shares issuable upon exercise of a warrant exercisable
within 60 days of June 17, 1999. The address of Fleet National Bank is One
Federal Street, Boston, MA 02110. Fleet is selling 100,000 shares in the
offering. After the offering Fleet will beneficially own warrants to
purchase 211,812 shares or 1.5% of our common stock.

(6) Consists of 662,600 shares issuable upon exercise of a warrant exercisable
within 60 days of June 17, 1999. The address of Goldman, Sachs & Co. is 85
Broad St., New York, NY 10004. Goldman Sachs is selling 200,000 shares in
the offering. After the offering Goldman Sachs will beneficially own
warrants to purchase 462,600 shares or 3.2% of our common stock.

(7) Includes 9,750 shares held by Mr. Hermann's spouse and 20,167 shares
issuable upon the exercise of options exercisable within 60 days of June
17, 1999.

(8) Includes 21,000 shares issuable to Mr. Santagati upon the exercise of
options exercisable within 60 days of June 17, 1999.

(9) Includes 10,000 shares issuable to Mr. Redfield upon the exercise of
options exercisable within 60 days of June 17, 1999.

(10) Includes 24,167 shares issuable to Mr. Murphy upon the exercise of options
exercisable within 60 days of June 17, 1999.

(11) Includes 5,834 shares issuable to Mr. Sillari upon the exercise of options
exercisable within 60 days of June 17, 1999.

(12) Consists of 10,000 shares issuable to Ms. Courage upon the exercise of
options exercisable within 60 days of June 17, 1999.

(13) Includes 4,500 shares owned by Mr. Milton as trustee of a trust for his
children and 98,500 shares issuable upon the exercise of options
exercisable within 60 days of June 17, 1999.

(14) Includes 120,000 shares issuable to Mr. Mahan upon the exercise of options
exercisable within 60 days of June 17, 1999.

(15) Includes 65,000 shares issuable to Mr. Pittenger upon the exercise of
options exercisable within 60 days of June 17, 1999.

(16) Includes 187,500 shares issuable to Mr. Jones upon the exercise of options
exercisable within 60 days of June 17, 1999.

(17) Includes 6,250 shares issuable to Mr. Troupe upon the exercise of options
exercisable within 60 days of June 17, 1999.

(18) Represents directors and executive officers as of June 17, 1999 and
includes the shares described in footnotes (1) through (4), and (7)
through (15), and (17) above.

Preferred Stock

As of June 17, 1999, Spectrum Equity Investors II, L.P., owned 657,555
shares, or 98.6%, of the Series A preferred stock outstanding.

41
<PAGE>

Certain Relationships and Related Transactions

We lease office space from a trust of which Robert J. Fabbricatore, our
Chairman and Chief Executive Officer, is a beneficiary. Until March 1, 1999 we
also leased office space from another trust of which Robert J. Fabbricatore is
a beneficiary. Rental payments under the leases totaled approximately $392,000
for the last three fiscal years. We also sublease space at our cost to Comm-
Tract Corp., a company in which Mr. Fabbricatore is a principal stockholder.
Sublease income totaled $306,125 for the last three fiscal years. We also
contract with Comm-Tract Corp. for the installation of telephone lines and for
the service and maintenance of equipment marketed by CTC. During the last three
fiscal years, Comm-Tract Corp. provided us with services, inventory and
equipment totaling $829,481. We believe that the payments to the trusts and
Comm-Tract Corp. are comparable to the costs for such services, inventory and
equipment, and for rentals of similar facilities, which we would be required to
pay to unaffiliated individuals in arms-length transactions.

Carl Redfield, one of our directors, is an executive officer of Cisco. We
have purchased, and expect to continue purchasing, most of our network
equipment from Cisco. Also, we have entered into a vendor facility with Cisco
Capital, an affiliate of Cisco. See "Description of Senior Secured Facilities."

Ralph Sillari, one of our directors, is an Executive Vice President of Fleet
National Bank. We have entered into a senior secured credit facility with Fleet
National Bank. See "Description of Senior Secured Facilities."

Katherine D. Courage, one of our directors, is a Managing Director of Credit
Suisse First Boston, one of the underwriters of this offering. Ms. Courage is
also a director of NorthEast Optic Network. We have commitments with NorthEast
Optic Network for the provision of leased transmission facilities.

Ralph S. Troupe, who became a director in May 1999, is Vice President of
North American Field Operations, East at International Network Services, or
INS. We have engaged INS to design, engineer and buildout our network in our
existing markets. We have outstanding commitments to INS of approximately
$1 million.

Goldman Sachs and Fleet National Bank are the selling stockholders in this
offering. Goldman Sachs is a beneficial owner of more than five percent of our
common stock. Goldman Sachs Credit Partners, L.P., an affiliate of Goldman
Sachs, and Fleet National Bank are both lenders under our senior secured credit
facility. See "Description of Senior Secured Facilities."

Description of Senior Secured Facilities

Fleet/Goldman Credit Facility

As of September 1, 1998, we entered into a senior secured credit facility
with Goldman Sachs Credit Partners, L.P., or GSCP, and Fleet National Bank, or
Fleet. GSCP and Fleet provided us with a three-year senior secured credit
facility consisting of revolving loans in the aggregate amount of up to $75
million. Advances under the facility bear interest at 1.75% over the prime
rate. Advances under the facility are secured by a first priority perfected
security interest on all of our assets, except that we have the ability to
exclude assets we acquire through purchase money financing. In addition, we are
required to pay a commitment fee of 0.5% per annum on any unused amounts under
the facility. We are also required to pay a monthly line fee of $150,000 per
month. In connection with this credit facility we issued to Goldman Sachs & Co.
warrants to purchase 662,600 shares of our common stock and to Fleet National
Bank warrants to purchase 311,812 shares of our common stock. We may borrow $15
million unconditionally and $60 million based on trailing 120 days accounts
receivable collections, reducing to the trailing 90 days of collections by
March 31, 2000. If we wish to prepay the loan during the first 18 months we
must pay a prepayment penalty of 2% of the aggregate amount of the facility. As
of March 31, 1999, we had borrowed $36,145,000 under this credit facility.

Under this credit facility, we have agreed, among other things, to maintain
minimum quarterly net revenues, to achieve minimum EBITDA targets for rolling
six-month periods measured at the end of each fiscal quarter and to achieve a
minimum quarterly target of provisioned ALEs.

42
<PAGE>

We have also agreed that we will not, without the prior written consent of
the lenders, with various exceptions:

. create, incur or assume any secured indebtedness,

. create, incur or assume any liens,

. enter into any merger, consolidation, reorganization, recapitalization
or reclassification of our stock,

. sell, lease, assign, transfer or otherwise dispose of any of our assets,

. declare or pay any cash dividends or purchase, acquire or redeem any of
our stock,

. make, acquire or incur any liabilities in connection with the
acquisition of any entity or the acquisition of all or substantially all
of the assets of any entity,

. make capital expenditures in excess of $32 million for the period from
September 1, 1998 to March 31, 2000 and $87 million for the period from
April 1, 2000 through September 1, 2001.

Events of default under this credit facility include:

. failure to make payments on the loan,

. failure to observe various covenants,

. insolvency proceedings,

. the filing of any governmental liens in an amount exceeding $2 million,

. the filing of any judgment liens in an amount exceeding $2 million,

. default on a material agreement with obligations exceeding $2 million,

. payment of any subordinated indebtedness, except as specifically
permitted,

. any material misrepresentation or misstatement in any warranty or
representation,

. the limitation or termination of any guaranty, or

. the occurrence of a change of control, except in connection with the
reorganization.

Cisco Capital Vendor Facility

On October 14, 1998, we entered into a three-year vendor facility for up to
$25 million with Cisco Capital. We have agreed to a three year, $25 million
total volume purchase commitment of Cisco equipment and services. Cisco Capital
has agreed to advance funds as these purchases occur. We can also use the
facility for working capital costs associated with the integration and
operation of Cisco solutions and related peripherals.

Under the terms of the vendor facility and an intercreditor agreement
between Cisco Capital and GSCP, we have agreed to give Cisco Capital a senior
security interest in all products Cisco provides to us or other products
purchased with the proceeds of the first $15 million advanced under the
facility and a subordinate security interest in all of our other assets. We are
required to repay 5% of the outstanding amount of the first $15 million of
indebtedness advanced under the facility at the end of each of the ninth, tenth
and eleventh quarterly periods during the term of the facility. We are required
to pay interest on funds advanced under the facility at an annual rate of
12.5%. In addition to other amounts, we are also required to pay a commitment
fee of .50% per annum on any unused amounts under the facility.

This vendor facility limits or restricts, except as permitted under our
senior secured credit facility and other than other various exceptions, our
ability to: merge with or acquire all of the assets of any entity; sell or
dispose of assets; purchase or otherwise acquire the capital stock or assets of
any person, or extend any credit to any person; declare or pay any cash
dividends; or redeem or purchase any capital stock.

This vendor facility also limits or restricts, among other things, our
ability to: incur additional indebtedness; amend, modify or waive some
provisions of our senior secured facility; voluntarily repay any subordinated
debt; or amend or modify any document or instrument governing subordinated
debt. Events of default under the vendor facility include:

. failure to make payments on the loan,

43
<PAGE>

. any representation or warranty is incorrect when made or deemed made,

. failure to perform or observe our covenants,

. insolvency proceedings,

. failure to pay any amounts due or observe any covenants under our senior
secured facility or other indebtedness in an amount over $2 million
which failure results in the acceleration of such indebtedness,

. failure to pay under, or be in breach of, any other agreement with
Cisco, Cisco Capital, or their subsidiaries,

. failure of any guarantor to perform or observe any covenant contained in
any guaranty,

. any event of default in any other loan documents as defined therein,

. revocation of any consent, authorization or other approval necessary to
enable us to borrow under the vendor facility,

. the occurrence of a change of control, as defined therein,

. any payment of indebtedness subordinated to the vendor facility, except
as expressly permitted,

. the entrance of various judgments against us.

Holding Company Reorganization

Shortly after the closing of this offering, we expect to complete a
reorganization into a holding company structure. We are a Massachusetts
corporation. As a result of the reorganization, we will become a wholly owned
subsidiary of CTC Communications Group, a Delaware corporation. CTC
Communications Group was formed by us for this purpose and has no other
business. We will complete the merger by causing CTC-Newco, a subsidiary of CTC
Communications Group organized for this purpose, to merge into us. All of our
issued and outstanding common and preferred stock, including the common stock
offered by this prospectus, will be converted into the same number of shares of
common and preferred stock of CTC Communications Group. CTC Communications
Group's business will initially consist of owning all of our common stock. We
will continue to carry on our existing business. Our directors and some
executive officers will continue as directors and executive officers of CTC
Communications Group. Following the reorganization, CTC Communications Group
will pledge our shares to the lenders under the credit facility with GSCP and
Fleet.

44
<PAGE>

Description of Capital Stock

The following summary describes the material terms of our capital stock.
However, you should refer to the actual terms of the capital stock contained in
our amended and restated articles of organization, the certificate of
designation for the Series A preferred stock, and our amended and restated by-
laws.

The authorized capital stock of the Company consists of 25,000,000 shares of
common stock and 1,000,000 shares of preferred stock. The common stock has a
par value of $.01 per share and the preferred stock has a par value of $1.00
per share. We have designated 666,666 shares of our preferred stock as Series A
convertible preferred stock.

As of June 17, 1999, there were 10,376,974 shares of our common stock
outstanding, and after the offering there will be 13,876,974 shares
outstanding. On that date our common stock was held by 497 stockholders of
record. As of June 17, 1999, options to purchase 3,615,809 shares of our common
stock were outstanding and warrants to purchase 1,288,071 shares of our common
stock were outstanding. Of these warrants, warrants to purchase 300,000 shares
are expected to be exercised by selling stockholders in connection with this
offering. As of June 17, 1999, 666,666 shares of our Series A preferred stock
were outstanding.

Common Stock

The holders of our common stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders. After the payment of any
required preferential amounts to the holders of any outstanding preferred
stock, holders of common stock are entitled to receive dividends that may be
declared by the board of directors. In the event of the liquidation,
dissolution or winding up of CTC, holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities and the payment of
any required preferential amounts to the holders of any outstanding preferred
stock. The common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock.

Preferred Stock

Each share of our Series A preferred stock accrues a dividend in an amount
equal to an annual rate of 9% of the $18.00 per share purchase price per annum
compounding every six months. This dividend is payable upon redemption,
liquidation or conversion of the Series A preferred stock. The holders of a
majority of the Series A preferred stock may elect to cause us to redeem the
Series A preferred stock after April 9, 2003. Upon any liquidation, dissolution
or winding up of CTC, holders of the Series A preferred stock will be entitled
to receive the payment of a preferential amount, before any distribution or
payment is made with respect to any junior class of our capital stock. The
preference amount payable for each share of our Series A preferred stock will
be an amount in cash equal to the greater of:

. the purchase price plus all accrued dividends through the date of
payment, or

. the purchase price plus all accrued dividends plus an acceleration of
the dividend due through April 9, 2003. Prior to any liquidation,
dissolution or winding up of CTC, the Series A preferred stock will
automatically convert into common stock if the liquidation amount is
less than the amount the holder of Series A preferred stock would have
received had the holder converted to common stock.

The Series A preferred stock can be converted into common stock. In
addition, we have the right to convert the Series A preferred stock. We can
convert the Series A convertible preferred stock prior to April 10, 2002, if
the trading price of our common stock is at least $27.00 for thirty consecutive
trading days. After April 10, 2002, we can convert the Series A convertible
preferred stock if the trading price of our common stock is at least $9.00 for
thirty consecutive trading days. On the date of issuance, the 666,666 shares of
Series A preferred stock were convertible into 1,333,332 shares of our common
stock. The number of shares of common stock into which the Series A preferred
stock can be converted increases by an amount equal to the

45
<PAGE>

accrued dividend divided by $9.00. The number of shares of common stock also
adjusts on some issuances of common stock, or securities convertible into or
exercisable for common stock, that would dilute the economic interest of the
holders of the Series A preferred stock. Holders of the Series A preferred
stock are entitled to a number of votes equal to the lesser of

. the whole number of shares of common stock they would receive if they
converted their Series A preferred stock plus the number of warrants
they hold that were issued with the preferred stock and

. the number of shares of Series A preferred stock they hold multiplied by
2.476.

For example, on June 17, 1999, the aggregate accrued dividend on the Series A
convertible preferred stock was $1,320,573. Dividing this accrued dividend by
$9.00 equals 146,730, or the number of additional shares of common stock
issuable upon conversion of the Series A convertible preferred stock. In
connection with the issuance of the Series A convertible preferred stock CTC
issued warrants to purchase an aggregate of 133,333 shares of its common stock.
The sum of the shares issuable on conversion of the Series A convertible
preferred stock, or 1,480,063, plus the 133,333 warrant issued with the Series
A convertible preferred stock is 1,613,396. Because this number is less than
666,666 multiplied by 2.476, the number of votes the holders of the Series A
convertible preferred stock are entitled to on June 17, 1999 is 1,613,396.
Except as required by law or the certificate of designation, the holders of
Series A preferred stock vote with the holders of the common stock as a single
class.

Our board of directors may issue the 333,334 shares of authorized but
unissued preferred stock from time to time in one or more series. The rights,
preferences, privileges and restrictions of the different series may be
determined by our board of directors without any further vote or action by the
stockholders. Accordingly, our board of directors, without stockholder
approval, can issue preferred stock with voting and conversion rights which
could adversely affect the voting power of the holders of common stock. The
issuance of preferred stock may have the effect of delaying, deferring or
preventing a change in control.

Registration Rights

Under the terms of a registration rights agreement with the purchasers of
the Series A preferred stock, those purchasers can request that we register
their sale of the shares of common stock issuable upon exercise of the warrants
or upon conversion of the Series A preferred stock under the Securities Act.
Toronto Dominion, Relational Funding Corporation, Goldman Sachs and Fleet have
similar registration rights under the terms of warrants we issued to them.

Certain Provisions of our Charter and Bylaws

Our charter and bylaws, and the charter and bylaws of CTC Communications
Group if the reorganization is completed, may prevent, discourage or delay any
change in the control of CTC or CTC Communications Group and may make it more
difficult to remove the board and management. Our and CTC Communications
Group's board has the authority to issue preferred stock with voting or other
rights or preferences that could impede the success of any attempt to effect a
change in control of CTC or CTC Communications Group. Our and CTC
Communications Group's bylaws provide for three classes of directors serving
for staggered three-year terms. Directors can be removed only for cause and
only by either a vote of not less than a majority of the total number of votes
of our outstanding capital stock entitled to elect directors, or by the vote of
a majority of the directors. These provisions could also impede the success of
any attempt to acquire control of CTC or CTC Communications Group.

Our and CTC Communications Group's bylaws establish procedures for
stockholders to nominate directors or bring other matters to a vote by our
stockholders at a meeting, including advance notice procedures. In general,
notice must be received at least 60 and no more than 90 days prior to the
meeting. This notice must contain specified information concerning the
stockholder submitting the proposal. Such procedures also authorize regulation
of the order of business and conduct of stockholder meetings, the authority of
the presiding

46
<PAGE>

officer and attendance at such meetings. These provisions can be amended only
by a majority of the directors or by a majority of votes of our outstanding
capital stock at a meeting held for the purpose of considering the amendment.
The provisions could make it more difficult for a third party to acquire
control of our or CTC Communications Group's board. In addition, these
provisions could make it more difficult for a third party to acquire, or
discourage a third party from attempting to acquire, a majority of our
outstanding voting stock and may make more difficult or discourage a takeover
of CTC or CTC Communications Group.

Massachusetts Anti-Takeover Laws

We are subject to the Massachusetts Business Combination Statute. This
statute prohibits a publicly-held Massachusetts corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the time of the transaction in which the person became an
interested stockholder, unless:

. prior to such time, the board of directors of the corporation approves
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder,

. upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owns at
least 90% of the outstanding voting stock (excluding shares held by
persons who are both directors and officers of the corporation and
employee stock plans), or

. on or after the consummation date, the business combination is approved
by the board of directors and by the affirmative vote of at least 66
2/3% of the outstanding voting stock that is not owned by the interested
stockholder.

A "business combination" generally includes a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholder, and
an "interested stockholder" is generally a person who, together with affiliates
and associates, owns, or within three years, owned, 5% or more of the
corporation's voting stock.

Our bylaws provide that Chapter 110D of the Massachusetts General Laws does
not apply to us. However, our board may in the future amend the bylaws to
become subject to the statute. In general, if Chapter 110D were applicable to
us, any person or entity that acquired 20% or more of our outstanding voting
stock could not vote that stock unless authorized by our other stockholders.

Our board is permitted under Massachusetts law to consider noneconomic
factors, such as employee welfare, suppliers, creditors, customers, the economy
of the state, region and nation, community and societal consideration and long-
term and short-term corporate and stockholder interests when considering
business combinations as defined in the Business Combination Statute.

Delaware Anti-Takeover Laws

If the reorganization is completed, CTC Communications Group will be subject
to Section 203 of the Delaware General Corporation Law. This statute will
prohibit us from engaging in a "business combination" with an "interested
stockholder" for a period of three-years after the time of the transaction in
which one person became an interested stockholder, unless:

. the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder was approved by our board
of directors before the stockholder became an interested stockholder,

. upon consummation of the transaction that made the stockholder an
interested stockholder, the interested stockholder owns at least 85% of
the voting stock missing language owned by directors who are also
officers or held in employee benefit plans in which the employees do not
have a confidential right to tender stock held by the plan in a tender
or exchange offer, or

47
<PAGE>

. the business combination is approved by the board of directors of the
corporation and authorized at a meeting by two-thirds of the voting
stock, other than voting stock owned by the interested stockholder.

A "business combination" generally includes mergers or consolidations
between us and an interested stockholder, transactions with an interested
stockholder involving our assets or stock or assets or stock of our majority-
owned subsidiaries, and transactions which increase an interested stockholder's
percentage ownership of stock.

An "interested stockholder" generally includes those stockholders who become
beneficial owners of 15% or more of our voting stock, together with affiliates
or associates of that stockholder.

Limitation of Liability of Directors and Indemnification of Directors and
Officers

Our charter provides that our directors will not be personally liable for
monetary damages to us or our stockholders for breach of fiduciary duty as a
director, except for liability for any breach of the director's duty of loyalty
to us or our stockholders, for acts or omissions not in good faith, for acts or
omissions involving intentional misconduct or a knowing violation of law or for
any transaction from which the director derived an improper benefit. Our bylaws
provide that our directors and officers will be indemnified against liabilities
that arise from their service as directors and officers.

Transfer Agent and Registrar

Boston EquiServe L.P. is the transfer agent and registrar for the common
stock.

48
<PAGE>

Underwriting

Under the underwriting agreement, which will be filed as an exhibit to the
registration statement relating to this prospectus, the underwriters named
below, for whom Lehman Brothers Inc. and Credit Suisse First Boston Corporation
are acting as representatives, have each agreed to purchase from us and from
the selling stockholders the respective number of shares shown opposite its
name below:

<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Lehman Brothers Inc................................................
Credit Suisse First Boston Corporation.............................
---------
Total............................................................ 3,500,000
=========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of the common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 525,000 additional shares at the public offering price less
the underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.

The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no
exercise or full exercise by the underwriters of their over-allotment option.

<TABLE>
<CAPTION>
Per Without With
Share Option Option
----- ------- ------
<S> <C> <C> <C>
Public offering price...................................... $ $ $
Underwriting discount...................................... $ $ $
Proceeds, before expenses, to our company.................. $ $ $
</TABLE>

We have agreed, subject to various exceptions, that we will not offer, sell,
contract to sell, announce our intention to sell, pledge or otherwise dispose
of, directly or indirectly, or file with the Securities and Exchange Commission
a registration statement under the Securities Act relating to any additional
shares of our common stock or securities convertible into or exchangeable or
exercisable for any of our common stock without the prior written consent of
Lehman Brothers Inc. for a period of 90 days after the date of this prospectus.
In addition, our officers, directors, selling stockholders and certain other
stockholders are entering into similar agreements. These agreements also apply
to common stock or securities convertible into or exchangeable or exercisable
for common stock of CTC Communications Group, assuming the holding company
reorganization is consummated.

We and the selling stockholders have agreed to indemnify the underwriters
against liabilities under the Securities Act, or contribute to payments which
the underwriters may be required to make in that respect.

49
<PAGE>

Our shares are traded on The Nasdaq National Market under the symbol "CPTL."

Until the distribution of the shares is completed, rules of the Securities
and Exchange Commission may limit the ability of the underwriters and selling
group members to bid for and purchase shares. As an exception to these rules,
the representatives are permitted to engage in transactions that stabilize the
price of the shares. These transactions may consist of bids or purchases for
the purposes of pegging, fixing or maintaining the price of the shares.

The underwriters may create a short position in the shares in connection
with the offering, which means that they may sell more shares than are set
forth on the cover page of this prospectus. If the underwriters create a short
position, then the representatives may reduce that short position by purchasing
shares in the open market. The representatives also may elect to reduce any
short position by exercising all or part of the over-allotment option.

The representatives may impose a penalty bid on certain underwriters and
selling group members. This means that if the representatives purchase shares
in the open market to reduce the underwriters' short position or to stabilize
the price of the shares, they may reclaim the amount of the selling concession
from the underwriters and selling group members who sold those shares as part
of the offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
an offering.

Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the shares. In addition, neither we
nor any of the underwriters makes any representation that the representatives
will engage in such transactions or that such transactions, once commenced,
will not be discontinued without notice.

This prospectus is not, and under no circumstances is to be construed as, an
advertisement or a public offering of the shares in Canada or any province or
territory thereof. Any offer or sale of shares in Canada will be made only
under an exemption from the requirements to file a prospectus in the province
or territory of Canada in which such offer or sale is made.

The shares offered in this prospectus are only being registered for offering
in the United States. No action will be taken by us or by the underwriters in
any other jurisdiction where action is required to permit a public offering of
the shares offered in this prospectus. People who obtain this prospectus are
required by us and by the underwriters to inform themselves about and to
observe any restrictions on the offering of the shares and the distribution of
this prospectus.

Purchasers of the shares offered in this prospectus may be required to pay
stamp taxes and other charges under the laws and practices of the country of
purchase, in addition to the offering price listed on the cover of this
prospectus.

In connection with the offering, underwriters and selling group members may
engage in passive market making transactions in our common stock on The Nasdaq
National Market in accordance with Regulation M under the Securities Exchange
Act of 1934, as amended, during a period before the commencement of offers or
sales of our common stock in the offering.

Katherine D. Courage, a Managing Director of Credit Suisse First Boston
Corporation, is one of our directors.

50
<PAGE>

Legal Matters

The validity of the shares of common stock offered hereby will be passed
upon for CTC by Ropes & Gray, Boston, Massachusetts, and for the underwriters
by Latham & Watkins, Washington, D.C.

Experts

The financial statements of CTC at March 31, 1999 and 1998, and for each of
the three years in the period ended March 31, 1999, appearing in this
prospectus and registration statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.

Where You Can Find More Information

We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a registration statement on Form S-1 under the Securities Act of 1933,
as amended, with respect to the common stock offered under this prospectus.
This prospectus does not contain all of the information contained in the
registration statement and the exhibits and schedules to the registration
statement. Some items are omitted in accordance with the rules and regulations
of the Securities and Exchange Commission. For further information about CTC
and the common stock offered under this prospectus, you should review the
registration statement and the exhibits and schedules filed as a part of the
registration statement. Descriptions of contracts or other documents referred
to in this prospectus are not necessarily complete. If the contract or other
document is filed as an exhibit to the registration statement, you should
review that contract or document. You should be aware that when we discuss
these contracts or documents in the prospectus we are assuming that you will
read the exhibits to the registration statement for a more complete
understanding of the contract or documents.

We are subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended, and, in
accordance therewith, we file reports, proxy statements and other information
with the Securities and Exchange Commission. Such reports, proxy statements and
other information filed by us can be inspected and copied at the public
reference facilities maintained by the Securities and Exchange Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the
following regional offices of the Securities and Exchange Commission: 500 West
Madison Street, Chicago, Illinois 60661 and 7 World Trade Center, New York, New
York 10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material may
also be accessed electronically by means of the Securities and Exchange
Commission's home page on the internet at http://www.sec.gov.

51
<PAGE>

CTC Communications Corp.

Index to Financial Statements

<TABLE>
<S> <C>
Audited Financial Statements
Report of Independent Auditors............................................ F-2
Balance Sheets as of March 31, 1999 and 1998.............................. F-3
Statements of Operations for the years ended March 31, 1999, 1998 and
1997..................................................................... F-4
Statements of Stockholders' Equity (Deficit) for the years ended March 31,
1999, 1998 and 1997...................................................... F-5
Statements of Cash Flows for the years ended March 31, 1999, 1998 and
1997..................................................................... F-6
Notes to Financial Statements............................................. F-7
</TABLE>

F-1
<PAGE>

Report of Independent Auditors

Board of Directors

CTC Communications Corp.

We have audited the accompanying balance sheets of CTC Communications Corp.,
as of March 31, 1999 and 1998, and the related statements of operations,
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended March 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CTC Communications Corp. at
March 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 1999, in conformity
with generally accepted accounting principles.

Ernst & Young LLP

May 19, 1999

Boston, Massachusetts

F-2
<PAGE>

CTC Communications Corp.

Balance Sheets

<TABLE>
<CAPTION>
March 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents.......................... $ 2,254,258 $ 2,167,930
Accounts receivable, less allowance for doubtful
accounts of $1,717,000 and $492,000 in 1999 and
1998, respectively................................ 19,200,931 17,288,183
Prepaid commissions................................ 2,500,000 287,300
Prepaid expenses and other current assets.......... 1,022,198 504,436
Amounts due from officers and employees............ 55,572 84,754
Income taxes receivable............................ 2,512,310 2,152,579
----------- -----------
Total current assets................................. 27,545,269 22,485,182
Property and equipment:
Property and equipment............................. 49,417,689 13,376,970
Accumulated depreciation and amortization ......... (11,959,766) (6,837,683)
----------- -----------
37,457,923 6,539,287
Deferred income taxes................................ -- 1,834,000
Deferred financing costs, net of amortization........ 4,294,568 --
Other assets......................................... 104,085 108,885
----------- -----------
$69,401,845 $30,967,354
=========== ===========
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable and accrued expenses.............. $27,439,488 $ 8,958,476
Accrued salaries and related taxes................. 1,656,367 756,159
Current portion of obligations under capital
leases............................................ 3,230,077 231,796
Current portion of notes payable................... 1,705,141 1,196,400
----------- -----------
Total current liabilities............................ 34,031,073 11,142,831
Obligations under capital leases, net of current
portion............................................. 8,004,366 1,114,277
Notes payable to banks, net of current portion....... 53,917,603 7,130,671
Commitments and contingencies
Series A Redeemable Convertible Preferred Stock, par
value $1.00 per share; authorized 1,000,000
shares, 726,631 and no shares issued and
outstanding at March 31, 1999 and 1998,
respectively (liquidation preference $18,640,023
at March 31, 1999)................................ 12,949,129 --
Stockholders' equity (deficit):
Common Stock, par value $.01 per share; authorized
25,000,000 shares, 10,352,513 and 9,980,661 shares
issued and outstanding at March 31, 1999 and 1998,
respectively...................................... 103,525 99,806
Additional paid-in capital......................... 7,175,076 5,245,704
Deferred compensation.............................. (212,410) (318,410)
Retained earnings (deficit) ....................... (46,535,492) 6,688,300
----------- -----------
(39,469,301) 11,715,400
Amounts due from stockholders...................... (31,025) (135,825)
----------- -----------
Total stockholders' equity (deficit)................. (39,500,326) 11,579,575
----------- -----------
$69,401,845 $30,967,354
=========== ===========
</TABLE>

See accompanying notes.

F-3
<PAGE>

CTC Communications Corp.

Statements of Operations

<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Revenues:
Telecommunications revenue.......... $ 70,963,692 $16,171,716 $11,094,838
Agency commission revenue........... -- 24,775,420 29,195,261
------------ ----------- -----------
70,963,692 40,947,136 40,290,099
Operating Costs and Expenses:
Cost of telecommunications
revenues........................... 61,865,904 14,038,565 8,709,122
Selling, general and administrative
expenses........................... 57,663,458 31,491,963 23,819,714
------------ ----------- -----------
119,529,362 45,530,528 32,528,836
------------ ----------- -----------
Income (loss) from operations......... (48,565,670) (4,583,392) 7,761,263
Other Income (Expense):
Interest income..................... 184,312 145,012 201,369
Interest expense.................... (5,219,350) (106,465) (17,753)
Other............................... 77,724 174,395 15,052
------------ ----------- -----------
(4,957,314) 212,942 198,668
------------ ----------- -----------
Income (loss) before income taxes..... (53,522,984) (4,370,450) 7,959,931
Income tax expense (benefit).......... (1,527,000) (1,486,000) 3,277,000
------------ ----------- -----------
Net income (loss)..................... $(51,995,984) $(2,884,450) $ 4,682,931
============ =========== ===========
Net Income (Loss) per Common Share:
Basic............................... $ (5.24) $ (0.29) $ 0.49
============ =========== ===========
Diluted............................. $ (5.24) $ (0.29) $ 0.43
============ =========== ===========
Weighted Average Number of Shares Used
in Computing Net Income (Loss) per
Common Share:
Basic............................... 10,130,701 9,886,000 9,600,000
============ =========== ===========
Diluted............................. 10,130,701 9,886,000 10,773,000
============ =========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE>

CTC Communications Corp.

Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
Common Stock Additional Retained Amounts
--------------------- Paid-In Deferred Earnings Treasury Due From
Shares Par Value Capital Compensation (Deficit) Stock Stockholders Total
---------- --------- ---------- ------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1996................... 9,584,122 $ 95,841 $4,644,988 $ -- $ 4,889,819 $ -- $(135,825) $ 9,494,823
Issuance of stock
pursuant to employee
stock purchase plan... 8,714 87 70,088 -- -- -- -- 70,175
Exercise of employee
stock options......... 36,571 366 43,378 -- -- -- -- 43,744
Net income............. -- -- -- -- 4,682,931 -- -- 4,682,931
---------- -------- ---------- --------- ------------ --------- --------- ------------
Balance at March 31,
1997................... 9,629,407 96,294 4,758,454 -- 9,572,750 -- (135,825) 14,291,673
Issuance of stock
pursuant to employee
stock purchase plan... 9,844 98 71,662 -- -- -- -- 71,760
Exercise of employee
stock options......... 376,387 3,764 347,222 -- -- -- -- 350,986
Acquisition of treasury
stock................. -- -- -- -- -- (271,072) -- (271,072)
Retirement of treasury
stock................. (34,977) (350) (270,722) -- -- 271,072 -- --
Deferred compensation.. -- -- 339,088 (318,410) -- -- -- 20,678
Net loss............... -- -- -- -- (2,884,450) -- -- (2,884,450)
---------- -------- ---------- --------- ------------ --------- --------- ------------
Balance at March 31,
1998................... 9,980,661 99,806 5,245,704 (318,410) 6,688,300 -- (135,825) 11,579,575
Issuance of stock
pursuant to employee
stock purchase plan... 14,700 147 98,252 -- -- -- -- 98,399
Exercise of employee
stock options......... 366,482 3,665 235,806 -- -- -- (31,025) 208,446
Acquisition of treasury
stock................. -- -- -- -- -- (107,462) -- (107,462)
Retirement of treasury
stock................. (9,330) (93) (107,369) -- -- 107,462 -- --
Deferred compensation.. -- -- -- 106,000 -- -- -- 106,000
Receipt of amounts due
from stockholders..... -- -- -- -- -- -- 135,825 135,825
Issuance of common
stock purchase
warrants.............. -- -- 1,702,683 -- -- -- -- 1,702,683
Preferred stock
dividend.............. -- -- -- -- (1,079,364) -- -- (1,079,364)
Accretion of offering
costs related to
Series A Redeemable
Convertible Preferred
Stock................. -- -- -- -- (28,000) -- -- (28,000)
Accretion of warrants
related to Series A
Redeemable Convertible
Preferred Stock... -- -- -- -- (120,444) -- -- (120,444)
Net loss............... -- -- -- -- (51,995,984) -- -- (51,995,984)
---------- -------- ---------- --------- ------------ --------- --------- ------------
Balance at March 31,
1999................... 10,352,513 $103,525 $7,175,076 $(212,410) $(46,535,492) $ -- $ (31,025) $(39,500,326)
========== ======== ========== ========= ============ ========= ========= ============
</TABLE>

See accompanying notes.

F-5
<PAGE>

CTC Communications Corp.

Statements of Cash Flows

<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Operating Activities
Net income (loss).................... $(51,995,984) $(2,884,450) $ 4,682,931
Adjustments to reconcile net income
(loss) to net cash provided by (used
in)
operating activities:
Depreciation ...................... 3,785,827 1,283,509 742,895
Amortization....................... 2,440,217 134,357 --
Provision for doubtful accounts.... 4,988,698 1,421,000 316,669
Deferred income taxes.............. 1,834,000 (1,268,000) (289,000)
Stock-based compensation........... 106,000 20,678 --
Gain on sale of property and
equipment......................... -- (143,333) --
Changes in operating assets and
liabilities:
Accounts receivable................ (6,901,446) (7,804,363) (4,664,260)
Prepaid commissions................ (2,212,700) -- --
Prepaid expenses and other current
assets............................ (517,762) (382,937) (123,789)
Amounts due from officers and
employees......................... 29,182 -- --
Income taxes receivable............ (359,731) (2,152,579) 21,125
Other assets....................... (3,831,046) 4,800 4,800
Accounts payable and accrued
expenses.......................... 18,481,012 4,052,394 2,657,149
Accrued salaries and related
taxes............................. 900,208 -- --
Accrued income taxes............... -- (225,948) 225,948
Deferred revenue and other......... -- (6,588) (2,714)
------------ ----------- -----------
Net cash provided by (used in)
operating activities................ (33,253,525) (7,951,460) 3,571,754
Investing Activity
Additions to property and equipment.. (6,282,234) (4,765,025) (1,221,879)
------------ ----------- -----------
Net cash used in investing activity.. (6,282,234) (4,765,025) (1,221,879)
Financing Activities
Proceeds from issuance of Series A
Redeemable Convertible Preferred
Stock, net of
offering costs....................... 11,861,321 -- --
Proceeds from issuance of common
stock................................ 230,408 151,674 113,919
Amounts due from stockholders, net.... 104,800 -- --
Borrowings under notes payable........ 51,455,924 8,327,071 --
Repayment of notes payable............ (23,171,071) -- --
Repayment of capital lease
obligations.......................... (859,295) -- --
------------ ----------- -----------
Net cash provided by financing
activities........................... 39,622,087 8,478,745 113,919
------------ ----------- -----------
Increase (decrease) in cash and cash
equivalents........................... 86,328 (4,237,740) 2,463,794
Cash and cash equivalents at beginning
of year............................... 2,167,930 6,405,670 3,941,876
------------ ----------- -----------
Cash and cash equivalents at end of
year.................................. $ 2,254,258 $ 2,167,930 $ 6,405,670
============ =========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for interest................ $ 2,666,613 $ 57,886 $ 16,253
Cash paid (received) for income
taxes................................ $ (3,001,000) $ 2,160,527 $ 3,318,000

Noncash investing and financing
activities:
Receipt of common stock in exercise
of stock options..................... $ 107,462 $ 271,072 $ --
Network and related equipment
acquired under capital leases........ $ 10,747,665 $ 1,343,573 $ --
Network and related equipment
acquired under notes payable......... $ 19,010,755 $ -- $ --
Common stock purchase warrants issued
in connection with notes payable and
Series A Redeemable Convertible
Preferred Stock...................... $ 1,702,683 $ -- $ --
</TABLE>

See accompanying notes.

F-6
<PAGE>

CTC Communications Corp.

Notes to Financial Statements

March 31, 1999

1. Nature of Business

The Company

CTC Communications Corp. (the "Company") is an integrated communications
provider ("ICP"), which offers voice and data services predominantly to medium
and larger-sized business customers in New England and New York State. Prior to
becoming an ICP in January 1998, the Company had been a sales agent for Bell
Atlantic Corp. ("Bell Atlantic") since 1984. The Company has also offered long
distance and data services under its own brand name since 1994. In late 1998,
the Company began deploying a packet-switched network in its existing markets.
The Company operates in a single industry segment providing telecommunication
service to medium to large-sized business customers.

As the Company continues to deploy its network, further penetrates its
existing region and expands into new markets throughout the Boston--Washington,
D.C. corridor, the Company will need significant additional capital. The
Company believes that the proceeds of the $5,000,000 preferred stock commitment
described in Note 10 and the availability under the unsecured facility
described in Note 7 together with cash on hand and the amounts expected to be
available under its bank, lease and vendor financing arrangements will be
sufficient to fund its planned capital expenditures, working capital and
operating losses for at least the next 12 months. During this period the
Company will seek to raise additional capital through the issuance of debt or
equity securities, the timing of which will depend on market conditions. The
Company may also seek to raise additional capital through vendor financing,
equipment lease financing or bank loans.

There can be no assurance that additional financing will be available on
terms acceptable to the Company when needed. The agreements governing its
existing indebtedness limit its ability to obtain debt financing. If the
Company is unable to obtain financing when needed, it may delay or abandon its
development and expansion plans. That could have a material adverse effect on
its business, results of operations and financial condition. The actual timing
and amount of its capital requirements may be materially affected by various
factors, including the timing and actual cost of the network, the timing and
cost of its expansion into new markets, the extent of competition and pricing
of telecommunications services by others in its markets, the demand by
customers for its services, technological change and potential acquisitions.

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities
of three months or less as cash equivalents.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and
amortization. The Company accounts for internal use software under the
provisions of AICPA Statement of Position 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1").
Capitalization of costs commences when the preliminary project stage, as
defined under SOP 98-1, is completed. Amortization commences at the point that
the software components are substantially complete and ready for their intended
use. A significant portion of the network and related equipment costs is
subject to the risk of rapid technological change. Accordingly, the Company's
useful lives and depreciation policies reflect this risk. Depreciation and
amortization is provided using a combination of straight-line and accelerated
methods over the following estimated useful lives:

<TABLE>
<S> <C>
Furniture, fixture, and equipment............................... 3-5 years
Network and related equipment................................... 3-5 years
</TABLE>

F-7
<PAGE>

CTC Communications Corp.

Notes to Financial Statements--(Continued)

Leasehold improvements and assets under capital leases are amortized over
the lesser of the lease term or the useful life of the property, usually 3-5
years.

Impairment of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("SFAS No. 121"), the Company reviews its long-lived
assets, including property and equipment, and identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable. To determine
recoverability of its long-lived assets, the Company evaluates the probability
that future undiscounted net cash flows will be less than the carrying amount
of the assets. Impairment is measured at fair value. SFAS No. 121 had no effect
on the Company's financial statements.

Revenue Recognition

Telecommunications revenue is recognized as usage accrues. Agency revenue is
recognized when services are ordered and, if commissions are based on usage,
revenues are recognized as usage accrues. Provisions for cancellations are made
at the time revenue is recognized, and actual experience prior to the
developments described in Note 4 had consistently been within management's
estimates.

Deferred Financing Costs

In connection with certain financing arrangements consummated during fiscal
1999, the Company capitalized $5,398,529 of deferred financing costs. These
costs represent professional and debt origination fees, including the value of
common stock purchase warrants issued to lenders, and are being amortized over
the lives of the respective agreements. For the year ended March 31, 1999, the
Company recorded amortization of $1,103,961 related to deferred financing
costs.

Income Taxes

The Company provides for income taxes under the liability method prescribed
by SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred
income taxes are recognized for the future tax consequences of differences
between the tax and financial accounting bases of assets and liabilities at
each year end. Deferred income taxes are based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income (loss). Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized.

Income (Loss) Per Share

In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
128 "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is similar to the previously reported
fully diluted earnings per share. All income (loss) per share amounts for all
periods have been presented, and where appropriate, restated to conform to the
SFAS No. 128 requirements.

F-8
<PAGE>

CTC Communications Corp.

Notes to Financial Statements--(Continued)

Risks and Uncertainties

Concentration of Credit Risk

Financial instruments which potentially subject the Company to a
concentration of credit risk principally consist of cash, cash equivalents and
accounts receivable. Concentration of credit risk with respect to accounts
receivable in fiscal 1999 was minimized by the large number of customers across
New England and New York State. The Company reduces its risk of loss through
periodic review of customer creditworthiness and generally does not require
collateral. The carrying amount of cash and cash equivalents and accounts
receivable approximates fair value due to the short maturity of those
instruments.

Significant Estimates and Assumptions

The financial statements have been prepared in conformity with generally
accepted accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make significant estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates and assumptions
made by management affect the Company's allowance for doubtful accounts,
cancellation of orders and certain accrued expenses. Actual results could
differ from those estimates.

Accounting for Stock Options

The Company grants stock options for a fixed number of shares to employees
with an exercise price at least equal to the fair value of the shares at the
date of the grant. The Company has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25")
and related interpretations in accounting for its employee stock options
because the alternative fair value accounting provided for under SFAS No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB No. 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.

Stock options and other stock-based awards to non-employees are accounted
for based on the provisions of SFAS No. 123.

Leases

Leases, in which the Company is the lessee, which transfer substantially all
of the risks and benefits of ownership are classified as capital leases, and
assets and liabilities are recorded at amounts equal to the lesser of the
present value of the minimum lease payments or the fair value of the leased
properties at the beginning of the respective lease terms. Interest expense
relating to the lease liabilities is recorded to effect constant rates of
interest over the terms of the lease. Leases which do not meet such criteria
are classified as operating leases and the related rentals are charged to
expense as incurred.

Recent Accounting Pronouncements

During 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS No. 133") was issued. SFAS No. 133 requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives

F-9
<PAGE>

CTC Communications Corp.

Notes To Financial Statements--(Continued)

would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. SFAS No. 133 is effective beginning in 2000.
The adoption of SFAS No. 133 is not expected to have a material impact on the
financial position or of results of operations of the Company.

3. Property and Equipment

Property and equipment, at cost, and related accumulated depreciation and
amortization balances are as follows:

<TABLE>
<CAPTION>
March 31,
-----------------------
1999 1998
----------- -----------
<S> <C> <C>
Furniture, fixtures and equipment...................... $ 4,358,950 $ 3,246,237
Network and related equipment.......................... 31,309,749 7,946,704
Leasehold improvements................................. 1,657,752 840,456
Assets under capital lease............................. 12,091,238 1,343,573
----------- -----------
49,417,689 13,376,970
Less accumulated depreciation and amortization......... 11,959,766 6,837,683
----------- -----------
$37,457,923 $ 6,539,287
=========== ===========
</TABLE>

4. Bell Atlantic Litigation

In December 1997, the Company terminated its agency contract and filed suit
against Bell Atlantic in Federal District Court for breach of contract,
including the failure of Bell Atlantic to pay approximately $11,500,000 of
agency commissions owed to the Company. The Company also asserted violations by
Bell Atlantic of the antitrust laws and the Telecommunications Act. On February
24, 1999 the Company settled the lawsuit. Under terms of the settlement, the
Company received cash and other consideration. As a result of the settlement
the Company wrote off approximately $1,500,000 of accounts receivable. In
addition, the Company paid $1,200,000 of legal costs previously accrued as of
March 31, 1998 attributable to the collection effort to recover the Bell
Atlantic receivable and incurred approximately $7,800,000 of legal and other
expenses during fiscal year 1999 associated with the litigation.

5. Related-Party Transactions

The installation of certain telecommunications equipment is generally
subcontracted to a company controlled by the Chairman of the Company. In
addition, equipment is purchased from this company. Amounts paid to this
company for hardware and services, based on fair market value, aggregated
$499,257, $232,775 and $97,190 during fiscal 1999, 1998 and 1997, respectively.

The Company leases office space from trusts in which the Chairman is a
beneficiary. Rent expense for these facilities aggregated $125,904, $132,656
and $132,656 in fiscal 1999, 1998 and 1997, respectively. One of those leases
expired during fiscal 1999. The remaining lease expires during fiscal 2002.

The Company subleases space to a company controlled by the Chairman of the
Company. Terms of the sublease are identical to those included in the Company's
lease. Sublease rental income totaled $106,293, $119,416 and $80,416 in fiscal
1999, 1998 and 1997, respectively.

F-10
<PAGE>

CTC Communications Corp.

Notes To Financial Statements--(Continued)

6. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

<TABLE>
<CAPTION>
March 31,
----------------------
1999 1998
----------- ----------
<S> <C> <C>
Trade accounts payable............................... $17,788,702 $5,837,449
Accrued cost of telecommunications revenue........... 5,475,143 1,171,119
Sales taxes payable.................................. 3,829,809 688,033
Bell Atlantic litigation expenses.................... -- 1,200,000
Other................................................ 345,834 61,875
----------- ----------
$27,439,488 $8,958,476
=========== ==========
</TABLE>

7. Financing Arrangements

In July 1998, the Company consummated a $20,000,000 interim bank credit
facility (the "Interim Credit Facility"). In connection with this agreement,
the Company issued warrants to purchase 55,555 shares of common stock to
Spectrum Equity Investors II, L.P. in consideration for the commitment by
Spectrum that upon the Company's request on or before June 30, 1999, Spectrum
would purchase $5,000,000 of convertible preferred stock. Borrowings under the
Interim Credit Facility were repaid by proceeds from a revolving line of credit
consummated in September 1998, as described below.

In September 1998, the Company entered into a revolving line of credit
agreement (the "Revolving Line of Credit") with a consortium of lenders,
providing for a three year senior secured credit facility of up to $75,000,000.
Advances under the Revolving Line of Credit bear interest at the prime rate
plus 1.75% per annum. The outstanding debt is secured by all the Company's
assets excluding those acquired through purchase money financing. The Company
is required to pay a commitment fee of 0.5% per annum on any unused amounts
under the Revolving Line of Credit, as well as a monthly line fee of $150,000.
The availability of the initial $15,000,000 is not subject to specific
restrictions. However, the availability of the balance of $60,000,000 of the
Revolving Line of Credit is based upon trailing 120 day accounts receivable
collections, reducing to trailing 90 days of collections by March 31, 2000. The
Company paid a one-time up front fee of $2,531,250, representing 3.375% of the
facility. A termination penalty of $1,500,000 applies during the first eighteen
months of the term of the Revolving Line of Credit. Warrants to purchase
974,412 shares of the Company's common stock at an exercise price of $6.75 per
share were issued to the lenders in connection with the transaction. The value
of the warrants is being amortized and included in interest expense over the
three year term of the Revolving Line of Credit. The Revolving Line of Credit
provides for certain financial and operational covenants, including, but not
limited to, minimum quarterly revenues, minimum earnings before interest,
taxes, depreciation, amortization, and non-recurring charges for rolling six-
month periods, and a minimum quarterly number of provisioned access line
equivalents. As of March 31, 1999, the Company had availability under the
Revolving Line of Credit of $45,200,000. Aggregate outstanding borrowings were
$36,145,000 at March 31, 1999.

In October 1998, the Company entered into a three year vendor financing
facility (the "Vendor Financing Facility"). Under the terms of the agreement,
the Company agreed to a $25,000,000 volume purchase commitment from this
vendor. The Vendor Financing Facility also provides that up to an aggregate of
$10,000,000 may be borrowed to pay for costs associated with the integration of
this vendor's equipment. Outstanding borrowings under the Vendor Financing
Facility are secured by all products purchased from the vendor, all products
purchased by the first $15,000,000 of the Vendor Financing Facility, and a
subordinated security interest in all other assets of the Company. Outstanding
borrowings bear interest at 12.5% per annum. The Company is also required to
pay a facility fee of $15,000 per month and a commitment fee of 0.50% per

F-11
<PAGE>

CTC Communications Corp.

Notes to Financial Statements--(Continued)

annum on any unused amounts under the Vendor Financing Facility. The terms
provide for repayment, at the end of the ninth, tenth and eleventh quarterly
periods, of 5% of the lesser of the outstanding balance, as defined, of the
Vendor Financing Facility and $15,000,000. The remaining principal is due at
the end of the three year term. As of March 31, 1999, the Company had an
outstanding balance of $15,425,998 and availability of $9,574,002. The
outstanding balance at March 31, 1999 includes amounts due to suppliers of
$2,926,000 financed subsequent to that date.

In March 1999, the Company entered into an unsecured credit facility (the
"Credit Facility") with a bank. Under the Credit Facility, the Company may
borrow $10,000,000 which is not subject to specific restrictions, and another
$20,000,000 at such time that the Company raises an additional $5,000,000 of
equity. Additional commitment fees will be due the bank if an outstanding
balance exists on the dates six months, nine months and one year after closing.
The Company is required to pay a quarterly availability fee of 1% of the unused
balance as well as a fee on any advances. Warrants to purchase 69,216 shares of
the Company's common stock at an exercise price of $11.8125 were issued in
connection with the Credit Facility and contingent warrants to purchase up to
573,913 shares of common stock at an exercise price of up to $11.8125 per share
may be issued to the lender if advances under the Credit Facility are
outstanding six months after the closing date of the Credit Facility. The value
of the warrants to purchase 69,216 shares of common stock has been capitalized
and is being amortized ratably over the term of the Credit Facility as interest
expense. In the event any contingent warrants are issued, the value of the
warrants will be capitalized and amortized over the then remaining term of the
Credit Facility as interest expense. Interest is payable based upon a variable
rate, which increases over the term of the agreement. The Credit Facility
expires June 2000.

The Credit Facility provides for certain financial and operational
covenants. No amounts were outstanding under this facility at March 31, 1999.
In order to satisfy the $5,000,000 equity requirement to borrow the full
$30,000,000 under the Credit Facility, the Company has the ability and intends
to call the $5,000,000 preferred stock commitment described in Note 10--
Preferred Stock if, by June 30, 1999, the Company has not received a
replacement equity commitment of $5,000,000 or received a waiver of the
$5,000,000 equity requirement included in the Credit Facility.

Notes payable consisted of the following:

<TABLE>
<CAPTION>
March 31,
-----------------------
1999 1998
----------- ----------
<S> <C> <C>
Revolving Line of Credit........................... $36,145,000 $ --
Revolving and working capital line of credit....... -- 7,345,071
Equipment line of credit........................... -- 982,000
Vendor Financing Facility.......................... 15,425,998 --
Notes payable for network and related equipment.... 4,051,746 --
----------- ----------
55,622,744 8,327,071
Less current portion............................... (1,705,141) (1,196,400)
----------- ----------
$53,917,603 $7,130,671
=========== ==========

</TABLE>

F-12
<PAGE>

CTC Communications Corp.

Notes to Financial Statements--(Continued)

<TABLE>
<S> <C>
Long-term debt matures as follows:
Year ending March 31:
2000........................................................... $ 1,705,141
2001........................................................... 2,059,302
2002........................................................... 51,858,301
-----------
$55,622,744
===========
</TABLE>

8. Leases

The Company leases office facilities under long-term lease agreements
classified as operating leases. The following is a schedule of future minimum
lease payments, net of sublease income, for operating leases as of March 31,
1999:

<TABLE>
<CAPTION>
Sublease
Operating Rental
Leases Income Net
---------- --------- ----------
<S> <C> <C> <C>
Year ending March 31:
2000...................................... $2,094,925 $(109,897) $1,985,028
2001...................................... 2,007,121 (111,420) 1,895,701
2002...................................... 1,912,473 (111,420) 1,801,053
2003...................................... 1,668,232 (111,420) 1,556,812
2004...................................... 918,614 (111,420) 807,194
Thereafter................................ 273,990 (49,325) 224,665
---------- --------- ----------
Net future minimum lease payments.......... $8,875,355 $(604,902) $8,270,453
========== ========= ==========
</TABLE>

Rental expense for operating leases aggregated $1,779,608, $1,121,916 and
$1,001,919 in fiscal 1999, 1998 and 1997, respectively. Sublease rental income
amounted to $106,293, $119,416 and $90,016 in fiscal 1999, 1998 and 1997,
respectively.

The Company leases certain equipment under capital leases. At March 31,
1999, the Company has capitalized leased equipment totaling $12,091,238 with
related accumulated amortization of $1,470,614. Obligations under capital
leases mature as follows:

<TABLE>
<S> <C>
Year ending March 31:
2000........................................................... $ 4,235,411
2001........................................................... 4,260,012
2002........................................................... 3,093,937
2003........................................................... 1,527,344
2004........................................................... 78,418
Thereafter..................................................... --
-----------
13,195,122
Less amount representing interest............................... (1,960,679)
-----------
Present value of minimum lease payments......................... 11,234,443
Less current portion of obligations under capital leases........ (3,230,077)
-----------
Obligations under capital leases, net of current portion........ $ 8,004,366
===========
</TABLE>

9. Telecommunications Agreements

On January 15, 1996, the Company entered into a four-year non-exclusive
agreement with a long-distance service provider for the right to provide long
distance service to the Company's customers at prices affected by

F-13
<PAGE>

CTC Communications Corp.

Notes to Financial Statements--(Continued)

volume attainment levels during the term of the agreement. The Company is not
obligated to purchase any minimum levels of usage over the term of the
agreement, but rates may be adjusted due to the failure of achieving certain
volume commitments. These provisions had no effect on the financial statements
for the year ended March 31, 1999.

On October 20, 1994, the Company entered into a three-year non-exclusive
agreement with a long-distance service provider for the right to provide long
distance service to the Company's customers at fixed prices by service during
the term of the agreement. On May 6, 1998, the Company entered into an
amendment to the agreement which extended the term of the agreement through
October 2000. On March 31, 1999, the Company entered into an amendment which
provides that the Company shall be liable for a minimum aggregate usage
commitment of $50,000,000. Based upon existing and expected usage, these
provisions had no effect on the financial statements for the year ended March
31, 1999.

Prior to the execution of the agreements described above, and through March
31, 1999, the Company also had provided long distance service to customers
under an informal non-exclusive arrangement with another long distance service
provider. The Company is not obligated to purchase any minimum level of usage
and there are no other performance obligations.

On January 8, 1999, the Company entered into agreements with two
communications companies for the provision of transmission and co-location
facilities for the Company's initial network build-out in New England in New
York State. The agreements, which total $11,600,000 of expenditures by CTC over
three years, provide for connectivity between CTC's 22 network hub sites and
two fully redundant network operations centers.

10. Stockholders' Equity (Deficit)

At March 31, 1999, 6,357,142 shares of common stock are reserved for future
issuance upon exercise of outstanding stock options and common stock purchase
warrants and conversion of outstanding preferred stock.

Preferred Stock

The dividends, liquidation preference, voting rights and other rights of
each series of preferred stock, when issued, are to be designated by the Board
of Directors prior to issuance.

In April 1998, the Company completed a private placement of Series A
Redeemable Convertible Preferred Stock ("Series A"). Each share of Series A
accrues a cumulative dividend equal to an annual rate of 9% of the $18 per
share purchase price per annum, compounded every six months. The dividend is
payable upon redemption, liquidation, or conversion of the Series A.

A majority of the Series A stockholders may require a redemption by the
Company after April 9, 2003. Upon liquidation, dissolution, or winding up of
the Company, holders of Series A would be entitled to receive the payment of a
preferential amount before any payment is made with respect to any junior class
of stock. The preferential payment would be equal to the greater of the
purchase price plus accrued dividends through the date of payment or the
purchase price plus accrued dividends plus an acceleration of the dividend due
through April 9, 2003.

On the date of issuance, 666,666 shares of the Series A were convertible
into 1,333,332 shares of common stock. The number of shares of common stock
into which the Series A can be converted increases by an amount equal to the
accrued dividend divided by $9.00. At March 31, 1999, 666,666 shares of Series
A were convertible into 1,453,262 shares of common stock. In addition, the
number of shares of common stock into which Series A can be converted also
adjusts upon certain dilutive issuances of common stock or securities

F-14
<PAGE>

CTC Communications Corp.

Notes to Financial Statements--(Continued)

convertible into or exercisable for common stock. Prior to any liquidation,
dissolution, or winding up of the Company, the Series A would automatically
convert into common stock if the liquidation amount is less than the amount the
holder of Series A would have received had the holder converted to common
stock.

Holders of Series A are entitled to a number of votes equal to the lesser of
1) the whole number of common stock they would receive if they converted their
Series A plus the number of warrants they hold that were issued in connection
with the issuance of Series A shares or 2) the number of shares of Series A
held multiplied by 2.476.

On July 13, 1998, the Company received a commitment letter from a Series A
stockholder to purchase at the Company's option, an additional $5,000,000 of
preferred stock on the same terms and conditions as the Series A issued in
April 1998. The option expires on June 30, 1999.

Common Stock Purchase Warrants

As of March 31, 1999, the Company issued warrants in connection with the
issuance of the Series A and the financing arrangements disclosed in Note 7 to
purchase an aggregate of 1,288,071 shares of common stock at exercise prices
ranging from $6.75 to $11.81 with exercise periods extending through March
2009. The values of the warrants range from $1.96 to $5.74 and were determined
using a Black-Scholes pricing methodology. Significant assumptions include the
interest rate of 5.21%, an expected volatility of 50% and an expected life of
the warrants of 2.5 to 3 years.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan (the "ESPP") which enables
participating employees to purchase Company shares at 85% of the lower of the
market prices prevailing on two valuation dates as defined in the ESPP.
Individuals can contribute up to 5% of their base salary. The Company made no
contributions to the ESPP during the three years in the period ended March 31,
1999. Indicated below is a summary of shares of common stock purchased by the
ESPP.

In July 1998 and February 1999, the ESPP purchased 6,737 shares and 7,963
shares, respectively, at $6.69 per share.

In July 1997, the ESPP purchased 5,438 shares at $6.48 per share and in
February 1998 the ESPP purchased 4,406 shares at $8.29 per share.

In July 1996, the ESPP purchased 2,998 shares at $11.05 per share and in
February 1997, the ESPP purchased 5,716 shares at $6.48 per share.

Stock Option Plans

Under the terms of its Employees Incentive Stock Option Plan, as amended,
1985 Stock Option Plan, 1993 Stock Option Plan, 1996 Stock Option Plan and 1998
Incentive Plan (collectively, the "Plans"), the Company may grant qualified and
non-qualified incentive stock options for the purchase of common stock to all
employees and, except for the 1993 Stock Option Plan, to members of the Board
of Directors. The Plans generally provide that the option price will be fixed
by a committee of the Board of Directors but for qualified incentive stock
options will not be less than 100% (110% for 10% stockholders) of the fair
market value per share on the date of grant.

F-15
<PAGE>

CTC Communications Corp.

Notes to Financial Statements--(Continued)

Non-qualified options are granted at no less than 85% (110% for 10%
stockholders) of the fair market value per share on the date of grant. No
options have a term of more than ten years, and options to 10% stockholders may
not have a term of more than five years.

In the event of termination of employment, other than by reason of death,
disability or with the written consent of the Company, all options granted to
employees are terminated. Vesting is determined by the Board of Directors.

On March 20, 1998, the Board approved the repricing of 1,175,500 options
with a new exercise price of $7.19 per share ($7.91 per share for 10%
stockholders).

Stock Based Compensation

Pro forma information regarding net income (loss) and income (loss) per
common share is required by SFAS No. 123, and has been determined as if the
Company had accounted for its employee stock options granted under the Plans
and shares issued pursuant to the ESPP under the fair value method of SFAS No.
123. The fair value for these options and shares issued pursuant to the ESPP
was estimated at the dates of grant using a Black-Scholes option pricing model
with the following weighted-average assumptions:

<TABLE>
<CAPTION>
Options ESPP
------------------- -------------------
1999 1998 1997 1999 1998 1997
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Expected life (years)................. 3.09 2.96 3.98 0.50 0.50 0.50
Interest rate......................... 4.82% 5.93% 6.28% 5.05% 5.43% 5.40%
Volatility............................ 83.69 85.14 87.88 91.23 64.67 93.03
Dividend yield........................ 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the expense related to estimated fair
value of the options is recognized over the options' vesting period. The
Company's pro forma net income (loss) and income (loss) per common share are as
follows:

<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- ----------
<S> <C> <C> <C>
Pro forma net income (loss)............. $(56,761,004) $(4,973,128) $4,094,000
Pro forma income (loss) per common share
(Basic)................................ $ (5.60) $ (0.50) $ 0.39
</TABLE>

The effects on fiscal 1997, 1998 and 1999 pro forma net income (loss) and
income (loss) per common share of expensing the estimated fair value of stock
options and shares issued pursuant to the ESPP are not necessarily
representative of the effects on reporting the results of operations for future
years as the periods presented include only one, two and three years of option
grants under the Company's plans.

F-16
<PAGE>

CTC Communications Corp.

Notes to Financial Statements--(Continued)

A summary of the Company's stock option activity and related information for
the years ended March 31 follows:

<TABLE>
<CAPTION>
1999 1998 1997
------------------- -------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
--------- -------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 2,965,007 $5.50 1,953,112 $4.36 1,995,878 $4.01
Options granted....... 1,297,000 8.65 2,791,000 7.11 280,539 9.67
Options terminated.... (279,716) 6.49 (1,402,718) 8.36 (286,734) 7.54
Options exercised..... (366,482) 0.66 (376,387) .93 (36,571) 1.20
--------- ---------- ---------
Outstanding at end of
year................... 3,615,809 $7.05 2,965,007 $5.50 1,953,112 $4.36
========= ========== =========
Exercisable at end of
year................... 961,177 698,250 772,282
========= ========== =========
Weighted-average fair
value of options
granted during the
year................... $ 4.80 $ 4.01 $ 6.43
========= ========== =========
</TABLE>

The following table presents weighted-average price and life information
about significant option groups outstanding at March 31, 1999:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------- --------------------------
Weighted Average
Remaining Weighted Weighted
Range of Number Contractual Average Number Average
Exercise Prices Outstanding Life--Years Exercise Price Exercisable Exercise Price
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.90-
1.10 129,261 0.5 $ 1.10 129,261 $ 1.10
2.70-
2.98 238,681 1.0 2.75 238,681 2.75
5.25-
5.75 213,000 4.4 5.72 32,500 5.75
6.00-
7.06 882,867 3.1 6.48 89,453 6.23
7.19 1,034,500 2.6 7.19 301,498 7.19
7.50-
8.69 536,000 4.7 7.58 43,284 7.69
10.12-
11.25 356,334 3.9 10.50 84,834 10.51
12.37-
13.00 58,500 5.3 12.80 0 0.00
15.00 83,333 3.9 15.00 20,833 15.00
20.00 83,333 3.9 20.00 20,833 20.00
--------- -------
3,615,809 961,177
========= =======
</TABLE>

11. Benefit Plans

Defined Contribution Plan (the "401(k) Plan")

The Company maintains a defined contribution plan (the "401(k) Plan") which
covers all employees who meet certain eligibility requirements and complies
with Section 401(k) of the Internal Revenue Code ("IRC"). Participants may make
contributions to the 401(k) Plan up to 15% of their compensation, as defined
under the terms of the 401(k) Plan, up to the maximum established by the IRC.
The Company may make a matching contribution of an amount to be determined by
the Board of Directors, but subject to a maximum of 6% of compensation
contributed by each participant. Company contributions vest ratably over three
years. Company contributions to the 401(k) Plan were $358,100, $310,788 and
$230,079 in fiscal 1999, 1998 and 1997, respectively.

F-17
<PAGE>

CTC Communications Corp.

Notes to Financial Statements--(Continued)

12. Income (Loss) Per Share

Income (loss) per common share has been calculated as follows:

<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- ----------
<S> <C> <C> <C>
Numerator:
Net income (loss)................... $(51,995,984) $(2,884,450) $4,682,931
Less preferred stock dividends and
accretion to redemption value of
preferred stock.................... (1,135,364) -- --
------------ ----------- ----------
Equals: numerator for Basic and
Diluted income (loss) per common
share.............................. $(53,131,348) $(2,884,450) $4,682,931

Denominator:
Denominator for Basic income (loss)
per common share-weighted average
shares............................. 10,130,701 9,886,000 9,600,000
Effect of employee stock options.... -- -- 1,173,000
------------ ----------- ----------
Denominator for Diluted income (loss)
per common share..................... 10,130,701 9,886,000 10,773,000
------------ ----------- ----------
Basic income (loss) per common share.. $ (5.24) $ (.29) $ .49
============ =========== ==========
Diluted income (loss) per common
share................................ $ (5.24) $ (.29) $ .43
============ =========== ==========
</TABLE>

13. Income Taxes

The provision (benefit) for income taxes consisted of the following:

<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal................................. $(3,361,000) $ (218,000) $2,660,000
State................................... -- -- 906,000
----------- ----------- ----------
(3,361,000) (218,000) 3,566,000
Deferred tax provision (benefit).......... 1,834,000 (1,268,000) (289,000)
----------- ----------- ----------
$(1,527,000) $(1,486,000) $3,277,000
=========== =========== ==========
</TABLE>

F-18
<PAGE>

CTC Communications Corp.

Notes to Financial Statements--(Continued)

Significant components of the Company's deferred tax liabilities and assets
as of March 31 are as follows:

<TABLE>
<CAPTION>
1999 1998
------------ ----------
<S> <C> <C>
Deferred tax assets:
Depreciation....................................... $ -- $ 64,000
Bell Atlantic litigation costs..................... -- 486,000
Bad debt allowance................................. 695,000 960,000
Accruals and allowances, other..................... 40,000 305,000
Net operating loss carryforward.................... 23,027,000 96,000
------------ ----------
Total deferred tax asset............................. 23,762,000 1,911,000
Deferred tax liability:
Prepaid expenses................................... (8,000) (38,000)
Cash value of life insurance....................... (38,000) (39,000)
Depreciation....................................... (1,328,000) --
------------ ----------
Total deferred tax liability......................... (1,374,000) (77,000)
------------ ----------
Net deferred tax asset before valuation allowance.... 22,388,000 1,834,000
Valuation allowance.................................. (22,388,000) --
------------ ----------
Net deferred tax asset............................... $ -- $1,834,000
============ ==========
</TABLE>

Management has provided a valuation allowance against deferred tax assets
as it is more likely than not that the Company will not realize these assets.

At March 31, 1999, the Company had federal and state net operating loss
carryforwards of approximately $56,856,000, which may be used to reduce future
income tax liabilities, and expire through 2014. Changes in the Company's
ownership will subject the net operating loss carryforwards and tax credits to
limitations pursuant to Sections 382 and 383 of the IRC.

The income tax expense is different from that which would be obtained by
applying the enacted statutory federal income tax rate to income (loss) before
income taxes. The items causing this difference are as follows:

<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- ----------
<S> <C> <C> <C>
Tax (benefit) at U.S. statutory rate.... $(18,197,815) $(1,486,000) $2,706,000
State income taxes, net of federal
benefit................................ -- -- 552,000
Valuation allowance and other........... 16,670,815 -- 19,000
------------ ----------- ----------
$ (1,527,000) $(1,486,000) $3,277,000
============ =========== ==========
</TABLE>

F-19
<PAGE>

CTC Communications Corp.

Notes to Financial Statements--(Continued)

14. Subsequent Event

Subsequent to year end, the Company filed a Registration Statement on Form
S-1 with the Securities and Exchange Commission for the purpose of registering
the sale by the Company of up to 3,725,000 shares of common stock.

Subsequent to year end the Company initiated a statutory reorganization in
which the Company intends to merge, subject to shareholder approval, with a
newly formed holding company, CTC Group. In connection with the reorganization,
shareholders will have appraisal rights under Massachusetts law to which they
are otherwise not entitled. If the reorganization is consummated and
stockholders exercise their appraisal rights, the Company would be required by
law to acquire their shares for cash at their appraised value. Management
believes this will not have a material effect on the Company's financial
condition.

15. Quarterly Information (Unaudited)

A summary of operating results and net income (loss) per share for the
quarterly periods in the two years ended March 31, 1999 is set forth below:

<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------------
June 30 September 30 December 31 March 31 Total
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended March 31,
1999
Total revenues.......... $12,835,685 $ 14,516,189 $ 19,024,531 $ 24,587,287 $ 70,963,692
Net loss................ (7,931,000) (10,983,624) (11,997,025) (21,084,335) (51,995,984)
Net loss per share--
Basic.................. (.79) (1.13) (1.20) (2.08) (5.24)
Net loss per share--
Diluted................ (.79) (1.13) (1.20) (2.08) (5.24)
Year ended March 31,
1998
Total revenues.......... $11,658,954 $ 11,845,097 $ 11,155,646 $ 6,287,439 $ 40,947,136
Net income (loss)....... 1,374,000 1,244,000 506,000 (6,008,450) (2,884,450)
Income (loss) per
share--Basic........... .13 .13 .05 (.6) (.29)
Income (loss) per
share--Diluted......... .14 .12 .05 (.6) (.29)
</TABLE>

The first two quarters of fiscal year 1998 net income per share amounts have
been restated to comply with SFAS No. 128.

F-20
<PAGE>

Inside Back Cover

[A montage of pictures: The top left picture shows people at CTC's Network
Operations Center and the caption reads "CTC's Main Network Operations Center is
located in the new Technology Center building in Waltham, Mass." The top right
picture shows a person working on one of CTC's Cisco Systems data switch and the
caption reads "CTC's new integrated communications network incorporates advanced
Cisco Systems data switches and is designated as a Cisco-Powered Network/TM/."
There are four pictures on the bottom of the page that depict various screens
from CTC's electronic billing system, IntelliVIEW/TM/. The captions for these
four screens are as follows:
"IntelliVIEW/TM/ is a searchable,
sortable electronic billing system that gives customers better control over
their telecommunications usage."
"Summary Screen
A concise summary page shows customers their telecommunications
totals with "drill down" capability at the click of a mouse."
"Line Usage
This report is one of several available to customers. It shows inbound and
outbound line usage, enabling customers to better manage and monitor line
utilization."
"Advanced Query
An advanced query lets customers sort calls by a variety of parameters,
including: originating line, destination, time, duration, cost, code, or date."]
<PAGE>

3,500,000 Shares

[CTC Logo Appears Here]

Common Stock

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

PROSPECTUS

, 1999

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

Lehman Brothers

Credit Suisse First Boston

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All amounts shown are estimates, except
the Securities and Exchange Commission registration fee and the National
Association of Securities Dealers, Inc. filing fee.

<TABLE>
<CAPTION>
Item Amount
---- --------
<S> <C>
SEC Registration Fee............................................ $ 18,708
NASD Filing Fee................................................. 7,904
Nasdaq National Market Listing Fee.............................. 19,500
Accounting Fees and Expenses.................................... 100,000
Legal Fees and Expenses......................................... 350,000
Printing Expenses............................................... 100,000
Miscellaneous................................................... 3,888
--------
Total......................................................... $600,000
========
</TABLE>

The Registrant will bear all expenses shown above.
- --------

Item 14. Indemnification of Directors and Officers

Section 67, Chapter 156B of the General Laws of the Commonwealth of
Massachusetts, as amended (the "Massachusetts Business Corporation Law"), and
Article IV of the Registrant's Bylaws, to which reference is hereby made,
contain provisions authorizing indemnification by the Registrant of directors
and officers, against certain liabilities and expenses, which they may incur as
directors and officers of the Registrant or of certain other entities. Section
67, Chapter 156B of the Massachusetts Business Corporation Law provides that
the indemnification of directors, officers, employees and agents of a
corporation and persons who serve at the corporation's request as directors,
officers, employees and other agents of another organization may be provided to
whatever extent as shall be specified by (i) the articles of organization of
the corporation or (ii) a bylaw adopted by the stockholder or (iii) a vote
adopted by the holders of a majority of the shares of stock entitled to vote on
the election of directors.

Article IV of the Registrant's Bylaws provide that the Registrant shall, to
the fullest extent legally permissible, indemnify each of its directors and
officers (including persons who were acting at its request as directors,
trustees or officer of another organization), against all expenses and
liabilities (including attorneys' fees, judgments, court costs, and the costs
of reasonable settlement) reasonably incurred by such person in connection
therewith; provided, however, no such indemnification shall be made in relation
to matters as to which such director or officer shall be finally adjusted in
any such action, suit or proceeding not to have acted in good faith in the
reasonable belief that this action was in the best interests of the Registrant.
In the event that a settlement or compromise of such action, suit or proceeding
is effected, indemnification may be had but only if the Board of Directors
shall have been furnished with an opinion of counsel for the Registrant to the
effect that such settlement or compromise is in the best interest of the
Registrant and that such director or officer does not appear not to have acted
in good faith in the reasonable belief that his action was in the best
interests of the Registrant, and if the Board of Directors shall have adopted a
resolution approving such settlement or compromise.

Section 13, Chapter 156B of the Massachusetts Business Corporation Law
provides that the articles of organization of a corporation may contain a
provision eliminating or limiting the personal liability of a director

II-1
<PAGE>

to the corporation or its stockholders for monetary damages for breach of a
fiduciary duty as a director notwithstanding any provision of law imposing such
liability; provided, however, that such provision shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Sections 61 or 62, Chapter 156B of the Massachusetts Business
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. Article Six of the Restated Articles of Organization
of the Registrant contains a provision consistent with Section 13, Chapter 156B
of the Massachusetts Business Corporation Law and provides that a director of
the Registrant shall not be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director.

Item 15. Recent Sales of Unregistered Securities

The following information is furnished with regard to all Securities sold by
the Registrant within the past three years which were not registered under the
Securities Act.

(a) From April 1, 1996 to June 17, 1999, the Registrant issued a total of
792,339 shares of common stock for an aggregate consideration of $692,146
pursuant to the exercise of employee incentive stock options by employees of
the registrant.

(b) On April 10, 1998, the Registrant issued to Spectrum Equity Investors
II, L.P. and certain other private investors for $12 million, 666,666 shares of
Series A preferred stock and five-year warrants to purchase an aggregate of
133,333 shares of its Common Stock at an exercise price of $9.00 per share.

(c) On July 16, 1998, the Registrant issued to Spectrum five-year warrants
to purchase up to 55,555 shares of common stock at a purchase price of $9.00
per share in consideration for the commitment by Spectrum that, at any time
prior to June 30, 1999, Spectrum will, upon the Registrant's request, purchase
an additional $5 million of preferred stock containing the same terms and
conditions as the Series A preferred stock.

(d) On September 1, 1998, the Registrant issued to Goldman, Sachs & Co. and
Fleet National Bank, in consideration of the lenders providing a three-year
senior secured credit facility to the Registrant, five-year warrants to
purchase an aggregate of 974,412 shares of Common Stock at a purchase price of
$6.75 per share.

(e) On January 15, 1999, the Registrant issued to Relational Funding
Corporation, in consideration for the provision of a master equipment lease
agreement, warrants to purchase 55,555 shares of common stock at a purchase
price of $9.00 per share.

(f) On March 24, 1999 the Registrant issued to Toronto Dominion (Texas),
Inc. in consideration for the provision of a standby credit facility in the
aggregate amount of up to $30 million, warrants to purchase an aggregate of
69,216 shares of common stock at a purchase price of $11.1825 per share.

All of the above shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as
amended, as transactions by an issuer not involving a public offering.

II-2
<PAGE>

Item 16. Exhibits and Financial Statement Schedules

The following is a list of exhibits filed as a part of this registration
statement.

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<C> <S>
1.1 Form of Underwriting Agreement(13)
2.1 Agreement and Plan of Reorganization dated as of November 16, 1998
among the Registrant, CTC Communications Group, Inc. and CTC-
Newco, Inc.(13)
3.1 Restated Articles of Organization, as amended(6)
3.2 Amended and Restated By-Laws(6)
4.1 Form of Common Stock Certificate(5)
5.1 Opinion of Ropes & Gray(13)
9.1 Voting Agreement dated April 10, 1998 among Robert Fabbricatore
and certain of his affiliates and Spectrum(7)
10.1 1996 Stock Option Plan, as amended (3)
10.2 1993 Stock Option Plan(5)
10.3 Employee Stock Purchase Plan(4)
10.4 Lease for premises at 360 Second Ave., Waltham MA(5)
10.5 Sublease for premises at 360 Second Ave., Waltham MA(5)
10.6 Lease for premises at 110 Hartwell Ave., Lexington MA(5)
10.7 Lease for premises at 120 Broadway, New York, NY(5)
10.8 Agreement dated February 1, 1996 between NYNEX and the Company(5)
10.9 Agreement dated May 1, 1997 between Pacific Bell and the Company
(5)
10.10 Agreement dated January 1, 1996 between SNET America, Inc. and the
Company(5)
10.11 Agreement dated June 23, 1995 between IXC Long Distance Inc. and
the Company, as amended(5)
10.12 Agreement dated August 19, 1996 between Innovative Telecom Corp.
and the Company(5)
10.13 Agreement dated October 20, 1994 between Frontier Communications
International, Inc. and the Company, as amended(5)
10.14 Agreement dated January 21, 1997 between Intermedia Communications
Inc. and the Company(5)
10.15 Employment Agreement between the Company and Steven Jones dated
February 27, 1998(7)
10.16 Securities Purchase Agreement dated April 10, 1998 among the
Company and Spectrum and its affiliates named therein(6)
10.17 Registration Rights Agreement dated April 10, 1998 among the
Company and Spectrum and its affiliates named therein(6)
10.18 Form of Warrant dated April 10, 1998(6)
10.19 Loan and Security Agreement dated as of September 1, 1998 by and
between the Company, Goldman Sachs Credit Partners L.P. and Fleet
National Bank(8)
10.20 Agreement with Cisco Systems Capital Corp. dated as of October 14,
1998(9)
10.21 Warrant dated July 15, 1998 issued to Spectrum(10)
10.22 Lease for premises at 220 Bear Hill Road, Waltham MA(10)
10.23 Warrant dated September 1, 1998 issued to Goldman, Sachs & Co.(10)
10.24 Warrant dated September 1, 1998 issued to Fleet National Bank(10)
10.25 1998 Incentive Plan(3)
10.26 Loan Agreement dated as of March 15, 1999 by and between the
Company, TD Dominion (Texas), Inc., and TD Securities (USA)
Inc.(11)
10.27 Warrant dated March 24, 1999 issued to Toronto Dominion (Texas),
Inc.(11)
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<C> <S>
23.1 Consent of Ropes & Gray (contained in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP(12)
24.1 Power of Attorney(11)
24.2 Power of Attorney of Ralph S. Troupe (contained on page II-8)(12)
</TABLE>
- --------
(1) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996.
(2) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Registration Statement on Form S-18 (Reg. No. 2-96419-B)
(3) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Registration Statement on Form S-8 (File No. 333-68767).
(4) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Registration Statement on Form S-8 (File No. 33-44337).
(5) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Annual Report on Form 10-K for the Fiscal Year Ended March
31, 1997.
(6) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Current Report on Form 8-K dated May 15, 1998.
(7) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Annual Report on Form 10-K for the Fiscal Year Ended March
31, 1998.
(8) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Current Report on Form 8-K dated October 2, 1998.
(9) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Current Report on Form 8-K dated November 6, 1998.
(10) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.

(11) Previously filed.
(12) Filed herewith.

(13) To be filed by amendment.

(b) Financial Statement Schedules

II-4
<PAGE>

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

CTC COMMUNICATIONS CORP.

<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
---------- ----------- ---------- ----------- ----------
Additions
(1) (2)
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
- ----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Year ended March 31,
1999:
Allowance for doubtful
accounts............. $492,000 $ 4,988,698 $-- $ 3,763,698 $1,717,000
Year ended March 31,
1998:
Allowance for doubtful
accounts............. $377,000 $ 1,421,000 $-- $ 1,306,000(a) $ 492,000
Year ended March 31,
1997:
Allowance for doubtful
accounts............. $190,215 $ 316,669 $-- $ 129,884(a) $ 377,000
</TABLE>
- --------

(a) Bad debts written off, net of collections.

All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.

II-5
<PAGE>

Item 17. Undertakings

(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 14--Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

(b) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

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

II-6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Waltham, Commonwealth of
Massachusetts, on this 21st day of June, 1999.

CTC Communications Corp.

By: /s/ Robert J. Fabbricatore
---------------------------------
Name: Robert J. Fabbricatore
Title: Chairman of the Board and
Chief Executive Officer

II-7
<PAGE>

POWER OF ATTORNEY

Know All Men By These Presents, that Ralph S. Troupe constitutes and
appoints Robert J. Fabbricatore and John D. Pittenger, jointly and severally,
his attorneys-in-fact, each with full power of substitution, and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement on Form S-1, any subsequent
registration statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933 (a "462(b) Registration Statement") and
any and all amendments (including post-effective amendments) to any such 462(b)
Registration Statement, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof. This
Power of Attorney may be signed in several counterparts.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following person in the capacity
and on the date indicated.

<TABLE>
<S> <C> <C>
/s/ Ralph S. Troupe June 21, 1999
______________________________________
Ralph S. Troupe
</TABLE>

II-8
<PAGE>

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Robert J. Fabbricatore Chairman of the Board and June 21, 1999
______________________________________ Chief Executive Officer,
Robert J. Fabbricatore Director

/s/ John D. Pittenger Chief Financial Officer June 21, 1999
______________________________________
John D. Pittenger

/s/ Richard J. Santagati* Director June 21, 1999
______________________________________
Richard J. Santagati

/s/ J. Richard Murphy* Director June 21, 1999
______________________________________
J. Richard Murphy

/s/ Henry Hermann* Director June 21, 1999
______________________________________
Henry Hermann

/s/ Ralph C. Sillari* Director June 21, 1999
______________________________________
Ralph C. Sillari

/s/ Kevin J. Maroni* Director June 21, 1999
______________________________________
Kevin J. Maroni

/s/ Robert A. Nicholson* Director June 21, 1999
______________________________________
Robert A. Nicholson

/s/ Carl Redfield* Director June 21, 1999
______________________________________
Carl Redfield

/s/ Katherine D. Courage* Director June 21, 1999
______________________________________
Katherine D. Courage

*By /s/ John D. Pittenger
______________________________________
Attorney-in-Fact

</TABLE>

II-9
<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<C> <S>
1.1 Form of Underwriting Agreement(13)
2.1 Agreement and Plan of Reorganization dated as of November 16, 1998
among the Registrant, CTC Communications Group, Inc. and CTC-
Newco, Inc.(13)
3.1 Restated Articles of Organization, as amended(6)
3.2 Amended and Restated By-Laws(6)
4.1 Form of Common Stock Certificate(5)
5.1 Opinion of Ropes & Gray(13)
9.1 Voting Agreement dated April 10, 1998 among Robert Fabbricatore
and certain of his affiliates and Spectrum(7)
10.1 1996 Stock Option Plan, as amended (3)
10.2 1993 Stock Option Plan(5)
10.3 Employee Stock Purchase Plan(4)
10.4 Lease for premises at 360 Second Ave., Waltham MA(5)
10.5 Sublease for premises at 360 Second Ave., Waltham MA(5)
10.6 Lease for premises at 110 Hartwell Ave., Lexington MA(5)
10.7 Lease for premises at 120 Broadway, New York, NY(5)
10.8 Agreement dated February 1, 1996 between NYNEX and the Company(5)
10.9 Agreement dated May 1, 1997 between Pacific Bell and the Company
(5)
10.10 Agreement dated January 1, 1996 between SNET America, Inc. and the
Company(5)
10.11 Agreement dated June 23, 1995 between IXC Long Distance Inc. and
the Company, as amended(5)
10.12 Agreement dated August 19, 1996 between Innovative Telecom Corp.
and the Company(5)
10.13 Agreement dated October 20, 1994 between Frontier Communications
International, Inc. and the Company, as amended(5)
10.14 Agreement dated January 21, 1997 between Intermedia Communications
Inc. and the Company(5)
10.15 Employment Agreement between the Company and Steven Jones dated
February 27, 1998(7)
10.16 Securities Purchase Agreement dated April 10, 1998 among the
Company and the Purchasers named therein(6)
10.17 Registration Rights Agreement dated April 10, 1998 among the
Company and the Holders named therein(6)
10.18 Form of Warrant dated April 10, 1998(6)
10.19 Loan and Security Agreement dated as of September 1, 1998 by and
between the Company, Goldman Sachs Credit Partners L.P. and Fleet
National Bank(8)
10.20 Agreement with Cisco Systems Capital Corp. dated as of October 14,
1998(9)
10.21 Warrant dated July 15, 1998 issued to Spectrum(10)
10.22 Lease for premises at 220 Bear Hill Road, Waltham MA(10)
10.23 Warrant dated September 1, 1998 issued to Goldman, Sachs & Co.(10)
10.24 Warrant dated September 1, 1998 issued to Fleet National Bank(10)
10.25 1998 Incentive Plan(3)
10.26 Loan Agreement dated as of March 15, 1999 by and between the
Company, TD Dominion (Texas), Inc., and TD Securities (USA)
Inc.(11)
10.27 Warrant dated March 24, 1999 issued to Toronto Dominion (Texas),
Inc.(11)
23.1 Consent of Ropes & Gray (contained in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP(12)
24.1 Power of Attorney(11)
24.2 Power of Attorney of Ralph S. Troupe (contained on page II-8)(12)
</TABLE>
- --------
(1) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996.
(2) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Registration Statement on Form S-18 (Reg. No. 2-96419-B)

1
<PAGE>

(3) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Registration Statement on Form S-8 (File No. 333-68767).
(4) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Registration Statement on Form S-8 (File No. 33-44337).
(5) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Annual Report on Form 10-K for the Fiscal Year Ended March
31, 1997.
(6) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Current Report on Form 8-K dated May 15, 1998.
(7) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Annual Report on Form 10-K for the Fiscal Year Ended March
31, 1998.
(8) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Current Report on Form 8-K dated October 2, 1998.
(9) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Current Report on Form 8-K dated November 6, 1998.
(10) Incorporated by reference to an Exhibit filed as part of CTC
Communications' Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.

(11) Previously filed.
(12) Filed herewith.

(13) To be filed by amendment.

(b) Financial Statement Schedules

<PAGE>

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated May 19, 1999,
included in Amendment No. 1 to the Registration Statement (Form S-1) and
related Prospectus of CTC Communications Corp. for the registration of
3,500,000 shares of its Common Stock.

Our audits also included the financial statement schedule listed in Part II.
This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
the financial statement schedule referred to above, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

Ernst & Young LLP

Boston, Massachusetts

June 18, 1999