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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.  Capitalized terms used in this Exhibit 99.1 but not otherwise defined
herein should have the respective meanings ascribed thereto in the periodic
report with which this Exhibit 99.1 is filed.   

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 
$87.1 million for the first nine 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 $5.3 million, $53.2 million and $55.1 million and has 
incurred negative EBITDA of $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 $10.7 million and $31.3 
million and negative EBITDA of $3.3 million and $14.7 million for the three 
and nine months ended September 30, 1997, respectively.  At September 30, 
1997, the Company had a retained deficit of $147.9 million.  In its Annual 
Report on Form 10-K for the fiscal year ended December 31, 1996, the Company 
reported that it would achieve positive EBITDA sometime during the second 
quarter of 1997 and would be profitable by the first quarter of 1998 or prior 
thereto.  The Company has achieved breakeven EBITDA in certain months of the 
second and third quarters of 1997, but as a result of several factors that 
arose subsequent to the date of the Company's filing of its Form 10-K for 
fiscal 1996, the Company was unable to meet certain of its prior objectives.  
Principal among these factors adversely affecting the Company's operating 
performance were delivery delays for Primary Rate Interface ("PRI") 
telecommunications facilities required to meet customer demand, accelerated 
investment by the Company in its overseas operations in order to respond to 
rapidly developing markets, and lower than expected growth during the third 
quarter in the demand for its domestic Internet services. 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 


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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. 
   
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: (1) other Internet access providers, including local providers, such as
The Internet Access Company, Inc. ("TIAC"), or national providers, such as Epoch
Internet, and (2) telecommunications companies, such as AT&T Corp. ("AT&T"), GTE
Corp., recent acquirer of Bolt, Beranek & Newman Inc. ("BBN") ), MCI
Communications Corporation ("MCI") (which recently announced an agreement to
merge with WorldCom, Inc.), WorldCom, Inc., through mergers with 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. 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 Communications Co., Inc. ("MFS") and of MFS with
WorldCom, Inc., as well as GTE Corp.'s recently consummated acquisition of BBN,
ICG Communications, Inc.'s recently announced merger with NETCOM On-Line
Communications Services, Inc. and MCI's recently announced merger with WorldCom,
Inc., 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. 

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   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
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 September 30, 1997, the Company
provided wholesale network services to 41 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.  In addition, growth in the Company's wholesale
network services business has recently been constrained by delivery delays for
Primary Rate Interface ("PRI") telecommunications facilities (which connect
dial-up customers to the Company's network) required to meet customer demand. 
During the period ended September 30, 1997, the Company's need for such
facilities increased significantly over the same period in fiscal 1996, while
actual delivery by RBOCs of the facilities required to meet this need lagged
significantly behind, resulting in lower than projected revenues from this
business.  The Company has been working with certain RBOCs to expedite delivery
of PRI orders to enable the Company to accommodate more efficiently the growing
demand for its wholesale network services.  For the foregoing reasons, there can
be no assurance that the Company's wholesale network services will provide
significant revenue in the future.  

Risks of Growth and Expansion

   The Company had more than 350 POPs as of September 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, 

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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. 

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

   On July 22, 1997, the Company entered into an IRU and Stock Purchase
Agreement, as amended on October 1, 1997, 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 (the "Initial Shares").  In
addition, if the fair market value of the Initial Shares is less than $240.0
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 sole option, in an amount equal to the difference between $240.0
million and the then fair market value of such shares (the "Contingent Payment
Obligation").  The Company has the right to accelerate its Contingent Payment
Obligation to deliver additional stock and/or cash to IXC at any date after the
closing of this transaction.  In addition, the right of IXC to receive the
Contingent Payment Obligation will terminate on such date the Initial Shares
value, as defined, is equal to or greater than $240.0 million.  The agreement
permits PSINet to use the OC-48 bandwidth for any purpose in 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. The agreement contemplates that the total amount of
OC-48 bandwidth will be delivered to the Company in specified minimum increments
every six months during the two year period following the closing of the
transaction. In addition, after the closing of this transaction, the Company
expects to incur on an annual basis approximately $1.15 million in operation and
maintenance fees with respect to the IRUs to be acquired from IXC per each 1,000
route miles of OC-48 bandwidth accepted under the purchase agreement with IXC. 
The transaction with IXC is expected to close prior to March 31, 1998, subject
to approval by the Company's shareholders and other closing conditions.  In
addition, the Company's Board of Directors has approved certain modifications to
the Company's Preferred Stock Purchase Rights Plan in connection with this
transaction.
   
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   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 its contractual obligation to PSINet; risks 
associated with any change in control or change in management of IXC; risks 
associated with the possible significant dilution of the stock ownership of 
PSINet's other shareholders and/or the possible significant cash outlay 
required of PSINet as a result of PSINet's contractual requirement pursuant 
to the Contingent Payment Obligation to deliver to IXC, as of prescribed 
date, additional stock and/or cash in an amount equal to the difference 
between $240.0 million and the then fair market value of the shares delivered 
to IXC at closing; risks associated with IXC's sale of substantial numbers of 
shares of PSINet stock; 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 its strategic alliance with IXC. 

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 $95.0 million.  In addition, after the closing of the
IXC transaction, the Company expects to incur on an annual basis approximately
$1.15 million in operation and maintenance fees with respect to the IRUs to be
acquired from IXC per each 1,000 route miles of OC-48 bandwidth accepted under
the IRU Agreement.  Other planned capital expenditures expected to be incurred
by the Company over the next four years include up to $35.0 million in
connection with the Company's anticipated buildout of its pan-European Internet
network. The Company is also obligated, under the terms of one of its Wholesale
Network Services Agreements, to provide the wholesale customer with a rental
facility of up to $5.0 million for telecommunications equipment ($1.4 million
drawn at September 30, 1997) for deployment in the customer's network.  In
addition, the Company may be obligated in accordance with the Contingent Payment
Obligation under the IRU Agreement with IXC to provide IXC with additional stock
and/or cash, at the Company's sole option, in an amount equal to the difference
between $240.0 million and the then fair market value of such shares on the
earlier of one year following delivery and acceptance of the total bandwidth to
be acquired from IXC or the fourth anniversary of the closing of the
transaction.  The Company has the right to accelerate its Contingent Payment
Obligation to deliver additional stock and/or cash to IXC at any date after
the closing of the transaction.    
   
   The Company believes it will have a reasonable degree of flexibility to
adjust the amount and timing of its 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 bandwidth corresponding to the IRUs to be acquired from IXC, together
with other working capital from operations, from existing credit facilities,
from capital lease financings 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. Additionally, on November 10, 1997,
the Company completed a private offering of 600,000 shares of its Series B 8%
Convertible Preferred Stock for proceeds of $30.0 million, before expenses.  In
the event the Company's Contingent Payment Obligation to IXC becomes payable,
such obligation may be satisfied by the delivery of additional shares of common
stock or, at the Company's sole option, cash or a combination thereof, and the
Company presently believes that it will have sufficient flexibility to satisfy
such obligation.  
   
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   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. 
   
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 and
iSTAR transactions, shareholders of the Company could suffer a significant
dilution of their interests in the 

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Company. The Company's shareholders also are subject to substantial dilution 
upon conversion of the Series B Preferred Stock.  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. 

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
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 

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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.  These
financing arrangements require that the Company satisfy certain financial
covenants and currently prohibit the payment of dividends and the repurchase of
capital stock of the Company without, in each case, the lender's consent.  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. 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 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 

                                          36
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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. 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 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 

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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 contractual 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 or delay of IXC to
deliver bandwidth corresponding to the PSINet IRUs or to provide operations and
maintenance and other services with respect to such bandwidth 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 and telecommunications facilities, including, most
recently, delays in delivery of PRI telecommunications facilities. 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.
   
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 

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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 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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