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                                                                  Exhibit 99.1
                                           

RISK FACTORS  

   From time to time, in both written reports and in oral statements by 
PSINet senior management, expectations and other statements are expressed 
regarding future performance of the Company.  These forward-looking 
statements are inherently uncertain and investors must recognize that events 
could turn out to be different than such expectations and statements. Key 
factors impacting current and future performance are discussed in the 
Company's Annual Report on Form 10-K and other filings with the Securities 
and Exchange Commission. In addition, the following Risk Factors as well as 
the other information in this Quarterly Report should be considered in 
evaluating the Company and its business. 

Limited History of Operations; Operating Deficit; Continuing Losses;
Potential Fluctuations in Operating Results

   The Company began offering its services in 1990. Although the Company has 
experienced revenue growth on an annual basis with revenue increasing from 
$15.2 million in 1994 to $38.7 million in 1995 to $84.4 million in 1996 and 
$55.1 million for the first six months of 1997, it has incurred losses and 
experienced negative earnings before interest, taxes, depreciation and 
amortization ("EBITDA") during each of such periods.  The Company has 
incurred net losses of approximately $5.3 million, $53.2 million and $55.1 
million and has incurred negative EBITDA of approximately $1.5 million, $27.9 
million and $28.0 million for each of the years ended December 31, 1994, 1995 
and 1996, respectively. Additionally, the Company has incurred net losses of 
approximately $11.3 million and $20.6 million and negative EBITDA of 
approximately $4.6 million and $11.4 million for the three and six months 
ended June 30, 1997, respectively.  At June 30, 1997, the Company had a 
retained deficit of $137.2 million. Although the Company achieved breakeven 
EBITDA during June of 1997, there can be no assurance that revenue growth 
will continue or that the Company will achieve profitability or maintain 
positive EBITDA in the future.  The Company expects to focus in the near term 
on continuing to increase its corporate customer base and expanding its 
wholesale network services strategy which will require it to continue to 
incur expenses for marketing, network infrastructure, personnel and the 
development of new services and software.  Such continued expenses may 
adversely impact cash flow and operating performance. The Company also plans 
to continue to enhance PSINet's network and the administrative and 
operational infrastructure necessary to support its Internet access service 
domestically and internationally. 

   The Company's 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 of the Company's control, including general economic conditions,
specific economic conditions in the Internet access industry, user demand for
the Internet, capital expenditures and other costs relating to the expansion of
operations, the introduction of new services by the Company or its competitors,
the mix of services sold and the mix of channels through which those services
are sold, pricing changes and new product introductions by the Company and its
competitors and delays in obtaining sole or limited source equipment. As a
strategic response to a changing competitive environment, the Company may elect
from time to time to make certain pricing, service or marketing decisions that
could have a material adverse effect on the Company's business, results of
operations and cash flow. 
 
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Competition

   The market for data communications services, including Internet access
services, is highly competitive. The industry has relatively insignificant
barriers to entry and numerous entities competing for the same customers. PSINet
expects that competition will continue to intensify. The Company believes that
the primary competitive factors for the provision of Internet services are
quality of service, reliability, price, technical expertise, ease of use,
variety of value-added services, quality and availability of customer support,
experience of the supplier, geographic coverage and name recognition. PSINet's
success in this market will depend heavily upon its ability to provide high
quality Internet connectivity and value-added Internet services at competitive
prices. 

   The Company's current and prospective competitors generally may be divided
into the following two groups: (1) other Internet access providers, such as
NETCOM On-Line Communications Services, Inc. ("NETCOM") and other national and
regional providers; and (2) telecommunications companies, such as AT&T Corp.
("AT&T"), GTE Corp. (as a result of the recently consummated acquisition of
Bolt, Beranek & Newman Inc. ("BBN") ), MCI Communications Corporation ("MCI"),
WorldCom, Inc. (through its mergers with MFS Communications Co., Inc. ("MFS")
and UUNET Technologies, Inc. ("UUNET")), Sprint, Inc., regional Bell operating
companies ("RBOCs") and various cable television companies.  Many of these
competitors have greater market presence, engineering and marketing
capabilities, and financial, technological and personnel resources than those
available to PSINet. As a result, they may be able to develop and expand their
communications and network infrastructures more quickly, adapt more swiftly to
new or emerging technologies and changes in customer requirements, take
advantage of acquisition and other opportunities more readily, and devote
greater resources to the marketing and sale of their products than can PSINet.
In addition, the ability of some of the Company's competitors to bundle other
services and products with Internet access services could place PSINet at a
marketing or competitive disadvantage.

   Recent Federal Communications Commission ("FCC") regulations may increase
competitive activity by RBOCs and other companies in the Internet access
business.  The 1996 Federal telecommunications legislation also contains certain
provisions which allow the RBOCs to provide electronic publishing of information
and databases.  In addition, this legislation makes it easier for national long
distance carriers such as AT&T to offer local telephone service.  These
regulations and legislation may result in additional competitive pressures on
the Company or have a material adverse effect on the Company's business, results
of operations and financial condition.
   
   PSINet believes that competition will intensify as new competitors, including
large computer hardware, software, media and other technology and
telecommunications companies, enter the Internet services market and as existing
competitors form alliances with or acquire other companies. For example, the
1996 mergers of UUNET with MFS and of MFS with WorldCom, Inc., as well as GTE
Corp.'s recently consummated acquisition of BBN, may create the potential for
network expense reductions which could result in a competitive advantage for the
combined entity.  Such acquisitions, alliances and expanded service offerings
may permit the Company's competitors to devote greater resources to the
development and marketing of new competitive products and services and the
marketing of existing competitive products and services. 

   As PSINet continues to expand its operations outside the United States, it
will encounter new competitors and competitive environments.  In some cases, the
Company will be forced to compete with and buy services from government owned or
subsidized telecommunications providers, some of which may enjoy a monopoly on
telecommunications services essential to the Company's business. There can be no
assurance that the Company will be able to purchase such services at a
reasonable price or at all. In addition to the risks associated with the
Company's previously described competitors, foreign competitors may possess a
better understanding of their local markets and better working relationships

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with local infrastructure providers and others. There can be no assurance that
the Company can obtain similar levels of local knowledge, and failure to obtain
that knowledge could place the Company at a significant competitive
disadvantage. 

   As a result of industry competition, the Company expects to encounter pricing
pressure, which in turn could result in reductions in the average selling price
of the Company's services. For example, certain of the Company's competitors
which are telecommunications companies, including AT&T and MCI, may be able to
provide customers with reduced or free communications costs in connection with
their Internet access services or offer Internet access as a standard component
of their overall service package, thereby increasing price pressure on PSINet.
The Company has in the past reduced prices on certain of its Internet access
options and may continue to do so in the future. There can be no assurance that
the Company will be able to offset the effects of any such price reductions with
an increase in the number of its customers, higher revenue from enhanced
services, cost reductions or otherwise.  PSINet is not able presently to predict
the impact which future growth in the Internet access and on-line services
businesses will have upon competition in the industry.  Increased price or other
competition could result in erosion of the Company's market share and could have
a material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that the Company will have the
financial resources, technical expertise or marketing and support capabilities
to continue to compete successfully. 

Entry Into Wholesale Network Services Business

   The Company altered its strategy in mid-1996 to include providing 
wholesale network services to Internet service providers ("ISPs") and 
telecommunications companies in the United States.  The wholesale network 
services business supplements the Company's core business.  At June 30, 
1997, the Company provided wholesale network services to approximately 40 
ISPs.  The ISPs are subject to a number of business risks, including, without 
limitation, those arising from the intense competition in their market, which 
could impact the Company's wholesale network services business.  There can be 
no assurance that this strategy will provide significant revenue in the 
future.

Risks of Growth and Expansion

   The Company had approximately 350 POPs as of June 30, 1997 and plans to
continue to expand the capacity of existing POPs as customer-driven demand
dictates.  The Company's rapid growth has placed, and in the future may continue
to place, a significant strain on the Company's administrative, operational and
financial resources and has increased demands on its systems and controls.  The
Company anticipates that its wholesale network service, as well as other
business growth, may require continued enhancements to and expansion of its
network.  Competition for qualified personnel in the internetworking 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, training
and successfully integrating qualified personnel into the Company's operations
is often lengthy and expensive. There can be no assurance that the Company will
be successful in attracting, integrating and retaining such personnel. In
addition, there can be no assurance that the Company's existing operating and
financial control systems and infrastructure will be adequate to maintain and
effectively monitor future growth. The inability to continue to upgrade the
networking systems or the operating and financial control systems, the inability
to recruit and hire necessary personnel, the inability to successfully integrate
new personnel into the Company's operations, the inability to manage its growth
effectively or the emergence of unexpected expansion difficulties could
adversely affect the Company's business, results of operations and financial
condition. 

                                       3
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Need for Additional Capital to Finance Growth and Capital Requirements

   The Company expects to continue to enhance its network in order to 
maintain its competitive position and continue to meet the increasing demands 
for service quality, availability and competitive pricing.  In order to take 
full advantage of the bandwidth being acquired from IXC, in addition to other 
planned capital expenditures, the Company expects to incur capital 
expenditures through the end of the year 2000 of up to approximately $95 
million.  The Company believes it will have a reasonable degree of 
flexibility to adjust the amount and timing of such capital expenditures in 
response to the Company's then existing financing capabilities, market 
conditions, competition and other factors. The Company believes that working 
capital generated from the use of such bandwidth, together with other working 
capital from operations, from existing credit facilities, and from proceeds 
of future equity or debt financings (which the Company expects to be able to 
obtain when needed), will be sufficient to meet the presently anticipated 
working capital and capital expenditure requirements of its operations.  In 
the event the Company has a Contingent Payment Obligation to IXC, it may be 
satisfied by the delivery of stock or, at the Company's option, cash or a 
combination thereof, and the Company presently believes that it has 
sufficient flexibility to satisfy such obligation.  
   
   The Company may seek to raise additional funds in order to take advantage of
unanticipated opportunities, more rapid international expansion or acquisitions
of complementary businesses, or to develop new products or otherwise respond to
changing business conditions or unanticipated competitive pressures.  There can
be no assurance that the Company will be able to raise such funds on favorable
terms.  In the event that the Company is unable to obtain such additional funds
on acceptable terms, the Company may determine not to enter into various
expansion opportunities. 

Risks Associated with International Expansion
   
   A component of the Company's strategy is its planned expansion into
international markets. To date, the Company has only limited experience in
providing international Internet service. There can be no assurance that the
Company will be able to obtain the permits and operating licenses required for
it 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 the
Company's ability to expand its international presence, there are certain risks
inherent in doing business on an international level, such as unexpected changes
in regulatory requirements, tariffs, customs, duties and other trade barriers,
difficulties in staffing and managing foreign operations, longer payment cycles,
problems in collecting accounts receivable, political instability,
expropriation, nationalization, war, insurrection and other political risks,
fluctuations in currency exchange rates, 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 certain other parts of the world and potentially adverse tax
consequences, which could adversely impact the success of the Company's
international operations. The Company may need to enter into joint ventures or
other strategic relationships with one or more third parties in order to conduct
its foreign operations successfully. There can be no assurance that such factors
will not have an adverse effect on the Company's future international operations
and, consequently, on the Company's business, financial condition and results of
operations. In addition, there can be no assurance that laws or administrative
practice relating to taxation, foreign exchange or other matters of countries
within which the Company operates will not change. Any such change could have a
material adverse effect on the Company's business, financial condition and
results of operations. 
 
                                       4

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Risks Associated With Acquisitions and Strategic Alliances

   As part of its business strategy, the Company expects to seek to develop
strategic alliances both domestically and internationally and/or to acquire
assets and businesses principally relating to or complementary to its current
operations. Any such future strategic alliances or acquisitions would be
accompanied by the risks commonly encountered in strategic alliances with or
acquisitions of companies. Such risks include, among other things, the
difficulty of assimilating the operations and personnel of the companies, the
potential disruption of the Company's ongoing business, the inability of
management to maximize the financial and strategic position of the Company by
the successful incorporation of licensed or acquired technology and rights into
the Company's service offerings, the maintenance of uniform standards, controls,
procedures and policies and the impairment of relationships with employees and
customers as a result of changes in management. There can be no assurance that
the Company would be successful in overcoming these risks or any other problems
encountered in connection with such strategic alliances or acquisitions. 

   In addition, if the Company were to proceed with one or more significant
acquisitions in which the consideration consists of cash, a substantial portion
of the Company's available cash could be used to consummate the acquisitions. If
the Company were to consummate one or more significant acquisitions or strategic
alliances in which the consideration consists of stock, such as the IXC
Transaction as described below, shareholders of the Company could suffer a
significant dilution of their interests in the Company.  Many of the businesses
that might become attractive acquisition candidates for the Company may have
significant goodwill and intangible assets, and acquisition of these businesses,
if accounted for as a purchase, would typically result in increases in the
Company's amortization expenses and the length of time over which they are
reported. In connection with acquisitions, the Company could incur substantial
expenses, including the expenses of integrating the business of the acquired
company or the strategic alliance with the Company's business. Such expenses, in
addition to the financial impact of such acquisitions, could have a material
adverse effect on the Company's business, financial condition and results of
operations and could cause substantial fluctuations in the Company's quarterly
and yearly operating results. 

Risks Associated With Strategic Alliances With IXC Internet Services, Inc.

   On July 22, 1997, the Company entered into an IRU and Stock Purchase
Agreement with IXC Internet Services, Inc. ("IXC"), an indirect subsidiary of
IXC Communications, Inc., to acquire a 20-year noncancellable indefeasible right
of use ("IRU") in up to 10,000 equivalent route miles of fiber-based OC-48
network bandwidth across the IXC fiber optic telecommunication network within
the United States in exchange for an approximately 20 percent (post-issuance)
common stock interest in the Company. The Company also signed a long-term
marketing agreement with IXC. Under the marketing agreement, the Company will be
selling its Internet access and value-added services through IXC. The
non-exclusive marketing agreement provides for IXC and its resellers to be able
to offer all of the Company's Internet services with long distance and other
telephone services to IXC customers throughout the United States.
               
   In connection with this transaction, IXC will receive common stock at closing
equal to approximately 20 percent of the issued and outstanding shares of the
Company, after giving effect to the IXC issuance.  In addition, if the fair
market value of these shares is less than $240 million at the earlier of one
year following delivery and acceptance of the total bandwidth or the fourth
anniversary of the closing of the transaction, the Company has agreed to provide
IXC with additional stock and/or cash, at the Company's option, in an amount
equal to the difference between $240 million and the then fair market value of
such shares.  The Company has the right to accelerate its obligation to deliver
additional stock and/or cash to IXC.  The agreement permits PSINet to use the
OC-48 bandwidth for any purpose in 

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connection with the provision of Internet services, but restricts PSINet and 
its customers from using the OC-48 bandwidth to deliver private line or long 
distance telephone services to any third party. PSINet expects to draw down 
the bandwidth in OC-12 increments beginning as soon as practicable after the 
closing and continuing over the next 24 months.  The agreement is expected to 
close not later than November 25, 1997, subject to approval by the Company's 
shareholders and other closing conditions. There can be no assurance that the 
agreement will be approved by the Company's shareholders nor can there be 
assurance that the Company and IXC will complete this transaction. 
   
   In the event the Company closes the transaction with IXC, the Company may
continue to be subject to a variety of risks relating to this transaction and
the acquisition, operation and maintenance of the associated bandwidth.  Such
risks include, without limitation: risks associated with IXC's ability to build
out its fiber optic telecommunication network and deliver to PSINet and
thereafter service 10,000 equivalent route miles of fiber-based OC-48 network
bandwidth, including financial, legal and technical risks associated with IXC's
ability to perform; risks associated with any change in control of IXC; risks
associated with the possible dilution of PSINet shareholders and/or the possible
cash outlay required of PSINet as a result of PSINet's contractual requirement
to deliver IXC, as of prescribed date, additional stock and/or cash in an amount
equal to the difference between $240 million and the then fair market value of
the shares delivered to IXC at closing; and other matters.  There can be no
assurance that the Company will be successful in overcoming these risks or any
other problems encountered in connection with this strategic alliance with IXC. 

Dependence on Key Personnel

   The Company's success depends to a significant degree upon the continued
contributions of its senior management team and technical, marketing and sales
personnel. The Company's employees may voluntarily terminate their employment
with the Company at any time.  Competition for qualified employees and personnel
in the internetworking industry is intense and there are a limited number of
persons with knowledge of and experience in the Internet service industry. The
Company's success also will depend on its ability to attract and retain
qualified management, marketing, technical and sales executives and personnel.
The process of locating such personnel with the combination of skills and
attributes required to carry out the Company's strategies is often lengthy. The
loss of the services of key personnel, or the inability to attract additional
qualified personnel, could have a material adverse effect on the Company's
results of operations, product development efforts and ability to expand its
network infrastructure. There can be no assurance that the Company will be
successful in attracting and retaining such executives and personnel. Any such
event could have a material adverse effect on the Company's business, financial
condition and results of operations. 

Potential Liability for Information Disseminated through Network; Pending and
Threatened Litigation

   The law relating to the liability of on-line services companies and Internet
access providers for information carried on or disseminated through their
systems is currently unsettled in the United States. Several private lawsuits
seeking to impose such liability upon on-line services companies and Internet
access providers are currently pending. In one case brought against an Internet
access provider, Religious Technology Center v. Netcom On-Line Communications
Services, Inc., a Federal district court ruled that under certain circumstances
Internet access providers could be held liable for copyright infringement.  The
imposition upon the Company and other providers of Internet access or Web
hosting sites of potential liability for information carried on or disseminated
through their systems could require the Company to implement measures to reduce
its exposure to such liability, which may require the expenditure of substantial
capital and other resources, or to discontinue certain product or service

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offerings. The increased attention focused upon liability issues as a result of
these lawsuits and legislative proposals could impact the growth of the
Internet. 

   The Company carries errors and omissions insurance with a basic policy
limitation of $2.0 million, subject to deductibles, exclusions and
self-insurance retention amounts. Such coverage may not be adequate or available
to compensate the Company 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 the Company's business, financial condition and
results of operations. 

   The law relating to the regulation and liability of on-line services and
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 the Company.

Risks Associated with Financing Arrangements

   The Company's financing arrangements are secured by substantially all of the
Company's assets and stock of certain subsidiaries of the Company and require
that the Company satisfy certain financial covenants and restrict the payment of
dividends.  The Company's secured lenders would be entitled to foreclose upon
those assets in the event of a default under the financing arrangements and to
be repaid from the proceeds of the liquidation of those assets before the assets
would be available for distribution to the Company's shareholders in the event
that the Company is liquidated. In addition, the collateral security
arrangements under the Company's existing financing arrangements may adversely
affect the Company's ability to obtain additional borrowings.

Government Regulatory Risks

   In recent years, there has been U.S. and foreign legislation and other 
initiatives to impose criminal liability on persons sending or displaying in 
a manner available to minors indecent material on an interactive computer 
service such as the Internet as well as on entities knowingly permitting 
facilities under its control to be used for such activities.  These 
initiatives may decrease demand for Internet access, chill the development of 
Internet content, or have other adverse effects on Internet access providers 
such as the Company.

   Recent FCC regulations may increase competitive activity by RBOCs and other
companies in the Internet access business.  The 1996 Federal telecommunications
legislation also contains certain provisions which allow the RBOCs to provide
electronic publishing of information and databases.  In addition, this
legislation makes it easier for national long distance carriers such as AT&T to
offer local telephone service.  These regulations and legislation may result in
additional competitive pressures on the Company or have a material adverse
effect on the Company's business, results of operations and financial condition.
   
   The Company provides Internet access, in part, through transmissions over
public telephone lines.  These transmissions are governed by regulatory policies
establishing charges and terms for communications.  The Company presently is
considered an enhanced services provider and, therefore, is not currently
subject to direct regulation or access charges imposed by the FCC or any other
agency for such operations, other than regulations applicable to businesses
generally.  The Company could become subject in the future to access charges and
FCC regulation and/or regulation by other regulatory commissions as a provider
of basic telecommunications services.  The FCC recently issued a Notice of
Inquiry in which it seeks comment on whether it should distinguish between
different categories of 

                                       7

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enhanced services, and announced that it will address issues about the 
continued viability of its current regulatory division between basic and 
enhanced services in a future proceeding.  If the FCC determines that such a 
distinction is appropriate, this could result in increased costs being 
imposed upon the Company.

Risk of System Failure or Shutdown

   The success of the Company is dependent upon its ability to deliver reliable,
high-speed access to the Internet. The Company's network, as is the case with
other networks providing similar service, is 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.  The Company is also
dependent upon the ability of its telecommunications providers to deliver
reliable, high-speed telecommunications service through their networks.  While
the Company's network has been designed with redundant circuits among POPs to
allow traffic rerouting, lab and field testing is performed before integrating
new and emerging technology into the network, and the Company engages in
capacity planning, there can be no assurance that the Company will not
experience failures or shutdowns relating to individual POPs or even
catastrophic failure of the entire network.  The Company carries property, POP
equipment and business interruption insurance with basic policy limitations of
$4.0 million, $5.0 million and $5.0 million, respectively, subject to
deductibles, exclusions and self-insurance retention amounts. Such coverage may
not be adequate or available to compensate the Company for all losses that may
occur. In addition, the Company generally attempts to limit its liability to
customers arising out of network failures through contractual provisions
disclaiming all such liability and, in respect of certain services, limiting
liability to a usage credit based upon the amount of time that the system was
not operational. There can be no assurance that such limitations will be
enforceable. In any event, significant or prolonged system failures or shutdowns
could damage the reputation of the Company and result in the loss of customers. 

New and Uncertain Market

   Substantially all of the Company's revenue to date has been, and for the
foreseeable future will be, derived from the sale of its Internet access,
services and products. The Company's success will depend upon the development
and expansion of the market for Internet access services and products and the
networks which comprise the Internet. The market for Internet services has only
recently developed and has been accompanied by increased press coverage
concerning the scope and nature of the information and services available on,
and potential uses of, the Internet. Certain critical issues presently
surrounding commercial use of the Internet, including security, reliability,
ease and cost of access, and quality of service, remain unresolved and may
adversely impact the growth of Internet use. If the Internet access market fails
to grow, grows more slowly than anticipated or becomes saturated with
competitors, the Company's business, financial condition and results of
operations would be materially adversely affected. 

Network Security Risks; Risks Associated with Providing Security Services

   Despite the implementation of network security measures by the Company, such
as limiting physical and network access to its routers, its infrastructure is
potentially vulnerable to computer viruses, break-ins and similar disruptive
problems caused by its 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 the Company's 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 the Company's customers, which may deter potential customers and
adversely affect existing customer relationships. Persistent security problems
continue to plague public and private 

                                       8

<PAGE>

data networks. Break-ins have reportedly reached computers connected to the 
Internet at General Electric Co., Sprint and IBM as well as the computer 
systems of NETCOM, UUNET, Netscape and the San Diego Supercomputer Center.   
Addressing problems caused by computer viruses, break-ins or other problems 
caused by third parties could have a material adverse effect on the Company. 

   The security services offered by the Company for use in connection with its
customers'  networks also cannot assure complete protection from computer
viruses, break-ins and other disruptive problems.  Although the Company attempts
to limit  contractually its liability in such instances, the occurrence of such
problems may result in claims against or liability on the part of the Company. 
Such claims, regardless of their ultimate outcome, could result in costly
litigation and could have a material adverse effect on the Company's business or
reputation or on its ability to attract and retain customers for its 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 the Company's
customer base and revenues.

Dependence on Suppliers

   The Company has few long-term contracts with its suppliers. The Company is
dependent on third party suppliers for its leased-line connections, or
bandwidth. Certain of these suppliers are or may become competitors of the
Company, and such suppliers are not subject to any restrictions upon their
ability to compete with the Company. To the extent that these suppliers change
their pricing structures, the Company may be adversely affected. In the event
that the IXC Transaction is consummated, the Company anticipates that its
dependence upon certain of these suppliers will be decreased.  Nevertheless,
until the IXC system is completed and, in certain geographic areas, even after
such completion, the Company will continue to be dependent upon such suppliers. 
Moreover, even if the IXC Transaction closes, any failure of IXC to deliver
bandwidth or to provide operations and maintenance in a timely or adequate
fashion could adversely affect the Company.  The Company is also dependent on
certain third party suppliers of hardware components. Although the Company
attempts to maintain a minimum of two vendors for each required product, certain
components used by the Company in providing its networking services are
currently acquired or available from only one source.

   The Company has from time to time experienced delays in the receipt of
certain hardware components. 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 materially adversely affect the
Company. The Company's 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 the Company's desire to maintain good relationships
with the suppliers. As the Company's suppliers revise and upgrade their
equipment technology, the Company may encounter difficulties in integrating the
new technology into the Company's network. 

   Certain of the vendors from whom the Company purchases telecommunications
bandwidth, including the RBOCs and other local exchange carriers ("LECs"),
currently are subject to tariff controls and other price constraints which in
the future may be changed. In addition, newly enacted legislation will produce
changes in the market for telecommunications services.  These changes may affect
the prices charged by the RBOCs and other LECs to the Company, which could have
a material adverse effect on the Company's business, financial condition and
results of operations.  Moreover, the Company is subject to the effects of other
potential regulatory actions which, if taken, could increase the cost of the
Company's telecommunications bandwidth through, for example, the imposition of
access charges.

                                       9
   
<PAGE>

Risks of Technology Trends and Evolving Industry Standards

   PSINet's success will depend upon its ability to develop new products and
provide new services that meet customers' changing requirements. The market for
Internet access is characterized by rapidly changing technology, evolving
industry standards, emerging competition, changes in customer needs and frequent
new service and product introductions. The Company's future success will depend,
in part, on its ability to effectively use leading technologies, to continue to
develop its technical expertise, to enhance its current services, to develop new
services that meet changing customer needs, and to influence and respond to
emerging industry standards and other technological changes on a timely and
cost-effective basis. There can be no assurance that the Company will be
successful in effectively using new technologies, developing new services or
enhancing its existing services on a timely basis or that such new technologies
or enhancements will achieve market acceptance. The Company believes that its
ability to compete successfully is also dependent upon the continued
compatibility and interoperability of its services with products and
architectures offered by various vendors. There can be no assurance that the
Company will be able to effectively address the compatibility and
interoperability issues raised by technological changes or new industry
standards.  In addition, there can be no assurance that services or technologies
developed by others will not render the Company's services or technology
uncompetitive or obsolete.

Dependence on Technology; Proprietary Rights

   The Company's success and ability to compete is dependent in part upon its
technology and proprietary rights, although the Company believes that its
success is more dependent upon its technical expertise than its proprietary
rights. The Company relies on a combination of copyright, trademark and trade
secret laws and contractual restrictions to establish and protect its
technology. Nevertheless, it may be possible for a third party to copy or
otherwise obtain and use PSINet's products or technology without authorization
or to develop similar technology independently, and there can be no assurance
that such measures are adequate to protect PSINet's proprietary technology. In
addition, PSINet's products may be licensed or otherwise utilized in foreign
countries where laws may not protect PSINet's proprietary rights to the same
extent as do laws in the United States. It is the Company's policy to require
employees and consultants and, when obtainable, suppliers to execute
confidentiality agreements upon the commencement of their relationships with the
Company. There can be no assurance that the steps taken by the Company will be
adequate to prevent misappropriation of its technology or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technology. The Company is also subject
to the risk of adverse claims and litigation alleging infringement of the
intellectual property rights of others. From time to time the Company has
received claims of infringement of other parties' proprietary rights. While the
Company does not believe that it has infringed the proprietary rights of other
parties, there can be no assurance that third parties will not assert
infringement claims in the future with respect to the Company's current or
future products or that any such claims will not require the Company to enter
into license arrangements or result in protracted and costly litigation,
regardless of the merits of such claims. No assurance can be given that any
necessary licenses will be available or that, if available, such licenses can be
obtained on commercially reasonable terms. 

Potential Volatility of Stock Price

   The market price and trading volume of the Company's Common Stock has been
and may continue to be highly volatile. Factors such as variations in the
Company's revenue, earnings and cash flow and announcements of new service
offerings, technological innovations, strategic alliances and/or acquisitions
involving competitors of the Company or price reductions by the Company, its
competitors or providers of alternative services could cause the market price of
the Common Stock to fluctuate 

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<PAGE>

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 
the Common Stock. 

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