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                                                                    EXHIBIT 99.1

                                  RISK FACTORS

YOU SHOULD BE AWARE THAT THERE ARE VARIOUS RISKS ASSOCIATED WITH US AND OUR 
BUSINESS, INCLUDING THE ONES DISCUSSED BELOW. YOU SHOULD CAREFULLY CONSIDER 
THESE RISK FACTORS, AS WELL AS THE OTHER INFORMATION CONTAINED IN OUR FORM 
10-Q AND OUR OTHER PERIODIC REPORTS AND DOCUMENTS FILED WITH THE SECURITIES 
AND EXCHANGE COMMISSION, IN EVALUATING PSINET AND OUR BUSINESS.

WE HAVE SIGNIFICANT INDEBTEDNESS AND WE MAY NOT BE ABLE TO MEET OUR OBLIGATIONS

We are highly leveraged and have significant debt service requirements. As of
March 31, 1999, our total indebtedness was $1.28 billion, representing 116% of
total capitalization, and our interest expense for the year ended December 31,
1998 and the three months ended March 31, 1999 was $63.9 million and $29.6
million, respectively.

Our high level of indebtedness could have several important effects on our
future operations, which, in turn, could have important consequences for the
holders of our securities, including the following:

-    a substantial portion of our cash flow from operations must be used to pay
     interest on our indebtedness and, therefore, will not be available for
     other business purposes;

-    covenants contained in the agreements evidencing our debt obligations
     require us to meet many financial tests, and other restrictions limit our
     ability to borrow additional funds or to dispose of assets and may affect
     our flexibility in planning for, and reacting to, changes in our business,
     including possible acquisition activities and capital expenditures; and

-    our ability to obtain additional financing in the future for working
     capital, capital expenditures, acquisitions, general corporate purposes or
     other purposes may be impaired.

Our ability to meet our debt service obligations and to reduce our total
indebtedness depends on our future operating performance and on economic,
financial, competitive, regulatory and other factors affecting our operations.
Many of these factors are beyond our control and our future operating
performance could be adversely affected by some or all of these factors. We
historically have been unable to generate sufficient cash flow from operations
to meet our operating needs and have relied on equity, debt and capital lease
financings to fund our operations. However, based on our current level of
operations, management believes that existing working capital, existing credit
facilities, capital lease financings and proceeds of future equity or debt
financings will be adequate to meet our presently anticipated future
requirements for working capital, capital expenditures and scheduled payments of
interest on our debt. We cannot assure, however, that our business will generate
sufficient cash flow from operations or that future working capital borrowings
will be available in an amount sufficient to enable us to service our debt or to
make necessary capital expenditures. In addition, we cannot assure that we will
be able to raise additional capital for any refinancing of our debt in the
future.

WE HAVE EXPERIENCED CONTINUING LOSSES, NEGATIVE CASH FLOW AND FLUCTUATIONS IN
OPERATING RESULTS

Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in new and rapidly evolving
markets. To address these risks, we must, among other things, respond to
competitive developments, continue to attract and retain qualified persons, and
continue to upgrade our technologies and commercialize our network services
incorporating such technologies. We cannot assure that we will be successful in
addressing such risks, and the failure to do so could have a material adverse
effect on our business, financial condition, results of operations and ability
to pay when 


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due principal, interest and other amounts in respect of our debt. Although we
have experienced revenue growth on an annual basis with revenue increasing from
$84.4 million in 1996 to $121.9 million in 1997 to $259.6 million in 1998, we
have incurred losses and experienced negative earnings before interest expense
and interest income, taxes, depreciation and amortization, other non-operating
income and expense, and charge for acquired in-process research and development
("EBITDA") during each of such periods. We expect to continue to operate at a
net loss and experience negative EBITDA in the near term as we continue our
acquisition program and the expansion of our global network operations. We have
incurred net losses available to common shareholders of $55.1 million, $46.0
million and $264.9 million and have incurred negative EBITDA of $28.0 million,
$21.2 million and $42.1 million for each of the years ended December 31, 1996,
1997 and 1998, respectively. During the three months ended March 31, 1999, we
incurred net losses available to common shareholders of $59.3 million and
negative EBITDA of $6.8 million. At March 31, 1999, we had an accumulated
deficit of $486.9 million. We cannot assure that we will be able to achieve or
sustain profitability or positive EBITDA.

Our operating results have fluctuated in the past and may fluctuate
significantly in the future as a result of a variety of factors, some of which
are outside our control. These factors, include, among others:

-    general economic conditions and specific economic conditions in the
     Internet access industry;

-    user demand for Internet services;

-    capital expenditures and other costs relating to the expansion of
     operations of our network;

-    the introduction of new services by us or our competitors;

-    the mix of services sold and the mix of channels through which those
     services are sold;

-    pricing changes and new product introductions by us and our competitors;

-    delays in obtaining sufficient supplies of sole or limited source equipment
     and telecom facilities; and

-    potential adverse regulatory developments.

As a strategic response to a changing competitive environment, we may elect from
time to time to make pricing, service or marketing decisions that could have a
material adverse effect on our business, results of operations and cash flow.

WE ARE PARTIALLY DEPENDENT ON OUR SUBSIDIARIES FOR REPAYMENT OF DEBT

We are an operating entity that also conducts a significant portion of our
business through our subsidiaries. Our cash flow from operations and
consequently our ability to service our debt, including our 10% senior notes and
11 1/2% senior notes, is therefore partially dependent upon our subsidiaries'
earnings and their distributions of those earnings to us. It may also be
dependent upon loans, advances or other payments of funds to us by those
subsidiaries. Our subsidiaries have no obligation, contingent or otherwise, to
make any funds available to us for payment of the principal of or interest on
many of our debt obligations, including our 10% senior notes and 11 1/2% senior
notes. Our subsidiaries' ability to make payments may be subject to the
availability of sufficient surplus funds, the terms of such subsidiaries'
indebtedness, applicable laws and other factors.

Our subsidiaries' creditors will have priority to the assets of such
subsidiaries over the claims of PSINet and the holders of our indebtedness. One
exception is that if such subsidiaries have provided guarantees of our
indebtedness and if loans made by us to our subsidiaries are recognized as
indebtedness, they will not have such priorities. In any event, our 10% senior
notes and 11 1/2% senior notes are effectively subordinated in right of payment
to all existing and future indebtedness and other liabilities of our


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subsidiaries, including trade payables. As of March 31, 1999, our subsidiaries
had approximately $181.1 million of total liabilities, including trade payables
and accrued liabilities, to which holders of our 10% senior notes and 11 1/2%
senior notes are structurally subordinated. Under the terms of agreements
evidencing our debt obligations, some of our subsidiaries are restricted in
their ability to incur debt in the future.

WE MAY NOT BE ABLE TO FUND THE EXPANSION WE WILL NEED TO REMAIN COMPETITIVE

In order to maintain our competitive position and continue to meet the
increasing demands for service quality, availability and competitive pricing, we
expect to make significant capital expenditures. At March 31, 1999, we were
obligated to make future payments that total $99.5 million for acquisitions of
global fiber-based telecommunications bandwidth, including indefeasible rights
of use or other rights. We also expect that there will be additional costs, such
as connectivity and equipment charges, in connection with taking full advantage
of such acquired bandwidth and indefeasible rights of use. Although we are
currently unable to estimate the extent of such additional costs, we currently
anticipate that our capital expenditures in 1999 will be consistent with those
in 1998.

We historically have been unable to generate sufficient cash flow from
operations to meet our operating needs and have relied on equity, debt and
capital lease financings to fund our operations. However, we believe that we
will have a reasonable degree of flexibility to adjust the amount and timing of
these capital expenditures in response to market conditions, competition, our
then-existing financing capabilities and other factors. We also believe that
working capital generated from the use of acquired bandwidth, together with
other existing working capital, existing credit facilities, capital lease
financings and proceeds of future equity or debt financings will be sufficient
to meet the presently anticipated working capital and capital expenditure
requirements of our operations.

We may need to raise additional funds in order to take advantage of
unanticipated opportunities, more rapid international expansion or acquisitions
of complementary businesses. In addition, we may need to raise additional funds
to develop new products or otherwise respond to changing business conditions or
unanticipated competitive pressures. We cannot assure that we will be able to
raise such funds on favorable terms. In the event that we are unable to obtain
such additional funds on acceptable terms, we may determine not to enter into
various expansion opportunities.

WE FACE RISKS ASSOCIATED WITH ACQUISITIONS AND STRATEGIC ALLIANCES RELATING TO
DIFFICULTIES IN INTEGRATING COMBINED OPERATIONS, INCURRENCE OF ADDITIONAL DEBT
TO FINANCE ACQUISITIONS AND OPERATIONS OF ACQUIRED BUSINESSES, POTENTIAL
DISRUPTION OF OPERATIONS AND RELATED NEGATIVE IMPACT ON EARNINGS, AND INCURRENCE
OF SUBSTANTIAL EXPENSES THAT COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION

Growth through acquisitions represents a principal component of our business
strategy. Over the 19 months ended April 30, 1999, we acquired 22 Internet
service providers and one business that operates a data center, primarily in ten
of the 20 largest global telecommunications markets. We expect to continue to
acquire assets and businesses principally relating to or complementary to our
current operations. We may also seek to develop strategic alliances both
domestically and internationally. Any such future acquisitions or strategic
alliances would be accompanied by the risks commonly encountered in acquisitions
or strategic alliances. Such risks include, among other things:

-    the difficulty of integrating the operations and personnel of the
     companies;

-    the potential disruption of our ongoing business;


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-    the inability of management to maximize our financial and strategic
     position by the successful incorporation of licensed or acquired technology
     and rights into our service offerings; and

-    the inability to maintain uniform standards, controls, procedures and
     policies and the impairment of relationships with employees and customers
     as a result of changes in management.

We cannot assure that we will be successful in overcoming these risks or any
other problems encountered in connection with such acquisitions or strategic
alliances. We believe that after eliminating redundant network architecture and
administrative functions and taking other actions to integrate the operations of
acquired companies we will be able to realize cost savings. However, we cannot
assure that our integration of acquired companies' operations will be
successfully accomplished. Our inability to improve the operating performance of
acquired companies' businesses or to integrate successfully the operations of
acquired companies could have a material adverse effect on our business,
financial condition and results of operations. In addition, as we proceed with
acquisitions in which the consideration consists of cash, a substantial portion
of our available cash will be used to consummate such acquisitions.

As with each of our recent acquisitions, the purchase price of many of the
businesses that might become attractive acquisition candidates for us likely
will significantly exceed the fair values of the net assets of the acquired
businesses. As a result, material goodwill and other intangible assets would be
required to be recorded which would result in significant amortization charges
in future periods. In addition, an intangible asset that frequently arises in
connection with the acquisition of a technology company is "acquired in-process
research and development," which under U.S. accounting standards, as presently
in effect, must be expensed immediately upon acquisition. Such expenses, in
addition to the financial impact of such acquisitions, could have a material
adverse effect on our business, financial condition and results of operations
and could cause substantial fluctuations in our quarterly and yearly operating
results. Furthermore, in connection with acquisitions or strategic alliances, we
could incur substantial expenses, including the expenses of integrating the
business of the acquired company or the strategic alliance with our existing
business.

We expect that competition for appropriate acquisition candidates may be
significant. We may compete with other telecommunications companies with similar
acquisition strategies, many of which may be larger and have greater financial
and other resources than we have. Competition for Internet companies is based on
a number of factors including price, terms and conditions, size and access to
capital, ability to offer cash, stock or other forms of consideration and other
matters. We cannot assure that we will be able to successfully identify and
acquire suitable companies on acceptable terms and conditions.

OUR GROWTH AND EXPANSION MAY STRAIN OUR ABILITY TO MANAGE OUR OPERATIONS AND OUR
FINANCIAL RESOURCES

Our rapid growth has placed a strain on our administrative, operational and
financial resources and has increased demands on our systems and controls. We
have approximately 525 points-of-presence and we plan to continue to expand the
capacity of existing points-of-presence as customer-driven demand dictates. In
addition, we have completed a number of acquisitions of companies and
telecommunications bandwidth during 1998 and plan to continue to do so. We
anticipate that our Carrier and Internet Service Provider Services business
unit, as well as other business growth, may require continued enhancements to
and expansion of our network. The process of consolidating the businesses and
implementing the strategic integration of these acquired businesses with our
existing business may take a significant amount of time. It may also place
additional strain on our resources and could subject us to additional expenses.
We cannot assure that we will be able to integrate these companies successfully
or in a timely manner. In addition, we cannot assure that our existing operating
and financial control systems and infrastructure will be adequate to maintain
and effectively monitor future growth.


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Our continued growth may also increase our need for qualified personnel. We
cannot assure that we will be successful in attracting, integrating and
retaining such personnel. The following risks, associated with our growth, could
have a material adverse effect on our business, results of operations and
financial condition:

-    our inability to continue to upgrade our networking systems or our
     operating and financial control systems;

-    our inability to recruit and hire necessary personnel or to successfully
     integrate new personnel into our operations;

-    our inability to successfully integrate the operations of acquired
     companies or to manage our growth effectively; or

-    our inability to adequately respond to the emergence of unexpected
     expansion difficulties.

WE FACE RISKS ASSOCIATED WITH OUR ACQUISITIONS OF BANDWIDTH FROM NETWORK
SUPPLIERS, INCLUDING OUR STRATEGIC ALLIANCE WITH IXC COMMUNICATIONS INC.,
RELATING TO OUR DEPENDENCE ON THEIR ABILITY TO SATISFY THEIR OBLIGATIONS TO US,
THE POSSIBILITY THAT WE MAY NEED TO INCUR SIGNIFICANT EXPENSES TO UTILIZE
BANDWIDTH AND THEIR ABILITY TO BUILDOUT THEIR NETWORKS UNDER CONSTRUCTION THAT
COULD ADVERSELY AFFECT OUR ABILITY TO UTILIZE ACQUIRED BANDWIDTH

We are subject to a variety of risks relating to our recent acquisitions of
fiber-based telecommunications bandwidth from our various global network
suppliers, including our strategic alliance with IXC Communications Inc., and
the delivery, operation and maintenance of such bandwidth. Such risks include,
among other things, the following:

-    the risk that financial, legal, technical and/or other matters may
     adversely affect such suppliers' ability to perform their respective
     operation, maintenance and other services relating to such bandwidth, which
     may adversely affect our use of such bandwidth;

-    the risk that we will not have access to sufficient additional capital
     and/or financing on satisfactory terms to enable us to make the necessary
     capital expenditures to take full advantage of such bandwidth;

-    the risk that such suppliers may not continue to have the necessary
     financial resources to enable them to complete, or may otherwise elect not
     to complete, their contemplated buildout of their respective fiber optic
     telecommunications systems; and

-    the risk that such buildout may be delayed or otherwise adversely affected
     by presently unforeseeable legal, technical and/or other factors.

We cannot assure that we will be successful in overcoming these risks or any
other problems encountered in connection with our acquisitions of bandwidth.

INTERNATIONAL EXPANSION IS A KEY COMPONENT OF OUR BUSINESS STRATEGY AND, IF WE
ARE UNABLE TO COMPLETE THIS EXPANSION, OUR FINANCIAL CONDITION MAY BE ADVERSELY
AFFECTED

A key component of our business strategy is our continued expansion into
international markets. We may need to enter into joint ventures or other
strategic relationships with one or more third parties in order to conduct our
foreign operations successfully. However, we cannot assure that we will be able
to obtain the permits and operating licenses required for us to operate, to hire
and train employees or to market, sell and deliver high quality services in
these markets. In addition to the uncertainty as to our ability to 


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continue to expand our international presence, there are risks inherent in doing
business on an international level. Such risks include:

-    unexpected changes in or delays resulting from regulatory requirements,
     tariffs, customs, duties and other trade barriers;

-    difficulties in staffing and managing foreign operations;

-    longer payment cycles and problems in collecting accounts receivable;

-    fluctuations in currency exchange rates and foreign exchange controls which
     restrict or prohibit repatriation of funds;

-    technology export and import restrictions or prohibitions;

-    delays from customs brokers or government agencies;

-    seasonal reductions in business activity during the summer months in Europe
     and other parts of the world; and

-    potentially adverse tax consequences, which could adversely impact the
     success of our international operations.

We cannot assure that such factors will not have an adverse effect on our future
international operations and, consequently, on our business, financial condition
and results of operations. In addition, we cannot assure that laws or
administrative practice relating to taxation, foreign exchange or other matters
of countries within which we operate will not change. Any such change could have
a material adverse effect on our business, financial condition and results of
operations.

In particular, we have made significant investments in Japan in 1998, which
continues to experience an economic recession. Other Asia-Pacific countries in
which we operate are also experiencing economic difficulties and uncertainties.
These economic difficulties and uncertainties could have a material adverse
effect on our business, financial condition and results of operations.

WE DEPEND ON KEY PERSONNEL AND COULD BE AFFECTED BY THE LOSS OF THEIR SERVICES

Competition for qualified employees and personnel in the Internet services
industry is intense and there are a limited number of persons with knowledge of
and experience in the Internet service industry. The process of locating such
personnel with the combination of skills and attributes required to carry out
our strategies is often lengthy. Our success depends to a significant degree
upon our ability to attract and retain qualified management, technical,
marketing and sales personnel and upon the continued contributions of such
management and personnel. In particular, our success is highly dependent upon
the personal abilities of our senior executive management, including William L.
Schrader, our Chairman of the Board and Chief Executive Officer and the founder
of PSINet, Harold S. Wills, our President and Chief Operating Officer, and
Edward D. Postal, our Senior Vice President and Chief Financial Officer. We have
employment agreements with Messrs. Wills and Postal. The loss of the services of
any one of them could have a material adverse effect on our business, financial
condition or results of operations.

WE DEPEND ON SUPPLIERS AND COULD BE AFFECTED BY CHANGES IN SUPPLIERS OR DELAYS
IN DELIVERY OF THEIR PRODUCTS AND SERVICES

We have few long-term contracts with our suppliers. We are dependent on third
party suppliers for our leased-line connections or bandwidth. Some of these
suppliers are or may become competitors of ours, and such suppliers are not
subject to any contractual restrictions upon their ability to compete with us.
If 


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these suppliers change their pricing structures, we may be adversely affected.
Moreover, any failure or delay on the part of our network providers to deliver
bandwidth to us or to provide operations, maintenance and other services with
respect to such bandwidth in a timely or adequate fashion could adversely affect
us.

We are also dependent on third party suppliers of hardware components. Although
we attempt to maintain a minimum of two vendors for each required product, some
components used by us in providing our networking services are currently
acquired or available from only one source. We have from time to time
experienced delays in the receipt of hardware components and telecommunications
facilities, including delays in delivery of PRI telecommunications facilities,
which connect dial-up customers to our network. A failure by a supplier to
deliver quality products on a timely basis, or the inability to develop
alternative sources if and as required, could result in delays which could have
a material adverse effect on us. Our remedies against suppliers who fail to
deliver products on a timely basis are limited by contractual liability
limitations contained in supply agreements and purchase orders and, in many
cases, by practical considerations relating to our desire to maintain good
relationships with the suppliers. As our suppliers revise and upgrade their
equipment technology, we may encounter difficulties in integrating the new
technology into our network.

Many of the vendors from whom we purchase telecommunications bandwidth,
including the regional bell operating companies, competitive local exchange
carriers and other local exchange carriers, currently are subject to tariff
controls and other price constraints which in the future may be changed. In
addition, recently enacted legislation will produce changes in the market for
telecommunications services. These changes may affect the prices that we are
charged by the regional bell operating companies and other carriers, which could
have a material adverse effect on our business, financial condition and results
of operations. Moreover, we are subject to the effects of other potential
regulatory actions which, if taken, could increase the cost of our
telecommunications bandwidth through, for example, the imposition of access
charges.

THE TERMS OF OUR FINANCING ARRANGEMENTS MAY RESTRICT OUR OPERATIONS

Our financing arrangements are secured by substantially all of our assets and
stock of some of our subsidiaries. These financing arrangements require that we
satisfy many financial covenants. Our ability to satisfy these financial
covenants may be affected by events beyond our control and, as a result, we
cannot assure you that we will be able to continue to satisfy such covenants.
These financing arrangements also currently prohibit us from paying dividends
and repurchasing our capital stock without the lender's consent. Our failure to
comply with the covenants and restrictions in these financing arrangements could
lead to a default under the terms of these agreements. In the event of a default
under the financing arrangements, our lenders would be entitled to accelerate
the indebtedness outstanding thereunder and foreclose upon the assets securing
such indebtedness. They would also be entitled to be repaid from the proceeds of
the liquidation of those assets before the assets would be available for
distribution to the holders of our securities, including the holders of the
notes. In addition, the collateral security arrangements under our existing
financing arrangements may adversely affect our ability to obtain additional
borrowings.

OUR FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED IF OUR SYSTEMS AND THOSE OF
OUR SUPPLIERS FAIL BECAUSE OF YEAR 2000 PROBLEMS

The commonly referred to Year 2000 ("Y2K") problem results from the fact that
many existing computer programs and systems use only two digits to identify the
year in the date field. These programs were designed and developed without
considering the impact of a change in the century designation. If not corrected,
computer applications that use a two-digit format could fail or create erroneous
results in any 


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computer calculation or other processing involving the Year 2000 or a later
date. We have identified two main areas of Y2K risk:

1.   Internal computer systems or embedded chips could be disrupted or fail,
     causing an interruption or decrease in productivity in our operations; and

2.   Computer systems or embedded chips of third parties including, without
     limitation, financial institutions, suppliers, vendors, landlords,
     customers, international suppliers of telecommunications services and
     others, could be disrupted or fail, causing an interruption or decrease in
     our ability to continue our operations.

We developed detailed plans for implementing, testing and completing any
necessary modifications to our key computer systems and equipment with embedded
chips to ensure that they are Y2K compliant. We engaged a third party consultant
to perform an assessment of our U.S. internal systems (e.g., accounting,
billing, customer support and network operations) to determine the status of
their Y2K compliance. The assessment of these systems has been completed and,
while some minor changes are necessary, we believe that no material changes or
modifications to our internal systems are required to achieve Y2K compliance.
Our U.S. chief information officer has developed a test bed of our U.S. internal
systems to implement and complete testing of the requisite minor changes. We
anticipate that our U.S. internal systems will be Y2K ready by September 30,
1999. We are in the process of completing an inventory of our internal systems
that we use in Canada, United Kingdom, Europe and Asia to determine the status
of their Y2K compliance. Each international office has plans in place to test,
upgrade or, if necessary, replace components of its internal systems to ensure
they are Y2K compliant. We anticipate that our international operations will be
Y2K compliant during the fourth quarter of 1999. To help ensure that our network
operations and services to our customers are not interrupted due to the Y2K
problem, we have established a network operations team that meets weekly to
examine our network on a worldwide basis. This team of operational staff have
conducted inventories of our network equipment (software and hardware) and have
found no material Y2K compliance issues. We believe that all equipment currently
being purchased for use in the PSINet network is Y2K compliant. Any existing
equipment that is not Y2K compliant is planned to be made Y2K compliant through
minor changes to the software or hardware or, in limited instances, replacement
of the equipment. We anticipate that our network will be Y2K compliant by the
end of the second quarter of 1999. In addition to administering the
implementation of necessary upgrades for Y2K compliance, our network team is
developing a contingency plan to address any potential problems that may occur
with our network as we enter the year 2000. We believe that, as a result of our
detailed assessment and completed modifications, the Y2K issue will not pose
significant operational problems for us. However, if the requisite modifications
and conversions are not made, or not completed in a timely fashion, it is
possible that the Y2K problem could have a material impact on our operations.

Our cost of addressing Y2K issues has been minor to date, less than 5% of our
information technology and network operations budgets, but this amount may
increase if additional outside consultants or personnel resources are required
or if important operational equipment must be remediated or replaced. Our
estimated total costs related to Y2K issues for 1999 is not expected to exceed
$2.0 million. These costs include equipment, consulting fees, software and
hardware upgrades, testing, remediation and, in limited instances, replacement
of equipment. The risk that Y2K issues could present to us include, without
limitation, disruption, delay or cessation of operations, including operations
that are subject to regulatory compliance. In each case, the correction of the
problem could result in substantial expense and disruption or delay of our
operations. The total cost of Y2K assessments and remediation is funded through
cash on hand and available from other sources and we are expensing these costs,
as appropriate. The financial impact of making all required systems changes or
other remediation efforts cannot be known precisely, but it is not expected to
be material to our financial position, results of operations, or cash flows. We
have not canceled any principal information technology projects as a result of
our Y2K effort, although we have rescheduled some internal tasks to accommodate
this effort.


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In addition, we have identified, prioritized and are communicating with our
suppliers, vendors, customers, lenders and other material third parties to
determine their Y2K status and any probable impact on us. To date, our inquiries
have not revealed any significant Y2K noncompliance issue affecting our material
third parties. We will continue to monitor and evaluate our long-term
relationships with our material third parties based on their responses to our
inquiries and on information learned from other sources. If any of our material
third parties are not Y2K ready and their non-compliance causes a material
disruption to any of their respective businesses, our business could be
materially adversely affected. Disruptions could include, among other things:

-    the failure of a material third party's business;

-    a financial institution's inability to take and transfer funds;

-    an interruption in delivery of supplies from vendors;

-    a loss of voice and data connections;

-    a loss of power to our facilities; and

-    other interruptions in the normal course of our operations, the nature and
     extent of which we cannot foresee.

We will continue to evaluate the nature of these risks, but at this time we are
unable to determine the probability that any such risk will occur, or if it does
occur, what the nature, length or other effects, if any, it may have on us. If
any of our material third parties experience significant failures in their
computer systems or operations due to Y2K non-compliance, it could affect our
ability to process transactions or otherwise engage in similar normal business
activities. For example, while we expect our internal systems, U.S. and
non-U.S., to be Y2K ready in stages during 1999, we and our customers who
communicate internationally will be dependent upon the Y2K-readiness of many
non-U.S. providers of telecommunication services and their vendors and
suppliers. If these providers and others are not Y2K ready, we and our customers
will not be able to send and receive data and other electronic transmissions,
which would have a material adverse effect on our revenues and business and that
of our customers. While many of these risks are outside our control, we have
identified and contacted our critical third party vendors and suppliers and are
establishing contingency plans to remedy any potential interruption to our
operations.

While we believe that we are adequately addressing the Y2K issue, we can not
assure that our Y2K compliance effort will prevent every potential interruption
or that the cost and liabilities associated with the Y2K issue will not
materially adversely impact our business, prospects, revenues or financial
position. We are uncertain as to our most reasonably likely worst case Y2K
scenario and have not yet completed a contingency plan to handle a worst case
scenario. We expect to have such contingency plan in place by September 30,
1999.

WE FACE A HIGH LEVEL OF COMPETITION IN THE INTERNET SERVICES INDUSTRY

The market for Internet connectivity and related services is extremely
competitive. We anticipate that competition will continue to intensify as the
use of the Internet grows. The tremendous growth and potential market size of
the Internet access market has attracted many new start-ups as well as
established businesses from different industries.

Our current and prospective competitors include other national, regional and
local Internet service providers, long distance and local exchange
telecommunications companies, cable television, direct broadcast satellite,
wireless communications providers and on-line service providers. We believe that
our network, products and customer service distinguish us from these
competitors. However, some of these 


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competitors have a significantly greater market presence, brand recognition and
financial, technical and personnel resources than us.

We compete with all of the major long distance companies, also known as
interexchange carriers, including AT&T, MCI WorldCom, Sprint and Cable &
Wireless/IMCI, which also offer Internet access services. The recent sweeping
reforms in the federal regulation of the telecommunications industry have
created greater opportunities for local exchange carriers, including the
regional bell operating companies, to enter the Internet connectivity market. We
believe that there is a move toward horizontal integration through acquisitions
of, joint ventures with, and the wholesale purchase of connectivity from
Internet service providers to address the Internet connectivity requirements of
the current business customers of long distance and local carriers. The
WorldCom/MFS/UUNet consolidation, the WorldCom/MCI merger, the ICG/NETCOM
merger, Cable & Wireless' purchase of the internetMCI assets, the
Intermedia/DIGEX merger, GTE's acquisition of BBN, Global Crossing's recently
announced plans to acquire Frontier Corp. (and Frontier's acquisition of Global
Center) and AT&T's purchase of IBM's global communications network are
indicative of this trend. Accordingly, we expect to experience increased
competition from the traditional telecommunications carriers. Many of these
telecommunications carriers may have the ability to bundle Internet access with
basic local and long distance telecommunications services. Such bundling of
services may have an adverse effect on our ability to compete effectively with
the telecommunications providers and may result in pricing pressure on us that
could have a material adverse effect on our business, financial condition and
results of operations.

Many of the major cable companies have announced that they are exploring the
possibility of offering Internet connectivity, relying on the viability of cable
modems and economical upgrades to their networks. Several announcements also
have recently been made by other alternative service companies approaching the
Internet connectivity market with various wireless terrestrial and
satellite-based service technologies.

The predominant on-line service providers, including America Online, CompuServe,
Microsoft Network and Prodigy, have all entered the Internet access business by
engineering their current proprietary networks to include Internet access
capabilities. We compete to a lesser extent with these on-line service
providers. However, America Online's recent acquisition of Netscape
Communications Corporation and related strategic alliance with Sun Microsystems
will enable it to offer a broader array of Internet protocol-based services and
products that could significantly enhance its ability to appeal to the business
marketplace and, as a result, compete more directly with us.

Recently, there have been several announcements regarding the planned deployment
of broadband services for high speed Internet access by cable and telephone
companies. These services would include new technologies such as cable modems
and xDSL. These providers have initially targeted the residential consumer.
However, it is likely that their target markets will expand to encompass
business customers, which is our target market. This expansion could adversely
affect the pricing of our service offerings.

As a result of the increase in the number of competitors and the vertical and
horizontal integration in the industry, we currently encounter and expect to
continue to encounter significant pricing pressure and other competition in the
future. Advances in technology as well as changes in the marketplace and the
regulatory environment are constantly occurring, and we cannot predict the
effect that ongoing or future developments may have on us or on the pricing of
our products and services. Increased price or other competition could result in
erosion of our market share and could have a material adverse effect on our
business, financial condition and results of operations. We cannot assure that
we will have the financial resources, technical expertise or marketing and
support capabilities to continue to compete successfully.


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<PAGE>

As we continue to expand our operations outside the United States, we will
encounter new competitors and competitive environments. In some cases, we will
be forced to compete with and buy services from government-owned or subsidized
telecommunications providers. Some of these providers may enjoy a monopoly on
telecommunications services essential to our business. We cannot assure that we
will be able to purchase such services at a reasonable price or at all. In
addition to the risks associated with our previously described competitors,
foreign competitors may pose an even greater risk, as they may possess a better
understanding of their local markets and better working relationships with local
infrastructure providers and others. We cannot assure that we can obtain similar
levels of local knowledge. Failure to obtain that knowledge could place us at a
significant competitive disadvantage.

TECHNOLOGY TRENDS AND EVOLVING INDUSTRY STANDARDS COULD RESULT IN OUR
COMPETITORS DEVELOPING OR OBTAINING ACCESS TO BANDWIDTH AND TECHNOLOGIES THAT
CARRY MORE INFORMATION FASTER THAN OUR BANDWIDTH AND TECHNOLOGY AND,
CONSEQUENTLY, RENDER OUR BANDWIDTH OR TECHNOLOGY OBSOLETE

Our products and services are targeted toward users of the Internet, which has
experienced rapid growth. The market for Internet access and related services is
characterized by rapidly changing technology, evolving industry standards,
changes in customer needs and frequent new product and service introductions.
Our future success will depend, in part, on our ability to effectively use and
develop leading technologies.

We cannot assure that we will be successful in responding to changing technology
or market trends. In addition, services or technologies developed by others may
render our services or technologies uncompetitive or obsolete. Furthermore,
changes to our services in response to market demand may require the adoption of
new technologies that could likewise render many of our assets technologically
uncompetitive or obsolete. As we accept bandwidth from IXC and our other
existing global network suppliers or acquire bandwidth or equipment from other
suppliers that may better meet our needs than existing bandwidth or equipment,
many of our assets could be determined to be obsolete or excess. The disposition
of obsolete or excess assets could have a material adverse effect on our
business, financial condition and results of operations.

Even if we do successfully respond to technological advances and emerging
industry standards, the integration of new technology may require substantial
time and expense, and we cannot assure that we will succeed in adapting our
network infrastructure in a timely and cost-effective manner.

WE MAY BE LIABLE FOR INFORMATION DISSEMINATED THROUGH NETWORK

The law relating to liability of Internet service providers for information
carried on or disseminated through their networks is not completely settled. A
number of lawsuits have sought to impose such liability for defamatory speech
and infringement of copyrighted materials. The U.S. Supreme Court has let stand
a lower court ruling which held that an Internet service provider was protected
from liability for material posted on its system by a provision of the
Communications Decency Act. However, the findings in that case may not be
applicable in other circumstances. Other courts have held that online service
providers and Internet service providers may, under some circumstances, be
subject to damages for copying or distributing copyrighted materials. Provisions
of the Communications Decency Act which imposed criminal penalties for using an
interactive computer service for transmitting obscene or indecent communications
have been found unconstitutional by the U.S. Supreme Court. However, on October
21, 1998, new federal legislation was enacted that requires limitations on
access to pornography and other material deemed "harmful to minors." This
legislation has been attacked in court as a violation of the First Amendment. We
are unable to predict the outcome of this case. The imposition upon Internet
service providers or web server hosts of potential liability for materials
carried on or disseminated through their systems could require us to implement
measures to reduce our exposure to such liability. Such measures may require
that we spend substantial resources or discontinue some product or service


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<PAGE>

offerings. Any of these actions could have a material adverse effect on our
business, operating results and financial condition.

We carry errors and omissions insurance with a policy limit of $5.0 million,
subject to deductibles and exclusions. Such coverage may not be adequate or
available to compensate us for all liability that may be imposed. The imposition
of liability in excess of, or the unavailability of, such coverage could have a
material adverse effect on our business, financial condition and results of
operations.

The law relating to the regulation and liability of Internet access providers in
relation to information carried or disseminated also is undergoing a process of
development in other countries. Decisions, laws, regulations and other
activities regarding regulation and content liability may significantly affect
the development and profitability of companies offering on-line and Internet
access services, including us.

FCC REGULATIONS MAY LIMIT THE SERVICES WE CAN OFFER

Consistent with our growth and acquisition strategy, we are now engaged in, or
will soon be engaged in, activities that subject us to varying degrees of
federal, state and local regulation. The FCC exercises jurisdiction over all
facilities of, and services offered by, telecommunications carriers to the
extent that they involve the provision, origination or termination of
jurisdictionally interstate or international communications. The state
regulatory commissions retain jurisdiction over the same facilities and services
to the extent they involve origination or termination of jurisdictionally
intrastate communications.

Our Internet operations are not currently subject to direct regulation by the
FCC or any other governmental agency, other than regulations applicable to
businesses generally. However, the FCC has recently indicated that some services
offered over the Internet, such as phone-to-phone Internet protocol telephony,
may be functionally indistinguishable from traditional telecommunications
service offerings and their non-regulated status may have to be re-examined. We
are unable to predict what regulations may be adopted in the future, or to what
extent existing laws and regulations may be found applicable, or the impact such
new or existing laws may have on our business. We can not assure that new laws
or regulations relating to Internet services, or existing laws found to apply to
them, will not have a material adverse effect on us. Although the FCC has
recently decided not to allow local telephone companies to impose per-minute
access charges on Internet service providers, and that decision has been upheld
by the reviewing court, further regulatory and legislative consideration of this
issue is likely. In addition, some telephone companies are seeking relief
through state regulatory agencies. Such rules, if adopted, would affect our
costs of serving dial-up customers and could have a material adverse effect on
our business, financial condition and results of operations.

In addition to our Internet activities, we have recently focused attention on
acquiring telecommunications assets and facilities, which is a regulated
activity. Our wholly-owned subsidiary, PSINetworks Company, has received an
international Section 214 authorization from the FCC to provide global
facilities-based and global resale telecommunications services. Our wholly-owned
subsidiary, PSINet Telecom UK Limited, has received an international facilities
license from DTI and OFTEL, the responsible telecommunications regulatory bodies
in the United Kingdom. Currently, the FCC and OFTEL do not closely regulate the
charges or practices of non-dominant carriers, such as our subsidiaries.
Nevertheless, these regulatory agencies have the power to impose more stringent
regulatory requirements on us and to change our regulatory classification, which
may adversely affect our business.

Our subsidiaries have also received competitive local exchange carrier
certification in New York, Virginia, Colorado and Texas, have applied for
competitive local exchange carrier certification in Maryland and California, and
we are considering the financial, regulatory and operational implications of
becoming a competitive local exchange carrier in other states. As a provider of
domestic basic 


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<PAGE>

telecommunications services, particularly competitive local exchange services,
we could become subject to further regulation by the FCC and/or another
regulatory agency, including state and local entities.

An important issue for competitive local exchange carriers is the right to
receive reciprocal compensation for the transport and termination of Internet
traffic. Most states have required incumbent local exchange carriers to pay
competitive local exchange carriers reciprocal compensation. In October 1998,
the FCC determined that dedicated Digital Subscriber Line service is an
interstate service and properly tariffed at the interstate level. In February
1999, the FCC concluded that at least a substantial portion of dial-up Internet
service provider traffic is jurisdictionally interstate. The FCC also concluded
that its jurisdictional decision does not alter the exemption from access
charges currently enjoyed by Internet service providers. The FCC established a
proceeding to consider an appropriate compensation mechanism for interstate
Internet traffic. Pending the adoption of that mechanism, the FCC saw no reason
to interfere with existing interconnection agreements and reciprocal
compensation arrangements. The FCC order has been appealed. There can be no
assurance that any future court, state regulatory or FCC decision on this matter
will favor our position. An unfavorable result may have an adverse impact on our
potential future revenues as a competitive local exchange carrier, as well as
increasing our costs for PRIs generally.

IF WE EXPERIENCE SYSTEM FAILURE OR SHUTDOWN, WE MAY NOT BE ABLE TO DELIVER
SERVICES

Our success depends upon our ability to deliver reliable, high-speed access to
the Internet and upon the ability and willingness of our telecommunications
providers to deliver reliable, high-speed telecommunications service through
their networks. Our network, and other networks providing services to us, are
vulnerable to damage or cessation of operations from fire, earthquakes, severe
storms, power loss, telecommunications failures and similar events, particularly
if such events occur within a high traffic location of the network. We have
designed our network to minimize the risk of such system failure, for instance,
with redundant circuits among points-of-presence to allow traffic rerouting. In
addition, we perform lab and field testing before integrating new and emerging
technology into the network, and we engage in capacity planning. Nonetheless, we
cannot assure that we will not experience failures or shutdowns relating to
individual points-of-presence or even catastrophic failure of the entire
network.

We carry business personal property insurance at both scheduled locations and
unscheduled locations to protect us against losses due to property damage and
business interruption. Such coverage, however, may not be adequate or available
to compensate us for all losses that may occur. In addition, we generally
attempt to limit our liability to customers arising out of network failures by
contractually disclaiming all such liability. In respect of many services, we
have also contractually limited liability to a usage credit based upon the
amount of time that the system was not operational. We cannot assure, however,
that such limitations will be enforceable. In any event, significant or
prolonged system failures or shutdowns could damage our reputation and result in
the loss of customers.

ALTHOUGH WE HAVE IMPLEMENTED NETWORK SECURITY MEASURES, OUR NETWORK MAY BE
SUSCEPTIBLE TO VIRUSES, BREAK-INS OR DISRUPTIONS

We have implemented many network security measures, such as limiting physical
and network access to our routers. Nonetheless, our network's infrastructure is
potentially vulnerable to computer viruses, break-ins and similar disruptive
problems caused by our customers or other Internet users. Computer viruses,
break-ins or other problems caused by third parties could lead to interruptions,
delays or cessation in service to our customers. Furthermore, such inappropriate
use of the Internet by third parties could also potentially jeopardize the
security of confidential information stored in the computer systems of our
customers. This could, in turn, deter potential customers and adversely affect
our existing customer relationships.


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<PAGE>

Security problems represent an ongoing threat to public and private data
networks. Attacks upon the security of Internet sites and infrastructure
continue to be reported to organizations such as the CERT Coordination Center at
Carnegie Mellon University, which facilitates responses of the Internet
community to computer security events. Addressing problems caused by computer
viruses, break-ins or other problems caused by third parties could have a
material adverse effect on us.

The security services that we offer in connection with our customers' networks
cannot assure complete protection from computer viruses, break-ins and other
disruptive problems. Although we attempt to limit contractually our liability in
such instances, the occurrence of such problems may result in claims against us
or liability on our part. Such claims, regardless of their ultimate outcome,
could result in costly litigation and could have a material adverse effect on
our business or reputation or on our ability to attract and retain customers for
our products. Moreover, until more consumer reliance is placed on security
technologies available, the security and privacy concerns of existing and
potential customers may inhibit the growth of the Internet service industry and
our customer base and revenues.

RISK ASSOCIATED WITH DEPENDENCE ON TECHNOLOGY AND WITH PROPRIETARY RIGHTS

Our success and ability to compete is dependent in part upon our technology and
technical expertise and, to a lesser degree, on our proprietary rights as well.
In order to establish and protect our technology, we rely on a combination of
copyright, trademark and trade secret laws and contractual restrictions.
Nevertheless, we cannot assure that such measures are adequate to protect our
proprietary technology. It may be possible for a third party to copy or
otherwise obtain and use our products or technology without authorization or to
develop similar technology independently. In addition, our products may be
licensed or otherwise utilized in foreign countries where laws may not protect
our proprietary rights to the same extent as do laws in the United States. It is
our policy to require employees and consultants and, when obtainable, suppliers
to execute confidentiality agreements upon the commencement of their
relationships with us. Nonetheless, we cannot assure that these precautions will
be adequate to prevent misappropriation of our technology or that our
competitors will not independently develop technologies that are substantially
equivalent or superior to our technology.

In addition, we are also subject to the risk of adverse claims and litigation
alleging infringement by us of the intellectual property rights of others. From
time to time, we have received claims that we have infringed other parties'
proprietary rights. While we do not believe that we have infringed the
proprietary rights of other parties, we cannot assure that third parties will
not assert infringement claims in the future with respect to our current or
future products. Such claims may require that we enter into license arrangements
or may result in protracted and costly litigation, regardless of the merits of
such claims. We cannot assure that any necessary licenses will be available or
that, if available, such licenses can be obtained on commercially reasonable
terms.

We have recently introduced new enterprise service offerings, including
value-added, Internet protocol-based enterprise communication services and
xDSL-based Internet access services in limited areas. The failure of these
services to gain market acceptance in a timely manner or at all, or the failure
of xDSL-based services, in particular, to achieve significant market coverage
could have a material adverse effect on our business, financial condition and
results of operations. If we introduce new or enhanced services with
reliability, quality or compatibility problems, it could significantly delay or
hinder market acceptance of such services, which could adversely affect our
ability to attract new customers and subscribers. Our services may contain
undetected errors or defects when first introduced or as enhancements are
introduced. Despite testing by us or our customers, we cannot assure that errors
will not be found in new services after commencement of commercial deployment.
Such errors could result in additional development costs, loss of or delays in
market acceptance, diversion of technical and other resources from our other
development efforts and the loss of credibility with our customers and


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<PAGE>

subscribers. Any such event could have a material adverse effect on our
business, financial condition and results of operations.

Additionally, if we are unable to match our network capacity to customer demand
for our services, our network could become congested during periods of peak
customer demand. Such congestion could adversely affect the quality of service
we are able to provide. Conversely, due to the high fixed cost nature of our
infrastructure, if our network is under-utilized, it could adversely affect our
ability to provide cost-efficient services. Our failure to match network
capacity to demand could have a material adverse effect on our business,
financial condition or results of operations.

THE MARKET PRICE AND TRADING VOLUME OF OUR STOCK MAY BE VOLATILE

The market price and trading volume of our common stock has been and may
continue to be highly volatile. Factors such as variations in our revenue,
earnings and cash flow and announcements of new service offerings, technological
innovations, strategic alliances and/or acquisitions involving our competitors
or price reductions by us, our competitors or providers of alternative services
could cause the market price of our common stock to fluctuate substantially. In
addition, the stock markets recently have experienced significant price and
volume fluctuations that particularly have affected technology-based companies
and resulted in changes in the market prices of the stocks of many companies
that have not been directly related to the operating performance of those
companies. Such broad market fluctuations have adversely affected and may
continue to adversely affect the market price of our common stock.

WE DO NOT ANTICIPATE THAT WE WILL PAY CASH DIVIDENDS ON OUR COMMON STOCK

We have never declared or paid any cash dividends on our common stock and do not
anticipate paying cash dividends on our common stock in the foreseeable future.
In addition, our debt securities and credit facility contain limitations on our
ability to declare and pay cash dividends.

FORWARD-LOOKING STATEMENTS

Some of the information contained in the periodic report with which this Exhibit
99.1 is filed may contain forward-looking statements. Such statements can be
identified by the use of forward-looking terminology such as "believes",
"expects", "may", "will", "should", or "anticipates" or similar words, or by
discussions of strategy that involve risks and uncertainties. These statements
may discuss our future expectations or contain projections of our results of
operations or financial condition or expected benefits to us resulting from
acquisitions or transactions. We cannot assure that the future results
indicated, whether expressed or implied, will be achieved. The risk factors
noted in this section and other factors noted throughout the report with which
this Exhibit 99.1 is filed, including risks and uncertainties, could cause our
actual results to differ materially from those contained in any forward-looking
statement.


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