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

                                    FORM 10-K

 X  Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
--- 1934

                      For the Year Ended December 31, 2000

    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
--- Act of 1934 for the transition period.

                       Commission File Number: 000-21605

                        ADELPHIA BUSINESS SOLUTIONS, INC.
             (Exact name of registrant as specified in its charter)


                Delaware                                  25-1669404
      (State or other jurisdiction of                 (I.R.S. Employer
       incorporation or organization)                 Identification No.)

          One North Main Street
             Coudersport, PA                              16915-1141
   (Address of principal executive offices)               (Zip code)

                                 814-274-9830
              (Registrant's telephone number including area code)

       Securities registered pursuant to Section 12(b) of the Act: None.
          Securities registered pursuant to Section 12(g) of the Act:
                    Class A Common Stock, $0.01 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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes      X        No
        ---           ---

Aggregate market value of outstanding Class A Common Stock par value $0.01 and
Class B Common Stock, par value $0.01, held by non-affiliates of the registrant
at March 28, 2001 was approximately $125 million based on the closing sale price
of the Class A Common Stock as computed by the NASDAQ National Market system as
of that date. For purposes of this calculation only, affiliates are deemed to be
Adelphia Communications Corporation and the directors and executive officers of
the Registrant.

At March 28, 2001, 47,742,758 shares of Class A Common Stock, par value $0.01,
and 86,603,483 shares of Class B Common Stock, par value $0.01, of the
registrant were outstanding.

Documents Incorporated by Reference: Portions of the Proxy Statement for the
2001 Annual Meeting of Stockholders are or may be incorporated by reference into
Part III hereof.

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 the Form 10-K or any amendment to the
Form 10-K. ___

<PAGE>

                       ADELPHIA BUSINESS SOLUTIONS, INC.

                               TABLE OF CONTENTS

SAFE HARBOR STATEMENT                                                         3


PART I

  ITEM 1.  BUSINESS                                                           3

  ITEM 2.  PROPERTIES                                                        16

  ITEM 3.  LEGAL PROCEEDINGS                                                 16

  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               16


PART II

  ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS                                              18

  ITEM 6.  SELECTED 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         32

  ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                       33

  ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL  DISCLOSURE                                            61


PART III

  ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                61

  ITEM 11. EXECUTIVE COMPENSATION                                            61

  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT    61

  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                    61


PART IV

  ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K   61

<PAGE>




SAFE HARBOR STATEMENT

    The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information, statements or
schedules included in this Form 10-K, including Management's Discussion and
Analysis of Financial Condition and Results of Operations, is forward-looking,
such as information relating to the effects of future regulation, future capital
commitments and the effects of competition. Such forward-looking information
involves important risks and uncertainties that could significantly affect
expected results in the future from those expressed in any forward-looking
statements made by, or on behalf of, the Company. These "forward-looking
statements" can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," "intends" or "anticipates" or
the negative thereof or other variations thereon or comparable terminology, or
by discussions of strategy that involve risks and uncertainties. These risks and
uncertainties include, but are not limited to, uncertainties relating to our
ability to successfully market our services to current and new customers, access
markets on a nondiscriminatory basis, identify, design and construct fiber optic
networks, install cable and facilities (including switching electronics) and
obtain rights of way, access rights to buildings and any required governmental
authorizations, franchises and permits, all in a timely manner, at reasonable
costs and on satisfactory terms and conditions, as well as uncertainties
relating to general business and economic conditions, acquisitions and
divestitures, the cost of availability of capital, government and regulatory
policies, the pricing and availability of equipment, materials, inventories and
programming, product acceptance, risks associated with reliance on the
performance and financial condition of vendors and customers, dependence on the
Company's customers and their spending patterns, the ability of the Company to
execute on its business plan and to design and construct fiber optic networks
and related facilities, technological developments and changes in the
competitive environment in which the Company operates. Persons reading this
Report on Form 10-K are cautioned that forward-looking statements herein are
only predictions, that no assurance can be given that the future results will be
achieved, and that actual events or results may differ materially as a result of
the risks and uncertainties facing the Company. Unless otherwise stated, the
information contained in this Form 10-K is as of and for the twelve months ended
December 31, 2000. Additional information regarding factors that may affect the
business and financial results of Adelphia Business Solutions can be found in
the Company's filings with the Securities and Exchange Commission, including the
prospectus and most recent prospectus supplement under Registration Statement
No. 333-11142 (formerly No. 333-88927), under the caption "Risk Factors."


PART I

ITEM 1. BUSINESS

The Company

    Adelphia Business Solutions, Inc. ("Adelphia Business Solutions" or the
"Company"), founded in 1991, is a majority owned subsidiary of Adelphia
Communications Corporation ("Adelphia") and is a leading provider of
facilities-based integrated communications services to customers that include
businesses, governmental and educational end users and other communications
services providers throughout the United States. As of December 31, 2000, the
Company offered communications services in 75 markets and expects by the end of
the year 2001 to be offering services in approximately 80 markets, including
substantially all of the top 40 metropolitan statistical areas in the United
States. To serve the Company's customers' broad and expanding communications
needs, the Company has assembled a diverse collection of high-bandwidth, local
and long-haul network assets. The Company intends to integrate these assets with
advanced communications technologies and services in order to provide
comprehensive end-to-end communications services over its national network. The
Company provides customers with communications services such as local switch
dial tone (also known as local phone service), long-distance service, high-speed
data transmission, and Internet connectivity. The customers have a choice of
receiving these services separately or as bundled packages, which are typically
priced at a discount when compared to the price of the separate services.


    In order to take advantage of the improved economic returns and better
customer service from providing services "on-net," or over the Company's own
network, the Company is in the process of further expanding the reach of its
network system. The Company's original 22 local markets (referred to as the
"Original Markets") are principally located in the eastern half of the United
States. Due to the Company's success in operating and expanding the original
markets, the Company intends to serve approximately 80 total markets by the end
of the year 2001, leveraging the Company's existing and planned switching
platforms and inter-city fiber networks. The Company believes that the full
buildout of this footprint will position it to address approximately 53% of the
60 million business access lines nationwide, which currently represent
approximately $70 billion in addressable annual revenues. This network system
<PAGE>

expansionincludes the purchase, lease or construction of local fiber optic
networkfacilities and the interconnection of substantially all of the
Company'smarkets with its own fiber optic facilities. The Company will also
implement various technologies including dense wave division multiplexing, or
DWDM, to provide greater bandwidth capacity on its local and long-haul network
system. Once fully installed, the long-haul fiber optic backbone in the eastern
half of the United States, combined with the Company's local fiber, will support
the Company's full line of communication service offerings.


    To further expand our local network system, in March 1998, the Company
purchased from the Federal Communications Commission ("FCC") 195 31-GHz licenses
for a fixed wireless technology known as local multipoint distribution service,
or LMDS. In addition, in April 2000, the Company purchased 177 39-GHz licenses
for fixed wireless technology. These licenses cover approximately 230 million
people throughout the United States, or approximately 90% of the nation's
population. The Company believes the ownership of this spectrum may permit the
Company to employ a wireless connection strategy to complement the Company's
fiber network when fiber may not be available or economically justified.


    In May 1999, the Company announced its intention to further complement its
high-bandwidth network assets through the deployment of Digital Subscriber Line,
or DSL, technology. As of December 31, 2000, the Company had arrangements with
incumbent local exchange carriers ("ILEC") with respect to co-locating its
network connection equipment in 299 of their local service offices. By the end
of 2001, the Company plans to be collocated in approximately 400 local service
offices, which will all be equipped with DSL equipment. The Company intends to
use DSL to deliver bundled voice and data product offerings where the Company
has not yet installed its own fiber, or where fiber network deployment is not
economically justified. This technology, when deployed, will represent another
cost-effective, high bandwidth option to deliver communications services over
the Company's own network.


   Company Name Change.


    On October 25, 1999, stockholders of the Company elected to change the legal
name of the Company from Hyperion Telecommunications, Inc. to Adelphia Business
Solutions, Inc., which management believes will further align the strengths of
Adelphia and the Company to develop a single brand in the communications
marketplace.


Recent Developments

    On January 7, 2000, the Company entered into an agreement with Allegheny
Communications Connect, Inc. ("Allegheny") to purchase an indefeasible right of
use ("IRU") for a total of approximately 600 long-haul and metro route miles
from western Pennsylvania through West Virginia, and in Maryland and Virginia.


    On January 10, 2000, the Company entered into an agreement with Williams
Communications, Inc. ("Williams") to purchase an IRU for a total of 4,543 route
miles of fiber in the western United States at a cost of approximately $23
million.


    During January 2000, the Company entered into an IRU agreement with Level 3
Communications ("Level 3") for approximately 3,100 long-haul route miles
throughout much of the western United States. In addition, the Company entered
into an agreement with Level 3 to acquire access to approximately 750 miles of
metro duct in the following central business districts: Chicago, Cincinnati,
Dallas, Denver, Detroit, Los Angeles, Orlando, Phoenix, San Diego, San
Francisco, San Jose and Seattle. The total cost of the agreement is
approximately $54.6 million.


    During January 2000, the Company entered into an agreement with Metromedia
Fiber Network ("Metromedia") which allows the Company to acquire access to fiber
strand miles across any of Metromedia's North American markets.


    During April 2000, the Company was the successful bidder, in the FCC
auction, for 177 licenses covering 39-GHz spectrum in an area with a population
of approximately 164 million. The Company was granted the licenses in October
2000. The total purchase price was approximately $77.6 million.


    During April 2000, the Company and Bell Atlantic (now known as Verizon
Communications) reached a settlement for the outstanding amounts due the Company
from Bell Atlantic. As a result of the settlement, the Company wrote off $7.0
million of accounts receivable during the quarter ended March 31, 2000.


    On May 3, 2000, the Company entered into a contract to build an advanced
information technology infrastructure and to provide communications services to
the Commonwealth of Pennsylvania state government. As part of the contract, the
<PAGE>

Company was required to place $75.8 million into a restricted account to be used
for the completion on the technology infrastructure. As of December 31, 2000,
the Company had used $21.6 million towards the completion of the infrastructure.


    During June 2000, Adelphia exercised a warrant to purchase 913,380 shares of
Class A common stock of the Company at a price of $6.15 per share. Adelphia
purchased the warrant in May 1998 from WorldCom in connection with the Company's
IPO. Total proceeds to the Company were $5.6 million.


    During July 2000, the Company consummated a purchase agreement with
Allegheny Communications Connect, Inc. ("Allegheny") to acquire its interest in
a jointly owned network located in State College, PA. Consideration paid to
Allegheny was 330,000 shares of the Company's Class A common stock. This
purchase increased the Company's ownership in this network to 100%. The
acquisition was accounted for under the purchase method of accounting.
Accordingly, the financial results of the acquired network have been included in
the consolidated results of the Company effective from the date acquired.


    During August 2000, the Company entered into an agreement with Dominion
Telecom, Inc. ("Dominion") in which the Company agreed to provide Dominion with
an IRU of approximately 865 miles of long-haul fiber on the Company's Virginia
fiber ring. The total proceeds to be received from this agreement will be
approximately $16.0 million of which the Company has received approximately
$11.8 million. During January 2001, the Company entered into an amendment with
Dominion to provide Dominion with an IRU for additional strands of fiber in the
Company's Virginia ring as well as an IRU for approximately 213 miles of
long-haul fiber on the Company's Tennessee ring. Total proceeds to be received
from this amendment will be approximately $7.9 million.


    During December 2000, the Company revised its network expansion plan. The
Company reduced the number of markets it intends to be operating in by the end
of 2001 from a range of 175 to 200 to approximately 80. During January 2001, the
Company reduced its national staff by approximately 8% as a result of the
Company's revised network expansion plan. Most affected employees were located
in markets in which the Company has stopped expansion. For the year ended
December 31, 2000, the Company recorded a restructuring charge of $5.4 million
related to the revised network expansion plan. The reserve was comprised
primarily of direct costs associated with the reduction of the Company's
business plan. In addition, the Company will record a $3.6 million charge to
earnings in the first quarter of calendar 2001 for severance costs associated
with the related layoff of employees mentioned previously. See Note 11
"Restructuring Charges" to the Company's Consolidated Financial Statements for
further information.


    During December 2000, the Company sold to a subsidiary of Adelphia certain
network and telecommunications assets. The assets sold related to six markets in
Virginia, Colorado, California and Ohio which the Company has decided not to
pursue as part of the revised business plan. Network or market information
presented in this Form 10-K includes these six markets. The aggregate purchase
price for these transactions was approximately $87.5 million plus the assumption
of certain liabilities. The Company will manage these networks for Adelphia on a
going forward basis.


    The Company and certain of Adelphia's other subsidiaries and affiliates are
parties to a joint bank credit facility. As part of this facility, the Company
and its subsidiaries have the ability to borrow up to an aggregate of $500.0
million, which would be guaranteed by other members of the borrowing group,
subject to compliance by the entire borrowing group with certain covenants and
financial tests. As of December 31, 2000, a subsidiary of the Company had
borrowed $500.0 million under this new credit facility. In addition, the Company
has agreed to pay a subsidiary of Adelphia approximately $15.0 million as a fee
for placing the credit facility. The interest rate at which the Company has
borrowed these funds is 12 1/2%, a portion of which is payable to a subsidiary
of Adelphia. For the year ended December 31, 2000, the Company recorded $7.0
million in interest expense relating to the portion of interest due to the
subsidiary of Adelphia.


    During March 2001, the Company issued and sold 25,322 shares of Class A
common stock, to the public in a rights offering at a price of $7.28 per share.
Simultaneously, the Company issued and sold 11,820,070 and 51,459,624 shares of
Class A and Class B common stock, respectively in the rights offering to
Adelphia at a price of $7.28 per share. Total proceeds to the Company were
$460.9 million.


Growth Strategy

    The key components of the Company's strategy as a leading provider of
facilities-based integrated communications services are:
<PAGE>


   Focus on Communications-Intensive Customers.


    Adelphia Business Solutions provides its services to
communications-intensive customers. This includes business, government and
educational end users, as well as other communications service providers.
Adelphia Business Solutions believes that its target customers represent a large
and under-served customer pool that generally have limited choices in their
communications services purchasing decisions. These customers generally seek
reliability, high quality, broad geographic coverage, end-to-end service,
solutions-oriented customer service and timely introduction of new and
innovative services. The Company offers dedicated access services on a wholesale
basis to interexchange or long distance carriers ("IXCs") and has a national
service agreement with AT&T and WorldCom to be their preferred supplier.


   Expansion of Sales and Sales Support Efforts.


    Adelphia Business Solutions' goal is to create better customer retention and
become the principal and preferred cost-effective alternative to the incumbent
communications services provider. To achieve this and to capitalize on the
Company's expanding addressable market, Adelphia Business Solutions has
increased and intends to continue to increase its direct sales and support team
consisting of sales professionals and engineers. The Company has expanded its
sales and sales support staff from 616 salespeople at December 31, 1999 to 763
salespeople at December 31, 2000, and expects to increase its sales force to
approximately 1,000 salespeople by December 31, 2001.


   Focus on Providing Bundled Packages of Communications Services.


    In response to market demands and to maximize our selling efforts, the
Company offers a full suite of communications services to our customers.
Adelphia Business Solutions offers its services separately to suit specific
customer needs or bundled together to provide customers with a cost-effective
and comprehensive communications solution. In addition to the pricing benefits
Adelphia Business Solutions' customers receive from purchasing bundled
communications services, the Company believes that bundled services provide it
with increased customer retention, higher operating margins and a reduced cost
of acquiring new customers.


    The Company's service offerings currently include a wide range of local dial
tone and long distance services in all of the Company's operating markets. In
addition, the Company has recognized the expanding demand for high-bandwidth by
its customers in order to support the growing number of data applications. The
Company's first series of data products to take advantage of these additional
revenue opportunities is high-speed Internet access, frame relay and ATM.
Additionally, the Company plans to add to its product capabilities by activating
data centers and providing such products as e-mail, directory services and web
hosting. To accelerate the Company's frame relay and ATM service offerings, the
Company entered into a wholesale provider agreement with Intermedia
Communications ("Intermedia"), whereby the Company uses Intermedia's frame relay
network and data switches to offer data services to the Company's customers and
then move the Company's customers' traffic onto the Company's own network system
as it becomes operational. The Company believes this approach provides an
efficient market-entry strategy under the Adelphia Business Solutions trade
name, while providing better long-term operating margins through the use of the
Company's own network system. The Company believes that the introduction of high
margin data products should drive revenue growth and better leverage the
Company's significant fiber assets.


   Drive On-Net Traffic Over High Capacity Fiber Optic Network System.


    The broad deployment of fiber optic cable in Adelphia Business Solutions'
markets typically enables connectivity among the Company, the ILEC central
offices and the Company's customers. Adelphia Business Solutions expects this
strategy to result in a high proportion of traffic that is both originated and
terminated on its network system, which would provide the Company with higher
long-term operating margins. As of December 31, 2000, the Company has collocated
in 299 ILEC central offices, a figure which is expected to increase to
approximately 400 during 2001.


    In addition to the broad deployment of fiber optic cable in its markets,
Adelphia Business Solutions has been adding an inter-city fiber network system
that connects its various markets. Once fully deployed, this long-haul fiber
optic backbone in the eastern half of the United States, combined with the
Company's local fiber, will support the Company's full line of communications
offerings. The Company believes long-term operating margins on Adelphia Business
Solutions' long distance, Internet and data transfer businesses will increase
significantly as a result of connecting these markets. The Company also believes
that its planned deployment of LMDS and DSL technologies will provide
additional, alternative means to connect customers to its networks.

<PAGE>

   Reduced Expansion Plan.


    Adelphia Business Solutions has announced that it is limiting its fiber
optic network expansion in the western half of the United States. This reduced
expansion will decrease the Company's addressable market from 65% to 53% of the
business access lines in the United States and will allow the Company to offer
services in approximately 80 markets by December 31, 2001. These markets will
provide Adelphia Business Solutions with a market opportunity of approximately
32 million addressable business access lines, which currently generate over $70
billion of annual communications services revenues.


    Adelphia Business Solutions plans to roll out service in these markets
through the use of large regionally based Lucent 5ESS switches that will serve
several markets in geographic proximity to each switch. Each of these markets
will be connected to the system network by inter-city fiber that has been or
will be purchased or leased from a number of fiber optic transmission providers.


Products and Services

    Adelphia Business Solutions' products and services are designed to appeal to
the sophisticated communications needs of its business, governmental and
educational customers.


   Local Services.


    Adelphia Business Solutions provides local dial-tone services to customers,
which allows them to complete calls in its calling area and to access a long
distance calling area. Local services and long distance services can be bundled
together using the same transport facility. Adelphia Business Solutions'
networks are designed to allow a customer to easily increase or decrease
capacity and alter enhanced services as the communications requirements of the
business change. In addition to its core local services, Adelphia Business
Solutions also provides public payphone services and access to third party
directory assistance and operator services.


   Long Distance Services.


    Adelphia Business Solutions provides domestic and international long
distance services for completing intrastate, interstate and international calls.
Long distance service is offered as an additional service to Adelphia Business
Solutions' local exchange customers. Long distance calls that do not terminate
on Adelphia Business Solutions' networks (which are currently the bulk of such
calls) are passed to long distance carriers which route the remaining portion of
the call.


   Enhanced Services.


    In addition to providing typical enhanced services such as voicemail, call
transfer and conference calling, Adelphia Business Solutions offers additional
value-added enhanced services to complement its core local and long distance
services. These enhanced service offerings include:

<PAGE>

         Access to Internet Services-Enables customers to use its available
         capacity for access to Internet Service Providers ("ISP"s).


         Data Networking Services-The Company can provide high-speed, broadband
         services to use for data and Internet access such as Integrated
         Services Digital Network (ISDN) and Primary Rate Interface (PRI).


         Specialized Application Services-The Company can create products and
         services that are tailored for target industries with special
         communications needs such as the hospitality industry. These services
         typically include non-measured rate local calling, expanded local
         calling area, discounted long distance rates and tailored trunking
         configurations.


         Internet Support Services-The Company can provide web hosting solutions
         for commercial and non-profit organizations. These services may include
         co-location services, storage services, domain name registration,
         virtual hosting services, traffic statistics, and 24-hour access for
         web site changes.


Sales and Marketing

    The Company targets its network sales and marketing activities to medium and
large businesses, government and educational end users and resellers, including
IXCs. The Company services its customers through a dedicated sales and sales
support staff of 763 professionals at December 31, 2000 focused on selling the
Company's portfolio of service offerings, and currently has over 1,050
technicians, customer service representatives and administrative support staff
at December 31, 2000, enabling the Company to provide its customers with
continuous support and superior service. The Company expects to increase its
marketing efforts by increasing the size of its current sales and sales support
staff during 2001 to approximately 1,000 professionals as it increases the
breadth of its product offerings to satisfy the growing communications needs of
its customers. In addition, the Company has initiated direct marketing and sales
of local telecommunications services on an unbundled loop basis to or through
total service resale to small business customers in certain markets, generally
offering such services under either the Adelphia Business Solutions name or a
co-branded name that includes the name of the particular local partner. The
Company offers many of its services in accordance with tariffs filed with the
FCC for interstate services and State public utility commissions ("PUCs") for
intrastate services. Most enhanced services are not subject to tariffing at
either the federal or state level. Where tariffs are permitted or mandatory the
company's networks are classified as non-dominant carriers by the FCC and
therefore have substantial pricing flexibility and in many cases may enter into
customer and product specific agreements.


   End Users


    The Company targets end users which include medium and large businesses,
governmental and educational institutions and other communications service
providers. End users are currently marketed through Company direct sales
representatives in each market. The national sales organization also provides
support for the local sales groups and develops new product offerings and
customized communications applications and solutions which address the specific
requirements of particular customers. In addition, the Company markets the
Company's networks products through advertisements, media relations, direct mail
and participation in trade conferences. End users typically commit to a service
agreement for a term of two to five years which is either renegotiated or
automatically converted to a month-to-month arrangement at the end of the
contract term. The Company believes it will be able to continue to compete
effectively for end users by offering superior reliability, product diversity,
service and custom solutions to end user needs at competitive prices. A
significant component of the Company's reliability will be its ability to offer
customers end-to-end SONET ring construction for many localized applications.
The Company's construction of SONET rings combined with the Company's large
network size will enable the Company to offer fiber optic coverage superior to
the ILEC in its markets


   Resellers


    Resellers utilize the Company's services primarily as a local component of
their own service offerings to end-users. The Company has national supplier
agreements with all of the major IXCs. The Company believes it can effectively
provide IXCs with a full complement of traditional access services as well as
switched services. Factors that increase the value of the Company's networks to
IXCs include reliability, state-of-the-art technology, route diversity, and ease
of ordering and customer service. The Company also generally prices the services
of a network at a discount relative to the ILEC. In order to further complement
the services provided to the IXCs, the Company integrates its networks with IXC
networks to enable the IXC to (i) access service, billing and other data
<PAGE>

directly from the Company and (ii) electronically send automated service
requests to the Company. In pursuing this strategy, the Company has entered into
a National Service Agreement with AT&T pursuant to which the Company, through
its networks, is an AT&T preferred supplier of dedicated special access and
switched access transport services. The National Service Agreement requires the
Company to provide such services to AT&T at a discount from the tariffed or
published LEC rates. In addition, the Company has entered into a Preferred
Provider Agreement with WorldCom pursuant to which the Company is designated
WorldCom's preferred provider of new end user dedicated access circuits and of
end user dedicated access circuits resulting from conversions from the ILEC in
the Company's markets.


   Special Purpose Networks

    The Company develops special purpose networks in order to meet specific
customer network requirements. To date, these special purpose networks have
included construction of IXC backbone networks, campus networks, private
carriage networks and other similar network applications. The terms and
conditions for these special purpose networks are generally specified in
agreements with three to five year terms which automatically renew on a
month-to-month basis. In addition, special customer networks are normally
constructed with excess fiber band width capacity, which allows the Company to
make additional capacity available to other end users.


Ownership of the Company and the Company's Networks

    As of December 31, 2000, Adelphia Business Solutions was an approximately
60% owned subsidiary, on a fully diluted basis, of Adelphia. As of the
completion of the Rights Offering on March 19, 2001, Adelphia's ownership
increased to approximately 79% on a fully diluted basis. Unless the context
otherwise requires, references to the "networks" or the "Company's networks"
mean the (i) telecommunications networks (the "Original Markets") in operation
or under construction as of May 8, 1998, the date of the Company's initial
public offering, which include three joint ventures managed by the Company and
in which the Company holds a 50% interest and are broken into two subcategories,
those 14 markets which began operations in 1996 or previously (the "Class of
1996") and the eight markets which began operations in 1997 or 1998 (the "Class
of 1997/98") and (ii) additional networks operational or under development
subsequent to May 8, 1998 (the "Expansion Markets") which are broken into two
subcategories, those which began operations in 1999 (the "Class of 1999"), and
those which began operations in 2000 (the "Class of 2000"). Of these markets, in
December 2000, the Company sold one Class of 1996 market, two Class of 1999
markets and three Class of 2000 markets to Adelphia.


Operating Agreements

    Generally, subsidiaries of the Company historically had entered into
partnership agreements (or limited liability agreements) with local partners to
take advantage of the benefits of building networks in conjunction with local
cable television or utility operators. Typically operating partnerships were
formed and operated pursuant to three key agreements: (i) a partnership or
limited liability company agreement between the Company or one of its wholly
owned subsidiaries and a cable operator or utility company (the "Local Partner
Agreement"); (ii) a fiber capacity lease agreement between the local partner and
the operating partnership (the "Fiber Lease Agreement"); and (iii) a management
agreement between the operating partnership and the Company or one of its
subsidiaries (the "Management Agreement"). In recent years the Company has
purchased the interests held by most of its local partners, and as of December
31, 2000, only three of the Company's 22 Original Markets were not wholly-owned
by the Company.


     The Local Partner Agreements generally prohibit the transfer of partnership
interests, including most changes in control, or impose restrictions that
significantly limit a partner's ability to transfer its partnership interest.
The partners typically retain certain rights of first refusal and buy/sell
rights. Generally, after a specified period of time, either partner may transfer
its interest to an unrelated third party if such partner first offers its
interest to the other partner at the same terms and the other partner elects not
to purchase the interest. In addition, either partner typically can, after a
specified period of time, make an offer to the other partner to sell its own
interest. The other partner must respond to the offer indicating its election to
either accept the offer to buy or sell at the offered price. The two remaining
operating partnerships were created in the last seven years and have a duration
of 10 to 25 years unless earlier dissolved. Generally, each partner and certain
of its affiliates are restricted from competing with the operating partnership
in the defined business area so long as the partner is a partner plus two or
three years thereafter.


    Generally, the Original Markets lease fiber optic capacity from their local
partners or former local partners. In some instances, the operating partnerships
lease existing fiber optic capacity and in other instances, the operating
partnerships have requested the local partners or former local partners to
construct new fiber optic capacity. In many cases, local partners or former
local partners have upgraded the capacity of their cable or utility
infrastructure, and as a result, have shared construction costs with the
<PAGE>

operating partnership. Monthly lease payments in both instances are based on the
amortization of the operating partnership's share of the local partner's cost of
construction and material costs over the term of the Fiber Lease Agreement.
Because construction and material costs are amortized over the then current term
of the Fiber Lease Agreement, it is possible for the amount of a monthly lease
payment to be significantly lower during a renewal term unless the construction
of additional fiber optic cable is scheduled for such renewal term. Typically,
the amount of the lease payments in a renewal period equals the amount of
monthly maintenance costs for the leased fiber optic cable.


    Substantially all of the Fiber Lease Agreements are in their initial terms
of 5 to 25 years in length with various renewal options. Generally, either party
can terminate the Fiber Lease Agreement at the end of the then current term upon
prior written notice to the other party. Several of the Fiber Lease Agreements
contain termination rights which provide the lessor with the option to terminate
the lease if the lessor becomes subject to telecommunications regulation, an
action is brought against the lessor challenging or seeking to adversely modify
the lessor's continued validity or authority to operate, legal or regulatory
determination renders it unlawful or impossible for the lessor to satisfy its
obligations under the lease or in case of an imposition of public utility or
common carrier status on the lessor as a result of its performance of the lease.


    Throughout the term of the Fiber Lease Agreements and thereafter, title to
the fiber optic cable remains with the local partner or former local partners.
Similarly, the operating partnerships retain title to all of their own
electronics and switches that become a part of the network. A local partner or
former local partner cannot sell the fiber subject to the Fiber Lease Agreement
to a third party unless its obligations under the Fiber Lease Agreement are
assumed by the third party. When the Company acquires 100% of the ownership
interest of an operating partnership by an acquisition of interests from a local
partner, the Fiber Lease Agreement typically is amended to provide for a 10 to
25 year lease of fiber optic capacity to the Company from the former local
partner.


   IRU Agreements


    The Company has entered into several agreements that entitle the Company to
a long-term lease or an IRU of local and long-haul dark fiber as of December 31,
2000. Generally each agreement requires Adelphia Business Solutions to pay an
aggregate price consisting of an initial payment, followed by installments
during the construction period based upon achieving certain milestones (e.g.,
commencement of construction, conduit installation and fiber installation). The
final payment for each segment will be made at the time of acceptance.


    Each agreement provides for the sharing of certain maintenance and operating
costs. The agreements establish anticipated delivery dates for construction and
delivery of segments along the route of Adelphia Business Solutions' networks.
The agreements provide for penalties in the event of delay of segments and, in
certain circumstances, allow Adelphia Business Solutions to terminate
non-delivered segments of the contracts.


   AT&T Lease Agreement


    On December 31, 1997 the Company consummated an agreement for a $24.5
million long-term lease facility from AT&T Capital Corporation (the "AT&T Lease
Agreement"). The AT&T Lease Agreement provides financing for certain of the
networks' switching equipment. Included in the AT&T Lease Agreement is the sale
and leaseback of certain switching equipment for which the Company received
$14.9 million. The terms of the switching equipment leases under the AT&T Lease
Agreement are seven and one half years, commencing December 31, 1997. The AT&T
Lease Agreement requires the Company to maintain and insure the leased equipment
and prohibits the Company from subleasing the equipment, except to certain
designated Company subsidiaries. Under the AT&T Lease Agreement, the Company is
required to indemnify AT&T Capital Corporation for certain claims with respect
to the leased equipment and for certain tax liabilities


   Management Agreements


    Generally, the Company or a wholly-owned subsidiary of the Company provides
the three operating joint ventures with the following services pursuant to a
management agreement for a fee based on the Company's cost of providing such
services: general management, monitoring, marketing, regulatory processing,
accounting, engineering, designing, planning, construction, maintenance,
operations, service ordering and billing. The term of the typical Management
Agreement is three or five years and automatically renews for continuous
one-year periods unless one party provides the other with written notice that it
intends to terminate the agreement.

<PAGE>

The Company Networks

   Network Development and Design


    Prior to any network construction in a particular market, the Company's
corporate development staff reviews the demographic, economic, competitive and
communications demand characteristics of the market. These characteristics
generally include market location, the size of the communications market, the
number and size of business, educational and government end users and the
economic prospects for the area. In addition, the Company also carefully
analyzes Local Exchange Carriers Central Office, or LEC-CO, access line
demographic data. The Company also analyzes market size utilizing a variety of
data, including available estimates of the number of interstate access and
intrastate private lines in the region, which is available from the FCC.


    If a particular market targeted for development is deemed to have
sufficiently attractive demographic, economic, competitive and communications
demand characteristics, the Company's network planning and design personnel,
generally working in conjunction with the Company's local partner, Adelphia, or
one of Adelphia's affiliates, design a large regional network targeted to
provide access to the identified business, educational and government end user
revenue base and to the IXC POPs and the LEC-COs in the geographic area covered
by the proposed network. The actual network design is influenced by a number of
market, cost and technical factors including: (i) availability and ease of fiber
deployment; (ii) location of LEC-COs and IXC POPs; (iii) the Company's market
information; and (iv) cost of construction. The Company relies on the
performance and related financial condition of its supplies, parties to its
IRU's, other industry vendors and customers. If the ability of these parties to
perform their agreements with the Company were adversely affected due to
financial or other problems, it could have an adverse effect on the Company.


   Network Construction


    The Company's networks are constructed to cost-effectively access areas of
significant end user communications traffic, as well as the majority of the
LEC-COs, POPs and most of the IXCs. The Company establishes general requirements
for network design including engineering specifications, fiber type and amount,
construction timelines and quality control. The Company's engineering personnel
provide project management, including contract negotiation and overall
supervision of the construction, testing and certification of all facilities.
The construction period for a new network varies depending upon the number of
route miles to be installed, the initial number of buildings targeted for
connection to the network, the general deployment of the network and other
factors.


   Network Operating Control Center


    In Coudersport, Pennsylvania, the Company has built the Network Operating
Control Center, or NOCC, which is equipped with state-of-the-art system
monitoring and control technology. The NOCC is a single point interface for
monitoring all of the Company's networks and provisioning all services and
systems necessary to operate the networks. The NOCC supports all of the
Company's networks including the management of 3,173 building connections, 33
switches or remote switching modules and 8,975 network route miles as of
December 31, 2000. The NOCC is designed to accommodate the Company's anticipated
growth.


    The NOCC is utilized for a variety of network management and control
functions including monitoring, managing and diagnosing the Company's SONET
networks, central office equipment, customer circuits and signals and the
Company's switches and associated equipment. The NOCC is also the location where
the Company provisions, coordinates, tests and accepts all orders for switched
and dedicated circuits. In addition, the NOCC maintains the database for the
Company's circuits and network availability. Network personnel at the NOCC also
develop and distribute a variety of software utilized to manage and maintain the
networks.


   Equipment Supply


    The Company purchases fiber optic transmission and other electronic
equipment from Lucent, Fujitsu, Tellabs and other suppliers at negotiated
prices. The Company expects that fiber optic cable, equipment and supplies for
the construction and development of its networks will continue to be readily
available from Lucent, Fujitsu, Tellabs and other suppliers as required. The
Company has negotiated multi-year contracts for equipment with Lucent, Fujitsu
and Tellabs.

<PAGE>

   Connection to Customer Locations


    Office buildings are connected by network backbone extensions to one of a
number of physical rings of fiber optic cable, which originate and terminate at
the operating company's central office. Signals are sent simultaneously on both
primary and alternate protection paths through a network backbone to the
Company's central office. Within each building, Company-owned internal wiring
connects the Company's fiber optic terminal equipment to the customer premises.
Customer equipment is connected to Company-provided electronic equipment
generally located where customer transmissions are digitized, combined and
converted to an optical signal. The traffic is then transmitted through the
network backbone to the Company's central office where it can be reconfigured
for routing to its ultimate destination on the network.


    The Company locates its fiber optic equipment in space provided by the
building owner or, more typically, on a customer's premises. IXCs often enter
into discussions with building owners to allow the Company to serve the IXCs'
customers. This network configuration enables the Company to share electronic
equipment among multiple customers, causes little interruption for customers
during installation and maintenance and allows the Company to introduce new
services rapidly and at low incremental cost.


Employees

    As of December 31, 2000, the Company employed 2,774 employees. In support of
the Company's operations, the Company also regularly uses the services of its
local partners, employees and contract technicians for the installation and
maintenance of its networks. None of the Company's employees are represented by
a collective bargaining agreement. The Company believes that the Company's
relationships with their respective employees are good. During January 2001, the
Company reduced its national staff by approximately 8% as a result of the
Company's revised network expansion plan. Most of the affected employees were
located in markets in which the Company has stopped expansion.


Competition

    The Company faces competition from many competitors with significantly
greater financial resources, well-established brand names and large, existing
installed customer bases. Moreover, we expect the level of competition to
intensify in the future.


    In each of the markets served by the Company's networks, the services
offered by the Company compete principally with the services offered by the ILEC
serving that area. ILECs have long-standing relationships with their customers,
have the potential to subsidize competitive services from monopoly service
revenues, and benefit from favorable state and federal regulations. The
Telecommunications Act of 1996 (the "Telecommunications Act") and associated
federal and state regulatory initiatives are intended to provide increased
business opportunities to competitive local exchange carriers ("CLECs") such as
the Company. However, regulators may provide ILECs with increased pricing
flexibility for their services, or other significant regulatory relief, as
competition increases or for other reasons. Further, if a Regional Bell
Operating Company ("RBOC") is authorized to provide long distance service
originating in one or more states by fulfilling the market operating provisions
of the Telecommunications Act, the RBOC may be able to offer "one stop shopping"
that would be competitive with the Company's offerings. To date, the FCC has
approved applications for such authority for Verizon (formerly Bell Atlantic) in
New York and for SBC in Texas, Oklahoma and Kansas. These approvals may well
result in decreased market share for the major IXCs, which are among the
operating companies' significant customers. Any of these results could have an
adverse effect on the Company.


    There has been significant merger activity among the RBOCs in anticipation
of entry into the long distance market, including the completed merger of
Ameritech and SBC, whose combined territory covers a substantial portion of the
Company's markets. Other combinations have occurred in the industry, which may
have an effect on the Company, such as the combination of AT&T Corp. with
MediaOne, Bell Atlantic with GTE, which became Verizon Communications, Qwest
with US West, and AOL with Time Warner. The effects of these combinations are
unknown at this time. The Company believes that combinations of RBOCs and others
will pose a greater competitive threat to the Company's strategy of originating
and terminating a significant proportion of its customers' communications
traffic over its own networks, rather than relying on the network of the ILEC.


    The Company also faces, and will continue to face, competition from other
current and potential market entrants, including other CLECs and data-centric
local providers, ILECs which are not subject to RBOC restrictions on long
distance, AT&T, MCIWorldCom, Sprint and other IXCs, cable television companies,
electric utilities, microwave carriers, wireless telecommunications providers
<PAGE>

and private networks built by large end users. In addition, new carriers, such
as Global Crossing, Williams, Qwest and Level 3 are building and managing
nationwide networks which, in some cases, are designed to provide local
services. Further, AT&T's acquisition of various cable companies will exploit
ubiquitous local cable infrastructure for telecommunications and other services
provided by the operating companies. Finally, although the Company has generally
good relationships with existing IXCs, there are no assurances that any of these
IXCs will not build their own facilities, purchase other carriers or their
facilities, or resell the services of other carriers rather than use the
Company's services when entering the market for local exchange services.


Regulation

   Government Overview


    A significant portion of the services provided by the Company and its
networks are subject to regulation by federal, state and local government
agencies. Future federal or state regulations and legislation may be less
favorable to the Company than current regulation and legislation and therefore
may have a material and adverse impact on its business and financial projects.
In addition, the Company 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 Legislation and Regulation


    The Telecommunications Act, enacted in 1996, establishes local exchange
competition as a national policy. This act is intended to remove state
regulatory barriers to competition. To do so, it imposes numerous requirements
to facilitate the provision of local telecommunications services by multiple
providers. For instance, local carriers must interconnect their networks,
transfer their customers' telephone numbers to each other when customers change
carriers, and compensate each other for local traffic they exchange. ILECs have
additional duties, such as providing competitors with network interconnection at
any technically feasible point, with access to unbundled network elements, and
with collocation at ILEC premises, among other things. Finally, the FCC is
responsible for implementing rules relating to these requirements as well as
universal service subsidies, charges for access to long distance carriers,
access to buildings, customer privacy, and services for the disabled.


    The Telecommunications Act prohibits state and local governments from
enforcing any law, rule or legal requirement that prohibits or has the effect of
prohibiting any entity from providing interstate or intrastate
telecommunications services. On the other hand, states may adopt laws necessary
to preserve universal service, protect public safety and welfare, ensure the
continued quality of telecommunications services and safeguard the rights of
consumers, and localities may manage public rights-of-way. There have been
numerous disputes over what conditions a local government may impose on CLECs as
part of a "franchise" to occupy the public right-of-way. The results of these
cases have been mixed, in some cases sustaining, and in others rejecting,
burdensome financial and/or operational requirements. The Company has
successfully challenged states' attempts to limit competition in certain rural
areas. One state has requested a stay of the favorable FCC order. Depending on
the result, the Company's expansion plans may be adversely affected.


    The FCC is charged with the broad responsibility of implementing the local
competition provisions of the Telecommunications Act. It has done so by
promulgating rules which encourage increased local competition. The FCC's rules
have been and likely will continue to be subject to litigation, but in most
significant respects they have ultimately been upheld by the courts. The FCC's
rules for setting the prices that ILECs may charge CLECs for use of their
networks remain in litigation. These rules are generally viewed as favorable to
CLECs. There can be no assurance that these rules will be sustained by the
courts.


    Many CLECs have experienced difficulties with the ILECs' fulfillment of
their duties with respect to provisioning, interconnection, rights-of-way,
collocation and implementing the systems used by CLECs to order and receive
unbundled network elements and wholesale service from the ILECs. Coordination
with ILECs is necessary for new carriers such as the Company to provide local
service to customers on a timely and competitive basis. The Telecommunications
Act created incentives for RBOCs to cooperate with new carriers, allowing the
RBOCs to offer long distance services originating in their region, if the RBOC
satisfies statutory conditions designed to open their local markets to
competition, but ILECs may not view that incentive as sufficient to justify
willing compliance with their obligations under the Telecommunications Act.
Moreover, the Company cannot be assured that RBOCs will be accommodating to the
Company's networks once they are permitted to offer long distance service, as
they have thus far in New York, Texas, Oklahoma and Kansas. If the Company's
<PAGE>

networks cannot obtain the cooperation of an RBOC for any reason, the Company's
networks' ability to offer local services in such region on a timely and cost
effective basis would be adversely affected.


    The FCC has adopted rules designed to make it easier and less expensive for
CLECs to obtain collocation at ILEC central offices by, among other things,
restricting the ILECs' ability to prevent certain types of equipment from being
collocated, requiring ILECs to offer alternative collocation arrangements to
CLECs, and establishing nationwide guidelines for how long it should take to
establish a collocation arrangement. The FCC has also required ILECs to allow
CLECs to use the high-frequency portion of the spectrum on a customer line to
offer data services even if the CLEC does not provide the customer with voice
service. While the intent of these rules is to facilitate competition by CLECs
such as the Company's networks, ILECs continue to resist the rules and it
remains uncertain that they will prove significant in practical terms.


    ILECs generally contest the claim that the obligation to pay reciprocal
compensation to CLECs applies to local telephone calls terminating to ISPs. The
ILECs claim that this traffic is interstate in nature and therefore should be
exempt from compensation arrangements applicable to local, intrastate calls.
Most states have required ILECs to pay ISPs reciprocal compensation. The FCC
accepted this logic, but ruled that this general conclusion did not supercede
any state ruling that compensation is required under a particular contract or
prevent a state from imposing compensation on a prospective basis. On March 24,
2000, a federal court of appeals vacated the FCC's ruling. The matter is now
before the FCC for further consideration. The FCC's order on remand, and/or
subsequent state rulings, could affect the costs incurred by ISPs and CLECs and
the demand for their offerings. An unfavorable outcome could materially affect
the Company's potential future revenues.


    Several ILECs have initiated legislative efforts to remove certain
obligations imposed in the Telecommunications Act with respect to
RBOC-provisioned high-speed data services, including, among other things, the
obligation to unbundle and offer for resale such services. In addition, the
ILECs are seeking to provide high-speed data services on an interLATA basis
without first opening their markets to competition in accordance with the
Telecommunications Act. The FCC reaffirmed in late 1999 that such services are
subject to the resale and unbundling obligations of the Telecommunications Act.
This decision is under review by the courts. In addition, there are numerous
bills being considered by Congress which would deregulate advanced services.
These outcomes could have a material adverse effect on the Company.


    Any of the regulatory changes discussed above could require renegotiation of
relevant portions of existing interconnection agreements, or subject them to
additional court and regulatory proceedings. It remains to be seen whether the
networks can continue to obtain and maintain interconnection agreements on terms
acceptable to them in every state.


    The FCC also manages universal service subsidies for rural, high-cost, and
low-income markets, qualifying schools and libraries and services provided to
rural health care providers. It currently assesses the Company's networks for
such payments and other subsidies on the basis of certain revenue for the
previous year. Various states also implement their own universal service
programs to which the Company is subject.


    When the Company's networks provide interexchange telecommunications service
to customers who receive local service from another carrier, the Company will
generally be required to pay the other carrier access charges. Similarly, when
another carrier provides interexchange service to a customer who receives local
service from the Company, the other carrier owes the Company access charges.
ILEC interstate access charges are subject to extensive regulation by the FCC;
CLEC access charges are subject to less regulation but still must be just,
reasonable, and not unreasonably discriminatory. Some of the interexchange
providers to whom the Company's networks provide access services, including AT&T
and Sprint, have refused to pay access charges that exceed the access charges of
the ILEC in any given geographic area, leading to litigation. While the
Company's networks have not experienced any such challenges to their rights to
collect access charges, they could experience them in the future. The FCC has
initiated a proceeding to investigate whether CLEC access charges should be
subjected to more stringent regulation. The manner in which the FCC regulates or
lowers access charge levels could have a material effect on the ability of the
Company's networks to compete in providing interstate access services and
terminating and originating long distance traffic.


    The FCC has ruled that non-dominant IXCs, such as the Company, will no
longer be able to file tariffs with the FCC concerning their interexchange long
distance services. This ruling deprives the Company of the advantages of being
<PAGE>

able to rely on terms and conditions contained in a filed tariff, requiring
instead reliance on individual contracts.


    The FCC also presides over ongoing proceedings addressing a variety of other
matters, including number portability, Internet-Protocol telephony, slamming,
rights of way, building access, numbering resources, pole attachments, customer
privacy, wire tapping, and services to the disabled. The outcome of any such
proceedings may adversely affect the Company and its ability to offer service in
competition with LECs.


   State Regulation


    Most State Public Utility Commissions ("PUCs") require companies that wish
to provide intrastate common carrier services to be certified to provide such
services. These certifications generally require a showing that the carrier has
adequate financial, managerial and technical resources to offer the proposed
services in a manner consistent with the public interest. The certificates or
other authorizations held by the Company permit it to provide a full range of
local telecommunications services, including basic local exchange service. In
certain states, each of the Company, its subsidiaries and the Company's networks
may be subject to additional state regulatory requirements, including tariff
filing requirements, to begin offering the telecommunications services for which
such entities have been certificated. In some states, the Company network tariff
lists a rate range or sets prices on an individual case basis. Many states also
have additional regulatory requirements such as reporting and customer service
and quality requirements, and universal service contributions, all of which are
subject to change and may adversely affect the Company. In addition, in
virtually every state, the Company is subject to the outcome of proceedings by
the state commission that address regulation of LECs and CLECs, competition,
geographic build-out, mandatory detariffing, service requirements, and universal
service issues.


    In addition to obtaining certification, a Company network must negotiate
terms of interconnection with the ILEC before it can begin providing switched
services. To date, the Company's networks have negotiated interconnection
agreements with one or more of the ILECs, in each state in which they have been
certificated. Agreements are subject to State PUC approval.


    The Company is subject to requirements in some states to obtain prior
approval for, or notify the commission of any transfers of control, sales of
assets, corporate reorganizations, issuance of stock or debt instruments, name
changes and other transactions that may effect a change in the way that the
Company does business. Although the Company believes such authorization can be
obtained, there can be no assurance that the state commissions would grant the
Company authority to complete any transactions


   Local Government Authorizations


    A Company network may be required to obtain from municipal authorities
street opening and construction permits, or operating franchises, to install and
expand its fiber optic networks in certain cities. In some cities, the Local
Partners or subcontractors may already possess the requisite authorizations to
construct or expand the Company's networks. A Company network or its Local
Partners also may be required to obtain a license to attach facilities to
utility poles in order to build and expand facilities. Because utilities that
are owned by a cooperative or municipality are not subject to federal pole
attachment regulation, there are no assurances that a Company network or its
Local Partners will be able to obtain pole attachments from these utilities at
reasonable rates, terms and conditions.


    In some of the areas where the Company's networks provide service, their
Local Partners pay license or franchise fees based on a percent revenues or some
other measure such as quantity of facilities installed. In addition, in areas
where the Company does not use its own facilities or those constructed by a
Local Partner, the Company's networks may be required to pay such fees. There
are no assurances that certain municipalities that do not currently impose fees
will not seek to impose fees in the future, nor is there any assurance that,
following the expiration of existing franchises, fees will remain at their
current levels. In addition, some municipalities may seek to impose requirements
or fees on users of transmission facilities, even though they do not own such
facilities.


    In many markets, other companies providing local telecommunications
services, particularly the ILECs, currently are excused from paying license or
franchise fees or pay fees that are materially lower than those required to be
paid by the Company network or Local Partner. The Telecommunications Act
requires municipalities to charge nondiscriminatory fees to all
telecommunications providers, but it is uncertain how quickly this requirement
will be implemented by particular municipalities in which the Company operates
or plans to operate or whether it will be implemented without a legal challenge
initiated by the Company or another CLEC. Such legal challenges by other CLECs
have produced mixes results, with some municipal requirements that the Company
believes are discriminatory or otherwise illegal being judicially upheld.

<PAGE>

    If any of the existing local partner agreements or fiber lease agreements
held by a Local Partner or a Company network for a particular market were
terminated prior to its expiration date, such termination could have a material
adverse effect on the Company.


ITEM 2.  PROPERTIES

    The Company leases its principal executive offices from Adelphia in
Coudersport, Pennsylvania and leases its offices in Pittsburgh, Pennsylvania and
other cities in which the Company has networks. Additionally, the Company owns
its NOCC facilities which are also located in Coudersport, Pennsylvania.


    All of the fiber optic cable, fiber optic communications equipment and other
properties and equipment used in the networks, are owned or leased by the
Company and its subsidiaries or in certain circumstances, the joint ventures.
Fiber optic cable plant used in providing service is primarily on or under
public roads, highways or streets, with the remainder being on or under private
property. As of December 31, 2000, the Company's total communications equipment
in service consists of fiber optic communications equipment, fiber optic cable,
switches and other electronic equipment, furniture and fixtures, leasehold
improvements and construction in progress. Such properties do not lend
themselves to description by character and location of principal units.


    Substantially all of the fiber optic communications equipment used in the
Company's networks is housed in multiple leased facilities in various locations
throughout the metropolitan areas served by the Company. The Company believes
that its properties and those of its subsidiaries or joint ventures are adequate
and suitable for their intended purpose.


ITEM 3.  LEGAL PROCEEDINGS

    None.


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

    None.






<PAGE>


Executive Officers of the Registrant


    The executive officers of the Company are:


      NAME              AGE                 POSITION

      John J. Rigas...   76   Chairman and Director

      James P. Rigas..   43   Vice Chairman, Chief Executive
                              Officer, President and Director

      Michael J. Rigas   47   Vice Chairman, Secretary and Director

      Timothy J. Rigas   44   Vice Chairman, Chief Financial
                              Officer, Treasurer and Director




John J. Rigas is the Chairman of the Board of Directors of the Company. He
also is the founder, Chairman, Chief Executive Officer and President of
Adelphia. Mr. Rigas has owned and operated cable television systems since
1952. Among his business and community service activities, Mr. Rigas is
Chairman of the Board of Directors of Citizens Bank Corp., Inc., Coudersport,
Pennsylvania and a member of the Board of Directors of the Charles Cole
Memorial Hospital. He is a director of the National Cable Television
Association and a member of its Pioneer Association and a past President of
the Pennsylvania Cable Television Association. He is also a member of the
Board of Directors of C-SPAN and the Cable Advertising Bureau, and is a
Trustee of St. Bonaventure University. He graduated from Rensselaer
Polytechnic Institute with a B.S. in Management Engineering in 1950.


John J. Rigas is the father of Michael J. Rigas, Timothy J. Rigas and
James P. Rigas, each of whom currently serves as a director and executive
officer of the Company.


James P. Rigas is Vice Chairman, Chief Executive Officer, President and a
Director of the Company, Executive Vice President, Strategic Planning and a
Director of Adelphia and a Vice President and Director of Adelphia's other
subsidiaries. Mr. Rigas currently spends substantially all of his time on
concerns of the Company. He has been with Adelphia since 1986. Mr. Rigas
graduated from Harvard University (magna cum laude) in 1980 and received a
Juris Doctor degree and an M.A. degree in Economics from Stanford University
in 1984. From June 1984 to February 1986, he was a consultant with Bain &
Co., a management consulting firm.


    Michael J. Rigas is Vice Chairman, Secretary and a Director of the Company,
Executive Vice President, Operations and a Director of Adelphia and a Vice
President and Director of Adelphia's other subsidiaries. He has been with
Adelphia since 1981. From 1979 to 1981, he worked for Webster, Chamberlain &
Bean, a Washington, D.C. law firm. Mr. Rigas graduated from Harvard University
(magna cum laude) in 1976 and received his Juris Doctor degree from Harvard Law
School in 1979.


    Timothy J. Rigas is Vice Chairman, Chief Financial Officer, Treasurer and a
Director of the Company, Executive Vice President, Chief Accounting Officer,
Treasurer and a Director of Adelphia, and a Vice President and Director of
Adelphia's other subsidiaries. He has been with Adelphia since 1979. Mr. Rigas
graduated from the University of Pennsylvania, Wharton School, with a B.S.
degree in Economics (cum laude) in 1978.

<PAGE>

PART II
(Dollars in thousands, except per share amounts)

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

   Market Performance


    The Company's Class A common stock is quoted on the National Association of
Securities Dealers Automated Quotations System National Market System
(NASDAQ-NMS). Adelphia Business Solutions' NASDAQ-NMS symbol is "ABIZ". Prior to
October 25, 1999, the Company's NASDAQ-NMS symbol was "HYPT".


    The following table sets forth the range of high and low closing bid prices
of the Class A common stock on NASDAQ/NMS. Such bid prices represent
inter-dealer quotations, without retail mark-up, mark-down or commission, and
may not necessarily represent actual transactions.


                             CLASS A COMMON STOCK

         QUARTER ENDED:                    HIGH        LOW

         March 31, 1999                   $  16 3/8   $  8 5/8

         June 30, 1999                    $  18 7/8   $  11

         September 30, 1999               $  25       $  15 1/2

         December 31, 1999                $  51 1/4   $  24 11/16

         March 31, 2000                   $  67 1/2   $  46 1/2

         June 30, 2000                    $  60       $  21 1/4

         September 30, 2000               $  23       $  8

         December 31, 2000                $  10 3/8   $  3 7/16





    As of March 28, 2001 there were 416 holders of record of the Company's Class
A common stock, par value $0.01 per share and 23 holders of record of the
Company's Class B common stock, par value $0.01 per share.


   Dividends


    The Company has never declared any cash dividends on any of its respective
equity securities. Covenants in the indenture pursuant to which the Company's
Senior Discount Notes, Senior Secured Notes and Senior Subordinated Notes were
issued restrict the ability of the Company to pay cash dividends on its capital
stock.


   Sale of Unregistered Securities


    During June 2000, Adelphia exercised a warrant to purchase 913,380 shares of
Class A common stock of the Company at a price of $6.15 per share. Adelphia
purchased the warrant in May 1998 from WorldCom in connection with the Company's
IPO. Total proceeds to the Company were $5.6 million. These shares were sold in
reliance on the exemption under section 4(2) of the Securities Act.


    In July 2000, Adelphia Business Solutions issued 330,000 shares of Class A
common stock to Allegheny in exchange for its interest in a jointly owned
network located in State College, Pennsylvania. These shares were sold in
reliance on the exemption under section 4(2) of the Securities Act.


    On March 19, 2001, Adelphia Business Solutions issued and sold 25,322 shares
of Class A common stock to the public in a rights offering at a price of $7.28
per share. Simultaneously, in a private placement in reliance on the exemption
under section 4(2) of the Securities Act, Adelphia purchased 11,820,070 and
51,459,624 shares of Class A and Class B Common Stock, respectively, in the
rights offering at a price of $7.28 per share. The net proceeds of approximately
$460.9 million will be used to pay down the Company's outstanding borrowings
under its revolving bank credit facility, all of which, subject to the terms and
maturity of that credit facility, may be re-borrowed and used by the Company for
general corporate purposes.


<PAGE>

ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)

    The following selected consolidated financial data as of and for the nine
months ended December 31, 1998 and as of and for the years ended December 31,
1999 and 2000 have been derived from the audited consolidated financial
statements of the Company and the related notes thereto. This data should be
read in conjunction with the consolidated financial statements and related notes
thereto for the nine months ended December 31, 1998, the years ended December
31, 1999 and 2000 and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Form 10-K. The
balance sheet data as of March 31, 1997 and 1998 and December 31, 1998 and the
statement of operations data and the other Company data with respect to the
years ended March 31, 1997 and 1998 have been derived from audited consolidated
financial statements of the Company not included herein.

<TABLE>
<CAPTION>

                                                              Nine
                                                             Months
                                                             Ended
                                       Year Ended           December           Year Ended
Statement of Operations Data (a)        March 31,              31,             December 31,
                                 ----------------------    ---------    ------------------------
                                    1997         1998         1998         1999         2000
                                 ---------    ---------    ---------    ----------   -----------

<S>                              <C>          <C>          <C>          <C>          <C>
Revenues .....................   $   5,088    $  13,510    $  34,776    $  154,575   $   351,974
Operating expense:
  Network operations .........       3,432        7,804       18,709        58,525       183,314
  Selling, general and
   administrative ............       6,780       14,314       35,341       142,615       277,198
  Restructuring charges ......        --           --           --            --           5,420
  Depreciation and
   amortization ..............       3,945       11,477       26,671        65,244       114,614
                                 ---------    ---------    ---------    ----------   -----------
Operating loss ...............      (9,069)     (20,085)     (45,945)     (111,809)     (228,572)
Gain on sale of investment ...       8,405         --           --            --            --
Interest income ..............       5,976       13,304       10,233        19,933         3,900
Interest income - affiliate ..        --           --          8,395         8,483         6,282
Interest expense .............     (28,377)     (49,334)     (38,638)      (74,314)      (88,576)
Other income .................        --           --          1,113          --            --
Equity in net loss of
 joint ventures ..............      (7,223)     (12,967)      (9,580)       (7,758)       (2,858)
Extraordinary gain on
 repurchase of debt ..........        --           --            237          --            --
                                 ---------    ---------    ---------    ----------   -----------
Net loss .....................     (30,547)     (69,082)     (74,185)     (165,466)     (309,824)
Dividend  requirements
 applicable to preferred stock        --        (12,409)     (21,117)      (31,618)      (35,665)
                                 ---------    ---------    ---------    ----------   -----------
Net loss applicable to
 common stockholders .........   $ (30,547)   $ (81,491)   $ (95,302)   $ (197,084)  $  (345,489)
                                 =========    =========    =========    ==========   ===========
Basic and diluted net
 loss per weighted average
 share of common stock .......   $   (0.89)   $   (2.33)   $   (1.80)   $    (3.47)  $     (4.93)
Common stock dividends .......        --           --           --            --            --

Other Company Data (a)
  EBITDA (b) .................   $  (5,124)   $  (8,608)   $ (19,274)   $  (46,565)  $  (108,538)
  Capital expenditures and
   company investments (c) ...      79,396      132,889      215,770       477,702       723,185
  Cash (used in) provided
   by operating activities ...      (4,823)      (6,333)      35,795        17,485      (144,330)
  Cash used in investing
   activities ................     (72,818)    (266,604)    (245,063)     (556,194)     (736,917)
  Cash provided by
   financing activities ......     137,455      443,873      221,088       298,272       882,657
<CAPTION>

                                     As of March 31,                   As of December 31,
                                 ----------------------    -------------------------------------
                                    1997         1998         1998          1999         2000
                                 ---------    ---------    ---------    ----------   -----------
Balance Sheet Data (a):

<S>                              <C>          <C>          <C>          <C>           <C>
Cash and cash equivalents ....   $  59,814    $ 230,750    $ 242,570    $    2,133    $    3,543
Total assets .................     174,601      639,992      836,342     1,563,703     1,889,466
Long term debt and
 exchangeable redeemable
 preferred stock .............     215,675      735,980      722,783     1,106,026     1,687,523
Common stock and other
 stockholders' equity
 (deficiency) ................     (50,254)    (118,991)      74,031       279,931       (17,270)
<FN>

(a)  The data presented represents financial information for the Company and its
     consolidated subsidiaries. As of December 31, 2000, three of the Company's
     networks were owned by joint ventures in which it owned an interest of 50%,
     and for which the Company reports its interest pursuant to the equity
     method of accounting consistent with generally accepted accounting
     principles. During December 2000, the Company sold six markets to Adelphia.
     As a result, Statement of Operations and Other Company Data includes such
     networks while Balance Sheet Data excludes such networks as of December 31,
     2000.
(b)  Earnings before interest expense, income taxes, depreciation and
     amortization, restructuring charges, other non-cash charges, gain on sale
     of investment, interest income and equity in net loss of joint ventures
     ("EBITDA") and similar measurements of cash flow are commonly used in the
     telecommunications industry to analyze and compare telecommunications
     companies on the basis of operating performance, leverage, and liquidity.
     While EBITDA is not an alternative to operating income as an indicator of
     operating performance or an alternative to cash flows from operating
     activities as a measure of liquidity, all as defined by generally accepted
     accounting principles, and while EBITDA may not be comparable to other
     similarly titled measures of other companies, the Company's management
     believes EBITDA is a meaningful measure of performance.
(c)  For the fiscal years ended March 31, 1997 and 1998, the nine months ended
     December 31, 1998, and the years ended December 31, 1999 and 2000, the
     Company's capital expenditures (including capital expenditures relating to
     its wholly-owned operating companies) were $24.6, $68.6, $146.8, $453.2,
     and $712.8 million, respectively, and the Company's investments in its less
     than wholly-owned operating companies were $34.8, $64.3, $69.0, $24.5 and
     $10.4 million, respectively, for the same periods. In addition, during the
     fiscal year ended March 31, 1997, the Company invested $20.0 million in
     fiber assets and a senior secured note.
</FN>
</TABLE>
<PAGE>

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

    See Safe Harbor Statement following the table of contents, which section is
incorporated by reference herein.


Overview

    The "Company" or "Adelphia Business Solutions" means Adelphia Business
Solutions, Inc. together with its majority-owned subsidiaries, except where the
context otherwise requires. Unless the context otherwise requires, references
herein to the networks mean (i) the 22 telecommunications networks in operation
or under construction as of May 8, 1998, the date of the Company's initial
public offering (the "Original Markets"), which are owned by wholly-and
majority-owned subsidiaries or by two joint venture partnerships or limited
liability companies managed by the Company and in which the Company holds a 50%
equity interest with one or more other partners, and are broken into two
subcategories, the 14 markets which began operations in 1996 or previously (the
"Class of 1996") and the eight markets which began operations in 1997 or 1998
(the "Class of 1997/98") and (ii) the additional networks operational or under
development subsequent to May 8, 1998 (the "New Markets") which are broken into
two subcategories, those which began operations in 1999 (the "Class of 1999")
and those which began operations in 2000 (the "Class of 2000"). During December
2000, the Company sold to a subsidiary of Adelphia certain network and
telecommunications assets. The assets sold related to six markets in Virginia,
Colorado, California and Ohio which the Company has decided not to pursue as
part of the revised business plan. Network or market information presented in
this Form 10-K includes these six markets.


    Adelphia Business Solutions is a leading provider of facilities-based
integrated communications services to customers that include businesses,
governmental and educational end users and other communications services
providers primarily throughout the eastern United States. As of December 31,
2000, the Company offered a full range of communications services in 75 markets
and expects by the end of the year 2001 to be offering services in approximately
80 markets, including substantially all of the top 40 metropolitan statistical
areas in the United States. To serve the Company's customers' broad and
expanding communications needs, the Company has assembled a diverse collection
of high-bandwidth, local and national network assets. The Company intends to
integrate these assets with advanced communications technologies and services in
order to provide comprehensive end-to-end communications services over its
networks. The Company provides customers with communications services such as
local switch dial tone (also known as local phone service), long distance
service, high-speed data transmission and Internet connectivity. The Company's
customers have a choice of receiving these services separately or as bundled
packages which are typically priced at a discount when compared to the price of
the separate services.


   In order to take advantage of the improved economic returns and better
customer service from providing services "on-net," or over the Company's own
network, the Company is in the process of further expanding the reach of its
network system. The Company's Original Markets are principally located in the
eastern half of the United States. Due to the Company's success in operating and
expanding the Original Markets, the Company intends to serve approximately 80
total markets by the end of the year 2001, leveraging the Company's existing and
planned switching platforms and inter-city fiber networks. The Company believes
that the full buildout of this footprint will position it to address
approximately 53% of the 60 million business access lines nationwide, which
currently represent approximately $70 billion in annual revenues. This network
system expansion includes the purchase, lease or construction of local fiber
optic network facilities and the interconnection of all of the Company's
existing and new markets with its own fiber optic facilities. The Company will
also implement various technologies including dense wave division multiplexing,
or DWDM, to provide greater bandwidth capacity on its local and long-haul
network system. Once fully installed, the long-haul fiber optic backbone in the
eastern half of the United States, combined with the Company's local fiber will
support the Company's full line of communication service offerings.


   Financing Transactions


    During June 2000, Adelphia exercised a warrant to purchase 913,380 shares of
Class A Common Stock of the Company at a price of $6.15 per share. Adelphia
purchased the warrant in May 1998 from WorldCom in connection with the Company's
IPO. The total proceeds to the Company were $5.6 million.


    The Company and certain of Adelphia's other subsidiaries and affiliates are
party to a joint bank credit facility. As part of this facility, the Company and
its subsidiaries have the ability to borrow up to an aggregate of $500.0
<PAGE>

million, which would be guaranteed by other members of the borrowing group,
subject to compliance by the entire borrowing group with certain covenants and
financial tests. As of December 31, 2000, a subsidiary of the Company had
borrowed $500.0 million under this new credit facility. In addition, the Company
has agreed to pay a subsidiary of Adelphia approximately $15.0 million as a fee
for placing the credit facility. The interest rate at which the Company has
borrowed these funds is 12 1/2%, a portion of which is payable to a subsidiary
of Adelphia. For the year ended December 31, 2000, the Company recorded $7.0
million in interest expense relating to the portion of interest due to the
subsidiary of Adelphia.


    During March 2001, the Company issued and sold 25,222 shares of Class A
common stock to the public in a rights offering at a price of $7.28 per share.
Simultaneously, the Company issued and sold 11,820,070 and 51,459,624 shares of
Class A and Class B common stock, respectively in the rights offering to
Adelphia at a price of $7.28 per share. Total proceeds to the Company were
$460.9 million.


   Acquisition of Partner Interests


    During July 2000, the Company consummated a purchase agreement with
Allegheny Communications Connect, Inc. ("Allegheny") to acquire its interest in
a jointly owned network located in State College, PA. Consideration paid to
Allegheny was 330,000 shares of the Company's Class A common stock. This
purchase increased the Company's ownership in this network to 100%. The
acquisition was accounted for under the purchase method of accounting.
Accordingly, the financial results of the acquired network have been included in
the consolidated results of the Company effective from the date acquired.


   Sale of Operating Networks


    During December 2000, the Company sold to a subsidiary of Adelphia certain
network and telecommunications assets. The assets sold related to six markets in
Virginia, Colorado, California and Ohio which the Company has decided not to
pursue as part of the revised business plan. The aggregate purchase price for
these transactions was approximately $87.5 million plus the assumption of
certain liabilities. The results of operations discussed in Management's
Discussion and Analysis of Financial Conditions and Results of Operations
include these six markets.


Results of Operations

Twelve months Ended December 31, 2000 in Comparison with twelve months Ended
December 31, 1999


   Revenues


    The primary sources of revenues, reflected as a percentage of total revenue,
were as follows:

                                                 Twelve Months
                                                     Ended
                                                 December 31,
                                                 1999    2000
                                                ------- --------
        Local Services                           69.2%    69.2%
        Dedicated Access                         21.1%     9.7%
        Management Fees                           3.2%     2.2%
        Enhanced Services                         3.1%     8.9%
        Long Distance                             1.1%     2.4%
        Other                                     2.3%     7.6%


<PAGE>


    Revenues increased 128% to $352.0 million for the twelve months ended
December 31, 2000, from $154.6 million in the prior twelve-month period.


                                                              Amounts
        The increase is attributable to the following:     (in thousands)
                                                           --------------
        Growth in Class of 1996 Markets                     $    105,498
        Growth in Class of 1997/98 Markets                        10,164
        Acquisition of Local Partner Interests                    20,416
        Growth in Class of 1999 Markets                           56,580
        Class of 2000 Markets                                      2,093
        Management fees                                            2,648




   Network Operations


    Network operations expense increased 213% to $183.3 million for the twelve
months ended December 31, 2000, from $58.5 million in the prior twelve-month
period.


                                                              Amounts
        The increase is attributable to the following:     (in thousands)
                                                           --------------
        Growth in Original Markets                          $     40,938
        Acquisition of local partner interests                     8,299
        Expansion Markets                                         72,343
        Network Control Center                                     3,209



    The increased number and size of the operations of the networks resulted in
increased employee related costs, equipment maintenance costs and expansion
costs.


   Selling, general and administrative expense


    Selling, general and administrative expense increased 94% to $277.2 million
for the twelve months ended December 31, 2000, from $142.6 million in the prior
twelve-month period.


                                                              Amounts
        The increase is attributable to the following:     (in thousands)
                                                           --------------
        Growth in Original Markets                          $     35,303
        Acquisition of local partner interests                     9,184
        Expansion Markets                                         49,171
        Sales and marketing activities                             2,616
        Corporate overhead charges                                38,309


   Restructuring Charges


    Restructuring charges and executive severance was $5.4 million for the
twelve months ended December 31, 2000 primarily as a result of the Company's
revised network expansion plan.


   Depreciation


    Depreciation and amortization expense increased 76% to $114.6 million during
the twelve months ended December 31, 2000, from $65.2 million in the prior
twelve-month period primarily as a result of increased depreciation resulting
from the higher depreciable asset base at the NOCC and the networks,
amortization of deferred financing costs and the acquisition of local partner
interests.

<PAGE>

   Interest Income


    Interest income decreased to $3.9 million during the twelve months ended
December 31, 2000 from $19.9 million in the prior twelve-month period as a
result of the payment of interest due to the Company from Telergy received in
1999 as well as decreases in interest income resulting from lower amounts of
cash and cash equivalents and U.S. Government securities.


   Interest Income - Affiliate


    Interest income - affiliate decreased 26% to $6.3 million during the twelve
months ended December 31, 2000 from $8.5 million in the prior twelve-month
period as a result of lower demand advances made to Adelphia.


   Interest Expense


    Interest expense increased 10% to $81.6 million for the twelve months ended
December 31, 2000, from $74.3 million in the prior twelve-month period as a
result of the draws on the credit facility.


   Interest Expense - Affiliate


    Interest expense - affiliate was $7.0 million as a result of draws on the
credit facility discussed previously and incremental payments of interest to
Adelphia in connection with these draws.


   Equity in Net Loss of Joint Ventures


    Equity in net loss of joint ventures decreased by 63% to $2.9 million for
the twelve months ended December 31, 2000, from $7.8 million in the prior
twelve-month period as a result of the consolidation of several joint ventures
resulting from the purchase of the local partners' interests, and the maturing
of the remaining joint venture networks. The decreased net losses of the joint
ventures were primarily the result of increased revenues only partially being
offset by startup and other costs and expenses associated with design,
construction, operation and management of the networks.


    The number of non-consolidated joint venture networks paying management fees
to the Company decreased from four at December 31, 1999 to three at December 31,
2000. These networks paid management and monitoring fees to the Company, which
are included in revenues, aggregating approximately $7.6 million for the twelve
months ended December 31, 2000, an increase of approximately $2.6 million over
the prior twelve-month period. The non-consolidated networks' net losses,
including networks under construction, for the twelve months ended December 31,
1999 and 2000, aggregated approximately $15.2 million and $6.2 million,
respectively.


   Preferred Stock Dividends


    Preferred stock dividends increased 13% to $35.7 million during the twelve
months ended December 31, 2000 from $31.6 million during the prior twelve-month
period. The increase was due to a higher outstanding preferred stock base
resulting from the payment of dividends in additional shares of preferred stock.

<PAGE>


Twelve months Ended December 31, 1999 in Comparison with twelve months Ended
December 31, 1998

   Revenues


    The primary sources of revenues, reflected as a percentage of total revenue,
were as follows.

                                                 Twelve Months
                                                     Ended
                                                 December 31,
                                                 1998     1999
                                                ------- --------
        Local Services                           53.0%    69.2%
        Dedicated Access                         37.5%    21.1%
        Management Fees                           9.3%     3.2%
        Enhanced Services                         ---      3.1%
        Long Distance                             0.1%     1.1%
        Other                                     0.1%     2.3%


    Revenues increased 290% to $154.6 million for the twelve months ended
December 31, 1999, from $39.6 million in the prior twelve-month period.


                                                              Amounts
        The increase is attributable to the following:     (in thousands)
                                                           --------------
        Growth in Original Markets                          $     75,978
        Acquisition of local partner interests                    27,955
        Expansion Markets                                          9,798
        Management fees                                            1,247


   Network Operations Expense


    Network operations expense increased 175% to $58.5 million for the twelve
months ended December 31, 1999 from $21.3 million in the prior twelve-month
period.


                                                              Amounts
        The increase is attributable to the following:     (in thousands)
                                                           --------------
        Growth in Original Markets                          $     17,270
        Acquisition of local partner interests                     8,381
        Expansion Markets                                         10,888
        Network Control Center                                       701


    The increased number and size of the operations of the networks resulted in
increased employee related costs, equipment maintenance costs and expansion
costs.


   Selling, General and Administrative


    Selling, general and administrative expense increased 251% to $142.6 million
for the twelve months ended December 31, 1999 from $40.6 million in the prior
twelve-month period.



                                                              Amounts
        The increase is attributable to the following:     (in thousands)
                                                           --------------
        Growth in Original Markets                          $     28,406
        Acquisition of local partner interests                    12,242
        Expansion Markets                                         42,609
        Sales and marketing activities                             6,865
        Corporate overhead charges                                11,830

<PAGE>

   Depreciation and Amortization


    Depreciation and amortization expense increased 110% to $65.2 million during
the twelve months ended December 31, 1999 from $31.1 million in the prior
twelve-month period primarily as a result of increased depreciation resulting
from the higher depreciable asset base at the NOCC and the networks,
amortization of deferred financing costs and the acquisition of local partner
interest.


   Interest Income


    Interest income for the twelve months ended December 31, 1999 increased 28%
to $19.9 million from $15.6 million in the prior twelve-months period as a
result of the payment of interest due the company from Telergy as discussed
previously, offset by decreases in interest income resulting from lower amounts
of cash and cash equivalents and U.S. government securities.


   Interest Income - Affiliate


    Interest income - affiliate remained relatively unchanged at $8.5 million
for the twelve months ended December 31, 2000 as compared to $8.4 million in the
prior twelve-month period.


   Interest Expense


    Interest expense increased 43% to $74.3 million during the twelve months
ended December 31, 1999 from $52.0 million in the prior twelve-month period as a
result of the issuance of the 12% Senior Subordinated Notes due 2007, partially
offset by an increase in the amount of interest capitalized on projects under
construction in 1998.


   Equity in Net Loss of Joint Venture


    Equity in net loss of joint ventures decreased by 41% to $7.8 million during
the twelve months ended December 31, 1999 from $13.3 million in the prior
twelve-month period as a result of the consolidation of several joint ventures
resulting from the purchase of the local partners' interests, and the maturing
of the remaining joint venture networks. The decreased net losses of the joint
ventures were primarily the result of increased revenues only partially
offsetting startup and other costs and expenses associated with design,
construction, operation and management of the networks.


    The number of non-consolidated networks paying management fees to the
Company decreased from eight at December 31, 1998 to four at December 31, 1999.
These networks paid management and monitoring fees to the Company, which are
included in revenues, aggregating approximately $4.9 million for the twelve
months ended December 31, 1999, an increase of approximately $1.2 million over
the prior twelve-month period. The non-consolidated networks' net losses,
including networks under construction, for the twelve months ended December 31,
1998 and 1999 aggregated approximately $28.4 million and $15.2 million,
respectively.


   Preferred Stock Dividends


    Preferred stock dividends increased by 14% to $31.6 million during the
twelve months ended December 31, 1999 from $27.7 million during the prior
twelve-month period. The increase is due to a higher outstanding preferred stock
base resulting from the payment of dividends in additional shares of preferred
stock.


Supplementary Network Financial Analysis

    At December 31, 2000, 54 of the 75 operational markets had been in operation
for two years or less, while the remaining 21 markets have been in operation for
more than two years. In order to provide an additional measure of the financial
position, growth and performance of the Company and its networks, management
analyzes the aggregates operational markets based on the year or years in which
the markets became operational. The Original Markets, including nonconsolidated
joint ventures, are broken down into two categories, those which began
operations in 1996 or before and those which began operations in 1997 or 1998.
The Expansion Markets are also broken down into two categories, those which
began operations in 1999 and those which began operations in 2000. The following
table provides information relating to the aggregation of those markets. This
financial information, however, is not indicative of the Company's overall
historical financial position or results of operations.

<PAGE>


<TABLE>
<CAPTION>

Adelphia Business Solutions, Inc.
Unaudited Combined Results of Original and Expansion Markets
Before allocation of Corporate Overhead (a)

                                Quarter Ended December 31, 2000                      Quarter Ended September 30, 2000
                   ----------------------------------------------------  ---------------------------------------------------
                         Original          Expansion                           Original           Expansion
                         Markets            Markets                            Markets             Markets
                    ------------------   -----------------               ------------------   -----------------
(dollars in           Class     Class     Class    Class       Total       Class    Class      Class    Class       Total
 thousands)            of         of       of        of      Operating       of       of         of       of      Operating
                      1996     1997/98    1999      2000     Results(a)     1996    1997/98     1999     2000     Results(a)
                    --------  --------  --------  --------   ----------  ---------  --------  --------  --------  ----------

<S>                 <C>       <C>       <C>       <C>        <C>         <C>        <C>       <C>       <C>      <C>
Revenue ........... $ 81,936  $ 14,825  $ 22,275  $  2,005   $  121,041  $  78,168  $ 14,061  $ 18,829  $   105  $  111,163


Direct Operating
 Expenses .........   22,440     6,365    26,060     2,370       57,235     20,933     6,575    23,986      879      52,373
                    --------  --------  --------  --------   ----------  ---------  --------  --------  -------   ---------

Gross Margin ......   59,496     8,460    (3,785)     (365)      63,806     57,235     7,486    (5,157)    (774)     58,790
Gross Margin
 Percentage .......    72.6%     57.1%    (17.0%)   (18.2%)       52.7%      73.2%     53.2%    (27.4%)      NM       52.9%


Sales, General
 and Administrative
 Expenses .........   27,970     5,644    22,781     6,031       62,426     30,171     5,296    21,689    3,519      60,675
                    --------  --------  --------  --------   ----------  ---------  --------  --------  -------  ----------

EBITDA before
 allocation of
 Corporate
 Overhead (b) ..... $ 31,526  $  2,816  $(26,566) $ (6,396)  $    1,380  $  27,064  $  2,190  $(26,846) $(4,293) $   (1,885)
                    --------  --------  --------  --------   ----------  ---------  --------  --------  -------  ----------
EBITDA as a
 Percentage of
 Revenues .........    38.5%     19.0%   (119.3%)      NM          1.1%      34.6%     15.6%   (142.6%)     NM        (1.7%)

<CAPTION>

                     December 2000 Quarter vs. September 2000 Quarter
                               Percentage Change Comparison
                    ---------------------------------------------------
                         Original          Expansion
                         Markets            Markets
                    ------------------   -----------------
Percent Change        Class     Class     Class    Class       Total
 Comparison            of         of       of        of      Operating
                      1996     1997/98    1999      2000     Results(a)
                    --------  --------  --------  --------   ----------

<S>                     <C>       <C>      <C>          <C>        <C>
Revenue ...........     4.8%      5.4%     18.3%        NM         8.9%

Direct Operating
 Expenses .........     7.2%     (3.2%)     8.6%        NM         9.3%
                    --------  --------  --------  --------   ----------

Gross Margin ......     4.0%     13.0%    (26.6%)       NM         8.5%

Sales, General
 and Administrative
 Expenses .........    (7.5%)     6.6%      5.0%        NM         2.9%
                    --------  --------  --------  --------   ----------

EDITDA before
 allocation of
 Corporate
 Overhead (b) .....    16.5%     28.6%      1.0%        NM           NM
                    --------  --------  --------  --------   ----------

<FN>

(a) The above table summarizes operating results before the allocation of
corporate overhead for Adelphia Business Solutions' Original and Expansion
Markets, grouped by the year or years in which operations commenced. Operating
Results are presented before an allocation of Corporate Overhead for network
operating control center, engineering and other administrative support functions
totaling $23.7 million in the December 2000 quarter and $17.1 million in the
September 2000 quarter and before a bad debt provision for previously recorded
revenues of $15 million in the December 2000 quarter. The Original Markets
include fourteen markets in the Class of 1996 and eight markets in the Class of
1997/1998. The Expansion Markets include thirty markets in the Class of 1999 and
twenty-nine markets in the Class of 2000.

(b) Earnings before interest, income taxes, depreciation and amortization,
restructuring charges, other income/expense and non-cash stock compensation
("EBITDA") and similar measures of cash flow are commonly used in the
telecommunications industry to analyze and compare telecommunications companies
on the basis of operating performance, leverage, and liquidity. While EBITDA is
not an alternative indicator of operating performance or an alternative to cash
flows from operating activities as a measure of liquidity as defined by GAAP,
and while EBITDA may not be comparable to other similarly titled measure of
other companies, management of Adelphia Business Solutions believes that EBITDA
is a meaningful measure of performance.

</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Adelphia Business Solutions, Inc.
Unaudited Combined Results of Original and Expansion Markets Continued
Before allocation of Corporate Overhead (a)

                            Quarter Ended December 31, 2000                       Quarter Ended December 31, 1999
                   ----------------------------------------------------  ---------------------------------------------------
                         Original          Expansion                           Original           Expansion
                         Markets            Markets                            Markets             Markets
                    ------------------   -----------------               ------------------   -----------------
(dollars in           Class     Class     Class    Class       Total       Class    Class      Class    Class       Total
 thousands)            of         of       of        of      Operating       of       of         of       of      Operating
                      1996     1997/98    1999      2000     Results(a)     1996    1997/98     1999     2000     Results(a)
                    --------  --------  --------  --------   ----------  ---------  --------  --------  --------  ----------

<S>                 <C>       <C>       <C>       <C>        <C>         <C>        <C>       <C>       <C>      <C>
Revenue ........... $ 81,936  $ 14,825  $ 22,275  $  2,005   $  121,041  $  52,740  $  8,121  $  6,462  $   ---  $   67,053


Direct Operating
 Expenses .........   22,440     6,365    26,060     2,370       57,235     11,221     4,009     7,743      ---      23,073
                    --------  --------  --------  --------   ----------  ---------  --------  --------  -------   ---------

Gross Margin ......   59,496     8,460    (3,785)     (365)      63,806     41,249     4,112    (1,381)     ---      43,980
Gross Margin
 Percentage .......    72.6%     57.1%    (17.0%)   (18.2%)       52.7%      78.6%     50.6%    (21.4%)     ---       65.6%


Sales, General
 and Administrative
 Expenses .........   27,970     5,644    22,781     6,031       62,426     22,911     3,264    14,508      420      41,103
                    --------  --------  --------  --------   ----------  ---------  --------  --------  -------  ----------

EBITDA before
 allocation of
 Corporate
 Overhead (b) ..... $ 31,526  $  2,816  $(26,566) $ (6,396)  $    1,380  $  18,338  $    848  $(15,890) $  (420) $    2,877
                    --------  --------  --------  --------   ----------  ---------  --------  --------  -------  ----------
EBITDA as a
 Percentage of
 Revenues .........    38.5%     19.0%   (119.3%)      NM          1.1%      34.9%     10.4%   (245.9%)     ---         4.3%

<CAPTION>

                     December 2000 Quarter vs. December 1999 Quarter
                             Percentage Change Comparison
                    ---------------------------------------------------
                         Original          Expansion
                         Markets            Markets
                    ------------------   -----------------
Percent Change        Class     Class     Class    Class       Total
 Comparison            of         of       of        of      Operating
                      1996     1997/98    1999      2000     Results(a)
                    --------  --------  --------  --------   ----------

<S>                     <C>       <C>      <C>          <C>        <C>
Revenue ...........    56.2%     82.6%    244.7%        NM        80.5%

Direct Operating
 Expenses .........   100.0%     58.8%    232.2%        NM       148.1%
                    --------  --------  --------  --------   ----------

Gross Margin ......    44.2%    105.7%        NM        NM        45.1%

Sales, General
 and Administrative
 Expenses .........    22.1%     72.9%     57.0%        NM        51.9%
                    --------  --------  --------  --------   ----------

EDITDA before
 allocation of
 Corporate
 Overhead (b) .....    71.9%    232.1%        NM        NM       (52.0%)
                    --------  --------  --------  --------   ----------
<FN>

(a) The table above summarizes operating results before the allocation of
corporate overhead for Adelphia Business Solutions' Original and Expansion
Markets, grouped by the year or years in which operations commenced. Operating
Results are presented before an allocation of Corporate Overhead for network
operating control center, engineering and other administrative support functions
totaling $23.7 million in the December 2000 quarter and $14.4 million in the
December 1999 quarter and before a bad debt provision for previously recorded
revenues of $15 million in the December 2000 quarter. The Original Markets
include fourteen markets in the Class of 1996 and eight markets in the Class of
1997/98. The Expansion Markets include thirty markets in the Class of 1999 and
twenty-nine markets in the Class of 2000.

(b) Earnings before interest, income taxes, depreciation and amortization,
restructuring charges and executive severance, other income/expense and non-cash
stock compensation ("EBITDA") and similar measures of cash flow are commonly
used in the telecommunications industry to analyze and compare
telecommunications companies on the basis of operating performance, leverage,
and liquidity. While EBITDA is not an alternative indicator of operating
performance or an alternative to cash flows from operating activities as a
measure of liquidity as defined by GAAP, and while EBITDA may not be comparable
to other similarly titled measure of other companies, management of Adelphia
Business Solutions believes that EBITDA is a meaningful measure of performance
</FN>
</TABLE>
<PAGE>

   Liquidity and Capital Resources


    The development of the Company's business and the installation and expansion
of the networks, as well as the development of the markets, combined with the
construction and expansion of the Company's NOCC, have resulted in substantial
capital expenditures and investments during the past several years. Capital
expenditures by the Company were $453.2 million and $712.8 million for the years
ended December 31, 1999 and 2000, respectively. Further, investments made by the
Company in nonconsolidated networks and in LMDS licenses were $24.5 million and
$88.0 million for the years ended December 31, 1999 and 2000, respectively. The
significant increase in capital expenditures for the year ended December 31,
2000 is largely attributable to capital expenditures necessary to develop the
Original Markets and the Expansion Markets, as well as the fiber purchases to
interconnect the networks. The Company expects that it will continue to incur
substantial capital expenditures in this development effort. The Company also
expects to continue to fund operating losses as the Company develops and grows
its business. For information regarding recent transactions affecting the
Company's liquidity and capital resources, see "Financing Transactions" and
"Acquisitions of Partners Interests" above.


    The Company has experienced negative operating and investing cash flow since
its inception. A combination of operating losses, substantial capital
investments required to build the Company's networks and its state-of-the-art
NOCC, and incremental investments in the joint ventures has resulted in
substantial negative cash flow.


    Expansion of the Company's Original Markets and services and the development
of Expansion Markets and additional networks and services requires significant
capital expenditures. The Company's operations have required and will continue
to require substantial capital investment for (i) the installation of
electronics for switched services in the Company's networks, (ii) the expansion
and improvement of the Company's NOCC and Original Markets, (iii) the design,
construction and development of Expansion Markets and (iv) the acquisition of
additional ownership interests in the Original Markets. The Company has made
substantial capital investments and investments in joint ventures in connection
with the installation of 5ESS switches or remote switching modules in all of its
Original Markets and has installed regional super switches in certain key
Expansion Markets when such Expansion Markets were operational. To date, the
Company has installed switches in all of its Original Markets and plans to
provide such services in all of its Expansion Markets on a standard switching
platform based on Lucent 5 switch technology. The Company also plans to purchase
its partners' interest in the joint ventures when it can do so at attractive
economic terms. The Company estimates that, in addition to the cash and cash
equivalents on hand and the restricted cash as of December 31, 2000, a total of
approximately $500 million will be required to fund the Company's capital
expenditures, working capital requirements, operating losses and pro rata
investments in the joint ventures during calendar 2001. The Company currently
expects calendar 2001 revenues to be in the range of $500 million, with first
quarter 2001 revenue at approximately the same level as December 2000 quarterly
revenue. These expectations include the Company's estimate of the effect of the
revised business plan, the sale of the six markets to Adelphia and the general
economic downturn affecting the United State economy and its effect on the
Company's customers and vendors.


    In addition, there can be no assurance (i) that the Company's future cash
requirements will not vary significantly from those presently planned due to a
variety of factors including acquisition of additional networks, continued
acquisition of increased ownership in its networks, material variances from
expected capital expenditure requirements for Original Markets and Expansion
Markets and development of the LMDS spectrum, or (ii) that anticipated
financings, Local Partner investments and other sources of capital will become
available to the Company on economically attractive terms or at all. In
addition, it is possible that expansion of the Company's networks may include
the geographic expansion of the Company's existing clusters and the development
or acquisition of other new markets not currently planned.


    The Company will need additional funds to fully fund its business plan. The
Company expects to fund its capital requirements through existing resources,
credit facilities and vendor financings at the Company and joint venture levels,
internally generated funds, equity invested by Local Partners in joint ventures
and additional debt or equity financings, as appropriate, and expects to fund
any potential additional purchase of partnership interests of Local Partners
through existing resources, internally generated funds and additional debt or
equity financings, as appropriate. The Company's ability to generate cash to
meet its future needs will depend generally on its results of operations and the
continued availability of external financing.


    During March 2001, the Company issued and sold 25,322 shares of Class A
common stock, to the public in a rights offering at a price of $7.28 per share.
Simultaneously, the Company issued and sold 11,820,070 and 51,459,624 shares of
Class A and Class B common stock, respectively in the rights offering to
Adelphia at a price of $7.28 per share. Total proceeds to the Company were
$460.9 million.


   Recent Accounting Pronouncements


    Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," and by SFAS 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities" is effective for
the Company as of January 1, 2001. SFAS No. 133, as amended, establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value with changes in fair value reflected in the statement of operations.


    The Company has no freestanding derivative instruments. In conjunction with
preparing for the implementation of this standard, the Company reviewed
contracts from various functional areas of the Company to identify potential
derivatives embedded in the selected contracts. No embedded derivatives were
identified as a result of this review. The adoption of this statement or any
transition adjustment will not have a significant effect on the Company's
consolidated results of operations or financial position.


    In December  1999,  the  Securities  and Exchange  Commission  issued Staff
Accounting  Bulletin  ("SAB") No. 101, which clarified the existing  accounting
rules for  revenue  recognition.  SAB No. 101 was adopted by the Company in the
fourth  quarter  of 2000.  The  Company's  revenue  recognition  policy did not
change with the adoption of SAB No. 101.


   Impact of Inflation


    The Company does not believe that inflation has had a significant impact on
the Company's consolidated operations or on the operations of the joint ventures
in the nine months ended December 31, 1998 and the years ended December 31, 1999
and 2000


ITEM 7A.  QUANITITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

    The Company uses fixed rate debt to fund its working capital requirements,
capital expenditures and acquisitions. These debt arrangements expose the
Company to market risk related to changes in interest rates. The table below
summarizes the fair values and contract terms of the Company's financial
instruments subject to interest rate risk as of December 31, 2000.

<TABLE>
<CAPTION>

                                               Expected Maturity
                        ---------------------------------------------------------------------                 Fair
                           2001        2002        2003        2004        2005     Thereafter     Total      Value
                        ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------
<S>                     <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Fixed Rate Debt
 and Redeemable
 Preferred Stock:       $      ---  $      ---  $  303,840  $  250,000  $      ---  $  597,067  $1,150,907  $  655,385
 Average Interest Rate      12.54%      12.54%      12.44%      12.39%      12.44%      12.40%         ---         ---

Fixed Rate Non
 Public Debt:           $      ---  $      ---  $   18,068  $   38,409  $   48,636  $  394,887  $  500,000  $  500,000
 Average Interest Rate       12.50%     12.50%      12.50%      12.50%      12.50%      12.50%         ---         ---
</TABLE>





<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The consolidated financial statements and related notes thereto and
independent auditors' report follow.


                ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES


                     INDEX TO CONSOLDATED FINANCIAL STATEMENTS

Independent Auditors' Report                                               34

Consolidated Balance Sheets, December 31, 1999 and 2000                    35

Consolidated Statements of Operations, Nine Months Ended
 December 31, 1998 and Years Ended December 31, 1999 and 2000              36


Consolidated Statements of Common Stock and Other
 Stockholders' Equity (Deficiency), Nine Months Ended
 December 31, 1998 and Years Ended December 31, 1999 and 2000              37

Consolidated Statements of Cash Flows, Nine Months Ended
 December 31, 1998 and Years Ended December 31, 1999 and 2000              39

Notes to Consolidated Financial Statements                                 40

<PAGE>

                         INDEPENDENT AUDITORS' REPORT


Adelphia Business Solutions, Inc. and Subsidiaries


    We have audited the accompanying consolidated balance sheets of Adelphia
Business Solutions, Inc. and Subsidiaries as of December 31, 1999 and 2000, and
the related consolidated statements of operations, of common stock and other
stockholders' equity (deficiency) and of cash flows for the nine months ended
December 31, 1998 and the years ended December 31, 1999 and 2000. Our audits
also included the financial statement schedule listed in the Index at Item 14.
These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.


      We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

      In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Adelphia Business Solutions,
Inc. and subsidiaries as of December 31, 1999 and 2000, and the results of their
operations and their cash flows for the nine months ended December 31, 1998 and
the years ended December 31, 1999 and 2000 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.


/s/DELOITTE & TOUCHE LLP


Pittsburgh, Pennsylvania
March 22, 2001

<PAGE>

               ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                (Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                            December 31,
                                                        1999           2000
<S>                                                  <C>            <C>
ASSETS

Current assets:
  Cash and cash equivalents ......................   $     2,133    $     3,543
  Due from parent - net ..........................       392,629           --
  Due from affiliate - net .......................         6,230           --
  Accounts receivable - net ......................        68,075         79,650
  Other current assets ...........................         9,852         14,936
                                                     -----------    -----------
      Total current assets .......................       478,919         98,129

U.S. government securities - pledged .............        29,899           --
Restricted cash ..................................          --           54,178
Investments ......................................        44,066         48,409
Property, plant and equipment - net ..............       943,756      1,534,612
Other assets - net ...............................        67,063        154,138
                                                     -----------    -----------
      Total ......................................   $ 1,563,703    $ 1,889,466
                                                     ===========    ===========

LIABILITIES, PREFERRED STOCK, COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
  Accounts payable ...............................   $   150,151    $   158,249
  Due to parent - net ............................          --            1,544
  Due to affiliates - net ........................          --            8,067
  Accrued interest ...............................        16,566         31,011
  Accrued interest - parent ......................          --            7,003
  Other current liabilities ......................        11,029         13,339
                                                     -----------    -----------
      Total current liabilities ..................       177,746        219,213

13% Senior Discount Notes due 2003 ...............       253,860        291,891
12 1/4% Senior Secured Notes due 2004 ............       250,000        250,000
12% Senior Subordinated Notes due 2007 ...........       300,000        300,000
Note payable .....................................          --          500,000
Other debt .......................................        41,318         48,565
                                                     -----------    -----------
      Total liabilities ..........................     1,022,924      1,609,669

12 7/8% Senior Exchangeable Redeemable
 Preferred Stock .................................       260,848        297,067

Commitments and contingencies (Note 7)

Common stock and other stockholders' equity
(deficiency)
  Class A common stock, $0.01 par value,
   800,000,000 shares authorized, 34,066,587
   and 35,848,366 shares outstanding, respectively           341            358
  Class B common stock, $0.01 par value,
   400,000,000 shares authorized, 35,371,459
   and 35,143,859 shares outstanding, respectively           354            351
  Additional paid in capital .....................       666,021        678,140
  Class B common stock warrants ..................         2,177          1,022
  Unearned stock compensation ....................        (5,715)        (4,070)
  Accumulated deficit ............................      (383,247)      (693,071)
                                                     -----------    -----------
      Total common stock and other stockholders'
       equity (deficiency) .......................       279,931        (17,270)
                                                     -----------    -----------
      Total ......................................   $ 1,563,703    $ 1,889,466
                                                     ===========    ===========
</TABLE>

                  See notes to consolidated financial statements
<PAGE>
               ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                               Nine
                                              Months
                                               Ended
                                             December           Year Ended
                                                31,             December 31,
                                             ---------    ----------------------
                                                1998         1999         2000
                                             ---------    ---------    ---------

<S>                                          <C>          <C>          <C>
Revenues .................................   $  34,776    $ 154,575    $ 351,974

Operating expenses:
  Network operations .....................      18,709       58,525      183,314
  Selling, general and administrative ....      35,341      142,615      277,198
  Restructuring charges ..................        --           --          5,420
  Depreciation and amortization ..........      26,671       65,244      114,614
                                             ---------    ---------    ---------
      Total ..............................      80,721      266,384      580,546
                                             ---------    ---------    ---------

Operating loss ...........................     (45,945)    (111,809)    (228,572)

Other income (expense):
  Interest income ........................      10,233       19,933        3,900
  Interest income - affiliate ............       8,395        8,483        6,282
  Interest expense .......................     (38,638)     (74,314)     (81,573)
  Interest expense - affiliate ...........        --           --         (7,003)
  Other income ...........................       1,113         --           --
                                             ---------    ---------    ---------
Loss before income taxes, equity in net
 loss of joint ventures and
 extraordinary gain ......................     (64,842)    (157,707)    (306,966)

Income tax expense .......................        --             (1)        --
                                             ---------    ---------    ---------
Loss before equity in net loss of joint
 ventures and extraordinary gain .........     (64,842)    (157,708)    (306,966)

Equity in net loss of joint ventures .....      (9,580)      (7,758)      (2,858)
                                             ---------    ---------    ---------

Loss before extraordinary gain ...........     (74,422)    (165,466)    (309,824)
Extraordinary gain on repurchase of debt .         237         --           --
                                             ---------    ---------    ---------
Net loss .................................     (74,185)    (165,466)    (309,824)

Dividend requirements applicable to
 preferred stock .........................     (21,117)     (31,618)     (35,665)
                                             ---------    ---------    ---------

Net loss applicable to common stockholders   $ (95,302)   $(197,084)   $(345,489)
                                             =========    =========    =========

Basic and diluted net loss per weighted
 average share of common stock
 before extraordinary gain ...............   $   (1.81)   $   (3.47)   $   (4.93)
Basic and diluted extraordinary gain on
 repurchase of debt per weighted
 average share of common stock ...........        0.01         --           --
                                             ---------    ---------    ---------
Basic and diluted net loss per weighted
 average share of common stock ...........   $   (1.80)   $   (3.47)   $   (4.93)
                                             =========    =========    =========

Weighted average shares of common stock
 outstanding (in thousands) ..............      53,035       56,739       70,088
                                             =========    =========    =========


</TABLE>



                  See notes to consolidated financial statements


<PAGE>

               ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF COMMON STOCK
                   AND OTHER STOCKHOLDERS' EQUITY (DEFICIENCY)
                (Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                            Class A   Class B
                              Class A Class B  Additional   Common    Common                   Unearned
                              Common  Common    Paid-in     Stock     Stock      Loans to       Stock      Accumulated
                               Stock   Stock    Capital    Warrant   Warrant   Shareholders  Compensation    Deficit       Total
                              ------- ------- ----------  --------  ---------  ------------  ------------  -----------  ----------
<S>                           <C>     <C>     <C>         <C>       <C>        <C>           <C>           <C>          <C>
Balance, March 31, 1998       $    4  $  325  $      179  $ 13,000  $  11,087  $     (3,000) $       ---   $  (140,586) $ (118,991)
  Proceeds from issuance
   of Class A common stock       129     ---     190,731       ---        ---           ---          ---           ---     190,860
  Proceeds from issuance
   of Class A common stock
   to Adelphia                    33     ---      49,827       ---        ---           ---          ---           ---      49,860
  Exercise of Class A
   common stock warrant            7     ---      12,993   (13,000)       ---           ---          ---           ---         ---
  Conversion of note and
   payables to Adelphia to
   Class A common stock           36     ---      44,222       ---        ---           ---          ---           ---      44,258
  Exercise of Class B
   common stock warrants         ---       8       6,596       ---     (6,604)          ---          ---           ---         ---
  Conversion of Class B
   common stock to
   Class A common stock           10     (10)        ---       ---        ---           ---          ---           ---         ---
  Repayment of loan
   to shareholders               ---     ---         ---       ---        ---         3,000          ---           ---       3,000
  Dividend requirements
   applicable to
   preferred stock               ---     ---     (18,168)      ---        ---           ---          ---        (2,949)    (21,117)
  Other                          ---     ---        (353)      ---        ---           ---          ---           (61)       (414)
  Issuance of Class A
   common stock bonus              5     ---         755       ---        ---           ---          ---           ---         760
  Net loss                       ---     ---         ---       ---        ---           ---          ---       (74,185)    (74,185)
                              ------- ------- ----------  --------  ---------  ------------  -----------  ------------  ----------

Balance, December 31, 1998       224     323     286,782       ---      4,483           ---         ---       (217,781)     74,031
  Proceeds from issuance
   of Class A common stock        88     ---     252,766       ---        ---           ---         ---            ---     252,854
  Proceeds from issuance
   of Class B common stock       ---      52     149,948       ---        ---           ---         ---            ---     150,000
  Exercise of Class B
   common stock warrants         ---       3       2,303       ---     (2,306)          ---         ---            ---        ---
  Conversion of Class B
   common stock to
   Class A common stock           24     (24)        ---       ---        ---           ---         ---            ---        ---
  Unearned stock compensation      4     ---       6,396       ---        ---           ---      (5,715)           ---        685
  Dividend requirements
   applicable to
   preferred stock               ---     ---     (31,618)      ---        ---           ---         ---            ---     (31,618)
  Other                            1     ---        (556)      ---        ---           ---         ---            ---        (555)
  Net loss                       ---     ---         ---       ---        ---           ---         ---       (165,466)   (165,466)
                              ------- ------- ----------  --------  ---------  ------------  ----------  -------------  ----------

Balance, December 31, 1999    $   341 $   354 $  666,021  $    ---  $   2,177  $        ---  $   (5,715) $    (383,247) $  279,931
                              ======= ======= ==========  ========  =========  ============  ==========  =============  ==========

</TABLE>



                  See notes to consolidated financial statements

<PAGE>

               ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF COMMON STOCK
             AND OTHER STOCKHOLDERS' EQUITY (DEFICIENCY) (continued)
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>


                                                           Class A   Class B
                              Class A Class B  Additional  Common    Common                   Unearned
                              Common  Common    Paid-in     Stock     Stock      Loans to       Stock      Accumulated
                               Stock   Stock    Capital    Warrant   Warrant   Shareholders  Compensation    Deficit       Total
                              ------- ------- ----------  --------  ---------  ------------  ------------  -----------  ----------
<S>                           <C>     <C>     <C>         <C>       <C>        <C>           <C>           <C>          <C>
Balance, December 31, 1999    $   341 $   354 $  666,021  $    ---  $   2,177  $        ---  $     (5,715) $  (383,247) $  279,931
  Exercise of Class A
   common stock warrant             9     ---      5,612       ---        ---           ---           ---          ---       5,621
  Exercise of Class B
   common stock warrant           ---       1      1,154       ---      1,155           ---           ---          ---         ---
  Conversion ofClass B
   common stock to
   Class A common stock             4      (4)       ---       ---        ---           ---           ---          ---         ---
  Vesting of stock
   compensation                   ---     ---        ---       ---        ---           ---         1,645          ---       1,645
  Issuance of Class A
   common stock bonus               1     ---        401       ---        ---           ---           ---          ---         402
  Excess of sales
   price over carrying
   value of networks sold         ---     ---     34,255       ---        ---           ---           ---          ---      34,255
  Issuance of Class A common
   stock for purchase of
   telecommunications network       3     ---      6,928       ---        ---           ---           ---          ---       6,931
  Dividend requirements
   applicable to
   preferred stock                ---     ---    (35,665)      ---        ---           ---           ---          ---     (35,665)
  Other                           ---     ---       (566)      ---        ---           ---           ---          ---        (566)
  Net loss                        ---     ---        ---       ---        ---           ---           ---     (309,824)   (309,824)
                              ------- ------- ----------  --------  ---------  ------------  ------------  -----------  ----------

Balance, December 31, 2000    $  358   $  351 $  678,140  $    ---  $   1,022  $       ---   $     (4,070) $  (693,071) $ (17,270)
                              ======= ======= ==========  ========  =========  ============  ============  ===========  =========

</TABLE>

                  See notes to consolidated financial statements




<PAGE>

          ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (Dollars in thousands)
<TABLE>
<CAPTION>

                                                         Nine
                                                        Months
                                                         Ended         Year Ended
                                                       December        December 31,
                                                         31,      ---------------------
                                                        1998        1999        2000
                                                      ---------   ---------   ---------
<S>                                                   <C>         <C>         <C>
Cash flows from operating activities:
   Net loss .......................................   $ (74,185)  $(165,466)  $(309,824)
   Adjustments to reconcile net loss to net
    cash provided by (used in)operating activities:
         Depreciation .............................      23,838      59,430     102,126
         Amortization .............................       2,833       5,814      12,488
         Equity in net loss of joint ventures .....       9,580       7,758       2,858
         Non-cash interest expense ................      23,857      33,076      38,031
         Restructuring charges ....................        --          --         5,420
         Non-cash stock compensation ..............         761         685       1,319
         Extraordinary gain on repurchase of debt .        (237)       --          --
         Changes in operating assets and
          liabilites, net of effects of
          Acquisitions
           Other assets--net .......................     29,072     (62,580)    (27,835)
           Accounts payable .......................       9,862     127,697       6,411
           Accrued interest and other liabilities .      10,414      11,071      24,676
                                                      ---------   ---------   ---------
Net cash provided by (used in) operating activities      35,795      17,485    (144,330)
                                                      ---------   ---------   ---------


Cash flows from investing activities:
         Net cash used for acquisitions ...........        --      (129,118)       --
         Expenditures for property, plant
          and equipment ...........................    (146,752)   (453,206)   (712,807)
         Repayment of senior secured note .........        --        20,000        --
         Investments in joint ventures ............     (69,018)    (24,496)    (10,375)
         Investments in fixed wireless licenses ...     (44,605)       --       (77,632)
         Investments in restricted cash - net .....        --          --       (54,178)
         Sale of telecommunications networks ......        --          --        87,452
         Sale of U.S. government securities
          - pledged ...............................      15,312      30,626      30,626
                                                      ---------   ---------   ---------
Net cash used in investing activities .............    (245,063)   (556,194)   (736,914)
                                                      ---------   ---------   ---------

Cash flows from financing activities:
         Proceeds from issuance of Class A
          common stock ............................     255,462     262,500       5,621
         Proceeds from issuance of Class B
          common stock ............................        --       150,000        --
         Proceeds from debt .......................        --       300,000     500,000
         Repayment of debt ........................     (19,868)     (5,668)    (10,288)
         Costs associated with debt financing .....        --        (6,180)    (15,025)
         Costs associated with issuance of
          common stock ............................     (14,742)     (9,646)       --
         Repayment of loans from stockholders .....       3,000        --          --
         (Advances to) repayments from affiliates .      (2,764)   (392,734)    402,346
                                                      ---------   ---------   ---------
Net cash provided by financing activities .........     221,088     298,272     882,654
                                                      ---------   ---------   ---------

Increase (decrease) in cash and cash equivalents ..      11,820    (240,437)      1,410
Cash and cash equivalents, beginning of period ....     230,750     242,570       2,133
                                                      ---------   ---------   ---------
Cash and cash equivalents, end of period ..........   $ 242,570   $   2,133   $   3,543
                                                      =========   =========   =========
</TABLE>




                  See notes to consolidated financial statements

<PAGE>

              ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (Dollars in thousands, except per share amounts)

1.    The Company and Summary of Significant Accounting Policies




   Organization and Business


    The consolidated financial statements include the accounts of Adelphia
Business Solutions, Inc. and it's more than 50% owned subsidiaries ("Adelphia
Business Solutions" or the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation. The Company was formed in
1991 and is a majority-owned subsidiary of Adelphia Communications Corporation
("Adelphia"). On October 25, 1999, the stockholders of the Company elected to
change the name of the Company from Hyperion Telecommunications, Inc. to
Adelphia Business Solutions, Inc., which management believes will further align
the strengths of both companies to develop a single brand in the communications
marketplace.


    Adelphia Business Solutions operates in one segment and is a nationwide
facilities based integrated communications provider, or ICP, that offers
broadband communications solutions, including local switch dial tone, long
distance service, high-speed data transmission and internet connectivity.


    On March 30, 1999, Adelphia Business Solutions elected to change its fiscal
year from March 31 to December 31. The decision was made to conform to general
industry practice and for administrative purposes. The change became effective
for the nine months ended December 31, 1998.


    On May 8, 1998, the Company issued and sold 12,500,000 shares of Class A
common stock at a price to the public of $16.00 per share (the "IPO").
Simultaneously with the closing of the IPO, the Company issued and sold an
additional 3,324,001 shares of Class A common stock to Adelphia at a purchase
price of $15.00 per share (or an aggregate of approximately $49,900). In
addition, at such closing, the Company issued 3,642,666 shares of Class A common
stock to Adelphia in exchange for certain of the Company's indebtedness and
payables with a carrying value of $44,258 owed to Adelphia at a purchase price
of $15.00 per share (or an aggregate of $54,600). In a related transaction, on
June 5, 1998, the Company issued and sold 350,000 shares of Class A common stock
at the $16.00 IPO price pursuant to the underwriters' over-allotment option in
the IPO.


    On November 30, 1999, the Company issued and sold 8,750,000 shares of Class
A common stock at a price to the public of $30.00 per share. Simultaneously with
the closing of this transaction, the Company issued and sold 5,181,350 shares of
Class B common stock to Adelphia at a purchase price of $28.95 per share.


    During March 2001, the Company issued and sold 25,322 shares of Class A
common stock, to the public in a rights offering at a price of $7.28 per share.
Simultaneously, the Company issued and sold 11,820,070 and 51,459,624 shares of
Class A and Class B common stock, respectively in the rights offering to
Adelphia at a price of $7.28 per share. Total proceeds to the Company were
$460,900 million


    At December 31, 2000, Adelphia owned approximately 60% of Adelphia Business
Solutions' outstanding common stock and held approximately 90% of the total
voting rights.


    The Company is a leading provider of facilities-based integrated
communications services to customers that include businesses, governmental and
educational end users and other communications services providers primarily
throughout the eastern United States. The Company currently offers a full range
of communications services in 75 markets and expects by the end of the year 2001
to be offering services in approximately 80 markets, including substantially all
of the top 40 metropolitan statistical areas in the United States. To serve its
customers' broad and expanding communications needs, the Company has assembled a
diverse collection of high-bandwidth, local and national network assets. The
Company intends to integrate these assets with advanced communications
technologies and services in order to provide comprehensive end-to-end
communications services over our own networks. The Company provides customers
with communications services such as local switch dial tone (also known as local
phone service), long distance service, high-speed data transmission and Internet
connectivity. The Company offers its customers a choice of receiving these
services separately or as bundled packages which are typically priced at a
discount when compared to the price of the separate services.

<PAGE>

    To develop the original markets and the new markets, as well as the fiber
purchases to interconnect the networks, the Company expects that it will
continue to incur capital expenditures. In addition to cash and cash equivalents
on hand and the restricted cash as of December 31, 2000, a total of
approximately $500,000 will be required to fund the Company's capital
expenditures, working capital requirements, operating losses and pro rata
investments in the joint ventures during calendar 2001. The Company will need
additional funds to fully fund its business plan. The Company expects to fund
its capital requirements through existing resources, credit facilities and
vendor financings at the Company and joint venture levels, internally generated
funds, equity invested by local partners in joint ventures and additional debt
or equity financings, as appropriate, and expects to fund any potential
additional purchase of partnership interest of local partners through existing
resources, internally generated funds and additional debt or equity financings,
as appropriate. The Company's ability to generate cash to meet its future needs
will depend generally on its results of operations and the continued
availability of external financing.


    Joint ventures, which the Company currently does not control, are accounted
for under the equity method of accounting.


   Acquisitions of Partner Interests


    On February 12, 1998, the Company purchased additional partnership interests
in Louisville Lightwave (Louisville and Lexington), NHT Partnership (Buffalo),
New Jersey Fiber Technologies and Hyperion of Harrisburg. As a result, the
Company's ownership in these networks increased to 100%. The aggregate purchase
price was comprised of approximately $45,000 in cash and a warrant, which was
not exercised until May 1998, for 731,624 shares of the Company's Class A common
stock (See Note 6). In addition, the Company paid certain amounts related to
fiber lease financings upon consummation of the purchase of the additional
partnership interests.


    During March 1999, Adelphia Business Solutions consummated purchase
agreements with subsidiaries of Multimedia, Inc. and MediaOne of Colorado Inc.
to acquire their respective interests in jointly owned networks located in the
Wichita, Kansas, Jacksonville, Florida and Richmond, Virginia markets for an
aggregate of approximately $89,750. The agreements increased the Company's
ownership interest in each of these networks to 100%.


    During June 1999, the Company consummated a purchase agreement with Entergy
Corporation ("Entergy"), the parent of its local partner in the Baton Rouge,
Louisianna, Little Rock, Arkansas, and Jackson, Mississippi markets, whereby
Entergy received approximately $36,518 for its ownership interests in these
markets. The agreements increased the Company's ownership interest in each of
these networks to 100%.


    During July 2000, the Company consummated a purchase agreement with
Allegheny Communications Connect, Inc. ("Allegheny") to acquire interests in a
jointly owned network located in State College, Pennsylvania. Consideration paid
to Allegheny was 330,000 shares of the Company's Class A Common Stock. This
purchase increased the Company's ownership in this network to 100%.


    All of the acquisitions described above were accounted for using the
purchase method. Accordingly, the financial results of each acquisition have
been included in the Company's consolidated financial statements from the date
acquired.

<PAGE>


    The following unaudited financial information of the Company assumes that
each of the transactions described above had occurred at the beginning of the
preceding period.


                                         Nine
                                        Months
                                         Ended          Year Ended
                                       December         December 31,
                                          31,     --------------------
                                         1998        1999      2000
                                       ---------  ---------  ---------
               Revenues                $  49,156  $ 162,230  $ 352,689
               Net loss                  (79,789)  (170,522)  (310,303)
               Net loss applicable
                to common stockholders  (100,907)  (202,140)  (345,969)
               Basic and diluted net
               loss per weighted
                average share of
                common stock           $   (1.90) $   (3.56) $   (4.95)


   Cash and Cash Equivalents


    Cash and cash equivalents consist of highly liquid instruments with an
initial maturity date of three months or less.


   Restricted Cash


    Restricted cash consists of highly liquid investments with an initial
maturity date of three months or less reserved for the construction of the
advanced information technology infrastructure under the Company's contract with
the Commonwealth of Pennsylvania. The contract was entered into on May 3, 2000.
As part of the contract, the Company was required to place $75.8 million into a
restricted account to be used for the completion on the technology
infrastructure. As of December 31, 2000, the Company had used $21.6 million
towards the completion of the infrastructure.


   U.S. Government Securities - Pledged


    U.S. Government Securities - Pledged consist of highly liquid investments
which will be used to pay the first six semi-annual interest payments on the 12
1/4% Senior Secured Notes. Such investments are classified as held-to-maturity
and the carrying value approximates market value.


   Accounts Receivable


    An allowance for doubtful accounts of $9,640 and $48,513 is recorded as a
reduction of accounts receivable at December 31, 1999 and 2000, respectively.


   Property, Plant and Equipment


    Property, plant and equipment is stated at cost less accumulated
depreciation. Costs capitalized include amounts directly associated with network
engineering, design and construction.


    Provision for depreciation of property, plant and equipment is computed
using the straight-line method over the estimated useful lives of the assets
beginning in the month the asset is available for use or is acquired.


    The estimated useful lives of the Company's principal classes of property,
plant and equipment are as follows:

Telecommunications networks                               10-20 years
Network monitoring and switching equipment                 5-10 years
Fiber optic use rights                                       15 years
Other                                                      3-10 years

<PAGE>

   Revenue Recognition


    The Company recognizes revenue from communications services in the month the
related service is provided. Revenues on billings to customers in advance of
providing services are deferred and recognized when earned. The Company
recognizes revenues related to management and network monitoring of the joint
ventures in the month that the related services are provided. Reciprocal
compensation revenue is an element of switched service revenue, which represents
compensation from Local Exchange Carriers ("LECs") for local exchange traffic
originated by other LECs terminated on the Company's facilities. Adelphia
Business Solutions recognizes revenue based upon established contracts with the
LECs and has established a reserve for a portion of those revenues that are
under dispute.


   Significant Customers


    During the nine months ended December 31, 1998, Adelphia Business Solutions'
sales to AT&T and Bell Atlantic represented 11.4% and 10.1% of total revenues,
respectively. During the year ended December 31, 1999, Adelphia Business
Solutions' sales to AT&T and Bell Atlantic represented 8.8% and 14.7% of total
revenues, respectively. During the year ended December 31, 2000, Adelphia
Business Solutions' sales to Verizon represented 15.7% of total revenues.


   Basic and Diluted Net Loss per Weighted Average Share of Common Stock


    Basic net loss per weighted average share of common stock is computed based
upon the weighted average number of common shares and warrants outstanding
during the period. Diluted net loss per common share is equal to basic net loss
per common share because the Adelphia Warrant discussed in Note 6 had an
antidilutive effect for the periods presented. Class B common stock warrants to
purchase shares of Class B common stock have been included as shares outstanding
for purposes of the calculation of both basic and diluted net loss per share for
the nine months ended December 31, 1998 and the years ended December 31, 1999
and 2000.


   Other Assets - net


    Deferred debt financing costs, included in other assets, are amortized over
the term of the related debt. The unamortized amounts of deferred debt financing
costs at December 31, 1999 and 2000 were $17,434 and $27,034, respectively.
Included in other assets at December 31, 1999 and 2000 is $44,605 and $122,504,
respectively, relating to licenses. These licenses which cover approximately 60%
of the nation's population are a spectrum for a fixed wireless technology known
as local multipoint distribution service ("LMDS") and are being amortized on a
straight line basis over the life of the licenses, which is 10 years.


   Asset Impairments


    Adelphia Business Solutions periodically reviews the carrying value of its
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying value of these assets may not be recoverable.
Measurement of any impairment would include a comparison of estimated future
operating cash flows anticipated to be generated during the remaining life of
the assets with their net carrying value. An impairment loss would be recognized
as the amount by which the carrying value of the assets exceeds their fair
value.


   Financial Instruments


    Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of accounts receivable. Concentration of
credit risk with respect to accounts receivable is limited due to the dispersion
of the Company's customer base among different customers and geographic areas.


    The Company's financial instruments include cash and cash equivalents, notes
payable and redeemable preferred stock. The fair value of the notes payable
exceeded their carrying value by approximately $52,058 at December 31, 1999. The
carrying value of the notes payable exceeded their fair value by approximately
$275,626 at December 31, 2000. The carrying value of the redeemable preferred
stock was equal to its fair value at December 31, 1999. The carrying value of
<PAGE>

the redeemable preferred stock exceeded its fair value by approximately $207,947
at December 31, 2000. The fair values of the financial instruments were based
upon quoted market prices.


   Non-cash Financing and Investing Activities


    Capital leases entered into during the nine months ended December 31, 1998,
and the years ended December 31, 1999 and 2000 totaled $1,155, $5,772, and
$17,747 respectively (See Note 5). Dividend requirements applicable to preferred
stock were satisfied by the issuance of an additional 20,624, 30,733 and 34,885
shares of such preferred stock during the nine months ended December 31, 1998
and the years ended December 31, 1999 and 2000, respectively (See Note 5).


   Comprehensive Income


    Comprehensive income includes all changes to all changes in stockholder's
equity during a period except those resulting from investments by and
distributions to owners. For the nine months ended December 31, 1998 and the
years ended December 31, 1999 and 2000, the Company's only component of
comprehensive income is its net loss for those periods.


   Use of Estimates in the Preparation of Financial Statements


    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.



   Recent Accounting Pronouncements


    Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," and by SFAS 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities" is effective for
the Company as of January 1, 2001. SFAS No. 133, as amended, establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value with changes in fair value reflected in the statement of operations.


    The Company has no freestanding derivative instruments. In conjunction with
preparing for the implementation of this standard, the Company reviewed
contracts from various functional areas of the Company to identify potential
derivatives embedded in the selected contracts. No embedded derivatives were
identified as a result of this review. The adoption of this statement or any
transition adjustment will not have a significant effect on the Company's
consolidated results of operations or financial position.


    In December  1999,  the  Securities  and Exchange  Commission  issued Staff
Accounting  Bulletin  ("SAB") No. 101, which clarified the existing  accounting
rules for  revenue  recognition.  SAB No. 101 was adopted by the Company in the
fourth  quarter  of 2000.  The  Company's  revenue  recognition  policy did not
change with the adoption of SAB No. 101.


   Reclassifications


    Certain December 31, 1998 and 1999 amounts have been reclassified to conform
with the presentation for the year ended December 31, 2000.
<PAGE>

2. Property, Plant and Equipment

    Property, plant and equipment consists of the following:


                                              December 31,
                                          ----------------------
                                             1999        2000
                                          ----------  ----------
           Telecommunications networks    $  139,248  $  214,856
           Network monitoring and
            switching equipment              431,078     760,784
           Fiber optic use rights            108,239     156,858
           Construction in process           344,439     539,977
           Other                              18,270      55,351
                                          ----------  ----------
                                           1,041,274   1,727,826
           Less accumulated depreciation     (97,518)   (193,214)
                                          ----------  ----------
           Total                          $  943,756  $1,534,612
                                          ==========  ==========


    Additions to property, plant and equipment are recorded at cost which
includes amounts for material, applicable labor and overhead and interest.
Capitalized interest amounted to $9,986, $23,282 and $43,609 for the nine months
ended December 31, 1998 and the years ended December 31, 1999 and 2000,
respectively.

3.    Investment in Fiber Asset and Senior Secured Note

    On February 20, 1997, the Company entered into several agreements regarding
the leasing of dark fiber in New York state in furtherance of its strategy to
interconnect its networks in the northeastern United States. Pursuant to these
agreements and in consideration of a payment of $20,000, the Company received a
$20,000 Senior Secured Note bearing interest at 22 1/2% (subject to reduction
upon early repayment of principal) due February 2002 (subject to early
redemption options), from Telergy, Inc. ("Telergy"), a right to receive 58,752
shares of Telergy Class A common stock ("Telergy Stock"), and a fully prepaid
lease from a Telergy affiliate for an initial lease term of 25 years (with two
additional ten-year extensions) for 24 strands of dark fiber installed or to be
installed in a New York fiber optic telecommunications backbone network. As of
December 31, 1998, the Company included $11,500 and $8,500 in Property, Plant
and Equipment and Other Assets, respectively, as the allocation of the $20,000
payment between the fiber asset and the Senior Secured Note. No amounts were
allocated to the Telergy Stock. The allocation reflected the Company's estimate
of the relative fair values of the assets acquired.


    On May 15, 1998, Telergy paid the Company $1,000 in exchange for the Telergy
Stock and a gain of $1,000 was recorded by the Company, which is included in
"other income" in the consolidated statement of operations. On November 10,
1998, the Senior Secured Note was amended to mature on January 20, 2000 in
exchange for an indefeasible right to use ("IRU") or long term lease of certain
fiber segments in New York City and along Telergy's long haul fiber segments in
the northeastern United States and Southeastern Canada.


    During May 1999, the Company received $32,329 from Telergy for the repayment
of the Senior Secured Note. The payment represented $20,000 in principal and
$12,329 of interest, which is included in "Interest income" in the consolidated
statement of operations.

4.    Investments

    The equity method of accounting is used to account for investments in joint
ventures in which the Company owns less than a majority interest. Under this
method, the Company's initial investment is recorded at cost and subsequently
adjusted for the amount of its equity in the net income or loss of its joint
ventures. Dividends or other distributions are recorded as a reduction of the
Company's investment. Investments in joint ventures accounted for using the
equity method reflect the Company's equity in their underlying net assets.

<PAGE>


    The Company's nonconsolidated investments are as follows:

                                       Ownership        December 31,
                                      Percentage       1999     2000
                                      ----------  ---------  ---------
      PECO-Adelphia Business
       Solutions (Philadelphia)            50.0%  $  42,475  $  46,725
      PECO-Adelphia Business
       Solutions (Allentown,
       Bethlehem, Easton, Reading)         50.0%      7,425     11,050
      Adelphia Business Solutions
       of York                             50.0%      6,525      6,525
      Allegheny Hyperion
       Telecommunications              100.0%(1)      4,975        ---
                                                  ---------  ---------
                                                     61,400     64,300
      Cumulative equity in net losses               (17,334)   (18,391)
                                                  ---------  ---------
            Subtotal                              $  44,066  $  45,909
      Investments accounted for using
       the cost method                                  ---      2,500
                                                  ---------  ---------
            Total                                 $  44,066  $  48,409
                                                  =========  =========

      (1) As discussed in Note 1, the Company has consummated an agreement which
      increased its ownership to 100% in this network during July 2000.


    Summarized unaudited combined financial information for the Company's
nonconsolidated investments listed above being accounted for using the equity
method of accounting as of the dates and for the periods ended, is as follows:


                                              December 31,
                                          --------------------
                                             1999      2000
                                          ---------  ---------
           Current assets                 $  21,645  $  26,942
           PP&E-net                         112,210    105,420
           Non-current assets                    55        ---
           Current liabilities               10,175     10,221
           Non-current liabilities           45,278     31,010



                                         Nine
                                        Months
                                         Ended        Year Ended
                                       December       December 31,
                                          31,    ---------------------
                                         1998       1999       2000
                                       --------- ----------- ---------
               Revenues                $  24,986  $  43,753  $  62,766
               Net loss                  (22,325)   (15,154)    (6,218)

5.    Financing Arrangements

   Note Payable - Adelphia


    The Company had an unsecured credit arrangement with Adelphia which had no
repayment terms prior to April 15, 1996. On April 15, 1996, $25,000 of the
proceeds from the sale of the 13% Senior Discount Notes (the "Senior Discount
Notes") and Class B common stock warrants were used to repay a portion of this
obligation. Interest expense and fees on this credit arrangement were based upon
the weighted average cost of unsecured borrowings of Adelphia during the
corresponding periods. Effective April 15, 1996, the remaining balance due on
the Note payable-Adelphia was evidenced by an unsecured subordinated note due
April 16, 2003. This obligation had an interest rate of 16.5% per annum.
Interest accrued through May 8, 1998 on the amount outstanding to Adelphia
totaled $10,645. On May 8, 1998, the Note payable - Adelphia and all accrued
interest was converted into shares of Class A common stock simultaneously with
the closing of the IPO (See Note 1).
<PAGE>


   13% Senior Discount Notes and Class B Common Stock Warrants


    On April 15, 1996, the Company issued $329,000 of 13% Senior Discount Notes
due April 15, 2003 and 329,000 warrants to purchase an aggregate of 1,993,638
shares of its Class B common stock. Prior to April 15, 2001, interest on the
Senior Discount Notes is not payable in cash, but is added to principal.
Thereafter, interest is payable semi-annually commencing October 15, 2001. The
Senior Discount Notes are unsecured and are senior to all future subordinated
indebtedness. On or after April 15, 2001, the Company may redeem, at its option,
all or a portion of the Senior Discount Notes at 106.5%, which declines to par
in 2002, plus accrued interest.


    The holders of the Senior Discount Notes may put the Senior Discount Notes
to the Company at any time upon the occurrence of a Change of Control (as
defined in the Indenture) at a price of 101% of accreted principal. In addition,
the Company will be required to offer to purchase Senior Discount Notes at a
price of 100% with the proceeds of certain asset sales (as defined in the
Indenture). The Indenture stipulates, among other things, limitations on
additional borrowings, issuance of equity instruments, payment of dividends and
other distributions, repurchase of equity interests or subordinated debt,
sale-leaseback transactions, liens, transactions with affiliates, sales of
Company assets, mergers and consolidations.


    The Class B common stock warrants are exercisable at $0.00308 per share,
upon the earlier of May 1, 1997 or a Change of Control. Unless exercised, the
Class B common stock warrants will expire on June 30, 2001. The number of shares
and the exercise price for which a warrant is exercisable are subject to
adjustment under certain circumstances. Through December 31, 2000, 298,705
warrants were exercised and converted into 1,810,150 shares of Class B common
stock. The Company received $5 in consideration for the exercise of the
warrants.


    During the nine months ended December 31, 1998, the Company paid $17,313 to
repurchase a portion of the Senior Discount Notes which had a face value of
$25,160 and a carrying value of $17,750. The notes were retired upon repurchase
which resulted in a $237 gain.


   12 1/4% Senior Secured Notes


    On August 27, 1997, the Company issued $250,000 aggregate principal amount
of 12 1/4% Senior Secured Notes due September 1, 2004 (the "Senior Secured
Notes"). The Senior Secured Notes are collateralized through the pledge of the
common stock of certain of the Company's wholly-owned subsidiaries. A portion of
the proceeds was invested in U.S. government securities and placed in an escrow
account for payment in full when due of the first six scheduled semi-annual
interest payments on the Senior Secured Notes as required by the Indenture.


    Interest is payable semi-annually commencing March 1, 1998. The Senior
Secured notes rank pari passu in right of payment with all existing and future
senior Indebtedness (as defined in the Indenture) of the Company and will rank
senior in right of payment to future subordinated Indebtedness of the Company.
On or before September 1, 2000 and subject to certain restrictions, the Company
could redeem, at its option, up to 25% of the aggregate principal amount of the
Senior Secured Notes at a price of 112.25% of principal with the net proceeds of
one or more Qualified Equity Offerings (as defined in the Indenture). As of
September 1, 2000, the Company had not exercised its option to redeem any senior
secured notes. On or after September 1, 2001, the Company may redeem, at its
option, all or a portion of the Senior Secured Notes at 106.125% of principal
which declines to par in 2003, plus accrued interest. The holders of the Senior
Secured Notes may put them to the Company at any time upon the occurrence of a
Change of Control (as defined in the Indenture) at a price of 101% of principal.
The Indenture stipulates, among other things, limitations on additional
borrowing, payment of dividends and other distributions, repurchase of equity
interests, transactions with affiliates and the sale of assets.


   12 7/8% Senior Exchangeable Redeemable Preferred Stock


    On October 9, 1997, the Company issued $200,000 aggregate liquidation
preference of 12 7/8% Senior Exchangeable Redeemable Preferred Stock due October
15, 2007 (the "Preferred Stock"). Proceeds to the Company, net of commissions
and other transaction costs, were approximately $194,500.
<PAGE>


    Dividends are payable quarterly commencing January 15, 1998 at 12 7/8% of
the liquidation preference of outstanding Preferred Stock. Through October 15,
2002, dividends are payable in cash or additional shares of Preferred Stock at
the Company's option. Subsequent to October 15, 2002, dividends are payable in
cash. The Preferred Stock ranks junior in right of payment to all indebtedness
and other obligations of the Company, its subsidiaries and joint ventures. On or
before October 15, 2000, and subject to certain restrictions, the Company could
redeem, at its option, up to 35% of the initial aggregate liquidation preference
of the Preferred Stock originally issued with the net cash proceeds of one or
more Qualified Equity Offerings (as defined in the Certificate of Designation)
at a redemption price equal to 112.875% of the liquidation preference per share
of the Preferred Stock, plus, without duplication, accumulated and unpaid
dividends to the date of redemption; provided that, after any such redemption,
there are remaining outstanding shares of Preferred Stock having an aggregate
liquidation preference of at least 65% of the initial aggregate liquidation
preference of the Preferred Stock originally issued. As of October 15, 2000, the
Company had not exercised its option to redeem any Preferred Stock. On or after
October 15, 2002, the Company may redeem, at its option, all or a portion of the
Preferred Stock at 106.438% of the liquidation preference thereof declining to
100% of the liquidation preference in 2005, plus accrued interest. The Company
is required to redeem all of the shares of Preferred Stock outstanding on
October 15, 2007 at a redemption price equal to 100% of the liquidation
preference thereof, plus, without duplication, accumulated and unpaid dividends
to the date of redemption.


    The holders of the Preferred Stock may put the Preferred Stock to the
Company at any time upon the occurrence of a Change of Control (as defined in
the Certification of Designation) at a price of 101% of the liquidation
preference thereof. The Certificate of Designation stipulates, among other
things, limitations on additional borrowings, payment of dividends and other
distributions, transactions with affiliates and the sale of assets. The Company
may, at its option, on any dividend payment date, exchange in whole, but not in
part, the then outstanding shares of Preferred Stock for 12 7/8% Senior
Subordinated Debentures due October 15, 2007 (the "Exchange Debentures").
Interest, redemption and registration rights provisions of the Exchange
Debentures are consistent with the provisions of the Preferred Stock.


   12% Senior Subordinated Notes due 2007


    On March 2, 1999, Adelphia Business Solutions issued $300,000 aggregate
principal amount of 12% Senior Subordinated Notes due 2007 ("Subordinated
Notes"). An entity controlled by members of the Rigas Family, controlling
stockholders of Adelphia, purchased $100,000 aggregate principal amount of the
Subordinated Notes directly from the Company. Proceeds to the Company, net of
discounts, commissions and other transaction costs were approximately $295,000.


    Interest is payable semi-annually commencing May 1, 1999. The Subordinated
Notes rank behind all current and future indebtedness (other than trade
payables), except indebtedness that expressly provides that it is not senior to
the notes. On or before November 1, 2003 and subject to certain restrictions,
the Company could redeem at its option, up to 25% of the aggregate principal
amount of the Subordinated Notes at a price of 112.00% of principal with the net
proceeds of one or more Qualified Equity Offerings (as defined in the
Indenture). On or after November 1, 2003, the Company could redeem, at its
option, all or a portion of the Subordinated Notes at 106.00% of principal which
declines to par in 2005, plus accrued interest. The holders of the Subordinated
Notes may put them to the Company at any time upon the occurrence of a Change in
Control (as defined in the Indenture) at a price of 101.00% of principal. The
Indenture stipulates, among other things, limitations on additional borrowing,
payment of dividends, and other distributions, repurchase of equity, interests,
transactions with affiliates and the sale of assets.


    The expected maturities of the 13% Senior Discount Notes, the 12 1/4% Senior
Secured Notes, the 12 7/8% Senior Exchangeable Redeemable Preferred Stock and
the 12% Senior Subordinated Notes are as follows:



                        2001                     $   ---
                        2002                         ---
                        2003                      303,840
                        2004                      250,000
                        2005                         ---
                        Thereafter                597,067
<PAGE>

   Note Payable


    The Company and certain of Adelphia's other subsidiaries and affiliates are
parties to a joint bank credit facility. As part of their facility, the Company
and its subsidiaries have the ability to borrow up to an aggregate of $500,000
which, if borrowed, would be guaranteed by other members of the borrowing group.
As of December 31, 2000, a subsidiary of the Company had borrowed $500,000 under
this credit facility. In addition, the Company has agreed to pay a subsidiary of
Adelphia $15,000 as a fee for placing the credit facility. The interest rate at
which the Company has borrowed these funds is 12 1/2%, a portion of which is
payable to a subsidiary of Adelphia. For the year ended December 31, 2000, the
Company recorded $21,874 for interest expense relating to Note Payable, $7,003
of which was payable to a subsidiary of Adelphia.


    Maturities of Note Payable are as follows:



                        2001                     $    ---
                        2002                          ---
                        2003                       18,068
                        2004                       38,409
                        2005                       48,636
                        Thereafter                394,887





   Long Term Lease Facility


    On December 31, 1997, the Company consummated an agreement for a $24,500
long-term lease facility with AT&T Capital Corporation. The lease facility
provides financing for certain of the switching equipment. Included in the lease
facility is the sale and leaseback of certain switch equipment for which the
Company received $14,876.


   Other Debt


    Other debt consists primarily of capital leases entered into in connection
with the acquisition of fiber leases for use in the telecommunications networks
and the long-term lease facility described above. The interest rate on such debt
ranges from 7.5% to 15.0%.


    Maturities of other debt are as follows:

                        2001                     $ 5,700
                        2002                       5,954
                        2003                       6,194
                        2004                       6,724
                        2005                       7,935
                        Thereafter                16,058

6.    Common Stock and Other Stockholders' Equity (Deficiency)

    Adelphia Business Solutions' authorized capital stock consists of
800,000,000 shares of Class A common stock, par value $0.01 per share,
400,000,000 shares of Class B common stock, par value $0.01 per share, and
50,000,000 shares of preferred stock, par value $0.01 per share.

<PAGE>

   Common Stock


    Shares of Class A common stock and Class B common stock are substantially
identical, except that holders of Class A common stock are entitled to one vote
per share and holders of Class B common stock are entitled to 10 votes per share
on all matters submitted to a vote of stockholders. Each share of Class B common
stock is convertible into one share of Class A common stock. In the event a cash
dividend is paid, the holders of the Class A and the Class B common stock will
be paid an equal amount.


    Prior to the IPO in May 1998, certain former company officers (the
"Officers") were parties to a stockholder agreement, as amended (the
"Stockholder Agreement") with Adelphia. The Stockholder Agreement provided,
among other things, (i) that upon the earlier of (a) the termination of
employment of any of the officers or (b) after October 7, 1998, such officers
could put their shares to Adelphia for fair market value, unless such put rights
were terminated as a result of the registration of the Company's common stock
under the Securities Act of 1933 (the "Securities Act") and (ii) for certain
buy/sell and termination rights and duties among Adelphia and the Officers. The
Stockholder Agreement terminated automatically upon the date of the IPO.


    The Company also entered into Term Loan and Stock Pledge Agreements ("Loan
Agreements") with each of the Officers. Pursuant to the Loan Agreements, each
Officer borrowed $1,000 from the Company. Each of these loans accrued interest
at the average rate at which the Company could invest cash on a short-term
basis, was secured by a pledge of the borrower's common stock in the Company,
and would mature upon the earlier of (i) October 8, 1998 or (ii) the date of the
IPO and the Officers had the right to sell at least $1,000 worth of their
shares. Each Loan Agreement also provided that any interest accruing on a loan
from the date six months after the date of such loan would be offset by a bonus
payment when principal and interest thereon are due and which would include
additional amounts to pay income taxes applicable to such bonus payment.


    Pursuant to agreements among the Company, Adelphia and the Officers,
simultaneous with the consummation of the IPO, (i) the Stockholder Agreement and
Loan Agreements terminated, (ii) the Officers each repaid the $1,000 borrowed
from the Company pursuant to the Loan Agreements plus accrued interest thereon
by each selling 66,667 shares of Class B common stock to Adelphia and using the
proceeds therefrom to repay such loans and (iii) the Company paid to the
management stockholders bonus payments in the amount of interest accruing on the
Loans from the date six months after the date of the Loan Agreements and any
additional amounts necessary to pay income taxes applicable to such bonus
payments.


    On April 8, 1998, the Board of Directors of the Company approved a
3.25-for-one stock split of its Class A and Class B common stock payable to
stockholders of record on April 28, 1998. The stock split was effected in the
form of a dividend of 2.25 shares for every outstanding share of common stock.
All references in the accompanying consolidated financial statements to the
number of shares of common stock and the par value have been retroactively
restated to reflect the stock split on April 28, 1998.


    On October 25, 1999, the shareholders of the Company approved an amendment
to Article IV of the Amended and Restated Certificate of Incorporation
increasing the number of authorized shares of capital stock from 455,000,000 to
1,250,000,000, the authorized number of Class A common stock from 300,000,000 to
800,000,000, the authorized number of shares of Class B common stock from
150,000,000 to 400,000,000, and the authorized number of shares of Preferred
Stock from 5,000,000 to 50,000,000.


<PAGE>

    Changes in the number of shares outstanding for the Company's common stock
are as follows:


                                            Class A    Class B
                                            Common     Common
                                             Stock      Stock
                                           ---------- ----------
Shares Outstanding, March 31, 1998            396,500 32,500,000
                                           ---------- ----------

Issuance of Class A common stock           19,816,667        ---
Exercise of Class A common stock warrant      731,624        ---
Conversion of Class B common stock for
 Class A common stock                       1,372,780  1,187,541
Other                                          58,500 (1,372,780)
                                           ---------- ----------
Shares Outstanding, December 31, 1998      22,376,071 32,314,761
                                           ---------- ----------

Issuance of Class A common stock            8,750,000        ---
Issuance of Class B common stock                  ---  5,181,350
Issuance of Class B common stock for
 warrant exercise                                 ---    413,530
Conversion of Class B common stock for
 Class A common stock                       2,538,182 (2,538,182)
Other                                         402,324        ---
                                           ---------- ----------
Shares Outstanding, December 31, 1999      34,066,587 35,371,459
                                           ---------- ----------

Issuance of Class A common stock for
 purchase of telecommunications network       330,000        ---
Issuance of Class A common stock for
 warrant exercise                             913,380        ---
Issuance of Class B common stock for
 warrant exercise                                 ---    209,056
Conversion of Class B common stock for
 Class A common stock                         436,656   (436,656)
Other                                         101,743        ---
                                           ---------- ----------
Shares Outstanding, December 31, 2000      35,848,366 35,143,859
                                           ========== ==========


   Warrants


    Class A Common Stock Warrants


    On February 12, 1998, the Company consummated an agreement with Lenfest
Telephony, Inc. ("Lenfest") whereby Lenfest received a warrant to obtain 731,624
shares of Class A common stock of the Company (the "Lenfest Warrant") in
exchange for its partnership interest in the Harrisburg, Pennsylvania network.
The Lenfest Warrant was exercised during May 1998 for no additional
consideration.


      Class B Common Stock Warrants


    The Class B common stock warrants were issued on April 15, 1996 in
connection with the issuance of the Senior Discount Notes (See Note 5).


      Adelphia Warrant


    On June 13, 1997, the Company entered into agreements with MCI. Pursuant to
these agreements the Company is designated MCI's preferred provider for new end
user dedicated access circuits and conversions of end user dedicated access
circuits as a result of conversions from the incumbent LEC in the Company's
markets. Adelphia Business Solutions also has certain rights of first refusal to
provide MCI with certain communications services. Under this arrangement, the
Company issued a warrant to purchase 913,380 shares of Class A common stock for
$6.15 per share to MCI (the "MCI Warrant") representing 2 1/2% of the common
stock of the Company on a fully diluted basis. MCI could receive additional
warrants to purchase up to an additional 6% of the shares of the Company's Class
A common stock, on a fully diluted basis, at fair value, if MCI met certain
purchase volume thresholds over the term of the agreement.


    In connection with the IPO and the related over-allotment option, the
Company and MCI entered into an agreement that provides as follows with respect
to the MCI Warrant and MCI's right to receive additional MCI warrants as a
result of the IPO (the "Additional MCI Warrants"): (i) the Additional MCI
<PAGE>

Warrants, totaling 508,121 shares, issued with respect to the shares sold to the
public in the IPO, the over-allotment option and with respect to the Adelphia
shares purchased will have an exercise price equal to the lower of $6.15 per
share or the price per share to the public in the IPO (the "IPO Price"), and
(ii) Adelphia purchased from MCI the MCI Warrant and the Additional MCI Warrants
for a purchase price equal to the number of Class A common stock shares issuable
under the warrants being purchased times the IPO Price minus the underwriting
discount, less the aggregate exercise price of such warrants. Furthermore, in
consideration of the obligations undertaken by Adelphia to facilitate the
agreements between MCI and Adelphia Business Solutions, the Company paid to
Adelphia a fee of $500 and issued a warrant to Adelphia, which expires three
years after its issuance, to purchase 200,000 shares of Class A common stock at
an exercise price equal to the IPO Price. During June 2000, Adelphia exercised a
warrant to purchase 913,380 shares of Class A Common Stock of the Company at a
price of $6.15 per share. Total proceeds to the Company were $5,611.


   Long Term Incentive Compensation Plan


    On October 3, 1996, the Board of Directors and stockholders of the Company
approved the Company's 1996 Long-Term Incentive Compensation Plan (the "1996
Plan"). The 1996 Plan provides for the grant of (i) options which qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, (ii) options which do not so qualify, (iii)
share awards (with or without restrictions on vesting), (iv) stock appreciation
rights and (v) stock equivalent or phantom units. The number of shares of Class
A common stock available for issuance initially was 5,687,500. Such number is to
increase each year by 1% of outstanding shares of all classes of the Company's
common stock, up to a maximum of 8,125,000 shares. Options, awards and units may
be granted under the 1996 Plan to directors, officers, employees and
consultants. The 1996 Plan provides the incentive stock options must be granted
with an exercise price of not less than the fair market value of the underlying
common stock on the date of grant. Options outstanding under the Plan may be
exercised by paying the exercise price per share through various alternative
settlement methods.


    In August 1999, the Company issued under the 1996 Plan to each of John J.
Rigas, Michael J. Rigas, Timothy J. Rigas and James P. Rigas (i) stock options
(the "Rigas Options") covering 100,000 shares of Class A common stock, which
options will vest in equal one-third amounts on the third, fourth and fifth year
anniversaries of grant (vesting conditioned on continued service as an employee
or director) and which shall be exercisable at $16.00 per share and (ii) stock
awards (the "Rigas Grants") covering 100,000 shares of Class A common stock,
which stock awards will vest in equal one-third amounts on the third, fourth and
fifth year anniversaries of grant (vesting conditioned on continued service as
an employee or director).


    In addition to the Rigas Options, certain employees have been granted
options to purchase shares of Class A common stock at prices equal to the fair
market value of the shares on the date the option was granted. Options are
exercisable beginning from immediately after granting and have a maximum term of
ten years.


<PAGE>

    The following table summarizes stock option activity under all plans:


                                            Number    Weighted
                                              of       Average
                                            shares    Exercise
                                            subject     price
                                              to         per
                                            options     share
                                           ---------  ---------
         Outstanding, December 31, 1998          ---  $     ---
         Granted                             600,417      15.13
                                           ---------
         Outstanding, December 31, 1999      600,417      15.13
         Granted                             216,050      32.71
                                           ---------
         Outstanding, December 31, 2000      816,467      19.78
                                           =========



    The following table summarizes information about stock options outstanding
and exercisable at December 31, 2000


                  Options outstanding           Options exercisable
--------------------------------------------- ----------------------------------
                       Weighted      Wiighetd             Weighted     Weighted
                        average       average              average     average
  Exercise     Number   remaining    exercise    Number   remaining    exercise
  price per      of    contractual    price        of     contractual   price
    share     shares   life (years) per share    shares  life (years) per share
------------  ------- ------------- --------- ---------- ------------ ----------
$8.69-$61.63  816,467     5.4         $19.78    361,667      6.9        $23.59




    SFAS No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123")
requires the Company to disclose pro forma information regarding option grants
made to its employees. SFAS 123 specifies certain valuation techniques that
produce estimated compensation charges that are included in the pro forma
results below. These amounts have not been reflected in the Company's statement
of operations, because the Company applies the provisions of APB 25, "Accounting
for Stock Issued to Employees," which specifies that no compensation charge
arises when the exercise price of the employees' stock options equals or exceeds
the market value of the underlying stock at the grant date, as in the case of
options granted to the Company's employees.


    SFAS 123 pro forma numbers are as follows:


                                                     Year Ended
                                                     December 31,
                                                ---------------------
                                                  1999        2000
                                                ---------   ---------
     Net loss-as reported                       $(165,466)  $(309,824)
     Net loss-pro  forma  applying SFAS 123      (167,800)   (315,726)
     Basic  and  diluted  net  loss per
      common share-as reported under ABP 25         (3.47)      (4.93)
     Basic  and  diluted  net  loss per
      common share-pro forma under SFAS 123         (3.51)      (5.01)


<PAGE>



    Under SFAS 123, the fair value of each option grant is estimated on the date
of the grant using the Black-Scholes option pricing model with the following
weighted average assumptions



                                         Employee Stock
                                            Options
                                           Year Ended
                                          December 31,
                                       1999          2000
                                     ---------- -------------
      Expected dividend yield              0%         0%
      Risk-free interest rate           6.93%   5.10% - 6.20%
      Expected volatility                 50%    106% - 116%
      Expected life (in years)            5.2        9.1

    The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion the existing models do not necessarily provide a reliable single measure
of the fair value of the Company's options.


      In addition to the stock options and Rigas Grants, the Company issued
58,500 and 98,500 shares of Class A common stock to certain employees for the
nine months ended December 31,1998 and the year ended December 31, 2000,
respectively, resulting in the recognition of $761 and $387 of compensation
expense, respectively.

7.    Commitments and contingencies

    The Company rents office space, node space and fiber under leases with terms
which are generally less than one year or under agreements that are generally
cancelable on short notice. Total rental expense under all operating leases
aggregated $1,893, $10,166 and $22,606 for the nine months ended December 31,
1998 and the years ended December 31, 1999 and 2000, respectively.


    The minimum future lease obligations under the noncancelable operating
leases as of December 31, 2000 are approximately:

                Period ending December 31,

                        2001                     $ 25,851
                        2002                       25,639
                        2003                       26,067
                        2004                       25,281
                        2005                       23,538
                        Thereafter                109,552

    During July 1999, the Company purchased the naming rights to the NFL
Football Tennessee Titans stadium in Nashville, Tennessee. The term of the
naming rights contract is for 15 years and requires the Company to pay $2,000
per year.


    The communications industry and Adelphia Business Solutions are subject to
extensive regulation at the federal, state and local levels. On February 8,
1996, President Clinton signed the Telecommunications Act of 1996
("Telecommunications Act"), the most comprehensive reform of the nation's
telecommunications laws since the Commununications Act of 1934. Management of
the Company is unable to predict the effect that the Telecommunications Act,
related rulemaking proceedings or other future rulemaking proceedings will have
on its business and results of operations in future periods.


    Adelphia Business Solutions has entered into a series of agreements with
several local and long-haul fiber optic network providers. These agreements
provide the Company with ownership or an IRU to local and long-haul fiber optic
<PAGE>

cable. The Company believes this will allow it to expand its business strategy
to include on-net provisioning of regional, local and long distance, internet
and data communications and to cost-effectively further interconnect its markets
in the eastern half of the United States.


    The estimated  obligations under these arrangements as of December 31, 2000
are approximately

                        2001                     $  111,270
                        2002                         22,408
                        2003                            895
                        2004                            897
                        2005                            898
                        Thereafter                   13,107

    In addition to the amounts due under the agreements for the fiber optic
cable, the Company is also required to pay certain fiber optic network providers
for pro-rated maintenance and rights of ways fees on a yearly basis.

8.    Related Party Transactions

    The following table summarizes the Company's transactions with related
parties:

                                            Nine
                                           Months
                                           Ended         Year Ended
                                          December       December 31,
                                             31,     -------------------
                                            1998       1999       2000
                                          --------   --------   --------
               Revenues:
                  Management fees         $  2,135   $  4,948   $  7,596
                  Telecommunications
                   service revenue             363      1,840      8,581
                  Network monitoring fees      586       ---        ---
                                          --------   --------   --------
                        Total             $  3,087   $  6,788   $ 16,177
                                          ========   ========   ========

               Interest Income            $  8,395   $  8,483   $  6,282
                                          ========   ========   ========

               Expense
                  Interest expense        $    737   $    ---   $  7,003
                  Allocated corporate
                   costs                     2,981      8,587     18,519
                  Fiber leases                 139        236        306
                  Amortization of
                   deferred debt
                   financing cost              ---        ---      1,800
                                          --------   --------   --------
                        Total             $  3,857   $  8,823   $ 27,628
                                          ========   ========   ========


    Management fees from related parties represent fees received by the Company
from its unconsolidated joint ventures for the performance of financial, legal,
regulatory, network design, construction and other administrative services.


    Telecommunications services revenue from related parties represents fees
received by the Company from Adelphia for providing switched services to various
Adelphia offices, including Coudersport, Pennsylvania.


    Network monitoring fees represent fees received by the Company for technical
support for the monitoring of each individual joint venture's telecommunications
system.


    Interest income represents interest charged on certain affiliate receivable
balances with joint ventures and with Adelphia.


    Interest expense relates to the Note payable-Adelphia and the Note Payable
(See Note 5).
<PAGE>


    Allocated corporate costs represent costs incurred by Adelphia on behalf of
the Company for the administration and operation of the Company. These costs
include charges for office space, corporate aircraft and shared services such as
finance activities, information systems, computer services, human resources, and
taxation. Such costs were estimated by Adelphia and do not necessarily represent
the actual costs that would be incurred if the Company were to secure such
services on its own.


    Fiber lease expense represents amounts paid to various subsidiaries of
Adelphia for the utilization of existing cable television plant for development
and operation of the consolidated operating networks.


    Amortization of deferred debt financing costs for the year ended December
31, 2000 relate to the amortization of the $15,000 placement fee paid to a
subsidiary of Adelphia.


    During the nine months ended December 31, 1998 and the years ended December
31, 1999 and 2000, the Company paid $1,044, $7,577 and $11,387 respectively, to
entities owned by certain shareholders of Adelphia primarily for property, plant
and equipment and services at market rates.


    During the nine months ended December 31, 1998 and the years ended December
31, 1999 and 2000, the Company made demand advances to Adelphia. At December 31,
1998, 1999 and 2000, $4,950, $392,629 and $0, respectively were outstanding
under this agreement. The Company received interest on such advances at a rate
of between 5.15% and 6.33%, which is included in interest income - affiliate in
the consolidated statement of operations. Demand advances represent cash held by
Adelphia's centralized cash management system immediately available to the
Company for any corporate purpose on demand.


    During December 2000, the Company sold to a subsidiary of Adelphia certain
network and telecommunications assets. The assets sold related to six markets in
Virginia, Colorado, California and Ohio which the Company has decided not to
pursue as part of the revised business plan. Network or market information
presented in this Form 10-K includes these six markets. The aggregate purchase
price for these transactions was approximately $87.5 million plus the assumption
of certain liabilities. The Company will manage these networks for Adelphia on a
going forward basis.


9.  Employee Benefit Plan

    The Company participates in the Adelphia 401(k) and stock value plan which
provides that eligible full-time employees may contribute from 2% to 16% of
their pre-tax compensation subject to certain limitations. The Company matches
contributions up to 1.5% of each participant's pre-tax compensation. For the
nine months ended December 31, 1998 and the years ended December 31, 1999 and
2000, the Company's matching contributions were $87, $401 and $855,
respectively. The 401(k) and stock value plans also provide for certain stock
incentive awards on an annual basis.


    In addition to the 401(k) and stock value plan, the Company participates in
an Adelphia stock incentive plan which provides certain management level
employees with compensation bonuses based on a weighted average of Adelphia
Class A common stock and Adelphia Business Solutions Class A common stock
performance. Costs to the Company associated with this plan were approximately
$1,746 and $261 for the years ended December 31, 1999 and 2000, respectively.


10.   Income Taxes

    For the nine months ended December 31, 1998 and the years ended December 31,
1999 and 2000, Adelphia Business Solutions will not be included within
Adelphia's consolidated federal income tax return. Deferred income taxes reflect
the net tax effects of (a) temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes and (b) operating loss carryforwards.


<PAGE>



     At December 31, 2000, the Company had net operating loss carryforwards for
federal income tax purposes of $573,127, which expire as follows:

  Year of expriation:

       2007  $   626     2012  $ 42,386     2017  $    ---
       2008    3,504     2013       ---     2018   106,783
       2009    4,840     2014       ---     2019   140,930
       2010    7,588     2015       ---     2020   251,176
       2011   15,294     2016       ---


    The  Company's  net  deferred  tax asset  included in other assets - net is
comprised of the following


                                                  December 31,
                                                  1999       2000
                                                ---------  ---------
            Deferred tax asset:
             Differences between book and tax
              basis of intangible assets        $   1,562  $   4,874
             Net operating loss carryforwards     142,993    234,685
             Allowance for doubtful accounts
              and other                             4,384     21,720
                                                ---------  ---------
                   Total                          148,939    261,279
             Valuation allowance                 (114,043)  (239,597)
                                                ---------  ---------
                   Total                           34,896     21,682
                                                ---------  ---------
           Deferred tax liabilities:
             Differences between book and tax
              basis of property, plant
              and equipment                        34,626     21,645
             Investment in partnerships               233        ---
                                                ---------  ---------
                   Total                           34,859     21,645
                                                ---------  ---------
             Net deferred tax asset             $      37  $      37
                                                =========  =========



    The net change in the valuation allowance for the years ended December 31,
1999 and 2000 was an increase of $65,297 and $125,554, respectively. The Company
recorded the valuation allowance to reduce the deferred tax asset to zero
because the Company does not believe that it is more likely than not that it
will realize its deferred tax asset.
<PAGE>


    Income tax expense for the nine months ended December 31, 1998 and the years
ended December 31, 1999 and 2000 are as follows:


                                 Nine
                                Months
                                Ended
                               December       Year Ended
                                  31,         December 31,
                                 1998      1999       2000
                               --------  --------   --------
            Current            $    ---  $      1   $    ---
            Deferred                ---       ---        ---
                               --------  --------   --------

                Total          $    ---  $      1   $    ---
                               ========  ========   ========


    A reconciliation of the statutory federal income tax rate and the Company's
effective income tax rate is as follows:


                                 Nine
                                Months
                                Ended
                               December      Year Ended
                                  31,        December 31,
                                 1998      1999       2000
                               --------  --------   --------
           Statutory federal
            income tax rate       35.0%     35.0%      35.0%
           Change in federal
            valuation allowance   (35.0)    (35.0)     (35.0)
           State taxes, net of
            federal benefit         ---       ---        ---
                               --------  --------   --------
           Income Tax Expense      ---%      ---%       ---%
                               ========  ========   ========




11.   Restructuring Charges

    During December, 2000, the Company initiated a plan to reduce its network
expansion plan from its former target of 175 to 200 markets nationwide by the
end of 2001 to a new target of approximately 80 markets, thereby canceling plans
to enter or continue operations in approximately 120 markets. In January, 2001,
the Company reduced its national staff by approximately 8% as a result of the
Company's revised business plan. Most of the affected employees were located in
markets in which the Company has stopped expansion. For the year ended December
31, 2000, the Company recorded a charge of approximately $5,420 to cover a
portion of the costs associated with this revised business plan. Approximately
$4,568 of the charge relates to cash expenses relating to the termination of
lease contracts in the eliminated markets.


    Approximately $852 of the charge relates to severance for certain executive
employees. No amounts were recorded for severance for terminated non-executive
employees as of December 31, 2000. In addition, no amounts were recorded for the
disposal of assets as most equipment deployed in the terminated markets can be
redeployed in the Company's surviving markets, at little or no incremental
costs.



<PAGE>

12.  Quarterly Financial Data (unaudited)

    The following tables summarize the financial results of the Company for each
of the quarters in the years ended December 31, 1999 and 2000:
<TABLE>
<CAPTION>


                                                              Three Months Ended
Year Ended December 31, 1999               March 31      June 30       September 30    December 31
                                         ------------  ------------    ------------    ------------

<S>                                      <C>             <C>           <C>             <C>
Revenues .............................   $     21,438    $   34,215    $     43,347    $     55,575
                                         ------------  ------------    ------------    ------------
Operating expenses:
   Network operations ................          8,504        11,671          15,862          22,488
   Selling, general and administrative         21,009        32,637          39,972          48,997
   Depreciation and amortization .....         13,535        13,586          18,168          19,955
                                         ------------  ------------    ------------    ------------
     Total ...........................         43,048        57,894          74,002          91,440
                                         ------------  ------------    ------------    ------------

Operating loss .......................        (21,610)      (23,679)        (30,655)        (35,865)

Other income (expense):
   Interest income ...................          1,998        14,780           2,867             288
   Interest income - affiliate .......          2,828         2,779           1,336           1,540
   Interest expense ..................        (15,533)      (21,805)        (19,045)        (17,931)
                                         ------------  ------------    ------------    ------------
Loss before income taxes and
 equity in net loss of joint ventures         (32,317)      (27,925)        (45,497)        (51,968)
Income tax (expense) benefit .........           --              (4)           --                 3
                                         ------------  ------------    ------------    ------------
Loss before equity in net loss of
 joint ventures ......................        (32,317)      (27,929)        (45,497)        (51,965)

Equity in net loss of joint ventures .         (3,803)       (3,291)           (246)           (418)
                                         ------------  ------------    ------------    ------------
Net loss .............................        (36,120)      (31,220)        (45,743)        (52,383)

Dividend requirements applicable
 to preferred stock ..................         (7,479)       (7,720)         (7,979)         (8,450)
                                         ------------  ------------    ------------    ------------
Net loss applicable to common
 stockholders ........................   $    (43,599)   $  (38,940)   $    (53,722)   $    (60,833)
                                         ============    ==========    ============    ============

Basic and diluted net loss per
 weighted average share
 of common stock .....................   $      (0.79)   $    (0.70)   $      (0.97)   $      (1.01)
                                         ============    ==========    ============    ============

Weighted average shares of common
 stock outstanding (in thousands) ....         55,497        55,497          55,497          60,453
                                         ============    ==========    ============    ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                              Three Months Ended
Year Ended December 31, 2000               March 31      June 30       September 30    December 31
                                         ------------  ------------    ------------    ------------

<S>                                      <C>           <C>             <C>             <C>
Revenues .............................   $     69,301  $     80,214    $     93,551    $    108,908
                                         ------------  ------------    ------------    ------------

Operating expenses:
   Network operations ................         33,732        41,661          50,893          57,028
   Selling, general and administrative         58,846        63,348          67,205          87,799
   Restructuring charges .............           --             --             --             5,420
   Depreciation and amortization .....         19,438        26,689          27,103          41,384
                                         ------------  ------------    ------------    ------------
     Total ...........................        112,016       131,698         145,201         191,631
                                         ------------  ------------    ------------    ------------

Operating loss .......................        (42,715)      (51,484)        (51,650)        (82,723)

Other income (expense):
   Interest income ...................            404         1,020           1,247           1,229
   Interest income - affiliate .......          5,023         1,259            --              --
   Interest expense ..................        (12,930)      (15,264)        (14,557)        (38,822)
   Interest expense -  affiliate .....            --            --           (2,191)         (4,812)
                                         ------------  ------------    ------------    ------------

Loss before income taxes and
 equity in net (loss) income of joint
 ventures and extraordinary gain .....        (50,218)      (64,469)        (67,151)       (125,128)

Income tax expense ...................             --           --             --              --
                                         ------------  ------------    ------------    ------------
Loss before equity in net (loss)
 income of joint ventures ............        (50,218)      (64,469)        (67,151)       (125,128)

Equity in net (loss) income of
 joint ventures ......................           (105)         (346)            381          (2,788)
                                         ------------  ------------    ------------    ------------
Net loss .............................        (50,323)      (64,815)        (66,770)       (127,916)

Dividend requirements applicable
 to preferred stock ..................         (8,497)       (8,771)         (9,053)         (9,344)
                                         ------------  ------------    ------------    ------------
Net loss applicable to common
 stockholders ........................   $    (58,820) $    (73,586)   $    (75,823)   $   (137,260)
                                         ============  ============    ============    ============

 Basic and diluted net loss per
  weighted average share
  of common stock ....................   $      (0.85) $      (1.06)   $      (1.08)   $      (1.94)
                                         ============  ============    ============    ============

Weighted average shares of common
 stock outstanding (in thousands) ....         69,431        69,503          70,531          70,683
                                         ============  ============    ============    ============

</TABLE>
<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE
      None.


PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information set forth above in Part 1 under the caption "Executive
Officers of the Registrant" is incorporated herein by reference. The other
information required by this item is incorporated herein by reference to the
information set forth under the caption "Election of Directors" and the
information, if any, under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance," in the Company's definitive proxy statement for the 2001
Annual Meeting of Stockholders to be filed pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended, or by reference to a filing
amending this Form 10-K.


ITEM 11.  EXECUTIVE COMPENSATION

    The information required by this item is incorporated herein by reference to
the information set forth under the caption "Executive Compensation" in the
Company's definitive proxy statement for the 2001 Annual Meeting of Stockholders
to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934,
as amended, or by reference to a filing amending this Form 10-K.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this item is incorporated herein by reference to
the information set forth under the caption "Principal Stockholders" in the
Company's definitive proxy statement for the 2001 Annual Meeting of Stockholders
to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934,
as amended, or by reference to a filing amending this Form 10-K.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this item is incorporated herein by reference to
the information set forth under the caption "Certain Transactions" in the
Company's definitive proxy statement for the 2001 Annual Meeting of Stockholders
to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934,
as amended, or by reference to a filing amending this Form 10-K.


PART IV

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

    Financial Statements, schedules and exhibits not listed have been omitted
where the required information is included in the consolidated financial
statements or notes thereto, or is not applicable or required.


(a)(1) A listing of the consolidated financial statements, notes and independent
auditors' report required by Item 8 are listed in the index in Item 8 of this
Form 10-K

(2)   Financial  Statement  Schedules:  Schedule II - Valuation and  Qualifying
       Accounts

(3)   Exhibits


<PAGE>


                          SCHEDULE II
       ADELPHIA BUSINESS SOLUTIONS, INC AND SUBSIDIARIES
               VALUATION AND QUALIFYING ACCOUNTS
                    (Dollars in thousands)

                                Balance     Charged
                                  at          to                   Balance
                               Beginning     Costs                 at End
                                  of          and     Deductions     of
                                Period     Expenses   Write-Offs    Period
                              -----------  ---------  ----------  ---------

Nine Months Ended
 December 31, 1998

Allowance for doubtful
 accounts                     $       ---  $   1,128  $      ---  $   1,128
                              ===========  =========  ==========  =========

Valuation allowance for
 deferred tax assets          $    17,379  $  31,367  $      ---  $  48,746
                              ===========  =========  ==========  =========

Year Ended December 31, 1999

Allowance for doubtful
 accounts                     $     1,128  $   8,512  $     ---   $   9,640
                              ===========  =========  ==========  =========

Valuation allowance for
 deferred tax assets          $    48,746  $  65,297  $      ---  $ 114,043
                              ===========  =========  ==========  =========

Year Ended December 31, 2000

Allowance for doubtful
 accounts                     $     9,640  $  64,032  $  (25,159) $  48,513
                              ===========  =========  ==========  =========

Valuation allowance for
 deferred tax assets          $   114,043  $ 125,554  $      ---  $ 239,597
                              ===========  =========  ==========  =========

<PAGE>




EXHIBIT NO.                         DESCRIPTION

    3.1      Certificate of Incorporation of Registrant, together with
             all amendments thereto. (Incorporated herein by reference
             is Exhibit 3.01 to Registrant's Report on Form 10-Q for
             the Quarter Ended September 30, 1999.) (File No. 0-21605)

    3.2      Bylaws of Registrant, as amended (Incorporated herein by
             reference is Exhibit 3.2 to Registrant's Report on Form
             10-K for the Year Ended December 31, 1999.) (File No.
             0-21605)


    4.1      Indenture, dated as of April 15, 1996, between the
             Registrant and Bank of Montreal Trust Company.
             (Incorporated herein by reference is Exhibit 4.1 to
             Registration Statement No. 333-06957 on Form S-4.)

    4.2      First Supplemental Indenture, dated as of September 11, 1996,
             between, the Registrant and Bank of Montreal Trust Company,
             regarding the Registrant's 13% Senior Discount Notes due 2003.
             (Incorporated herein by reference is Exhibit 4.2 to Statement No.
             333-12619 on Form S-4.)

    4.3      Form of 13% Senior Discount Note. (Incorporated herein
             reference is Exhibit 4.3 to Registration Statement No.
             333-12619 on Form S-4.)

    4.4      Form of Class A Common Stock Certificate. (Incorporated
             herein by reference is Exhibit 4.1 to Registrant's
             Registration Statement on Form 8-A, dated October 23,
             1996.) (File No. 0-21605)

    4.5      Indenture, dated as of August 27, 1997, with respect to the
             Registrant's 12 1/4% Senior Secured Notes due 2004, between the
             Registrant and the Bank of Montreal Trust Company. (Incorporated
             herein by reference is Exhibit 4.01 to Form 8-K dated August 27,
             1997.) (File No.
             0-21605)

    4.6      Form of 12 1/4% Senior Secured Note due 2004 (contained
             in Exhibit 4.5.)

    4.7      Pledge Agreement between the Registrant and the Bank of
             Montreal Trust Company as Collateral Agent, dated as of
             August 27, 1997.  (Incorporated herein by reference is
             Exhibit 4.03 to Form 8-K dated August 27, 1997.) (File
             No. 0-21605)

    4.8      Pledge, Escrow and Disbursement Agreement, between the
             Registrant and the Bank of Montreal Trust Company, dated
             as of August 27, 1997. (Incorporated herein by reference
             is Exhibit 4.05 to Form 8-K dated August 27, 1997.) (File
             No. 0-21605)

    4.9      Second Supplemental Indenture, dated as of August 27, 1997, between
             the Registrant and the Bank of Montreal Trust Company, regarding
             the Registrant's 13% Senior Discount Notes due 2003. (Incorporated
             herein by reference is Exhibit 4.06 to Form 8-K dated August 27,
             1997.) (File No. 0-21605)

    4.10     Certificate of Designation for 12 7/8% Series A and
             Series B Senior Exchangeable Redeemable Preferred Stock
             due 2007.  (Contained in Exhibit 3.01 to Registrant's
             Current Report on Form 8-K for the event dated October 9,
             1997 which is incorporated herein by reference.) (File
             No. 0-21605)
<PAGE>

    4.11     Form of Certificate for 12 7/8% Senior Exchangeable Redeemable
             Preferred Stock due 2007. (Incorporated herein by reference is
             Exhibit 4.02 to the Registrant's Current Report on Form 8-K the
             event dated October 9, 1997.)
             (File No. 0-21605)

    4.12     Form of Indenture, with respect to the Registrant's 12
             7/8% Senior Subordinated Exchange Debentures due 2007.
             (Contained as Annex A in Exhibit 3.01 to Registrant's
             Current Report on Form 8-K for the event dated October 9,
             1997 which is incorporated herein by reference.) (File
             No. 0-21605)

    4.13     Indenture dated as of March 2, 1999, with respect to Hyperion
             Telecommunications, Inc. 12% Senior Subordinated Notes due 2007,
             between Hyperion and the Bank of Montreal Trust Company
             (Incorporated by reference herein is Exhibit 4.01 to the Current
             Report on Form 8-K for Adelphia Communications Corporation filed on
             March 10, 1999.) (File No. 0-16014)

    4.14     Form of 12% Senior Subordinated Notes due 2007 (Contained
             in Exhibit 4.13)

    4.15     Third Supplemental Indenture to the Indenture, dated as of April
             15, 1996, for the Company's 13% Senior Discount Notes due 2003
             (incorporated by reference herein is Exhibit 4.01 to the
             Registrant's Current Report on Form 8-K for the event dated
             February 14, 2001 filed on February 22, 2001.)(File No. 0-21605).

    4.16     First Supplemental Indenture to the Indenture, dated as of August
             27, 1997, for the Company's 12-1/4% Senior Secured Notes due 2004
             (incorporated by reference herein is Exhibit 4.02 to the
             Registrant's Current Report on Form 8-K for the event dated
             February 14, 2001 filed on February 22, 2001.)(File No. 0-21605).

    10.1     Underwriting Agreement dated as of November 23, 1999
             among Adelphia Business Solutions, Inc., Salomon Smith
             Barney Inc. and the several other Underwriters named
             therein (incorporated herein by reference is Exhibit 1.01
             to the Registrant's Form 8-K for the event dated November
             23, 1999.)(File No. 0-21605)

    10.2     Stock Purchase Agreement dated November 23, 1999 between Adelphia
             Business Solutions, Inc. and Adelphia Communications Corporation
             (incorporated herein by reference is Exhibit 10.01 to the
             Registrant's Form 8-K for the event dated November 23, 1999.)(File
             No. 0-21605)

    10.3     Asset Purchase Agreement dated as of December 29, 2000
             between Adelphia Business Solutions Operations, Inc. and
             ACC Operations, Inc. (Filed herewith)

    10.4     Pre-Incorporation and Shareholder Restrictive Agreement
             between Adelphia, Paul D. Fajerski, Charles R. Drenning
             and Randolph S. Fowler. (Incorporated herein by reference
             is Exhibit 10.5 to Registration Statement No. 333-06957
             on Form S-4.)

    10.5     Letter Agreement dated March 19, 1996 between the
             Registrant, Charles R. Drenning, Paul D. Fajerski,
             Randolph S. Fowler and Adelphia. (Incorporated herein by
             reference is Exhibit 10.12 to Registration Statement No.
             333-06957 on Form S-4.)

    10.6     Warrant Agreement dated as of April 15, 1996, by and
             among Hyperion Telecommunications, Inc. and Bank of
             Montreal Trust Company. (Incorporated herein by reference
             is Exhibit 10.13 to Registration Statement No. 333-06957
             on Form S-4.)
<PAGE>

    10.7     Warrant Registration Rights Agreement dated as of April
             15, 1996, by and among Hyperion Telecommunications, Inc.
             and the Initial Purchasers. (Incorporated herein by
             reference is Exhibit 10.14 to Registration Statement No.
             333-06957 on Form S-4.)

    10.8     Form of Management Agreement. (Incorporated herein by
             reference is Exhibit 10.15 to Registration Statement No.
             333-06957 on Form S-4.)

   10.9*     Employment Agreement between Hyperion Telecommunications,
             Inc. and Daniel R. Milliard dated as of March 4, 1997.
             (Incorporated herein by reference is Exhibit 10.03 to
             Current Report on Form 8-K of Adelphia Communications
             Corporation dated May 1, 1997.) (File Number 0-16014)

   10.10*    1996 Long-Term Incentive Compensation Plan. (Incorporated
             herein by reference is Exhibit 10.17 to Registration
             Statement No. 333-13663 on Form S-1.)

   10.11     Registration Rights Agreement among Charles R. Drenning,
             Paul D. Fajerski, Randolph S. Fowler, Adelphia
             Communications Corporation and the Company. (Incorporated
             herein by reference is Exhibit 10.18 to Registration
             Statement No. 333-13663 on Form S-1.)

   10.12     Registration Rights Agreement between Adelphia
             Communications Corporation and the Company. (Incorporated
             herein by reference is Exhibit 10.19 to Registration
             Statement No. 333-13663 on Form S-1.)

   10.13     Extension Agreement dated as of January 8, 1997, among
             Hyperion Telecommunications, Inc., Adelphia
             Communications Corporation, Charles R. Drenning, Paul D.
             Fajerski, Randolph S. Fowler, and six Trusts named
             therein. (Incorporated herein by reference is Exhibit
             10.04 to Current Report on Form 8-K of Adelphia
             Communications Corporation dated May 1, 1997.) (File
             Number 0-16014)

   10.14*    Management Services Agreement dated as of April 10, 1998, between
             Adelphia Communications Corporation and the Registrant
             (Incorporated herein by reference is Exhibit 10.23 to Registration
             Statement No. 333-48209 on Form S-1.)

   10.15     Letter Agreement dated April 10, 1998, among the
             Registrant, Adelphia Communications Corporation and
             MCImetro Access Transmission Services, Inc. (Incorporated
             herein by reference is Exhibit 10.24 to Registration
             Statement No. 333-48209 on Form S-1.)

   10.16     Amendment to Registration Rights Agreement dated as of April 15,
             1998, between the Registrant and Adelphia Communications
             Corporation (Incorporated herein by reference is Exhibit 10.25 to
             Registration Statement No.
             333-48209 on Form S-1.)

   10.17     Management Agreement dated as of December 29, 2000
             between Adelphia Business Solutions Operations, Inc. and
             ACC Operations, Inc. (Filed herewith)

   10.18     Warrant issued to MCI dated May 8, 1998 (Incorporated
             herein by reference is Exhibit 10.03 to the Registrant's
             Current Report on Form 8-K dated June 24, 1998.) (File
             No. 0-21605)
<PAGE>

   10.19     Warrant issued in favor of Adelphia Communications Corporation
             dated June 5, 1998 (Incorporated herein by reference is Exhibit
             10.04 to the Registrant's Current Report on Form 8-K dated June 24,
             1998.) (File No.
             0-21605)

   10.20     Credit Agreement dated as of April 14, 2000, among
             Century Cable Holdings, LLC, Ft. Myers Cablevision, LLC,
             and Highland Prestige Georgia, Inc., Bank of America,
             N.A. and the Chase Manhattan Bank, Co-Administrative
             Agents and Toronto Dominion (Texas), Inc., Syndication
             Agent (Incorporated by reference herein is Exhibit 10.01
             to the Form 10-Q of Adelphia Communications Corporation
             for the Quarter ended March 31, 2000 (File No. 0-16014).

    21.1     Subsidiaries of the Registrant (Filed herewith)

    23.1     Consent of Deloitte & Touche LLP (Filed herewith).

    99.1     "Schedule E - Form of Financial Information and Operating
             Data of the Subsidiaries and
             the Joint Ventures Presented by Cluster". (Filed herewith)

    99.2     "Schedule F - Form of Financial Information and Operating
             Data of the Pledged Subsidiaries
             and the Joint Ventures. (Filed herewith)

    99.3     Press Release Dated March 30, 2001. (Filed herewith)

    99.4     Press Release of Adelphia Business Solutions dated February 14,
             2001 (incorporated by reference herein is Exhibit 99.01 to the
             Registrant's Current Report on Form 8-K for the event dated
             February 14, 2001 filed on February 22, 2001.)(File No. 0-21605).

    99.5     Class A Common Stock Subscription Certificate for Rights Offering
             (incorporated by reference herein is Exhibit 99.07 to the
             Registrant's Current Report on Form 8-K for the event dated
             February 14, 2001 filed on February 22, 2001.)(File No. 0-21605).

    99.6     Class B Common Stock Subscription Certificate for Rights Offering
             (incorporated by reference herein is Exhibit 99.08 to the
             Registrant's Current Report on Form 8-K for the event dated
             February 14, 2001 filed on February 22, 2001.)(File No. 0-21605).


----------------------
* Denotes management contracts and compensatory plans and arrangements required
to be identified by Item 14(a)(3).


<PAGE>

    The Registrant will furnish to the Commission upon request copies of
instruments not filed herewith which authorize the issuance of long-term
obligations of Registrant not in excess of 10% of the Registrant's total assets
on a consolidated basis.


    (b) During the three months ended December 31, 2000, the Registrant filed no
Form 8-K reports.


    (c) The Company hereby files as exhibits to this Form 10-K the exhibits set
forth in Item 14(a)(3) hereof which are not incorporated by reference.


    (d) The Company hereby files as financial statement schedules to this Form
10-K the financial statement schedules set forth in Item 14(a)(2) hereof.


<PAGE>

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                 ADELPHIA BUSINESS SOLUTIONS, INC.

April 2, 2001                    By:    /s/ James P. Rigas
                                        James P. Rigas,
                                        President


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


April 2, 2001                    /s/ John J. Rigas
                                 John J. Rigas,
                                 Chairman and Director

April 2, 2001                    /s/ Timothy J. Rigas
                                 Timothy J. Rigas,
                                 Vice Chairman, Treasurer, Chief Financial
                                 Officer and Director

April 2, 2001                    /s/ Michael J. Rigas
                                 Michael J. Rigas,
                                 Vice Chairman, Secretary and Director

April 2, 2001                    /s/ James P. Rigas
                                 James P. Rigas,
                                 Vice Chairman, Chief Executive Officer,
                                 President and Director

April 2, 2001                    /s/ Pete J. Metros
                                 Pete J. Metros,
                                 Director

April 2, 2001                    /s/ James L. Gray
                                 James L. Gray,
                                 Director

April 2, 2001                    /s/ Edward S. Mancini
                                 Edward S. Mancini,
                                 Director

April 2, 2001                    /s/ Peter L. Venetis
                                 Peter L. Venetis,
                                 Director

<PAGE>


                                 EXHIBIT 21.1

                          SUBSIDIARIES OF REGISTRANT

      Adelphia Business Solutions, Inc. (Delaware)

      Adelphia Business Solutions Operations, Inc. (Delaware)

      Adelphia Business Solutions, L.L.C.  (Delaware)

      Adelphia Business Solutions General Holdings, Inc. (Delaware)

      Adelphia Business Solutions Capital, Inc. (Delaware)

      Adelphia Business Solutions Long Haul, L.P. (Delaware)

      Adelphia Business Solutions International, L.L.C. (Delaware)

      Adelphia Business Solutions Investment, LLC (Delaware)

      Adelphia Business Solutions of Connecticut, Inc. (Delaware)

      Adelphia Business Solutions of Delaware, L.L.C. (Delaware)

      Adelphia Business Solutions of District of Columbia, L.L.C. (Delaware)

      Adelphia Business Solutions of Florida, Inc. (Florida)

      Adelphia Business Solutions of Jacksonville, Inc. (Florida)

      Adelphia Business Solutions of Illinois, Inc. (Delaware)

      Adelphia Business Solutions of Kentucky, Inc. (Delaware)

      Adelphia Business Solutions of Louisiana, Inc. (Delaware)

      Adelphia Business Solutions of Louisiana, LLC (Delaware)

      Adelphia Business Solutions of Massachusetts, Inc. (Delaware)

      Adelphia Business Solutions of Michigan, Inc. (Delaware)

      Adelphia Business Solutions of Nashville, L.P. (California)

      Adelphia Business Solutions of New Hampshire, Inc. (Delaware)

      Adelphia Business Solutions of New Jersey, L.L.C. (Delaware)

      Adelphia Business Solutions of New York, Inc. (Delaware)

      Adelphia Business Solutions of Eastern New York, Inc. (Delaware)

      Adelphia Business Solutions of North Carolina, L.P. (Delaware)

      Adelphia Business Solutions of Ohio, Inc. (Delaware)

      Adelphia Business Solutions of Pennsylvania, Inc. (Delaware)
<PAGE>

      Adelphia Business Solutions of Rhode Island, Inc. (Delaware)

      Adelphia Business Solutions of South Carolina, Inc. (Delaware)

      Adelphia Business Solutions of Tennessee, Inc. (Delaware)

      Adelphia Business Solutions of Texas, L.P. (Delaware)

      Adelphia Business Solutions of Vermont, Inc. (Delaware)

      Adelphia Business Solutions of Virginia, L.L.C. (Virginia)

      Susquehanna Adelphia Business Solutions (Pennsylvania General Partnership)
        (50%)

      PECO Hyperion Telecommunications (Pennsylvania General Partnership) (50%)

      Structus Technology, Inc. (South Carolina)

<PAGE>


INDEPENDENT AUDITORS' CONSENT

We consent to the  incorporation by reference in  Post-Effective  Amendment No.
2 to  Registration  Statement No.  333-12619 on Form S-3  (formerly  Form S-1),
Registration  Statement No. 333-11142  (formerly No. 333-88927) on Form S-3 and
Registration   Statement  No.  333-62539  on  Form  S-8  of  Adelphia  Business
Solutions,  Inc., of our report dated March 22, 2001,  appearing in this Annual
Report on Form 10-K of Adelphia  Business  Solutions,  Inc.  for the year ended
December 31, 2000.





/s/ DELOITTE & TOUCHE LLP


   Pittsburgh, Pennsylvania
   March 30, 2001







<PAGE>

<TABLE>
<CAPTION>

                                                                   Exhibit 99.1

                              SCHEDULE E

                   Adelphia Business Solutions, Inc.

           Form of Financial Information and Operating Data
    Of the Subsidiaries and the Joint Ventures Presented by Cluster

Data presented for the quarter ended: 12/31/00

                                                                             ***
Unaudited                                                                   Other
                              North East   Mid-Atlantic    Mid-South       Markets         Total
                             ------------  ------------  -------------  -------------  -------------
FINANCIAL DATA (dollars in thousands):

<S>                          <C>           <C>           <C>            <C>            <C>
Total Revenue                $   18,915.0  $   59,929.6  $    21,595.5  $    20,602.1  $   121,042.2
Total Capital Expenditures   $   15,453.5  $   56,267.9  $    32,515.5  $    83,327.9  $   187,564.8
Total EBITDA                 $    1,253.8  $    4,584.1  $    (2,093.4) $    (5,445.0) $    (1,700.5)

Gross PP&E                   $  173,152.8  $  823,549.0  $   287,228.9  $   589,483.3  $ 1,873,414.0

Proportional Revenue*        $   18,915.0  $   51,628.7  $    21,595.5  $    20,602.1  $   112,741.3
Proportional Capital
 Expenditures*               $   15,453.5  $   53,114.6  $    32,515.5  $    83,327.9  $   184,411.5
Proportional EBITDA*         $    1,253.8  $    4,796.9  $    (2,093.4) $    (5,445.0) $    (1,487.7)

Proportional Gross PP&E      $  173,152.8  $  750,755.2  $   287,228.9  $   589,483.3  $ 1,800,620.2

STATISTICAL DATA Increase for December 31, 2000:
Markets in Operation                  ---            (1)            (1)            (2)            (4)
Route Miles                           ---           501             89            ---            590
Fiber Miles                           ---         9,189         13,175            ---         22,364
Buildings connected                    27            39            (61)             7             12
LEC-Cos collocated**                  ---            10              7            ---             17
Voice Grade Equivalent
 Circuits                             ---           ---        (40,992)           ---        (40,992)

As of September 30, 2000:
Markets in Operation***                15            31             16             17             79
Route Miles                         3,598         5,000          4,191          4,623         17,412
Fiber Miles                       111,277       194,704        108,067        146,281        560,329
Buildings connected                   800           985            833            543          3,161
LEC-Cos collocated**                   22           112             69             79            282
Voice Grade Equivalent
 Circuits                         407,232     1,620,192        767,424        544,992      3,339,840

As of December 31, 2000:
Markets in Operation                   15            30             15             15             75
Route Miles                         3,598         5,501          4,280          4,623         18,002
Fiber Miles                       111,277       203,893        121,242        146,281        582,693
Buildings connected                   827         1,024            772            550          3,173
LEC-Cos collocated**                   22           122             76             79            299
Voice Grade Equivalent
 Circuits                         407,232     1,620,192        808,416        544,992      3,380,832
<FN>

* Represents portion attributable to the Company.
** Local Exchange Carrier's central office
*** Other Markets amounts include, among other things, Network
    Control Centers and Corporate Capital Expenditures
    And Gross Property, Plant and Equipment
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                                   Exhibit 99.2


                          SCHEDULE F

              Adelphia Business Solutions, Inc.

       Form of Financial Information and Operating Data
      of the Pledged Subsidiaries and the Joint Ventures

Data presented for the quarter ended:                12/31/00

                          Unaudited

                                                         Total
FINANCIAL DATA (dollars in thousands)(a):
<S>                                                  <C>
Total Revenue                                        $   34,723.9
Total Capital Expenditures                           $   19,820.0
Total EBITDA                                         $    9,330.5

 Gross Property, Plant & Equipment                   $  361,795.8

STATISTICAL DATA(b):
As of December 31, 2000:
Markets in Operation                                            7
Route Miles                                                 3,672
Fiber Miles                                               168,523
Buildings connected                                         1,654
LEC-COs collocated                                             63
Voice Grade Equivalent Circuits                         1,289,568
<FN>

(a) Financial Data represents 100% of the operations of all entities except
Adelphia Business Solutions of Florida, at its ownership in the Jacksonville
network, which is 20%.

(b) Statistical Data represents 100% of
operating data for all entities.
</FN>
</TABLE>