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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 ---------------

                                    FORM 10-K

         [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
              SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1999

         [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
              SECURITIES EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER 000-27525

                                  DSL.NET, INC.
             ------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                DELAWARE                                     06-1510312
     -------------------------------                      ----------------
     (STATE OR OTHER JURISDICTION OF                      (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                      IDENTIFICATION
                                                               NUMBER)

     545 LONG WHARF DRIVE, NEW HAVEN, CONNECTICUT                06511
     --------------------------------------------              ----------
       (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                (ZIP CODE)


       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 772-1000

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                         COMMON STOCK, $.0005 PAR VALUE

    Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s)), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

    The aggregate market value of the voting stock held by non-affiliates of the
Registrant, as of March 24, 2000, was approximately $667,725,251 (based on the
closing price of the Registrant's Common Stock on March 24, 2000, of $23.3125
per share).

    The number of shares outstanding of the Registrant's $.0005 par value Common
Stock as of March 24, 2000 was 64,311,189.



                       DOCUMENT INCORPORATED BY REFERENCE

    The registrant intends to file a definitive proxy statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended December 31,
1999. Portions of such proxy statement are incorporated by reference into Part
III of this Form 10-K.

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<PAGE>
                                  DSL.net, Inc.

                           ANNUAL REPORT ON FORM 10-K

                          YEAR ENDED DECEMBER 31, 1999

                                TABLE OF CONTENTS

<TABLE><CAPTION>
                                                                                                         PAGE NO.
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<S>            <C>                                                                                       <C>
PART I
------
Item 1.        Business...................................................................................   3
Item 2.        Properties.................................................................................  16
Item 3.        Legal Proceedings..........................................................................  17
Item 4.        Submission of Matters to a Vote of Security Holders........................................  17

PART II
-------
Item 5.        Market for Registrant's Common Equity and Related Stockholder Matters......................  18
Item 6.        Selected Consolidated Financial Data.......................................................  20
Item 7.        Management's Discussion and Analysis of Financial Condition and Results of Operations......  22
Item 7A.       Quantitative and Qualitative Disclosure About Market Risk..................................  42
Item 8.        Financial Statements and Supplementary Data................................................  43
Item 9.        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......  62

PART III
--------
Item 10.       Directors and Executive Officers of the Registrant.........................................  62
Item 11.       Executive Compensation.....................................................................  62
Item 12.       Security Ownership of Certain Beneficial Owners and Management.............................  62
Item 13.       Certain Relationships and Related Transactions.............................................  62

PART IV
-------
Item 14.       Exhibits, Financial Statement Schedules, and Reports on Form 8-K...........................  63


SIGNATURES................................................................................................  65


</TABLE>

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                                     PART I

ITEM 1.  BUSINESS

THIS BUSINESS SECTION AND OTHER PARTS OF THIS ANNUAL REPORT ON FORM 10-K CONTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE SET FORTH IN ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND ELSEWHERE IN THIS ANNUAL
REPORT ON FORM 10-K.

GENERAL

     DSL.net, Inc. ("DSL.net" or the "Company") (Nasdaq: DSLN) provides
high-speed data communications and Internet access services using digital
subscriber line, or DSL, technology to small and medium sized businesses. We
primarily target select second and third tier cities, which typically have
populations of less than 900,000. Our networks enable data transport over
existing copper telephone lines at speeds of up to 1.5 megabits per second. Our
services offer customers high-speed digital connections at prices that are
attractive compared to the cost and performance of alternative data
communications services.

THE DSL.NET SOLUTION

     Our services provide small and medium sized businesses, primarily in second
and third tier cities, with high-speed Internet access and data services using
DSL technology. Key elements of our solution are:

     HIGH-SPEED CONNECTIONS. We offer Internet access at speeds of up to 1.5
megabits per second. Our network is designed to provide data transmission at the
same speed to and from the customer, known as symmetric data transmission. We
believe that symmetric data transmission is best suited for business
applications, because business users require fast connections both to send and
receive information. This compares to other DSL services which use asymmetric
data transmission, which permits users to send information at speeds much slower
than that at which they can receive information. We offer asymmetric services
for employees of our small business customers and home office workers.

     COMPLETE BUSINESS SOLUTION. We offer our customers a single point of
contact for a complete solution that includes all of the necessary equipment and
services to establish and maintain digital data communications. Our primary
services include Internet access, e-mail, assisting our customers in obtaining
Internet addresses, and hosting our customers' Web sites, and support networks
that connect customers' various offices and connect our customers to their
suppliers, customers and others. Through our partnerships with independent
suppliers and select application service providers, we also provide Web site
design and applications enabling electronic commerce. Our network is designed to
enable us to individually configure each customer's service remotely.

     ALWAYS-ON CONNECTIONS. With our service, customers can access the Internet
continuously without having to dial into the network for each use. These
"always-on" connections provide customers with the ability to readily access the
Internet and transfer information. Despite the

                                       -3-
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always-on connection, we charge our customers a flat fee per month rather than
billing them based on usage.

     ATTRACTIVE VALUE PROPOSITION. Our services offer customers high-speed
digital connections at prices that are attractive compared to the cost and
performance of alternative data communications services, such as dial-up, T1,
ISDN or frame relay lines. We believe that our services also increase the
productivity of network users by decreasing the time they spend connecting to
the Internet and waiting for information downloads and transfers.

     CUSTOMER SUPPORT. We provide customer service 24 hours a day, seven days a
week. This support is important to many of our small and medium sized business
customers because they do not typically have dedicated internal support staff.
With our remote monitoring and troubleshooting capabilities, we continuously
monitor our network and our customers' connections. This enables us to identify
and enhance network quality, service and performance and address network
problems promptly.

OUR SERVICES

     We utilize DSL technology to provide reliable and cost-effective service to
our customers. As part of our service offerings, we function as our customer's
Internet service provider and deliver a broad range of Internet-based,
value-added solutions. As of March 15, 2000, we provided service or had
installed equipment in more than 160 cities.

     Our services currently include all necessary equipment, software and lines
required to establish and maintain a digital Internet connection. Our primary
services include Internet access, e-mail, assisting our customers in obtaining
Internet addresses and hosting our customers' Web sites. We also support
networks that connect customers' various offices and connect our customers to
their suppliers, customers and others. In addition, through our partnerships
with independent suppliers and select application service providers, we offer
Web site design, as well as applications enabling electronic commerce.

     Currently, customers typically pay the cost of installation and a monthly
fee for the service. The monthly fee does not vary by number of users or usage,
although it does vary based on the speed of the connection. The fee includes the
cost of the modem installed at the customer's site, all phone line charges, and
general Internet access services, including e-mail, assistance in obtaining
Internet addresses and services related to the registration of these addresses
with various administrative bodies. Generally, customers subscribe to our
services for at least one year and are billed for our services on a monthly
basis. We also offer customers the ability to have their installation costs and
monthly service fees charged directly to their credit cards.

CUSTOMERS

     Our target customers are small and medium sized businesses in cities in
which we offer our services. In particular, we believe the following are
especially attractive customers:

     o    businesses currently using other high-speed data communications
          services, such as T1, ISDN and frame relay services, or low-speed
          dial-up Internet access;

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<PAGE>

     o    professional or service-based firms that have multiple Internet
          service provider accounts and phone lines;

     o    branch offices located in second and third tier cities that require
          transmission of large files between locations; and

     o    businesses that use data-intensive applications, such as financial
          services, technology, and publishing.

     None of our customers accounted for more than 5% of our total revenues
during the period from inception (March 3, 1998) through December 31, 1998 or
the year ended December 31, 1999.

SALES AND MARKETING

     Our marketing professionals have developed a methodology to identify the
businesses that would benefit from our services. Once we identify businesses in
a target market, we employ a targeted local marketing strategy utilizing a
variety of mediums, including direct mail, print and radio. In addition, we
sponsor local promotional events, such as information technology or
telecommunications seminars, to assist our local sales professionals. We utilize
both internal and external sales professionals to sell our services to
prospective customers. We also partner with local information technology
professionals to assist in the sale of our services.

STRATEGIC RELATIONSHIPS

     We entered into strategic relationships that we believe are valuable
because they provide additional marketing capabilities and distribution
channels, in addition to capital investment. We anticipate that we will enter
into additional strategic relationships with others in the future.

     Our current strategic relationships include:

     STAPLES. In July 1999, we entered into a strategic relationship with
Staples pursuant to which, among other things:

     o    STAPLES INVESTMENT. Staples invested $3,500,000 in return for shares
          of our Series E preferred stock which converted into 473,655 shares of
          our common stock upon the closing of our initial public offering on
          October 12, 1999. In addition, Staples purchased 360,000 shares of our
          common stock in connection with our initial public offering.

     o    MARKETING SERVICES THROUGH STAPLES. Staples has agreed to market our
          services to their small and medium sized business customers. Staples
          refers potential customers to us through their retail stores, catalog
          and web site. We have agreed to compensate Staples for each sale of
          our services generated through these channels. We intend to offer our
          customers the ability to connect over the Internet directly to Staples
          for their business supply purchases.

     o    MUTUAL EXCLUSIVITY. During the term of our agreement, which is
          initially for one year with the potential for annual renewals, we have
          agreed not to offer our services through another

                                      -5-
<PAGE>

          national office supply company. In turn, Staples has agreed to offer
          our services exclusively to its customers in the markets in which we
          offer our DSL service.

     MICROSOFT. In July 1999, we entered into a strategic relationship with
Microsoft pursuant to which, among other things:

     o    MICROSOFT INVESTMENT. Microsoft invested $15,000,000 in return for
          shares of our Series E preferred stock which converted into 2,029,949
          shares of common stock upon the closing of our initial public offering
          on October 12, 1999.

     o    CO-BRANDING FOR OUR CUSTOMERS. During the term of our agreement, which
          is initially for two years with the potential for annual renewals,
          Microsoft has agreed to jointly market with us a co-branded version of
          the Microsoft Network service (MSN). We have agreed to provide and
          market the co-branded MSN service to our new and existing customers.
          We will receive a portion of any advertising revenue generated through
          the co-branded MSN service.

     o    JOINT MARKETING OF OUR SERVICES. We have agreed to cooperate in joint
          marketing activities utilizing our respective sales forces to promote
          and sell the combined DSL.net services with the co-branded MSN
          services.

CUSTOMER SUPPORT AND OPERATIONS

     Our customer support professionals work to minimize the complexity and
inconvenience of data communications and Internet access for our customers. They
provide our customers with a single point of contact for implementation,
maintenance and operations support.

     IMPLEMENTATION. We manage the implementation of our service for each
customer. We lease the copper telephone lines from the local telephone company.
These lines run from our equipment located in the telephone company's central
office to our customer. We test these lines to determine whether they meet our
specifications and work with the local telephone company to correct any problems
identified by our testing. Field service technicians, typically outside
contractors, install the modem and any necessary wiring inside our customers'
offices and test the modem and connection over our network.

     MAINTENANCE. Our network operations center provides network surveillance
for all equipment in our network. We are able to detect and correct many of our
customers' maintenance problems remotely, often before our customer is aware of
the problem. Customer-initiated maintenance and repair requests are managed and
resolved primarily through our help desk. Our information management system,
which generates reports for tracking maintenance problems, allows us to
communicate maintenance problems from the customer service center to our network
operations center 24 hours a day, seven days a week.

     OPERATIONS SUPPORT SYSTEMS. Our operations support systems are intended to
improve many of our business processes, including customer billing, service
activation, inventory control, customer care reports and maintenance reports.
They have been designed to provide us with accurate, up-to-date information in
these areas. Additional enhancements and integration of these systems will be
implemented during 2000. We believe that our operations support systems will
provide us with the flexibility to add additional services for our customers as
well as to meet our expansion goals.

                                      -6-
<PAGE>

OUR NETWORK

     Our network delivers high-speed Internet access and data communication
services. It offers scaleability, reliability, security and high performance.

     NETWORK DESIGN.   The key design principles of our network are:

     o    INTELLIGENT END-TO-END NETWORK MANAGEMENT. Our network is designed to
          allow us to monitor network components and customer traffic from a
          central location. Because we control the lines to the customer, we can
          perform network diagnostics and equipment surveillance continuously.
          From our network operations center, we have visibility across our
          entire network, allowing us to identify and address network problems
          quickly and to provide quality service and performance.

     o    CONSISTENT PERFORMANCE WITH THE ABILITY TO EXPAND. We believe that
          networks that use technology that transmits packets of information,
          such as ours, will eventually replace networks that use conventional
          telephone transmission technology. We have designed our network to
          leverage the economics of DSL technology, to grow with our business
          and to provide consistent performance. We also use asynchronous
          transfer mode equipment in our network, which implements high-speed,
          high volume transmission of data.

     o    SECURITY. Our network is designed to reduce the possibility of
          unauthorized access and to allow our customers to safely transmit and
          receive sensitive information and applications. The modems we install
          on our customers' premises are designed to work in conjunction with
          installed security systems and network servers in an effort to provide
          safe connections to the Internet and a secure operating environment.

     NETWORK COMPONENTS.   The primary components of our network are:

     o    DSL MODEMS AND ON-SITE CONNECTIONS. We purchase DSL modems and provide
          them to our customers as part of the service contract. We configure
          the DSL modem and arrange for the installation of the modem and
          on-site wiring needed to connect the modem to the copper telephone
          line that we lease. We contract with independent field service
          organizations to perform these services, in addition to using a small
          internal staff.

     o    COPPER TELEPHONE LINES. We lease a copper telephone line running to
          each customer from our equipment in the local telephone company's
          central office under terms specified in our interconnection agreements
          with these companies. Each copper line must be specifically
          conditioned by the local telephone company to carry digital signals,
          typically for an additional charge. If we are unable to lease, or
          experience delays in leasing, a sufficient number of acceptable
          telephone lines on acceptable terms, our business will be harmed.

     o    CENTRAL OFFICE COLLOCATION. Through our interconnection agreements, we
          seek to secure space to locate our equipment in the central offices of
          traditional local telephone companies and offer our services from
          these locations. These collocation spaces are designed to offer the
          same high reliability and availability standards as the telephone

                                      -7-
<PAGE>

          companies' other central office spaces. We install the equipment
          necessary to provide high-speed DSL signals to our customers in these
          spaces. We have continuous access to these spaces to install and
          maintain our equipment. We expect that space in central offices will
          become increasingly scarce as competitive telecommunications companies
          vie for this space. We may not be able to secure space to install our
          equipment on a timely basis, which could delay our roll-out plan and
          adversely affect our business and prospects.

     o    CONNECTION TO THE INTERNET. Network traffic gathered at each central
          office is routed to one of our regional hubs and then to the Internet.
          In certain areas where we offer service from more than one central
          office, network traffic is routed from each central office in that
          area to a local hub which aggregates its traffic and the traffic from
          the other central offices located in that area and routes this traffic
          to a regional hub. Our hubs contain extra equipment and backup power
          to provide backup facilities in the event of an equipment failure and
          are actively monitored from our network operations center. We lease
          space for our hubs in facilities designed to host network equipment.
          Our hubs are connected to one another via fiber-optic cables and other
          high speed data communications technologies. We have agreements with
          MCI WorldCom and AT&T to provide this service, which enables us to
          have duplicate independent connections for our network links. Our
          network connects to the Internet through multiple Internet access
          providers.

     o    NETWORK OPERATIONS CENTER. Our network is managed from our network
          operations center located in New Haven, Connecticut. We provide
          end-to-end network management 24 hours a day, seven days a week. This
          enhances our ability to address performance and service issues before
          they affect the customer. From the network operations center, we can
          monitor individual customer lines and the equipment and circuits in
          each regional network and central office.

COMPETITION

     We face competition from many companies with significantly greater
financial resources, well-established brand names and large installed customer
bases. Although we believe competition in many second and third tier cities is
less intense than competition in larger cities, we expect the level of
competition in our markets to intensify in the future. We expect significant
competition from:

     OTHER DSL PROVIDERS. Certain competitive carriers, including Covad, Network
Access Solutions, NorthPoint and Rhythms NetConnections, offer DSL-based
services. The 1996 Telecommunications Act specifically grants competitive
telecommunications companies, including other DSL providers, the right to
negotiate interconnection agreements with traditional telephone companies,
including interconnection agreements which may be identical in all respects to,
or more favorable than, our agreements. Several of the large telecommunications
companies and computer companies, such as Microsoft and Qwest, have made
investments in DSL service providers.

     INTERNET SERVICE PROVIDERS. Several national and regional Internet service
providers, including America Online, Concentric Network, Flashcom, PSINet and
Verio, offer high-speed access capabilities to complement their existing
products and services. These companies generally provide Internet access to
residential and business customers over the traditional telephone companies'
networks. However, some Internet service providers offer DSL-based

                                      -8-
<PAGE>

access using another carrier's DSL service or, in some cases, are building their
own DSL networks. Some Internet service providers combine their significant and
even nationwide marketing presence with strategic or commercial alliances with
DSL-based competitive telecommunications companies and traditional local
telephone companies.

     TRADITIONAL LOCAL TELEPHONE COMPANIES. Many of the traditional local
telephone companies, including Bell Atlantic, BellSouth, SBC Communications and
U S West have begun deploying DSL-based services. These companies have
established brand names and reputations for high quality in their service areas,
possess sufficient capital to deploy DSL equipment rapidly, have their own
copper telephone lines and can bundle digital data services with their existing
voice services to achieve a competitive advantage in serving customers. We
believe that the traditional telephone companies have the potential to quickly
deploy DSL services. In addition, these companies also offer high-speed data
communications services that use other technologies. We depend on these
traditional local telephone companies to enter into agreements for
interconnection and to provide us access to individual elements of their
networks. Although the traditional local telephone companies are required to
negotiate in good faith in connection with these agreements, future
interconnection agreements may contain less favorable terms and result in a
competitive advantage to the traditional local telephone companies.

     NATIONAL LONG DISTANCE CARRIERS. National long distance carriers, such as
AT&T, MCI WorldCom, Nextlink, Qwest, Sprint and Williams have deployed
large-scale data networks, sell connectivity to businesses and residential
customers, and have high brand recognition. They also have interconnection
agreements with many of the traditional telephone companies, and many offer
competitive DSL services.

     OTHER FIBER-BASED CARRIERS. Companies such as Allegiance, Choice One,
e.spire and Intermedia have extensive fiber networks in many metropolitan areas,
primarily providing high-speed data and voice circuits to small and large
corporations. They also have interconnection agreements with the traditional
telephone companies under which they have acquired collocation space in many
large markets, which could position them to offer DSL service in those markets.

     CABLE MODEM SERVICE PROVIDERS. Cable modem service providers, such as At
Home and its cable partners, RoadRunner and High Speed Access, offer high-speed
Internet access over cable networks to consumers. @Work, a division of At Home,
has positioned itself to do the same for businesses. Where deployed, these
networks provide high-speed local access services, in some cases at speeds
higher than DSL service. They typically offer these services at lower prices
than our services, in part by sharing the capacity available on their cable
networks among multiple end users.

     WIRELESS AND SATELLITE DATA SERVICE PROVIDERS. Several new companies,
including Teligent and WinStar Communications, are emerging as wireless data
service providers. In addition, other companies, including Motorola Satellite
Systems and Hughes Communications, are emerging as satellite-based data service
providers. These companies use a variety of new and emerging technologies to
provide high-speed data services.

     We may be unable to compete successfully against these competitors. The
most significant competitive factors include: transmission speed, service
reliability, breadth of product offerings, price/performance, network security,
ease of access and use, content bundling, customer support, brand recognition,
operating experience, capital availability and exclusive contracts with
customers, including Internet service providers and businesses with multiple
offices. We believe our services compete favorably within our service markets
with respect to transmission speed,

                                      -9-
<PAGE>

price/performance, ease of access and use and customer support. Many of our
competitors enjoy competitive advantages over us based on their brand
recognition, breadth of product offerings, operating experience and exclusive
contracts with customers.

INTERCONNECTION AGREEMENTS WITH TRADITIONAL LOCAL TELEPHONE COMPANIES

     We are required to enter into and implement interconnection agreements
covering each of our target markets with the traditional local telephone company
in that market in order to provide service. These agreements govern, among other
things:

     o    the price and other terms under which we locate our equipment in the
          telephone company's central offices,

     o    the price we pay to lease copper telephone lines,

     o    the special conditioning of these copper lines that the traditional
          telephone company provides to enable the transmission of DSL signals,

     o    the price we pay to access the telephone company's transmission
          facilities, and

     o    certain other terms and conditions of our relationship with the
          telephone company.

     Under the 1996 Telecommunications Act, the traditional local telephone
companies have a statutory duty to negotiate in good faith with us for
agreements for interconnection and access to certain individual elements of
their networks. This interconnection process is subject to review and approval
by the state regulatory commissions. We have signed interconnection agreements
with Bell Atlantic, BellSouth, Cincinnati Bell, GTE, SBC Communications, Sprint,
U S West and/or their subsidiaries, which govern our relationships in 49 states
and the District of Columbia. Certain of our interconnection agreements govern
our relationship with the traditional telephone company throughout its service
areas and others relate only to individual states. In addition, we are currently
negotiating additional agreements with additional carriers as well as amendments
and replacements of existing agreements. Future interconnection agreements may
contain terms and conditions less favorable to us than those in our current
agreements and could increase our costs of operations.

     During these interconnection negotiations, either the telephone company or
we may submit disputes to the state regulatory commissions for mediation and,
after the expiration of the statutory negotiation period set forth in the 1996
Telecommunications Act, we may submit outstanding disputes to the states for
arbitration, as well as ask the state regulatory commissions to arbitrate a new
agreement or particulars thereof.

     Under the 1996 Telecommunications Act, states have begun and, in a number
of cases, completed regulatory proceedings to determine the pricing of
individual elements of their networks and services, and the results of these
proceedings will determine the price we pay for, and whether it is economically
attractive for us to use, these elements and services.

     Our interconnection agreements generally have terms of one or two years.
Therefore, we will have to renegotiate our existing agreements when they expire.
Although we expect to renew our interconnection agreements and believe the 1996
Telecommunications Act limits the ability of

                                      -10-
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traditional telephone companies not to renew these agreements, we may not
succeed in extending or renegotiating our interconnection agreements on
favorable terms. Additionally, disputes have arisen and will likely arise in the
future as a result of differences in interpretations of the interconnection
agreements. These disputes have delayed our deployment of our networks. They
have also adversely affected our service to our customers and our ability to
enter into additional interconnection agreements with the traditional telephone
companies in other states. Finally, the interconnection agreements are subject
to state regulatory commission, FCC and judicial oversight. These government
authorities may modify the terms of the interconnection agreements in a way that
hurts our business.

GOVERNMENT REGULATIONS

     A significant portion of the services that we offer will be subject to
regulation at the federal and/or state levels. The Federal Communications
Commission, or FCC, and state public utility commissions regulate
telecommunications common carriers, which are companies that offer
telecommunications services to the public or to all prospective users on
standardized rates and terms. Our data transport services are common carrier
services.

     The FCC exercises jurisdiction over common carriers, and their facilities
and services, to the extent they are providing interstate or international
communications. The various state utility commissions retain jurisdiction over
telecommunications carriers, and their facilities and services, to the extent
they are used to provide communications that originate and terminate within the
same state. The degree of regulation varies from state to state.

     In recent years, the regulation of the telecommunications industry has been
in a state of flux as the United States Congress and various state legislatures
have passed laws seeking to foster greater competition in telecommunications
markets. The FCC and state commissions have adopted many new rules to implement
those new laws and to encourage competition. These changes, which are still
incomplete, have created new opportunities and challenges for us and our
competitors. Certain of these and other existing federal and state regulations
are currently the subject of judicial proceedings, legislative hearings and
administrative proposals which could change, in varying degrees, the manner in
which this industry operates. Neither the outcome of these proceedings nor their
impact upon the telecommunications industry or us can be predicted at this time.
Indeed, future federal or state regulations and legislation may be less
favorable to us than current regulations and legislation and therefore have a
material and adverse impact on our business and financial prospects by
undermining our ability to provide DSL services at competitive prices. In
addition, we may expend significant financial and managerial resources to
participate in proceedings setting rules at either the federal or state level,
without achieving a favorable result.

     FEDERAL REGULATION AND LEGISLATION

     We must comply with the requirements of a common carrier under the
Communications Act of 1934, as amended, to the extent we provide regulated
interstate services. These requirements include an obligation that our charges,
terms and conditions for communications services must be "just and reasonable"
and that we may not make any "unjust or unreasonable discrimination" in our
charges or terms and conditions. The FCC also has jurisdiction to act upon
complaints against common carriers for failure to comply with their statutory
obligations. We are not currently subject to price cap or rate of return
regulation at the federal level and are not currently required to obtain FCC
authorization for the installation, acquisition or operation of our facilities.


                                      -11-
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     The FCC has established different levels of regulation for dominant and
non-dominant carriers. Of domestic carriers, only the traditional local
telephone companies are classified as dominant carriers and all other providers
of domestic common carrier service, including us, are classified as non-dominant
carriers. As a non-dominant carrier, we are subject to less FCC regulation than
are dominant carriers.

     In October 1998, the FCC ruled that DSL and other advanced data services
provided as dedicated access services in connection with interstate services
such as Internet access are interstate services subject to the FCC's
jurisdiction. Accordingly, we could offer DSL services without state regulatory
authority, so long as we do not also provide local or intrastate
telecommunications services via our network. This decision allows us to provide
our DSL services in a manner that potentially reduces state regulatory
obligations. This decision is currently subject to reconsideration and appeal.

     Comprehensive changes to the Communications Act were made by the 1996
Telecommunications Act, enacted on February 8, 1996. It represents a significant
milestone in telecommunications policy by establishing competition in local
telephone service markets as a national policy. The 1996 Telecommunications Act
removes many state regulatory barriers to competition and forecloses state and
local governments from creating laws preempting or effectively preempting
competition in the local telephone service market.

     The 1996 Telecommunications Act places substantial interconnection
requirements on the traditional local telephone companies.

     o    Traditional local telephone companies are required to provide physical
          collocation, which allows companies such as us and other
          interconnectors to install and maintain their own network termination
          equipment in the central offices of traditional local telephone
          companies, and virtual collocation only if requested or if physical
          collocation is demonstrated to be technically infeasible. This
          requirement is intended to enable us and other competitive carriers to
          deploy our equipment on a relatively convenient and economical basis.

     o    Traditional local telephone companies are required to unbundle
          components of their local service networks so that other providers of
          local service can compete for a wide range of local service customers.
          This requirement is designed to provide us flexibility to purchase
          only the equipment we require to deliver our services.

     o    Traditional local telephone companies are required to establish
          "wholesale" rates for their services to promote resale by competitive
          local exchange carriers and other competitors.

     o    Traditional local telephone companies are required to establish number
          portability, which allows a customer to retain its existing phone
          number if it switches from the traditional local telephone companies
          to a competitive local service provider.

     o    Traditional local telephone companies are required to establish
          dialing parity, which ensures that customers will not detect a quality
          difference in dialing telephone numbers or accessing operators or
          emergency services of local competitive service providers.

                                      -12-
<PAGE>

     o    Traditional local telephone companies are required to provide
          nondiscriminatory access to telephone poles, ducts, conduits and
          rights-of-way. In addition, the 1996 Telecommunications Act requires
          traditional local telephone companies to compensate competitive
          carriers for traffic originated by them and terminated on the
          competitive carrier's network.

     The 1996 Telecommunications Act in some sections is self-executing. The FCC
issues regulations interpreting the 1996 Telecommunications Act that impose
specific requirements upon which we and our competitors rely. The outcome of
various ongoing FCC rulemaking proceedings or judicial appeals of such
proceedings could materially affect our business and financial prospects by
increasing the cost or decreasing our flexibility in providing DSL services.

     The FCC prescribes rules applicable to interstate communications, including
rules implementing the 1996 Telecommunications Act, a responsibility it shares
in certain respects with the state regulatory commissions. As part of its effort
to implement the 1996 Telecommunications Act, the FCC issued an order governing
interconnection in August 1996. A federal appeals court for the Eighth Circuit,
however, reviewed the initial rules and overruled some of their provisions,
including some rules on pricing and nondiscrimination. In January 1999, the
United States Supreme Court reversed elements of the Eighth Circuit's ruling,
finding that the FCC has broad authority to interpret the 1996
Telecommunications Act and issue rules for its implementation, specifically
including authority over pricing methodology. The Supreme Court upheld the FCC's
directive to the traditional local telephone companies to combine individual
elements for competitors, and to allow competitors to pick and choose among
provisions in existing interconnection agreements. The Supreme Court also found
that the FCC's interpretation of the rules for establishing individual elements
of a network system was not consistent with standards prescribed in the 1996
Telecommunications Act, and required the FCC to reconsider and better justify
its delineation of individual elements. The pick and choose rule permits a
competitive carrier to select individual provisions of existing interconnection
agreements yet still tailor its interconnection agreement to its individual
needs by negotiating the remaining provisions. In November, 1999, the FCC issued
a modified list of the network elements that must be offered on an unbundled
basis by traditional local telephone companies, including the local copper
telephone lines leased by DSL.net. This decision is currently subject to
reconsideration and appeal.

     In March 1998, several traditional local telephone companies petitioned the
FCC for relief from certain regulations applicable to the DSL and other advanced
data services that they provide, including their obligations to provide copper
telephone lines and resold DSL services to competitive carriers. In August 1998,
the FCC concluded that DSL services are telecommunications services and,
therefore, the traditional local telephone companies are required to allow
interconnection of their facilities and equipment used to provide data transport
functionality, unbundle local telecommunications lines and offer for resale DSL
services. After some of the traditional local telephone companies appealed this
decision, the U.S. Court of Appeals for the District of Columbia remanded the
proceeding to the FCC for further consideration. In December 1999, the FCC
reaffirmed its conclusion on remand that traditional telephone companies are
required to offer to competitive data transmission companies the ability to
interconnect and the necessary unbundled network elements to provide advanced
data transmission services. This remand order is now pending on appeal before
the U.S. Court of Appeals. Any change in the August 1998 and December 1999
orders that would affect our ability to interconnect with and obtain facilities
from the traditional local telephone companies could affect our ability to
provide DSL services to the public.

                                      -13-
<PAGE>

     In the same August 1998 order, the FCC issued a notice of proposed
rulemaking seeking comments on its tentative conclusion that traditional local
telephone companies should be permitted to create separate affiliates to provide
DSL services. Under the separate affiliate proposal, traditional local telephone
companies would be required to provide wholesale service to other DSL carriers
at the same rates, terms and conditions that it provided to its separate
affiliate. The outcome of this proceeding remains uncertain. However, in October
1999 the FCC adopted a condition to the merger of two traditional local
telephone companies, SBC Communications and Ameritech, that will permit the
subsidiaries of these companies to create separate affiliates to provide DSL
services consistent with the regulations established in a final order. In
December 1999, the FCC listed Bell Atlantic's commitment to create an advanced
services affiliate as support for the Commission's decision to approve Bell
Atlantic's application to offer interexchange long-distance services in New York
state. Although the FCC proceeding remains pending, both SBC and Bell Atlantic
have established separate advanced services affiliates. Any final decision in
this proceeding that alters our relationship with the traditional local
telephone companies could adversely affect our ability to provide DSL services
at a competitive price.

     In March 1999, the FCC strengthened its regulations that require the
traditional local telephone companies to permit other carriers to collocate all
equipment necessary for interconnection. This requirement includes equipment
that we use to provide DSL data services. The FCC adopted limits on the
construction standards and other conditions for collocation that may be imposed
by traditional local telephone companies. These new rules would reduce our
collocation costs and expedite our ability to provide service to new areas.
However, in March 2000 the U.S. Court of Appeals for the District of Columbia
vacated some of these rules, and the FCC is now expecting to reopen this
proceeding. There is no guarantee that the renewed proceeding will produce
favorable collocation rules.

     In November 1999, the FCC issued an order reaffirming its prior conclusion
that DSL services must be offered for resale at a discount by traditional local
telephone companies to the extent such services are offered at retail to
residential and business customers. The FCC clarified, however, that advanced
services provided to Internet service providers would not be subject to resale
at a discount. Accordingly, traditional telephone companies may enter into
volume and term discounts for the provisioning of DSL services with internet
service providers without having to make such arrangements available to other
requesting CLECs at discounted rates.

     In December 1999, the FCC issued an order that requires the traditional
local telephone companies to provide "line sharing" of unbundled copper
telephone lines to DSL companies. Line sharing allows a DSL company to lease the
high frequency portion of a loop over which some types of DSL data traffic is
transmitted without having to lease the low frequency portion of the loop which
carries voice traffic. Line sharing is not currently available using symmetric
DSL technology, which transmits data at the same speed to and from the customer
and is the same technology that we principally use in providing our service. We
have requested each of the traditional local telephone companies to offer
amendments to our interconnection agreements that would establish rates and
terms for line sharing and are participating in line sharing pilot programs. If
the traditional local telephone companies do not offer acceptable rates and/or
terms, we may request state arbitration of these issues. If we require
arbitration in some states, we would not be able to implement line sharing
arrangements in those states until at least the second half of 2000. While the
rates for line sharing have not been determined, it is expected that by late
2000 DSL carriers will be able to obtain copper telephone lines for at least
some types of DSL services at lower costs than are available today. However, the
traditional local telephone companies may seek judicial review of this decision.
There is no guarantee that we will be able to benefit from the FCC's line
sharing decision.

                                      -14-
<PAGE>

     Also in December 1999, the FCC granted Bell Atlantic authority to provide
long distance interexchange service in New York, a service it and other
traditional local telephone companies that had been part of Bell Telephone prior
to the break-up of AT&T had previously been barred from offering. In January
2000, Southwestern Bell filed an application for authority to provide long
distance interexchange service in Texas, and additional applications are
expected over the next one to two years. While we do not presently provide long
distance interexchange service, this ruling and any future similar rulings could
negatively impact our business. First, Bell Atlantic will now be able to offer
potentially attractive packages of local, long distance and data services.
Second, the prospect of long distance authority has served as a powerful
incentive for the traditional Bell telephone companies to comply with their
obligations under the 1996 Telecommunications Act, including the provision of
unbundled network elements and collocation services to competitors such as us.
There is no guarantee that the traditional Bell telephone companies will extend
to us the same level of cooperation once they receive approval to provide long
distance interexchange service.

     The 1996 Telecommunications Act also directs the FCC, in cooperation with
state regulators, to establish a universal service fund that will provide
subsidies to carriers that provide service to individuals that live in rural,
insular, and high-cost areas. A portion of carriers' contributions to the
universal service fund also will be used to provide telecommunications related
facilities for schools, libraries and certain rural health care providers. The
FCC released its initial order in this context in June 1997, which requires all
telecommunications carriers to contribute to the universal service fund. The
FCC's implementation of universal service requirements remains subject to
judicial and additional FCC review. Additional changes to the universal service
regime, which could increase our costs, could have an adverse affect on us.

     DSL.net is authorized to provide interstate telecommunications services
pursuant to its tariff filed with the FCC in April 1999. Although not required
for our existing DSL data service offering, on August 6, 1999 we obtained
authority from the FCC to provide international telecommunications services
originating from the United States.

     STATE REGULATION

     In October 1998, the FCC deemed data transmission to the Internet as
interstate services subject only to federal jurisdiction. However, this decision
is currently subject to reconsideration and appeal. Also, some of our services
that are not limited to interstate access potentially may be classified as
intrastate services subject to state regulation. All of the states where we
operate, or intend to operate, require some degree of state regulatory
commission approval to provide certain intrastate services and maintain ongoing
regulatory supervision. In most states, intrastate tariffs are also required for
various intrastate services, although our services are not subject to price or
rate of return regulation. Actions by state public utility commissions could
cause us to incur substantial legal and administrative expenses and adversely
affect our business.

     As of March 24, 2000, we had obtained authorizations to provide local
exchange and long-distance telecommunications services in 48 states and the
District of Columbia, and we have filed for the same authority in the remaining
two states. Although we expect to obtain certifications in all states, there is
no guarantee that these certifications will be granted or obtained in a timely
manner.

                                      -15-
<PAGE>

     LOCAL GOVERNMENT REGULATION

     In certain instances, we may be required to obtain various permits and
authorizations from municipalities, such as for use of rights-of-way, in which
we operate our own local distribution facilities. Whether various actions of
local governments over the activities of telecommunications carriers such as
ours, including requiring payment of franchise fees or other surcharges, pose
barriers to entry for competitive local exchange carriers which violate the 1996
Telecommunications Act or may be preempted by the FCC is the subject of
litigation. While we are not a party to this litigation, we may be affected by
the outcome. If municipal governments impose conditions on granting permits or
other authorizations or if they fail to act in granting such permits or other
authorizations, the cost of providing DSL services may increase or it may
negatively impact our ability to expand our network on a timely basis and
adversely affect our business.

INTELLECTUAL PROPERTY

     We regard our products, services and technology as proprietary and attempt
to protect them with copyrights, trademarks, trade secret laws, restrictions on
disclosure and other methods. For example, we own a federal supplemental
registration and claim rights in the name DSL.net. There can be no assurance
these methods will be sufficient to protect our technology and intellectual
property. We also generally enter into confidentiality agreements with our
employees and consultants, and generally control access to and distribution of
our documentation and other proprietary information. Despite these precautions,
it may be possible for a third party to copy or otherwise obtain and use our
proprietary information without authorization, or to develop similar information
independently. Effective patent, copyright, trademark and trade secret
protection may be unavailable or limited in certain foreign countries, and the
global nature of the Internet makes it virtually impossible to control the
ultimate destination of our technology or proprietary information. There can be
no assurance that the steps we have taken will prevent misappropriation or
infringement of our technology or proprietary information. In addition,
litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets or to determine the validity and scope of
the proprietary rights of others. Such litigation could result in substantial
costs and diversion of resources and could have a material adverse effect on our
business, operating results and financial condition. In addition, some of our
information, including our competitive carrier status in individual states and
our interconnection agreements, is a matter of public record and can be readily
obtained by our competitors and potential competitors, possibly to our
detriment.

EMPLOYEES

     As of December 31, 1999, we had 267 employees. We believe that our future
success will depend in part on our continued ability to attract, hire and retain
qualified personnel. Competition for such personnel is intense, and we may be
unable to identify, attract and retain such personnel in the future. None of our
employees are represented by a labor union or are the subject of a collective
bargaining agreement. We have never experienced a work stoppage and believe that
our employee relations are good.


ITEM 2.  PROPERTIES

     Our headquarters consists of approximately 55,700 square feet in an office
building complex in New Haven, Connecticut. We also lease offices in Santa Cruz,
California. These spaces are occupied under various leases. In addition, we
lease office space for local sales

                                      -16-
<PAGE>

personnel and space for network equipment installations in a number of other
locations. With respect to our arrangements to use space in traditional
telephone companies' central offices, please see "BUSINESS - Interconnection
Agreements with Traditional Local Telephone Companies."


ITEM 3.  LEGAL PROCEEDINGS

     A lawsuit for wrongful termination of employment was filed against us in
the Superior Court in New Haven, Connecticut on July 29, 1999 by Frank W.
Pereira, a former officer who was employed by us for less than two months.
Plaintiff's claims are based chiefly on his allegation that we terminated his
employment because he allegedly voiced concerns to senior management about the
feasibility of our second and third tier city business strategy. He further
alleges that our senior management knew of these alleged flaws in the strategy.
The plaintiff is principally seeking compensatory damages for wages and unvested
stock options. We deny these allegations and believe that the plaintiff's claims
are without merit. We plan to defend the case vigorously.

     We are also a party to legal proceedings related to regulatory approvals.
We are subject to state commission, FCC and court decisions as they relate to
the interpretation and implementation of the 1996 Telecommunications Act, the
interpretation of competitive carrier interconnection agreements in general and
our interconnection agreements in particular. In some cases, we may be deemed to
be bound by the results of ongoing proceedings of these bodies. We therefore may
participate in proceedings before these regulatory agencies or judicial bodies
that affect, and allow us to advance, our business plans.

     From time to time, we may be involved in other litigation concerning claims
arising in the ordinary course of our business. We do not believe any of the
legal claims or proceedings will result in a material adverse effect on our
business, financial position, results of operations or cash flows.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     During the quarter ended December 31, 1999, we did not submit any matters
to the vote of our security holders.




                                      -17-
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     DSL.net effected its initial public offering of its common stock on October
6, 1999 at a price to the public of $7.50 per share. As of March 24, 2000, there
were approximately 78 holders of record of our common stock. DSL.net's common
stock is listed for quotation on the Nasdaq National Market under the symbol
"DSLN."

     The range of high and low sales prices per share of DSL.net's common stock
as reported on the Nasdaq National Market since DSL.net's initial public
offering are shown below.

                                                          HIGH          LOW
                                                         -------      -------
     Quarter ended December 31, 1999
        (from October 6, 1999)...........................$25.625      $ 7.469


     We have never declared or paid any cash dividends on our common stock and
currently intend to retain any future earnings for the future operation and
expansion of our business. In addition, our credit agreement with our bank
prohibits the payment of cash dividends. Accordingly, we do not anticipate that
any cash dividends will be declared or paid on our common stock in the
foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

     During the fiscal year ended December 31, 1999, we issued the following
securities that were not registered under the Securities Act of 1933, as
amended:

     (a) ISSUANCES OF CAPITAL STOCK, NOTES AND WARRANTS

     In January 1999, DSL.net issued and sold 3,500,000 shares of Series A
preferred stock and warrants to purchase 3,500,000 shares of a prior series B
preferred stock for an aggregate of $3,500,000, a portion of which was paid by
the cancellation of two convertible promissory notes in the aggregate principal
amount of $125,000. In addition, DSL.net issued three warrants to purchase
56,250 shares of Series A preferred stock at a price of $1.00 per share in
exchange for the rights to warrants to purchase 56,250 warrants of Series A
preferred stock. DSL.net also issued an aggregate of 225,000 shares of Series A
preferred stock in conversion of three convertible promissory notes in the
aggregate principal amount of $225,000. Each outstanding share of Series A
preferred stock converted into 2.666 shares of common stock upon the closing of
our initial public offering on October 12, 1999. Finally, DSL.net issued 8
shares of common stock for aggregate consideration of $0.02.

     In March 1999, DSL.net issued and sold an aggregate of 436,256 shares of
common stock for services valued at $44,585. Based on subsequent events, DSL.net
recognized compensation expense of $602,587 in connection with the issuance of
these shares. In addition, DSL.net issued one warrant to purchase 41,726 shares
of Series A preferred stock at an exercise price of $2.40 per share.

     In April 1999, DSL.net issued and sold an aggregate of 6,500,000 shares of
Series B preferred stock in exchange for 3,500,000 shares of Series A preferred
stock and the cancellation

                                      -18-
<PAGE>

of warrants to purchase 3,500,000 shares of a prior series B preferred stock. In
addition, in April 1999, DSL.net issued and sold an aggregate of 2,785,516
shares of Series C preferred stock for aggregate consideration of $10,000,002.
Each outstanding share of preferred stock converted into 2.666 shares of common
stock upon the closing of our initial public offering on October 12, 1999.

     In May 1999, DSL.net issued and sold an aggregate of 2,868,069 shares of
Series D preferred stock for aggregate consideration of $30,000,002, including a
secured promissory note in an aggregate principal amount of $5,999,429, which
note has since been paid in full. Each outstanding share of Series D preferred
stock converted into 2.666 shares of common stock upon the closing of our
initial public offering on October 12, 1999.

     In June 1999, DSL.net issued an aggregate of 95,603 shares of Series D
preferred stock for aggregate consideration of $1,000,007, including a secured
promissory note in an aggregate principal amount of $999,911. The note, which
contained an interest rate of 6.00%, was paid in full on July 16, 1999. In
addition, in July 1999, DSL.net issued an aggregate of 939,086 shares of Series
E preferred stock for aggregate consideration of $18,499,994. Each outstanding
share of Series D and E preferred stock converted into 2.666 shares of common
stock upon the closing of our initial public offering on October 12, 1999.

     (b) EXERCISES OF STOCK OPTIONS

     From February 19, 1999 through October 5, 1999, DSL.net had granted options
to purchase an aggregate of 7,091,880 shares of common stock under the Company's
1999 Stock Plan at exercise prices ranging from $.04 to $9.00 per share for an
aggregate exercise price of approximately $8,598,865, and 93,310 shares of
common stock had been issued in connection with the exercise of options.

     (c) EXERCISE OF WARRANTS

     On October 6, 1999, DSL.net issued 56,250 shares of Series A preferred
stock to three stockholders in connection with the exercise of their warrants.
These shares converted into 149,963 shares of common stock up on the closing of
our initial public offering or October 12, 1999.

     No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering or the rules and regulations
thereunder, or, in the case of certain options to purchase common stock and
employee stock grants, Rule 701 under the Securities Act. All of the foregoing
securities, other than common stock and options to purchase common stock issued
pursuant to Rule 701 under the Securities Act, are deemed restricted securities
for purposes of the Securities Act.



                                      -19-
<PAGE>

USE OF PROCEEDS FROM REGISTERED SECURITIES

     We sold 7,200,000 shares of our common stock, par value $.0005 per share,
in our initial public offering, pursuant to our final prospectus dated October
6, 1999. This prospectus was contained in our Registration Statement on Form S-1
(SEC File No. 333-80141), which was declared effective by the Securities and
Exchange Commission on October 5, 1999. All of the shares of common stock
covered by the Registration Statement were sold. The initial public offering
closed on October 12, 1999 and the sale of 1,026,000 additional shares pursuant
to the exercise of the overallotment option granted to the underwriters closed
on November 8, 1999.

     Net proceeds to DSL.net, excluding the exercise of the overallotment option
and after deduction of underwriting discounts and commissions, approximated
$50.3 million (before deducting offering expenses payable by DSL.net) and net
proceeds from the exercise of the overallotment option, after deduction of
underwriting discounts and commissions, approximated $7.2 million (before
deducting offering expenses payable by DSL.net). The aggregate amount of
expenses incurred by DSL.net through December 31, 1999 in connection with the
issuance and distribution of the shares of common stock offered and sold in the
initial public offering, including the exercise of the overallotment option, was
approximately $5.9 million, including $4.1 million in underwriting discounts and
commissions, and $1.8 million in other expenses. None of the expenses paid by
DSL.net in connection with the initial public offering or the exercise of the
overallotment option were paid, directly or indirectly, to directors, officers,
persons owning ten percent or more of DSL.net's equity securities, or affiliates
of DSL.net.

     As of December 31, 1999, DSL.net had invested all of the net proceeds from
the initial public offering, including the exercise of the underwriters'
overallotment option, primarily in marketable, investment-grade securities.


ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

     We were incorporated on March 3, 1998 and commenced operations on March 28,
1998. We present below summary financial and other data for our company. The
following historical data for the period from inception (March 3, 1998) through
December 31, 1998 and the year ended December 31, 1999, except for "Other Data,"
has been derived from our financial statements audited by PricewaterhouseCoopers
LLP, independent accountants. Our balance sheets at December 31, 1998 and 1999
and the related statements of operations, changes in stockholders' equity and
cash flows for the period from inception (March 3, 1998) to December 31, 1998
and the year ended December 31, 1999 and notes thereto appear elsewhere in this
annual report on Form 10-K.

     You should refer to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the more complete financial information
included elsewhere in this annual report on Form 10-K.

                                      -20-
<PAGE>
<TABLE><CAPTION>
                                                              PERIOD FROM
                                                               INCEPTION
                                                            (MARCH 3, 1998)
                                                                THROUGH        YEAR ENDED
                                                                 1998             1999
                                                             -------------    -------------
<S>                                                          <C>              <C>
STATEMENT OF OPERATIONS DATA:
Revenue ...................................................  $      31,533    $   1,312,546
Operating expenses:
     Network and operations ...............................        127,054        9,234,278
     General and administrative ...........................        230,272        4,978,510
     Sales and marketing ..................................         35,961        6,847,696
     Stock compensation ...................................      2,423,272        4,123,454
        Total operating expenses ..........................      2,816,559       25,183,938
Operating loss ............................................     (2,785,026)     (23,871,392)
Interest expense (income) .................................          4,611       (1,889,312)
Other expense .............................................           --              6,233
Net loss ..................................................  $  (2,789,637)   $ (21,988,313)

NET LOSS PER COMMON SHARE DATA:
Net Loss per common share .................................  $       (0.55)   $       (2.05)
Shares used in computing net loss per share ...............      5,118,342       16,549,535

OTHER DATA:
EBITDA ....................................................  $    (356,010)   $ (17,917,617)
Capital expenditures ......................................        290,082       33,811,121

CASH FLOW DATA:
Used in operating activities ..............................  $    (153,505)   $  (6,342,720)
Used in investing activities ..............................       (290,082)     (48,660,812)
Provided by financing activities ..........................        483,066      121,142,314



                                                                       DECEMBER 31,
                                                             ------------------------------
                                                                  1998             1999
                                                             -------------    -------------
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities...........  $      39,479    $  79,452,444
Total assets...............................................        369,980      117,631,772
Long-term obligations (including current portion) .........        433,161        3,055,625
Total stockholders' equity (deficit) ......................       (315,865)     100,732,886

</TABLE>

     EBITDA, shown above under "Other Data," consists of net loss excluding net
interest, taxes, depreciation of capital assets and noncash stock compensation
expense. Other companies, however, may calculate it differently from us. We have
provided EBITDA because it is a measure of financial performance commonly used
for comparing companies in the telecommunications industry in terms of operating
performance, leverage, and ability to incur and service debt. EBITDA is not a
measure determined under generally accepted accounting principles. EBITDA should
not be considered in isolation from, and you should not construe it as a
substitute for:

     o    operating loss as an indicator of our operating performance,

     o    cash flows from operating activities as a measure of liquidity,



                                      -21-
<PAGE>

     o    other consolidated statement of operations or cash flows data
          presented in accordance with generally accepted accounting principles,
          or

     o    as a measure of profitability or liquidity.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH ITEM 6 - SELECTED CONSOLIDATED
FINANCIAL DATA AND ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA THAT
APPEAR ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K. THIS DISCUSSION AND
ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE
INCLUDE, BUT ARE NOT LIMITED TO, THOSE SET FORTH IN "RISK FACTORS" AND ELSEWHERE
IN THIS ANNUAL REPORT ON FORM 10-K.

OVERVIEW

     We provide high-speed data communications services and Internet access to
small and medium sized businesses, primarily in second and third tier cities. We
began providing service in May 1998 and, as of March 15, 2000, we provided
service or had installed equipment in more than 160 cities. We intend to
continue our network expansion into a total of more than 300 cities by the end
of 2000.

     We have incurred operating losses and net losses for each month since our
formation. For the periods ended December 31, 1998 and 1999, we have experienced
net cash outflows for operating and investment activities. As of December 31,
1998 and 1999, we had accumulated deficits of approximately $2,790,000 and
$27,180,000, respectively. We intend to substantially increase our operating
expenses and capital expenditures in an effort to rapidly expand our network
infrastructure and service areas. We expect to incur substantial operating
losses, net losses and net operating cash outflows during our network build-out
and during the initial penetration of each new market we enter. Our losses and
net operating cash outflows are expected to continue and to increase as we
expand our operations.

     We incur network and operations expenses, sales and marketing expenses and
capital expenditures when we enter a new market. After selecting a target
market, we apply for space in the traditional telephone company's central office
from which we intend to provide service. The availability of space in these
central offices and the timing and cost of our obtaining that space varies by
location and by telephone company. Based on our experience to date, if space is
available in a desired central office, the time for us to obtain the required
approvals and deploy our equipment in that space has typically ranged from five
to ten months. To date, our initial cost for obtaining space in each central
office and interconnection to the telephone company's network has typically
averaged less than $50,000. In addition to this initial cost, we pay monthly
fees for maintenance, utilities and continued access to the telephone company's
network, which vary by location and are substantially lower than the initial
cost for obtaining space. Once we have deployed our network in a market, the
majority of our additional capital expenditures depend on orders to connect new
end users. These additional capital expenditures include the costs of additional
DSL equipment that is installed in the central offices and


                                      -22-
<PAGE>

additional modems that are installed in customers' sites. In addition to the
capital expenditures required to enter a market, we are required to fund each
market's cash flow deficit as we build our customer base.

     Our financial performance will vary, and whether and when we achieve
profitability will depend on a number of factors, including:

     o    development of the high-speed data communications industry and our
          ability to compete effectively;

     o    amount, timing and pricing of customer revenue;

     o    cost and timing of the deployment of our network, including
          installation of equipment in traditional telephone companies' central
          offices;

     o    commercial acceptance of our service and attaining expected
          penetration within our target markets;

     o    timely recruitment of qualified personnel, particularly sales and
          marketing, engineering and other technical personnel;

     o    upfront sales and marketing expenses;

     o    our ability to retain contractors to install equipment and wiring at
          customer premises on a timely and cost-effective basis;

     o    cost and utilization of our network components which we lease from
          other telecommunications providers;

     o    our ability to establish and maintain relationships with marketing
          partners;

     o    successful implementation of financial, information management and
          operations support systems to efficiently and cost-effectively manage
          our growth; and

     o    outcome of federal and state regulatory proceedings and related
          judicial proceedings, including proceedings relating to the 1996
          Telecommunications Act.

FACTORS AFFECTING FUTURE OPERATIONS

     REVENUES. We derive our revenues from monthly fees and installation costs
paid by customers for our services, which vary based on the speed of the
connection and the services ordered. The current monthly fee includes all phone
line charges, Internet access charges, the cost of the modem installed at the
customer's site and the other services we provide. During the year ended
December 31, 1999, monthly fees represented more than 80% of our revenue. During
the same period, reimbursement of installation costs represented less than 20%
of our revenue.

     We seek to price our services competitively. The market for high-speed data
communications services and Internet access is rapidly evolving and intensely
competitive. While many of our competitors and potential competitors enjoy
competitive advantages over us, we are

                                      -23-
<PAGE>

pursuing a significant market that, we believe, is currently underserved.
Although pricing will be an important part of our strategy, we believe that
direct relationships with our customers and consistent, high quality service and
customer support will be key to generating customer loyalty. During the past
several years, market prices for many telecommunications services and equipment
have been declining, a trend that we believe will likely continue.

     NETWORK AND OPERATIONS. Our network and operations expenses include costs
related to personnel, monthly rental for telecommunications lines between
customers, central offices and network service providers, customer line
installation, Internet access, certain depreciation and amortization expenses
and other costs. The costs of providing a customer's copper telephone line and
the related monthly leased line costs, which average approximately $20 per
month, are expensed as incurred. Our total costs for leasing lines will increase
as we lease additional lines to service additional customers. Further, we lease
high-speed fiber-optic lines and other network capacity to connect our central
office equipment with our network and the Internet and incur costs to connect to
the Internet. We expect these costs to increase as the volume of data
communications traffic generated by our customers increases.

     The majority of our capital expenditures relate to building our network and
delivering service to customers. Accordingly, the majority of our depreciation
and amortization expense, excluding deferred compensation expense, is included
in our network and operations expenses. This expense includes:

     o    Depreciation of network and operations equipment and DSL modems
          installed at customer sites;

     o    Depreciation of information systems, and computer hardware and
          software; and

     o    Amortization and depreciation of the costs of obtaining, designing and
          building our collocation space and corporate facilities.

     We expect depreciation and amortization expense to increase significantly
as more of our network becomes operational and as we increase capital
expenditures to expand.

     GENERAL AND ADMINISTRATIVE. Our general and administrative expenses consist
primarily of costs relating to personnel, customer service, finance, billing,
administrative services, recruiting, insurance, bad debts, legal services and
depreciation expense. We have hired and expect to continue to hire additional
employees. As a result, we expect these expenses to increase as the number of
employees increases.

     SALES AND MARKETING. Our sales and marketing expenses consist primarily of
expenses for personnel, the development of our brand name, promotional
materials, advertising and sales commissions and incentives. Sales and marketing
expenses are expected to increase significantly as we continue to expand our
business into new markets.

     We have entered into strategic business relationships with Staples and
Microsoft. The Staples marketing agreement designates us as their exclusive
supplier of the types of DSL services we provide in each of the markets in which
we offer our DSL service. The Microsoft arrangement allows us to jointly market
a co-branded version of the Microsoft Network (MSN) service to our customers and
Microsoft intends to use its existing channels and sales force to augment our
own marketing efforts.


                                      -24-
<PAGE>

     STOCK COMPENSATION. We have incurred noncash stock compensation expenses as
a result of the granting of stock and stock options to employees and others with
exercise prices per share subsequently determined to be below the fair values
per share of our common stock for financial reporting purposes at the dates of
grant. The stock compensation is being charged immediately or is being amortized
over the vesting period of the applicable options, which is generally 48 months.

     TAXATION. We have not generated any taxable income to date and, therefore,
have not paid any federal income taxes since inception. Use of our net operating
loss carryforwards, which will begin to expire in 2003, may be subject to
limitations. We have recorded a full valuation allowance on a deferred tax
asset, consisting primarily of net operating loss carryforwards, because of
uncertainty regarding their recoverability.

RESULTS OF OPERATIONS

     REVENUE. We first introduced services in May 1998. Revenue in 1998 was
approximately $32,000. Revenue increased to approximately $1,313,000 for the
year ended December 31, 1999. The increase in revenue was primarily due to the
increased number of customers subscribing for our services, resulting from our
increased sales and marketing efforts, the expansion of our network and our
acquisition of Tycho Networks, Inc. We expect revenue to increase in future
periods as we expand our network within our existing regions, deploy our network
into new regions and increase our sales and marketing efforts in all of our
regions.

     NETWORK AND OPERATIONS. Network and operations expenses increased to
approximately $9,234,000 for the year ended December 31, 1999 from approximately
$127,000 for the period from March 3, 1998 (inception) to December 31, 1998. The
increase in these expenses between the 1998 and 1999 periods was primarily due
to the increased number of customers subscribing for our services and other
increased costs resulting from the addition of personnel, the expansion of our
network and legal costs incurred in connection with our applications for
regulatory approvals in various states. We expect network and operations costs
to increase significantly in future periods as we increase our markets and
customer base.

     Depreciation and amortization expense, excluding amortization of deferred
compensation, increased to approximately $1,873,000 for the year ended December
31, 1999 from $6,000 for the period from March 3, 1998 (inception) to December
31, 1998. This expense increased as more of our network became operational and
we increased capital expenditures to expand.

     GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to approximately $4,979,000 for the year ended December 31, 1999 from
approximately $230,000 for the period from March 3, 1998 (inception) to December
31, 1998. The increases in general and administrative expenses were principally
the result of increases in the number of employees.

     SALES AND MARKETING. Sales and marketing expenses increased to
approximately $6,848,000 for the year ended December 31, 1999 from approximately
$36,000 for the period from March 3, 1998 (inception) to December 31, 1998.
These expenses increased primarily as a result of the increase in marketing and
promotional activities and increases in sales and marketing personnel. Sales and
marketing expenses are expected to increase significantly as we continue to
expand our business into new markets.

                                      -25-
<PAGE>

     STOCK COMPENSATION. Noncash stock compensation expenses were approximately
$4,123,000 for the year ended December 31, 1999 compared to $2,423,000 for the
period from March 3, 1998 (inception) to December 31, 1998. Expenses incurred in
1998 consisted of current period charges related to common stock issued to
certain officers. The expenses incurred in the year ended December 31, 1999
consisted of charges and amortization related to stock options and restricted
stock granted to our employees, directors and advisors during 1999.

     The unamortized balance of approximately $13,362,000 as of December 31,
1999 will be amortized over the remaining vesting period of each grant. As of
December 31, 1999, options to purchase 5,874,302 shares of common stock were
outstanding, which were exercisable at a weighted average exercise price of
$2.32 per share.

     INTEREST EXPENSE (INCOME), NET. Net interest income was approximately
$1,889,000 for the year ended December 31, 1999 compared to interest expense of
approximately $5,000 for the period from March 3, 1998 (inception) to December
31, 1998. This increase was primarily due to an increase in our cash balances as
a result of the issuance of preferred and common stock in 1999 and, to a lesser
extent, the repayment of debt with the proceeds therefrom. Interest expense in
1998 related primarily to a note payable which was paid in full in January 1999.

     NET LOSS. Net loss increased to approximately $21,988,000 for the year
ended December 31, 1999 from approximately $2,790,000 for the period from March
3, 1998 (inception) to December 31, 1998.

LIQUIDITY AND CAPITAL RESOURCES

     We have financed our capital expenditures and operations primarily with the
proceeds from stock issuances and borrowings. As of December 31, 1999, we had
cash, cash equivalents and marketable securities of approximately $79,452,000
and working capital of approximately $65,974,000.

     Net cash provided by financing activities in 1998 and 1999 was
approximately $483,000 and $121,142,000, respectively. This cash primarily
resulted from the sale of preferred stock and common stock and amounts borrowed
under our lease facilities and our credit line. We have used, and intend to
continue using, the proceeds from these financings primarily to implement our
business plan and for working capital.

     In August 1998, we issued a $100,000 demand note which bore interest at the
annual rate of 5.56%. As of December 31, 1998, $66,667 of principal of this note
remained outstanding. This note was repaid in full in January 1999.

     In November 1998, we received $350,000 from a short-term bridge note and
warrant financing. These notes had an aggregate principal amount of $350,000 and
bore interest at annual rates of 5.56% or 6%. These notes were exchanged for
shares of our Series A preferred stock in January 1999.

     During 1998, we also received $50,500 from the sale of capital stock to our
founders.

     In January 1999 we received net proceeds of approximately $3,302,000 from
the sale of shares of Series A preferred stock and certain warrants. In April
1999, we received net proceeds of approximately $9,940,000 from the sale of
shares of Series C preferred stock to our principal

                                      -26-
<PAGE>

stockholders and others. In May 1999, we received net proceeds of approximately
$29,961,000 from the sale of shares of Series D preferred stock to our principal
stockholders and others. In addition, we received approximately $1,007,000 in
connection with repayment of a note, including interest at 6.0%, from an officer
in connection with the purchase of Series D preferred stock in June 1999. In
July 1999, we received net proceeds of approximately $18,458,000 from the sale
of shares of Series E preferred stock to two strategic marketing partners. In
October and November 1999, we received net proceeds of approximately $55,722,000
from the sale of shares of common stock in our initial public offering. Upon the
closing of the initial public offering of our common stock on October 12, 1999,
all outstanding shares of our preferred stock converted automatically into
shares of common stock.

     In March 1999, we entered into a 36-month lease facility to finance the
purchase of up to an aggregate of $2,000,000 of equipment. Amounts financed
under this lease facility bear an interest rate of 8% or 9%, depending on the
type of equipment, and are secured by the financed equipment. There was
approximately $922,000 outstanding under this lease facility at December 31,
1999. In addition, during the year ended December 31, 1999, we purchased certain
software and equipment under other capital leases, which are being repaid over
periods ranging from 24 months to 36 months. In the aggregate, there was
approximately $1,609,000 outstanding under these capital leases at December 31,
1999.

     In May 1999, we established a line of credit which allows us to borrow up
to an aggregate of $5.0 million. This line of credit expires in May 2000, at
which time amounts outstanding will convert into a term loan, which will be
repayable over 36 months. Amounts borrowed under this line of credit generally
bear interest at the sum of 1% plus the higher of the bank's prime rate of
interest and the federal funds rate plus .5%. As of December 31, 1999, amounts
outstanding under this line of credit bore interest at the annual rate of 9.25%
and are secured by a lien on certain of our equipment. Borrowings under the line
of credit are restricted based on the value of the equipment securing the line
of credit. In addition, the line of credit also contains certain covenants,
including covenants requiring us to maintain certain financial ratios and
limitations relating to, among other things, new indebtedness, the creation of
liens, types of investments, mergers, consolidations and the transfer of all or
substantially all of our assets. As of December 31, 1999, approximately
$1,447,000 was outstanding, and approximately $3,553,000 was available, under
this line of credit.

     In January, 2000, we received commitments for a credit facility that will
replace our existing line of credit, subject to negotiation and execution of
definitive agreements. This new credit facility would provide an estimated
$45,000,000 revolving line of credit to be used for general corporate purposes
and for the issuance of letters of credit. Borrowing availability and rate of
interest under the proposed line of credit would vary depending upon specified
financial ratios. This revolving line of credit would contain certain covenants,
including covenants requiring us to maintain certain financial ratios and
limitations or prohibitions relating to, among other things, new indebtedness,
the payment of dividends, the creation of certain liens, types of investments,
mergers, consolidations and the transfer of certain assets. The interest rate
would be prime or LIBOR-based.

     In February 1999, we leased office space and subsequently have leased
additional space in New Haven, Connecticut. Annual minimum lease payments under
these leases are approximately $1,125,000 for each of the years 2000 through
2002, and approximately $900,000, $745,000 and $279,000 for 2003, 2004 and 2005,
respectively.

                                      -27-
<PAGE>

     On December 1, 1999, we acquired Tycho Networks, which is based in Santa
Cruz, California. Tycho Networks provides Internet access, web hosting and
related services throughout central coastal California. The approximate net
purchase price of $3.3 million, excluding transaction costs associated with the
acquisition, consisted of cash payments at closing of $1.6 million (including
notes paid at closing of approximately $0.8 million), amounts due to the selling
stockholders and others after the closing of approximately $0.8 million, net
liabilities assumed of approximately $0.5 million and other costs of
approximately $0.4 million.

     In 1998 and 1999, the net cash used in our operating activities was
approximately $154,000 and $6,343,000, respectively. This cash was used for a
variety of operating expenses, including salaries, consulting and legal
expenses, network operations and overhead expenses. Our net operating cash
outflows are expected to continue and to increase as we expand our operations.

     Net cash used in investing activities in 1998 and 1999 was approximately
$290,000 and $48,661,000, respectively. Of this amount, approximately
$33,811,000 was used primarily for the purchase of equipment and payment of
collocation costs, approximately $13,274,000 was used for the purchase of
marketable securities and approximately $1,576,000 was used to acquire Tycho
Networks, Inc.

     In March 2000, we received net proceeds of approximately $141,625,000 from
the sale of 5,750,000 shares of our common stock in a public offering.

     The development and expansion of our business requires significant capital
expenditures. The principal capital expenditures incurred to enter each market
include the procurement, design and construction of the space in traditional
telephone companies' central offices where we deploy our equipment, and the
purchase and installation of all necessary equipment. Capital expenditures were
approximately $290,000 and $33,811,000 in 1998 and 1999, respectively. We
currently anticipate spending approximately $60,000,000 for capital expenditures
for the balance of 2000. The planned capital expenditures are primarily for the
procurement, design and construction of central office spaces and the purchase
and installation of the equipment necessary for us to provide our services, as
well as for the continued development of our information and management systems,
including our operations support systems. The actual amounts and timing of our
capital expenditures will vary depending on the speed at which we are able to
expand and implement our network and could differ materially both in amount and
timing from our current plans.

     We believe that our existing cash and short-term investments, amounts
available under our equipment lease and credit facilities, and cash generated
from operations, will be sufficient to fund our operating losses, capital
expenditures, lease payments and working capital requirements through the first
half of 2001. We intend to use these cash resources to continue building our
network and for working capital and other general corporate purposes. We may
also use a portion of these cash resources to acquire complementary businesses.
The amounts actually expended for these purposes will vary significantly
depending on a number of factors, including revenue growth, if any, planned
capital expenditures, and the extent and timing of our entry into target
markets.

     We expect our operating losses, net operating cash outflows and capital
expenditures to increase substantially as we expand our network. We expect that
additional financing will be required in the future. We may attempt to raise
financing through some combination of commercial bank borrowings, leasing,
vendor financing and the sale of equity or debt securities.

                                      -28-
<PAGE>

     Our capital requirements may vary based upon the timing and the success of
implementation of our business plan and as a result of regulatory, technological
and competitive developments or if:

     o    demand for our services or our cash flow from operations is less than
          or more than expected;

     o    our development plans or projections change or prove to be inaccurate;

     o    we make acquisitions; or

     o    we accelerate deployment of our network or otherwise alter the
          schedule or targets of our business plan implementation.

     We cannot assure you that we will be able to raise sufficient debt or
equity capital on terms that we consider acceptable, if at all. If we are unable
to obtain adequate funds on acceptable terms, our ability to deploy and operate
our network, fund our expansion or respond to competitive pressures would be
significantly impaired.

IMPACT OF YEAR 2000

     Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. In order to distinguish
21st century dates from 20th century dates, the date code field needs to be
expanded to 4 digits. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with these Year 2000
requirements. The use of software and computer systems that are not Year 2000
compliant could result in system failures or miscalculations resulting in
disruptions of operations, including among other things, a temporary inability
to process transactions, send invoices, or engage in normal business activities.

     Since we have been recently organized, we have been able to build our
internal business systems with Year 2000 compliance in mind. Our current service
offerings are not date sensitive and do not rely on or need to process
date-related information in order to function as designed, either prior to and
after the year 2000.

     We have experienced no material adverse effect on our products from the
Year 2000 issue, including any problems relating to the traditional local
telephone companies, other vendors or our target customers. Nevertheless, there
can be no assurances that we will not experience problems resulting from any of
the foregoing which could have a material adverse impact on our business,
operating results and financial condition.

     To date, we have not incurred significant costs in order to comply with
Year 2000 requirements and we do not believe we will incur significant costs in
the future.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In 1998, we adopted Statement of Financial Accounting Standards, or SFAS,
No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.
SFAS No. 131 supersedes SFAS 14, FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS
ENTERPRISE, replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of our reportable segments. We operate in one segment: high-speed
data communication services. SFAS No. 131 also requires disclosures about
products and services, geographic areas, and major customers. The adoption of
SFAS No. 131 had no impact on our financial statements for the periods
presented.

     In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE. SoP 98-1 provides guidance for
determining whether computer software is internal-use software, and on
accounting for proceeds of computer software originally developed or obtained
for internal use and then subsequently sold to the public. It also provides
guidance on capitalization of the costs incurred for computer software developed
or obtained for internal use. The Company has applied the guidance set forth in
SoP 98-1, which was effective for the Company's year ended December 31, 1999.
The adoption of SoP 98-1 has not had a significant impact on our financial
statements.

     In April 1998, the Accounting Standards Executive Committee issued SoP
98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES, which provides guidance on
the financial reporting of start-up costs and organizational costs. It requires
costs of start-up activities and organizational costs to be expensed as
incurred. SoP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998. As we have not capitalized such costs to
date, the adoption of SoP 98-5 does not have an impact on our financial
statements.



                                      -29-
<PAGE>

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ( "SFAS ") No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. DSL.net is required to adopt SFAS No. 133,
as amended by SFAS No. 137, in fiscal 2001. SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. The Company has not
entered into any derivative financial instruments or hedging activities. As a
result, management believes adoption of SFAS No. 133 will not have a material
impact on the financial statements.

     In December 1999, the staff of the Securities and Exchange Commission
issued its Staff Accounting Bulletin ( "SAB ") No. 101, REVENUE RECOGNITION. SAB
No. 101 provides guidance on the measurement and timing of revenue recognition
in financial statements of public companies. Changes in accounting policies to
apply the guidance of SAB No. 101, as amended by SAB No. 101A, must be adopted
by recording the cumulative effect of the change in the fiscal quarter ending
June 30, 2000. Management has not yet determined the effect SAB No. 101 will
have, if any, on its accounting policies or the amount of the cumulative effect
to be recorded from adopting SAB No. 101.












                                      -30-
<PAGE>
                                  RISK FACTORS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND CERTAIN OTHER INFORMATION

     Some of the statements under "Risk Factors", "Management's Discussion and
Analysis of Financial Condition and Results of Operations", "Business" and
elsewhere in this Annual Report on Form 10-K constitute forward-looking
statements. DSL.net makes such forward-looking statements under the provisions
of the "Safe Harbor" section of the Private Securities Litigation Reform Act of
1995. These statements relate to future events or our future financial or
business performance and are identified by terminology such as "may", "might",
"will", "should", "expect", "scheduled", "plan", "intend", "anticipate",
"believe", "estimate", "potential", or "continue" or the negative of such terms
or other comparable terminology. Actual events or results may differ materially.
In evaluating these statements, you should specifically consider various
factors, including the risks outlined under "Risk Factors". These factors, among
others, may cause our actual results to differ materially from any
forward-looking statement. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements.


                         RISKS RELATING TO OUR BUSINESS

OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR BUSINESS AND
PROSPECTS

     We commenced operations in March 1998 and only recently began to market and
sell our services. We began offering commercial service in Stamford, Connecticut
in May 1998. Accordingly, you have limited information about our company with
which to evaluate our business, strategies and performance and an investment in
our common stock.

BECAUSE THE HIGH-SPEED DATA COMMUNICATIONS INDUSTRY IS NEW AND RAPIDLY EVOLVING,
WE CANNOT PREDICT ITS FUTURE GROWTH OR ULTIMATE SIZE

     The high-speed data communications industry is in the early stages of
development and is subject to rapid and significant technological change. Since
this industry is new and because the technologies available for high-speed data
communications services are rapidly evolving, we cannot accurately predict the
rate at which the market for our services will grow, if at all, or whether
emerging technologies will render our services less competitive or obsolete. If
the market for our services fails to develop or grows more slowly than
anticipated, our business, prospects, financial condition and results of
operations could be materially adversely affected. Many providers of high-speed
data communication services are testing products from numerous suppliers for
various applications, and these suppliers have not broadly adopted an industry
standard. In addition, certain industry groups are in the process of trying to
establish standards which could limit the types or speeds of the technologies we
could use. Certain critical issues concerning commercial use of DSL technology
for Internet access, including security, reliability, ease and cost of access
and quality of service, remain unresolved and may impact the growth of these
services.

WE HAVE INCURRED LOSSES AND HAVE EXPERIENCED NEGATIVE OPERATING CASH FLOW TO
DATE AND EXPECT OUR LOSSES AND NEGATIVE OPERATING CASH FLOW TO CONTINUE AND TO
INCREASE

     We have incurred significant losses and experienced negative operating cash
flow for each month since our formation. We expect to continue to incur
significant losses and negative operating cash flow for the foreseeable future.
If our revenue does not grow as expected or capital and operating expenditures
exceed our plans, our business, prospects, financial condition and results of
operations will be materially adversely affected. As of December 31, 1999, we
had an accumulated deficit of approximately $27,180,000. We cannot be certain if
or when we will be profitable or if or when we will generate positive operating
cash flow. We expect our operating expenses to increase significantly as we
expand our business. In addition, we expect to make significant additional
capital expenditures in 2000 and in subsequent years. We also expect to
substantially increase our operating expenditures, particularly network and
operations and sales and marketing expenditures, as we implement our business
plan. However, our revenue may not increase despite this increased spending.

                                      -31-
<PAGE>

OUR BUSINESS MODEL IS UNPROVEN, AND MAY NOT BE SUCCESSFUL

     We do not know whether our business model and strategy will be successful.
If the assumptions underlying our business model are not valid or we are unable
to implement our business plan, achieve the predicted level of market
penetration or obtain the desired level of pricing of our services for sustained
periods, our business, prospects, financial condition and results of operations
could be materially adversely affected. We have adopted a different strategy
than certain other DSL providers. We focus on selling directly to small and
medium sized businesses in second and third tier cities. In contrast, certain
other DSL providers sell services primarily to Internet service providers and
others who, in turn, resell these services to end users through their sales
forces. In addition, many other DSL providers are currently focused primarily on
offering their services in large metropolitan areas. Certain of our target
markets are within the larger metropolitan areas where other DSL providers are
focused on providing service. Our unproven business model makes it difficult to
predict the extent to which our services will achieve market acceptance. To be
successful, we must deploy our network in a significant number of our selected
markets and convince our target customers to utilize our service. It is possible
that we may never be able to deploy our network as planned or achieve
significant market acceptance, favorable operating results or profitability.

OUR FAILURE TO ACHIEVE OR SUSTAIN MARKET ACCEPTANCE AT DESIRED PRICING LEVELS
COULD IMPAIR OUR ABILITY TO ACHIEVE PROFITABILITY OR POSITIVE CASH FLOW

     Prices for digital communication services have fallen historically, a trend
we expect will continue. Accordingly, we cannot predict to what extent we may
need to reduce our prices to remain competitive or whether we will be able to
sustain future pricing levels as our competitors introduce competing services or
similar services at lower prices. Our failure to achieve or sustain market
acceptance at desired pricing levels could impair our ability to achieve
profitability or positive cash flow, which would have a material adverse effect
on our business, prospects, financial condition and results of operations.

IF WE FAIL TO RECRUIT QUALIFIED PERSONNEL IN A TIMELY MANNER AND RETAIN OUR
EMPLOYEES, WE WILL NOT BE ABLE TO EXECUTE OUR BUSINESS PLAN AND OUR BUSINESS
WILL BE HARMED

     To execute our business plan, we need to hire a substantial number of
qualified personnel, particularly sales and marketing, engineering and other
technical personnel. If we are unable to recruit qualified personnel in a timely
manner or to retain our employees, we will not be able to execute our business
plan. In particular, if we are unable to recruit and retain a sufficient number
of qualified personnel, including many who must be recruited to work locally in
the new markets where we provide or intend to provide service, we may not be
able to commence service as quickly as we expect in those new markets and, as a
result, our revenue growth may be lower than we expect and our business may be
harmed. Our industry is characterized by intense competition for, and aggressive
recruiting of, skilled personnel, as well as a high level of employee mobility.
Many of our future employees must be recruited to work locally in the new
markets where we intend to establish a presence. The combination of our local
sales and marketing strategy and the competitive nature of our industry may make
it difficult to hire qualified personnel on a timely basis and to retain our
employees.

                                      -32-
<PAGE>

OUR MANAGEMENT TEAM HAS LITTLE EXPERIENCE WORKING TOGETHER, AND THE LOSS OF KEY
PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS

     We depend on a small number of executive officers and other members of
senior management to work effectively as a team, to execute our business
strategy and business plan, and to manage employees located throughout the
United States. The loss of key managers or their failure to work effectively as
a team could have a material adverse effect on our business and prospects. We do
not have employment agreements with any of our executive officers, so any of
these individuals may terminate employment at any time.

OUR FAILURE TO ESTABLISH THE NECESSARY INFRASTRUCTURE TO SUPPORT OUR BUSINESS
AND TO MANAGE OUR GROWTH COULD STRAIN OUR RESOURCES AND ADVERSELY AFFECT OUR
BUSINESS AND FINANCIAL PERFORMANCE

     Our business plan anticipates that we will provide service in a significant
number of new cities and add a significant number of new employees in
geographically-dispersed areas. This rapid growth will continue to place a
significant strain on our management, financial controls, operations, personnel
and other resources. Our failure to manage our rapid growth could have a
material adverse effect on our ability to integrate expanding operations, the
quality of our services and our ability to recruit, manage and retain key
personnel. If we do not institute adequate financial and reporting systems,
managerial controls, and procedures to manage and operate from multiple
geographically-dispersed locations, our operations will be materially and
adversely affected. We have deployed operations support systems to help manage
customer service, bill customers, process customer orders and coordinate with
vendors and contractors. The subsequent integration and enhancement of these
systems could be delayed or cause disruptions in service or billing. In
addition, we have recently implemented a new financial and reporting system
which will interact with our operations support systems. To manage our growth
effectively, we must continue to successfully implement these systems on a
timely basis, and continually expand and upgrade these systems as our operations
expand.

DISAPPOINTING QUARTERLY REVENUE OR OPERATING RESULTS COULD CAUSE THE PRICE OF
OUR COMMON STOCK TO FALL

     Our quarterly revenue and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter. If our quarterly revenue or
operating results fall below the expectations of investors or security analysts,
the price of our common stock could fall substantially. Our quarterly revenue
and operating results may fluctuate as a result of a variety of factors, many of
which are outside our control, including:

     o    the amount and timing of expenditures relating to the rollout of our
          infrastructure and services;

     o    the ability to obtain and the timing of necessary regulatory
          approvals;

     o    the rate at which we are able to attract customers within our target
          markets and our ability to retain these customers at sufficient
          aggregate revenue levels;

     o    our ability to deploy our network on a timely basis;

                                      -33-
<PAGE>

     o    the availability of financing to continue our expansion;

     o    technical difficulties or network service interruptions;

     o    the availability of space in traditional telephone companies' central
          offices and timing of the installation of our equipment in those
          spaces; and

     o    the introduction of new services or technologies by our competitors
          and resulting pressures on the pricing of our service.

THE FAILURE OF OUR CUSTOMERS TO PAY THEIR BILLS ON A TIMELY BASIS COULD
ADVERSELY AFFECT OUR CASH FLOW

     Our target customers consist of small and medium sized businesses. We
anticipate having to bill and collect numerous relatively small customer
accounts. We may experience difficulty in collecting amounts due on a timely
basis. Our failure to collect accounts receivable owed to us by our customers on
a timely basis could have a material adverse effect on our business, financial
condition and cash flow.

OUR FAILURE TO DEVELOP AND MAINTAIN GOOD RELATIONSHIPS WITH MARKETING PARTNERS
IN A LOCAL SERVICE MARKET COULD ADVERSELY AFFECT OUR ABILITY TO OBTAIN AND
RETAIN CUSTOMERS IN THAT MARKET

     In addition to marketing through our direct sales force, we rely on
relationships with local marketing partners, such as integrators of computer
systems and networks and consultants. These partners recommend our services to
their clients, provide us with referrals and help us build a local presence in
each market. We may not be able to identify, and maintain good relationships
with, quality marketing partners and we cannot assure you that they will
recommend our services rather than our competitors' services to their customers.
Our failure to identify and maintain good relationships with quality marketing
partners could have a material adverse effect on our ability to obtain and
retain customers in a market and, as a result, our business would suffer.

OUR SUCCESS DEPENDS ON NEGOTIATING AND ENTERING INTO INTERCONNECTION AGREEMENTS
WITH TRADITIONAL TELEPHONE COMPANIES

     We must enter into and renew interconnection agreements with traditional
telephone companies in each of our target markets in order to provide service in
that market. These agreements govern, among other things, the price and other
terms regarding our location of equipment in the offices of traditional
telephone companies which house telecommunications equipment and from which
local telephone service is provided, known as central offices, and our lease of
copper telephone lines that connect those central offices to our customers. As
of March 1, 2000, we have entered into agreements with Bell Atlantic, BellSouth,
Cincinnati Bell, GTE, SBC Communications, Sprint, US West and/or their
subsidiaries, which govern our relationships in 49 states and the District of
Columbia. Delays in obtaining interconnection agreements would delay our
entrance into target markets and could have a material adverse effect on our
business and prospects. Our interconnection agreements generally have limited
terms of

                                      -34-
<PAGE>

one to two years and we cannot assure you that new agreements will be negotiated
or that existing agreements will be extended on terms favorable to us.
Interconnection agreements must be approved by state regulators and are also
subject to oversight by the FCC and the courts. These governmental authorities
may modify the terms or prices of our interconnection agreements in ways that
could adversely affect our ability to deliver service and our business and
results of operations.

FAILURE TO NEGOTIATE INTERCONNECTION AGREEMENTS WITH THE TRADITIONAL LOCAL
TELEPHONE COMPANIES COULD LEAD TO COSTLY AND LENGTHY ARBITRATION WHICH MAY NOT
BE RESOLVED IN OUR FAVOR

     Under federal law, traditional telephone companies have an obligation to
negotiate with us in good faith to enter into interconnection agreements. If no
agreement can be reached, either side may petition the applicable state
telecommunications regulators to arbitrate remaining disagreements. Arbitration
is a costly and lengthy process that could delay our entry into markets and
could harm our ability to compete. Interconnection agreements resulting from
arbitration must be approved by state regulators. We cannot assure you that a
state regulatory authority would resolve disputes in our favor.

FAILURE TO OBTAIN SPACE FOR OUR DSL EQUIPMENT IN THE LOCAL TELEPHONE COMPANIES'
CENTRAL OFFICES IN OUR TARGET MARKETS COULD ADVERSELY AFFECT OUR BUSINESS

     Our strategy requires us to obtain space for our DSL equipment in those
central offices of the traditional local telephone companies that already serve
a large number of our target customers. Failure to obtain required space to
locate our equipment in those central offices, known as collocation space, on a
timely basis could have a material adverse effect on our business. In addition
to negotiating and entering into interconnection agreements with traditional
telephone companies, we must obtain collocation space in each central office in
which we intend to locate equipment. We may not be able to secure collocation
space in the central offices of our choice on a timely basis. We expect that
central office space will become increasingly scarce as demand increases. In
addition, the terms of our collocation agreements are generally one to two years
and are subject to certain renegotiation, renewal and termination provisions.

OUR SUCCESS DEPENDS ON TRADITIONAL TELEPHONE COMPANIES PROVIDING ACCEPTABLE
TRANSMISSION FACILITIES AND COPPER TELEPHONE LINES

     We interconnect with and use the networks of traditional telephone
companies to provide our services to our customers. We cannot assure you that
these networks will be able to meet the telecommunications needs of our
customers or maintain our service standards. We also depend on the traditional
telephone companies to provide and maintain their transmission facilities and
the copper telephone lines between our network and our customers' premises. Our
dependence on traditional telephone companies could cause delays in establishing
our network and providing our services. Any such delays could have a material
adverse effect on our business. We lease copper telephone lines running from the
central office of the traditional telephone companies to each customer's
location. In many cases, the copper telephone lines must be specially
conditioned by the telephone company to carry digital signals. We may not be
able to lease a sufficient number of acceptable telephone lines on acceptable
terms, if at all. Traditional telephone companies often

                                      -35-
<PAGE>

rely on unionized labor and labor-related issues have in the past, and may in
the future, adversely affect the services provided by the traditional telephone
companies.

WE COMPETE WITH THE TRADITIONAL LOCAL TELEPHONE COMPANIES ON WHOM WE DEPEND

     Many of the traditional local telephone companies, including those created
by AT&T's divestiture of its local telephone service business, have begun
deploying DSL-based services. In addition, these companies also currently offer
high-speed data communications services that use other technologies.
Consequently, these companies have certain incentives to delay:

     o    our entry into, and renewals of, interconnection agreements with them,

     o    our access to their central offices to install our equipment and
          provide our services,

     o    providing acceptable transmission facilities and copper telephone
          lines, and

     o    our introduction and expansion of our services.

     Any such delays would negatively impact our ability to implement our
business plan and harm our competitive position, business and prospects.

WE DEPEND ON TWO LONG DISTANCE CARRIERS TO CONNECT OUR NETWORK

     Data is transmitted across our network via transmission facilities that we
lease from MCI WorldCom and AT&T. Failure of these carriers to provide service
or to provide quality service may interrupt the use of our services by our
customers. In August 1999, the service provided by MCI WorldCom was interrupted
for several days by a failure of their communications network. Several of our
customers were without service or had poor service during this period. As a
result, we issued approximately $21,000 in credits toward services to our
customers. We cannot be sure that the MCI WorldCom and AT&T service will not be
interrupted in the future.

OUR SUCCESS DEPENDS ON CONTRACTORS WHO INSTALL THE EQUIPMENT AND WIRING
NECESSARY TO UTILIZE OUR SERVICE IN THE CENTRAL OFFICES OF TRADITIONAL TELEPHONE
COMPANIES AND AT OUR CUSTOMERS' PREMISES

     We primarily utilize contractors to install necessary equipment and wiring
in the central offices of traditional telephone companies and on our customers'
premises. These installations must be completed on a timely basis and in a
cost-efficient manner. Failure to retain experienced contractors to install the
equipment and wiring or failure to complete these installations on a timely,
cost-efficient basis could materially delay our growth or damage our reputation,
our business and prospects and results of operations. If we are unable to retain
contractors to provide these services, we will have to complete these
installations ourselves, probably at a greater cost and with delay. We may be
required to utilize numerous contractors as we expand our operations, which may
divert management attention and result in delays in installations,
cancellations, increased costs and lower quality.

                                      -36-
<PAGE>

INTENSE COMPETITION IN THE HIGH-SPEED DATA COMMUNICATION SERVICES MARKET MAY
NEGATIVELY AFFECT THE NUMBER OF OUR CUSTOMERS AND THE PRICING OF OUR SERVICES

     The high-speed data communication services market is intensely competitive.
If we are unable to compete effectively, our business, prospects, financial
condition and results of operations would be adversely affected. We expect the
level of competition to intensify in the future, due, in part, to increasing
consolidation in our industry. Our competitors use various high speed
communications technologies for local access connections such as integrated
services digital network, or ISDN, frame relay, T1, DSL services and wireless,
satellite-based and cable networks. We expect significant competition from:

     o    Other providers of DSL-based services like us, including Covad,
          Network Access Solutions, NorthPoint and Rhythms NetConnections;

     o    Internet service providers, such as PSINet, Concentric Network and
          Flashcom, which offer high-speed access capabilities to complement
          their existing products and services;

     o    Traditional local telephone companies, including the traditional
          telephone companies created by AT&T's divestiture of its local
          telephone service business, some of which have begun deploying
          DSL-based services and which provide other high-speed data
          communications services;

     o    National long distance carriers, such as AT&T and MCI WorldCom, which
          are beginning to offer competitive DSL-based services;

     o    Cable modem service providers, such as At Home, which are offering
          high-speed Internet access over cable networks and have positioned
          themselves to do the same for businesses; and

     o    Providers utilizing alternative technologies, such as wireless and
          satellite-based data service providers.

     Many of our current and potential competitors have longer operating
histories, greater brand name recognition, larger customer bases and
substantially greater financial, technical, marketing, management, service
support and other resources than we do. Therefore, they may be able to respond
more quickly than we can to new or changing opportunities, technologies,
standards or customer requirements. See "Business--Competition."

WE MAY NOT BE ABLE TO CONTINUE TO GROW OUR BUSINESS IF WE DO NOT OBTAIN
SIGNIFICANT ADDITIONAL FUNDS ON ACCEPTABLE TERMS DURING 2001

     The actual amount and timing of our future capital requirements will depend
on the demand for our services and regulatory, technological and competitive
developments which could differ materially from our estimates. We may not be
able to raise sufficient debt or equity capital on terms that we consider
acceptable, if at all. If we are unable to obtain adequate funds on acceptable
terms, our ability to deploy and operate our network, fund our expansion or
respond to competitive pressures would be significantly impaired.

                                      -37-
<PAGE>

WE MAY INCUR SIGNIFICANT AMOUNTS OF DEBT IN THE FUTURE TO IMPLEMENT OUR BUSINESS
PLAN AND, IF INCURRED, THIS INDEBTEDNESS WILL CREATE GREATER FINANCIAL AND
OPERATING RISK AND LIMIT OUR FLEXIBILITY

     We intend to seek additional debt financing in the future. We are not
generating sufficient revenue or operating cash flow to fund our operations or
to repay existing or expected debt. We may not be able to repay our current debt
or any future debt. In addition, the terms of any future debt would likely
contain additional restrictive covenants that would limit our ability to incur
additional indebtedness and place other operating restrictions on our business.
If we incur additional debt, we will be required to devote increased amounts of
our cash flow to service indebtedness. This could require us to modify, delay or
abandon the capital expenditures and other investments necessary to implement
our business plan.

WE MAY BE SUBJECT TO RISKS ASSOCIATED WITH ACQUISITIONS

     We acquired Tycho Networks in December 1999 and may acquire additional
businesses in the future. An acquisition, including the recently-completed Tycho
Networks acquisition, may not produce the revenue, earnings or business
synergies that we anticipate, and an acquired business might not perform as we
expect. If we pursue any future acquisition, our management could spend a
significant amount of time and effort in identifying and completing the
acquisition and may be distracted from the operation of our business. We will
probably have to devote a significant amount of management resources to
integrating any acquired business, including the business of Tycho Networks,
with our existing operations, and that integration may not be successful.

OUR SERVICES ARE SUBJECT TO FEDERAL, STATE AND LOCAL REGULATION AND CHANGES IN
LAWS OR REGULATIONS COULD ADVERSELY AFFECT THE WAY WE OPERATE OUR BUSINESS

     The facilities we use and the services we offer are subject to varying
degrees of regulation at the federal, state and/or local levels. Changes in
applicable laws or regulations could, among other things, increase our costs,
restrict our access to the central offices of the traditional telephone
companies, or restrict our ability to provide our services. For example, the
1996 Telecommunications Act, which, among other things, requires traditional
telephone companies to unbundle network elements and to allow competitors to
locate their equipment in the telephone companies' central offices, is the
subject of ongoing proceedings at the federal and state levels, litigation in
federal and state courts, and legislation in federal and state legislatures. On
remand from a decision of the U.S. Supreme Court that invalidated certain FCC
regulations, the FCC recently re-established a list of unbundled network
elements that must be provided to competitive companies such as us; however,
this decision is still subject to petitions for reconsideration and to appeal.
Also, FCC rules governing pricing standards for access to the networks of the
traditional telephone companies are currently being challenged in federal court.
In addition, an FCC order that found that advanced services, such as DSL, are
subject to the market opening requirements of the 1996 Telecommunications Act
was remanded by a federal appellate court to the FCC for further consideration.
Another recent FCC order expanding collocation rights for DSL and other advanced
service providers is also under review on appeal. We cannot predict the outcome
of the various proceedings, litigation and legislation or whether or to what
extent these proceedings, litigation and legislation may adversely affect our
business and operations. In addition, decisions by the FCC and state
telecommunications regulators will determine some of the terms of our
relationships with traditional telecommunications carriers, including the terms
and prices of interconnection agreements, and access fees and surcharges on
gross revenue from interstate and

                                      -38-
<PAGE>

intrastate services. State telecommunications regulators determine whether and
on what terms we will be authorized to operate as a competitive local exchange
carrier in their state. In addition, local municipalities may require us to
obtain various permits which could increase the cost of services or delay
development of our network. Future federal, state and local regulations and
legislation may be less favorable to us than current regulations and legislation
and may adversely affect our businesses and operations. See
"Business--Governmental Regulations."

AN FCC PROPOSAL TO PERMIT THE TRADITIONAL LOCAL TELEPHONE COMPANIES TO OFFER DSL
SERVICES THROUGH A LESS-REGULATED SUBSIDIARY COULD, IF ADOPTED, ADVERSELY AFFECT
OUR BUSINESS PLAN BY ALTERING OUR RELATIONSHIP WITH THE LOCAL TELEPHONE
COMPANIES UPON WHOSE EQUIPMENT WE DEPEND FOR ACCESS TO CUSTOMERS

     In August 1998, the FCC proposed that the traditional local telephone
companies should be permitted to create separate affiliates to provide DSL
services that would operate under the relaxed regulatory treatment available to
competitive DSL carriers. Under the separate affiliate proposal, traditional
local telephone companies would be required to provide wholesale service to
competitor DSL carriers at the same rates, terms and conditions that it provided
to its separate affiliate. Though the outcome of this proceeding remains
uncertain, the FCC adopted a condition to the merger of two traditional local
telephone companies, SBC Communications and Ameritech, that will permit these
companies to create separate affiliates to provide DSL services. In December
1999, the FCC accepted Bell Atlantic's commitment to create an advanced services
affiliate as a condition to the Commission's decision to approve Bell Atlantic's
application to offer interexchange long-distance services in New York state.
Although the FCC proceeding remains pending, both SBC and Bell Atlantic have
established separate advanced services affiliates. Any final decision in this
proceeding that alters our relationship with the traditional local telephone
companies could adversely affect our ability to provide DSL services at a
competitive price.

UNCERTAIN TAX AND OTHER SURCHARGES ON OUR SERVICES MAY INCREASE OUR PAYMENT
OBLIGATIONS TO FEDERAL AND STATE GOVERNMENTS

     Telecommunications providers are subject to a variety of federal and state
surcharges and fees on their gross revenues from interstate and intrastate
services. These surcharges and fees may be increased and other surcharges and
fees not currently applicable to our services could be imposed on us. In either
case, the cost of our services would increase and that could have a material
adverse effect on our business, prospects, financial condition and results of
operations.

A BREACH OF OUR NETWORK SECURITY COULD RESULT IN LIABILITY TO US AND DETER
CUSTOMERS FROM USING OUR SERVICES

     Our network may be vulnerable to unauthorized access, computer viruses and
other disruptive problems. Any of the foregoing problems could result in
liability to us and deter customers from using our service. Unauthorized access
could jeopardize the security of confidential information stored in the computer
systems of our customers. Eliminating computer viruses and alleviating other
security problems may require interruptions, delays or cessation of service to
our customers, cause us to incur significant costs to remedy the problem, and
divert management attention. We can provide no assurance that the security
measures we have implemented will not be circumvented or that any failure of
these measures will not have a material adverse effect on our ability to obtain
and retain customers. Any of these factors could have a material adverse effect
on our business and prospects.

                                      -39-
<PAGE>

OUR FAILURE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS MAY ADVERSELY AFFECT
OUR BUSINESS

     We rely on unpatented trade secrets and know-how to maintain our
competitive position. Our inability to protect these secrets and know-how could
have a material adverse effect on our business and prospects. We protect our
proprietary information by entering into confidentiality agreements with
employees and consultants and potential business partners. These agreements may
be breached or terminated. In addition, third parties, including our
competitors, may assert infringement claims against us. Any such claims, could
result in costly litigation, divert management's attention and resources, and
require us to pay damages and/or to enter into license or similar agreements
under which we would be required to pay license fees or royalties.

WE MAY BE EXPOSED TO LIABILITY FOR INFORMATION CARRIED OVER OUR NETWORK OR
DISPLAYED ON WEB SITES THAT WE HOST

     Because we provide connections to the Internet and host web sites for our
customers, we may be perceived as being associated with the content carried over
our network or displayed on web sites that we host. We do not and cannot screen
all of this content. As a result, we may face potential liability for
defamation, negligence, copyright, patent or trademark infringement and other
claims based on the content carried over our network or displayed on web sites
that we host. These types of claims have been brought against providers of
online services in the past and can be costly to defend regardless of the merit
of the lawsuit. The protection offered by recent federal legislation that
protects online services from some claims when the material is written by third
parties is limited. Further, the law in this area remains in flux and varies
from state to state. We may also suffer a loss of customers or reputational harm
based on this content or resulting from our involvement in these legal
proceedings.

OUR FAILURE AND THE FAILURE OF THIRD PARTIES TO BE YEAR 2000 COMPLIANT COULD
NEGATIVELY IMPACT OUR BUSINESS

     Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. The use of software and
computer systems that are not Year 200 compliant could result in system failures
or miscalculations and may result in disruptions of operations including, among
other things, a temporary inability to process transactions, send invoices or
engage in normal business activities. We are subject to potential Year 2000
problems affecting our services and our business systems, the systems of the
traditional local telephone companies and other vendors, and our customers'
systems. Any of these year 2000 problems could have a material adverse effect on
our business, financial condition and results of operations. Year 2000 errors or
defects may be discovered in our internal software or other systems and, if such
errors or defects are discovered, the costs of making those systems Year 2000
compliant may be material. Year 2000 errors or defects in the internal systems
maintained by the traditional local telephone companies and other vendors, could
require us to incur significant unanticipated expenses to remedy any problems
or, if possible, replace affected vendors. Furthermore, Year 2000 problems of
our target customers could negatively impact their decision to buy our services.
See "Management's Discussion and Analysis and Results of Operations--Impact of
Year 2000."


                 RISKS RELATING TO OWNERSHIP OF OUR COMMON STOCK

OUR STOCK PRICE COULD FLUCTUATE WIDELY IN RESPONSE TO VARIOUS FACTORS, MANY OF
WHICH ARE BEYOND OUR CONTROL

     The trading price of our common stock has been and is likely to continue to
be highly volatile. Our stock price could fluctuate widely in response to
factors such as the following:

     o    actual or anticipated variations in quarterly operating results;

     o    announcements of new products or services by us or our competitors or
          new competing technologies;

     o    the addition or loss of customers;

     o    changes in financial estimates or recommendations by securities
          analysts;

     o    conditions or trends in the telecommunications industry, including
          regulatory developments;

                                      -40-
<PAGE>

     o    growth of the Internet and on-line commerce industries;

     o    announcements by us of significant acquisitions, strategic
          partnerships, joint ventures or capital commitments;

     o    additions or departures of our key personnel;

     o    future equity or debt offerings by us or our announcements of such
          offerings; and

     o    general market and economic conditions.

     In addition, in recent years the stock market in general, and the Nasdaq
National Market and the market for Internet and technology companies in
particular, have experienced large price and volume fluctuations. These
fluctuations have often been unrelated or disproportionate to the operating
performance of these companies. These market and industry factors may materially
and adversely affect our stock price, regardless of our operating performance.

OUR EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS OWN A SIGNIFICANT
PERCENTAGE OF OUR COMPANY AND WILL BE ABLE TO EXERCISE SIGNIFICANT INFLUENCE
OVER OUR COMPANY, WHICH COULD HAVE A MATERIAL AND ADVERSE EFFECT ON THE MARKET
PRICE OF OUR COMMON STOCK.

     After our public stock offering, including the exercise of the
underwriters' overallotment option, in March 2000, our executive officers,
directors and principal stockholders and their affiliates together controlled
approximately 54.1% of our outstanding common stock. As a result, these
stockholders, if they act together, are able to control all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions, and can have significant influence over our
affairs. This concentration of ownership may have the effect of delaying,
preventing or deterring a change in control, could deprive our stockholders of
an opportunity to receive a premium for their common stock as part of a sale and
might affect the market price of our common stock.

CERTAIN PROVISIONS OF OUR CHARTER, BY-LAWS AND DELAWARE LAW MAKE A TAKEOVER
DIFFICULT

     Our corporate documents and Delaware law contain provisions that might
enable our management to resist a takeover. These provisions include a staggered
board of directors, limitations on persons authorized to call a special meeting
of stockholders and advance notice procedures required for stockholders to make
nominations of candidates for election as directors or to bring matters before
an annual meeting of stockholders. These provisions might discourage, delay or
prevent a change of control or a change in our management. These provisions
could also discourage proxy contests and make it more difficult for our
stockholders to elect directors and take other corporate actions. The existence
of these provisions could limit the price that investors might be willing to pay
in the future for shares of common stock and could deprive our stockholders of
an opportunity to receive a premium for their common stock as part of a sale.

THE MARKET PRICE OF OUR COMMON STOCK MAY DROP SIGNIFICANTLY WHEN THE
RESTRICTIONS ON RESALE BY OUR EXISTING SECURITYHOLDERS LAPSE

                                      -41-
<PAGE>

     After our public stock offering in March 2000, we had approximately
63,382,196 shares of common stock outstanding. Approximately 50,516,196 shares,
or 80%, of our outstanding common stock are subject to restrictions on resale
under U.S. securities laws or lock-up agreements. An aggregate of 609,938 will
not be eligible for sale until April 4, 2000 without the consent of Deutsche
Bank Securities Inc. In addition, holders of 49,906,258 shares have agreed not
to sell their shares until May 26, 2000 without the consent of Deutsche Bank
Securities Inc. As these restrictions on resale end beginning in April 2000, the
market price of our common stock could drop significantly if holders of these
shares sell them or are perceived by the market as intending to sell them. These
sales also may make it difficult for us to sell equity securities in the future
at a time and price that we deem appropriate.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We have no derivative financial instruments in our cash and cash
equivalents. We invest our cash and cash equivalents in investment-grade, highly
liquid investments, consisting of commercial paper, bank certificates of deposit
and corporate bonds.







                                      -42-
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA






                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders of DSL.net, Inc.

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in stockholders'
equity (deficit) and of cash flows present fairly, in all material respects, the
financial position of DSL.net, Inc. and its subsidiaries at December 31, 1999
and 1998 and the results of their operations and their cash flows for the year
ended December 31, 1999 and for the period from inception (March 3, 1998)
through December 31, 1998, in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.


PRICEWATERHOUSECOOPERS LLP


Stamford, Connecticut
February 1, 2000







                                      -43-
<PAGE>
                                  DSL.NET, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE><CAPTION>
                                                                                             December 31,
                                                                                   ------------------------------
                                                                                       1998             1999
                                                                                   -------------    -------------
<S>                                                                                <C>              <C>
                                     ASSETS
Current assets:
Cash and cash equivalents ......................................................   $      39,479    $  66,178,261
Marketable securities ..........................................................            --         13,274,183
Accounts receivable (net of allowance of $63,000 at December 31, 1999) .........          30,597          318,516
Prepaid expenses and other current assets ......................................            --          1,043,935
                                                                                   -------------    -------------
Total current assets ...........................................................          70,076       80,814,895
Fixed assets, net (Note 3) .....................................................         284,338       32,664,924
Goodwill and other intangible assets (Note 2) ..................................            --          3,420,135
Other assets ...................................................................          15,566          731,818
                                                                                   -------------    -------------
Total assets ...................................................................   $     369,980    $ 117,631,772
                                                                                   =============    =============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable ...............................................................   $     231,073    $   9,587,186
Accrued salaries ...............................................................            --            848,841
Accrued liabilities ............................................................          16,219        3,173,173
Deferred revenue ...............................................................           5,392          234,061
Current portion of capital lease payable (Note 6) ..............................          16,494          715,953
Current portion of notes payable (Note 5) ......................................          66,667          281,316
                                                                                   -------------    -------------
Total current liabilities ......................................................         335,845       14,840,530
Capital lease payable (Note 6) .................................................            --            892,906
Notes payable (Note 5) .........................................................         350,000        1,165,450
                                                                                   -------------    -------------
Commitments and contingencies (Note 6) .........................................            --               --
Total liabilities ..............................................................         685,845       16,898,886
                                                                                   -------------    -------------
Stockholders' equity (deficit) (Note 8):
Common stock, $0.0005 par value; 508,963,394 and 200,000,000 shares
authorized; 16,795,800, and 58,382,196 shares issued and outstanding ...........           8,398           29,191
Additional paid-in capital .....................................................       2,465,374      141,245,583
Deferred compensation ..........................................................            --        (13,361,940)
Accumulated deficit ............................................................      (2,789,637)     (27,179,948)
                                                                                   -------------    -------------
Total stockholders' (deficit) equity ...........................................        (315,865)     100,732,886
                                                                                   -------------    -------------
Total liabilities and stockholders' equity .....................................   $     369,980    $ 117,631,772
                                                                                   =============    =============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                      -44-
<PAGE>
                                  DSL.NET, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
                                                                   For the Period
                                                                   from Inception
                                                                   (March 3, 1998)
                                                                      through         Year Ended
                                                                    December 31,     December 31,
                                                                        1998             1999
                                                                    ------------     ------------
<S>                                                                 <C>              <C>
Revenue                                                             $     31,533     $  1,312,546
                                                                    ------------     ------------
Operating expenses:
Network and operations (excluding $0 and $369,922 of stock
compensation, respectively) ....................................         127,054        9,234,278
General and administrative (excluding $2,423,272 and $3,058,037
of stock compensation, respectively) ...........................         230,272        4,978,510
Sales and marketing (excluding $0 and $695,495 of stock
compensation, respectively) ....................................          35,961        6,847,696
Stock compensation .............................................       2,423,272        4,123,454
                                                                    ------------     ------------
Total operating expenses .......................................    $  2,816,559     $ 25,183,938
                                                                    ------------     ------------
Operating loss .................................................    $ (2,785,026)    $(23,871,392)
                                                                    ------------     ------------
Interest expense (income), net .................................           4,611       (1,889,312)
Other expense, net .............................................            --              6,233
                                                                    ------------     ------------
Net loss .......................................................    $ (2,789,637)    $(21,988,313)
                                                                    ============     ============
Exchange of preferred stock (Note 8) ...........................            --         11,998,000
                                                                    ------------     ------------
Loss applicable to common stock ................................    $ (2,789,637)    $(33,986,313)
                                                                    ============     ============
Net loss per share-basic and diluted ...........................    $      (0.55)    $      (2.05)
                                                                    ============     ============
Shares used in computing net loss per share ....................       5,118,342       16,549,535
                                                                    ============     ============
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                      -45-
<PAGE>
                                  DSL.NET, INC.

      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE><CAPTION>
                                                                  Preferred Stock              Common Stock
                                                             ------------------------    ------------------------
                                                               Shares        Amount        Shares        Amount
                                                             ----------    ----------    ----------    ----------
<S>                                                          <C>           <C>           <C>           <C>
Initial capitalization, including retroactive
effect of stock splits ....................................      20,000    $   50,000     5,089,634    $      500
Exchange of preferred stock for common stock...............     (20,000)      (50,000)    7,634,451         5,862
Issuance of common stock ..................................        --            --       4,071,715         2,036
Repayment of notes receivable from officers ...............        --            --            --            --
Net loss ..................................................        --            --            --            --
                                                             ----------    ----------    ----------    ----------
Balance at December 31, 1998 ..............................        --      $     --      16,795,800    $    8,398
Issuance of warrants ......................................        --            --            --            --
Deferred compensation-restricted stock ....................        --            --            --            --
Stock compensation ........................................        --            --         436,256           218
Deferred compensation-stock options .......................        --            --            --            --
Amortization of deferred compensation .....................        --            --            --            --
Issuance of warrants ......................................        --            --            --            --
Surrender of common stock .................................        --            --      (3,102,256)       (1,551)
Acceleration associated with surrender ....................        --            --            --            --
Exchange of redeemable preferred stock ....................        --            --            --            --
Note receivable from officer ..............................        --            --            --            --
Repayment of note receivable from officer .................        --            --            --            --
Issuance of common stock-stock options ....................        --            --         116,635            58
Issuance of common stock, net of issuance costs ...........        --            --       8,226,000         4,113
Issuance of and conversion of redeemable
preferred stock into common stock .........................        --            --      35,909,761        17,955
Net loss ..................................................        --            --            --            --
                                                             ----------    ----------    ----------    ----------
Balance at December 31, 1999 ..............................        --      $     --      58,382,196    $   29,191
                                                             ==========    ==========    ==========    ==========
</TABLE>




<TABLE><CAPTION>
                                                                        Notes
                                                       Additional     Receivable
                                                        Paid-in          from          Deferred       Accumulated
                                                        Capital        Officers      Compensation       Deficit          Total
                                                     -------------   -------------   -------------   -------------   -------------
<S>                                                  <C>             <C>             <C>             <C>             <C>
Initial capitalization, including retroactive
effect of stock splits ...........................   $        --     $        (500)  $        --     $        --     $      50,000
Exchange of preferred stock for common stock .....       1,444,138            --              --              --         1,400,000
Issuance of common stock .........................       1,021,236            --              --              --         1,023,272
Repayment of notes receivable from officers ......            --               500            --              --               500
Net loss .........................................            --              --              --        (2,789,637)     (2,789,637)
                                                     -------------   -------------   -------------   -------------   -------------
Balance at December 31, 1998 .....................   $   2,465,374   $        --     $        --     $  (2,789,637)  $    (315,865)
Issuance of warrants .............................       1,155,000            --              --              --         1,155,000
Deferred compensation-restricted stock ...........       3,733,854            --        (3,733,854)           --              --
Stock compensation ...............................         602,369            --              --              --           602,587
Deferred compensation-stock options ..............      13,928,591            --       (13,928,591)           --              --
Amortization of deferred compensation ............            --              --         2,350,325            --         2,350,325
Issuance of warrants .............................         112,000            --              --              --           112,000
Surrender of common stock ........................        (778,087)           --           779,638            --              --
Acceleration associated with surrender ...........            --              --         1,170,542            --         1,170,542
Exchange of redeemable preferred stock ...........     (10,750,757)           --              --        (2,401,998)    (13,152,755)
Note receivable from officer .....................            --          (999,911)           --              --          (999,991)
Repayment of note receivable from officer ........            --           999,911            --              --           999,991
Issuance of common stock-stock options ...........           4,315            --              --              --             4,373
Issuance of common stock, net of issuance costs ..      55,718,285            --              --              --        55,722,398
Issuance of and conversion of redeemable
preferred stock into common stock ................      75,054,639            --              --              --        75,072,594
Net loss .........................................            --              --              --       (21,988,313)    (21,988,313)
                                                     -------------   -------------   -------------   -------------   -------------
Balance at December 31, 1999 .....................   $ 141,245,583   $        --     $ (13,361,940)  $ (27,179,948)  $ 100,732,886
                                                     =============   =============   =============   =============   =============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                      -46-
<PAGE>
                                  DSL.NET, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
                                                                   For the Period
                                                                   from Inception
                                                                   (March 3, 1998)
                                                                       through       Year Ended
                                                                     December 31,    December 31,
                                                                         1998            1999
                                                                    -------------   -------------
<S>                                                                 <C>             <C>
Cash flows from operating activities:
Net loss ......................................................     $  (2,789,637)  $ (21,988,313)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization .................................             5,744       1,831,331
Amortization of deferred debt issuance costs ..................              --            41,978
Stock compensation expense ....................................         2,423,272       4,123,454
Changes in operating assets and liabilities:
Increase in accounts receivable ...............................           (30,597)       (257,330)
Increase in prepaid expenses and other current assets .........              --          (943,888)
Increase in other assets ......................................           (15,566)       (578,145)
Increase in accounts payable ..................................           231,073       8,624,119
Increase in accrued salaries ..................................              --           848,841
Increase in accrued liabilities ...............................            16,814       1,831,119
Increase in deferred revenue ..................................             5,392         124,114
                                                                    -------------   -------------
Net cash used in operating activities .........................          (153,505)     (6,342,720)
                                                                    -------------   -------------
Cash flows from investing activities:
Purchases of fixed assets .....................................          (290,082)    (33,811,121)
Purchases of marketable securities ............................              --       (13,274,183)
Acquisition of subsidiary, net of cash acquired ...............              --        (1,575,508)
                                                                    -------------   -------------
Net cash used in investing activities .........................          (290,082)    (48,660,812)
                                                                    -------------   -------------
Cash flows from financing activities:
Initial capitalization ........................................            50,500            --
Proceeds from bridge financing ................................           350,000            --
Proceeds from equipment credit facility .......................              --         1,355,036
Proceeds from common stock issuance ...........................              --        55,726,681
Proceeds from equipment notes payable .........................           124,000       1,762,754
Proceeds from preferred stock issuance ........................              --        62,724,823
Payments on equipment notes payable ...........................           (41,434)        (66,667)
Principal payments under capital lease obligation .............              --          (360,313)
                                                                    -------------   -------------
Net cash provided by financing activities .....................           483,066     121,142,314
                                                                    -------------   -------------
Net increase in cash and cash equivalents .....................            39,479      66,138,782
Cash and cash equivalents at beginning of period ..............              --            39,479
                                                                    -------------   -------------
Cash and cash equivalents at end of period ....................     $      39,479   $  66,178,261
                                                                    =============   =============
Supplemental disclosure:
Cash paid:
Interest ......................................................     $       2,524   $     172,380
                                                                    =============   =============
Fixed assets financed under capital leases ....................     $      22,699   $   1,561,289
                                                                    =============   =============
Fixed asset purchases included in accounts payable ............     $        --     $   7,179,912
                                                                    =============   =============
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                      -47-
<PAGE>
                                  DSL.NET, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   FORMATION AND OPERATIONS OF THE COMPANY

     DSL.net, Inc. (the "Company") was incorporated in Delaware on March 3, 1998
and operations commenced March 28, 1998. The Company provides dedicated
high-speed digital communications and Internet access services using digital
subscriber line (DSL) technology. During the period ended December 31, 1998, the
Company was considered a development stage company in accordance with Statement
of Financial Accounting Standard No. 7. As of June 30, 1999, the Company was no
longer considered a development stage enterprise.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Significant accounting policies followed in the preparation of these
financial statements are as follows:

PRINCIPLES OF CONSOLIDATION

     The accompanying consolidated financial statements include the transactions
and balances of DSL.net, Inc. and its wholly owned subsidiaries, including
DSLnet Communications Delaware, Inc., DSLnet Communications LLC, DSLnet
Communications Puerto Rico, Inc., DSLnet Communications VA, Inc., and Tycho
Networks, Inc.  All material intercompany transactions and balances have been
eliminated.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The markets
for the Company's services are characterized by intense competition, rapid
technological development, regulatory changes, and frequent new product
introductions, all of which could impact the future value of the Company's
assets.

CASH EQUIVALENTS AND MARKETABLE SECURITIES

     The Company considers all highly liquid investments purchased with an
initial maturity of three months or less to be cash equivalents. The carrying
value of cash equivalents at December 31, 1999 was approximately $38,354,000.
The Company did not have any cash equivalents as of December 31, 1998.

     The Company considers its investment portfolio to be available-for-sale
securities as defined in Statement of Financial Accounting Standards ("SFAS")
No. 115. Marketable securities as of December 31, 1999 consist of debt
securities and certificates of deposit with maturities of greater

                                      -48-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


than three months and no more than a year. Securities are available-for-sale and
are carried at fair value. The unrealized losses earned on the securities as of
December 31, 1999 were de minimus.

CONCENTRATION OF CREDIT RISK

     Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash, cash equivalents,
marketable securities and accounts receivable. The Company's cash and investment
policies limit investments to short-term, investment grade instruments.
Concentrations of credit risk with respect to accounts receivable are limited
due to the large number of customers comprising the Company's customer base.

FIXED ASSETS

     Fixed assets are stated at cost and are depreciated using the straight-line
method over the estimated useful lives of the assets, which are between 3 and 5
years. Leasehold improvements are amortized over the shorter of the term of the
related lease or the useful life of the asset. Maintenance and repairs are
charged to expense as incurred. Collocation space improvements represent
payments to carriers for infrastructure improvements within their central
offices to allow the Company to install its equipment, which allows the Company
to interconnect with the carrier's network. These payments are being amortized
over their estimated useful lives of five years.

     In 1999, the Company adopted Statement of Position 98-1 ("SoP 98-1"),
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL
USE. This statement requires capitalization of certain costs incurred in the
development of internal use software. The Company has applied the guidance
outlined in SoP 98-1 and the impact of adoption has not been significant.

GOODWILL AND OTHER INTANGIBLE ASSETS

     Goodwill and other intangible assets are amortized on a straight-line basis
over the estimated future periods to be benefited, ranging from three to five
years. In addition, goodwill and other intangible assets are reviewed for
impairment quarterly, or whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
the assets to future undiscounted cash flows of the business acquired. If the
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. To date, no impairment has occurred. Accumulated
amortization of goodwill and other intangible assets was $0 and $63,306 at
December 31, 1998 and 1999, respectively.

OTHER ASSETS

     As of December 31, 1999 other assets included amounts held in certificates
of deposit of approximately $521,000. Such amounts collateralize a letter of
credit required under certain

                                      -49-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


facilities leases. Balances restricted under this letter of credit decline
annually, with a final expiration of May, 2003.

INCOME TAXES

     The Company uses the liability method of accounting for income taxes, as
set forth in Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR
INCOME TAXES. Under this method, deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities and net
operating loss carryforwards, all calculated using presently enacted tax rates.

REVENUE RECOGNITION

     Revenue is recognized pursuant to the terms of each contract on a monthly
service fee basis. Deferred revenue represents payments received in advance of
the services provided. Revenue related to installation charges are recognized to
the extent of direct costs incurred. Any excess installation charges over direct
costs are deferred and amortized to revenue over the service contract. Such
revenue is not expected to significantly exceed the direct costs. In certain
situations, the Company waives non-recurring installation charges in order to
obtain a sale. The Company expenses the related direct costs as incurred.

LONG-LIVED ASSETS

     Statement of Financial Accounting Standards No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
requires that long-lived assets and certain intangible assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If undiscounted expected future cash
flows are less than the carrying value of the assets, an impairment loss is to
be recognized based on the fair value of the assets. No impairment losses have
been recognized to date.

SEGMENT INFORMATION

     In 1998, the Company adopted Statement of Financial Accounting Standards
No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
(SFAS No. 131). SFAS No. 131 supersedes SFAS No. 14, FINANCIAL REPORTING FOR
SEGMENTS OF A BUSINESS ENTERPRISE, replacing the "industry segment" approach
with the "management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. The
Company operates in one segment: high-speed Internet access and data
communications services. SFAS No. 131 also requires disclosures about products
and services, geographic areas, and major customers. The adoption of SFAS No.
131 had no impact on the Company's financial statements for the periods
presented.

                                      -50-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


STOCK COMPENSATION

     The Company applies Accounting Principles Board Opinion No. 25 (APB 25) and
related interpretations in accounting for its stock option plan and stock awards
with the disclosure provisions of Statement of Financial Accounting Standards
No. 123 (SFAS 123). Under APB 25, compensation expense is computed to the extent
that the fair market value of the underlying stock on the date of grant exceeds
the exercise price of the employee stock option or stock award. Compensation so
computed is then recognized over the vesting period. The Company accounts for
equity instruments issued to nonemployees in accordance with SFAS 123 and
Emerging Issues Task Force ("EITF") 96-18.

     Stock compensation expense includes amortization of deferred compensation
and charges related to stock grants which are not subject to vesting
requirements. Stock compensation expense for the period from inception (March 3,
1998) to December 31, 1998 and for the year ended December 31, 1999 totaled
approximately $2,423,000 and $4,123,000, respectively.

EARNINGS (LOSS) PER SHARE

     The Company computes net loss per share pursuant to Statement of Financial
Accounting Standards No. 128, EARNINGS PER SHARE. Basic net loss per share is
computed by dividing income or loss applicable to common stockholders by the
weighted average number of shares of the Company's common stock outstanding
during the period. Diluted net loss per share is determined in the same manner
as basic net loss per share except that the number of shares is increased
assuming exercise of dilutive stock options and warrants using the treasury
stock method and dilutive conversion of the Company's preferred stock.

     As of December 31, 1998 and 1999, options to purchase no shares and
5,874,302 shares of common stock, respectively, and warrants to purchase
preferred stock convertible into 233,277 shares of common stock, and warrants to
purchase 194,556 shares of common stock, respectively, were excluded from the
calculation of earnings per share since their inclusion would be antidilutive
for all periods presented.

COMPREHENSIVE INCOME

     The Company has adopted the accounting treatment prescribed by Statement of
Financial Accounting Standards No. 130, COMPREHENSIVE INCOME. The adoption of
this statement had no material impact on the Company's financial statements for
the periods presented.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ( "SFAS ") No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. DSL.net is required to adopt SFAS No. 133,
as amended by SFAS No. 137, in fiscal 2001. SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. The Company has not
entered into any derivative financial instruments or hedging activities. As a
result, the Company believes adoption of SFAS No. 133 will not have a material
impact on the financial statements.

     In December 1999, the staff of the Securities and Exchange Commission
issued its Staff Accounting Bulletin ( "SAB ") No. 101, REVENUE RECOGNITION. SAB
No. 101 provides guidance on the measurement and timing of revenue recognition
in financial statements of public companies. Changes in accounting policies to
apply the guidance of SAB No. 101, as amended by SAB No. 101A, must be adopted
by recording the cumulative effect of the change in the fiscal quarter ending
June 30, 2000. Management has not yet determined the effect SAB No. 101 will
have, if any, on its accounting policies or the amount of the cumulative effect
to be recorded from adopting SAB No. 101.

                                      -51-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

3.   FIXED ASSETS
                                                          December 31,
                                                      --------------------
                                                        1998       1999
                                                      -------- -----------
Network equipment.................................... $161,814 $19,866,200
Furniture, fixtures, office equipment and software...   61,535   5,827,493
Vehicles.............................................      --       99,189
Collocation costs....................................   66,733   8,659,789
                                                      -------- -----------
                                                       290,082  34,452,671
Less-accumulated depreciation and amortization.......    5,744   1,787,747
                                                      -------- -----------
                                                      $284,338 $32,664,924
                                                      ======== ===========

     As of December 31, 1998 and December 31, 1999, the recorded cost of the
equipment under capital lease was $22,699 and $1,862,466, respectively.
Accumulated amortization for this equipment under capital lease was $1,265 and
$222,495 as of December 31, 1998 and 1999, respectively.

     During 1999, the Company capitalized computer software costs of $5,046,545
and has recorded amortization expenses related to these costs of $217,644.
Approximately $796,000 of total costs capitalized related to software that was
not in service as of December 31, 1999. As such, no amortization expense has
been recorded with regard to these costs.

     Depreciation and amortization expense related to fixed assets was $5,744
and $1,782,003 for the period from inception March 3, 1998 to December 31, 1998
and for the year ended December 31, 1999, respectively.

4.   ACQUISITION

     On December 1, 1999, the Company acquired Tycho Networks, Inc., a Santa
Cruz, California based provider of Internet access, web hosting and related
services throughout central coastal California. The acquisition was accounted
for under the purchase method of accounting and, accordingly, the purchase price
has been allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the date of acquisition. The approximate net purchase
price of $3,267,000, excluding transaction costs, consisted of cash payments at
closing of approximately $1,576,000 (including notes paid at closing of
approximately $793,000); amounts due to selling stockholders and others after
the closing of approximately $802,000; net liabilities assumed of approximately
$530,000 and other costs of approximately $359,000. In addition, the Company
incurred transaction costs associated with the acquisition of approximately
$125,000. Immediately prior to the acquisition, Tycho Networks sold fixed assets
with a net book value of approximately $90,000 to a related party and received
notes that were convertible into the preferred stock of the buyer. These notes
were assigned an estimated fair value of $90,000. The excess of purchase price
over the fair value of net assets received, including transaction costs, of
approximately $3,392,000, has been recorded as goodwill and is being amortized
over its estimated useful life of five years.

     The results of Tycho Networks, Inc.'s operations have been included in the
consolidated results of the Company from the date of acquisition. The following
table sets forth the unaudited pro forma consolidated financial information of
the Company, giving effect to the acquisition of Tycho Networks, Inc. as if it
had occurred at the beginning of the periods presented:

                                      -52-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

                                                           December 31,
                                                  -----------------------------
                                                      1998            1999
                                                  -------------   -------------
Pro forma revenue................................  $    380,060    $  2,906,271
Pro forma operating loss.........................  $ (4,198,261)   $(27,007,828)
Pro forma net loss...............................  $ (4,471,839)   $(25,328,578)
Pro forma net loss per share,
     basic and diluted...........................  $      (0.87)   $      (2.26)
Shares used in computing pro forma
     net loss per share..........................     5,118,342      16,549,535


     The pro forma results are not necessarily indicative of the actual results
of operations that would have been obtained had the acquisition taken place at
the beginning of the respective periods or the results that may occur in the
future.

5.   DEBT

NOTES PAYABLE

     In August 1998, the Company issued a $100,000 demand note payable for
funding capital expenditures and operating expenses. The note was originally
payable October 1, 1998, and bore interest at 5.56% per annum. At December 31,
1998, $66,667 remained unpaid. The amount was paid in January 1999.

     In November 1998, the Company entered into a series of Note and Warrant
Purchase Agreements pursuant to which the Company received $350,000 and issued
$350,000 principal amount of secured convertible promissory notes (the "Bridge
Notes") and warrants (the "Bridge Warrants") to acquire 87,500 shares of Series
A Preferred Stock. The Notes, which originally expired in January 1999 or
September 2000, bore interest at 5.56% or 6.0% per annum, depending upon the
holder, and were convertible into preferred shares at a rate equal to the
Company's next qualified equity financing. A total of $225,000 of the Bridge
Notes converted into 225,000 shares of Series A Preferred Stock in January 1999.
The remaining $125,000 was deducted from proceeds received by the Company in the
January 1999 issuance of Series A Preferred Stock. The Bridge Warrants valued at
approximately $18,000, are exercisable at $0.375 per share of common stock
($1.00 per share on a pre-split basis) for a period of five years or, in the
case of certain of the warrants, until the initial public offering of the
Company's common stock. Such warrants were exercised immediately prior to their
expiration upon the initial public offering of the Company's common stock on
October 6, 1999.

CREDIT FACILITY

     In May 1999, the Company entered into a secured credit facility (the
"Credit Facility") with a bank which will provide up to $5.0 million for the
purchase of telecommunications and office equipment and vehicles. The Credit
Facility expires in May 2000, at which time amounts outstanding will convert to
a term loan payable over 36 months. The Credit Facility bears interest on
outstanding borrowings at 1% over the higher of the bank's prime rate or the
federal funds rate plus 0.5%. As of December 31, 1999, amounts outstanding under
this line of credit bore interest at the annual rate of 9.25%. The Credit
Facility is secured by a lien on certain equipment and vehicles owned by the
Company located at its principal office, and imposes certain financial and other
covenants requiring us to maintain certain financial ratios and limits new
indebtedness, the creation of liens, types of investments, mergers,
consolidations and the transfer of all or

                                      -53-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


substantially all of our assets. As of December 31, 1999, there was $1,446,766
outstanding and $3,553,234 available under this line of credit. Financing costs
associated with the Credit Facility of $83,868 were deferred over the four year
life of the facility and term loan payable. Amortization expense related to the
deferred costs was $13,978 for the year ended December 31, 1999.

6.   COMMITMENT AND CONTINGENCIES

LEASES

     Rent expense under operating leases was approximately $14,275 and $720,691
for the period from inception (March 3, 1998) through December 31, 1998 and for
the year ended December 31, 1999, respectively.

     The Company is obligated under various capital equipment leases expiring at
different times until March, 2003.

     The future minimum annual lease payments under the terms of such
noncancelable leases as of December 31, 1999 are as follows:

                                                   Operating      Capital
                                                     Leases        Leases
                                                   ----------    ----------
2000.............................................. $1,258,878    $  877,490
2001..............................................  1,261,887       680,849
2002..............................................  1,261,887       303,052
2003..............................................  1,039,587        23,568
2004..............................................    882,630          --
Thereafter........................................    279,484          --
                                                   ----------    ----------
Total............................................. $5,984,353     1,884,959
                                                   ==========
Less-Amount representing interest.................                  276,100
                                                                 ----------
Present value of future minimum lease payments....               $1,608,859
                                                                 ==========

     In September 1998, the Company entered into an operating lease agreement
for office space in Norwalk, Connecticut. In February 1999, the Company
cancelled the Norwalk lease and entered into an operating lease for office space
in New Haven, Connecticut. Costs related to exiting the Norwalk lease were
$42,900 and were expensed as incurred. Subsequently, the Company entered into
amendments to the New Haven lease and various leases and subleases for
additional office space. In addition, the Company leases office space in Santa
Cruz, California related to its acquisition of Tycho Networks, Inc. (Note 4).

     In March 1999, the Company entered into a master lease agreement to provide
up to $2,000,000 for capital equipment purchases over an initial twelve month
period, subject to renewal options. Individual capital leases are amortized over
30 or 36 month terms and bear interest at 8% to 9% per annum. The outstanding
balance under this agreement at December 31, 1999 was $921,956.

LITIGATION

     The Company is involved in litigation with a former officer who claims
wrongful termination of employment. The plaintiff is principally seeking
compensatory damages for wages

                                      -54-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


and unvested stock options. The Company believes that the plaintiff's claims are
without merit, and plans to defend the case vigorously.

     From time to time, the Company may be involved in other litigation
concerning claims arising in the ordinary course of its business. The Company
does not believe any of the legal claims or proceedings will result in a
material adverse effect on its business, financial position, results of
operations or cash flows.

OTHER MATTERS

     As part of the master lease agreement, the Company issued 41,726 warrants
(the "Lease Warrants") to the lessor to purchase Series A Preferred Stock at a
formula-based price equal to approximately $2.40 per share. The warrants are
exercisable until October 2002. In conjunction with the Company's initial public
offering on October 6, 1999, and the conversion of all preferred stock into
common stock, these warrants became exercisable for 111,242 shares of common
stock at an exercise price of approximately $0.90 per share. The value of these
warrants is approximately $112,000 and is being amortized to interest expense
over the life of the capital lease obligation. Interest expense related to the
warrants was approximately $28,000 for the year ended December 31, 1999.

     The Company has entered into interconnection agreements. The agreements
generally have terms of one to two years and are subject to certain renewal and
termination provisions by either party generally upon 30 day notification. The
Company anticipates that it will renew such agreements beyond their initial
terms.

7.   RELATED PARTY TRANSACTIONS

     In January 1999, the Company entered into an Asset Transfer Agreement with
FutureComm, Inc., whose sole shareholder is an officer and founder of the
Company. The amount paid by the Company in exchange for certain equipment,
agreements, licenses and intellectual property was approximately $28,000.

     In May 1999, the Company entered into an agreement to license and implement
components of an operations support system from a software vendor. Two
stockholders of the Company, in the aggregate, own 16% of the outstanding
capital stock of the software vendor.

8.   STOCKHOLDERS' EQUITY

COMMON STOCK TRANSACTIONS

     In March 1998, the Company's founding stockholders were issued 5,089,634
shares of common stock and 20,000 shares of a prior series A preferred stock for
$50,500.

     In December 1998, the Company's Board of Directors declared a 50:1 reverse
stock split. The accompanying financial statements have been restated to reflect
this stock split. Concurrently, the preferred shareholder exchanged all the then
outstanding series A Preferred Stock for 7,634,451 shares of common stock,
adjusted for stock splits. The value attributed to this

                                      -55-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


exchange, which provided 3.75 shares of common stock for every split-effected
share of preferred stock, was approximately $1.4 million which has been charged
to compensation expense.

     In December 1998, the Company issued 4,071,715 shares of common stock to
two officers in exchange for promissory notes totaling $7,637. Such notes were
subsequently forgiven by the Company. Compensation expense of $1,023,272, or
$0.25 per share, has been recognized related to this issuance.

     In January 1999, the Company's Board of Directors declared a stock split of
1,909.09 shares for every outstanding common share. The accompanying financial
statements have been restated to reflect this stock split. In conjunction with
this split and the sale of Series A Preferred Stock described below, certain
employment tenure and performance criteria were required of management in order
to fully vest in a portion of their founders' shares. The value attributed to
these 14,857,397 nonvested shares is reflected in deferred compensation of
approximately $3,734,000, or $0.25 per share, and is being amortized over the
related vesting term.

     In March 1999, the Company issued 436,256 shares of common stock to an
executive officer of the Company, adjusted for stock splits. Compensation
expense of $602,587 has been recognized related to this issuance.

     In April 1999, the Company's founding shareholders surrendered 3,102,256
shares of common stock. Such stock was previously made subject to certain
employment tenure and performance vesting criteria. In exchange, the vesting
criteria on other restricted common stock owned by the founders was removed.
This share surrender and acceleration of vesting resulted in a compensation
charge of approximately $1.2 million in the second quarter of 1999 and
eliminated approximately $780,000, or $0.25 per share, from deferred
compensation.

     In May 1999, the Company declared a 2:1 stock split of its common stock.
The accompanying financial statements have been restated to reflect this stock
split.

     In July 1999, the Company declared a 0.333:1 stock dividend on its common
stock. The accompany financial statements have been restated to reflect this
stock dividend.

     During 1999, 116,635 shares of common stock were issued in exchange for
aggregate proceeds of approximately $4,400 pursuant to the exercise of options
granted under the 1999 Stock Plan (Note 10).

     On October 12, 1999, the Company completed its initial public offering of
7,200,000 shares of common stock resulting in net proceeds to the Company of
approximately $48.5 million. In addition, the underwriters exercised their
over-allotment option for 1,026,000 shares, resulting in net proceeds to the
Company of approximately $7.2 million on November 8, 1999.

     In conjunction with the closing of the Company's initial public offering on
October 12, 1999, all outstanding preferred stock was converted into 35,909,761
shares of common stock.

                                      -56-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


COMMON STOCK RESERVED

     The Company has reserved shares of common stock as follows:

                                                    December 31,
                                              -----------------------
                                                 1998         1999
                                              ----------   ----------
1999 Stock Plan.............................        --     12,364,200
1999 Employee Stock Purchase Plan...........        --        300,000
Conversion of promissory notes..............     933,100         --
Stock warrants..............................     233,277      194,556
                                              ----------   ----------
                                               1,166,377   12,858,756
                                              ==========   ==========
STOCK WARRANTS

     At December 31, 1998 the Company had outstanding stock purchase warrants to
purchase shares of preferred stock which were convertible into 233,277 shares of
common stock. At December 31, 1999 the Company had outstanding stock purchase
warrants to purchase 194,556 shares of common stock.

                                                    December 31,
                                              -----------------------
                                                 1998         1999
                                              ----------   ----------
Lease Warrants............................          --        111,242
Bridge Warrants...........................       233,277       83,314
                                              ----------   ----------
                                                 233,277      194,556
                                              ==========   ==========

     On October 6, 1999, warrants for 56,250 shares of Series A preferred stock
were exercised, for aggregate net proceeds of $56,250.

REDEEMABLE CONVERTIBLE PREFERRED STOCK

     In January 1999, the Company issued 3,500,000 shares of convertible voting
preferred stock designated as Series A Preferred Stock, together with warrants
to purchase 3,500,000 shares of a prior Series B Preferred Stock (the
"Warrants"), at an exercise price of $1.00 per share, for an aggregate of
$3,500,000. A total of $1,155,000 of the related proceeds has been allocated to
the Warrants.

     The Warrants, which were exercisable for a period of 5 years, were subject
to a repurchase right by the Company contingent upon a specified rate of return
upon an initial public offering or acquisition of the Company. If the Company
had exercised its repurchase right, it would have been obligated to pay the
holder the original exercise price plus interest from the date of exercise at 8%
per annum.

     In January 1999, the holders of $225,000 of Bridge Notes (Note 5) converted
$225,000 of the Bridge Notes into 225,000 shares of Series A Preferred Stock.
The remaining $125,000 of Bridge Notes reduced the proceeds paid to the Company
for the Series A Preferred Stock.

     In April 1999, certain holders of the Series A Preferred Stock exchanged
3,500,000 shares of Series A Preferred Stock and the Warrants for 6,500,000
shares of Series B

                                      -57-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


Preferred Stock. Cashless warrant exercises accounted for 2,525,070 of these
6,500,000 shares of Series B Preferred Stock. The exchange into the remaining
3,974,930 shares of Series B Preferred Stock, which was not contemplated in the
original Series A Preferred Stock purchase agreement, afforded the holders an
exchange rate of $0.57 per share which was lower than the deemed fair market
value of the preferred stock at the time of exchange of $3.59 per share and
therefore has been treated as a beneficial nonmonetary exchange under APB
Opinion No. 29, "Accounting for Nonmonetary Transactions." The difference
between the carrying value of the Series A Preferred Stock, $2,272,000, and the
deemed fair market value of the Series B Preferred Stock, $14,270,000, has been
included in the calculation of net loss per common share, although no assets of
the Company were expended. The exchange reduces additional paid-in capital and
increases the carrying value of the Series B Preferred Stock by approximately
$11,998,000 for the year ended December 31, 1999. The exchange has been given no
other accounting treatment in the 1999 financial statements of the Company.

     In April 1999, the Company issued 2,785,516 shares of convertible voting
preferred stock designated as Series C Preferred Stock at $3.59 per share for
net proceeds of $9,940,000. These shares were subsequently converted into
7,426,186 shares of common stock, representing a per share price of $1.35.

     In May and June 1999, the Company issued 2,963,672 shares of convertible
voting preferred stock designated as Series D Preferred Stock at $10.46 per
share for net proceeds of $29,961,000. In July 1999, we received approximately
$1,007,000 in connection with repayment of a note, including interest at 6.0%,
from an officer in connection with the purchase of Series D preferred stock in
June 1999. These shares were subsequently converted into 7,901,150 shares of
common stock, representing a per share price of $3.92.

     In July 1999, the Company issued 939,086 shares of convertible voting
preferred stock designated as Series E Preferred Stock at $19.70 per share for
net proceeds of approximately $18,468,000. These shares were subsequently
converted into 2,503,603 shares of common stock, representing a per share price
of $7.39.

     The preferred stock automatically converted into shares of common stock
upon the Company's initial public offering. While such shares of preferred stock
were outstanding, the Series A, Series B, Series C, Series D and Series E
Preferred stockholders were entitled to receive noncumulative cash dividends of
approximately $0.08 per share, $0.04 per share, $0.29 per share, $0.84 per share
and $1.58 per share, respectively, per annum when and as declared by the Board
of Directors. In the event of any voluntary or involuntary liquidation of the
Company, the Preferred stockholders were entitled to the original per share
issuance price, plus any declared but unpaid dividends. Remaining assets would
be distributed to the Preferred and Common stockholders on a pro rata basis
assuming full conversion of all such Preferred Stock. Any acquisition, merger or
consolidation which would result in a majority ownership change would have been
deemed to be a liquidation of the Company, resulting in the redemption of the
remaining preferred shareholder interest.

     The shares were converted into common stock at the rate of 2.666 shares of
common stock for one share of Preferred Stock, which had been adjusted for
certain subsequent dilutive issuances and stock splits. The Preferred Stock
automatically converted into shares of common stock upon the sale of the
Company's Common Stock in an initial public offering on October 12, 1999.

                                      -58-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

     The Series A, Series B, Series C, Series D and Series E Preferred
stockholders had voting rights similar to common stockholders and other rights
(on an as-converted basis), including the power to elect directors to a seven
member board as follows: Series A and B (as a class) elected two directors,
Series C elected one director, and Series A, B, C, D and E together with common
stockholders elected two directors. In addition, the holders of common stock
elected two directors.

9.   INCOME TAXES

     The Company's gross deferred tax assets and liabilities were comprised of
the following:
                                                      December 31,
                                             ------------------------------
                                                 1998               1999
                                             -----------        -----------
Gross deferred tax asset:
Net operating loss carryforwards ..........  $ 1,076,382        $ 7,462,759
Other .....................................       53,599            554,756
                                             -----------        -----------
                                               1,129,981          8,017,515
Gross deferred tax liability:
Depreciation ..............................        8,054            656,033
                                             -----------        -----------
                                               1,121,927          7,361,482
Valuation allowance .......................   (1,121,927         (7,361,482)
                                             -----------        -----------
Net deferred taxes ........................  $      --          $      --
                                             ===========        ===========

     The Company has provided a valuation allowance for the full amount of the
net deferred tax asset, since management has not determined that these future
benefits will more likely than not be realized as of December 31, 1999.

     At December 31, 1999 the Company had approximately $18.5 million of federal
and state net operating loss carryforwards that begin to expire in 2018 and
2003, respectively.

     The amount of the net operating loss carryforwards that may be utilized
annually to offset future taxable income and tax liability will be limited as a
result of certain ownership changes pursuant to Section 382 of the Internal
Revenue Code.

     The provision for (benefit from) income taxes reconciles to the statutory
federal tax rate as follows:
                                                          December 31,
                                                   -------------------------
                                                      1998           1999
                                                   ----------     ----------
Statutory federal tax rate........................   (34.00)%       (34.00)%
State income tax, net of federal benefit..........    (6.27)         (6.27)
Permanent differences.............................     0.05           7.29
Other.............................................      --            4.46
Deferred tax asset valuation allowance............    40.22          28.52
                                                   ----------     ----------
                                                        --  %          --  %
                                                   ==========     ==========
10.  INCENTIVE STOCK AWARD PLANS

EMPLOYEE STOCK OPTION PLAN
                                      -59-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


     In February 1999, the Company's Board of Directors adopted the 1999 Stock
Plan (the "Stock Plan") under which employees, directors, advisors and
consultants can be granted any or all of the following: incentive stock options
and non-qualified stock options, stock appreciation rights, and stock awards. A
total of 12,364,200 shares of common stock have been authorized under the Stock
Plan.

     Options generally vest 25% after one year, then ratably over the next
thirty-six months and are exercisable once vested for ten years from the date of
grant.

     A summary of activity under the Plan as of December 31, 1999 is as follows:

                                                        Weighted
                                                         Average
                                                 -----------------------
                                     Number of      Fair       Exercise
                                      Shares        Value       Price
                                    ----------   ----------   ----------
Outstanding at Inception .......          --     $     --     $     --
Granted ........................     7,692,879         3.59         2.01
Exercised ......................      (116,635)        0.25         0.04
Cancelled ......................    (1,701,942)        2.71         1.09
                                    ----------
Outstanding at December 31, 1999     5,874,302
                                    ==========


     The following summarizes the outstanding and exercisable options under the
Plan as of December 31, 1999:

<TABLE><CAPTION>
                                     Options Outstanding              Options Exercisable
                               -------------------------------   ----------------------------
                                Weighted Avg
                    Number     Remaining Life    Weighted Avg       Number      Weighted Avg
Exercise Price   Outstanding     (in years)     Exercise Price   Exercisable   Exercise Price
--------------   -----------   --------------   --------------   -----------   --------------
<S>              <C>           <C>              <C>              <C>           <C>
$0.04-0.07         2,383,741             9.17            $0.05        96,086            $0.04
$0.39-0.53         2,127,484             9.38            $0.47          --               --
$5.00-9.85         1,166,077             9.69            $7.73          --               --
$16.50-18.75         197,000             9.90           $17.81          --               --
</TABLE>


     If compensation expenses had been recognized based on the fair value of the
options at their grant date, in accordance with Financial Accounting Standard
No. 123 ("FAS 123"), the results of operations for the year ended December 31,
1999 would have been as follows:

Net loss:
As reported...........................................  $(21,988,313)
Pro forma under FAS 123...............................  $(22,426,281)
Basic and diluted net loss per common share:
As reported...........................................       $ (2.05)
Pro forma under FAS 123...............................       $ (2.08)

     The estimated fair value at date of grant for options granted for the year
ended December 31, 1999 ranged from $0.23 to $16.27 per share. The minimum value
of each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions:

Risk free interest rate..................      4.88%-6.09%
Expected dividend yield..................             None
Expected life of option..................         10 years
Expected volatility......................    .0001%-84.52%

     As additional options are expected to be granted in future years and the
options vest over several years, the above pro forma results are not necessarily
indicative of future pro forma results.

                                      -60-
<PAGE>
                                  DSL.NET, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


     Deferred compensation of approximately $13,929,000 has been attributed to
those common stock options granted during the year ended December 31, 1999, with
an exercise price below estimated fair value. Stock compensation expense is
recognized over the four year vesting period and totaled approximately
$4,123,000 for the year ended December 31, 1999.

EMPLOYEE STOCK PURCHASE PLAN

     The Company's 1999 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in September 1999. The Purchase Plan
authorized the issuance of up to a total of 300,000 shares of Common Stock to
participating employees.

     All employees of the Company and all employees of any participating
subsidiaries whose customary employment is more than 20 hours per week and more
than three months in any calendar year are eligible to participate in the
Purchase Plan. Under the terms of the Purchase Plan, the price per share paid by
each participant on the last day of the Offering Period (as defined therein) is
an amount equal to 85% of the fair market value of the Common Stock on either
the first day or the last day of the Offering Period, whichever is lower. The
Purchase Plan terminates on December 31, 2009 or such earlier date as the Board
of Directors determines. The Purchase Plan will terminate in any case when all
or substantially all of the unissued shares of stock reserved for the purposes
of the Purchase Plan have been purchased. Upon termination of the Purchase Plan
all amounts in the accounts of participating employees will be promptly
refunded.

     The first payment period of the Purchase Plan began on October 6, 1999 and
ended on February 29, 2000. An option to purchase up to 500 shares of the
Company's common stock was granted to each participant in the plan at the
beginning of the payment period.

11.  SUBSEQUENT EVENTS (UNAUDITED)

     The Company has adopted the DSL.net 401(k) Profit Sharing Plan which will
become effective on April 1, 2000. Employees meeting certain age and service
requirements are eligible to participate in this plan. The Company may elect to
make matching contributions at its discretion.

     In March, 2000, the Company completed an offering of 5,750,000 shares of
its common stock, including the exercise of the underwriters' overallotment
option. The offering resulted in proceeds to the Company of approximately
$141,625,000, net of underwriting discounts and commissions and estimated
offering expenses.

                                      -61-
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters during DSL.net's two most recent
fiscal years.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information under the Sections "Election of Directors," "Occupations of
Directors and Executive Officers" and "Section 16(a) Beneficial Ownership
Reporting Compliance" from the registrant's definitive proxy statement for the
annual meeting of stockholders to be held on May 25, 2000, which is to be filed
with the Securities and Exchange Commission not later than 120 days after the
close of the registrant's fiscal year ended December 31, 1999, is hereby
incorporated by reference.

ITEM 11.  EXECUTIVE COMPENSATION

     The information under the Sections "Compensation and Other Information
Concerning Directors and Officers" and "Stock Performance Graph" from the
registrant's definitive proxy statement for the annual meeting of stockholders
to be held on May 25, 2000, which is to be filed with the Securities and
Exchange Commission not later than 120 days after the close of the registrant's
fiscal year ended December 31, 1999, is hereby incorporated by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information under the Section "Securities Ownership of Certain
Beneficial Owners and Management" from the registrant's definitive proxy
statement for the annual meeting of stockholders to be held on May 25, 2000,
which is to be filed with the Securities and Exchange Commission not later than
120 days after the close of the registrant's fiscal year ended December 31,
1999, is hereby incorporated by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information under the Sections "Compensation and Other Information
Concerning Directors and Officers" and "Certain Relationships and Related
Transactions" from the registrant's definitive proxy statement for the annual
meeting of stockholders to be held on May 25, 2000, which is to be filed with
the Securities and Exchange Commission not later than 120 days after the close
of the registrant's fiscal year ended December 31, 1999, is hereby incorporated
by reference.

                                      -62-
<PAGE>
                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.

     (a)  The following documents are filed as part of this form 10-K.

          (1)    Financial Statements (see "Financial Statements and
                 Supplementary Data" at Item 8 and incorporated herein by
                 reference).

          (2)    Financial Statement Schedules (Schedules to the Financial
                 Statements have been omitted because the information required
                 to be set forth therein is not applicable or is shown in the
                 accompanying Financial Statements or notes thereto).

          (3)    Exhibits.

     The following exhibits are filed as part of and incorporated by reference
into this Form 10-K:

EXHIBIT
  NO.                                   EXHIBIT
-------                                 -------

2.01             Agreement and Plan of Merger, dated as of November 30, 1999, by
                 and among DSL.net, Inc. Long Wharf Mergeco, Inc. and Tycho
                 Networks, Inc. (incorporated by reference to Exhibit 2 filed
                 with our Form 8-K dated as of December 1, 1999).
3.01             Amended and Restated Certificate of Incorporation of DSL.net,
                 Inc. as amended (incorporated by reference to Exhibit 3.02
                 filed with our registration statement on Form S-1 (File No.
                 333-80141)).
3.02             Amended and Restated By-laws of DSL.net, Inc. (incorporated by
                 reference to Exhibit 3.03 filed with our registration statement
                 on Form S-1 (File No. 333-80141)).
4.01             Specimen Certificate for shares of DSL.net, Inc.'s Common Stock
                 (incorporated by reference to the exhibit of corresponding
                 number filed with our registration statement on Form S-1 (File
                 No. 333-80141)).
4.02             Description of Capital Stock (contained in the Certificate of
                 Incorporation filed as Exhibit 3.02 filed with our registration
                 statement on Form S-1 (File No. 333-80141)).
4.03             Form of Stock Purchase Warrant dated as of October 12, 1999
                 between DSL.net, Inc. and certain investors (incorporated by
                 reference to the exhibit of corresponding number filed with our
                 registration statement on Form S-1 (File No. 333-96349)).
4.04             Form of Stock Subscription Warrant dated as of October 12, 1999
                 by and between DSL.net, Inc. and Comdisco, Inc. (incorporated
                 by reference to the exhibit of corresponding number filed with
                 our registration statement on Form S-1 (File No. 333-96349)).
10.01+           Amended and Restated 1999 Stock Plan (incorporated by reference
                 to the exhibit of corresponding number filed with our
                 registration statement on Form S-1 (File No. 333-80141)).
10.02+           1999 Employee Stock Purchase Plan (incorporated by reference to
                 the exhibit of corresponding number filed with our registration
                 statement on Form S-1 (File No. 333-80141)).
10.03            Amended and Restated Investors' Rights Agreement dated as of
                 July 16, 1999 between DSL.net, Inc. and the purchasers named
                 therein (incorporated by reference to the exhibit of
                 corresponding number filed with our registration statement on
                 Form S-1 (File No.333-80141)).
10.04            Master Lease Agreement dated as of March 4, 1999 between
                 Comdisco, Inc. and DSL.net, Inc., as modified by the Addendum
                 thereto (incorporated by reference to the exhibit of
                 corresponding number filed with our registration statement on
                 Form S-1 (File No.333-80141)).
10.05            Credit Agreement dated as of May 12, 1999 by and between
                 DSL.net, Inc. and Fleet National

                                      -63-
<PAGE>

                 Bank (incorporated by reference to the exhibit of corresponding
                 number filed with our registration statement on Form S-1
                 (File No. 333-80141)).
10.06            Security Agreement dated as of May 12, 1999 by and between
                 DSL.net, Inc. and Fleet National Bank (incorporated by
                 reference to the exhibit of corresponding number filed with our
                 registration statement on Form S-1 (File No. 333-80141)).
10.07            Lease Agreement dated February 5, 1999 by and between DSL.net,
                 Inc. and Long Wharf Drive, LLC, as amended (incorporated by
                 reference to the exhibit of corresponding number filed with our
                 registration statement on Form S-1 (File No. 333-96349)).
10.08            Amendment No. 1 dated June 9, 1999 to Lease Agreement by and
                 between DSL.net, Inc. and Long Wharf Drive, LLC (incorporated
                 by reference to the exhibit of corresponding number filed with
                 our registration statement on Form S-1 (File No. 333-96349)).
10.09            Amendment No. 2 dated November 9, 1999 to Lease Agreement by
                 and between DSL.net, Inc. and Long Wharf Drive, LLC
                 (incorporated by reference to the exhibit of corresponding
                 number filed with our registration statement on Form S-1 (File
                 No. 333-96349)).
10.10            Amendment No. 3 dated January 20, 2000 to Lease Agreement by
                 and between DSL.net, Inc. and Long Wharf Drive, LLC
                 (incorporated by reference to the exhibit of corresponding
                 number filed with our registration statement on Form S-1 (File
                 No. 333-96349)).
10.11            Amended and Restated Shareholders' Agreement, as amended, by
                 and among DSL.net, Inc. and certain investors (incorporated by
                 reference to Exhibit 10.08 filed with our registration
                 statement on Form S-1 (File No. 333-80141)).
10.12+           Additional Compensation Agreement dated as of December 29, 1998
                 between DSL.net, Inc. and David Struwas (incorporated by
                 reference to Exhibit 10.18 filed with our registration
                 statement on Form S-1 (File No. 333-80141)).
10.13            On-Net Service Agreement dated February 2, 1999 by and between
                 DSL.net, Inc. and MCI Worldcom Technologies, Inc., as amended
                 (incorporated by reference to Exhibit 10.22 filed with our
                 registration statement on Form S-1 (File No. 333-96349)).
10.14            Amendment No. 1 to Amended and Restated Investors' Rights
                 Agreement (incorporated by reference to Exhibit 10.21 filed
                 with our registration statement on Form S-1 (File No.
                 333-80141)).
21.01            Subsidiaries of DSL.net, Inc.
23.01            Consent of PricewaterhouseCoopers LLP.
24.01            Power of Attorney (see signature page hereto).
27.01            Financial Data Schedule

-----------

+    Indicates a management contract or any compensatory plan, contract or
     arrangement.

(b)       Reports on Form 8-K

          (1)    Current Report on Form 8-K filed with the Commission on
                 November 2, 1999, which announced third quarter operating
                 results and revised the net loss per common share for the six
                 months ended June 30, 1999.

          (2)    Current Report on Form 8-K filed with the Commission on
                 December 15, 1999, which summarizes the terms of DSL.net's
                 acquisition of the outstanding stock of Tycho Networks, Inc.
                 on December 1, 1999.


                                      -64-
<PAGE>
                                   SIGNATURES

      PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.


                                          DSL.NET, INC.
                                          (Registrant)

Dated: March 30, 2000                     By:  /s/ David F. Struwas
                                             --------------------------------
                                             DAVID F. STRUWAS
                                             PRESIDENT, CHIEF EXECUTIVE OFFICER
                                               AND DIRECTOR


      We, the undersigned officers and directors of DSL.net, Inc., hereby
severally constitute and appoint David F. Struwas, Robert Q. Berlin and Stephen
Zamansky, and each of them singly, our true and lawful attorneys, with full
power to them and each of them singly, to sign for us in our names in the
capacities indicated below, any amendments to this Annual Report on Form 10-K,
and generally to do all things in our names and on our behalf in such capacities
to enable DSL.net, Inc. to comply with the provisions of the Securities Exchange
Act of 1934 and all requirements of the Securities and Exchange Commission.

      Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE><CAPTION>

SIGNATURE                                   TITLE(S)                            DATE
---------                                   --------                            ----
<S>                                         <C>                                 <C>
/s/ David F. Struwas                        President, Chief Executive          March 30, 2000
----------------------------                Officer and Director
DAVID F. STRUWAS                            (Principal Executive Officer)

/s/ Robert Q. Berlin                        Chief Financial Officer and         March 30, 2000
----------------------------                Vice President, Strategic
ROBERT Q. BERLIN                            Planning (Principal Financial
                                            and Accounting Officer)

/s/ Robert Gilbertson                       Director                            March 28, 2000
----------------------------
ROBERT GILBERTSON

/s/ William J. Marshall                     Director                            March 29, 2000
----------------------------
WILLIAM J. MARSHALL

/s/ William Seifert                         Director                            March 30, 2000
----------------------------
WILLIAM SEIFERT

/s/ James D. Marver                         Director                            March 29, 2000
----------------------------
JAMES D. MARVER

/s/ Paul K. Sun                             Director                            March 30, 2000
----------------------------
PAUL K. SUN
</TABLE>
                                      -65-
<PAGE>
                   Exhibit Index to Annual Report on Form 10-K
                     for Fiscal Year Ended December 31, 1999


EXHIBIT
  NO.                                   EXHIBIT
-------                                 -------
2.01             Agreement and Plan of Merger, dated as of November 30, 1999, by
                 and among DSL.net, Inc. Long Wharf Mergeco, Inc. and Tycho
                 Networks, Inc. (incorporated by reference to Exhibit 2 filed
                 with our Form 8-K dated as of December 1, 1999).
3.01             Amended and Restated Certificate of Incorporation of DSL.net,
                 Inc. as amended (incorporated by reference to Exhibit 3.02
                 filed with our registration statement on Form S-1 (File No.
                 333-80141)).
3.02             Amended and Restated By-laws of DSL.net, Inc. (incorporated by
                 reference to Exhibit 3.03 filed with our registration statement
                 on Form S-1 (File No. 333-80141)).
4.01             Specimen Certificate for shares of DSL.net, Inc.'s Common Stock
                 (incorporated by reference to the exhibit of corresponding
                 number filed with our registration statement on Form S-1 (File
                 No. 333-80141)).
4.02             Description of Capital Stock (contained in the Certificate of
                 Incorporation filed as Exhibit 3.02 filed with our registration
                 statement on Form S-1 (File No. 333-80141)).
4.03             Form of Stock Purchase Warrant dated as of October 12, 1999
                 between DSL.net, Inc. and certain investors (incorporated by
                 reference to the exhibit of corresponding number filed with our
                 registration statement on Form S-1 (File No. 333-96349)).
4.04             Form of Stock Subscription Warrant dated as of October 12, 1999
                 by and between DSL.net, Inc. and Comdisco, Inc. (incorporated
                 by reference to the exhibit of corresponding number filed with
                 our registration statement on Form S-1 (File No. 333-96349)).
10.01+           Amended and Restated 1999 Stock Plan (incorporated by reference
                 to the exhibit of corresponding number filed with our
                 registration statement on Form S-1 (File No. 333-80141)).
10.02+           1999 Employee Stock Purchase Plan (incorporated by reference to
                 the exhibit of corresponding number filed with our registration
                 statement on Form S-1 (File No. 333-80141)).
10.03            Amended and Restated Investors' Rights Agreement dated as of
                 July 16, 1999 between DSL.net, Inc. and the purchasers named
                 therein (incorporated by reference to the exhibit of
                 corresponding number filed with our registration statement on
                 Form S-1 (File No.333-80141)).
10.04            Master Lease Agreement dated as of March 4, 1999 between
                 Comdisco, Inc. and DSL.net, Inc., as modified by the Addendum
                 thereto (incorporated by reference to the exhibit of
                 corresponding number filed with our registration statement on
                 Form S-1 (File No.333-80141)).
10.05            Credit Agreement dated as of May 12, 1999 by and between
                 DSL.net, Inc. and Fleet National Bank (incorporated by
                 reference to the exhibit of corresponding number filed with our
                 registration statement on Form S-1 (File No. 333-80141)).
10.06            Security Agreement dated as of May 12, 1999 by and between
                 DSL.net, Inc. and Fleet National Bank (incorporated by
                 reference to the exhibit of corresponding number filed with our
                 registration statement on Form S-1 (File No. 333-80141)).
10.07            Lease Agreement dated February 5, 1999 by and between DSL.net,
                 Inc. and Long Wharf Drive, LLC, as amended (incorporated by
                 reference to the exhibit of corresponding number filed with our
                 registration statement on Form S-1 (File No. 333-96349)).
10.08            Amendment No. 1 dated June 9, 1999 to Lease Agreement by and
                 between DSL.net, Inc. and Long Wharf Drive, LLC (incorporated
                 by reference to the exhibit of corresponding number filed with
                 our registration statement on Form S-1 (File No. 333-96349)).
10.09            Amendment No. 2 dated November 9, 1999 to Lease Agreement by
                 and between DSL.net, Inc. and Long Wharf Drive, LLC
                 (incorporated by reference to the exhibit of corresponding
                 number filed with our registration statement on Form S-1 (File
                 No. 333-96349)).
10.10            Amendment No. 3 dated January 20, 2000 to Lease Agreement by
                 and between DSL.net, Inc. and Long Wharf Drive, LLC
                 (incorporated by reference to the exhibit of corresponding

                                      -66-
<PAGE>
                 number filed with our registration statement on Form S-1 (File
                 No. 333-96349)).
10.11            Amended and Restated Shareholders' Agreement, as amended, by
                 and among DSL.net, Inc. and certain investors (incorporated by
                 reference to Exhibit 10.08 filed with our registration
                 statement on Form S-1 (File No. 333-80141)).
10.12+           Additional Compensation Agreement dated as of December 29, 1998
                 between DSL.net, Inc. and David Struwas (incorporated by
                 reference to Exhibit 10.18 filed with our registration
                 statement on Form S-1 (File No. 333-80141)).
10.13            On-Net Service Agreement dated February 2, 1999 by and between
                 DSL.net, Inc. and MCI Worldcom Technologies, Inc., as amended
                 (incorporated by reference to Exhibit 10.22 filed with our
                 registration statement on Form S-1 (File No. 333-96349)).
10.14            Amendment No. 1 to Amended and Restated Investors' Rights
                 Agreement (incorporated by reference to Exhibit 10.21 filed
                 with our registration statement on Form S-1 (File No.
                 333-80141)).
21.01            Subsidiaries of DSL.net, Inc.
23.01            Consent of PricewaterhouseCoopers LLP.
24.01            Power of Attorney (see signature page hereto).
27.01            Financial Data Schedule

-----------

+    Indicates a management contract or any compensatory plan, contract or
     arrangement.




                                      -67-