UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q
                                   (Mark One)

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

          For the quarterly period ended March 31, 2001

                              or

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

          For the transition period from..................to.................

                       Commission file number 0-29536
                                              --------

                                AT&T CANADA INC.

             (exact name of registrant as specified in its charter)

              Canada                                    43-1656187
              ------                                    ----------
          (State or other jurisdiction of       (Employer identification No.)
           incorporation or organization)

                           200 Wellington Street West
                            Toronto, Ontario, Canada
                                     M5V 3G2
                    (Address of principal executive offices)
                                   (Zip code)

                                 (416) 345-2000
              (Registrant's telephone number, including area code)


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............

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

                       Class                    Outstanding at April 17, 2001
                ----------------------          -----------------------------
                Class A Voting Shares                   309,064
                Class A Deposit Receipts (1)            236,924
                Class B Non-Voting Shares               97,765,207
                Class B Deposit Receipts (2)            97,765,207

         (Former Name, former address and former fiscal year if changed
                               since last report)
         --------------------------------------------------------------

--------

(1)  The Class A Deposit Receipts represent a beneficial  interest in 236,924 of
     the 309,064 Class A Voting Shares  referred to above.

(2)  The  Class B  Deposit  Receipts  represent  a  beneficial  interest  in the
     97,765,207 Class B Non-Voting Shares referred to above.


<PAGE>



INDEX

PART I.    FINANCIAL INFORMATION                                        Page
                                                                       Number

Item 1.     Financial Statements                                         3

            Consolidated Balance Sheets                                  3

            Consolidated Statements of Operations and Deficit            4

            Consolidated Statement of Cash Flows                         5

            Notes to Consolidated Financial Statements                   6-13

Item 2.     Management's Discussion and Analysis of Financial            14-18
            Condition and Results of Operations



PART II.   OTHER INFORMATION

Item 1.     Legal Proceedings                                            19

Item 2.     Changes in Securities and Use of Proceeds                    19

Item 3.     Defaults Upon Senior Securities                              19

Item 4.     Submission of Matters to a Vote of Security Holders          19

Item 5.     Other Information                                            19

Item 6.     Exhibits and Reports on Form 6-K                             19

SIGNATURES                                                               20































                                       2
<PAGE>

PART I.  Financial Information

         Item 1.  Financial Statements

                                AT&T Canada Inc.
                      Interim Consolidated Balance Sheets
                       (in thousands of Canadian dollars)
                                  (Unaudited)


                                          March 31,           December 31,
                                            2001                2000
                                         -----------         ------------
                                         (unaudited)         (audited)


Assets

Current assets:
      Cash and short term deposits       $  793,028           $   68,587
      Accounts receivable                   210,953              242,161
      Other current assets                   20,494               12,922
                                         ----------           ----------
                                          1,024,475              323,670

Property, plant and equipment             2,169,887            2,120,659
Goodwill                                  1,678,996            1,705,155
Deferred pension asset                       10,774               10,626
Deferred foreign exchange                   204,468               40,853
Other assets, net                           116,941              112,691
                                         ----------           ----------
                                         $5,205,541           $4,313,654


Liabilities and Shareholders' Equity

Current liabilities:
      Accounts payable                   $   55,251           $   78,961
      Accrued liabilities                   267,322              270,640
      Accrued interest payable               25,829               43,589
      Income taxes payable                    3,614                3,655
      Current portion of long term debt
        (note 3)                              2,096                2,210
                                         ----------           ----------
                                            354,112              399,055


Long term debt (note 3)                   4,716,937            3,628,465
Other long term liabilities                  27,174               26,581


Shareholders' equity
      Common shares                       1,054,509            1,039,065
      Warrants                                  988                1,192
      Deficit                              (948,179)            (780,704)
                                         ----------           ----------
                                            107,318              259,553
                                         ----------           ----------
                                         $5,205,541           $4,313,654
                                         ==========           ==========

 See accompanying condensed Notes to Interim Consolidated Financial Statements


                                       3
<PAGE>


                                AT&T Canada Inc.
           Interim Consolidated Statements of Operations and Deficit
                       (in thousands of Canadian dollars)
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                  Three months ended
                                                                       March 31
                                                                  2001            2000
                                                                  ----            ----

<S>                                                            <C>              <C>
Revenue                                                        $  387,864       $ 364,029

Expenses
   Service costs                                                  247,191         249,463
   Selling, general and administrative                            109,114          92,464
                                                               ----------       ---------
                                                                  356,305         341,927

Earnings before interest, taxes,
  depreciation, amortization and integration costs                 31,559          22,102

Depreciation and amortization                                     108,348          86,944
                                                               ----------       ---------

Loss from operations                                              (76,789)        (64,842)

Other income (expense):
   Other income                                                    (2,069)             --
   Interest income                                                  1,509           5,666
   Interest expense                                               (88,296)        (72,640)
                                                               ----------       ---------

Loss before minority interest and income taxes                    (165,645)       (131,816)

   Minority interest                                                   --          30,601
   Provision for income taxes                                      (1,830)         (1,593)
                                                               ----------       ---------

Loss for the period                                              (167,475)       (102,808)

Deficit, beginning of period                                     (780,704)       (257,497)
                                                               ----------       ---------
Deficit, end of period                                         $ (948,179)      $(360,305)
                                                               ==========       ==========
Basic and diluted loss per common share                        $    (1.73)      $   (1.09)
                                                               ----------       ----------

Weighted average number of
common shares outstanding (in thousands)                           96,777           94,580
                                                               ----------       ----------

Fully diluted weighted average shares outstanding
(in thousands)                                                    143,199          144,733
                                                               ==========       ==========


             See accompanying condensed Notes to Interim Consolidated Financial Statements
</TABLE>


                                       4
<PAGE>

<TABLE>
<CAPTION>

                                AT&T Canada Inc.
                  Interim Consolidated Statement of Cash Flows
                       (in thousands of Canadian dollars)
                                  (unaudited)

                                                                      Three months ended
                                                                            March 31
                                                                      2001           2000
                                                                  ------------  ------------
Cash provided by (used in):
Operating activities:
<S>                                                             <C>             <C>
    Loss for the period                                         $   (167,475)   $   (102,808)
    Adjustments required to reconcile loss to
    cash flows from operating activities:
        Depreciation and amortization                                108,348          86,944
        Accretion of senior discount note interest                    34,586          29,912
        Amortization of deferred foreign exchange & debt
        issue costs                                                   10,537               -
        Minority Interest                                                  -         (30,601)
        Other                                                           (148)            315
                                                                  ------------  -------------
                                                                     (14,152)        (16,238)

        Change in non-cash working capital                           (23,333)        (63,385)
                                                                  ------------  -------------

    Net cash used in operating activities                            (37,485)        (79,623)


Investing activities:
    Acquisitions, net of cash acquired                                     -        (103,403)
    Additions to property, plant and equipment                      (124,396)       (115,962)
    Decreases in other assets                                         (4,748)         (3,681)
    Additions to restricted investments                                    -          21,064
                                                                  ------------  -------------
    Net cash used in investing activities                           (129,144)       (201,982)

Financing activities:
    Issue of share capital, net of issue costs                        15,240          14,157
    Issues of long term debt, net of issue costs                     877,230         396,165
    Other                                                                320             663
                                                                  -----------   -------------
    Net cash provided by financing activities                        892,790         410,985

Effect of exchange rate changes on cash                              (1,720)               -
                                                                  -----------   -------------
Increase in cash and short-term deposits                            724,441          129,380
Cash and short-term deposits, beginning of period                    68,587          289,331
                                                                  -----------   -------------
Cash and short-term deposits, end of period                     $   793,028     $    418,711
                                                                =============   =============
Supplemental Information:

Income taxes paid                                               $     1,745     $      3,995
Interest paid                                                        72,969           54,005



         See accompanying condensed Notes to Interim Consolidated Financial Statements
</TABLE>


                                       5
<PAGE>


               Notes to Interim Consolidated Financial Statements
                                   (Unaudited)


AT&T Canada Inc. (the  "Company") was  incorporated  as MetroNet  Communications
Corp.   ("MetroNet")  under  the  laws  of  the  Province  of  Alberta  and  was
subsequently  continued under the Canada Business  Corporations Act. The Company
changed its name to AT&T Canada Inc.  coincident  with the  consummation  of the
combination  of  MetroNet  and AT&T  Canada  Corp.  (formerly  AT&T  Canada Long
Distance  Services  Company) ("AT&T LDS") and ACC  TelEnterprises  Ltd.  ("ACC")
effective June 1, 1999.


The  Company  is a holding  company,  which  engages  in the  telecommunications
business in Canada through its  subsidiaries,  the most  significant of which is
its 69% owned operating  subsidiary,  AT&T Canada Corp. The Company's activities
in the  telecommunications  business  consist  primarily of the  development and
construction  of  telecommunications  networks for the provision of local,  long
distance, data and Internet and E-Business solutions to businesses in Canada.


1.     Basis of presentation:


       The accompanying interim  consolidated  financial statements are prepared
       in accordance with  accounting  principles  generally  accepted in Canada
       which, in the case of the Company,  conform in all material respects with
       those in the United States, except as outlined in note 9.



       Certain  information  and  footnote   disclosures  normally  included  in
       financial  statements  prepared in  accordance  with  generally  accepted
       accounting principles have been condensed to include the notes related to
       elements  which  have   significantly   changed  in  the  period.   These
       consolidated  financial statements should be read in conjunction with the
       audited consolidated  financial statements and notes thereto for the year
       ended December 31, 2000.



       The  financial  information  included  herein  reflects  all  adjustments
       (consisting  only of normal  recurring  adjustments)  which  are,  in the
       opinion of management,  necessary to a fair  presentation  of the results
       for the interim  periods  presented.  The results of  operations  for the
       three months ended March 31, 2001 are not  necessarily  indicative of the
       results to be expected for the full year.

2.     Significant accounting policies:


       These interim  consolidated  financial  statements are prepared following
       accounting  policies  consistent with the Company's audited  consolidated
       financial  statements  and notes thereto for the year ended  December 31,
       2000,  except that  effective  January 1, 2001,  the Company  adopted the
       "Earnings  per  Share"  standards  issued by the  Canadian  Institute  of
       Chartered  Accountants.  The  standard  requires  the use of the treasury
       stock method for calculating  fully diluted earnings per share consistent
       with United States  Generally  Accepted  Accounting  Principles.  For the
       periods  presented,  all  stock  options  and  warrants  outstanding  are
       anti-dilutive,  and  therefore,  the diluted  loss per share is the basic
       loss per share.




                                       6
<PAGE>


<TABLE>
<CAPTION>


3.     Long-term debt:

-------------------------------------------------------------------------------------------------------------------------------
                                                                         March 31,         December 31,
                                                                           2001               2000
------------------------------------------------------------------------------------------------------------------------
                                                                       (Unaudited)           (Audited)
  12.0% Senior Notes (2001 - U.S. $248.4 million;
<S>          <C> <C>         <C>                                   <C>                 <C>
    December 31, 2000 - U.S. $248.4 million)                       $     391,591       $      372,419
  10.75% Senior Discount Notes (2001 - U.S. $144.1 million;
    December 31, 2000 - U.S. $140.4 million)                             227,075              210,455
  9.95% Senior Discount Notes (2001 - U.S. $783.2 million;
    December 31, 2000 - U.S. $764.3 million)                           1,234,568            1,146,036
  10.625% Senior Notes (2001 - U.S. $225.0 million;
    December 31, 2000 - U.S. $225.0 million)                             354,668              337,388
  7.65% Senior Notes (2001 - U.S. $1.0 billion;
    December 31, 2000 - U.S. $500.0 million) (a)                       1,576,300              749,750
  7.15% Senior Notes                                                     150,000              150,000
  7.625% Senior Notes (U.S. $250.0 million)                              394,075              374,875
  Senior Credit Facilities (b)                                           370,000              270,000
  Capital lease obligations                                               20,756               19,752
------------------------------------------------------------------------------------------------------------------------
                                                                       4,719,033            3,630,675

       Less current portion of capital lease obligations                   2,096                2,210

------------------------------------------------------------------------------------------------------------------------
                                                                  $    4,716,937       $    3,628,465
------------------------------------------------------------------------------------------------------------------------


       At March 31, 2001, principal repayments on long-term debt required within
       five years  consist of $150  million  for the 7.15%  Senior  Notes due in
       2004,  U.S.  $250  million for the 7.625%  Senior Notes due 2005 and $370
       million of the Credit Facility due 2003 through to 2004.
</TABLE>


(a)      7.65% Senior Notes:


           On March 30, 2001,  the Company  issued and sold U.S. $500 million of
           7.65% Senior Notes due 2006, which constituted an additional issuance
           to the 7.65%  Senior Notes issued  September  22, 1999 (the  combined
           issuance are defined as the "7.65%  Notes").  The 7.65% Notes are due
           on September  15, 2006 and are  repayable in the amount of U.S.  $1.0
           billion. The 7.65% Notes are redeemable,  in whole or in part, at the
           option of the Company at a  redemption  price equal to the greater of
           (i) 100% of the  principal  amount  and  (ii) the sum of the  present
           values of the remaining  scheduled payments of principal and interest
           thereon  discounted at a prescribed  interest rate to the  redemption
           date on a semi-annual basis plus accrued and unpaid interest, if any,
           to the date of  redemption.  Each  holder of the 7.65%  Notes has the
           right to require  the Company to  repurchase  all or any part of such
           holder's  7.65%  Notes in the  event of a change  in  control  of the
           Company,  as defined in the Indenture governing the 7.65% Notes, at a
           repurchase  price  in cash  equal  to 101%  of the  principal  amount
           thereof, plus accrued and unpaid interest to the repurchase date. The
           7.65%,  Notes are unsecured,  subordinated to all existing and future
           secured  indebtedness  of the Company and rank pari passu to existing
           unsecured  indebtedness.  The  Indenture  covering  the  7.65%  Notes
           contains  certain   covenants   including  limits  on  sale/leaseback
           transactions   or  liens,   the   ability  to   subordinate   certain
           intercompany  debt and the ability of the Company to  consolidate  or
           merge with or into or transfer all or substantially all of its assets
           to another entity.



                                       7
<PAGE>

(b) Senior Credit Facilities:


           The  Company  has a credit  agreement  with a  syndicate  of  various
           financial institutions to provide the Company with the following:



           (i)  A revolving  term  facility to a maximum of $525 million (or the
                equivalent  U.S.  dollar amount thereof) to be used to refinance
                vendor  financing  indebtedness  of up to  90% of  the  cost  of
                telecommunication  assets, as defined,  acquired by the Company;
                and


           (ii) An  operating  facility  to a  maximum  of $75  million  (or the
                equivalent  U.S.  dollar amount  thereof) to be used for working
                capital and general  corporate  purposes of which $25 million is
                available for letters of credit and $10 million is available for
                a swingline credit line.


           The Company is in compliance with all of its debt covenants including
           the completion of its requirement to raise additional financing prior
           to June 30, 2001.


4.  Financial instruments

    (a) Fair values of financial assets and liabilities:

          The  fair  values  of  cash  and   short-term   deposits,   restricted
          investments,    accounts   receivable,   accounts   payable,   accrued
          liabilities and accrued  interest payable  approximate  their carrying
          values due to the short-term nature of these instruments.

          The fair value of long-term debt, including the attached warrants,  at
          March 31, 2001 was approximately $4,857.1 million (December 31, 2000 -
          $3,710.9 million), based on current trading values.


          The fair value of foreign currency  options,  cross currency swaps and
          forward contracts at March 31, 2001 was  approximately  $289.4 million
          (December 31, 2000 - $84.5 million), based on current trading values.

    (b) Foreign currency risk:

          The Company is exposed to foreign  currency  fluctuations  on its U.S.
          dollar   denominated  debt,  its  U.S.  dollar  cash  and  short  term
          investments  as well  as the  restricted  investments  that  are  also
          denominated in U.S. dollars. Foreign currency risks are managed by the
          Company whenever possible,  by matching U.S. dollar denominated assets
          with related  liabilities  through the use of  financial  instruments,
          including  from time to time,  purchasing  foreign  currency  options,
          cross currency swaps and forward exchange  contracts.  As at March 31,
          2001, the Company had purchased the following financial instruments to
          hedge the exposure on the U.S. dollar denominated financings:

          i.   Two foreign  currency  options that give the Company the right to
               i)  acquire  U.S.  dollars  at the  current  exchange  rate  at a
               specified  date in the  future,  ii) acquire  U.S.  dollars at an
               already  determined  exchange rate, or iii) to enter into a cross
               currency  interest  exchange  agreement  to convert  U.S.  dollar
               interest  payments  at a  specified  rate on a notional  Canadian
               dollar principal  amount.  The fair value of these two options at
               March 31, 2001 was U.S.$54.7 million.

          ii.  Nineteen  cross  currency  swaps  under  which the  Company  sold
               U.S.$1,196.1  million at rates ranging from Cdn. $1.4575 to $1.55
               per U.S.  $1.00.  The  Company  is  obligated  to  purchase  U.S.
               $1,475.9  million  between  September  2003 and September 2006 at
               rates that range from Cdn.  $1.4575 to $1.55 per U.S. $1.00.  The
               fair  value of these  swaps at  March  31,  2001 was U.S.  $179.7
               million.


                                       8
<PAGE>

          iii. One forward  exchange  contract under which the Company sold $470
               million U.S.  dollars on March 31, 2001 at a rate of Cdn. $1.4597
               to U.S. $1.00. The Company was obligated to buy U.S. $470 million
               on April 30, 2001 at the rate of Cdn.  $1.4593 to U.S. $1.00. The
               fair value of this forward exchange contract as at March 31, 2001
               was U.S. $55.0 million.

     The above noted  financial  instruments,  the U.S. cash held and short term
     investments hedge the fixed rate U.S. dollar denominated debt.

       (c) Interest rate risk:

<TABLE>
<CAPTION>

  The following  table  summarizes  the Company's  exposure to interest
  rate risk.

-------------------------------------------------------------------------------------------------------------------------------
                                                            Fixed interest rate maturing within
-------------------------------------------------------------------------------------------------------------------------------
                                               Floating                                   After     Non-interest
           March 31, 2001 (Unaudited)           rate         1 year       1 - 5 years    5 years       bearing
-------------------------------------------------------------------------------------------------------------------------------

           Financial assets:

<S>                                         <C>            <C>           <C>         <C>           <C>
           Cash and short-term deposits     $   793,028    $       -     $      -    $       -     $       -
           Accounts receivable                      -              -            -            -         210,953

           Financial liabilities:

           Current liabilities                      -            2,096          -            -         352,015
           Long-term debt                       370,000            -        562,735    3,784,202           -

-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

       (d) Credit risk:

           The Company's  financial  instruments that are exposed to credit risk
           are cash and short-term  deposits,  accounts receivable and financial
           instruments used for hedging purposes.  Cash and short-term  deposits
           are on  deposit at major  financial  institutions.  Credit  risk with
           respect to accounts  receivable is limited due to the large number of
           customers  to which the  Company  provides  services.  Credit risk on
           hedging instruments is limited as these transactions are only entered
           into with highly rated bank counter-parties.


5.   Fully diluted weighted average shares outstanding:

     Effective January 1, 2001, the Company adopted the treasury stock method of
     calculating fully diluted shares in accordance with new CICA  requirements.
     The  treasury  stock method  includes  only those  unexercised  options and
     warrants  where the average  market price of the common  shares  during the
     period exceeds the exercise price of the options and warrants. In addition,
     this method  assumes  that the  proceeds  would be used to purchase  common
     shares at the average market price during the period.

     The fully diluted  shares  include the ownership by AT&T Corp.  and British
     Telecom in AT&T Canada Corp., the Company's principal operating subsidiary,
     equivalent to  approximately  43.7 million shares.

     The  exercise of options and warrants  outstanding  at March 31, 2001 would
     have an  anti-dilutive  effect on the  earnings  per share and is therefore
     excluded from the calculation.









                                       9
<PAGE>


6.     Segmented information:

       The  Company   currently   operates  in  one   operating   segment,   the
       telecommunications  industry in Canada.  The  Company  offers a number of
       products, delivered through its integrated fibre optics networks, sold by
       a national  sales force and  provisioned  by one  operations  group.  The
       Company makes  decisions and evaluates  financial  performance  primarily
       based on its products. This view may change in the future as the business
       evolves.

       Revenue by product is as follows:


--------------------------------------------------------------------------------
                                                      Three months ended
                                                          March 31,
                                                   2001                 2000
--------------------------------------------------------------------------------
                                             (Unaudited)         (Unaudited)

       Long distance                            175,480              179,905
       Data                               $     122,714        $     111,567
       Local                                     46,266               40,143
       Internet and E-Business solutions         37,646               22,588
       Other                                      5,758                9,826

--------------------------------------------------------------------------------
                                          $     387,864        $     364,029
--------------------------------------------------------------------------------


       During the period  ended  March 31,  2001,  no  customers  of the Company
       individually represented more than 10% of the Company's revenues.


7.     Related party transactions:

       Services  are  exchanged  between the Company  and its  shareholders  and
       certain  of their  subsidiaries.  These  transactions  are in the  normal
       course of operations  and are measured at the exchange  amounts being the
       amounts agreed to by the parties.


       Transactions with related parties were as follows:

--------------------------------------------------------------------------------
                                                      Three months ended
                                                           March 31,
                                                   2001                 2000
--------------------------------------------------------------------------------
                                                 (Unaudited)         (Unaudited)

Revenue                                             $34,674              $24,511
Expenses                                            $30,644              $21,334

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

 Amounts due from and to the related parties are as follows:

--------------------------------------------------------------------------------
                                                   March 31,        December 31,
                                                    2001               2000
--------------------------------------------------------------------------------
                                                 (Unaudited)         (Audited)

Accounts receivable                                    $ 6,372         $14,265
Accounts payable                                       $11,458         $12,181
================================================================================

8.   Reclassification of prior period amounts

     Certain  amounts  presented in the prior periods have been  reclassified to
     conform with the presentation adopted in the current year.



                                       10
<PAGE>


9.   Reconciliation to accounting  principles  generally  accepted in the United
     States:


     The  Company's  consolidated  financial  statements  have been  prepared in
     accordance with accounting principles generally accepted ("GAAP") in Canada
     which,  in the case of the Company,  conform in all material  respects with
     those in the United States, except as outlined below:


     (a)  Statements of operations:


          The  application of U.S. GAAP would have the following  effect on loss
          for the year, deficit and basic loss per common share as reported:

                                                       Three months ended
                                                            March 31,
 (in thousands of dollars), unaudited                 2001              2000
                                                    --------          --------

Loss for the period, Canadian GAAP                $ (167,475)        $ (102,808)
Stock-based compensation expense (a)(i)                 (231)              (150)
Unrealized gain on derivative instruments (a)(ii)      9,411                 -
                                                  ----------         -----------
Loss for the period, US GAAP                        (158,295)          (102,958)

Opening deficit, US GAAP                            (794,180)          (253,755)
                                                  ----------         ----------
Ending deficit, US GAAP                           $ (952,475)        $ (356,713)
                                                  ==========         ==========

Basic loss per common share under US GAAP         $    (1.64)        $    (1.09)
                                                  ==========         ==========

Weighted average number of common shares
  outstanding                                         96,777              94,580

(i)  Stock-based compensation expense:

     For U.S. GAAP purposes,  the Company has chosen to account for  stock-based
     compensations  using the  intrinsic  value method  prescribed in Accounting
     Principles  Board Opinion  ("APB") No. 25,  "Accounting for Stock Issued to
     Employees".  Accordingly,  compensation  expense for U.S. GAAP purposes has
     been  recognized  at the date of share  purchases  or option  grants at the
     amount by which the quoted  market price of the stock exceeds the amount an
     employee must pay to acquire the stock.

     In  March  2000,  FASB  issued  FASB  Interpretation  No.  44  ("FIN  44"),
     "Accounting  for Certain  Transactions  involving  Stock  Compensation - an
     Interpretation of Accounting  Principles Board ("APB") Opinion No. 25." FIN
     44 clarifies the  following:  the criteria for  determining  whether a plan
     qualifies  as a  non-compensatory  plan;  the  accounting  consequences  of
     various modifications to the terms of the previously fixed stock options or
     awards; and the accounting for an exchange of stock compensation  awards in
     combination.  FIN 44 is effective July 1, 2000, but certain  conclusions in
     FIN 44 covers  specific events that occurred after either December 15, 1998
     or January 12, 2000.  The Company  accounted for FIN 44 in the current year
     as part of the reconciliation to accounting  principles  generally accepted
     in the United States.


(ii) Unrealized gain on derivative instruments:

     In June 1998, with subsequent  amendments and  interpretations  in 1999 and
     2000, the Financial  Accounting Standards Board (FASB) issued SFAS No. 133,
     "Accounting for Derivative  Instruments and Hedging  Activities."  SFAS No.
     133 establishes methods of accounting for derivative financial  instruments
     and  hedging  activities  related  to  those  instruments  as well as other
     hedging  activities.  The Company is required and has implemented  SFAS No.


                                       11
<PAGE>

     133, as amended by SFAS No. 137 ("SFAS  133") for the  current  fiscal year
     ending  December 31,  2001.  On January 1, 2001,  the Company  recognized a
     one-time  transition gain of $26.0 million which  represents the net effect
     of recognizing  the market value of the Company's  derivative  portfolio of
     $84.5 million, the derecognition of the unamortized balance of the swaption
     premiums of $17.6  million and the  derecognition  of the deferred  foreign
     exchange  losses of $40.9  million as at December 31, 2000.  $22 million of
     this one time transition gain was recognized  through the Accumulated Other
     Comprehensive Income ("AOCI") account and $4 million was recognized through
     earnings.  The Company has designated  derivatives with a notional value of
     U.S.  $1,890  million as Cash Flow Hedges which hedge the foreign  currency
     rate risk of cash flows relating to its U.S. dollar-denominated debt with a
     face value of U.S.  $1,890  million.  These Cash Flow  Hedges  were and are
     expected to continue to be highly effective in hedging the foreign currency
     rate risk.  The  changes in market  value of the  effective  portion of the
     derivatives  designated  as Cash Flow Hedges flow  through the AOCI account
     each month.  The AOCI account  forms a component of  shareholder's  equity.
     However,  included in the Cash Flow Hedges are two  swaptions  that contain
     both intrinsic value and time value components. The changes in market value
     of the intrinsic  value  component  flow through the AOCI account while the
     change  in  market  value of the time  value  component  is  recognized  in
     earnings on a monthly basis. The market value of the Cash Flow Hedges as at
     March 31, 2001 was $234.4 million. In addition, the Company holds a foreign
     exchange  forward  contract with a notional value of U.S. $470 million that
     has not been  designated as a hedging  instrument and therefore the changes
     in its market  value are marked  through  earnings  each month.  The market
     value of this contract as at March 31, 2001 was $55.0 million.



     As a result of SFAS 133, the Company  recognized a net gain of $9.4 million
     to  earnings  due to the  $4.0  million  one time  transition  gain and the
     increase in fair market value of the foreign  exchange forward contract not
     designated  as a hedging  instrument,  partially  offset  by the  change in
     market value of unhedged U.S. dollar denominated debt.



(b)  Other disclosures:

     (i)  Stock-based compensation expense disclosure:

          Had the Company  determined  compensation  expense  costs based on the
          fair value at the date of grant for stock  options under SFAS No. 123,
          loss  attributable  to common  shareholders  and basic  loss per share
          would have increased as indicated below.


          The  Company  utilized  the  Black-Scholes  option  pricing  model  to
          estimate  the fair  value at the date of  grant  for  options  granted
          subsequent to the Company's initial Public Offering.  In first quarter
          of  2001,  under  the  Black-Scholes  model,  687,839  options  with a
          weighted average fair value of $10.24 per share were granted using the
          following assumptions:  risk free rate of return ranging from 4.93% to
          5.29%,  estimated  volatility  factor  ranging  from  0.162 to  0.387,
          estimated option life of five years and no dividend payments.


          In 2000,  under the  Black-Scholes  model,  3,760,500  options  with a
          weighted average fair value of $15.16 per share were granted using the
          following assumptions:  risk free rate of return ranging from 5.32% to
          6.55%,  estimated  volatility  factor  ranging  from  0.09  to  12.72,
          estimated option life of five years and no dividend payments.










                                       12
<PAGE>
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------------
                                                                                    Three months ended
                                                                                         March 31,
                                                                                  2001                 2000
-------------------------------------------------------------------------------------------------------------------------------
                                                                              (Unaudited)          (Unaudited)

          Loss attributable to common shareholders,

<S>                                                                         <C>                  <C>
            U.S. GAAP - as reported                                         $   (158,295)        $  (102,958)
          Loss attributable to common shareholders,
            U.S. GAAP - pro forma                                               (171,664)           (116,705)
          Loss per share - as reported                                             (1.64)               (1.09)
          Loss per share - pro forma                                               (1.77)               (1.23)
          Weighted average number of shares outstanding (in thousands)            96,777               94,580

-------------------------------------------------------------------------------------------------------------------------------
</TABLE>










































                                       13
<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations



The following  discussion and analysis  should be read in conjunction  with AT&T
Canada  Inc.'s  Interim  Consolidated   Financial  Statements  and  Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
included in AT&T Canada's Inc.'s 2000 Annual Report.


Forward-Looking Statements

This discussion and analysis explains AT&T Canada Inc.'s (the "Company" or "AT&T
Canada")  financial  condition and results of  operations  for the quarter ended
March 31, 2001 compared  with the quarter ended March 31, 2000,  and is intended
to help shareholders and other readers  understand the dynamics of the Company's
business  and  the  key  factors  underlying  its  financial  results.   Certain
statements  in  this   Management's   Discussion   and  Analysis   ("MD&A")  and
Consolidated Financial Statements constitute  forward-looking  statements.  Such
forward-looking statements involve known and unknown risks,  uncertainties,  and
other factors which may cause the actual results, performance or achievements of
the Company, to be materially different from any future results, performance, or
achievements  expressed  or implied  by such  forward-looking  statements.  Such
factors include, among others, the following: competition, technological changes
and changes to the regulatory environment.

Overview


In the first  quarter of 2001,  the  Company's  revenue grew by 6.6% to $387,864
over the first  quarter  of 2000 as a result  of  increases  in data,  local and
Internet  and  E-Business  solutions,  partially  offset  by a  decline  in long
distance  revenue.  The Company's  EBITDA  increased to $31,559  mainly due to a
change in the Canadian regulatory environment whereby the Company's contribution
costs have been reduced effective January 1, 2001.

The Company's  presence in the business long distance,  local, data and Internet
and  E-Business  solutions  markets  allows  it to  bundle  a full  spectrum  of
products.   With  its  extensive   local  and  long  distance   facilities   and
interconnection  arrangements,  the Company is capable of serving  approximately
85% of the  Canadian  business  telecommunications  market.  It has the greatest
reach of any  competitive  carrier in Canada.  Its  strategic  partnerships  and
interconnection agreements with other international service providers, including
AT&T Corp.  and  British  Telecommunications  plc,  allow the Company to provide
global voice, data, Internet and E-Business solutions to its business customers.



























                                       14
<PAGE>


Results of Operations

Quarter ended March 31, 2001 Compared to Quarter ended March 31, 2000

(All dollar  amounts are stated in  thousands of Canadian  dollars  except where
otherwise noted)


Key financial data:

                                        Quarter ended         Quarter ended
                                        March 31, 2001        March 31, 2000
--------------------------------------------------------------------------------
                                         (Unaudited)           (Unaudited)

Revenue
     Long Distance                      $  175,480            $   179,905
     Data                               $  122,714            $   111,567
     Local                              $   46,266            $    40,143
     Internet and E-Business solutions  $   37,646            $    22,588
     Other                              $    5,758            $     9,826
                                        ---------------------------------
Total Revenue                           $  387,864            $   364,029
                                        =================================

Service Costs                           $  247,191            $   249,463

Gross Margin                            $  140,673            $   114,566
Gross Margin %                                36.3%                  31.5%

Selling, General and Administrative
  Costs ("SG&A")                        $  109,114            $    92,464
SG&A as a % of Revenue                        28.1%                  25.4%

EBITDA before integration costs and
  provision for restructuring           $   31,559            $    22,102
% of Revenue                                   8.1%                   6.1%


Revenue


Revenue of $387,864  increased  by $23,835 or 6.5% in the first  quarter of 2001
from the first quarter of 2000. The Company's  proportion of revenues from data,
local, Internet and E-Business solutions and other services grew from 51% in the
first quarter of 2000 to 55% in the first quarter of 2001,  with a corresponding
decline in the proportion of long distance services.

Long distance  ("LD") revenue  decreased by $4,425 or 2.5%, from $179,905 in the
first  quarter of 2000 to  $175,480 in the first  quarter of 2001,  due to lower
prices per minute and lower  non-volume  related  services  offset,  in part, by
substantial growth in LD minutes.  Long distance minutes increased by 21% in the
first  quarter of 2001 as compared to the first  quarter of 2000,  while  prices
dropped by 16.1% during the same period.

Data revenue  increased by $11,147 or 10.0%,  from $111,567 in the first quarter
of 2000  to  $122,714  in the  first  quarter  of  2001,  due to the  growth  in
Asynchronous  Transfer Mode  ("ATM"),  high speed data (MACH) and Data VPN Frame
Relay (the Company's  virtual  private  network  product),  partially  offset by
decreases in legacy private line data services.

Local voice  revenue  increased  by $6,123 or 15.3%,  from  $40,143 in the first
quarter of 2000 to $46,266 in the first quarter of 2001,  due to the addition of
local access lines. As at March 31, 2001,  local access lines in service totaled
460,706,  representing  growth  of  16,073  lines in the  quarter.  For the same
quarter in 2000, growth was 36,145 lines to total 335,229 at March 31, 2000. The
reduction in growth is primarily  the result of lower demand from the  Company's
wholesale and internet  service  providers'  ("ISP")  distribution  channel,  as
certain customers in this sector experience  financial  difficulty.  As at March
31, 2001, the Company had completed an additional 10 local city  networks,  from
first quarter 2000, to achieve a footprint of 29 cities.




                                       15
<PAGE>

Internet and E-Business  solutions  revenue  increased by $15,058 or 66.7%, from
$22,588 in the first  quarter  of 2000 to $37,646 in the first  quarter of 2001,
due to the Company's  strategic  acquisitions in 2000 and internal  growth.  The
acquisitions of DMC Inc. and Brak Systems Inc. broadened the Company's portfolio
of Internet and E-Business products to include solutions consulting and Internet
security,  in addition to Internet  access and  Internet  data centre  services.
Consistent with the Company's  strategy to focus on higher growth products,  the
Internet and E-Business  solutions  portfolio increased to 9.7% of total revenue
in the first quarter of 2001 from 6.2% in the first quarter of 2000.

Other  revenue  was   generated   through   call-center   revenue  and  sale  of
telecommunications equipment.

For the balance of 2001,  the Company will focus on increasing  revenue from its
high growth,  higher margin products in data,  local and Internet and E-Business
solutions.

Service Costs and Selling, General and Administrative Expenses

The Company's  principal  operating expenses consist of service costs;  selling,
general and  administrative  costs  ("SG&A")  and  depreciation.  Service costs
consist of expenses  directly  related to  delivering  service to customers  and
servicing the operations of the Company's  networks,  expenses  associated  with
fibre and  other  leases  where  the  Company  does not  presently  have its own
facilities,  local and long  distance  transport  costs paid to other  carriers,
maintenance agreements, right-of-way fees, municipal access fees, hub site lease
expenses,  costs of service  personnel  and leases of utility space in buildings
connected to the Company's  networks.  SG&A expenses  include the costs of sales
and marketing  personnel,  promotional  and  advertising  expenses and corporate
administrative expenses.

Service Costs decreased by $2,272 or 0.9%, from $249,463 in the first quarter of
2000 to $247,191 in the first quarter of 2001, due to the positive impact of the
change in the contribution subsidy regime,  offset, in part, by additional costs
related  to  higher  volume  and  Service  Costs   associated   with   strategic
acquisitions in 2000.  Effective January 1, 2001, the Canadian  Radio-television
and  Telecommunications  Commission  ("CRTC") changed the  contribution  subsidy
regime by significantly expanding the number of participants who are required to
pay  contribution  and revised  the  contribution  basis of the  subsidy  from a
per-minute  basis to a  percentage  of eligible  revenue less  deductions.  Five
separate  appeals of this decision have been filed  including one by Bell Canada
("Bell") and one by Telus Communications Inc. ("Telus"). Of the five, three have
been dismissed  including the Bell and Telus appeals.  The remaining two appeals
do not question  the basic  framework  of the new regime and  consequently,  the
Company does not expect the results to have a negative impact on the Company.


Gross margin  increased by $26,107 or 22.8%,  from $114,566 in the first quarter
of 2000 to $140,673 in the first  quarter of 2001,  due primarily to revision of
the  contribution  subsidy regime and emphasis on higher  growth,  higher margin
products and  services,  such as on-net local,  VPN and Internet and  E-Business
solutions.


SG&A expenses  increased by $16,650 or 18%, from $92,464 in the first quarter of
2000  to  $109,114  in the  first  quarter  of  2001,  mainly  due to  increased
uncollectible  accounts  primarily  as a result  of the  financial  difficulties
experienced  by  wholesalers  and ISPs,  development  of the sales force and the
strategic acquisitions.


EBITDA (1)

EBITDA  increased  from  $22,102 in the first  quarter of 2000 to $31,559 in the
first quarter of 2001. On a percentage of revenue  basis,  EBITDA grew from 6.1%
in the first quarter of 2000 to 8.1% in first quarter of 2001.

-----------------
(1)  EBITDA is a financial measure commonly used in the  telecommunications  and
     other industries and is presented to assist in understanding  the Company's
     operating  results.  However,  it is not intended to represent cash flow or
     results of operations in accordance with Canadian or U.S. GAAP.


                                       16
<PAGE>

Integration costs and provision for restructuring


During the first  quarter of 2001,  the provision  for  restructuring  and asset
write-downs  has been  drawn down by $3,049.  The  remaining  balance of $19,177
represents  expenditures for lease and other contract  cancellations  related to
excess space in various leased premises,  and termination penalties of contracts
with alternate  access facility  providers where settlement of penalties has not
been mutually agreed to or the flow of payment remains outstanding.


See  additional   discussion  of  the   integration   costs  and  provision  for
restructuring in Note 10 to 2000 Annual Consolidated Financial Statements.

Depreciation and Amortization

Depreciation  and  amortization  expense  increased  to  $108,348  for the first
quarter of 2001 compared to $86,944 for the first quarter of 2000.  The increase
was  primarily  due to the  Company's  strategic  acquisitions  in  2000  and an
increase in the level of  depreciation  due to the  Company's  capital  spending
program.

Interest Income and Expense


Interest income  decreased from $5,666 in the first quarter of 2000 to $1,509 in
the first quarter of 2001.  The decrease of $4,157 was due to lower average cash
and  short-term  deposits  versus the first  quarter of 2000.  Interest  expense
increased  from  $72,640  in the first  quarter  of 2000 to $88,296 in the first
quarter  of  2001.  Of  the  interest  expensed  during  the  quarter,   $45,201
represented  cash  interest  payments,  $34,586 was  accreted on the  respective
notes, and the remaining $8,509 was accrued interest.  The increased expense was
due to higher  average debt  balances  and interest on advances  from the credit
facility.


Liquidity and Capital Resources

Cash Flow from Operating Activities


During the first  quarter of 2001,  net cash used in  operating  activities  was
$37,485.  Included  in this amount is a change in  non-cash  working  capital of
$23,333,  which was mainly due to interest payments offset by increased accounts
receivable collections during the quarter.


Capital Expenditures

The continued  development  of the  Company's  business and the build out of its
networks  in its target  markets has and will  continue  to require  significant
capital spending. The Company's strategy is to build high capacity networks with
broad market  coverage,  which increases its level of capital  expenditures  and
operating  losses  during the  development  phases.  The Company  believes  that
ownership  of the high  capacity  networks  will  enhance  its future  financial
performance and profitability.


Expenditures on property,  plant and equipment  during the first quarter of 2001
totaled $128,980  compared to $115,962 for the first quarter of 2000. The higher
spending level in 2001 is consistent with the Company's capital spending program
for 2001 which focuses on the development of its broadband IP network to support
new  data,   Internet   and   E-Business   solutions,   information   technology
infrastructure and growth from customer demand.



Liquidity


The Company used cash of $166,629 in the first quarter  ending March 31, 2001 to
fund operations,  capital spending and corporate  development  activities.  This
requirement  was funded with a $100,000  draw from the Senior  Credit  Facility,
cash on hand  and  proceeds  from the  issuance  of  equity  for  stock  options
exercised.



                                       17
<PAGE>

The  Company  will need  capital to fund its  capital  spending  program and its
operating and working capital requirements. The terms of certain debt agreements
specify  that  new  debt  can  only be used to fund up to 90% of  capital  asset
additions with the balance to be funded  principally  from  operations and other
sources.  The  Company  expects  that its  capital  expenditures  will be funded
through the proceeds  from the U.S.  $500,000 of 7.65% Senior Notes issued March
30, 2001 and advances under its revolving term facility.  The Company expects to
meet its operating and working capital  requirements from cash on hand, advances
under its  operating  facility  and the  proceeds  from an  accounts  receivable
securitization. The Company is confident that it will be successful in obtaining
capital from these sources.  However,  there can be no assurance that sufficient
financing  will be  available  to the Company or, if  available,  that it can be
obtained on  acceptable  terms or within the  limitations  contained in existing
financing agreements.

The Company has issued significant amounts of U.S.  dollar-denominated  debt and
is therefore exposed to the risk of fluctuations in the relationship between the
value of  Canadian  and  U.S.  dollars.  At  March  31,  2001,  the U.S.  dollar
denominated  debt  amounted to $2.65  billion (Cdn $4.2  billion).  To hedge its
foreign currency  exposure,  the Company has a variety of financial  instruments
including  foreign  currency  options,  cross  currency  interest rate swaps and
forward exchange contracts,  which the Company continually  evaluates.  At March
31, 2001, the Company had hedged 75.4% of its cash debt, principal and interest,
service requirements to 2008.


Credit Rating

On March 6, 2001,  Standard and Poor's Rating Services ("S&P") confirmed its BBB
investment  grade rating of the Company's  senior  unsecured  debt. On March 13,
2001,  Moody's  Investor  Services  Inc.  ("Moody's")  also  confirmed  its Baa3
investment grade rating of the Company's senior unsecured debt.

Notes Offering

Since January 2001, the Company issued and sold Senior Notes as follows:

7.65% Note Offering

On March 30, 2001, the Company issued and sold U.S. $500 million of 7.65% Senior
Notes due at a price of 99.648% of the  stated  principal  amount per Note which
constituted  an additional  issuance to the 7.65% Senior Notes issued  September
22, 1999 (the  combined  issuance are defined as the "7.65%  Notes").  The 7.65%
Notes will mature on September 15, 2006.  Interest on the 7.65% Notes is payable
semi-annually  in cash in  arrears  on  March  15 and  September  15 each  year,
commencing on September 15, 2001.

Risks & Uncertainties

See  discussion  on  the  Company's  Risks  &   Uncertainties   section  of  the
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" included in AT&T Canada's Inc.'s 2000 Annual Report.




















                                       18
<PAGE>




PART II. Other Information

          Item 1. Legal Proceedings

                  None

          Item 2. Changes in Securities and Use of Proceeds

                  (a)  Not applicable

                  (b)  Not applicable
                  (c)  Not applicable

                  (d)  Not applicable

         Item 3.  Defaults Upon Senior Securities

                  None

         Item 4.  Submission of Matters to a Vote of Security Holders

                  (a)  Not Applicable.

                  (b)  Not Applicable.

                  (c)  Not Applicable.

                  (d)  Not Applicable.

         Item 5.  Other Information

                  None

         Item 6.  Exhibits and Reports on Form 6-K

                  (a)  Exhibits

                       None

                  (b)  Reports on Form 6-K

                   i)   On March 20, 2001,  the Company  filed a Report on Form
                        6-K for the  month of March  2001  with the  Commission
                        regarding the Company's  fourth  quarter 2000 Financial
                        Results Press Release.  This Report on 6-K included the
                        Company's  (a)  condensed   consolidated  statement  of
                        operations  for the three  months ended  September  30,
                        2000 and  December  31,  1999 and 2000;  (b)  condensed
                        consolidated balance sheets as at December 31, 1999 and
                        2000; (c) selected  quarterly  statistical data for the
                        three months ended September 30, 2000, and December 31,
                        1999 and 2000.

                   ii)  On March 27, 2001,  the Company  filed a Report on Form
                        6-K for the  month of March  2001  with the  Commission
                        regarding  the  Company's   2000  Annual  Report  which
                        included,  among other things, the audited consolidated
                        balance  sheets of the Company as at December  31, 1999
                        and 2000 and the  consolidated  statements of operation
                        and  deficit and cash flows for each of the years ended
                        December  31,  1998,  1999 and 2000.

                   iii) On March 27, 2001,  the Company  filed a Report on Form
                        6-K for the  month of March  2001  with the  Commission
                        regarding  the Notice of Annual and Special  Meeting of
                        Shareholders and Management Proxy Circular.

                   iv)  On March 27, 2001,  the Company  filed a Report on Form
                        6-K for the  month of March  2001  with the  Commission
                        regarding  the  Company's  issuance of the 7.65% Senior
                        Notes in a U.S. private placement.




                                       19
<PAGE>


                    v)  SIGNATURES



         Pursuant to the  requirements  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.



                                    AT&T CANADA INC.



Date:  May 1, 2001                  /s/ David Lazzarato
                                    --------------------------------------------
                                    David Lazzarato
                                    Executive Vice President and Chief Financial
                                    Officer
                                    (For the Registrant and Principal Financial
                                     Officer)










































                                       20