<PAGE>                                                                        
                                                                 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, it has incurred losses and 
experienced negative cash flow from operations during each of its last three 
fiscal years including a loss of $53.2 million and negative cash flow from 
operations of $30.1 million for 1995 and a loss of $38.3 million and negative 
cash flow from operations of $28.4 million for the nine months ended 
September 30, 1996.  At September 30, 1996, the Company had a retained 
deficit of $99.8 million. There can be no assurance that revenue growth will 
continue or that the Company will achieve profitability or positive cash flow 
from operations in the future.  The Company expects to focus in the near term 
on continuing to increase its corporate subscriber base and expanding its 
consumer wholesaling strategy which will require it to continue to incur 
expenses for marketing, network infrastructure, personnel and the development 
of new services and software, and thereby may adversely impact cash flow and 
operating performance. The Company also plans to continue to enhance the 
PSINet network and the administrative and operational infrastructure 
necessary to support its Internet access service domestically and 
internationally. As a result, the Company believes that it will continue to 
incur losses throughout 1996, and there can be no assurance that the Company 
will achieve profitability in the future.  

   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 timing of customer 
subscriptions, 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 or acquisitions that could have a material adverse effect 
on the Company's business, results of operations and cash flow. In addition, 
due to changing market conditions, substantial amortization expenses may be 
accelerated in accordance with generally accepted accounting principles to 
recognize changes in the expected life of acquisitions and related long-lived 
assets. 

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 price, quality of service, reliability, 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. 




                                      21


<PAGE>


   The Company's current and prospective competitors generally may be divided 
into the following three groups: (1) other Internet access providers, such as 
Bolt, Beranek & Newman Inc., and other national and regional providers; (2) 
telecommunications companies, such as AT&T Corp. ("AT&T"), MCI Communications 
Corporation ("MCI"), MFS Communications Co., Inc. ("MFS"), Sprint, Inc., 
regional Bell operating companies ("RBOCs") and various cable television 
companies; and (3) on-line services providers, such as America Online, Inc. 
("America Online"), CompuServe Incorporated ("CompuServe"), Delphi Internet 
Services (a division of News Corp.), the Microsoft Network ("MSN"), a service 
of Microsoft Corp. ("Microsoft"), NETCOM On-Line Communications Services, 
Inc. ("NETCOM"), and Prodigy. 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 
competitive disadvantage. 

   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. The 
recent merger of UUNET Technologies, Inc. ("UUNET") with MFS and the pending 
merger of MFS and WorldCom, Inc., for example, 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 expands 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. 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.  





                                      22


<PAGE>

RECENT ENTRY INTO CONSUMER WHOLESALING BUSINESS

   In response to competitive considerations in the market for individual 
customers, the Company has determined to focus its efforts in this market on 
the high-end business user and has altered its strategy to include the 
provision of wholesale services to consumer-oriented Internet service 
providers in the United States, rather than providing the consumer services 
directly.  There can be no assurance that the Company will be successful in 
implementing this strategy change or marketing to high-end business users or 
other Internet service providers or that the Company will be able to offset 
the effects of any revenue reductions with respect to its new consumer 
Internet service focus with an increase in the number of its customers, 
higher revenue from enhanced services, cost reductions or otherwise.

RISKS OF GROWTH AND EXPANSION

   The Company had expanded its network to approximately 345 POPs as of 
September 30, 1996 and plans to continue to add additional POPs and expand  
the capacity of existing POPs as needed during the remainder of 1996 and 
1997.  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 increased demands on its systems and controls.  
The Company anticipates that its consumer wholesale focus, 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 
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. 

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.  As of September 
30, 1996, the Company's network was comprised of more than 345_POPs.  Based 
upon its present business plan, the Company believes that working capital, 
funds from operations, existing credit facilities and additional borrowings 
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 existing operations.  The Company may seek to 
raise additional funds in order to take advantage of unanticipated 
opportunities, including more rapid international expansion or acquisitions 
of complementary businesses or technologies, or to develop new products or 
otherwise respond to unanticipated competitive pressures.  There can be no 
assurance that the Company will be able to raise such funds on favorable 
terms or at all.  In the event that the Company is unable to obtain such 
additional funds or 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 as to the 
ability of the Company to obtain the capital it requires to finance its 
expansion into these markets. In addition, 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 to doing business on an international level, such as 
unexpected changes in regulatory requirements, tariffs, 



                                      23
<PAGE>

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 additional joint ventures or 
other strategic relationships with one or more third parties in order to 
successfully conduct its foreign operations. 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. The Company has no present commitments or agreements with respect 
to any material strategic alliance or acquisition except as otherwise 
disclosed in this Form 10-Q and the Company's other periodic reports filed 
with the Securities and Exchange Commission. 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. 

   PSINet has entered into strategic alliances in Korea and The Netherlands 
and, most recently, has entered into an arrangement to form a joint venture 
for the purpose of building a network and providing Internet services 
throughout Europe. The Company has no prior experience working with these 
companies. This lack of experience as well as the international nature of 
these ventures could increase the likelihood of failure and materially 
adversely affect the Company's results of operations.  Additionally, the 
Company may be required to issue Company stock in connection with its 
obligation to purchase an additional 10% interest in World Online B.V. and 
has entered into option arrangements in connection with the Company's 
European joint venture which could result in the issuance of Company stock to 
the Company's joint venture partner.  

   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, 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 substantial 
amortization charges to the Company.  In the event the Company consummates 
additional acquisitions in the future that must be accounted for as 
purchases, such acquisitions would likely further increase 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 fees of financial advisors, attorneys and accountants, the 
expenses of integrating the business of the acquired company or the strategic 
alliance with the Company's business and any expenses associated with 
registering shares of the Company's capital stock, if such 

                                      24
<PAGE>

shares are issued. 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. If the Company is unable to hire 
additional sales and marketing personnel, the marketing and sale of existing 
and new products will likely be adversely impacted. 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 addition, recently 
enacted federal legislation prohibits and imposed liability for the 
transmission on the Internet of certain types of information and content. 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 Internet access providers 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, however, 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 
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 the Company to satisfy certain financial covenants and restrict the 
payment of dividends. As of September 30, 1996, the Company was in compliance 
with these restrictions.  The Company's secured lenders would be entitled to 
foreclose 


                                      25

<PAGE>


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

   The 1996 Federal telecommunications legislation imposes criminal liability 
on persons sending or displaying in a manner available to minors indecent 
material on an interactive computer service such as the Internet.  The 1996 
Federal telecommunications legislation also imposes criminal liability on an 
entity knowingly permitting facilities under its control to be used for such 
activities.  Entities solely providing access to facilities not under their 
control (including transmission, downloading, intermediate storage, access 
software and other incidental capabilities) are exempted from liability, as 
are service providers that take good faith, reasonable, effective and 
appropriate actions to restrict access by minors to the prohibited 
communications.  The constitutionality of these provisions is being 
challenged in Federal court, and the interpretation and enforcement of them 
is uncertain.  This legislation 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.  In addition, in light of the 
uncertainty attached to interpretation and application of this law, there can 
be no assurance that the Company would not have to modify its operations to 
comply with the statute, including prohibiting users from maintaining home 
pages on the World Wide Web.  

   In January 1995, the U.S. Federal Communications Commission ruled that 
telephone companies must charge a separate Subscriber Line Charge for each 
derived channel available in an ISDN bundle. An ISDN bundle generally 
provides from three to 24 channels. The Company currently does not incur 
increased costs as a result of this ruling due to an effective waiver for 
network access lines.  If however, the waiver were to be revoked, this ruling 
could result in increased costs being imposed on the Company and, 
consequently, could adversely affect the Company's business, results of 
operations and financial condition.

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 
also 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, especially if 
such an 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 and business interruption insurance with a basic policy limitation 
of $5.0 million, subject to deductibles, exclusions and self-insurance 
retention amounts. Such coverage, however, may not be adequate to compensate 
the Company for all losses that may occur. In addition, the Company 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 subscribers. 

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 





                                      26

<PAGE>

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. 

SECURITY RISKS; RISKS ASSOCIATED WITH SECURITY OFFERINGS

   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 subscribers. Persistent security problems continue to 
plague public and private 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, 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. 
Moreover, the Company is 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 


                                      27

<PAGE>

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 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. 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. These agreements provide that confidential information developed 
or made known during the course of a relationship with the Company is to be 
kept confidential and not disclosed to third parties except in specific 
circumstances. 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.  




                                      28

<PAGE>

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 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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