<PAGE>

                                                                   Exhibit 10.17

America Online Latin America, Inc. has omitted from this Exhibit 10.17 portions
of the Agreement for which confidential treatment has been requested from the
Securities and Exchange Commission. The portions of the Agreement for which
confidential treatment has been requested have been filed separately with the
Securities and Exchange Commission.

                          MASTER AGREEMENT FOR DATA
                    COMMUNICATIONS AND VALUE ADDED SERVICES
                                    (MEXICO)

This Master Agreement for Data Communications and Value Added Services (this
"Agreement") entered into on January 20, 2000 (the "Effective Date") by and
between AOL Mexico, S. de R.L. de C.V. a Mexican limited liability company with
offices in Mexico City ("AOL") and AVANTEL, S.A., a Mexican company with offices
in Mexico City ("AVANTEL").

     WHEREAS, AOL is an Internet and online services provider who desires to
build a proprietary AOLnet data communications network in Mexico;

     WHEREAS, AOLnet is defined to be the subset of AOL's dial-up access
network, in which AOL has complete control of:

     (i)  the usage, location and quantities of the applicable equipment;

    (ii)  the purchase, usage, and deployment of all hardware and software
          utilized to support the dial-up access network infrastructure; and

   (iii)  The right to market all available capacity as expressed in Paragraph
          1.3.

          WHEREAS, AVANTEL is a provider of data communications services and
value-added services, including Internet access services;

          WHEREAS, AVANTEL has agreed to build out a portion of AOLnet in Mexico
and provide communications services and value-added services to AOL;

          WHEREAS, the parties desire to formalize their relationship;

NOW, THEREFORE, in consideration of the mutual promises set forth herein, the
parties agree as follows:

1.  Scope of Services: AVANTEL shall install, activate, maintain, and operate
    ------------------
Modems as established in the AVANTEL Proposal attached to this agreement as
Exhibit D, for AOL's nationwide dial-up network in AOL-designated cities in
Mexico, as set forth in Exhibit C ("Deployment Plan"). The parties further agree
to negotiate in good faith regarding future
<PAGE>

expansion of AOL-designated cities within Mexico. The initial total network size
shall be [*] Modems. For purposes of this Agreement, "Modem" or "Port" shall
mean an individual data channel, having the bandwidth specified in Paragraph
2.1.(e) from a specified location in Mexico to any of the then-current AOL data
centers. This channel may be established via an analog or digital ingress (e.g.,
a channeled E-1, ISDN or ADSL circuit) to a Modem Box. "Modem Box" shall mean
the physical product, which houses the Modems and the netserver capacity to
provide intelligence regarding the network.

     1.1. Commitments AOL agrees to order from AVANTEL a minimum of [*] modems
     ----------------
for the buildout of AOLnet in Mexico by May 2001; provided, however, that
AVANTEL meets all required performance criteria as initially established in
Exhibit A and reasonably modified by AOL in the future. The modifications to the
performance criteria must be done in writing duly signed by AOL and AVANTEL in
the event of significant changes to cost directly resulting therefrom, the
parties may review the fees set forth in Paragraph 2 ("Fees").

     Such performance criteria include, but are not limited to: (i) meeting the
monthly buildout targets specified by AOL, and (ii) meeting the requisite
service levels for such buildout (including without limitation the performance
levels specified in Exhibit A.  If in any month AVANTEL fails to meet any of its
installation commitments, unless in case AVANTEL failure was because of any
service provided by the local operator, AOL's minimum commitment for all
following months shall be reduced by one-twelfth of the percentage by which
AVANTEL has fallen short its quality and capacity requirements for such month.
The above-described reduction in commitment shall not limit any of AOL's other
rights and remedies hereunder or by law. Except for the specific commitments
expressed above, AOL shall not otherwise be committed to purchase modems or
services from AVANTEL.

     (a) AVANTEL Obligations.- AVANTEL shall deploy any capacity requests
     -------------------------
accepted by AVANTEL within [*].  The parties agree that [*].  AVANTEL also
agrees to [*].  If AVANTEL refuses to accept a capacity request or does not
deploy a capacity request within [*] after accepting such request, AOL shall be
free to request installation of such capacity from another provider.  Further,
any such capacity request that AVANTEL refuses or does not timely fulfill shall
nevertheless be counted towards AOL's minimum commitment as specified in
Paragraph 1.1. [*] and in the event [*]..

                                       2
<PAGE>

     (a)  AOL will have the right to direct AVANTEL to [*] Modems (as defined
below) within [*] of the latest acceptance date of such Modems, subject to
Paragraph 1.1(c), only in case the Modems Provider do not make any charge for
those Modems. [*] shall mean [*] percent [*] of the number of Modems AVANTEL is
deploying in connection with an AOL initial buildout request, as defined in
Paragraph 1 ("Scope of Services").

     (b)  For the [*], parties shall negotiate the terms upon which AOL shall
loan to AVANTEL the use of such equipment (i.e., the right to return such
equipment for full refund therefor), including all hardware, software, spare
parts and installation services necessary for the operation of the service for
[*].

     (c)  [*] before the end of such [*] period, AOL shall provide AVANTEL with
a written communication defining how many of the [*] Modems will be kept, and
[*]. For each [*] Modems returned by AOL, AOL shall pay AVANTEL a service fee
for removal thereof in the amount of [*] during the first year of this
agreement, [*], which AVANTEL shall invoice to AOL in accordance with Paragraph
2.3 ("Invoicing and Payment Conditions") below.

1.2  Implementation of Network and Value Added Services.  AOL shall have
     --------------------------------------------------
absolute control over the services and the establishment of a reasonable
schedule for installations. In the event that AOL directs a change in services,
locations or circuits type or a reallocation of Modems among locations after
tasking has been issued or Modems have been activated, any additional direct
costs incurred by AVANTEL, including any service termination or service
activation costs, will be reimbursed by AOL.  AOL shall retain control of how
the users connect to the network and how the network connects to AOL.  AVANTEL
shall control the design and use of the network backbone, the value-added
services, and the backhaul circuits from the virtual Pop's to the physical
Pop's.  AVANTEL shall determine the location of actual Modem installation, and
AVANTEL shall also identify the number and location of spare Modems necessary to
ensure compliance with the performance specifications described in Exhibit A.

1.3  Third party relationship. AOL shall not market the services provided by
     ------------------------
AVANTEL to any third party, specially those which directly compete with AVANTEL,
without prior written approval from AVANTEL and the authorization of the
corresponding authorities, except to AOL's parents or AOL's subsidiaries where
AOL is a [*]% or greater owner and where is no restriction from the
corresponding authorities. If requested by AVANTEL, AOL shall have to prove the
legal relationship it has with its parents or subsidiaries where AOL is a [*]%
or greater owner. The

                                       3
<PAGE>

foregoing shall in no way impede AOL from providing Internet services to
consumers and businesses.


 2.  Fees.
     -----
     2.1  Network Charges. In exchange for the network services and value added
          ---------------
services to be provided hereunder, AVANTEL will be paid the following for Modems
accepted by AOL, as established in Paragraph 3 ("Acceptance Testing"), without
taxes (all prices are quoted in Mexican pesos).

          (a)  Dedicated Modems: Pricing below is per Dedicated Modem per
               ----------------
month, provided that such fee per Dedicated Modem will not be charged with
regards to a Returnable Dedicated Modem at such time that it is returned or
withdrawn in accordance with Paragraph 1.1(b).

DALLAS
------
                                         Monthly Rental Per Port
--------------------------------------------------------------------------------
Range of Ports                       [*]                         [*]
--------------------------------------------------------------------------------
[*]                                  [*]                         [*]
--------------------------------------------------------------------------------
[*]                                  [*]                         [*]
--------------------------------------------------------------------------------
[*]                                  [*]                         [*]
--------------------------------------------------------------------------------
[*]                                  [*]                         [*]
--------------------------------------------------------------------------------


RESTON
------

                                         Monthly Rental Per Port
--------------------------------------------------------------------------------
Range of Ports                       [*]                         [*]
--------------------------------------------------------------------------------
[*]                                  [*]                         [*]
--------------------------------------------------------------------------------
[*]                                  [*]                         [*]
--------------------------------------------------------------------------------
[*]                                  [*]                         [*]
--------------------------------------------------------------------------------
[*]                                  [*]                         [*]
--------------------------------------------------------------------------------

AVANTEL will waive all monthly charges for the alpha and beta tests of the
SERVICE to be provided by AVANTEL, as established in Exhibit D.  Once the
SERVICE is launched, AOL must pay for all modems that have been accepted by AOL.
If AOL orders more than [*] Modems

                                       4
<PAGE>

during the term of the Agreement after AOL launches the service, the proposed
tariff for [*] Modems will be retroactive to the first month of operation after
Alpha and Beta Tests. The proposed tariff for [*] Modems will be applied
retroactively to the first month of operation after Alpha and Beta Tests only
once during the term of this agreement.

If the contract is terminated without cause before the three year term, AOL must
pay to AVANTEL all the investment and the monthly telephone line and IPL rents
pending of payment for the first year of service, according to the current
registered tariffs if and only if AVANTEL has made best efforts at reusing these
resources. In the event of such a payment the amount will not exceed the amounts
detailed in Paragraph 8.2. (c) ("Termination Charges").

These prices are valid for a [*] contract. Prices do not include taxes. Prices
for the third year will be confirmed at the beginning of the corresponding
period.

(b)  [*]: Prices according to the following table, [*].


                                                                   [*]
                               ------------------------------------------------
Monthly Port/Hours
-------------------------------------------------------------------------------

[*]                                                                [*]
-------------------------------------------------------------------------------
[*]
-------------------------------------------------------------------------------
[*]                                                                [*]
-------------------------------------------------------------------------------

(c)    [*]: In the event that AOL [*].
(d)      National 800 Number Service

<TABLE>
<CAPTION>
                                 Monthly 800 Service Commitment in Pesos
----------------------------------------------------------------------------------------
<S>                    <C>             <C>                <C>               <C>
                        [*]                [*]               [*]               [*]
----------------------------------------------------------------------------------------
   Price per            [*]                [*]               [*]               [*]
    Minute
----------------------------------------------------------------------------------------
</TABLE>

AVANTEL will provide to AOL a [*].

                                       5
<PAGE>

Prices for 800 Domestic Service in Mexican Pesos.  Prices are subject to change
according to AVANTEL's registered tariff. Prices do not include dedicated access
lines or local service charges made by the local carrier.  Prices do not include
taxes.

        (e)  The Base Price paid to AVANTEL shall include all costs relating to
the management of the dial-up network, including but not limited to:

            (i)  the network circuit requirement [*], a LEC circuit requirement
                 of [*] Modems, and a backhaul requirement of [*];

           (ii)  recurring LEC circuit charges;

          (iii)  recurring backhaul circuit charges;

           (iv)  amortization of all one-time circuit installation fees;

            (v)  analog POTs lines;

           (vi)  non-capital equipment;

          (vii)  site maintenance;

         (viii)  recurring co-location charges;

           (ix)  co-location installation fees;

            (x)  other one-time installation fees;

           (xi)  Modem management fees;

          (xii)  equipment lease expenses at AVANTEL sites; and

         (xiii)  the cost of any spare equipment.

For purposes of this paragraph, the [*] requirements are as follows:

               Throughput      Modems per [*] (or equivalent)
               ----------      -----------   ----------------

                    [*]    [*]

[*] shall be defined as a network circuit with a [*] capacity with [*].

        (f) The Base Price is valid for a [*] bps service only. Each additional
[*] increment, as set forth above, that is requested by AOL will result in an
additional [*] per Modem per month to the Base Price. The parties agree that the
network sizing assumes that backhaul and backbone circuits are sized at no
greater than [*] per individual circuit, measured as an average over recurring
[*] windows.

        (g) Subject to Paragraphs 11 ("Indemnity") and 12 ("Limitation of
Liability"), AOL agrees to pay all applicable goods and services taxes relating
to the services provided under this Agreement as identified in the relevant
invoice provided pursuant to Paragraph 2.3 ("Invoicing and Payment Conditions").

                                       6
<PAGE>

        (h) In the event service is interrupted for reasons attributable only to
AVANTEL, AVANTEL shall be penalized as follows:

 .  Failure for non-continuos interruptions up to [*] and less than [*]: If
   provision of the dial-up access service is interrupted for a period greater
   than [*], AVANTEL shall grant to AOL a credit for [*] price of activated
   ports billed and paid in the [*] months prior to the interruption, multiplied
   by the number of hours the interruption lasted.

 .  Failure for [*] and up to [*] continuous interruption: AVANTEL shall discount
   to AOL [*] of the amounts invoiced in the month when interruption is
   incurred, if service is interrupted for [*] to [*] continuous and
   uninterrupted [*], as of the time when AVANTEL receives the report from AOL
   in the National Monitoring and Control Center (CNMC) and a TROUBLE TICKET has
                                                              ------------------
   been assigned and opened for such report.
   -----------------------------------------

 . Failure for more than [*] continuous interruption: AVANTEL shall discount to
  AOL [*] of the amounts invoiced in the month when interruption is incurred, if
  service is interrupted for a term exceeding [*] continuous and uninterrupted
  [*], as of the time when AVANTEL receives a report from AOL in the National
  Monitoring and Control Center (CNMC) and a TROUBLE TICKET has been assigned
  and opened for such report.

AVANTEL shall not be bound to pay any of the aforementioned penalties if
interruption results from a force majeure, act of God event, as well as
interruptions attributable to the supplier of local telephone services.

2.2  Price Changes.  In the event that changes to government regulations,
     -------------
including tariffs, exchange rates or tax modifications, affect the services
provided in this Agreement and result in savings or additional costs to AVANTEL,
AVANTEL agrees to pass through the total amount of such savings or additional
costs to AOL.  AOL and AVANTEL further agree, at 12-month intervals or when
mutually agreed, to in good faith evaluate and adjust prices quoted in Paragraph
2.1 ("Network Charges"), which may have been influenced by changes in inflation
(e.g. referencing the IGP-DI rate) increased efficiency (e.g. better tools
requiring fewer support staff) or reduced costs structures (e.g. increased
capacity).  AVANTEL hereby agrees that the foregoing covenant is a material term
of this Agreement.

                                       7
<PAGE>

2.3  Invoicing and payment conditions:
     ---------------------------------

     AOL shall be bound to pay AVANTEL the full amount of the invoices submitted
for the services subject matter of this Agreement or the termination charges
within the [*] calendar days following the period when services were provided or
the termination was notified.

     For charge calculation purposes, a month shall be considered as having [*].
All collections and payments for the services under this Agreement shall be made
in Mexican pesos.

     It is expressly agreed by AOL and AVANTEL that AVANTEL shall be able to
invoice during a [*] period after the billing cutoff date, any service pending
to be invoiced.

     Should the full amount billed by AVANTEL be not paid within the [*]
calendar days following the period when services were provided, for reasons
attributable to AOL,  AOL shall be bound to pay AVANTEL late payment interests
on past due balances, as of the [*] calendar day following the end of the period
when services were provided and up to the date when payment is made.

     AVANTEL may suspend the provision of the services for payment failure and
with no responsibility for AVANTEL, if after the periods mentioned below AOL
fails to pay its debts, including the late payment interests referred to in the
paragraph above, which shall be charged as follows:

     a)  During the [*]:

 .  As of day 1 and up to day [*] of this period, [*] on past due balances, and

 .  As of day [*] and up to day [*] of this period, [*] on past due balances.

     b)  During the second year of the term, AVANTEL shall wait a [*]:

 .  As of day [*] and up to day [*] of this period, [*] on past due balances, and

 .  As of day [*] and up to day [*] of this period, [*] on past due balances.

     c)  During the [*]:

                                       8
<PAGE>

 .  As of day [*] and up to day [*] of this period, [*] on past due balances,

 .  As of day [*] and up to day [*] of this period, [*] on past due balances.

     AVANTEL may suspend the provision of the service subject matter of this
agreement for payment failure. If this agreement is terminated due to the
payment failure there shall be no transition period, and AOL shall pay the
corresponding termination charges, as set forth in this agreement. However, AOL
may continue receiving services from AVANTEL if AOL prepays an amount equal to
[*].

     AOL hereby agrees that the foregoing covenant is a material term of this
Agreement.

2.4  Procedure applicable to invoiced amounts in dispute
     ---------------------------------------------------

     Should AOL do not agree with its invoice, it shall address its dispute in
writing to AVANTEL within the [*] as of the cutoff date indicated in each
invoice.  AOL binds itself to pay the undisputed amount by the payment due date,
and the [*].

     AOL shall pay the difference between the disputed amount paid and the
disputed amount due after AVANTEL and AOL determine that such charges are
applicable to AOL, which shall be determined within the following [*] days after
the disputed amounts were notified to AVANTEL. If such charges are determined to
be applicable to AOL, AOL shall be bound to immediately pay AVANTEL the disputed
amount due plus late payment interests on such amount as it was defined in
Section 2.3., as of the date the dispute is resolved until the date when payment
is made.

     If such charges are determined no to be applicable to AOL, AVANTEL shall be
bound to credit the disputed amount paid or the difference between the disputed
amount due and the disputed amount paid, plus late payment interests on such
amount as it was defined in Section 2.3., as of the date the dispute amount was
paid and the dispute is resolved.

     Disputed amounts shall be understood as such amounts invoiced to AOL by
AVANTEL, which are not recognized by AOL or which it considers are not
applicable because they are services not provided.

                                       9
<PAGE>

     Should invoiced amount dispute be not resolved by the PARTIES responsible
areas within the [*] following the date when AOL presents the dispute, the
PARTIES agree that such dispute be submitted for its resolution to their [*],
which shall be awarded with a 15 (fifteen) calendar day term for such
resolution. In the event [*] do not reach an agreement for any dispute, such
dispute shall be exclusively and definitely resolved by the [*]. in a term not
exceeding [*] as of the date when dispute is submitted for its resolution.

     Should AOL claim disputes for invoiced amounts three consecutive times, and
such three times be determined that dispute was not applicable, AOL shall be
bound to thereafter pay the full amount of the invoices presented by AVANTEL,
and any dispute by AOL shall be resolved as established, after payment is made.

        2.5  [*].
             (a)  [*].
             (b)  [*]
             (c)  [*]
             (d)  [*]
             (e)  [*]

        2.6  [*]
             (a)  [*]
             (b)  [*]
             (c)  [*] then:

             (i)  [*]

            (ii)  [*]

             (d)  [*]
i)  [*]
ii) [*]
             (e)  [*]

                                       10
<PAGE>

3.  Acceptance Testing.
    ------------------

3.1  Acceptance Criteria and Data.  Newly activated Modem Boxes will be subject
     ----------------------------
to an acceptance test by AOL.  Each acceptance test shall last for a period of
[*].  AOL shall have the option of rejecting a Modem Box and associated circuits
which meets or exceeds one or more of the following failure thresholds:  (a) [*]
(b) [*].  (c) [*]  AVANTEL shall provide to AOL all of the performance data
necessary to conduct the acceptance tests on a daily basis during the testing
period.  If such data is not received by AOL daily, the applicable Modem Box
shall automatically be deemed rejected.

3.2  Notice of Failure.  In the event that a newly activated Modem Box meets or
     -----------------
exceeds any of the failure thresholds specified in Paragraph 3.1 ("Acceptance
Criteria and Data") within the [*] day test period, AOL may, at its option, send
AVANTEL an e-mail notice of rejection, specifying the failure thresholds which
were met or exceeded during the test.  In determining acceptance, AOL shall not
hold AVANTEL accountable for problems due to AOL's client software.  Provided
that all relevant daily performance data has been provided to AOL as required by
Paragraph 3.1 ("Acceptance Criteria and Data"), any Modem Boxes that have not
been rejected by AOL by the end of the sixth day following activation will be
deemed accepted.

3.3  Rejected Modem Boxes.  Rejected Modem Boxes shall be removed from service
     --------------------
pending further troubleshooting and corrective action by AVANTEL. Following such
troubleshooting and corrective action by AVANTEL, AVANTEL may re-activate the
Modem Boxes for customer use, and a new [*] acceptance period shall commence.
No fees shall be charged to AOL during the period in which AVANTEL is
implementing troubleshooting and corrective action or during the subsequent new
[*] testing period.  After the six day testing period without any requirement
from AOL, AVANTEL automatically shall consider such Modem Boxes as accepted, and
billing will begin.

3.4  Payment Obligations.  The payment obligation of AOL for any Modem Box
     -------------------
begins at the end of the [*] testing period and only upon acceptance of such
Modem Box by AOL.

4.  Technical and Operational Requirements.  AVANTEL shall provide services that
    --------------------------------------
meet the specifications as set forth in this Paragraph 4 and in Exhibit B
("Operational Requirements"):

4.1  Netserver and Backbone Capacity
     -------------------------------
     (a)  from the netserver to the backbone, there will be no more than [*]
Modems per [*] line or [*] Modems per [*] line;

     (b)  the b ackbone is sized for aggregate dial and Internet traffic.

                                       11
<PAGE>

     (c)  the IWAN or Cross-border lines to AOL shall be sized at 70% of peak
     utilization as measured over recurring [*] windows.

4.2  Access and Connection Protocol.  AVANTEL shall provide support for the
     ------------------------------
following AOLnet access methods, access technology, connection protocols and hub
architecture:

     (a)  the proprietary AOL P3 protocol

     (b)  PPP

     (c)  TCP/IP

     (d)  UDP

     (e)  ISDN synchronous & asynchronous (v.120)

     (f)  128K Multi-link ISDN

     (g)  L2TP

     (h)  xDSL

     (i)  1-way Cable

     (j)  Routing to multiple services including but not limited to AOL and any
other AOL-offered service as requested by AOL, provided that the user's TCP/IP
connection terminates at a site, which is subject to subparagraph (l) below .

     (k)  Routing to resale customers that may be part of AOL's overall network
allocation, provided that the user's TCP/IP connection terminates at a site
which is subject to subparagraph (l) below.

     (l)   Routi ng to other AOL-specified sites in addition to the Dallas POP,
or Dulles / Reston POP as an option, provided that the cost of routing to the
other AOL-specified sites does not exceed the cost of routing the equivalent
traffic to the Dallas POP or Dulles / Reston POP as an option, subject to prior
agreement by AVANTEL and AOL on how IP routing is implemented.

4.3  IP Addresses.  AVANTEL shall acquire and manage IP addresses for all
     ------------
protocols utilized by AOL during the term of this Agreement.  Each [*] and
AVANTEL further agrees that [*] AOL shall be provided the source IP addresses
prior to use two weeks in advance of implementation within the network. AVANTEL
acknowledges and agrees that it must assign IP addresses in connection with its
implementation of the PPP protocol in a manner that permits AOL to reliably
identify the location and identity of users.

4.4  IETF Standards.  AVANTEL shall, in its network design and topology, comply
     --------------
with IETF approved and adopted standards applicable to the access methods set
forth in Paragraph 4.2.

                                       12
<PAGE>

4.5  Domain Name Services.  AVANTEL shall provide domain name service as
     --------------------
follows:

        (a)  resolve domain name service queries to AOL destinations

        (b)  support domain name service for AOL service access to the AOL
             domain and any zones resident on AOL name servers

        (c)  maintaining domain name service servers

        (d)  support AOL in acquisition of IP address blocks as requested by AOL

        (e)  AVANTEL shall not require return of address blocks currently in use
by AOL and shall provide additional blocks from the allocated AVANTEL space in
accordance with applicable NIC Mexico rules.

4.6  Changes in Operating Requirement. AOL may direct changes to the operating
     ---------------------------------
requirements described in this Section 4 to provisioned bandwidth, AOLnet access
methods, access technology, and hub architecture, and AVANTEL will respond
promptly with any adjusted pricing related to such request.  In the event that
such changes necessitate an extension of the timeframe originally scheduled for
the installation of Modems, the installation schedule shall be extended the same
amount of time required to execute such changes.

4.7  Usage.  AOL is obligated to terms substantially similar to those set forth
     -----
below in its Terms of Service relating to the services provided under this
Agreement:

        (a)  Transmitting illegal, obscene or pornographic information of any
kind, expressly including, but not limited to, information that constitutes a
criminal offense or a violation of applicable laws.

        (b)  Transmitting information or adding information or software, which
is affected by a virus, or damaging component that might in some way affect the
service which is being provided.

        (c)  Fraudulently using the service in any way, which contradicts the
specifications, included herein.

        (d)  Copying, pasting, publishing, transmitting, reproducing or
distributing in any way information, software or any other material obtained via
Internet and which is protected by industrial or intellectual property rights,
or any other right, without obtaining the prior permission of the owner or
holder of the right.

If AOL becomes aware of the fact that one of its authorized members has violated
any of the prohibitions set forth above, AOL must take all reasonable steps to
enforce its Terms of Service.

                                       13
<PAGE>

5.  Network Performance.
    -------------------

5.1  Service Performance Levels.  The network shall perform in accordance with
     --------------------------
the service performance levels set forth in Exhibit A ("Service Performance
Levels").  AOL shall notify AVANTEL in the event that the network fails to meet
or exceed the Service Performance Levels [*].  AVANTEL shall have [*] following
the receipt of such notice to cure such failure.  If AVANTEL fails to cure such
failure within such [*] period, AOL may, at its sole option, either (i)
terminate this Agreement for default, in accordance with Paragraph 8.2
("Termination") or (ii) suspend the minimum network order commitments of
Paragraph 1.1 ("Commitments") until such time as the network meets or exceeds
the Service Performance Levels (based on average measurements over [*]).  For
purposes of the foregoing, suspending the minimum network order commitments
shall mean that for each month until the network has been brought into
compliance with the Service Performance Levels, AOL shall have no obligation to
place any orders for network capacity with AVANTEL for such month.  Further, AOL
shall have no obligation following any period of suspension to make up for any
network capacity orders not made during such period of suspension.

5.2  Year 2000 Compliance.  AVANTEL represents and warrants that the services
     --------------------
provided under this Agreement are Y2K compliant.  Year 2000 compliant shall
mean:
        (a)  Business processes and procedures must contain no logical or
arithmetic inconsistencies and will function without interruption prior to,
during and after Year 2000.

        (b)  The Year 2000 must have the ability to recognize and manage
business processes and procedures that occur in association with the leap year.

        (c)  All interfaces and processes must be able to handle the data
storage, display and output of date driven information as it relates to the
century, in order to eliminate date ambiguity.

        (d)  Successfully and reliably process date relevant functions and data
containing dates from, into and between the twentieth and twenty-first
centuries.

        (e)  The above definitions apply, provided that all other products
(e.g., hardware, software, and firmware) interfacing with AOL and CompuServe
properly exchange date data with it.

5.3  Architectural Independence.

     (a) Alternate Carriers.  In the event AVANTEL determines that another
         ------------------
carrier's offerings represent a superior value, or other factors which may make
another carrier's offerings preferable, AVANTEL may utilize a carrier other than
its current carrier for the network or any portion thereof.  AVANTEL
acknowledges AOL's goal is to achieve architectural independence among its
service providers to minimize the probability that a single failure could impact
more

                                       14
<PAGE>

than one AOL service provider. AVANTEL shall solicit AOL's input prior to the
use of a carrier other than its current carrier.

          (b) International or Cross-Border Circuits. During the term of this
              --------------------------------------
Agreement, AOL may decide to [*]. In the event of such an occurrence, AOL agrees
to [*].
          AOL shall have the right, which may be exercised at its sole
discretion at any time without penalty, to [*] (including the applicable
provisions for the payment of fees) that pertain to the provision of [*] , in
such case, [*] will be redefined.

5.4  AVANTEL Representation. AVANTEL represents and warrants that the relevant
     -----------------------
authorities in Mexico have certified any and all Modem and Modem Box, as defined
above, in accordance with the applicable laws and regulations.

6.  Project Management.  AVANTEL shall set up an AOL project team, staffed with
    ------------------
a AVANTEL Project Manager and a dedicated AOL project manager [*], who will be
responsible for building, maintaining, and operating AOLnet and the AOL Internet
access.  The AVANTEL project manager shall be AOL's primary point of contact and
report to AOL [*].

7.  Audits
    ------

    7.1  Each party reserves the right to audit the other party's relevant books
and records strictly related to this agreement to verify the audited party's
compliance with the terms of this Agreement. This audit and any other audit
permitted under this Agreement by one party of the books and records of the
other party, shall be performed by an independent certified public accounting
firm as follows:

        (i)  following at least [*] prior written notice to the audited party;

       (ii)  at the auditing party's sole cost and expense;

      (iii)  in a reasonable scope and duration;

       (iv)  in a manner so as not to interfere with the audited party's
             business operations; and

        (v)  in compliance with the audited party's security requirements.

Unless the parties mutually agree otherwise, the number of audits that each
party may conduct shall not exceed one per year.  Nothing contained in this
paragraph is intended to allow either party access to or review of confidential
information, the disclosure of which would violate the terms of an agreement
with any third party. Materials of the audited party reviewed by such

                                       15
<PAGE>

independent certified public accounting firm in the course of the audit shall be
deemed confidential and their use shall be limited to the conduct of the audit
and any resulting report shall not contain any confidential information of the
audited party or any third party.  Such accounting firm shall, prior to
conducting such audit, execute a nondisclosure agreement acceptable to the
audited part containing the substantive provisions of this paragraph.  Any
report or other information produced or reviewed by the auditor shall not be
distributed within the auditing party except to such persons with a need to
know.  The foregoing report and/or information shall be made available to the
audited party on request.  Each party shall maintain complete and accurate
records and shall retain such records for a period not less than the term of
this Agreement or such other longer period as may be required by applicable law,
rule, or regulation.  The disclosure of any documents, records or any other
information shall be limited to portion of the documents, records or information
that relate to this Agreement.

7.2  Within [*] of AOL's written request, a senior executive officer of AVANTEL
will certify, through sworn affidavit, that [*].

8.  Term and Termination.
    --------------------

    8.1 Term. The term of this relationship shall be [*] from the Effective
        ----
Date. The Agreement may be renewed at the option of AOL and prior written
agreement duly signed by AVANTEL, for additional one-year periods upon six
months notice to AVANTEL. At the end of the Agreement, the parties will
implement a six-month transition period to allow for the orderly migration of
AVANTEL's customers and AOL's assumption of management and control of the
network as established in Paragraph 8.2.d.. The parties will resolve all
transition issues in an equitable manner.

    8.2. Termination: Either party shall have the right to terminate this
         -----------
agreement for Material Breach, provided that any such breach is uncured after
[*] written notice, or the term specified in the corresponding Section or
Paragraph. If the default party fails to comply with its obligations within such
term, the agreement shall be automatically terminated. Nothing in this Section
shall negate or otherwise invalidate either party's ability to terminate this
agreement as a result of a breach of agreement by the other party or as
otherwise stated elsewhere in the Agreement.

8.2.a. AOL may terminate this agreement without the need of a judicial order, if
AVANTEL incurs any of the following failures to comply, and such failure to
comply is not cured as established before:

                                       16
<PAGE>

    i)   If AVANTEL fail to present a business proposal [*] under the conditions
         set forth in Article 2.5, or

    ii)  If AVANTEL fail to meet the conditions offered [*], according to
         Section 2.6, or

   iii)  If AVANTEL fail to comply with Network Performance according to Section
         5.1., or

    iv)  If an assignment is made contravening that provided in section 14.4.,
         or

     v)  If AVANTEL fail to comply and the service levels expressed in Exhibit
         "A", or

8.2.b. AVANTEL may terminate this agreement without the need of a judicial
order, if AOL incurs any of the following failures to comply, and such failure
to comply is uncured after 30 (thirty) days written notice, or the term
specified in the corresponding Section or Paragraph.

     i)  If AOL fail to pay the monthly charges in accordance with Section 2.3.

    ii)  If an assignment is made contravening that provided in section 14.4.,
         or


The following reasons are exempted from that established in paragraph 2 above.
AVANTEL may terminate this Agreement for these reasons without the need of a
judicial order, by written notice given to AOL at least 24 hours in advance:

     i)  If AOL [*].

    ii)  If AOL [*].

8.2.c. Termination charges.

If this agreement is terminated or canceled pursuant to that provided by any of
its articles, AOL shall be bound to pay AVANTEL the following:

1. Any amount due outstanding at the effective termination or cancellation date,
for services provided by AVANTEL under the terms of this Agreement.

2. The corresponding termination charge, according to the following table:

<TABLE>
<CAPTION>

    Month when termination is enforced            Termination charge, in dollars US currency
--------------------------------------------------------------------------------------------------
<S>            <C>                                        <C>
                    [*]                                               [*]
--------------------------------------------------------------------------------------------------
                    [*]                                               [*]
--------------------------------------------------------------------------------------------------
                    [*]                                               [*]
--------------------------------------------------------------------------------------------------
</TABLE>

AVANTEL shall compute the termination charge payable by AOL, for the number of
ports [*] and the [*].

                                       17
<PAGE>

In the event of termination AVANTEL will perform its best efforts to reduce the
termination charges by repurposing resources used by AOL. In the event the
termination occurs before the first twelve months of the contract, AOL agrees to
pay AVANTEL the amounts that local carriers charge to AVANTEL for services
required to fulfill this agreement. In the event of any termination, AVANTEL
will transfer ownership of the telephone numbers in the network to AOL or its
designee, subject to regulatory feasibility of this procedure, if any.

8.2.d. Transition period:

Should this Agreement be terminated, AVANTEL agrees to work reasonably with AOL
or its designees to ensure a smooth and scheduled migration of the control and
management of the services provided at that time to AOL.  For such purpose,
PARTIES agree the following:

1)   Before the initiation of the Transition Period, AOL shall pay AVANTEL any
amount due, and shall have resolved any invoiced amounts disputed, at the date
when the Agreement termination notice is to be enforced, as well as the
corresponding termination charges according to section 8.2.c above;

2)  Before the initiation of the Transition Period, parties herein shall confirm
the services that will still need to be provided, such services shall be
detailed in a document, which will be signed by the parties and shall be
attached hereto as an exhibit. Therefore, parties agree that during the
Transition Period the Dispute Procedures set forth in section 2.4 herein shall
only be applicable if there is a difference between the amounts billed and the
services provided based on the document herein mentioned.

3)  AOL binds itself to pay AVANTEL the full amount of the invoices presented
for services provided during the Transition Period, within the [*] calendar days
following the end of the period during which such services were provided, should
AOL fail to make the payment within the aforementioned period, AVANTEL shall
have the right to immediately cancel the provision of the services, with no
responsibility for AVANTEL, and to enforce the legal action it deems appropriate
to recover the amounts due.

4)  The Transition Period shall be in force for a term not exceeding [*], as of
the date when the termination notice is enforceable.

5)  Services provided during the Transition Period shall be subject to the terms
and conditions of this agreement, as long as they are not contrary to those
provided in this section.

                                       18
<PAGE>

9.  Confidentiality.  The parties agree that all disclosures of confidential
    ---------------
and/or proprietary information before and during the term of this Agreement
shall constitute confidential information of the disclosing party.  Such
confidential information shall include, but not be limited to, [*].  Each party
                                                                 -
shall use commercially reasonable efforts to ensure the confidentiality of such
information supplied by the disclosing party, or which may be acquired by either
party in connection with or as a result of the provision of the services under
this Agreement.  Each party agrees that it shall not disclose, use, modify,
copy, reproduce, or otherwise divulge such confidential information.

        9.1  The non disclosure obligation shall not be applicable to:

             (a)  Information that is in or becomes part of the public domain
without violation of this Agreement by the receiving party;

             (b)  Information that was known to be in the possession of the
receiving party on a non-confidential basis prior to the disclosure thereof to
the receiving party by the disclosing party, as evidenced by written records;

             (c)  Information that was developed independently by the receiving
party's employees;

             (d)  Information that is disclosed to the receiving party by a
third party under no obligation of confidentiality to the disclosing party and
without violation of this Agreement by the receiving party; or

             (e)  Information that is authorized, in writing, by the disclosing
party for disclosure or release by the receiving party.

10.  Certain Conditions:
     ------------------
[*]: AVANTEL shall destine [*] of invoiced amount less taxes due to this
Agreement to [*] or, [*].

11.  Indemnity.  AVANTEL agrees to indemnify, defend, and hold AOL harmless from
     ---------
damages, losses, or liabilities (including reasonable attorneys' fees) arising
from (i) any third party claims [*] arising from the use of any AVANTEL-
developed materials; (ii)  AOL claims arising out of a breach by AVANTEL of this
Agreement; and (iii) AOL claims relating to any [*]; (iv) any [*] resulting from
[*] in connection with this Agreement.

AOL agrees to indemnify, defend, and hold AVANTEL harmless from and against
damages, losses, or liabilities (including reasonable attorneys' fees) arising
from: (i) Any claim related to any [*]; (ii) [*] in connection with this
Agreement.

                                       19
<PAGE>

12.  Limitation of Liability.  Notwithstanding anything else to the contrary
     -----------------------
stated or implied herein, neither party shall have any liability whatsoever for
any indirect, incidental, consequential, or special damages (including lost
profits) suffered by the other or by any assignee or other transferee of the
other, even if informed in advance of the possibility of such damages, which
includes, but is not limited to, loss of profits, revenues or business
opportunities.

13.  Ownership and Remedies upon Termination or Expiration.
     ------------------------------------------------------
     (a)  AVANTEL shall retain title and ownership to the dial-up network
equipment, including but not limited to, Modems and related equipment; provided,
however, that as a condition of such ownership, the parties agree that:

          (i)  AOL, in its sole discretion, shall determine [*] and [*] for the
     Modems and related equipment, and AVANTEL agrees to implement any new
     technology on an expedited basis for AOL, as established in Paragraph 1.1;

         (ii)  AOL shall recoup all of the economic benefit of any [*] by AOL of
     a [*]; and

        (iii)  Even in the event of Agreement termination, AVANTEL shall not [*]
     to any third party, just in case this [*] is technical and legal possible
     for AVANTEL, without written notice to AOL. This shall not be applicable in
     the event of Agreement termination due to payment failure by AOL according
     to Paragraph 2.3.

         (iv)  Upon termination of this Agreement arising from a material
     uncured breach by AVANTEL, the parties agree that:

 .  AOL (or its designee) shall be allowed to manage the operation of the AOL
   portion of the network utilizing AVANTEL personnel and staff and AVANTEL
   equipment and software at AVANTEL locations, and AVANTEL shall permit such
   personnel and staff to have restricted (but reasonably sufficient) access to
   such AVANTEL locations for the purpose of managing such operations, with the
   applicable charges payable to AVANTEL for all Services rendered during the
   [*] after the effective date of termination, transition period;

 .  The parties shall implement a [*] transition period to allow for AOL's
   assumption of management and control of the network. AOL shall pay to AVANTEL
   its services rendered

                                       20
<PAGE>

   until the date AVANTEL and AOL finished the transition of them. AVANTEL shall
   not encumber or permit the [*].

Notwithstanding anything to the contrary in this Agreement, any changes in the
AOL [*] shall require prior written approval from AOL, except in case the change
of [*] is done because an authority requirement, legal or regulatory rule.  AOL
shall also retain title and ownership to all data contained in written reports
prepared and delivered to AOL hereunder. Any software developed by AVANTEL
incidental to the performance of services for AOL, the cost of which is charged
to, and reimbursed by, AOL shall be jointly owned by AVANTEL and AOL, and
AVANTEL may not use such software for the benefit of a third party unless
AVANTEL pays to AOL the cost that was charged to AOL for the development of such
software.  Notwithstanding the foregoing, in no event shall AVANTEL use such
software for the benefit of any entity reasonably construed to be a competitor
of AOL.  AVANTEL further agrees to execute any and all necessary documentation
to perfect AOL's ownership rights in such software as reasonably requested by
AOL ,at AOL's responsibility and cost.  AVANTEL further agrees that it has no
ownership rights or usage rights (except as necessary to fulfill its obligations
as set forth in this Agreement) to any AOL proprietary information or software
provided hereunder, including but not limited to any AOL proprietary information
or AOL software which may be incorporated into written material or software
delivered under this Agreement.

14.  General.
     -------

     14.1  Governing Law.  This Agreement shall be governed and construed
           -------------
under the laws of the [*] and the federal district court of [*], are hereby
elected to settle any disputes arising herefrom, with the exclusion of any other
no matter how privileged it may be.

     14.2  Press Release.  The terms of this Agreement are confidential, and
           -------------
neither party shall [*] the terms and conditions of this Agreement.  Such
obligations shall apply [*]. In addition,[*].

     14.3  Force Majeure.
           -------------
      (a)  During the term of this Agreement, neither party shall be in default
of its obligations to the extent that its performance is delayed or prevented by
outside causes beyond its reasonable control, such as but not limited to acts of
God, natural disasters, bankruptcy of a vendor, strikes and other labor
disturbances, acts of war or civil disturbance, or other equivalent

                                       21
<PAGE>

or comparable events. Market fluctuations and decreases in the business volume
of AOL shall not be considered as acts of God.

      (b)  In such event, the non-performing party will be excused from any
further performance obligations so affected for as long as such circumstances
prevail and such party continues to use commercially reasonable efforts to
recommence performance without delay. [*].

      (c)  Any party so delayed in its performance will immediately notify the
party to whom performance is due by telephone (to be confirmed promptly in
writing) and describe in reasonable detail the circumstances causing such delay.

          If any of the circumstances described in this Paragraph prevent,
hinder, or delay performance of the Services necessary for the performance of
AOL's critical functions for more than [*] then AOL may terminate this Agreement
without penalty as of a date specified by AOL in a notice of termination to
AVANTEL.  For the avoidance of doubt, at all times, AOL may procure such
services from an alternate source.

     14.4  Assignment.  Neither party may assign this Agreement or its rights or
           ----------
obligations under this Agreement to a third party without the prior written
consent of the other party, whose consent shall not be unreasonably withheld.

          In the event of the consummation of a reorganization, merger or
          -
consolidation or sale or other disposition of substantially all of the assets of
either party or the acquisition by any individual, entity or group of beneficial
ownership of more than a controlling interest of either party, then the other
party shall have the right to terminate this Agreement without penalty but
otherwise in accordance with paragraph 8.2.

     14.5  Notices.  All notices or reports permitted or required under this
           -------
Agreement shall be in writing and shall be delivered by personal delivery,
telegram, or facsimile transmission or by registered mail, return receipt
requested.  Notices shall be sent to the signatories of this Agreement at the
address set forth at the beginning of this Agreement or such other address as
either party may specify in writing.  Notices shall be effective upon receipt.
In the case of AOL, any and all notices to be provided to AOL under this
Agreement must also be provided to AOL at Bosque de Ciruelos No. 168, Col.
Bosques de las Lomas, C.P. 11700 en Mexico, D.F., to the attention of its
General Counsel.

     14.6  No Agency. Nothing contained herein shall be construed as creating
           ---------
any agency, partnership, or other form of joint enterprise between the parties.

                                       22
<PAGE>

     14.7  Full Power.  Each party warrants that it has full power to enter
           ----------
into and perform this Agreement, and the person signing this Agreement on such
party's behalf has been duly authorized and empowered to enter into this
Agreement. Each party further acknowledges that it has read this Agreement,
understands it, and agrees to be bound by it.

      14.8  Survival. Paragraphs 2.3 ("Invoicing and Payment Conditions"), 8.2
            --------
("Termination"), 9 ("Confidentiality"), 10 ("Certain Conditions"), 11
("Indemnity"), 12 ("Limitation of Liability"), 13 ("Ownership") and 14
("General") of this Agreement shall survive for a period of [*] [*] after
cancellation, termination or expiration of this Agreement.

      14.9  Entire Agreement.  This Agreement constitutes the entire agreement
            ----------------
between the parties with respect to the subject matter hereof. This Agreement
may only be changed by mutual agreement of authorized representatives of the
parties in writing.

     14.10  Waiver.  No failure on the part of either party to exercise, and
            ------
no delay in exercising any right or remedy hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right or remedy granted hereby or by law.

     14.11  Language and Counterpart.  This Agreement may be executed in
            ------------------------
Spanish and English, provided however that the Spanish version shall always
prevail in the event of any disputes concerning this agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the Effective Date.

AOL MEXICO, S. de R.L. de C.V.                         AVANTEL S.A.



By:  _____________________________       By:  ________________________________
Name:   Lic. Eduardo Escalante                   Ing. Javier Vieyra Navarro
Title:  President                        Title:  Local Services Director
Date:   January 20, 2000                 Date:   January 20, 2000

                                       23
<PAGE>

                                   EXHIBIT A
                           Service Performance Levels
I.  Reports
    -------
AVANTEL will provide to AOL the following reports:

1.  Usage Reports

          A.  Daily reports on hourly usage by modem by city

          B.  Daily reports on percentage of ineffective calls

2.  Daily reports on circuit utilization, including but not limited to [*].
These reports will include (i) 5 minute in and out bit rates; (ii) packet loss
(average, median and 95th percentile for each major router pair); (iii) round
trip delays between major router pairs.

3.  Read only access by AOL to SNMP variables on AOL demarcation routers
II.  Service Level Requirements
     --------------------------
AVANTEL shall meet or exceed the AOLnet network average in the following areas:

1.  Connection Success (getting connected to the AOL service)

          A.  [*]

          B.  [*]

          C.  Training

          D.  Ineffectives

          E.  Customer Reported Problems

2.  Connection Quality (staying connected)

          A.  Percentage of [*]

          B.  [*]

          C.  [*]

3.  Problem Resolution

          A.  Modem Availability

          B.  Trouble Tickets Resolution Time

          C.  Service Down Time

4.  Ability to Fill Orders

          A.  Modem Plan

          B.   Backbone Capacity Plan

                                      24
<PAGE>

                                   EXHIBIT B
                                   ---------
                            Operational Requirements
                            ------------------------
I.   Network Engineering
          AVANTEL agrees to provide network engineering to address operational
and long-term planning issues.

II.  Operations

          AVANTEL will continue to provision, staff, and operate a Network
Operations Center ("NOC") with dedicated support for AOL and a backup NOC at a
separate location at least 300 miles away.  The scope of this task will include
the following AVANTEL support and value added services for the network:

          A.   Operation of the NOC and co-located systems with trained and
               qualified personnel on a continuous 24 hours per day, 7 days per
               week basis.

          B.   Operation of all NOC equipment, monitoring, and fault isolation
               functions.

          C.   Coordinating the dispatch maintenance representatives for
               corrective maintenance activities and recording information in a
               Problem Report ("PR") as follo ws:

               1.   In the Mexico City metropolitan area, the AVANTEL field
                    service will respond within [*] hour for all repairs that
                    cannot be completed through remote means

               2.   AVANTEL will provide field service within [*] hours for all
                    repairs that cannot be completed through remote means for
                    all other locations.

               3.   Initiation of a corrective maintenance request, plus
                    recording the time that the call is received by the AVANTEL
                    maintenance representative.

               4.   Upon arrival of the maintenance representative at the site,
                    the NOC confirms the reported problems and records the site
                    arrival time with the representative.

               5.   Upon notification to the NOC by the on-site maintenance
                    representative of any of the following conditions, AOL
                    representatives are conferred with for advice or assistance:
                    work stoppage, delay, denial of access to the equipment.

               6.   Upon restoration of service by the maintenance
                    representative, the NOC confirms operation of the equipment
                    and records the time when service was restored and the
                    reason for the outage in concert with the maintenance
                    representative.

                                      25
<PAGE>

          D.   Initiation of PRs, maintenance of a log of all PRs, coordination
               of PRs with support personnel and tracking of problems until
               resolution using a commercial trouble reporting system.

          E.   Utilizing the SNMP capabilities and AVANTEL diagnostic software
               resident in the NOC for:

               1.   Daily test ing of modems and local
                    access numbers

               2.   Measurements of the usage of each modem several times during
                    each 24 hour period

               3.   Monitoring and recording the backbone and trunk availability
                    and utilization

               4.   Accounting for the disposition of each call placed to AOLnet
                    (i.e. how many calls were placed, how many calls were sent
                    successfully to AOL, how many calls were lost in the network
                    due to routing problems, how many calls were sent to AOL,
                    but AOL did not accept them, etc.)

          F.   Providing on-site analyst support Monday through Friday
               (excluding AVANTEL holidays) during normal working hours. A
               dedicated access number shall be maintained for AOL's exclusive
               use, which shall always be operational. Analyst support is
               defined as including the following:

               1.   Supporting short-term and long-term AOLnet problem
                    identification, analysis, and resolution.

               2.   Ensuring that p roper steps are taken to resolve the problem

               3.   Identifying and tracking all software, baseline and patches,
                    deployed in the AOLnet and NOC platforms

               4.   Supporting the deployment of new software and hardware to
                    the AOLnet and NOC equipment as coordinated with AOL

               5.   Providing support to network provisioning requirements

               6.   Maintaining a technical library for the NOC

          G.   Performing on-call analyst support to AOLnet on a continuous 24
               hour per day, 7 days per week basis. On-call analyst personnel
               respond to urgent requests from the NOC in conjunction with the
               on-site AVANTEL personnel. Procedures for the conduct of network
               testing are in accordance with those developed in conjunction
               with AOL representatives.

          H.   Providing operational support to AOLnet in the area of network
               testing in association with provisioning actions. Such testing
               shall be conducted from the NOC in conjunction with the on-site
               AVANTEL installation team personnel.

                                      26
<PAGE>

          I.   Maintaining and providing updates and changes to NOC maps

          J.   Maintaining an authorized outage listing for NOC controller use

          K.   Acting as AOL's agent in network security matters on a day-to-day
               basis in accordance with commercially reasonable practices and
               making recommendations for improvements

          L.   Using commercial teleconferencing facilities in the resolution of
               network problems, escalation of problems, and planning activities

          M.   Providing electronic mail service support for the NOC via the e-
               mail/DNS capability resident on the Sun workstations

          N.   Providing a facsimile service resident in the NOC equipment

          O.   Delivering the following reports to the AOL representatives
               designated:

               1.   Daily modem and site usage

               2.   Daily call disposition reports

               3.   Weekly summary of the amount of time required to close PRs

               4.   Daily ineffective call report

               5.   Daily backbone utilization statistics

               6.   Daily network latency and congestion statistics

               7.   Trace data as required to debug client and AOLnet problems

               AOL may request additional reports that assist in improving
               AOLnet quality. AVANTEL will provide these additional reports, or
               the raw data, subject to technical reasonableness.

III.   Design and Topology of AOLnet

          AVANTEL intends to continue to improve the network design to: reduce
risk, improve robustness, and enhance the price/performance of the transmission
system.

          A.   Traffic Assumptions

          B.   Location of Points of Presence

          C.   Network Architecture

          D.   Network Topology

          AOL shall be allowed to establish a route of last resort on the
AVANTEL network.  AVANTEL will manage such traffic and provision their network
to maintain a maximum circuit load as defined in Paragraph 2.1(d).

IV.  Network Support Organization

          AVANTEL has structured the program so that we can both rapidly build
out a network and deliver quality service, and it can provide to AOL value added
services.

                                      27
<PAGE>

         A.   Program Management: The program management group is responsible
              for the management of the project as a whole. The program
              management team is led by a program executive who has direct and
              immediate access to the senior management of AVANTEL
              Communications and a program manager who reports to the program
              executive. The program management team is the primary point of
              contact between AVANTEL and AOL and coordinates the activity of
              all functional groups within AVANTEL and is responsible for
              project and financial management of the program.

         B.   Engineering: Network engineering handles the technical aspects of
              the project, resolution of problems escalated by the NOC, planning
              for future network expansion, and improving performance and
              process. Engineering interacts directly with AOL and the NOC.

         C.   Deployment: The deployment team consists of field engineers and
              technicians and others who have experience dealing directly with
              local carriers, preparing sites, and installing equipment. Part of
              the team will be based at AVANTEL to coordinate activities and
              provide support for installers.

         D.   Operations:  A NOC handles the operation and maintenance of the
              network. The NOC is connected to AOL's central facilities,
              including a direct telephone link to the AOL operations center.
              The NOC's monitoring capability is set up to detect and correct
              most network problems before they are visible to AOL or its
              customers.

         E.   The NOC directs the maintenance activity based on input from the
              monitoring systems and AOL. AVANTEL handles the large majority of
              repair tasks over the telephone with technicians at the POPs by
              storing hardware at the POPs, establishing working agreements with
              the POPs and other service providers and by providing written
              procedures. When it is necessary to send technicians to deal with
              problems, AVANTEL uses its existing infrastructure of satellite
              offices and field engineers.

         F.   AVANTEL shall support AOL in the acquisition of IP address blocks
              as requested by AOL. AVANTEL shall not require return of address
              blocks currently in use by AOL and shall provide additional blocks
              from the allocated AVANTEL space as requested by AOL. The
              provision at additional address blocks must continue for at least
              the next two years, and AVANTEL must give AOL a minimum of one-
              year notice should AVANTEL choose to terminate this service.

         G.   AVANTEL agrees not to restrict traffic to and from AOL unless
              requested to do so by AOL or required to do so by court order or
              applicable law.

                                      28
<PAGE>

         H.   AVANTEL shall manage the backbone and interconnection points with
              other Internet providers and customers to minimize loss and delay
              of AOL traffic. Such management shall include creation of new
              interconnection points as required.

         I.   Each party shall use reasonable efforts to aggregate routing
              information sent to the other and to control the addition and
              withdrawal of routing information.

         J.   AVANTEL shall announce AOL routing information at AVANTEL
              interchange points as agreed by AOL.

                                      29
<PAGE>

                                   EXHIBIT C
                                Deployment Plan
AOL-Designated Cities
---------------------
Mexico City

Guadalajara

Monterey


Tijuana

Cuernavaca

Puebla

And other cities as described in Exhibit D

Launch Requirements

As we mentioned before the Internet de Avantel platform can provide up to [*]
access port and Internet access server equipment to cover the AOL requirement.
Avantel assures availability of the number of ports and coverage in the cities
and within the launch time schedules planned by AOL, and the expected growth,
according to the following table:

<TABLE>
<CAPTION>
                 Pre-Alpha      Alpha       Beta 1       Beta 2       Beta 3      Launch      Launch+12
City                TBD          TBD          TBD          TBD          TBD         TBD          TBD
---------------------------------------------------------------------------------------------------------
<S>             <C>          <C>          <C>          <C>          <C>          <C>        <C>
Mexico City             [*]          [*]          [*]          [*]          [*]        [*]            [*]
Guadalajara             [*]          [*]          [*]          [*]          [*]        [*]            [*]
Monterrey               [*]          [*]          [*]          [*]          [*]        [*]            [*]
Tijuana                 [*]          [*]          [*]          [*]          [*]        [*]            [*]
Cuernavaca              [*]          [*]          [*]          [*]          [*]        [*]            [*]
Puebla                  [*]          [*]          [*]          [*]          [*]        [*]            [*]

Totals                  [*]          [*]          [*]          [*]          [*]        [*]            [*]
</TABLE>

                   Table 3.  AOL Mexico Release Time Schedule

The foregoing table is provided as example, and is not binding either party.

                                      30
<PAGE>

                                   EXHIBIT D
                                   ---------
                                AVANTEL PROPOSAL
                                ----------------

AOL Request
-----------

In order to complete the proposal delivered to AOL, on past [*] Avantel now
presents this document as an alternative solution to provide network
connectivity to the AOL Mexican users.

Is important to mention than this document is fully based on the AOL RFP and the
information achieved in our last meeting with AOL, in Reston, Va., and makes
references to our proposal delivered to AOL, dated by [*]

                         Alternate solution Description
                         ------------------------------

As we described in our last proposal to AOL, the Avantel SDH Optical Fiber
Network provides transport and several telecommunication services with physical
presence in 33 cities (POPs) across the country.

Additionally, in accordance to AOL Launch schedule, we can also provide services
in 10 more cities, for a total of [*].
This proposal considers to provide local access services to AOL Mexican users in
the cities shown below using [*] (see figure 1):
The available cities by date will be:

[*]

        Mexico                 Guadalajara              Monterrey
        Cd. Juarez             Guanajuato               San Luis Potosi
        Tampico                Tula                     Torreon
        Cuernavaca             Puebla                   Tijuana
        Chihuahua

[*]

        Aguascalientes         Cd. Valles               Cd. Victoria
        Celaya                 Cuautitlan               Cuautla
        Irapuato               Leon                     Matamoros
        Merida                 Ocotlan                  Pachuca
        Queretaro              Reynosa                  Saltillo
        Tlaxcala               Tepatitlan               Texcoco
        Toluca                 Tulancingo               Zacatecas

                                      31
<PAGE>

[*]

        Acapulco               Coatzacoalcos            Culiacan
        Durango                Hermosillo               Monclova
        Morelia                Veracruz                 Villahermosa


Technical Solution

In each city on table shown above, [*]
                                     -
Avantel will [*]  In [*]
[*]



              Figure 1.  Proposed Topology for AOL Mexican users.

Avantel can also provide an 800 national access number for remote users located
in another cities not included in table above.

The proposal exceeds [*] access ports of total capacity for AOL Mexican Users.


                                      32
<PAGE>

Avantel can provide any capacity and bandwidth, as a clear channel, Frame Relay,
ATM and/or Internet domestic and international circuits, using their redundant
optical fiber network.  We are quite sure than our network capacity and quality
services will met and exceed AOL Mexico requirements.

As mentioned all the network elements are monitored 24 hours a day, 7 days a
week, by our main NOC (Network Operation Center) located in Monterrey City, and
in case of failure they will dispatch the personnel to attend and correct the
problem, where ever be located.

For network monitoring Avantel will provide a 64 Kbps Frame Relay circuit
connected to our main Monitoring Network System, including the USA router.
Avantel responsibilities
Avantel will provide to AOL Mexican network request:

-  Local access in each city described in table above.
-  800-access number (quoted separately).
-  K56Flex or V.90 standard modems.
-  [*] Access Server platform.
-  Both [*] Routers in Mexico and USA (Dallas).
-  National and international network facilities to transport the AOL Mexican
   Users traffic.
-  Full network management in Mexico and the LAN port in the USA [*] Router
   (Demarc Point).
-  Reporting as requested (described in Paragraph 6.0 in our last proposal).