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

                                 FORM 10-K

             Annual Report Pursuant to Section 13 or 15(d) of
                    The Securities Exchange Act of 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000   Commission File No. 000-25945

                   NETWORK ACCESS SOLUTIONS CORPORATION
          (Exact name of registrant as specified in its charter)

                Delaware                               54-1738938
     (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)              Identification Number)

          13650 Dulles Technology Drive, Herndon, Virginia  20171
       (Address, including zip code, of principal executive offices)

    Registrant's Telephone Number, Including Area Code:  (703) 502-2000

     Securities Registered Pursuant to Section 12(b) of The Act:  None

        Securities Registered Pursuant to Section 12(g) of The Act:

                      Common Stock, $0.001 par value
                           (Title of each class)

   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.     [X] Yes     [ ] No

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

   The aggregate market value of the voting stock held by non-affiliates
of the registrant, based upon the closing price of the Common Stock on
March 15, 2001, as reported on The Nasdaq Stock Market, was $17,199,811.

   The number of shares outstanding of the registrant's Common Stock on
March 15, 2001, after giving effect to any shares in treasury, was
52,552,404.

                    DOCUMENTS INCORPORATED BY REFERENCE
   Portions of the registrant's definitive Proxy Statement to be filed
with the Securities and Exchange Commission for the registrant's 2001
Annual Meeting of Stockholders to be held in June 2001, are incorporated by
reference into Part III of this Form 10-K.

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                                  PART  I

Item 1.  Business.

The Company

   We are a major provider of broadband network solutions to business
customers. We provide our data communications services using a variety of
high-speed access methods and generally market those services directly
through our own sales force.  With our network infrastructure, we are able
to provide Internet, private frame relay and private asynchronous transfer
mode, or ATM, access to our customers through high-speed, always-on
connections at speeds up to 2.3 megabits per second. We have branded our
network service "CopperNet," which we commercially launched in the
northeast and mid-Atlantic regions of the United States in January 1999.

   We were incorporated in 1995 in Virginia and reincorporated in Delaware
in 1998, selling data communications products and providing related
services for corporate networks.  We recognized that businesses were
finding it extremely expensive and time consuming to manage and secure the
complex elements of their networks. To exploit this opportunity, we began
offering our customers additional services to help them design, build,
maintain and secure their networks.

   In 1996, we recognized the opportunity presented by the convergence of
three factors:

        -   the accelerating growth in the data communications
            requirements of businesses;

        -   deregulation of the local telephone network by the
            Telecommunications Act of 1996, or the 1996 Telecom Act; and

        -   the compelling features of digital subscriber line, or DSL,
            technology.

   To exploit this opportunity, we began to develop technical standards
and processes for delivery of DSL-based services to our customers. We now
seek to solve the data communications needs of our business customers by
offering them network services, telecommunications products and equipment
made by others and consulting services.  Although the majority of our
revenue has historically been derived from our product sales and consulting
services, we expect to continue to dedicate most of our financial and
management resources to further developing our network services business.
Through this business, which includes our CopperNet service offering, we
provide metropolitan area networks, or MANs, and wide area networks, or
WANs, to our customers. We also manage and monitor our customers' networks.
Through our product sales business, we sell telecommunications equipment
that our customers use to build, maintain and secure their networks.
Through our consulting services business, we design our customers networks,


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install the related equipment and provide services to help them secure
their networks.

   On February 8, 2000, in connection with the announcement of a strategic
summary operating agreement with SBC Telecom, Inc. and Telefonos de Mexico,
S.A. de D.V. and a $150 million preferred stock investment by SBC
Communications Inc. and Telmex Communications, LLC, we announced that we
would be extending our network deployment into the southeastern and western
regions of the United States. We refer to these SBC entities as SBC and
these Telmex entities as Telmex. We, along with SBC and Telmex, had
initially targeted deployment in the following 20 markets within these
regions: Atlanta, Charlotte, Denver, Greensboro, Jacksonville, Louisville,
Memphis, Miami, Minneapolis, Nashville, New Orleans, Orlando, Phoenix,
Portland, Raleigh-Durham, Salt Lake City, Seattle, Tampa, Tucson and West
Palm Beach.

   On December 22, 2000, we amended various agreements with SBC and with
Telmex, and entered into new agreements with SBC.  Collectively, these
agreements provided for:

        -   a termination of the parties' efforts to expand our network
            into the southeastern and western regions of the United
            States;

        -   the conversion of the 750,000 shares of our Series B
            Convertible Preferred Stock, or Series B preferred stock, held
            by SBC into 2,554,375 shares of our common stock;

        -   the purchase by SBC of certain third-party network equipment
            that had previously been procured by us for purposes of the
            southeastern and western United States expansion of our
            network;

        -   the sale of certain of our services to SBC for resale and the
            sale of certain SBC services to us for resale;

        -   the agreement of SBC to act as our agent for the sale of
            certain of our services;

        -   the agreement of SBC to assist us with our negotiations with
            third parties concerning the purchase of certain goods and
            services, with the goal of achieving cost savings for us;

        -   a transfer by us to SBC of our lease interests in certain
            traditional telephone company central offices located
            primarily in the southeastern and western United States, in
            addition to a $5 million line of credit provided by SBC to us
            to finance a portion of the costs associated with the
            procurement of these central office interests;

        -   the agreement of SBC to assume our rights and obligations
            concerning, or alternatively subleasing from us, the fourth
            and fifth floors of our leased headquarters facility in
            Herndon, Virginia;

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        -   the agreement of SBC to assume our rights and obligations,
            either through termination and assumption or alternatively
            through assignment, concerning 46,500 of the total 61,500
            square feet at our leased distribution center in Sterling,
            Virginia;

        -   a settlement and mutual release of certain claims between us
            and SBC; and

        -   a settlement and mutual release of certain claims between us
            and Telmex.

   We currently offer networking using our own infrastructure in the
following nine northeast and mid-Atlantic cities and their surrounding
markets: Baltimore, Boston, New York, Norfolk, Philadelphia, Pittsburgh,
Richmond, Washington D.C. and Wilmington. Customer locations outside of
these major metropolitan areas are served through partnerships with
Intermedia, WorldCom, and AT&T.

   As of December 31, 2000, we had installed DSL equipment in more than
500 central offices within our northeast and mid-Atlantic markets.  We had
also installed T-1 equipment in a subset of 139 offices and other switching
centers, which essentially completes our current plans for the roll-out of
our network in these markets.  Additional markets will be opened on a case-
by-case basis as market conditions provide. We estimate that the central
offices where we currently have installed our equipment serve substantially
all of the business users in these specific areas served by the given
central office. As of December 31, 2000, we had installed 11,084 lines in
our northeast and mid-Atlantic regions.

   We have designed our network to support our customers' changing data
networking needs. Our network supports newer, evolving technologies that
transmit both data and, with additional equipment, voice. Unlike
traditional telecommunications networks, these newer technologies transmit
data in small bundles, or packets, of information from multiple users over
the same lines, and are referred to as packet-based technologies. These
packet-based technologies generally allow for a more efficient use of a
network. Our CopperNet service is compatible with Internet protocol, or IP,
and packet-based communications systems such as ATM and frame relay. This
architecture also supports the traditional technologies that carry most of
today's voice telephone conversations. This network design allows us to
offer businesses and their telecommuters cost-effective solutions for
accessing the Internet, as well as other emerging applications and services
of corporate networks, such as video and audio conferencing, application
and Web hosting, multimedia and e-commerce. We create city-wide MANs and
connect them to our private, leased, high-speed fiber optic backbone
network to move traffic between MANs. This network design enables us to
provide our customers seamless connections to remote offices or employees
anywhere on our network, including other cities. Our network provides
dedicated connections to our customers, enabling them to operate as if they
were using their own private network. Additionally, sites which are already
connected to the Internet can use our virtual private network, or VPN,

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products to gain similar capacity, and speed as would be found on our
private network.

Industry Overview

   We believe that a substantial business opportunity exists because of
the concurrence of several factors.

   Growing Demand for High-Speed Data Communications and Networking
Solutions.  Many businesses and other organizations are finding it
expensive and time-consuming to manage the complex elements of their
networks. Businesses are implementing internal networks using Internet
technology, or intranets, and local area networks, or LANs, to enable
employees to work from remote locations and from home, and to create
private networks that connect corporate networks in multiple locations.
This demand in turn drives the need for high-speed, high-capacity
communications to support these applications.  According to International
Data Corporation, or IDC, the broadband connectivity market is estimated to
reach $50 billion in 2002.

   High-speed data communications have become important to businesses in
part due to the dramatic increase in Internet usage. To remain competitive,
businesses increasingly need high-speed connections to maintain complex Web
sites, access critical business information and communicate more
efficiently with employees, customers and business partners.  This need is
especially acute in the underserved small- to medium-sized enterprise
market. According to IDC, of the 7.9 million small businesses in the United
States today, only 12% have broadband Internet access.  By 2002, it is
estimated that there will be more than 2.2 million business subscribers of
DSL, an annual growth rate in excess of 100% over four years.

   Voice is a key application for broadband networks, and the advanced
features of the NAS network are designed to accommodate future voice
services.  Based on a recent TeleChoice study, there will be approximately
40,000 DSL lines used for voice by the end of 2001, approximately 100,000
by the end of 2002, and nearly 1.75 million by the end of 2004.

   Increasing Network Congestion.  The growing use of bandwidth-intensive
applications is creating many challenges for the existing public telephone
network, public Internet and private networks of all kinds. These
challenges affect the structure of the existing network and limit the
ability of businesses to take full advantage of the benefits of new
information technologies. Networks are becoming increasingly congested due
to the rapid growth in data traffic and the imbalance in capacity between
LANs and WANs.

   High speed local access technologies such as DSL will be deployed to
help solve the "last mile" bottleneck. The last mile is that part of the
network that runs from an end-user's location to the nearest service entry
point into a network. Since the break-up of AT&T, substantially all data
services have been configured with a local carrier, typically a traditional


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telephone company like Verizon, providing the last mile, and a long
distance carrier like AT&T, WorldCom or Sprint providing the long distance
portion. Although competition in the long distance market has evolved,
stimulating technological development and causing price reductions, the
local access markets have not similarly developed. As a result, the
traditional local access market remains technologically behind the long
distance market, with last-mile access to major public networks like the
Internet and data networks remaining either very slow or very expensive. In
addition, expertise and networking solutions still will be needed to remedy
bottlenecks, other than the last-mile bottlenecks throughout existing
networks.

   Commercial Availability of Low-Cost DSL Technology.  The full potential
of Internet and remote LAN applications cannot be realized without removing
the performance bottlenecks of the local telephone networks. DSL technology
is designed to remove this performance bottleneck by increasing the data
carrying capacity of copper telephone lines from the 128 kilobits per
second speeds available on integrated services digital network, or ISDN,
lines to speeds of up to 2.3 megabits per second on synchronous DSL lines.
Because DSL technology reuses unconditioned copper lines, DSL requires a
lower initial fixed investment than that needed for existing alternative
technologies, such as cable modems, fiber, wireless and satellite
communications systems. As a result, after the build-out of a central
office, subsequent investments in DSL technology for customers within the
area served by that central office are directly related to the number of
paying customers.

   Needs of Small- and Medium-Sized Businesses.  A significant number of
small- and medium-sized businesses have no practical alternative to low
performance dial-up or ISDN lines.  Because traditional alternatives, such
as T-1 or T-3 lines, are priced on a per-mile basis, the majority of small-
and medium-sized businesses cannot afford these services from the
traditional telephone companies because they are too far away from the
nearest switching center. As a result, their employees suffer productivity
limitations associated with slow transmission speeds. In addition, these
businesses increasingly need integrated, value-added applications and
services, such as web and application hosting or computer system back-up,
that require more bandwidth capacity.

   Needs of Large Businesses to Improve Remote Worker Productivity.  Many
large companies are supporting increasing numbers of remote offices and
telecommuters as a means of dealing with transportation infrastructure
constraints, skilled worker unavailability and other workplace issues.
These companies face the challenge of finding a cost-effective way to make
their remote workers as productive as those who have access to all of the
high performance communications and networking resources available to
workers located at corporate headquarters. A high-speed network solution
that securely encompasses access to the corporate LAN, the corporate
telephone system, the Internet, the corporate video conferencing system,
customers, suppliers and partners permits a substantial increase in remote
office and worker productivity.


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   Significant and Growing Demand for Network-Enabled Broadband
Applications and Services.  As applications become more advanced and
necessary to conduct day-to-day business, we expect that the demand for
broadband capacity will rise accordingly. Many companies lack the resources
to develop, implement, manage and continually enhance their hosting and
information technology applications needs. As a result, not only should the
demand for bandwidth capacity rise, but there should be strong demand for
outsourcing many of these applications so that companies are able to focus
on their core competencies.

   Impact of the Telecommunications Act of 1996.  The Telecommunications
Act of 1996 (including its related regulations), which we refer to as the
1996 Telecom Act, allows competitive telecommunications companies similar
to us to take advantage of traditional telephone companies' existing copper
telephone line networks rather than construct a competing infrastructure at
significant cost. The 1996 Telecom Act requires traditional telephone
companies:

        -   to allow competitive telecommunications companies to lease
            copper lines on a line-by-line basis;

        -   to permit competitive telecommunications companies to
            collocate their equipment in central offices, which enables
            competitive telecommunications companies to access end-users
            through existing telephone infrastructure;

        -   to provide competitive telecommunications companies with the
            operations support services necessary for competitive
            telecommunications companies to compete; and

        -   to permit competitive telecommunications companies to share
            access to and provide service over traditional telephone
            companies' existing copper telephone lines.

   The 1996 Telecom Act creates an incentive for some traditional
telephone companies, including Verizon, to cooperate with competitive
telecommunications companies because the incumbent carriers cannot provide
long-distance service in the regions where they provide local exchange
service until the FCC determines that the traditional telephone company has
satisfied specific statutory criteria for opening its local markets to
competition.

Our Solution

   We provide a full range of broadband network solutions to allow
businesses to outsource their Internet access, data transport, and other
telecommunications or data communications needs effectively. We market our
services both directly to businesses through our sales force and indirectly
through other service providers. Our network services include:



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   High-speed, Last-Mile Connectivity.  CopperNet is designed to solve the
last mile challenge using DSL and short-run T-1 technology to provide high-
speed data connections to our customers. Our network is capable of
delivering data at speeds ranging incrementally from 128 kilobits per
second to 2.3 megabits per second symmetrically. The highest CopperNet
speeds allow our customers to transfer data at rates faster than
traditional T-1 data connections. We provide packet-based connections, but
because many of today's existing networks use channelized technology, we
also provide channelized connections. Thus, CopperNet addresses both older
channelized network requirements, like traditional voice telephone
networks, and the packet-based communications better suited for newer, more
efficient technologies such as ATM and frame relay, both of which transmit
data at high-speed and can accommodate multiple types of media, including
voice, video and data. In addition to ATM and frame relay, CopperNet also
accommodates other technologies based on IP, which is the set of standards
that enables Internet communications.

   Adaptable Network Design.  Our network supports today's bandwidth-
intensive business requirements, such as corporate networks, VPNs, office-
to-office connectivity, telecommuting solutions, collaborative computing of
users in different areas, Internet/intranet access, traditional voice,
video conferencing, multimedia, e-mail, video and audio transmission, web
and application hosting and e-commerce. We have designed our network so
that we can individually configure a customer's features and speeds from
our network operations center, eliminating the need for customers to
upgrade their hardware or for us to visit their premises in order to
enhance or upgrade services.

   Metropolitan Area Network Solutions.  We recognize that businesses with
city-wide locations, as well as remote users who telecommute, need to
communicate and share confidential information. We have constructed data
communications networks that cover entire metropolitan areas. These MANs
provide high-capacity, secure, direct connections between remote locations
and provide cost-effective private network solutions to our customers with
the capacity, speed, reliability and level of service that they require.

   Wide Area Network Solutions.  Many organizations have offices and
employees in multiple cities. By linking our MANs, we have constructed a
data communications network that covers an entire region in our northeast
and mid-Atlantic regions. This WAN provides high-capacity, secure and
reliable connections between distant locations. Because our WAN customers,
like our MAN customers, are served end-to-end on our CopperNet
infrastructure, we are able to deliver a wide area, private network with
the capacity, speed, reliability and level of service that they require.

   Network-Enabled Broadband Communications and Services.  We believe that
providing high-speed access and data communications solutions will only be
part of the solution we provide to our customers. Because our emphasis is
on building customer relationships through our direct sales force and
working with them to provide the best communications solutions, we believe
that we will be able to identify further customer needs and effectively

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market and sell new solutions to meet these needs. For example, we
currently provide remote online control, monitoring and management of our
customers' networks. In addition, we develop and implement sophisticated
network security solutions to protect our customers' networks and vital
data, including VPNs, encryption and access authentication, risk assessment
and audits, design consulting, security testing through attempted breaches
of security and analysis of and response to breaches of security.

Our Strategy

   Our goal is to be the premier provider of broadband network solutions
for businesses. To achieve our goal, and to take advantage of our market
opportunity, we are implementing a strategy consisting of the following
principal elements:

   Provide in-depth coverage in our primary markets.  Because DSL can only
be provided to each end-user from the central office closest to that end-
user, we must collocate our equipment in a large number of central offices
in order to provide in-depth coverage of our markets.  Additionally, by
equipping a large number of offices, we significantly shorten the average
length of a T-1 to our customers, making it a cost-effective technology for
small- and medium-sized enterprises. Thus, we have pursued a strategy of
providing services in a substantial majority of the central offices in each
of our target markets. Furthermore, our focus on the northeast and mid-
Atlantic regions has enabled us to deploy our network with speed and depth.
We believe that our coverage within our target markets is much deeper than
that of any provider other than Verizon, enabling us to better serve our
customers by providing them with access for substantially all of their end-
users.

   Focus on small- and medium-sized business customers.  We believe that
many small- and medium-sized businesses currently do not have a cost-
effective and integrated solution to their Internet access and data
transport needs. Many small- and medium-sized businesses want to provide
high-speed Internet access to their employees and connect multiple branch
offices in the same city or multiple cities through MAN or WAN connections,
but traditional data communications services are cost-prohibitive for these
businesses. Because our CopperNet solution is more cost-effective than
current solutions offered by traditional telephone companies, we intend to
focus on this natural market for our services. In addition, we believe that
our marketing approach enables us to provide these customers with a more
effective and integrated solution to their data communications needs.

   Focus on selected large enterprise customers.  We believe that many
large enterprise customers are unable to efficiently provide cost-effective
high-speed access to their remote workers. Many large businesses have
remote offices and workers that are not able to take advantage of the full
array of communications and networking resources available to workers at
the main office. Our extensive network coverage within our target markets

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allows us to provide service to most remote workers or office locations
within those markets.

   Enhance our network to meet the broadest array of business
requirements.  Our network is designed to provide our customers with
adaptable networking solutions that take advantage of many technologies.
Our network supports a broad array of business requirements, such as
corporate networks, VPNs, office-to-office connectivity, telecommuting
solutions, collaborative computing of users in different areas,
Internet/intranet access, video conferencing and multimedia, e-mail, video
and audio transmission, web and application hosting and e-commerce. Our
network provides solutions that can be adapted to meet the needs of our
customers and integrate technological innovations as they are developed.

   Expand network-enabled features and applications.  We want our network
to become a platform that facilitates the delivery of productivity-
enhancing features and applications to businesses and their employees. We
intend to directly or jointly provide these services. Currently we offer
our own enhanced Internet services and plan to offer local and long
distance voice services to our customers. One of our objectives in
providing these enhanced features and applications is to strengthen
customer loyalty and increase revenue per customer.

   Provide superior customer care.  We emphasize a comprehensive service
solution for our customers by developing a project implementation plan for
each installation and we have procedures that address the on-going
maintenance of their service. This  ensures that each customer receives the
service for which it has contracted according to our service level
agreements. We manage all aspects of our customers' connections to our
network, including the design and installation of the end-user's
connection, equipment configuration and network monitoring. By providing
our customers regular reports on the performance of their services, we are
able to demonstrate to our customers our performance relative to our
commitments and how customers may benefit by acquiring additional
networking services from us.

   Deliver our products and services through different types of marketing.
We emphasize direct sales and marketing to small- and medium-sized
businesses and to selected large enterprises. We also sell our services
indirectly through our sales partners, including Internet service
providers, or ISPs, long distance and local carriers and other networking
service companies. Our sales force is supported by sales engineers who are
certified experts in all our vendor-partners' products and technologies,
including Lucent Technologies, Inc., Cisco Systems, Inc. and Paradyne
Corporation. We intend to leverage our existing customer base through
selling them additional products and services. Some of our sales partners
include Galaxy, TruCom, and Comcast Communications.

   Capitalize on economics of DSL.  DSL technology requires a lower
initial fixed investment than alternative technologies because DSL uses
existing copper telephone lines. Thus, we are able to offer businesses

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services comparable to traditional technologies at approximately 30% to 70%
of the cost of such services. After we build out a central office, our
subsequent investments for the customers within the area served by that
central office are directly related to the number of paying customers,
making a significant portion of our capital expenditures success-based.

   Entering 2000, we were engaged in an effort to build a nationwide
network of local central offices for our product offerings.  Due to a
number of reasons, including significant external changes throughout the
telecommunications industry and our changing relationship with SBC and
Telmex, we adopted new elements to our strategy in the fall of 2000 to
leverage our existing capital base and to take advantage of our completed
network in the northeastern and mid-Atlantic regions.

   Our new strategy elements emphasize:

   Focus on the business customer and exit the residential market.  Our
sales and marketing efforts are now focused solely on the business customer
with multiple data communications needs.  These customers typically have a
greater need for integrated service bundles that drive higher revenues and
margins; they provide opportunities for us to cross-sell services; and they
often are repeat buyers of services.  Residential customers do not
represent as great an opportunity, and therefore we do not focus on this
market.

   Increased production through our direct sales channels.  We have
structured our sales force to concentrate on selling bundled and integrated
services, which we believe are necessary to build market share in the
business marketplace, and which contribute to higher profit margins.  By
selling directly to the customer, we can establish and develop customer
relationships and offer value-added services that grow with our customers'
businesses.  We will continue to sell selectively through wholesale and
indirect channels to supplement our direct sales efforts.

   Nationwide expansion through partnership.  Additional market reach will
be secured through relationships with other carriers, such as Intermedia,
WorldCom, and AT&T, instead of through capital investments outside the
geographic markets where our network is complete.  These agreements will be
reciprocal where possible, providing additional channel partners as well as
market opportunity for our direct sales force.

   Success-based, "smart build" approach.  On a case-by-case basis,
additional geographic expansion opportunities will be explored.
Opportunities, which result in network expansion, will be primarily
customer-driven and success-based, although other factors including market
competition may be considered in determining where to expand the network.

   The strategy shift was accompanied by a restructuring of our operations
to more closely align operating costs with revenues.  In November 2000, we
took actions designed to reduce selling, general and administration
expenses by 24% in the fourth quarter 2000. The majority of the cost

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reductions were attributable to a workforce restructuring that eliminated
approximately 145 positions, representing about 23% of the workforce at
that time.  In addition, network expenditures were reviewed and revised,
resulting in additional cost savings.

Our Service and Product Offerings

   Our robust and flexible portfolio of services can be provided
individually or combined into a wide variety of solutions for our
customers.  Some examples include:

    Bundled Services

   High-Speed Internet.  Using our broadband network for last-mile access,
customers can receive high-speed Internet at significantly lower costs than
traditional access methods.  Combining these network capabilities with our
consulting and integration services, we offer a full portfolio of business-
class Internet solutions, including customer premises equipment, or CPE;
firewalls; domain name system, or DNS, web, and e-mail hosting; static IP
addressing; and border gateway protocol, or BGP.

   Secure Telecommuting and Branch Networking.  Traditional telecommuting
solutions generally suffer from either a lack of performance due to the
constraints of dial-up services, or a lack of security due to the role that
the Internet plays in VPN solutions.  Our unique broadband network puts
high-performance private frame relay services within reach of entirely new
markets, especially residential telecommuters and branch offices.  Combined
with our WAN capabilities, we can affordably serve telecommuters and
branches throughout our serving area who would have otherwise not entered
the broadband market.

   Meshed Corporate Networking.  By virtue of our mature frame relay and
ATM core, we can provide fully meshed corporate networking environments.
This is particularly valuable to customers who have offices that require
secure, high-performance connections to multiple corporate data centers.
Our broadband network puts these solutions within affordable reach of
customers who would have otherwise opted for dial-up.

   High-Availability Services.  Combining both our network and consulting
capabilities, we deliver secure, high-availability services which merge our
own broadband access products with dial-backup or local exchange carrier
frame relay.  Through BGP, similar high-availability services can be
offered to Internet customers.  Customers can obtain a project managed,
integrated network solution that is monitored and maintained on an ongoing
basis.

    Network Services

   CopperNet.  In January 1999, we began commercially offering our
CopperNet services. CopperNet provides high-speed, continuously connected
packet-based and channelized communications services. CopperNet connects

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business users to our MANs and WAN using ATM and frame relay over DSL and
T-1 lines. CopperNet customers are able to connect to our MANs to obtain
high-capacity, secure and reliable connections between distant locations.
Because our customers are served end-to-end on our CopperNet network, we
are able to deliver a true wide area private network with the capacity,
speed, reliability and level of service that they require.

   CopperNet Frame.  CopperNet Frame provides seamless access to LANs and
WANs using ATM and Frame Relay technologies over DSL and T-1 lines to
deliver a flexible suite of services. The benefit to CopperNet Frame
customers is the low cost and simplicity of use when contrasted with ISDN
and long-haul T-1 services provided by other carriers.

   CopperNet Internet.  CopperNet Internet is a suite of Internet services
and connectivity options designed specifically for business applications.
Our customers choose their connectivity speed, ranging from 128 Kbps to 2.3
Mbps, and we provide the necessary hardware, register our customers' chosen
domain name and configure and maintain our customers' e-mail and web
services.

   VPN Service.  Our VPN service is a fully managed offering for
organizations with a remote or mobile workforce that needs reliable and
secure access to the corporate network. We provide a full-service VPN
solution that includes necessary hardware, software and communications
services for a single monthly fee.

   ROC Services.  We offer remote online control, or ROC, services to meet
our customers' outsourced network requirements. From our network operations
center in Herndon, Virginia, we monitor the integrity of our customers'
MANs and WANs. We proactively monitor the performance of our customers'
network devices and perform trouble resolution to address network problems,
often before our customers' end-users become aware of them.

   SOC Services.  We offer secure online control, or SOC, services to meet
our customers' outsourced network security requirements. We provide
proactive network monitoring, intrusion detection and management of these
network security solutions on a 24-hours-per-day, seven-days-per-week
basis. We provide a variety of security solutions including barriers, or
firewalls, between internal corporate networks and external networks like
the Internet, VPN service, encryption and access authentication solutions
for customers looking for the highest level of security on any network on
which data is transported.

   Value-Added Products and Services.  We offer an array of broadband-
enabled applications and features that take advantage of high speed
connectivity.  These applications extend the capabilities of small- and
medium-sized businesses and provide them access to expanded markets,
resources and functionality.

   Network Management Services.  We provide our customers the opportunity
to outsource network management services that are difficult or costly for

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                                                                         14
them to manage internally. For example, we provide a single point of
contact for vendor management/coordination, including vendors for equipment
on the customers' premises, long distance carriers and traditional
telephone companies, a help desk for network administrators, monitoring and
coordinated maintenance of network services.

    Consulting Services

   We provide professional consulting and network integration services to
complement all of our network services. We also provide network design and
integration, network management, staging, installation, maintenance and
warranty services. Our consulting services include network security and
professional services such as:

   Risk assessments and audits.  We work in conjunction with a customer's
engineering staff to determine if a network's critical components work
together, and provide for overlapping network protection features and
adequate firewall security at the perimeter of a network. We also determine
whether an optimal defensive strategy exists and if it is followed. We
assess the effectiveness of a customer's reporting and response mechanisms
and determine vulnerabilities and other critical issues.

   Network security architecture consulting.  We provide expertise in
designing, implementing, modifying and protecting data networks of all
sizes.

   Controlled security breaches.  We will conduct organized security
breaches with software tools and techniques designed to expose unauthorized
information security breaches. These controlled penetrations are tailored
to customer requirements. Following a security breach, our engineers will
interpret the outcome and present results to both senior executives and
lead engineers. We also take steps to ensure that knowledge gained from a
controlled security breach is not lost during subsequent implementation and
maintenance phases.

    Product Sales

   As part of our overall data communications solutions, we sell data
communications products, including the network components and security
components that our customers require in order to build, maintain and
secure their networks. We primarily provide equipment manufactured by
Lucent, Cisco and Paradyne. We do not manufacture any of this equipment
ourselves. Our engineers select product solutions to improve our customers'
operations and network efficiencies, and then help install and configure
the equipment in our customers' networks.

Customers

   As of December 31, 2000, we had more than 5,000 customers.



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                                                                         15
   Network services, which includes our CopperNet service, represented
35.0%, 10.4% and 2.7% of our revenue for the years ended December 31, 2000,
1999 and 1998, respectively.

   The customers with concentrations of revenue greater than 10% of total
revenue are as follows:

                                       Years Ended December 31,
                                 -------------------------------------
                                    2000         1999         1998
                                 ----------- -----------   -----------
   AT&T . . . . . . . . . . . . $        -   $ 5,358,165   $ 5,869,907
   Quest Diagnostics. . . . . .    3,365,257         -             -
   AstraZeneca, PLC . . . . . .          -           -         933,556
                                 ----------- -----------   -----------
                                $  3,365,257 $ 5,358,165   $ 6,803,463
                                 =========== ===========   ===========

Sales and Marketing

   We emphasize direct sales and marketing to small- and medium-sized
businesses and to selected large enterprises. We also sell our services
indirectly through our sales partners, including ISPs, long distance and
local carriers and other networking services companies.

   Direct Sales.  We market our full complement of products and services,
including our network services, consulting services and product sales,
through our direct sales force, which is supported by sales engineers who
also seek to sell our consulting services and network services. Our sales
representatives focus on selling CopperNet connectivity to small- and
medium-sized businesses and our account executives focus on selling
CopperNet connectivity and consulting services and network services to
medium- and large-sized businesses.  We have structured our sales force to
concentrate on selling bundled and integrated services, which we believe
are necessary to build market share in the business marketplace, and which
contribute to higher profit margins.  By selling directly to the customer,
we can establish and develop customer relationships and offer value-added
services that grow with our customers' businesses.  We seek to coordinate
our direct sales and marketing efforts with our vendor partners, including
Lucent, Cisco and Paradyne. Our direct sales process generally ranges from
30 to 60 days for small- and medium-sized businesses, which generally
require simple connectivity and networking solutions. Larger businesses
with more complex networking requirements often require customized
solutions. The large business sales process may take up to six months and
may involve:

        -   a significant technical evaluation;

        -   an initial trial rollout of our services; and

        -   a commitment of capital and other resources by the customer.

   Indirect Sales.  We sell our full complement of products and services,
including our network services, consulting services and products, through
network service providers, including ISPs, long distance and local carriers


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                                                                         16
and other networking services companies. These providers combine one or
more of our services with their own Internet, frame relay and voice
services and resell those bundled services to their existing and new
customers. We address these markets through sales and marketing personnel
dedicated to this channel. We intend to augment our CopperNet sales through
partnerships with other service providers which offer complementary
services and can offer CopperNet as part of a complete business solution.
We also leverage our equipment vendors' partnerships as sources for sales
opportunities by offering joint technology seminars, implementing marketing
campaigns and sharing cross-selling opportunities.

Preferred Stock Issuance and SBC and Telmex Agreement

   On February 8, 2000, we announced strategic financing agreements with
SBC and Telmex in which those companies agreed to purchase a total of $150
million, $75 million each, of our Series B preferred stock, for $100 per
share. On March 7, 2000, we issued 1,500,000 shares of our Series B
preferred stock to SBC and Telmex. Our Series B preferred stock is non-
voting and pays a 7.0% cumulative dividend, which can be satisfied with
either additional stock or cash. Each share of Series B preferred stock is
convertible at any time into 3.2258 shares of our common stock, or a total
of 4,838,700 common shares.

   In conjunction with the financing agreements, we executed a summary
operating agreement with both SBC and Telmex. In connection with the
financing agreements, we announced that we would be expanding our network
into 20 additional markets in the southeastern and western regions of the
United States.

   On December 22, 2000, we amended various separate agreement with SBC
and with Telmex, and entered into a series of separate new agreements with
SBC.  These agreements, among other things, terminated the parties' efforts
concerning the targeted expansion of our network into the southeastern and
western United States, provided for the transfer of our lease interests in
certain traditional telephone company central offices to SBC, provided for
SBC to transfer financial benefit to us in various forms of cost reduction,
provided for service resale relationships, and resulted in a settlement and
release of certain claims between us and SBC, and between us and Telmex.
See "Item 1 - The Company."

Other Key Strategic and Commercial Relationships

   We have entered into, are continuing to explore, and expect to enter
into strategic and commercial relationships. We believe that these
relationships are valuable because they provide additional marketing and
distribution, network resources, technology and possible selective
geographic expansion opportunities. In some cases, these relationships
involve capital investment, product development or targeted numbers of new
lines or customers.

   Lucent.  Since 1995, we have sold data communications products and

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                                                                         17
equipment from Ascend (a wholly owned subsidiary of Lucent). Ascend has
provided us with a capital lease facility and a credit facility for working
capital. In addition, we are continuing to explore opportunities to
participate in product development and the distribution of products and
services for their network of sales partners.

   Cisco.  Since 1996, we have sold data communications products and
equipment from Cisco.  In November 1999, we were awarded Cisco Powered
Network, or CPN, certification. The CPN certification represents a critical
component of our business-class Internet access service offering, and Cisco
routers are used as the CPE in this offering.

   Paradyne.  Since 1995, we have sold data communications products and
equipment made by Paradyne. In addition, we are continuing to explore
opportunities to participate in product development and the distribution of
products and services for their network of sales partners.

   Intermedia.  In August 1999, we entered into a reseller agreement to
sell frame relay services out of region. This allows us to expand our frame
relay service via a network-to-network interface, or NNI, which provides
nationwide frame relay coverage.

   WorldCom.  In November 2000, we entered into a reseller agreement to
sell private line services in areas outside the local access and transport
areas, or LATAs, where our network facilities are located or to WorldCom
buildings in which the service provider already maintains data
communications equipment for the purpose of providing service, known as on-
net buildings.  Additionally, WorldCom provides collocation space in
selected markets.

   AT&T.  In November 2000, we entered into a reseller agreement to sell
private line services in areas outside the LATAs where our network
facilities are located or to on-net AT&T buildings.

   OLM.net LLC.  In February 2001, we entered into a reseller agreement to
sell web and email services as part of our Internet offering.

Customer Service

   Network service providers and communications managers at businesses
typically have to assemble their digital communications networks using
multiple vendors. This leads to additional work and cost for the customer
as well as complex coordination issues. We work with each customer to
develop project implementation plans. These plans include qualifying the
customer for our service offerings, placing orders for connection
facilities, coordinating the delivery of the connection, turn up and final
installation. We emphasize a comprehensive service solution for our
customers and provide our service according to a predetermined service
level commitment with each customer. Our comprehensive solution includes:



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   Customer Line Installation.  We work with each of our customers to
establish all connection and configuration requirements to connect the
customer's main location to our network. We order the copper telephone line
for our customers, manage the installation process, test the copper
telephone line once installed, assist our customers in configuring the
equipment that terminates the copper telephone line, and monitor the copper
telephone line from our network operations center.

   End-User Line Installation.  We order all end-user connections from the
traditional telephone companies according to pre-determined technical line
specifications. We manage the traditional telephone company's provisioning
performance, test the installed line, and monitor the end-user line from
our network operations center.

   End-User Premises Wiring and Modem Configuration.  We use both our own
and contracted installation crews to install any required inside wiring at
each end-user site. We rely on contracted crews to meet customers' demands
at peak times. Our installation crews configure and install end-user
equipment with information specific to each customer.

   PC Configuration.  We configure end-user PCs at sites where our
Internet services are being installed.  This brings added value to our end-
users and shortens the acceptance process on the part of our customers and
accelerating revenues.

   Network Monitoring.  We monitor our network from our network operations
center on a continuous end-to-end basis, which often enables us to correct
potential network problems before service to a customer or end-user is
affected. We also provide direct monitoring access of end-users to our
network service providers and enterprise customers.

   Customer Reporting.  We communicate regularly with our customers about
the status of their service. We provide web-based tools to allow individual
network service providers and communications managers to monitor their end-
users directly, to place orders for new end-users, to enter work orders on
end-user lines and to communicate with us on an ongoing basis.

   Customer Service and Technical Support.  We provide service and
technical support to all our customers 24-hours-per-day, seven-days-per-
week. We serve as the sole contact for customers to whom we make direct
sales. We also provide the second level of support for our indirect
customers. We have developed and will continue to expand a database
containing the questions we have addressed and the answers we have provided
in response to past network issues. In this way, we are able to better
respond to future customer questions.

   Operating Support Systems. We have designed and are implementing an
integrated suite of customized applications around our current and planned
business processes, using products from vendors such as Metasolv, DSET,
Crossworlds and Clarify for our operational support systems; Daleen for
billing; and Cisco for network management. Our electronic gateway interface


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                                                                         19
with the traditional telephone company will result in improved speed to
market and enhanced customer service.

Network Structure and Technology

   Overview.  We operate a series of MANs connected by our private,
leased, high-speed fiber optic backbone. Our network employs a structure
designed to deliver superior end-to-end capabilities, high-speed, last-mile
connections and efficient data traffic management. Our technologically
advanced network design has positioned us to deliver the high level of data
communications services, including Internet access, VPNs, video
conferencing and a broad array of multimedia services, increasingly
demanded by businesses. We have planned for growth by ensuring that our
network is scalable, flexible and secure.

        -   Scalable.  Our adaptable, hierarchical network structure
            allows us to provide both channelized and packet-based
            services reliably and incrementally, which enables us to match
            investment with demand. As new CopperNet end-users are added
            to our network, our Traffic Management group monitors network
            utilization, and installs more equipment and network
            transmission circuits as necessary so that reliable
            performance is maintained for all users as our network grows.

        -   Flexible.  From our network operations center, we constantly
            monitor our network, the network service providers' networks
            and our customers' connections, and also perform network
            diagnostics and equipment surveillance, and initialize our
            end-users' connections. Because our network is centrally
            managed, we can  evaluate and enhance network quality, service
            and performance and improve network conditions promptly, often
            without our end-users becoming aware of the enhancements. This
            capability also allows us to reduce costs traditionally
            associated with on-site network configuration and repair.

        -   Secure.  With dedicated, direct access to our private network,
            our end-users and businesses generally experience fewer
            network security risks than users of common dial-up modems,
            ISDN lines or dedicated access to the Internet because there
            is less risk of unauthorized access. Our network is designed
            to ensure secure availability of all internal applications and
            information for all end-users, whether they are within the
            corporate headquarters or telecommuting from remote locations.
            Our network provides a direct connection between discrete
            locations, which reduces the possibility of unauthorized
            access and allows our customers to safely perform their
            required tasks.

        -   Components.  Our components are integrated into networks
            across local, metropolitan and wide areas that combine speed
            and balanced capacity to deliver a high performance networking
            experience for our customers.


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                                                                         20

        -   Customer Endpoint.  We currently offer channelized and packet-
            based connections in our network. We offer CPE as part of our
            complete service offering.  The cost of CPE can be included in
            the monthly recurring charge of the service or purchased
            outright. We configure and install these devices with end-
            users' computer and network equipment along with any required
            on-site wiring needed to connect the equipment and the
            telephone line. Under the rules of the Federal Communications
            Commission, or FCC, a customer also is free to obtain
            compatible CPE from sources other than us.

        -   Copper Telephone Lines.  We lease copper telephone lines,
            known as unbundled network elements, which run from our
            network access points in central offices to the customer
            endpoint under terms specified in telecommunications
            regulations and our interconnection agreements. We have worked
            closely with Verizon to define specifications that provide for
            the quality of the copper telephone lines we receive, thereby
            ensuring the transmission speed of end-user connections.

        -   Central Office Collocation Spaces.  Through FCC and state
            telecommunications regulatory policies as well as our
            interconnection agreements, we secure collocation space in
            central offices from which we offer CopperNet. These
            collocation spaces are designed to offer the same high
            reliability and availability standards as the telephone
            companies' other central office spaces. At present, our
            collocation spaces are either physical; secure collocation
            open physical environment, or SCOPE; or virtual. With physical
            collocation, we install and maintain our equipment in central
            offices and have complete access to the space. With SCOPE
            collocation, we install and maintain our equipment in central
            offices, but our access to the space is non-exclusive. With
            virtual collocation, the telephone company installs and
            maintains the equipment on our behalf, but we have no access
            to the space. Approximately 98% of our central office
            collocations are physical or SCOPE, and we expect over time to
            eliminate virtual collocation.

        -   Metropolitan Area Backbone.  Our metropolitan area backbone is
            a private, leased, high-speed, fiber optic network that
            connects our network access points in central offices, node
            sites, and selected customer locations. To date, we have
            leased fiber optic circuits capable of speeds of up to 45
            megabits per second from Verizon, Level 3 Communications and
            other providers of metropolitan area backbone services. We
            continue to review alternative providers in an effort to
            reduce costs. We do not have long-term lease agreements for
            these fiber optic circuits.



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                                                                         21
        -   Node Sites.  A node site is a physical location where we
            connect businesses and network service providers with our
            central offices within a particular MAN. The node site houses
            our equipment to switch and interconnect customer traffic to
            central offices within a metropolitan area and between
            different metropolitan areas. Our node sites are housed in a
            secured facility in each of the nine metropolitan areas in
            which our network currently operates.

        -   Wide Area Backbone.  Our wide area backbone is a private,
            leased, high-speed, fiber optic network that connects our node
            sites in various metropolitan areas. To date, we have leased
            fiber optic circuits capable of speeds of up to 155 megabits
            per second from Level 3 Communications, Virginia Electric and
            Power Company and other providers. We do not have long-term
            lease agreements for these fiber optic circuits. We intend to
            upgrade our wide area backbone to higher capacities as
            necessary to deliver the quality of service that our customers
            demand. We continue to evaluate alternative providers of
            capacity in order to reduce costs.

        -   Network Operations Center.  We manage our network from our
            network operations center located in our corporate
            headquarters in Herndon, Virginia. We provide end-to-end
            network management to our customers using advanced network
            management tools on a 24-hours-per-day, seven-days-per-week
            basis. This enhances our ability to address performance or
            connectivity issues before they affect the end-user. From our
            network operations center, we can monitor our network,
            including the equipment and circuits in our MANs and central
            offices, and our customers' networks, including individual
            end-user lines and DSL modems.

Competition

   In each of our businesses, we face competition from many companies with
significantly greater financial resources, well-established brand names and
large, existing installed customer bases. We expect the level of
competition to intensify in the future. Some of the other competitive
factors we face in each of our business segments include:

        -   reliability of service;

        -   diversity of product and service offerings;

        -   breadth of network coverage;

        -   price/performance;

        -   network security;

        -   infrastructure scaleability;



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                                                                         22
        -   ease of access and use;

        -   service bundling;

        -   sales relationships;

        -   customer support;

        -   strategic relationships;

        -   company size;

        -   attraction, retention and motivation of qualified personnel;

        -   technology capabilities; and

        -   operating experience.

   We believe that each potential customer presents a unique opportunity
for competition and presents competitive challenges specific to that
customer. The significance of the different competitive factors we face
will vary with each customer depending on the needs of the particular
customer and the particular competitor we face. For example, if we are
competing for a customer against another provider of product sales and
consulting services, we expect to compare favorably as to diversity of
product and service offerings and operating experience, but perhaps less
favorably as to brand recognition and financial resources. If we are
competing for a customer against a traditional telephone company, we expect
to compare favorably as to client support, transmission speed and
price/performance, but perhaps less favorably as to operating experience
and access to capital. If we are competing for a customer against another
provider of DSL, we expect to compare favorably as to diversity of service
offerings, sales relationships and operating experience, but perhaps less
favorably as to the geographic breadth of network coverage.

   We believe that our most direct competition for product sales and
consulting services will come from Verizon's network integration services
division and from other providers of network integration services like Tech
Data Corporation. Historically, these companies have been our principal
competitors.

   By focusing our business on broadband network solutions, we encounter a
different set of competitors for our network services. We believe that our
most direct competition for broadband network solutions will come from
Verizon and other traditional telephone companies and carriers operating in
our target markets. However, we also anticipate competition from service
providers using other technologies.

   Verizon and Other Traditional Telephone Companies.  Verizon and the
other traditional telephone companies present in our target markets have
commenced commercial deployment of DSL-based services. We recognize that
each traditional telephone company has the potential to quickly overcome

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                                                                         23
many of the obstacles that we believe have delayed widespread deployment of
DSL services by traditional telephone companies in the past. The
traditional telephone companies currently represent and will in the future
increasingly represent strong competition in all of our target markets. The
traditional telephone companies have an established brand name; a large
number of existing customers; a reputation for high quality in their
service areas; sufficient capital to deploy DSL equipment rapidly; their
own copper lines; and can bundle digital data services with their existing
analog voice services to achieve economies of scale in providing service to
customers. In the absence of strong oversight by the FCC and state
telecommunications regulators, traditional telephone companies also have an
economic incentive to benefit their own DSL retail operations by providing
themselves with the copper telephone lines, collocation, support services
and other essential DSL service inputs on more favorable terms than they
provide these facilities and services to their DSL competitors, like us.
These factors give the traditional telephone companies a potential
competitive advantage compared with us. Accordingly, we may be unable to
compete successfully against SBC, Verizon, BellSouth, Qwest Communications
International Inc. or the other traditional telephone companies, and any
failure to do so would materially and adversely affect our business,
operating results and financial condition.

   Other Major DSL Providers.  Other competitive telecommunications
companies plan to offer or have begun offering DSL-based access services in
our targeted markets, and others are likely to do so in the future.
Competitive telecommunications companies that provide DSL service include
Covad Communications Group, Inc. and Rhythms NetConnections, Inc.

   Other Service Providers and Technologies.  Many of our competitors are
offering, or may soon offer, technologies and services that will compete
with some or all of our high-speed offerings. These technologies include
T-1, ISDN, satellite, cable modems and analog modems and could be provided
by the following:

        -   Cable Modem Service Providers.  Cable modem service providers,
            like MediaOne, Excite@Home, through its @Home service
            offering, and their cable partners, are offering or preparing
            to offer high-speed Internet access over fiber and cable
            networks to consumers. At Home, through its @Work service
            offering, has positioned itself to do the same for businesses.
            Where deployed, these networks provide local access services,
            in some cases at higher speeds than our CopperNet. They
            typically offer these services at lower prices than our
            services, in part by sharing the capacity available on their
            cable networks among multiple end users.



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                                                                         24
        -   Traditional Long Distance Carriers.  Many of the leading
            traditional long distance carriers, like AT&T, Sprint and
            WorldCom, are expanding their capabilities to support high-
            speed, end-to-end networking services. Increasingly, their
            services include high-speed local access combined with MANs
            and WANs, and a full range of Internet services and
            applications. We expect them to offer combined data, voice and
            video services over these networks. These carriers have
            deployed large-scale networks, have large numbers of existing
            business and residential customers and enjoy strong brand
            recognition, and, as a result, represent significant
            competition. For instance, they have extensive fiber networks
            in many metropolitan areas that primarily provide high-speed
            data and voice communications to large companies. They could
            deploy last-mile services in combination with their current
            fiber networks. They also have interconnection agreements with
            many of the traditional telephone companies and have secured
            collocation spaces from which they could begin to offer
            competitive services.

        -   New Long Distance Carriers.  New long distance carriers, such
            as Williams Communications, Qwest and Level 3 Communications,
            are building and managing high bandwidth, nationwide packet-
            based technology networks for WANs. These same providers are
            acquiring or partnering with ISPs to offer services directly
            to business customers. These companies could extend their
            existing networks to include fiber optic networks within
            metropolitan areas and high-speed services, either alone or in
            partnership with others.

        -   Internet Service Providers.  ISPs provide Internet access to
            business and residential customers. These companies generally
            provide Internet access over traditional telephone companies'
            networks at ISDN speeds or below. Some ISPs have begun
            offering DSL-based access using DSL services offered by the
            traditional telephone companies or other DSL-based competitive
            telecommunications companies. Some Internet service providers
            such as WorldCom, Earthlink, Inc. and PSINet have significant
            and even nationwide marketing presences and combine these with
            strategic or commercial alliances with DSL-based competitive
            telecommunications companies.



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                                                                         25
        -   Wireless and Satellite Data Service Providers.  Several new
            companies are emerging as wireless and satellite-based data
            service providers over a variety of frequency bands. Companies
            such as Teligent, Inc., Advanced Radio Telecom Corp. and
            WinStar Communications, Inc., hold point-to-point microwave
            licenses to provide fixed wireless services such as voice,
            data and videoconferencing. We also may face competition from
            satellite-based systems such as Motorola Satellite Systems,
            Inc., Hughes Space Communications, Globalstar
            Telecommunications Ltd. and others that are planning or are in
            the process of building global satellite networks that can be
            used to provide broadband voice and data services.

Relationship with Verizon

   Our relationship with Verizon is critical to our current business. We
depend on Verizon for collocation facilities, copper telephone lines,
support services and some of the fiber optic transport that we use for
CopperNet in our target markets. Our interconnection agreements with
Verizon govern much of this critical relationship. We have signed
interconnection agreements with Verizon in each of the states covering our
target markets. These agreements cover a number of aspects, including:

        -   the price and terms to lease access to Verizon's copper lines;

        -   the special conditioning Verizon provides to enable the
            transmission of DSL signals on these lines;

        -   the price and terms for collocation of our equipment in
            Verizon's central offices;

        -   the price and terms to access Verizon's transport facilities;

        -   the terms to access conduits and other rights of way Verizon
            has constructed for its own network facilities;

        -   the operational support systems and interfaces that we use to
            place orders and trouble reports and monitor Verizon's
            response to our requests;

        -   the dispute resolution process we and Verizon use to resolve
            disagreements relating to the terms of the interconnection
            agreement; and

        -   the term of the interconnection agreement, its transferability
            to successors, its liability limits and other general aspects
            of our relationship with Verizon.

   We have entered into interconnection agreements with Verizon that
expire in June 2002 for Delaware, Maryland, New Jersey, Pennsylvania,

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                                                                         26
Virginia, Washington, D.C. and West Virginia.  For Massachusetts and New
York, we have entered into interconnection agreements that continue in
perpetuity absent a 90-day termination notice by either party.  As of March
15, 2000, no termination has been given by either party.

   Additionally, the FCC, state telecommunications regulators and the
courts have authority to interpret our interconnection agreements and to
resolve disputes in the event of a disagreement between us and Verizon.
There can be no assurance that these bodies will not interpret the terms or
prices of our interconnection agreements in ways that could adversely
affect our business, operating results and financial condition.

Government Regulation

   The following summary describes material telecommunications regulations
and legislation directly affecting our industry.

   The facilities and services that we obtain from Verizon in order to
provide CopperNet are regulated extensively by the FCC and state
telecommunications regulatory agencies. To a lesser extent, these
regulators also exercise regulatory control over the terms under which we
provide CopperNet to the public. Municipalities also regulate limited
aspects of our telecommunications business by imposing zoning requirements,
permit or right-of-way procedures or fees, among other regulations.
Regulatory agencies generally have the authority to condition, modify,
cancel, terminate or revoke operating authority for failure to comply with
applicable laws, rules, regulations or policies. Fines or other penalties
also may be imposed for such violations. We believe that we operate our
business in compliance with applicable laws and regulations of the various
jurisdictions in which we operate and that we possess the approvals
necessary to conduct our current operations. However, there can be no
assurance that regulators or third parties would not raise issues regarding
our compliance or non-compliance with applicable laws and regulations.

   Federal Regulation.  The 1996 Telecom Act substantially departs from
prior telecommunications law by establishing competition as a national
policy in all telecommunications markets. This legislation removes many
state regulatory barriers to competition in telecommunications markets
dominated by traditional telephone companies and preempts, after notice and
an opportunity to comment, laws restricting competition in those markets.
The 1996 Act also greatly expands the obligation of traditional telephone
companies to make available to competitors the facilities and services that
competitors need in order to provide telecommunications service, and it
requires traditional telephone companies to interconnect their networks on
reasonable terms with the networks of competitors.  More specifically, the
1996 Act requires the traditional telephone companies to:

        -   provide collocation, which allows competitive
            telecommunications companies to install and maintain their own
            network termination equipment in telephone company central
            offices;



<PAGE>
<PAGE>
                                                                         27
        -   unbundle and provide access to components of their service
            networks to other providers of telecommunications services;

        -   provide competitors with access to back office computer
            systems in order to facilitate the competitors' ordering and
            maintenance of the facilities and services they obtain from
            the traditional telephone companies;

        -   establish wholesale rates for the services they offer at
            retail to promote resale by competitors; and

        -   provide competitors with nondiscriminatory access to telephone
            poles, ducts, conduits and rights of way.

   Traditional telephone companies also are required by the 1996 Telecom
Act to negotiate interconnection agreement in good faith with competing
carriers requesting any or all of the above arrangements. If a requesting
carrier cannot reach an agreement within the prescribed time, either
carrier may request binding arbitration by the applicable state
telecommunications regulatory agencies.

   The FCC and state telecommunications regulators also are instructed by
the 1996 Telecom Act to perform certain duties to implement the regulatory
policy changes prescribed by the 1996 Act, including the adoption of rules
and regulations to carry out Congressional intent. The outcome of various
ongoing proceedings to carry out these responsibilities, or judicial
appeals of these proceedings, could materially affect our business,
operating results and financial condition.  Below, we summarize recent
regulatory initiatives that have a potential impact on our company.  This
summary is illustrative of the types of regulations that potentially affect
our business rather than describing every telecommunications regulatory
policy that affects us.

   In January 1999, the U.S. Supreme Court held that, while the FCC has
broad authority to interpret the 1996 Telecom Act and issue rules for its
implementation, the agency had violated the 1996 Act in defining the
individual network elements that traditional telephone companies must make
available to competing telecommunications providers, and it sent the matter
back to the FCC with instructions to consider further the question of which
parts of a traditional telephone company's network must be provided to
competitors. The FCC released an order on November 5, 1999 that sought to
follow the Supreme Court's instructions. The order reaffirms the agency's
earlier holding that traditional telephone companies must make available
each of the particular inputs that we use in order to provide our CopperNet
services (including, but not limited to, copper telephone lines,
transmission facilities between local telephone company offices and various
back-office support services). In addition, the FCC's November 1999 order
requires, upon the request of competing telecommunications companies like
us, that traditional telephone companies provide the competing carriers
with certain other inputs (such as subloops, and in some cases packet

<PAGE>
<PAGE>
                                                                         28
switching) that may prove useful as we expand our CopperNet service,
especially into more suburban areas.

   While the Supreme Court's January 1999 order had affirmed that the 1996
Telecom Act gives the FCC broad authority as a general matter, 18 months
later the U.S. Court of Appeals for the Eighth Circuit held that the FCC
nonetheless violated the 1996 Act in adopting rules that define the
methodology that state telecommunications regulators must use in setting
the prices that competitors must pay for those parts of their telephone
networks that the traditional telephone companies make available to
competitors.  On January 22, 2001, the U.S. Supreme Court agreed to review
this Eighth Circuit decision.  If the outcome of this review is unfavorable
to competitors, it could have a significant negative impact on the price we
pay for the inputs we must obtain from Verizon telephone companies in order
to provide CopperNet service.

   On March 17, 2000, the U.S. Court of Appeals for the D.C. Circuit
instructed the FCC to reconsider certain regulations it had adopted one
year earlier defining the types of equipment that competitors like us may
collocate inside the offices of traditional telephone companies in order to
facilitate the competitors' provision of telecommunications services.  The
FCC has instituted a proceeding to comply with the Court's mandate. The
impact of the Court's decision on our company is unclear since we have no
way to determine what action the FCC will take in response to the Court's
mandate.  If the FCC takes action to limit the type of equipment that
competitors may collocate in these offices, we may be adversely affected.

   In August 2000, the FCC clarified its collocation rules by adopting
time frames by which traditional telephone companies must provision a
collocation arrangement.  The FCC's August 2000 order takes steps to ensure
that competitors can obtain these arrangements in a timely and efficient
manner by requiring a traditional telephone company to provide physical
collocation, including cageless collocation, no later than 90 calendar days
after receiving a collocation request (except where a state sets its own
standard) and by requiring a traditional telephone company to allow a
competitor to construct adjacent structures on land owned or controlled by
the traditional telephone company to the extent physical collocation space
is exhausted in a particular structure.

   In June 2000, Bell Atlantic and GTE consummated a merger of their two
companies after the FCC, in an order released June 16, 2000, approved the
merger subject to conditions and the spinning off of substantially all of
GTE's nationwide Internet business into a separate public corporation.
Upon consummation of the merger, the combined Bell Atlantic/GTE entity was
named Verizon.  The FCC's merger conditions are intended, among other
things, to promote equitable and efficient deployment of advanced services,
including high speed data services.  One condition requires that the merged
entity provide retail advanced services through an affiliate other than its
traditional telephone companies and that the merged entity's traditional
telephone companies provide facilities and services to this new affiliate
on the same terms that they provide such services and facilities to
competitors.  The FCC found that absent this and the other merger

<PAGE>
<PAGE>
                                                                         29
conditions, the proposed GTE-Bell Atlantic merger likely would have reduced
the FCC's ability to implement the market-opening requirements of the 1996
Act through comparative practice oversight (benchmarking) methods, and
would have increased the incentive and ability of the merged entity to
discriminate against its rivals, particularly with respect to the provision
of advanced services, including high speed data services.  However, on
January 9, 2001, the U.S. Court of Appeals for the D.C. Circuit issued an
order that could call into question the enforceability of the requirement
in the FCC's GTE/Verizon merger order that Verizon provide advanced
services through an entity other than a traditional telephone company.  At
present though, Verizon provides advanced services through an entity
different from its traditional telephone companies.

   On December 23, 1999, the FCC ruled that many telecommunications
services that provide high-speed dedicated access to the Internet are
interstate services rather than intrastate services.  An interstate service
must be provided subject to FCC regulatory controls, whereas an intrastate
service must be provided subject to regulatory controls of the
telecommunications regulatory agency of the state where the service is
provided.  This ruling, which has been appealed to the U.S. Court of
Appeals for the D.C. Circuit, could be potentially advantageous to us if
upheld since it could reduce the number of telecommunications regulatory
agencies that control the terms under which we provide CopperNet and since
FCC regulatory controls in some respects are less burdensome than state
regulatory controls. For example, the 1996 Telecom Act authorizes the FCC
to forbear from regulating the terms under which carriers classified as
non-dominant must provide interstate telecommunications service. The FCC
has exercised its forbearance authority by exempting non-dominant carriers
like us from filing a tariff setting forth the terms under which they
provide any interstate access service. Since we believe CopperNet is
interstate special access, we provide the service to existing customers
pursuant to contract rather than tariff.  We have no way of knowing whether
the Circuit Court will affirm the FCC's decision.

   On May 8, 1997, the FCC released an order establishing a separate
federal universal service support fund, which provides subsidies to
carriers that provide service to underserved individuals and customers in
high-cost or low-income areas, and to companies that provide
telecommunications services for schools and libraries and to rural health
care providers.  Beginning in the fall of 2000, we were required to make
payments to the universal service fund and were also required to contribute
to certain state universal service funds. The universal service rules are
administered jointly by the FCC, the fund administrator, and state
regulatory authorities.  In February 2001, NAS began assessing a charge on
its customers' interstate telecommunications services to recover the
company's Federal Universal Service Fund obligations.

   On November 2, 1999, the FCC held that a provision in the 1996 Telecom
Act requiring that traditional telephone companies offer their retail
services at a wholesale price to competitors like us does not apply when
these telephone companies provide a discounted DSL service directed to
ISPs. In that case, while competitors may purchase the traditional

<PAGE>
<PAGE>
                                                                         30
telephone companies' ISP-directed DSL offering on the same terms as the
ISPs, the FCC ruled that competitors have no legal right to a wholesale
discount off the price paid by ISPs. This ruling could adversely affect us
if it gives ISPs an economic incentive to meet all of their DSL needs by
subscribing to the traditional telephone companies' ISP-directed discounted
DSL offerings rather than by subscribing to DSL services offered by
competitors like us.

   On August 27, 1999, the FCC issued an order that establishes a
procedure by which traditional telephone companies may apply for authority
to set the retail prices they charge for certain high speed data
transmission services, including services that may compete with the
CopperNet service that we provide, without substantial regulatory
oversight.  In an order released March 14, 2001,  the FCC granted pricing
flexibility to Verizon's traditional telephone companies in some of the
areas where we provide competing service, thereby giving the Verizon
companies additional flexibility to price their retail high-speed data
services in order to respond to competition.

   In December 1999, the FCC approved Verizon's application for authority
to provide long distance telephone service to customers in New York. The
agency based its decision to grant this application on its finding that
Verizon's traditional telephone company in New York is providing services
and facilities to competitors like us on terms that comply with the 1996
Telecom Act and the FCC's rules. The agency made this finding even though
many Verizon competitors, including us, had urged the FCC to find that
Verizon is not yet complying with these requirements.  The FCC's finding
that Verizon provides facilities and service to competitors in compliance
with existing regulatory requirements could reduce Verizon's incentive to
improve its provisioning of services and facilities to competitors in New
York.  The FCC also is scheduled to make a decision by April 2001 about
whether to approve Verizon's more recently filed application for authority
to provide long distance telephone service to customers in Massachusetts.
Many Verizon competitors, including us, have urged the FCC to deny this
application on grounds that Verizon's traditional telephone company in
Massachusetts is not yet complying with its obligation to provide
facilities and services to competitors on terms that comply with the 1996
Telecom Act and the FCC's rules.

   On December 9, 1999, the FCC issued an order requiring that traditional
telephone companies make available to competitors the upper frequencies of
a local telephone line that serves a given address so that the competitor
may provide high speed data service to the customer over the same line that
the traditional telephone company uses in providing regular local telephone
service to that customer.  On January 19, 2001, the FCC issued an order
that clarified certain aspects of the December 9, 1999 order.  Verizon
started to make available this functionality to competitors in the last
half of 2000.  We do not presently use this functionality in providing high
speed data services, although some of our competitors do.

   In the January 19, 2001 order referred to above, the FCC also invited
comments on whether it should adopt regulations requiring traditional

<PAGE>
<PAGE>
                                                                         31
telephone companies to make available to competitors the specialized
services and facilities that are necessary in order to provide high speed
data services using DSL technologies to customers whose local telephone
lines consist partially of fiber and partially of copper wire, rather than
entirely of copper wire.  At present, companies using DSL technology are
unable to provide the fastest speed service to customers whose local phone
lines contain some fiber optic wiring.  Since an estimated 15 or 20 percent
of all customer locations may be served by local telephone lines containing
some fiber, the adoption of FCC rules in this area could significantly
increase the number of customer locations to which high speed data service
using DSL technologies can be provided.  However, we have no way of
predicting whether the FCC will adopt regulations in this area.  We also
have no way of predicting whether any such regulations that it adopts will
require traditional telephone companies to make available the services and
facilities that are necessary to provide DSL services over such lines in an
efficient and cost effective manner.  We also cannot predict the timing of
any FCC regulations in this area.

   In August 2000, the FCC issued a report pursuant to Section 706 of the
1996 Telecom Act concluding that advanced telecommunications capability is
being deployed in a reasonable and timely fashion overall. The FCC noted
that although high-speed data services are available in many parts of the
country, rural and low-income areas are particularly vulnerable to not
receiving timely access to such services.  The FCC concluded that the
following recommendations, among others, will promote access to advanced
services for those identified as being particularly vulnerable to not
having affordable access to high-speed services by encouraging competition,
promoting infrastructure investment and addressing the affordability of
advanced services.  The FCC will:

        -   examine its rules to ensure that competitors can access remote
            terminals;

        -   streamline the equipment approval process for wireless and
            customer premise equipment with advanced telecommunications
            capability;

        -   continue its commitment to the e-rate and consider reviewing
            its program to determine whether it can do even more to
            promote high-speed connections in schools, libraries, and the
            surrounding communities;

        -   consider making more spectrum available for broadband
            services, both licensed and unlicensed; and

        -   initiate a proceeding on the issue of whether to establish a
            national policy to mandate access by multiple Internet service
            providers to a cable company's platform. This proceeding was
            initiated in September 2000.

   In October 2000, The FCC implemented measures to enhance the ability of
competing telecommunications companies to provide services to customers in

<PAGE>
<PAGE>
                                                                         32
residential and commercial buildings or other multiple tenant environments
(MTEs).  The FCC: (1) forbade telecommunications carriers in commercial
settings from entering into exclusive contracts with building owners,
including contracts that effectively restrict premises owners or their
agents from permitting access to other telecommunications service
providers; (2) established procedures to reduce competitive carriers'
dependence on the traditional telephone companies to gain access to on-
premises wiring, while at the same time recognizing the varied needs of
carriers and building owners (these actions relate to the location of the
demarcation point, which marks the end of traditional telephone company's
control over wiring and the beginning of the customer's or MTE owner's
control); and (3) determined that under Section 224 of the Communications
Act, utilities, including traditional telephone companies, must afford
other telecommunications carriers and cable service providers reasonable
and nondiscriminatory access to conduits and rights-of-way located in
customer buildings and campuses, to the extent such conduits and rights-of-
way are owned or controlled by the utility.

   State Regulation.  While it is clear from the January 1999 Supreme
Court decision discussed above that the FCC has broad authority to
implement provisions in the 1996 Telecom Act that are intended to open
telecommunications markets to competition, state telecommunications
regulators also have substantial authority in this area. For example,
although the Supreme Court's decision validated the FCC's jurisdiction to
prescribe the methodology traditional telephone companies must use in
setting the price of copper telephone wires and other network elements, the
FCC has exercised that jurisdiction by adopting a pricing standard and has
given state regulators substantial authority to apply that standard in
order to determine actual prices. Some states have set only temporary
prices for some network elements that are critical to the provision of DSL
services because they have not yet completed the regulatory proceedings
necessary to determine permanent prices. Other states have begun
proceedings to set new permanent prices based on more current data. The
results of these various proceedings will determine the price we pay for,
and whether it is economically attractive for us to use, these network
elements and services.

   The 1996 Telecom Act also gives state telecommunications regulators
broad authority to approve or reject interconnection agreements that
competitive telecommunications companies enter with traditional telephone
companies and broad authority to resolve disputes that arise under these
interconnection agreements. Under the 1996 Telecom Act, if we request,
traditional telephone companies have a statutory duty to negotiate in good
faith with us for agreements for interconnection and access to unbundled
network elements. A separate agreement is signed for each of the states in
which we operate. During these negotiations either the traditional
telephone company or we may submit disputes to the state regulatory
commissions for mediation and, after the expiration of the statutory
negotiation period provided in the 1996 Telecom Act, we may submit
outstanding disputes to the states for arbitration. The 1996 Telecom Act

<PAGE>
<PAGE>
                                                                         33
also allows state regulators to supplement FCC regulations as long as the
state regulations are not inconsistent with FCC requirements.

   In addition, all of the states in which we operate require some degree
of state regulatory commission approval to provide certain intrastate
telecommunications services.  For example, we have obtained non-expiring
state authorizations to provide intrastate services from the state
regulatory agency in all of these states. In most states, intrastate
tariffs are also required for various intrastate services, although non-
dominant carriers like us are not typically subject to price or rate of
return regulation for tariffed intrastate services. The statutes of some of
the states where we provide CopperNet service require that we obtain
approval from the public utility commission in those states to issue new
securities.

   It is possible that a variety of other state regulatory policies could
be adopted that address other matters that affect our business. We are
unable to predict what policies may be adopted in the future, to what
extent existing laws and regulations may be found applicable to our
business, or the impact such new or existing laws or regulations may have
on our business. In addition, laws or regulations could be adopted in the
future that may decrease the growth and expansion of the Internet's use,
thereby decreasing demand for our services.

   Local Government Regulation.  In certain instances, we may be required
to obtain various permits and authorizations from municipalities in which
we operate our own facilities. The extent to which such actions by local
governments pose barriers to entry for competitive telecommunications
companies that may be preempted by the FCC is the subject of litigation.
Although our network consists primarily of unbundled network elements of
the traditional telephone companies, in certain instances we may deploy our
own facilities and therefore may need to obtain certain municipal permits
or other authorizations. The actions of municipal governments in imposing
conditions on the grant of permits or other authorizations or their failure
to act in granting such permits or other authorizations could have a
material adverse effect on our business, operating results and financial
condition.

Intellectual Property

   We regard our products, services and technology as proprietary and
attempt to protect them with copyrights, trademarks, trade secret laws,
restrictions on disclosure and other methods. There can be no assurance
these methods will be sufficient to protect our technology and intellectual
property. We also generally enter into confidentiality agreements with our
employees and consultants, and generally control access to and distribution
of our documentation and other proprietary information. Despite these
precautions, it may be possible for a third party to copy or otherwise
obtain and use our products, services or technology without authorization,
or to develop similar technology independently. We own federal trademarks
for the marks CuNet, CU COPPERNET and COPPERNET for use with

<PAGE>
<PAGE>
                                                                         34
"communications services, namely, high-speed electronic data transmission
services." We expect to seek registration of our copyrights in software and
other intellectual property to the extent possible. There is no assurance
that we will obtain any significant copyright protection for our systems
that would protect our intellectual property from competition. Currently,
we have not filed any patent applications. In addition, effective patent,
copyright, trademark and trade secret protection may be unavailable or
limited in certain foreign countries, and the global nature of the Internet
makes it virtually impossible to control the ultimate destination of our
proprietary information. There can be no assurance that the steps we have
taken will prevent misappropriation or infringement of our technology. In
addition, litigation may be necessary in the future to enforce our
intellectual property rights, to protect our trade secrets or to determine
the validity and scope of the proprietary rights of others. Litigation of
this type could result in substantial costs and diversion of resources and
could have a material adverse effect on our business, operating results and
financial condition. In addition, some of our information, including our
competitive carrier status in individual states and our interconnection
agreements, is a matter of public record and can be readily obtained by our
competitors and potential competitors, possibly to our detriment.

Employees

   As of December 31, 2000, we employed 456 individuals in engineering,
sales, marketing, customer support and related activities and general and
administrative functions. None of these employees is represented by a labor
union, and we consider our relations with our employees to be satisfactory.
We are not a party to any collective bargaining agreement. Our ability to
achieve our financial and operational objectives depends in large part upon
the continued service of our senior management and key technical, sales,
marketing and managerial personnel, and our continuing ability to attract
and retain highly qualified technical, sales, marketing and managerial
personnel. Competition for qualified personnel is intense, particularly in
sales, network engineering and product management, and we may be unable to
identify, attract and retain such personnel in the future.  In November
2000, we eliminated approximately 145 positions as part of our actions to
reduce selling, general and administrative expenses.

Item 2.  Properties.

   Our headquarters are in Herndon, Virginia, in facilities consisting of
approximately 113,093 square feet under a lease that was executed on
October 27, 1999.  On December 22, 2000, the Company entered into an
agreement with SBC under which SBC agreed to assume or sublease 46,022
square feet, constituting the fourth and fifth floors of the facility, for
the remaining term of our lease with the landlord.

   In addition, the Company leases two facilities in Sterling, Virginia,
in one of which SBC has agreed to assume or sublease the majority of the
leased space as part of our agreement with them.  We intend to sublease the
other facility in 2001.  We also currently have branch offices in

<PAGE>
<PAGE>
                                                                         35
Wilmington, Delaware; Columbia, Maryland; Woburn, Massachusetts; East
Brunswick and Morristown, New Jersey; New York and Uniondale, New York;
Malvern and Pittsburgh, Pennsylvania; and in Richmond and Virginia Beach,
Virginia.  We are currently evaluating our branch office space needs.  We
expect to close some of these offices in 2001, consolidate space where
feasible, and enable certain employees to telecommute.

   We also lease collocation space in central offices from Verizon where
we operate or plan to operate under the terms of our interconnection
agreements with Verizon and regulations imposed by state telecommunications
regulators and the FCC. While the terms of these leases are perpetual, the
productive use of our collocation facilities is subject to the terms of our
interconnection agreements.  See "Item 1 - Business - Relationship with
Verizon."

Item 3.  Legal Proceedings.

   We are currently involved in a number of legal proceedings, some of
which, as described below, could have a material adverse effect on our
business, financial position, results of operations or cash flows.
Additionally, our present and possible future legal proceedings and claims,
whether with or without merit, could be expensive to defend, divert
management's attention, and consume our time and resources.  There can be
no assurance concerning the outcome of current or future legal proceedings
or claims.

   We are a defendant, along with two directors and a principal
stockholder, and a counter-claimant, in a case filed in the United States
District Court for the Eastern District of Virginia in November 2000 by
former officer Christopher J. Melnick.  Plaintiff alleges several causes of
action including breach of contract and securities fraud, and seeks both
monetary damages in an amount to be proven at trial and a declaratory
judgment.  We have filed an answer substantially denying Plaintiff's
allegations and have also filed a counterclaim against Mr. Melnick.  Mr.
Melnick's motion for a temporary restraining order was denied. The case is
now in discovery.

   InterConnX Inc. initiated an action against us in the United States
District Court for the Eastern District of Virginia in November 2000.
Plaintiff alleges claims for breach of contract and seeks monetary damages
in the amount of approximately $955,000.  We have filed an answer
substantially denying Plaintiff's allegations.  The case is now in
discovery.

   Vitria Technology, Inc. initiated an action against the Company in the
Fairfax County Circuit Court, Virginia in November 2000.  Plaintiff alleges
several causes of action and seeks monetary damages in the amount of
approximately $540,000. We have filed an answer substantially denying
Plaintiff's allegations.  The case is now in discovery.

   Additionally, we are subject to state telecommunications regulators,
FCC and court decisions as they relate to the interpretation and

<PAGE>
<PAGE>
                                                                         36
implementation of the 1996 Telecom Act, the Federal Communications Act of
1934, as amended, various state telecommunications statutes and
regulations, the interpretation of competitive telecommunications company
interconnection agreements in general and our interconnection agreements in
particular. In some cases, we may be deemed to be bound by the results of
ongoing proceedings of these bodies or the legal outcomes of other
contested interconnection agreements that are similar to our agreements.
The results of any of these proceedings could have a material adverse
effect on our business, financial condition, results of operations and cash
flows.

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

   None.


<PAGE>
<PAGE>
                                                                         37
                                 PART  II

Item 5.  Market for Registrant's Common Equity and Related Stockholder
         Matters.

   Stock Data.  Our common stock trades on The Nasdaq Stock Market (sm)
under the symbol "NASC." As of March 15, 2001, there were 102 record
holders and approximately 6,672 beneficial holders of our common stock. The
following table sets forth, for the periods indicated, the high and low
closing prices for our common stock:

                            2000                 1999
                     ------------------   ------------------
          Quarter      High       Low       High       Low
          -------    --------  --------   --------  --------
          First       $35.13    $22.00        -         -
          Second      $22.94     $9.56     $13.94     $8.63
          Third       $11.44     $4.13     $18.00    $10.00
          Fourth       $4.06     $0.47     $36.50    $12.25

   On March 15, 2001, the last reported sales price of our common stock on
The Nasdaq Stock Market was $0.78.

   We have never paid cash dividends.  It is our present policy to retain
earnings to finance the growth and development of our business, and
therefore we do not anticipate paying cash dividends on our common stock in
the foreseeable future.

   Our common stock is listed on The Nasdaq Stock Market and is therefore
subject to its rules and regulations.  During late 2000 and early 2001, we
and Nasdaq had several discussions concerning the listing standard that was
applicable to our common stock and whether or not we met such standard with
respect to applicable net tangible asset and stock price tests.  On
February 1, 2001, Nasdaq informed us that, upon review of our Form 8-K
filed January 31, 2001, we were in compliance with all of the requirements
of Nasdaq Maintenance Standard 1, and closed the matter.  We may be found
by Nasdaq to be out of compliance with this standard in the future if we
report, as part of an SEC filing, net tangible assets of below $4 million
or if the closing bid price of our common stock, as reported by Nasdaq, is
below $1.00 for 30 consecutive trading days.  If we are unable to cure any
such possible non-compliance within the applicable time periods, our common
stock could be delisted from The Nasdaq Stock Market.  In such event, our
common stock would be available for immediate quotation on the over-the-
counter bulletin board, or OTCBB, for those market makers quoting our
common stock during the 30-day period preceding its delisting from Nasdaq.

   Additional Investor Relations Information.  All of our current press
releases and other investor relations information, including all of our
current required filings with the Securities and Exchange Commission, may
be found at http://www.nas-corp.com on the Internet's world wide web. For

<PAGE>
<PAGE>
                                                                         38
those without Internet access, the same information may be obtained without
charge by request to us addressed to: Investor Relations, Network Access
Solutions Corporation, Three Dulles Tech Center, 13650 Dulles Technology
Drive, Herndon, VA  20171.

   Transfer Agent.  Our transfer agent is American Stock Transfer & Trust
Company, 40 Wall Street, New York, NY 10005, telephone (877) 777-0800.

   Annual Meeting.  Our next Annual Meeting of Stockholders is scheduled
to be held at 9:00 a.m. on Tuesday, June 5, 2001, at Three Dulles Tech
Center, 13650 Dulles Technology Drive, in Herndon, Virginia.

   Use of Proceeds.  In June 1999, we commenced and completed a firm
commitment underwritten initial public offering of 7,500,000 shares of our
common stock. The shares were registered with the Securities and Exchange
Commission pursuant to a registration statement on Form S-1 (No.
333-74679), which was declared effective on June 3, 1999. After deducting
underwriting discounts and commissions of $5.5 million and expenses of $1.8
million, we received net proceeds of $81.8 million.

<PAGE>
<PAGE>
                                                                         39
Item 6.  Selected Financial and Other Data.

   We present below summary financial and other data for our company. The
summary historical statement of operations and other data for each of the
three years in the period ended December 31, 2000 have been derived from
our audited financial statements that are included elsewhere in this Form
10-K. The statement of operations and other data for the years ended
December 31, 1997 and 1996 have been derived from audited financial
statements that were included in our prior public filings. The summary
balance sheet data as of December 31, 2000 and 1999 has been derived from
our audited financial statements that are included elsewhere in this Form
10-K. The balance sheet data as of December 31, 1998, 1997 and 1996 has
been derived from audited financial statements that were included in our
prior public filings.

<TABLE>
<CAPTION>
                                                                             Year ended December 31,
                                                          ------------------------------------------------------------
                                                             2000        1999         1998        1997         1996
                                                          ----------  ----------   ----------  ----------   ----------
<S>                                                       <C>         <C>          <C>         <C>          <C>
Statement of Operations Data:                                         (in thousands, except per share data)
Revenue:
   Product sales and consulting services. . . . . . . .   $   19,914  $   15,618   $   11,328  $    8,941   $   14,482
   Network services . . . . . . . . . . . . . . . . . .       10,703       1,821          311           4          -
                                                          ----------  ----------   ----------  ----------   ----------

      Total revenue . . . . . . . . . . . . . . . . . .       30,617      17,439       11,639       8,945       14,482
                                                          ----------  ----------   ----------  ----------   ----------

Operating expenses:
   Product sales and consulting services costs
      (exclusive of depreciation and amortization
      presented below). . . . . . . . . . . . . . . . .       18,252      13,027        9,400       7,411       12,066
   Network services costs (exclusive of depre-
      ciation and amortization presented below) . . . .       22,641       4,813           41           2          -
   Selling, general and administrative. . . . . . . . .       78,128      27,670        4,017       1,437        2,255
   Amortization of deferred compensation on
      stock options . . . . . . . . . . . . . . . . . .        7,509       8,165          219         -            -
   Depreciation and amortization. . . . . . . . . . . .       24,676       5,195          130          12            7
                                                          ----------  ----------   ----------  ----------   ----------

      Total operating expenses. . . . . . . . . . . . .      151,206      58,870       13,807       8,862       14,328
                                                          ----------  ----------   ----------  ----------   ----------

Income (loss) from operations . . . . . . . . . . . . .     (120,589)    (41,431)      (2,168)         83          154
Interest income (expense), net. . . . . . . . . . . . .        2,713       1,072           64          (5)          (1)
Follow-on offering costs. . . . . . . . . . . . . . . .         (574)        -            -           -            -
                                                          ----------  ----------   ----------  ----------   ----------

Income (loss) before income taxes . . . . . . . . . . .     (118,450)    (40,359)      (2,104)         78          153
Provision (benefit) for income taxes. . . . . . . . . .           50         (71)         (28)         36           63
                                                          ----------  ----------   ----------  ----------   ----------

Net income (loss) . . . . . . . . . . . . . . . . . . .     (118,500)    (40,288)      (2,076)         42           90
Preferred stock dividends . . . . . . . . . . . . . . .        8,472         339          322         -            -
Preferred stock accretion . . . . . . . . . . . . . . .          146         258          245         -            -
Preferred stock conversion inducement charge. . . . . .       22,141         -            -           -            -
                                                          ----------  ----------   ----------  ----------   ----------

Net income (loss) applicable to common stockholders . .   $ (149,259) $  (40,885)  $   (2,643) $       42   $       90
                                                          ==========  ==========   ==========  ==========   ==========

Net income (loss) per common share applicable to
    common stockholders (basic and diluted) . . . . . .   $    (3.18) $    (0.99)  $    (0.10) $     0.00   $     0.00
                                                          ==========  ==========   ==========  ==========   ==========

Weighted average common shares outstanding
    (basic and diluted) . . . . . . . . . . . . . . . .       46,986      41,259       27,302      21,915       21,915
                                                          ==========  ==========   ==========  ==========   ==========
</TABLE>

<PAGE>
<PAGE>
                                                                         40
<TABLE>
<CAPTION>
                                                                             Year ended December 31,
                                                          ------------------------------------------------------------
                                                             2000        1999         1998        1997         1996
                                                          ----------  ----------   ----------  ----------   ----------
<S>                                                       <C>         <C>          <C>         <C>          <C>
                                                                                 (in thousands)
Other Data:
Adjusted EBITDA (1) . . . . . . . . . . . . . . . . . .   $  (88,404) $  (28,071)  $   (1,819) $       95   $      161
Capital expenditures (2). . . . . . . . . . . . . . . .       60,035      55,262        5,021         122           30
Net cash provided by (used in) operating activities . .      (77,591)    (20,184)      (2,810)        805          (27)
Net cash used in investing activities . . . . . . . . .      (66,813)    (61,435)      (1,341)       (122)         (30)
Net cash provided by financing activities . . . . . . .      140,899      94,341        8,956           9           55
__________

(1)   Adjusted EBITDA consists of net income (loss) excluding net interest, taxes, depreciation and amortization (including
      amortization of deferred compensation).  Adjusted EBITDA is provided because it is a measure of financial performance
      commonly used in the telecommunications industry. We have presented adjusted EBITDA to enhance your understanding of our
      operating results. You should not construe it as an alternative to operating income, as an indicator of our operating
      performance or as an alternative to cash flows from operating activities as a measure of liquidity determined in accordance
      with generally accepted accounting principles. We may calculate adjusted EBITDA differently than other companies. For
      further information, see our financial statements and related notes elsewhere in this Form 10-K.

(2)   Net of a transfer of assets to SBC of $23.7 million in 2000.




<CAPTION>
                                                                               As of December 31,
                                                          ------------------------------------------------------------
                                                             2000        1999         1998        1997         1996
                                                          ----------  ----------   ----------  ----------   ----------
<S>                                                       <C>         <C>          <C>         <C>          <C>
                                                                                 (in thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term investments . . .   $   67,815  $   42,816   $    5,518  $      713   $       22
Property and equipment, net . . . . . . . . . . . . . .       90,456      55,098        5,031         140           31
Total assets. . . . . . . . . . . . . . . . . . . . . .      170,171     104,620       12,928       1,865        5,352
Total debt (including capital lease obligations). . . .       44,273      23,814        2,513          93           84
Mandatorily redeemable preferred stock. . . . . . . . .       79,238         -          5,641         -            -
Total stockholders' equity. . . . . . . . . . . . . . .        6,561      68,009          932         250          208

</TABLE>

<PAGE>
<PAGE>
                                                                         41
Quarterly Results of Operations

   The following table presents our quarterly results of operations data
and the components of net loss for 2000 and 1999. In the opinion of
management, this information has been prepared substantially on the same
basis as the financial statements appearing elsewhere in this Form 10-K,
and all necessary adjustments, consisting only of normal recurring
adjustments, have been included in the amounts stated below to present
fairly the unaudited quarterly results when read in conjunction with our
financial statements and related notes thereto appearing elsewhere in this
Form 10-K. The operating results for any quarter are not necessarily
indicative of the operating results for any future period.

<TABLE>
<CAPTION>
                                                                   2000                                    1999
                                                   -------------------------------------   -------------------------------------
                                                   Dec 31    Sep 30    Jun 30    Mar 31    Dec 31    Sep 30    Jun 30    Mar 31
                                                   -------   -------   -------   -------   -------   -------   -------   -------
                                                                             (in thousands; unaudited)
<S>                                               <C>       <C>       <C>       <C>       <C>       <C>       <C>        <C>
Revenue:
   Product sales and consulting services. . . . . $  4,244  $  6,219  $  4,709  $  4,742  $  3,744  $  3,639  $  3,578   $ 4,657
   Network services . . . . . . . . . . . . . . .    3,457     2,880     2,682     1,684     1,007       529       166       119
                                                   -------   -------   -------   -------   -------   -------   -------   -------

      Total revenue . . . . . . . . . . . . . . .    7,701     9,099     7,391     6,426     4,751     4,168     3,744     4,776
                                                   -------   -------   -------   -------   -------   -------   -------   -------

Operating expenses:
   Product sales and consulting services costs
      (exclusive of depreciation and amortization
      presented below). . . . . . . . . . . . . .    4,684     5,581     3,931     4,056     3,144     3,085     2,964     3,834
   Network services costs (exclusive of depre-
      ciation and amortization presented below) .    6,108     6,502     6,050     3,981     2,671     1,359       612       171
   Selling, general and administrative. . . . . .   18,415    23,992    20,791    14,930    10,943     8,809     5,385     2,533
   Amortization of deferred compensation on
      stock options . . . . . . . . . . . . . . .    2,073     1,992     1,745     1,699     1,466     1,431     4,728       540
   Depreciation and amortization. . . . . . . . .    7,060     8,210     5,538     3,868     2,698     1,612       698       187
                                                   -------   -------   -------   -------   -------   -------   -------   -------

      Total operating expenses. . . . . . . . . .   38,340    46,277    38,055    28,534    20,922    16,296    14,387     7,265
                                                   -------   -------   -------   -------   -------   -------   -------   -------

Loss from operations. . . . . . . . . . . . . . .  (30,639)  (37,178)  (30,664)  (22,108)  (16,171)  (12,128)  (10,643)   (2,489)
Interest income (expense), net. . . . . . . . . .      227       714     1,398       374       320       559       202        (9)
Follow-on offering costs. . . . . . . . . . . . .      -         -         -        (574)      -         -         -         -
                                                   -------   -------   -------   -------   -------   -------   -------   -------

Loss before income taxes. . . . . . . . . . . . .  (30,412)  (36,464)  (29,266)  (22,308)  (15,851)  (11,569)  (10,441)   (2,498)
Provision (benefit) for income taxes. . . . . . .      -          50       -         -         -           1       (71)      -
                                                   -------   -------   -------   -------   -------   -------   -------   -------

Net loss. . . . . . . . . . . . . . . . . . . . . $(30,412) $(36,514) $(29,266) $(22,308) $(15,851) $(11,570) $(10,370)  $(2,498)
Preferred stock dividends . . . . . . . . . . . .    2,415     2,721     2,645       691       -         -         142       197
Preferred stock accretion . . . . . . . . . . . .       87        26        26         7       -         -         108       150
Preferred stock conversion inducement charge. . .   22,141       -         -         -         -         -         -         -
                                                   -------   -------   -------   -------   -------   -------   -------   -------

Net loss applicable to common stockholders. . . . $(55,055) $(39,261) $(31,937) $(23,006) $(15,851) $(11,570) $(10,620)  $(2,845)
                                                   =======   =======   =======   =======   =======   =======   =======   =======

</TABLE>

<PAGE>
<PAGE>
                                                                         42
Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.

   The following discussion and analysis is provided to increase the
understanding of, and should be read in conjunction with, the Financial
Statements and Notes. Historical results and percentage relationships among
any amounts in the Financial Statements are not necessarily indicative of
trends in operating results for any future period.

Overview

   We began operations in 1995 by selling data communications products
made by others and providing consulting services for WANs. Shortly
thereafter, we began offering a wide range of networking solutions for the
data communications needs of businesses. We provide network integration
services, where we design our customers' networks and sell and install
related network equipment. We also manage our customers' networks, ensure
the security of their networks and provide related professional services.
From 1995 through 1998, our revenue was derived primarily from product
sales and consulting services.

   In 1996, we began to pursue deployment of a series of city-wide
networks that enable DSL services. In February 1997, we began developing
technical standards for delivery of DSL-based services within our target
markets through a joint effort with Verizon. In April 1997, we entered into
our first interconnection agreement with Verizon, which allowed us to use
their copper telephone lines and to collocate our equipment in telephone
company offices known as "central offices." Central offices serve as the
central connection point for all copper telephone lines in a local area and
form the basis for our network and a telephone company's network. We began
CopperNet service trials in November 1997 and began commercially offering
our CopperNet service in Philadelphia and Washington, D.C. in January 1999.

   We currently offer networking solutions using our own infrastructure in
the following nine northeast and mid-Atlantic cities and their surrounding
markets: Baltimore, Boston, New York, Norfolk, Philadelphia, Pittsburgh,
Richmond, Washington D.C. and Wilmington. Customer locations outside of
these major metropolitan areas are served through partnerships with
Intermedia, WorldCom, and AT&T.

   As of December 31, 2000, we had installed DSL equipment in more than
500 central offices within our northeast and mid-Atlantic markets.  We had
also installed T-1 equipment in subset of 139 offices and other switching
centers, which essentially completes our current plans for the roll-out of
our network in these markets.  Additional markets will be opened on a case-
by-case basis as market conditions provide. We estimate that the central
offices where we currently have installed our equipment serve substantially
all of the business users in these areas. As of December 31, 2000, we had
installed 11,084 lines in our northeast and mid-Atlantic regions.

   We have invested substantial amounts in the development and deployment

<PAGE>
<PAGE>
                                                                         43
of the network we use to deliver our CopperNet service. We have funded the
deployment of our CopperNet services through proceeds received from a
preferred and common stock financing in August 1998, issuance of promissory
notes that were converted into common stock during the three months ended
June 30, 1999, capital lease financing, our initial public offering and the
proceeds received from the sale of $150 million of our Series B preferred
stock to SBC and Telmex, as described in more detail in Note 11 of Notes to
Financial Statements.  From February 1997 through the third quarter 2000,
we increased our operating expenses and capital expenditures in an effort
to continue to rapidly expand our equipment and human resource-related
infrastructure and DSL-based network services.  In the fourth quarter of
2000, we adopted new elements to our strategy.  See "Item 1 - Our
Strategy."

   On December 22, 2000, we amended various separate agreements with SBC
and with Telmex, and entered into separate new agreements with SBC.  See
"Item 1 - The Company."

   These new and amended agreements with SBC resulted in a reduction of
our property and equipment related to the transfer of our lease interest in
certain central offices of $23.7 million and a conversion of preferred
stock of $79.2 million, including accrued dividends of $4.2 million, into
2,554,375 shares of our common stock.  Related to this transfer we recorded
an account receivable of $1.6 million for our lease interests in certain
central offices that SBC agreed to purchase from us.  As a result of the
above transactions, we recorded a preferred stock inducement charge of
$22.1 million during 2000.

   We expect to continue to incur substantial operating losses, net losses
and negative cash flow during our penetration of each market we serve.
Although we continue to derive the majority of our revenue from our product
sales and consulting services, we expect that over time revenue from
network services, which includes our CopperNet services, will constitute
the more significant portion of our total revenue.

Revenue

    Revenue consists of:

   Network services.  We charge monthly service fees for access to our
CopperNet local, metropolitan and wide area networks. We also provide a
wide variety of network services to customers, including remote network
management and monitoring, network security, dedicated private connections
to our network, Internet access, e-commerce and other data applications.
Some of these services are delivered to customers using resources from
third-party providers under contract to us.

   Product sales and consulting services.  As part of our overall data
communications solutions, we sell data communications products, including
the network and security components that our customers require in order to
build, maintain and secure their networks. We sell, install and configure

<PAGE>
<PAGE>
                                                                         44
selected equipment from our manufacturing partners. Our engineers provide
product solutions to improve our customers' operations and network
efficiencies. Our engineers refer to a standard network design that they
seek to customize to fit the needs of each customer. We also bill our
customers for network design and integration, on-site network management,
staging, installation, maintenance and warranty services, network security
and professional services based on time and materials for contracted
services. In addition, we derive revenue from the maintenance and
installation of equipment. Some of these services may be provided through
third-party providers under contract to us.

Operating Expenses

     Operating expenses consists of:

   Network services costs.  Our network services costs generally consist
of non-employee-based charges such as:

        -   CopperNet service fees. We pay a monthly service fee for each
            copper line and for each collocation arrangement, as well as
            usage fees for the support services we obtain from the
            traditional telephone companies we work with in order to serve
            our CopperNet customers. Sometimes, we must pay these
            companies to perform special work, such as preparing a
            telephone line to use DSL technology, when such work is
            required in order to serve a particular client.

        -   Other access costs and levied line expense. We pay
            installation charges and monthly fees to competitive
            telecommunications companies or traditional telephone
            companies for other types of access, other than through our
            CopperNet network, which we provide to customers as part of
            our network services.

        -   Backbone connectivity charges. We incur charges for our fiber
            optic network, or backbone, within a metropolitan area,
            typically from a competitive telecommunications company or a
            traditional telephone company, and for the backbone
            interconnecting our networks in different metropolitan areas
            from a long distance carrier. We pay these carriers a one-time
            installation and activation fee and a monthly service fee for
            these leased network connections.

        -   Network operations expenses. We incur various recurring costs
            at our network operations center. These costs include data
            connections, engineering supplies and certain utility costs.



<PAGE>
<PAGE>
                                                                         45
        -   Equipment operating lease expenses. In the future, we may
            decide to enter into operating leases for some or all of the
            equipment we use in our network, including the DSL equipment
            we use in the traditional telephone company's central office
            locations and equipment installed on the customer's premises.
            Currently, we generally use capital leases to finance the
            acquisition of substantially all of this equipment, which we
            depreciate over a range of two to five years.

   Product sales and consulting services costs.  We purchase equipment
from various vendors whose technology and hardware solutions we recommend
to our customers. We do not manufacture any of this equipment. Consulting
services cost of revenue consists of charges for hardware maintenance,
installation and certain contract services that we purchase from third
parties.

    Selling, general and administrative expenses

   Our selling, general and administrative expenses include all employee-
based charges, including field technicians, engineering support, customer
service and technical support, information systems, billing and
collections, general management and overhead and administrative functions.

        -   Sales and marketing expenses.  We distribute our products and
            services through direct and indirect sales efforts, agents and
            telemarketing. Our direct sales force focuses on selling
            CopperNet connectivity to small- and medium-sized businesses
            and consulting services and network services to medium- and
            large-sized businesses. We indirectly sell our full complement
            of products and services, including our network services,
            consulting services and products, through certain established
            network service providers that meet our credit standards,
            including ISPs, long distance and local carriers and other
            networking services companies. Our sales and marketing
            expenses have increased, and will continue to increase, as we
            expand our customer base.

        -   General and administrative expenses.  As we expand our
            customer base, the number of employees in certain functions,
            such as customer service and network operations, may grow. We
            pay licensing fees for standard systems to support our
            business processes, such as billing systems.

    Amortization of deferred compensation on stock options

   We had outstanding stock options to purchase a total of 10,454,328 and
10,984,459 shares of common stock as of December 31, 2000 and 1999,
respectively, at weighted average exercise prices of $3.60 and $1.71 per
share, respectively.  At December 31, 2000, 6,452,678 of these options were
exercisable for restricted shares of our common stock that generally vest
over a three- to four-year period.  In certain instances, we determined the
fair market value of the underlying common stock on the date of grant was

<PAGE>
<PAGE>
                                                                         46
in excess of the exercise price of the options.  As a result, we recorded
deferred compensation of $7.0 million and $23.1 million as of December 31,
2000 and 1999, respectively.  We recorded this amount as a reduction to
stockholders' equity that is amortized as a charge to operations over the
vesting periods.  Related to these options we recognized $7.5 million and
$8.2 million of stock compensation expense for the years ended December 31,
2000 and 1999, respectively.

   On April 1, 1999, we entered into a stock option agreement that granted
to one of our directors an option to purchase 250,000 shares of our common
stock at an exercise price of $6.67 per share. On June 3, 1999, this
director exercised this option. In addition, the agreement stipulated that
this director will be issued an additional option to purchase 407,500
shares of common stock at an exercise price of $3.00 per share. These
options immediately vested upon our initial public offering. As a result,
we recognized approximately $3.5 million of compensation expense during the
year ended December 31, 1999 related to these options.

    Depreciation and amortization

   Depreciation expense arising from our network and equipment purchases
for our customers' premises will increase as our business expands.  Build-
out costs, including one-time installation and activation fees, collocation
fees and other DSL-based equipment costs are capitalized and amortized over
a range of two to five years.

Interest Income (Expense), Net

   Interest income (expense), net, primarily consists of interest income
from our cash and cash equivalents less interest expense associated with
our debt and capital leases. As our capital expenditures increase, we
anticipate that our interest expense associated with our capital leases
will increase.

<PAGE>
<PAGE>
                                                                         47
Results of Operations

   The following tables present our results of operations data and the
components of net income (loss) as a percentage of our revenue.

<TABLE>
<CAPTION>
                                                                Year ended December 31,
                                                          -----------------------------------
                                                             2000        1999         1998
                                                          ----------  ----------   ----------
<S>                                                       <C>         <C>          <C>
                                                                (percentage of revenue
Revenue:
   Product sales and consulting services. . . . . . . .      65.0%       89.6%        97.4%
   Network services . . . . . . . . . . . . . . . . . .      35.0        10.4          2.6
                                                          ----------  ----------   ----------

      Total revenue . . . . . . . . . . . . . . . . . .     100.0%      100.0%       100.0%
                                                          ----------  ----------   ----------

Operating expenses:
   Product sales and consulting services costs
      (exclusive of depreciation and amortization
      presented below). . . . . . . . . . . . . . . . .      59.6        74.7         80.7
   Network services costs (exclusive of depre-
      ciation and amortization presented below) . . . .      73.9        27.6          0.4
   Selling, general and administrative. . . . . . . . .     255.3       158.7         34.5
   Amortization of deferred compensation on
      stock options . . . . . . . . . . . . . . . . . .      24.5        46.8          1.9
   Depreciation and amortization. . . . . . . . . . . .      80.5        29.8          1.1
                                                          ----------  ----------   ----------

      Total operating expenses. . . . . . . . . . . . .     493.8       337.6        118.6
                                                          ----------  ----------   ----------

Loss from operations. . . . . . . . . . . . . . . . . .    (393.8)     (237.6)       (18.6)
Interest income, net. . . . . . . . . . . . . . . . . .       8.8         6.2          0.6
Follow-on offering costs. . . . . . . . . . . . . . . .      (1.8)        -            -
                                                          ----------  ----------   ----------

Loss before income taxes. . . . . . . . . . . . . . . .    (386.8)     (231.4)       (18.0)
Provision (benefit) for income taxes. . . . . . . . . .       0.1        (0.4)        (0.2)
                                                          ----------  ----------   ----------

Net loss. . . . . . . . . . . . . . . . . . . . . . . .      (386.9)     (231.0)       (17.8)

Preferred stock dividends . . . . . . . . . . . . . . .      27.7         1.9          2.8
Preferred stock accretion . . . . . . . . . . . . . . .       0.6         1.5          2.1
Preferred stock conversion inducement charge. . . . . .      72.3         0.0          0.0
                                                          ----------  ----------   ----------

Net loss applicable to common stockholders. . . . . . .    (487.5)%    (234.4)%      (22.7)%
                                                          ==========  ==========   ==========

</TABLE>

<PAGE>
<PAGE>
                                                                         48
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

   Revenue.  We recognized $30.6 million in revenue for the year ended
December 31, 2000, as compared to $17.4 million for the year ended December
31, 1999, an increase of $13.2 million.  This increase was attributable to
an $8.9 million increase in network services and a $4.3 million increase in
product sales and consulting services.  Network services increased from
$1.8 million for the year ended December 31, 1999 to $10.7 million for the
year ended December 31, 2000. This was the result of increased sales of
services related to our DSL-enabled network, which was introduced in early
1999. Product sales and consulting services revenue increased from $15.6
million for the year ended December 31, 1999 to $19.9 million for the year
ended December 31, 2000. This increase was mainly due to significant sales
to two customers that comprised $5.2 million during the year ended December
31, 2000.

   Product sales and consulting services costs.  Product sales and
consulting services costs were $18.3 million for the year ended December
31, 2000, as compared to $13.0 million for the year ended December 31,
1999, an increase of $5.2 million.  This was due to an increase in product
sales and consulting services revenue of $4.3 million over the same period.

   Network services costs.  Network services costs were $22.6 million for
the year ended December 31, 2000, as compared to $4.8 million for the year
ended December 31, 1999, an increase of $17.8 million.  This increase was
principally attributable to an increase in expenses incurred to continue to
expand, develop and operate our CopperNet and other networking services.

   Selling, general and administrative expenses.  Selling, general and
administrative expenses were $78.1 million  for the year ended December 31,
2000, as compared to $27.7 million for the year ended December 31, 1999, an
increase of $50.5 million.  This increase was primarily due to increased
staffing and other expenses incurred to develop, operate and sell our
CopperNet network and other networking solutions.

   Amortization of deferred compensation on stock options.  Amortization
of deferred compensation was $7.5 million for the year ended December 31,
2000, as compared to $8.2 million for the year ended December 31, 1999, a
decrease of $656,000.  This decrease is attributable to the decrease in the
unamortized deferred compensation from $18.4 million to $17.9 million as of
December 31, 1999 and 2000, respectively, which is principally due to the
cancellation of stock options granted to key employees at less than fair
market value, and the related amortization of this  balance over the
remaining vesting period for these options.

   Depreciation and amortization expense.  Depreciation and amortization
expense was $24.7 million for the year ended December 31, 2000, as compared
to $5.2 million for the year ended December 31, 1999, an increase of $19.5
million.  This increase was primarily due to investments in our CopperNet
network, computer equipment and software, office furnishings and leasehold

<PAGE>
<PAGE>
                                                                         49
improvements, which increased from $60.4 million at December 31, 1999, to
$120.5 million at December 31, 2000.

   Loss from operations.  Our loss from operations was $120.6 million for
the year ended December 31, 2000, as compared to $41.4 million for the year
ended December 31, 1999, an increase of $79.2 million.  The increased loss
for the year ended December 31, 2000 was primarily due to increased
staffing and other operating expenses we incurred in connection with the
development, expansion, operation and support of our CopperNet network.

   Interest income (expense), net.  For the year ended December 31, 2000,
we recorded net interest income of $2.7 million, consisting of interest
income of $6.5 million and interest expense of $(3.8) million. For the year
ended December 31, 1999 we recorded net interest income of $1.1 million,
consisting of interest income of $2.1 million and interest expense of
$(1.0) million. The increase in interest income was primarily attributable
to interest earned from the net proceeds of $149.8 million received from
our preferred stock offering in March 2000.  The increase in interest
expense is primarily due to interest on capital lease obligations, which
have increased from  $20.9 million at December 31, 1999 to  $41.8 million
at December 31, 2000.

   Follow-on offering costs. During the year ended December 31, 2000, we
expensed $574,000 related to our follow-on offering of common stock that we
commenced earlier in the year but subsequently withdrew due to unfavorable
market conditions. There were no similar costs during the comparable period
in 1999.

   Provision (benefit) for income taxes.  We had a provision for income
taxes of $50,000 for the year ended December 31, 2000, as compared to a
benefit of ($71,000) for the year ended December 31, 1999.

   Preferred stock dividends.  During the year ended December 31, 2000,
the amount of preferred stock dividends was $8.5 million, as compared to
$339,000 for the year ended December 31, 1999 an increase of $8.1 million.
This increase is attributable to the issuance of our Series B preferred
stock of $150 million during March 2000.  The Company accrued dividends at
7% per annum on the Series B preferred stock and 8% per annum on the Series
A preferred stock, on the outstanding principal amount.

   Preferred stock accretion.  During the year ended December 31, 2000,
the amount of preferred stock accretion to redemption price recognized was
$146,000, as compared to $258,000 for the year ended December 31, 1999, a
decrease of $112,000.

   Preferred stock conversion inducement charge.  During the year ended
December 31, 2000 the amount of preferred stock conversion inducement
charge recognized was $22.1 million.  There were no similar costs during
the comparable period in 1999.  This conversion charge was part of an

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                                                                         50
agreement with SBC in which $75,000,000 of Series B preferred stock was
converted into 2,554,375 shares of common stock at $31.00 per share on
December 22, 2000.

   Net loss applicable to common shareholders.  For the foregoing reasons,
our net loss applicable to common shareholders was $149.3 million for the
year ended December 31, 2000, as compared to $40.9 million for the year
ended December 31, 1999, an increase of $108.4 million.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

   Revenue.  We recognized $17.4 million in revenue for the year ended
December 31, 1999, as compared to $11.6 million for the year ended December
31, 1998, an increase of $5.8 million.  This increase was attributable to a
$4.3 million increase in product sales and consulting services and a $1.5
million increase in network services.  Product sales and consulting
services revenue increased from $11.3 million for the year ended December
31, 1998 to $15.6 million for the year ended December 31, 1999.  This
increase was mainly due to product sales from one of our largest customers,
AT&T.  Additionally, AT&T accounted for 30.7% and 50.4% of total revenue
for the years ended December 31, 1999 and 1998, respectively.  Network
services increased from $311,000 for the year ended December 31, 1998 to
$1.8 million for the year ended December 31, 1999.  This was the result of
increased sales of services related to our DSL-enabled network, which was
introduced in early 1999.

   Product sales and consulting services costs.  Product sales and
consulting services costs were $13.0 million for the year ended December
31, 1999, as compared to $9.4 million for the year ended December 31, 1998,
an increase of $3.6 million.  This was due to an increase in product sales
and consulting services revenue of $4.3 million over the same period.

   Network services cost.  Network services costs was $4.8 million for the
year ended December 31, 1999, as compared to $41,000 for the year ended
December 31, 1998, an increase of $4.7 million.  The increase was
principally attributable to an increase in expenses incurred to continue to
expand, develop and operate our CopperNet and other networking services.

   Selling, general and administrative expenses.  Selling, general and
administrative expenses were $27.7 million  for the year ended December 31,
1999, as compared to $4.0 million for the year ended December 31, 1998, an
increase of $23.7 million.  This increase was primarily due to increased
staffing and other expenses incurred to develop, expand, operate and
support our CopperNet network and other networking solutions.

   Amortization of deferred compensation on stock options.  Amortization
of deferred compensation was $8.2 million for the year ended December 31,
1999, as compared to $219,000 for the year ended December 31, 1998, an
increase of $8.0 million.  This increase is attributable to the increase in
the unamortized deferred compensation from $3.5 million to $18.4 million as


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                                                                         51
of December 31, 1998 and 1999, respectively, which is principally due to
the granting of stock options to key employees in certain cases at less
than fair market value, and the related amortization of this balance over
the remaining vesting period for these options.

   Depreciation and amortization expense.  Depreciation and amortization
expense was $5.2 million for the year ended December 31, 1999, as compared
to $130,000 for the year ended December 31, 1998, an increase of $5.1
million.  This increase was primarily due to investments in our CopperNet
network, computer equipment and software, office furnishings and leasehold
improvements, which increased from $5.2 million at December 31, 1998, to
$60.4 million at December 31, 1999.

   Loss  from operations.  Our loss from operations was $41.4 million for
the year ended December 31, 1999, as compared to $2.2 million for the year
ended December 31, 1998, an increase of $39.2 million. The increased loss
for the year ended December 31, 1999 was primarily due to increased
staffing, amortization of deferred compensation and other operating
expenses we incurred in connection with the development, expansion,
operation and support of our CopperNet network.

   Interest income (expense), net.  For the year ended December 31, 1999,
we recorded net interest income of $1.1 million, consisting of interest
income of $2.1 million and interest expense of $(1.0) million.  For the
year ended December 31, 1998 we recorded net interest income of $64,000,
consisting of interest income of $145,000 and interest expense of
$(81,000).  The increase in interest income was primarily attributable to
interest earned from the net proceeds of $81.8 million from our initial
public offering in June 1999.  The increase in interest expense is
primarily due to interest on notes payable and capital lease obligations,
which have increased from $1.5 million at December 31, 1998 to $20.9
million at December 31, 1999.

   Benefit for income taxes.  We had a benefit for income taxes of $71,000
for the year ended December 31, 1999, as compared to $28,000 for the year
ended December 31, 1998.

   Preferred stock dividends.  During the year ended December 31, 1999,
the amount of preferred stock dividends was $339,000, as compared to
$322,000 for the year ended December 31, 1998 an increase of $17,000.  The
company accrued dividends at 8% per annum on the Series A preferred stock
outstanding principal amount.

   Preferred stock accretion.  During the year ended December 31, 1999,
the amount of preferred stock accretion to redemption price recognized was
$258,000, as compared to $245,000 for the year ended December 31, 1998 an
increase of $13,000.

   Net loss applicable to common shareholders.  For the foregoing reasons,
our net loss applicable to common shareholders was $40.9 million for the

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                                                                         52
year ended December 31, 1999, as compared to $2.6 million for the year
ended December 31, 1998, an increase of $38.3 million.

Liquidity and Capital Resources

   During 2000 and 1999, we incurred operating losses of $120,589,115 and
$41,431,064, respectively, and negative cash flows from operations of
$77,590,832 and $20,183,676, respectively. We had an accumulated deficit of
$160,635,363 at December 31, 2000 and expect to incur operating losses for
the foreseeable future.  Management has taken actions to significantly
reduce both operating, selling, general and administrative expenses and
capital expenditures. These actions include restructuring operations to
more closely align operating costs with revenues, reducing selling, general
and administrative expenses and capital expenditures through workforce
reductions, and reviewing and revising network expenditures.  Currently, we
have sufficient cash, cash equivalents and short-term investments to fund
operations until early 2002. Management expects to continue to reduce
operating costs and selling, general and administrative expenses and
capital expenditures.  Management is exploring debt, equity and other
strategic options to provide additional funding for operations in future
periods.  Such debt, equity and other strategic options may involve
significant potential dilution to common stockholders.  There can be no
assurance that such additional funding will be available on terms
attractive to us, or at all.

   Initial Public Offering. The net proceeds from our initial public
offering, completed in June 1999, were approximately $81.8 million.

   Borrowings and Sale of Preferred Stock. In February 2000, we borrowed
$15 million from each of SBC and Telmex until we received regulatory
approvals for the issuance of 1,500,000 shares of our Series B preferred
stock on March 7, 2000. The loans bore interest at a rate of prime plus 2%
during the time they were outstanding, and we repaid both loans plus
accrued interest in full upon consummation of the preferred stock sale on
March 7, 2000. The net proceeds from our sale of preferred stock in March
2000 were approximately $149.8 million.

   Operating Activities.  Net cash used in operating activities for the
year ending December 31, 2000 was $77.6 million.  This was primarily the
result of operating losses of $118.5 million attributable to the expansion
of our CopperNet network and development of our CopperNet services, but
also the result of an increase in accounts receivable of $4.0 million and
an increase in other assets of $1.1 million.  These were partially offset
by increases in non-cash expenses consisting primarily of depreciation of
$24.7 million, amortization of deferred compensation on stock options of
$7.5 million and provision for doubtful accounts receivable of $1.3
million, accompanied by increases in accounts payable of $4.7 million and
accrued expenses of $7.5 million.

   Net cash used in operating activities for the year ending December 31,
1999 was $20.2 million. This was primarily the result of operating losses

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                                                                         53
of $40.3 million attributable to the expansion of our network and
development of our CopperNet services, accompanied by an increase in
accounts receivable of $1.8 million. This was partially offset by an
increase in non-cash expenses consisting primarily of amortization of
deferred compensation on stock options of $8.2 million and depreciation of
$5.2 million, accompanied by an increase in accounts payable of $6.2
million and an increase in accrued expenses of $3.3 million.

   Net cash used in operating activities for the year ending December 31,
1998 was $2.8 million.  This was primarily the result of operating losses
of $2.1 million.  This was partially offset by an increase in accounts
receivable of $1.1 million.

   Investing Activities. Net cash used in investing activities was $66.8
million for the year ended December 31, 2000. This was primarily the result
of purchases of short-term investments of $28.3 million and purchases of
property and equipment of $22.0 million.  This was accompanied by
deployment of equipment for our CopperNet services of $16.6 million.  These
purchases are net of a transfer of assets to SBC of $23.7 million.

   Net cash used in investing activities was $61.4 million for the year
ended December 31, 1999. This was primarily the result of the deployment of
equipment for our CopperNet services of $28.4 million, short-term
investments of $24.6 million and purchases of property and equipment of
$6.8 million.

   Net cash used in investing activities was $1.3 million for the year
ending December 31, 1998.  This was the result of the deployment of
equipment for our CopperNet services of $641,000 and purchases of property
and equipment of $516,000.

   Financing Activities. Net cash provided by financing activities was
$140.9 million for the year ended December 31, 2000. This was primarily the
result of net proceeds from our preferred stock offering of $150.0 million
and borrowings on sale/leaseback arrangements of $5.5 million. These were
partially offset primarily by principal payments on capital lease
obligations of $14.3 million.

   Net cash provided by financing activities was $94.3 million for the
year ended December 31, 1999. This was primarily the result of net proceeds
from our initial public offering of $83.7 million and borrowings on notes
payable of $12.0 million.  These were partially offset by issuance costs
paid of $1.9 million and principal payments on capital lease obligations of
$1.7 million.

   Net cash provided by financing activities was $9.0 million for year
ending December 31, 1998.  This was primarily the result of net proceeds
from issuance of preferred stock of $5.1 million, issuance of common stock
of $4.9 million and borrowings on notes payable of $2.4 million.  This was

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                                                                         54
partially offset by treasury stock acquired of $1.9 million and principal
payments on notes payable of $1.5 million.

   Debt and Capital Lease Arrangements. We currently have debt and capital
lease facilities available to us of approximately $135.5 million. Of this
amount, Lucent (through its acquisition of Ascend) has provided us with a
$95.0 million capital lease facility to fund acquisitions of certain Lucent
equipment, under which $22.0 million was outstanding as of December 31,
2000. The terms of our capital leases range from three to four years. These
leases require monthly lease payments and have an interest rate of 9.5%.
Lucent has the right to withdraw or suspend further advances to us if our
interconnection agreements with Bell Atlantic are not renewed or are
terminated, or if certain key employees terminate their employment with us
without competent replacement, in the reasonable commercial judgment of
Lucent. In addition, we have arrangements with other vendors that permit us
to finance up to $35.5 million of equipment and other assets and $5.0
million of working capital, under a variety of applicable interest rates
ranging from 6.0% to 13.3%. An aggregate of $44.3 million was outstanding
under these arrangements, including the Lucent facilities, as of December
31, 2000.

Recent Accounting Pronouncements

   In July 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, "Deferral of
the Effective Date of FAS 133" which defers the effective date of SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities."  SFAS
No. 133 is effective for all quarters of fiscal years beginning after
January 1, 2001.

   In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," which amended SFAS
No. 133.  The amendments in SFAS No. 138 relates to such matters as normal
purchases and normal sales, the definition of interest rate risk, hedging
recognized foreign-currency-denominated assets and liabilities, and
intercompany derivatives.  The Company adopted this standard effective
January 1, 2001, and the effect was not material.

   In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin (SAB) Number 101, "Revenue Recognition in Financial
Statements."  This bulletin was effective for the quarter ended December
31, 2000.  This bulletin established more clearly defined revenue
recognition criteria than previously existing accounting pronouncements,
and specifically addresses revenue recognition requirements for non-
refundable fees, such as activation fees, collected by a company upon
entering into an arrangement with a customer, such as an arrangement to
provide telecommunications services.  As of December 31, 2000,
implementation of SAB 101 did not have a material effect on the financial
position, results of operations or cash flows.


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                                                                         55
Outlook

   The company experienced strong revenue growth this year.  Network
services revenues grew 488%, product and integration revenues grew 28%, and
total revenues grew 76%.  This growth was primarily due to our ability to
successfully add new customers and to cross-sell services to existing
customers through our direct sales channel.

   During the first half of the year, we exceeded our goal of building a
dominant network footprint in the Verizon region ahead of schedule and we
now have ubiquitous access to the nation's densest collection of
businesses.

   We did, however, change our course during the year when we decided to
cease our nationwide expansion with our partners SBC and Telmex, and to
scale our business to serve business customers primarily in the Verizon
territory.  We believe that small and medium-sized businesses within this
market are underserved and that the demand for broadband services among
these customers is very high.   We will continue to emphasize our direct
sales and marketing efforts within this region and to develop new sales
partnerships.

   In conjunction with this change in direction, we re-aligned our
business to focus on profitability.  We reduced our capital requirements by
75% by adopting a "smart-build" approach for geographic expansion.  We also
initiated efforts to shed low-margin business and improve our gross margin.
We also reduced selling, general and administrative expenses and
restructured our workforce to support the changes in our business strategy.

   Throughout the year, we made technical and operational improvements to
our backbone network that are expected to lower our network costs and
increase our network efficiency.  Our network now supports newer, evolving
technologies designed to transmit both data and, with additional equipment,
voice, and it will enable us to offer additional services that may include
e-commerce, voice-over technology (including IP, frame relay and ATM), web
and application hosting, video conferencing and server back-up services.

   We are also completing the implementation of an improved information
and customer support system.  This new system architecture and electronic
transaction processing capability will enhance productivity, improve
service delivery, and enable us to scale new customers onto our network
more efficiently and cost-effectively.

   On December 22, 2000, we amended various separate agreement with SBC
and with Telmex, and entered into a series of separate new agreements with
SBC.  These agreements, among other things, terminated the parties' efforts
concerning the targeted expansion of our network into the southeastern and
western United States, provided for the transfer of our lease interests in
certain traditional telephone company central offices to SBC, provided for
SBC to transfer financial benefit to us in various forms of cost reduction,
provided for service resale relationships, and resulted in a settlement and


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                                                                         56
release of certain claims between us and SBC, and between us and Telmex.
See "Item 1 - The Company."

Forward-looking Statements

   Many statements made in this Form 10-K are forward-looking statements
relating to future events and our future performance within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including, without limitation, statements regarding
our expectations, beliefs, intentions or future strategies that are
signified by the words "expects," "anticipates," "intends," "believes" or
similar language. These forward-looking statements address, among other
things:

        -   our CopperNet deployment plans and strategies;

        -   development and management of our business;

        -   our relationships with SBC and Telmex;

        -   our ability to attract, retain and motivate qualified
            personnel;

        -   our ability to attract and retain customers;

        -   the extent of acceptance of our services;

        -   the market opportunity and trends in the markets for our
            services;

        -   our ability to upgrade our technologies;

        -   prices of telecommunication services;

        -   the nature of regulatory requirements that apply to us;

        -   our ability to obtain and maintain any required governmental
            authorizations;

        -   our future capital expenditures and needs;

        -   our ability to obtain and maintain financing on commercially
            reasonable terms; and

        -   the extent and nature of competition.

   These statements may be found in this section, and in this Form 10-K
generally.

   We have based these forward-looking statements on our current
expectations and projections about future events based on information
available to us on this date, and we assume no obligation to update any
forward-looking statements.  All written and oral forward-looking

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                                                                         57
statements made in connection with this Form 10-K are expressly qualified
in their entirety by the "Trends, Risks and Uncertainties" and other
cautionary statements included in this Form 10-K.  Our actual results could
differ materially from those anticipated in these forward-looking
statements.

Trends, Risks and Uncertainties

 It is difficult to determine whether we will be successful in a new and
 evolving market

   We began operations in 1995 by helping our customers integrate their
network equipment, by selling them that network equipment and by providing
them with related network services. Starting in 1999, we refocused our
company, through our CopperNet services, on providing DSL-based high-speed
digital communications services.  Consequently, our financial results now
and in the future are not, and will not be, directly comparable to our
prior financial results. Substantially all of our revenue in 1995, 1996,
1997, 1998 and 1999, and the majority of our revenue in 2000, was derived
from product sales and consulting services. We expect to continue to derive
much of our revenue from these activities, but our network services, which
includes our CopperNet services, currently constitutes the source of a
minority of our revenue. As a result, not only have we changed the focus of
our company, there also is limited historical financial information upon
which to base an evaluation of our performance.

   Similarly, because we have only recently begun providing CopperNet
services, it is difficult for us to predict the extent to which CopperNet
will achieve market acceptance. The market for DSL-based services is highly
competitive and quickly changing. Providers of high-speed data
communications services are testing products from various suppliers for
certain applications, and suppliers have not broadly adopted an industry
standard. Critical issues concerning commercial use of DSL for Internet and
local area network access, including security, reliability, ease and cost
of access and quality of service, remain unresolved and may affect the
growth of this market. If the market for CopperNet fails to develop, grows
more slowly than anticipated or becomes saturated with competitors, our
business will not reach or maintain the level of profitability we hope to
achieve.

 The data communications market is increasingly competitive

   We face competition in the data communications market from many
competitors with significantly greater financial resources, well-
established brand names and large, existing installed customer bases. We
expect the level of competition to continue to be intense in the future,
including through consolidation of our industry. Many of our competitors
are offering, or may soon offer, technologies and services that will
directly compete with some or all of our service offerings. Our competitors
use technologies for local access connections that include DSL, wireless
data, cable modems and ISDN technologies. Some of our competitors or

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                                                                         58
potential competitors may have the financial resources to withstand
substantial price competition. Moreover, our competitors may be able to
negotiate contracts with suppliers of telecommunications services that are
more favorable than contracts negotiated by us.

 We operate in a highly competitive industry characterized by rapid
 technology changes

   Our industry is subject to rapid and significant technological changes.
DSL technology does not currently have widely accepted standards and
continues to develop. Alternative technologies for providing high-speed
data communications are available and may be superior to the technology we
use. As a consequence:

        -   we will continue to rely on third parties, including some of
            our competitors and potential competitors, to develop and
            provide us with access to communications and networking
            technology;

        -   our success will depend on our ability to anticipate or adapt
            to new technology on a timely basis; and

        -   we expect that new products and technologies will emerge that
            may be superior to, or may not be compatible with, our current
            products and technologies.

   If we fail to adapt successfully to technological changes or
obsolescence or fail to obtain access to important technologies, our
business, prospects, financial condition and results of operations could be
materially adversely affected.

 We may be unable to grow our business in our target markets

   As part of a preferred stock investment by SBC and Telmex in March
2000, we intended to expand CopperNet into the southeastern and western
regions of the United States.  Due to a number of reasons, including
significant external changes throughout the telecommunications industry and
our changing relationship with SBC and Telmex, in the latter part of 2000
we ceased efforts to enter into collocation agreements with traditional
telephone companies that would enable us to place DSL equipment in central
offices outside of the northeast and mid-Atlantic regions.  Instead, we
adopted new elements to our strategy to leverage our existing capital base
and take advantage of our completed network in the northeastern and mid-
Atlantic regions.  These elements include focusing our sales and marketing
efforts on attracting "high-yield" business customers, or customers needing
bundled and integrated network services, which generally contribute to
higher profit margins.  Our failure to sell more of our service offerings
to current customers or to attract new customers to purchase these service

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                                                                         59
offerings, could impair our ability to achieve profitability or positive
cash flow and could have a material adverse effect on our business.

 We have a history of losses and may incur losses in the future

   We have incurred substantial losses and experienced negative cash flow
since 1997. As of December 31, 2000, we had an accumulated deficit of
approximately $160 million. To date, we have incurred substantial capital
expenditures in order to expand our business. Although we are in the
process of reducing our capital expenditures, we may incur future net
losses and negative cash flow for the next several years due to continued
development of CopperNet.  Our future cash requirements for developing our
network and operating our business, as well as our revenues, will depend on
a number of factors including:

        -   network development schedules and associated costs;

        -   the rate at which customers and end-users purchase our
            services and the pricing of such services;

        -   the financial condition of our customers;

        -   the level of marketing required to acquire and retain
            customers and to attain a competitive position in the market
            place;

        -   the rate at which we invest in engineering and development and
            intellectual property with respect to existing and future
            technology;

        -   pending litigation;

        -   existing and future technology; and

        -   unanticipated opportunities.

 Our cash flow is subject to falling data communications prices

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

 We are subject to a number of risks that may limit our revenue growth

   Our failure to address the risks, expenses and difficulties we may

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                                                                         60
encounter providing CopperNet services, including those frequently
encountered by companies in new and rapidly evolving markets, may limit our
revenue growth and make it difficult for us to compete effectively with
others. These risks include:

        -   the nature of our ongoing relationship with Verizon;

        -   the nature of our ongoing relationships with SBC and Telmex;

        -   our success in maintaining the continuity of our
            interconnection agreements;

        -   our ability to successfully re-focus business operations,
            reduce costs and achieve profitability;

        -   our ability to keep pace with technological innovations within
            the telecommunications industry;

        -   our ability to attract, retain and motivate qualified
            personnel;

        -   our ability to protect our proprietary rights;

        -   our ability to successfully market our services to current and
            new customers;

        -   our ability to generate customer demand for our services in
            our target markets;

        -   market pricing for our services and for competing services;

        -   the extent of increasing competition;

        -   our ability to acquire funds for our operations beyond 2001;

        -   the ability of our equipment and service suppliers to meet our
            needs and our relationships with such suppliers;

        -   trends in regulatory, legislative and judicial developments;

        -   our ability to manage changes in the level of our operations;

        -   our ability to maintain the minimum listing requirements for
            The Nasdaq Stock Market; and

        -   the potential significant dilution from the issuance of equity
            or the conversion of preferred stock, or other strategic
            alternatives.

   Our failure to manage these risks successfully could materially
adversely affect our financial performance.



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                                                                         61
 We are subject to risks arising from our relationship with Verizon

   Verizon, as the dominant traditional telephone company operating in our
target markets, is both an essential supplier of facilities and services
for CopperNet and potentially a significant DSL competitor. Traditional
telephone companies, like Verizon, pose a significant risk to the success
of our business. Verizon has existing networks in local areas and across
metropolitan areas and has its own Internet service provider business. It
has also increased its residential sales of DSL-based access services. We
believe that Verizon is deploying DSL services to businesses on a
widespread basis.

   Verizon is currently our sole supplier of copper telephone lines and of
the central office space we need to place, or collocate, our DSL equipment
and support services for CopperNet. Verizon may be reluctant to cooperate
with us in meeting our supply needs. Verizon has in the past, and may in
the future, reject certain of our collocation applications or telephone
line requests or delay providing us with the collocation space or telephone
lines we need. We have experienced lengthy delays between the time we apply
for collocation space and the time that Verizon actually permits us to
place our equipment in this space. We may face competition for this space
from other competitive telecommunications companies.  Verizon's position as
both a DSL competitor and a supplier of numerous essential inputs to our
DSL offering also gives Verizon an incentive to subsidize its own DSL
offerings by failing to fully allocate to its retail DSL service the costs
it incurs in providing that service.  See "Item 1 - Relationship with
Verizon."

   We also significantly depend on the quality of the copper telephone
lines and Verizon's maintenance of such lines. We cannot ensure that we
will be able to obtain the copper telephone lines and services we require
from Verizon at quality levels, prices, terms and conditions satisfactory
to us. Our failure to do so would have a material adverse effect on our
business, prospects, financial condition and results of operations. See
"Item 1 - Relationship with Verizon."

 We are subject to risks associated with relying on third-party vendors

   We depend on the availability of fiber optic transmission facilities
from third parties to connect our equipment within and between metropolitan
areas. If these facilities are unavailable, we may not have alternative
means immediately available to connect our DSL equipment in different
locations. These fiber optic carriers include long distance carriers,
traditional telephone companies like Verizon and other competitive
telecommunications companies. Many of these entities are, or may become,
our DSL competitors. We may be unable to negotiate or renew favorable
supply agreements. We depend on the timeliness of fiber optic carriers to
process our orders for customers who seek to use our services. We have in
the past experienced supply problems with some of our fiber optic

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                                                                         62
suppliers, and they may not be able to meet our needs on a timely basis in
the future.

   We also purchase our equipment from many vendors, including Lucent,
Cisco and Paradyne. We outsource a significant percentage of installation
and field service to third parties. Because we depend on third parties, we
do not have guaranteed capacity nor do we fully control delivery schedules,
quality assurance, production yields and costs. If any significant
installer or field service provider interrupts its service to us or fails
to perform to required specifications, or if any of our vendors reduces or
interrupts its supply, this interruption or reduction would force us to
seek alternative vendors and providers, which could disrupt our business.
Our suppliers may be unable to manufacture and deliver the amount or
quality of equipment we order, or the available supply may be insufficient
to meet our demand. Currently, the DSL modem and other equipment used for a
single connection over a copper telephone line must come from the same
vendor since there are no existing interoperability standards for the
equipment used in our higher speed services. If our competitors enter into
exclusive or restrictive arrangements with our suppliers or licensors, then
these events may materially and adversely affect the availability and
pricing of the equipment we purchase and the technology we license.

 Our success depends on the continuity of our interconnection agreements

   We depend on contractual arrangements, or interconnection agreements,
which enable us to use traditional telephone companies' copper telephone
lines, to collocate our equipment in their offices and to obtain from the
traditional telephone companies the back office support systems we need in
order to provide CopperNet services. The success of our strategy depends on
our ability to renew our interconnection agreements on a timely basis and
on satisfactory terms and conditions. Delays in obtaining renewals or a
failure to obtain satisfactory terms and conditions could have a material
adverse effect on our business, prospects, financial condition and results
of operations. We cannot guarantee that we will be able to negotiate new
agreements with the traditional telephone companies that will benefit us.

   Interconnection agreements are also subject to state telecommunications
regulatory, FCC and judicial oversight. These governmental bodies may
modify the terms or prices of our interconnection agreements in ways that
adversely affect our business, prospects, financial condition and results
of operations. See "Item 1 - Relationship with Verizon" and "Item 1 -
Government Regulation."

 Our stock price may fluctuate significantly, depending on various
 factors, including future operating results

   The price at which our common stock trades depends upon many factors,
including our historical and anticipated quarterly and annual operating
results, variations between our actual results and securities analyst and
investor expectations, announcements by us or others and developments
affecting our business, securities analyst and investor perceptions of our

<PAGE>
<PAGE>
                                                                         63
company and comparable public companies, changes in our industry and
general market and economic conditions. Some of these factors are beyond
our control. As a result, our operating results in one or more future
periods could fail to meet or exceed the expectations of securities
analysts or investors. If this happens, the trading price of our common
stock would likely decline. The stock market has from time to time
experienced extreme price and volume fluctuations. The data communications
market in which we operate is highly competitive and we may not be able to
compete effectively against established industry competitors with
significantly greater financial resources.

 Future sales of our common stock in the public market could depress our
 stock price

   To finance future operating activities, we may choose to sell shares of
our common stock or instruments convertible into our common stock in public
or private offerings.  Sales of substantial amounts of common stock in the
public market or the appearance that a large number of shares is available
for sale, could adversely affect the market price for our common stock. In
addition to the adverse effect a price decline could have on holders of
common stock, that decline would likely impede our ability to raise capital
through the issuance of additional shares of common stock or other equity
securities.

 We may be adversely affected by future difficulty in accessing capital
 markets

   To fund continued development of CopperNet and fund operating losses,
we may need access to the capital markets on reasonable terms. If adequate
funds are unavailable or not available on acceptable terms, we may further
revise our business strategies. Should we revise our business strategies,
we may not achieve break even on a cash-flow basis or EBITDA basis or turn
to profitability as quickly as planned.

   We believe that current capital market conditions, particularly for our
industry, will significantly reduce our ability to obtain additional
financing on reasonable terms or at all. If we experience continued or
prolonged barriers to raising additional financing through the capital
markets, we may need to make additional significant reductions in our
capital expenditures and/or operations. Such reductions could have a
material adverse effect on our financial condition and business operations
and prevent us from effectively implementing our business plan. Such
reductions may also adversely affect the relationships with our customers
and/or their end-users that may in turn adversely affect our growth and
financial results.

   We have no commitments for any future debt, equity or other financing
(other than vendor financing) and there can be no assurance that we will be
able to obtain additional financing in the future from either debt or
equity financings, bank loans, collaborative arrangements or other sources

<PAGE>
<PAGE>
                                                                         64
on terms acceptable to us, or at all. Any additional equity financing may
be dilutive to our stockholders.

 Our services are subject to uncertain government regulations

   Because many of the facilities and services we need in order to provide
CopperNet are subject to regulation at the federal, state and local levels,
changes in applicable laws or regulations could have an adverse impact on
our business. For example, the FCC and state telecommunications regulators
help determine the terms under which collocation space is provided to us.
They also oversee the terms under which we gain access to a traditional
telephone company's copper telephone lines and transport facilities,
including price, that we need in order to provide CopperNet services.
Regulatory policies may also affect the terms under which traditional
telephone companies provide us with the operational support and management
of telephone line usage that are crucial to the success of CopperNet.
Future federal or state regulations and legislation may have an adverse
impact on our business. In addition, we may choose to expend significant
resources to participate in regulatory proceedings at the federal or state
level without achieving favorable results. We expect traditional telephone
companies to pursue litigation in courts, institute administrative
proceedings with the FCC and state telecommunications regulators and lobby
the U.S. Congress in an effort to affect the applicable laws and
regulations in a manner that would be more favorable to them and against
our interests. Any changes in our regulatory environment could create
greater competitive advantages for all or some of our competitors or could
make it easier for additional parties to provide DSL services.

   Telecommunication service providers also pay a variety of surcharges
and fees on their gross revenue from interstate and intrastate services.
The surcharges and fees we currently are required to pay may increase due
to periodic revisions of the applicable surcharges by federal and state
regulators. A finding that we misjudged the applicability of the surcharges
and fees could increase our payment obligations and have a material adverse
effect on our business, prospects, financial condition and results of
operations. See "Item 1 - Government Regulation."

 If we are unable to hire and retain our key personnel, our business will
 suffer

   We depend on our ability to retain and motivate high quality personnel,
especially our management. Our success depends on Jonathan P. Aust, our
Chairman and Chief Executive Officer, and our other executive officers and
key employees. Members of our senior management team have changed, and in
some cases have worked together for only a short period of time. Moreover,
we do not have "key person" life insurance policies on any of our
employees. Although we have employment agreements with certain members of
the senior management team, these agreements can be terminated by the
employees on thirty days' notice. Each of our other employees may terminate
his or her employment with us at any time.



<PAGE>
<PAGE>

   Our future success depends on our continuing ability to identify, hire,
train and retain highly qualified technical, sales, marketing and customer
service personnel. The industry in which we compete has a high level of
employee mobility and aggressive recruiting of skilled personnel. In
particular, we face intense competition for qualified personnel,
particularly in sales, network engineering and product management. The
northern Virginia region, which is the location of our headquarters and
where we currently have our greatest hiring needs, is experiencing a severe
shortage of qualified employees in many of these areas. As a result, the
costs of attracting and retaining qualified employees has increased during
recent periods and is continuing to increase. We may be unable to continue
to employ our key personnel or to attract and retain qualified personnel in
the future.

 A system failure could cause delays or interruptions of service to our
 customers

   The reliability of our services would be impaired by a natural disaster
or other unanticipated interruption of service at our owned or leased
facilities. If a traditional telephone company, competitive
telecommunications company or other service provider fails to provide the
communications capacity we require, as a result of a natural disaster,
operational disruption or any other reason, then this failure could
interrupt our services and have a material adverse effect on our business.

 A breach of our network security could cause delays or interruptions of
 service to our customers

   Our network may be vulnerable to unauthorized access, computer viruses
and other disruptive problems. Unauthorized access could also potentially
jeopardize the security of confidential information stored in the computer
systems of our customers, which might cause us to be liable to our
customers, and might deter potential customers. Eliminating computer
viruses and alleviating other security problems may require interruptions,
delays or cessation of service to our customers and our customers' end
users. Any of these factors relating to network security could have a
material adverse effect on our business.

 Our intellectual property protection may be inadequate to protect our
 proprietary rights and we may be subject to infringement claims that
 could materially adversely affect our business

   The steps we have taken may be inadequate to protect our technology or
other intellectual property. Our inability to protect our proprietary
rights could have a material adverse effect on our business, prospects,
financial condition and results of operations. We currently have no patents
or patent applications pending. We also rely on unpatented trade secrets
and know-how to maintain our competitive position. We seek to protect this
information by confidentiality agreements with employees, consultants and
others. These agreements may be breached or terminated, leaving us with
inadequate remedies. Our competitors may learn or discover our trade

<PAGE>
<PAGE>
                                                                         66
secrets. Our competitors may independently develop technologies that are
substantially equivalent or superior to ours. Third parties, including our
competitors, may assert infringement claims against us and, in the event of
an unfavorable ruling on any claim, we may be unable to obtain a license or
similar agreement to use technology we need to conduct our business.

 Our principal stockholders and management own a significant percentage of
 our company and may exercise significant influence over our company,
 which could have a material and adverse effect on the market price of our
 common stock

   Our executive officers, directors and principal stockholders together
beneficially own approximately 75% of our common stock (not including stock
options or convertible preferred stock) as of March 15, 2000. These
stockholders may determine the composition of our board of directors,
approve all matters requiring stockholder approval including any merger and
exercise significant influence over our affairs. This concentration of
ownership could delay or prevent a change in our control or otherwise
discourage a potential acquirer from attempting to obtain control of us,
which in turn could have a material and adverse effect on the market price
of our common stock.

 Our certificate of incorporation and bylaws contain provisions that could
 delay or prevent a change in control and therefore could hurt our
 stockholders

   Provisions of our certificate of incorporation and bylaws could make it
more difficult for a third party to acquire control of our company, even if
a change in control would be beneficial to stockholders. Our certificate of
incorporation provides for a classified board of directors and will allow
our board to issue, without stockholder approval, preferred stock with
terms set by the board. The preferred stock could be issued quickly with
terms that delay or prevent the change in control of our company or make
removal of management more difficult. Also, the issuance of preferred stock
may cause the market price of our common stock to decrease.

 Continuing economic downturn or volatility could adversely affect demand
 for our services

   Until the middle part of 2000, the general health of the U.S. economy
has been relatively strong and growing, a consequence of which has been
increasing capital spending by growing companies to keep pace with rapid
technological advances. Based on recent economic trends, companies may seek
to reduce expenses and reduce, in the near term, expenditures, such as
those for our services. Concern about continuing economic decline could
delay decisions among certain of our customers to roll out our services or
could delay decisions by prospective customers to make initial evaluations
of our services. Such delays could have a material adverse effect on our
business, prospects, operating results and financial condition.



<PAGE>
<PAGE>
                                                                         67
 We are exposed to various risks related to legal proceedings or claims

   We have been, are currently or in the future may be, involved in legal
proceedings or claims regarding contracts and other matters. These legal
proceedings and claims, whether with or without merit, could be time-
consuming and expensive to defend, and divert management's attention and
resources. There can be no assurance regarding the outcome of current or
future legal proceedings or claims. If we are not able to resolve a claim,
negotiate a settlement of the matter, obtain necessary licenses on
commercially reasonable terms, and/or successfully prosecute or defend a
position, our financial condition and results of operations could be
materially and adversely affected.  Our success is dependent in part upon
the protection of our propriety rights. Infringement upon our proprietary
rights by a third party could result in uncompensated lost market and
revenue opportunities for us. See "Item 3 - Legal Proceedings."

 We may make acquisitions of technologies or businesses which may disrupt
 our business and be dilutive to our existing stockholders

   We may consider acquisitions of businesses and technologies in the
future on an opportunistic basis.  Acquisitions of businesses and
technologies involve numerous risks, including the diversion of management
attention, difficulties in assimilating the acquired operations, loss of
key employees from the acquired company, and difficulties in transitioning
key customer relationships.  In addition, these acquisitions may result in
dilutive issuances of equity securities, the incurrence of additional debt,
large one-time expenses and the creation of goodwill or other intangible
assets that result in significant amortization expense.  Any of these
factors could materially harm our business or our operating results in a
given period or could cause our stock price to decline.


Item 7a. Quantitative and Qualitative Disclosures about Market Risk.

   We are not exposed to fluctuations in currency exchange rates because
all of our services are invoiced in U.S. dollars.  We are exposed to the
impact of interest rate changes on our short-term cash investments,
consisting of U.S. Treasury obligations and other investments in respect of
institutions with the highest credit ratings, all of which have maturities
of three months or less.  These short-term investments carry a degree of
interest rate risk.  We believe that the impact of a 10% increase or
decline in interest rates would not be material to our investment income.




<PAGE>
<PAGE>
                                                                         68
Item 8.  Financial Statements and Supplementary Data.

Index to Financial Statements                                          Page

Financial Statements:

   Report of Independent Accountants. . . . . . . . . . . . . . . . . . .72

   Balance Sheets as of December 31, 2000 and 1999. . . . . . . . . . . .73

   Statements of Operations and Other Comprehensive Loss for the
      years ended December 31, 2000, 1999 and 1998. . . . . . . . . . . .75

   Statements of Changes in Stockholders' Equity for the years ended
      December 31, 2000, 1999 and 1998. . . . . . . . . . . . . . . . . .79

   Statements of Cash Flows for the years ended December 31, 2000, 1999
      and 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77

   Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . .81

Financial Statement Schedule:

   Schedule II - Valuation and qualifying Accounts. . . . . . . . . . . 104

   Schedules not listed above have been omitted because they are not
applicable or the information required to be set forth therein is included
in the financial statements or notes thereto.


<PAGE>
<PAGE>
                                                                         69
                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders
Network Access Solutions Corporation

   In our opinion, the accompanying balance sheets and the related
statements of operations and other comprehensive loss, changes in
stockholders' equity and cash flows present fairly, in all material
respects, the financial position of Network Access Solutions Corporation
(the Company) at December 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States of America which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

                                 /s/  PricewaterhouseCoopers LLP

McLean, Virginia
March 22, 2001


<PAGE>
<PAGE>
                                                                         70
                   NETWORK ACCESS SOLUTIONS CORPORATION

                              BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                             As of December 31,
                                                                                         ---------------------------
ASSETS                                                                                      2000           1999
                                                                                        ------------    ------------
<S>                                                                                     <C>            <C>
Current assets:
  Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,734,747   $  18,240,096
  Short-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   53,080,590      24,575,893
  Accounts receivable, net of allowance for doubtful accounts of $1,450,866
     and $376,399 as of December 31, 2000 and 1999, respectively. . . . . . . . . . . .    5,900,652       3,257,204
  Prepaid and other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . .    2,361,461         634,723
  Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      456,151         440,770
                                                                                        ------------    ------------
     Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   76,533,601      47,148,686
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   90,456,490      55,097,670
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    1,600,000       1,600,000
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    1,581,373         773,507
                                                                                        ------------    ------------
     Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $170,171,464   $ 104,619,863
                                                                                        ============    ============

LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,164,484   $   8,221,681
  Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   24,920,340       4,366,424
  Current portion of deferred compensation liability. . . . . . . . . . . . . . . . . .          -           166,667
  Current portion of capital lease obligations. . . . . . . . . . . . . . . . . . . . .   14,075,691       5,630,429
  Current portion of note payable . . . . . . . . . . . . . . . . . . . . . . . . . . .      532,312         478,925
  Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       14,239          42,788
                                                                                        ------------    ------------
     Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   54,707,066      18,906,914
  Long-term portion of capital lease obligations. . . . . . . . . . . . . . . . . . . .   27,744,518      15,251,100
  Long-term portion of note payable . . . . . . . . . . . . . . . . . . . . . . . . . .    1,920,899       2,453,211
                                                                                        ------------    ------------
     Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   84,372,483      36,611,225
                                                                                        ------------    ------------

Commitments and contingencies

Series B mandatorily redeemable preferred stock, $0.001 par value,
  750,000 and 0 shares authorized, issued and outstanding
  as of December 31, 2000 and 1999, respectively (liquidation
  preference $79,300,685 as of December 31, 2000) . . . . . . . . . . . . . . . . . . .   79,237,763             -
                                                                                        ------------    ------------

Stockholders' equity:
  Common stock, $0.001 par value, 150,000,000 shares authorized,
      59,573,474 and 53,831,997 shares issued and outstanding as of
      December 31, 2000 and 1999, respectively. . . . . . . . . . . . . . . . . . . . .       59,573          53,832
  Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  186,775,001     130,431,898
  Accumulated other comprehensive gain (loss) . . . . . . . . . . . . . . . . . . . . .      157,047         (51,960)
  Deferred compensation on stock options. . . . . . . . . . . . . . . . . . . . . . . .  (17,893,494)    (18,389,540)
  Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (160,635,363)    (42,135,592)
  Less treasury stock, at cost, 8,567,369 and 8,550,000 shares
      as of December 31, 2000 and 1999, respectively. . . . . . . . . . . . . . . . . .   (1,901,546)     (1,900,000)
                                                                                        ------------    ------------
     Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .    6,561,218      68,008,638
                                                                                        ------------    ------------

     Total liabilities, mandatorily redeemable preferred stock and
         stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $170,171,464   $ 104,619,863
                                                                                        ============    ============
</TABLE>

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

<PAGE>
<PAGE>
                                                                         71
                   NETWORK ACCESS SOLUTIONS CORPORATION

           STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS

<TABLE>
<CAPTION>
                                                                              For the years ended December 31,
                                                                          ------------------------------------------
                                                                             2000           1999           1998
                                                                         ------------   ------------    ------------
<S>                                                                      <C>            <C>            <C>
Revenue:
  Product sales and consulting services . . . . . . . . . . . . . . . .  $ 19,913,809   $ 15,618,610   $  11,328,154
  Network services. . . . . . . . . . . . . . . . . . . . . . . . . . .    10,703,425      1,820,519         310,921
                                                                         ------------   ------------    ------------

     Total revenue. . . . . . . . . . . . . . . . . . . . . . . . . . .    30,617,234     17,439,129      11,639,075
                                                                         ------------   ------------    ------------

Operating expenses:
  Product sales and consulting services costs
     (exclusive of depreciation and amortization
     presented below) . . . . . . . . . . . . . . . . . . . . . . . . .    18,251,990     13,027,561       9,400,652
  Network services costs (exclusive of depre-
     ciation and amortization presented below). . . . . . . . . . . . .    22,641,341      4,812,522          40,738
  Selling, general and administrative . . . . . . . . . . . . . . . . .    78,128,132     27,669,535       4,017,057
  Amortization of deferred compensation on
     stock options. . . . . . . . . . . . . . . . . . . . . . . . . . .     7,509,168      8,165,293         218,997
  Depreciation and amortization . . . . . . . . . . . . . . . . . . . .    24,675,718      5,195,282         130,004
                                                                         ------------   ------------    ------------

     Total operating expenses . . . . . . . . . . . . . . . . . . . . .   151,206,349     58,870,193      13,807,448
                                                                         ------------   ------------    ------------

Loss from operations. . . . . . . . . . . . . . . . . . . . . . . . . .  (120,589,115)   (41,431,064)     (2,168,373)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . .     6,536,247      2,094,719         145,468
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . .    (3,823,288)    (1,022,854)        (81,006)
Follow-on offering costs. . . . . . . . . . . . . . . . . . . . . . . .      (573,723)           -               -
                                                                         ------------   ------------    ------------

Loss before income taxes. . . . . . . . . . . . . . . . . . . . . . . .  (118,449,879)   (40,359,199)     (2,103,911)
Provision (benefit) for income taxes. . . . . . . . . . . . . . . . . .        49,892        (71,292)        (27,973)
                                                                         ------------   ------------    ------------

Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  (118,499,771)   (40,287,907)     (2,075,938)
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . .     8,471,919        339,726         322,192
Preferred stock accretion . . . . . . . . . . . . . . . . . . . . . . .       145,896        257,719         244,417
Preferred stock conversion inducement charge. . . . . . . . . . . . . .    22,141,000            -               -
                                                                         ------------   ------------    ------------

Net loss applicable to common stockholders. . . . . . . . . . . . . . .  $(149,258,586) $(40,885,352)  $  (2,642,547)
                                                                         ============   ============    ============

Net loss per common share applicable to
    common stockholders (basic and diluted) . . . . . . . . . . . . . .  $      (3.18)  $      (0.99)  $       (0.10)
                                                                         ============   ============    ============

Weighted average common shares outstanding
    (basic and diluted) . . . . . . . . . . . . . . . . . . . . . . . .    46,986,190     41,258,618      27,302,144
                                                                         ============   ============    ============

Comprehensive loss:
  Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $(118,499,771) $(40,287,907)  $  (2,075,938)
Other comprehensive loss:
  Unrealized gain (loss) on short-term investments
     available for sale . . . . . . . . . . . . . . . . . . . . . . . .       157,047        (51,960)            -
                                                                         ------------   ------------    ------------
Total comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . .  $(118,342,724) $(40,339,867)  $  (2,075,938)
                                                                         ============   ============    ============

</TABLE>


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

<PAGE>
<PAGE>
                                                                         72
                   NETWORK ACCESS SOLUTIONS CORPORATION

               STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
           For the years ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>
                                                    Other
                                                   Compre-     Deferred
                    Common Stock      Additional    hensive  Compensation    Retained      Treasury Stock
                 ------------------    Paid-in      (Loss)     on Stock      Earnings    ---------------------
                   Shares    Amount    Capital       Gain       Options     (Deficit)     Shares     Amount          Total
                 ---------- -------  ------------  --------  ------------  ------------  --------- -----------   -------------
<S>              <C>         <C>     <C>           <C>       <C>           <C>           <C>       <C>          <C>
Balance,
 December 31,
 1997 . . . . .  21,915,000  $21,915 $        -    $    -    $        -    $    228,253        -   $       -    $      250,168
Sale of common
 stock, net
 of direct
 issuance costs
 of $27,341 . .  22,050,000  22,050     4,853,010       -             -             -          -           -         4,875,060
Purchase of
 treasury stock,
 at cost. . . .         -       -             -         -             -             -    8,550,000  (1,900,000)     (1,900,000)
Shares issued
 to employee
 for service. .     585,000     585       129,415       -             -             -          -           -           130,000
Accrual of
 preferred
 stock
 dividends. . .         -       -        (322,192)      -             -             -          -           -          (322,192)
Accretion of
 preferred
 stock. . . . .         -       -        (244,417)      -             -             -          -           -          (244,417)
Deferred
 compensation .         -       -       3,681,750       -      (3,681,750)          -          -           -               -
Amortization of
 deferred
 compensation .         -       -             -         -         218,997           -          -           -           218,997
Net loss. . . .         -       -             -         -             -      (2,075,938)       -           -        (2,075,938)
                 ---------- -------  ------------  --------  ------------  ------------  --------- -----------   -------------
Balance,
 December 31,
 1998 . . . . .  44,550,000  44,550     8,097,566       -      (3,462,753)   (1,847,685) 8,550,000  (1,900,000)        931,678
Sale of common
 stock, net
 of direct
 issuance costs
 of $1,846,100.   7,500,000   7,500    81,846,400       -             -             -          -           -        81,853,900
Conversion of
 convertible
 notes
 payable. . . .     833,334     833     9,999,167       -             -             -          -           -        10,000,000
Conversion of
 preferred
 stock. . . . .     416,667     417     4,999,583       -             -             -          -           -         5,000,000
Cancellation of
 preferred
 stock. . . . .         -       -       1,238,096       -             -             -          -           -         1,238,096
Exercise of
 stock
 options. . . .     531,996     532     1,756,451       -             -             -          -           -         1,756,983
Accrual of
 preferred
 stock
 dividends. . .         -       -        (339,726)      -             -             -          -           -          (339,726)
Accretion of
 preferred
 stock. . . . .         -       -        (257,719)      -             -             -          -           -          (257,719)
Deferred
 compensation .         -       -      23,092,080       -     (23,092,080)          -          -           -               -
Amortization of
 deferred
 compensation .         -       -             -         -       8,165,293           -          -           -         8,165,293
Net unrealized
 loss on
 short-term
 investments
 available
 for sale . . .         -       -             -     (51,960)          -             -          -           -           (51,960)
Net loss. . . .         -       -             -         -             -     (40,287,907)       -           -       (40,287,907)
                 ---------- -------  ------------  --------  ------------  ------------  --------- -----------   -------------
Balance,
 December 31,
 1999 . . . . .  53,831,997  53,832   130,431,898   (51,960)  (18,389,540)  (42,135,592) 8,550,000  (1,900,000)     68,008,638
Purchase of
 treasury stock,
 at cost. . . .         -       -             -         -             -             -       17,369      (1,546)         (1,546)
Conversion of
 preferred
 stock into
 common
 stock. . . . .   2,554,375   2,554    79,168,681       -             -             -          -           -        79,171,235
Preferred stock
 conversion
 inducement
 charge . . . .         -       -     (22,141,000)      -             -             -          -           -       (22,141,000)
Exercise of
 stock
 options. . . .   3,187,102   3,187       920,115       -             -             -          -           -           923,302
Accrual of
 preferred
 stock
 dividends. . .         -       -      (8,471,919)      -             -             -          -           -        (8,471,919)
Accretion of
 preferred
 stock. . . . .         -       -        (145,896)      -             -             -          -           -          (145,896)
Deferred
 compensation .         -       -       7,013,122       -      (7,013,122)          -          -           -               -
Amortization of
 deferred
 compensation .         -       -             -         -       7,509,168           -          -           -         7,509,168
Net unrealized
 gain on
 short-term
 investments
 available
 for sale . . .         -       -             -     209,007           -             -          -           -           209,007
Net loss. . . .         -       -             -         -             -    (118,499,771)       -           -      (118,499,771)
                 ---------- -------  ------------  --------  ------------  ------------  --------- -----------   -------------
Balance,
 December 31,
 2000 . . . . .  59,573,474  $59,573 $186,775,001  $157,047  $(17,893,494)$(160,635,363) 8,567,369 $(1,901,546)$     6,561,218
                 ========== =======  ============  ========  ============  ============  ========= ===========   =============

</TABLE>

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


<PAGE>
<PAGE>
                                                                         73
                   NETWORK ACCESS SOLUTIONS CORPORATION
                         STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                              For the years ended December 31,
                                                                          ------------------------------------------
                                                                             2000           1999           1998
                                                                         ------------   ------------    ------------
<S>                                                                               <C>            <C>             <C>
Cash flows from operating activities:
   Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $(118,499,771) $(40,287,907)  $  (2,075,938)
   Adjustment to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization expense . . . . . . . . . . . . . .    24,675,718      5,195,282         130,004
      Provision for doubtful accounts receivable. . . . . . . . . . . .     1,325,384        324,441          28,133
      Benefit for deferred income taxes . . . . . . . . . . . . . . . .           -              -            77,146
      Shares issued to employee for services. . . . . . . . . . . . . .           -              -           130,000
      Amortization of deferred compensation on stock options. . . . . .     7,509,169      8,165,293         218,997
      Net changes in assets and liabilities:
         Accounts receivable. . . . . . . . . . . . . . . . . . . . . .    (3,968,832)    (1,774,854)     (1,069,599)
         Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . .       (15,381)      (381,537)        (11,686)
         Prepaid and other current assets . . . . . . . . . . . . . . .       446,985       (529,030)       (105,693)
         Other assets . . . . . . . . . . . . . . . . . . . . . . . . .    (1,067,138)      (106,785)       (100,865)
         Accounts payable . . . . . . . . . . . . . . . . . . . . . . .     4,671,124      6,153,050        (139,113)
         Accrued expenses . . . . . . . . . . . . . . . . . . . . . . .     7,527,126      3,348,916         240,996
         Deferred compensation. . . . . . . . . . . . . . . . . . . . .      (166,667)      (333,333)            -
         Income tax payable . . . . . . . . . . . . . . . . . . . . . .           -              -          (132,064)
         Deferred revenue . . . . . . . . . . . . . . . . . . . . . . .       (28,549)        42,788             -
                                                                         ------------   ------------    ------------
            Net cash used in operating activities . . . . . . . . . . .   (77,590,832)   (20,183,676)     (2,809,682)
                                                                         ------------   ------------    ------------

Cash flows from investing activities:
   Purchases of short-term investments. . . . . . . . . . . . . . . . .   (28,295,690)   (24,627,853)            -
   Expenditures for network under development . . . . . . . . . . . . .   (16,563,151)   (28,384,550)       (640,511)
   Purchases of property and equipment. . . . . . . . . . . . . . . . .   (21,954,493)    (6,822,909)       (515,690)
   Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . .           -       (1,600,000)            -
   Deposit for software and related services. . . . . . . . . . . . . .           -              -          (185,000)
                                                                         ------------   ------------    ------------
            Net cash used in investing services . . . . . . . . . . . .   (66,813,334)   (61,435,312)     (1,341,201)
                                                                         ------------   ------------    ------------

Cash flows from financing activities:
   Borrowings on notes payable. . . . . . . . . . . . . . . . . . . . .           -       12,000,000       2,406,652
   Borrowings on sale/leaseback . . . . . . . . . . . . . . . . . . . .     5,502,720        530,000             -
   Repayments of notes payable. . . . . . . . . . . . . . . . . . . . .      (478,925)       (67,864)     (1,500,000)
   Principal payments on capital leases . . . . . . . . . . . . . . . .   (14,323,466)    (1,672,781)            -
   Issuance of common stock . . . . . . . . . . . . . . . . . . . . . .           -       83,700,000       4,902,401
   Issuance of redeemable preferred stock . . . . . . . . . . . . . . .   150,000,000            -         5,102,499
   Issuance costs related to common and preferred stock offerings . . .      (208,817)    (1,905,371)        (55,798)
   Issuance costs related to follow-on offering . . . . . . . . . . . .      (514,451)           -               -
   Exercise of stock options. . . . . . . . . . . . . . . . . . . . . .       923,302      1,756,983             -
   Treasury stock acquired. . . . . . . . . . . . . . . . . . . . . . .        (1,546)           -        (1,900,000)
                                                                         ------------   ------------    ------------
            Net cash provided by financing activities . . . . . . . . .   140,898,817     94,340,967       8,955,754
                                                                         ------------   ------------    ------------

Net (decrease) increase in cash and cash equivalents. . . . . . . . . .    (3,505,349)    12,721,979       4,804,871
Cash and cash equivalents at the beginning of the period. . . . . . . .    18,240,096      5,518,117         713,246
                                                                         ------------   ------------    ------------

Cash and cash equivalents at the end of the period. . . . . . . . . . .  $ 14,734,747   $ 18,240,096   $   5,518,117
                                                                         ============   ============    ============

Supplemental disclosure of cash flow information:
   Cash paid during the period for:
      Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  3,654,043   $ 1,027,452    $      27,948
      Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .        49,893            -           153,343
   Non-cash investing and financing activities:
      Capital leases. . . . . . . . . . . . . . . . . . . . . . . . . .    29,759,425     20,511,172       1,513,138
      Preferred stock dividends . . . . . . . . . . . . . . . . . . . .     8,471,919        339,726         322,192
      Preferred stock accretion . . . . . . . . . . . . . . . . . . . .       145,896        257,719         244,417
      Preferred stock inducement charge . . . . . . . . . . . . . . . .    22,141,000            -               -
      Shares issued to employee for services. . . . . . . . . . . . . .           -              -           130,000
      Expenditures for offering costs included in accounts payable. . .           -          200,000       2,351,281
      Expenditures for network included in accounts payable . . . . . .     1,124,817      1,894,810             -
      Purchases of property and equipment included in accounts payable.     3,041,672            -               -
      Expenditures for network included in accrued expenses . . . . . .    11,005,000            -               -
      Purchases of property and equipment included in accrued expenses.     2,221,790            -               -
      Conversion of notes payable into common stock . . . . . . . . . .           -       10,000,000             -
      Conversion of redeemable preferred stock into common stock. . . .    79,168,681      6,238,096             -

</TABLE>


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


<PAGE>
<PAGE>
                                                                         74
                   NETWORK ACCESS SOLUTIONS CORPORATION

                       NOTES TO FINANCIAL STATEMENTS

1. Business

      The Company

   Network Access Solutions Corporation, or the Company, was originally
incorporated in the Commonwealth of Virginia on December 19, 1994. On
August 3, 1998, the Company reincorporated in the State of Delaware. Prior
to the reincorporation, the Company had authorized 10,000 shares of common
stock, of which 7,803 shares were issued and outstanding. As of August 3,
1998, the Company was recapitalized with authorized capital stock of
15,000,000 shares of common stock, $.001 par value per share and 10,000,000
shares of preferred stock, $.001 par value per share. On March 18, 1999,
the Company increased the authorized common stock to 50,000,000 shares with
a par value of $.001 per share. In conjunction with this reincorporation
and recapitalization, the Company changed from a July 31 year-end to a
calendar year-end. On March 18, 1999, the Company and its Board of
Directors declared a two for one stock split, effected as a stock dividend,
of its common stock. On May 7, 1999, the Company and its Board of Directors
declared a 2.25 for one stock split, effected as a stock dividend, of its
common stock. All share information has been retroactively adjusted for all
periods presented to reflect the new capital structure and stock splits.

   The Company, which is a major provider of high-speed data
communications services and related applications, provides network
services, telecommunications products and equipment and consulting services
to business customers. Through its CopperNet branded service, the Company
offers its customers high-speed, continuous connectivity using Digital
Subscriber Line (DSL) technology. The Company provides metropolitan area
and wide area network services, manages and monitors its customers'
networks, sells telecommunications equipment, designs networks for its
customers, installs the equipment and provides related services. The
Company currently offers its DSL-based networking solutions in the
following nine cities and their surrounding markets: Baltimore, Boston, New
York, Norfolk, Philadelphia, Pittsburgh, Richmond, Washington, D.C., and
Wilmington.

2. Summary of Significant Accounting Policies

    Use of Estimates

   The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. The estimates involve judgments

<PAGE>
<PAGE>

with respect to, among other things, various future factors which are
difficult to predict and are beyond the control of the Company. Therefore,
actual amounts could differ from these estimates.

    Revenue Recognition

   The Company's revenue is derived from product sales and consulting
services and from network services.  Revenue is recognized when persuasive
evidence of an arrangement exists, delivery has occurred or services
rendered, prices are fixed and determinable and collection is reasonably
assured.  The Company recognizes revenue on the sale of its products when a
valid purchase order is received, shipment occurs, collection is probable
and no significant obligations remain related to the completion of
installation and performance of services.  The Company provides consulting
services, including network planning, design, and integration services,
under time-and-material type contracts and recognizes revenue as services
are performed and as costs are incurred.

   The Company provides network services, including DSL-based services,
under monthly and fixed rate service contracts.  Revenue on monthly
contracts is recognized when services are performed.  Revenue on fixed rate
service contracts is recognized as costs are incurred over the related
contract period, which generally does not exceed one year.  Payments
received in advance of providing services are recorded as deferred revenue
until the period in which such services are provided.  Revenue related to
installation and activation fees is deferred and amortized over the
estimated customer life.  All direct incremental costs for installation and
activation revenue up to the revenue amount are also amortized over the
estimated customer life.  Any excess costs over revenue is expensed. Such
revenue historically has not significantly exceeded the direct costs.  In
certain situations, the Company will waive non-recurring installation and
activation fees in order to obtain a sale.

    Concentration of Credit Risk

   Financial instruments, which potentially subject the Company to
concentrations of credit risk consist of cash and cash equivalents, short-
term investments and accounts receivable. Cash and cash equivalents are
held in a money market account at a national financial institution. Short-
term investments consist of marketable securities, which are principally
composed of debt securities with corporations and foreign governments. The
Company has not recognized any losses on its cash and cash equivalents.

   The Company grants uncollateralized credit in the form of accounts
receivable to its customers. As of December 31, 2000, SEI Investments and
Quest Diagnostics comprised 12% and 13% of accounts receivable. As of
December 31, 1999, AstraZeneca, PLC comprised 12% of accounts receivable.



<PAGE>
<PAGE>
                                                                         76
    Cash and Cash Equivalents

   The Company considers all highly liquid instruments purchased with an
original maturity of three months or less to be cash equivalents.

    Restricted Cash

   Restricted cash is composed of amounts held in escrow to collateralize
the Company's operating lease commitments for its headquarters in Herndon,
Virginia.

    Short-term Investments

   The Company's short-term investments consist of marketable securities
that include bonds with maturities of less than two years. The marketable
securities are classified as "available for sale" since management intends
to hold the investments for an indefinite period and may sell the
investments prior to their maturity. The investments are carried at
aggregate fair value based generally on quoted market prices. Gains and
losses are determined based on the specific identification method.
Available-for-sale marketable securities that are reasonably expected by
management to be sold within one year from the balance sheet date are
classified as current assets.

    Inventory

   Inventories are stated at the lower of cost or market. Cost is
determined using the weighted-average method. Inventories consist primarily
of components, subassemblies and finished products held for sale.

    Property and Equipment

   Property and equipment consists of network costs associated with the
development and implementation of the DSL networks, office and computer
equipment, and furniture and fixtures. The costs associated with the DSL
network under development are composed of collocation fees, equipment,
equipment held under capital leases, and equipment installation. These
assets are stated at cost. The Company leases certain of its equipment
under capital lease agreements. The capital lease assets are stated at the
lower of the present value of the net minimum lease payments or the fair
value at the inception of the lease, and are depreciated over the shorter
of the estimated useful life or the lease term. Depreciation of office and
computer equipment and furniture and fixtures is computed using the
straight-line method, generally over three to five years, based upon
estimated useful lives, commencing when the assets are placed in service.
The depreciation of the DSL network costs commences as individual network
components are placed in service and are depreciated over two to five
years. Expenditures for maintenance and repairs are expensed as incurred.
When assets are retired or disposed, the cost and related accumulated

<PAGE>
<PAGE>
                                                                         77
depreciation are removed from the accounts, and any resulting gain or loss
is recognized in operations for the period.

   The Company capitalizes costs associated with the design and
implementation of the Company's systems including internally and externally
developed software in accordance with Statement of Position (SOP) 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Capitalized external software costs include the actual costs
to purchase existing software from vendors, integration and installation
costs. Capitalized internal software costs generally include personnel
costs incurred in the enhancement and implementation of purchased software
packages.  Costs associated with training, data conversion, and maintenance
agreements are expensed as incurred.

    Advertising Costs

   Advertising costs are expensed as they are incurred.  Advertising
expenses for the year ended December 31, 2000, were $569,468.  There were
no advertising expenses for the years ended December 31, 1999 and 1998.

    Income Taxes

   The Company accounts for income taxes by utilizing the asset and
liability method. Under this method, deferred income taxes are recognized
for the tax consequences in future years of differences between the tax
bases of assets and liabilities and their financial reporting amounts at
each year-end, based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce net
deferred tax assets to the amount expected to be realized. The provision
for income taxes consists of the Company's current provision (benefit) for
federal and state income taxes and the change in net deferred tax assets
and liabilities during the period.

    Fair Value Information

   The Company believes the carrying amount of certain of its financial
instruments, which include cash equivalents, accounts payable, capital
leases and notes payable, approximate fair value.

    Impairment of Long-Lived Assets

   The Company periodically evaluates the recoverability of its long-lived
assets. This valuation consists of a comparison of the carrying value of
the assets with the assets' expected future cash flow undiscounted and
without interest costs. If the carrying value of an asset exceeds the
expected future cash flows, an impairment exists. An impairment loss is
measured by the amount by which the carrying value of the asset exceeds
fair value measured by the value of future discounted cash flows, using a
discount rate commensurate with the risks involved, quoted market prices in


<PAGE>
<PAGE>
                                                                         78
an active market, if available, option pricing models, appraisals and
fundamental analysis.

    Net Loss Per Share

   The Company presents basic and diluted net loss per share. Basic net
loss per share is computed based on the weighted average number of
outstanding shares of common stock. Diluted net loss per share adjusts the
weighted average for the potential dilution that could occur if stock
options, warrants or other convertible securities were exercised or
converted into common stock. Diluted loss per share for the year ended
December 31, 2000 and 1999, are the same as basic loss per share because
the effects of such items were anti-dilutive.

    Stock-Based Compensation

   The Company measures compensation expense for its employee stock-based
compensation using the intrinsic value method and provides pro forma
disclosures of net loss as if the fair value method had been applied in
measuring compensation expense. Under the intrinsic value method of
accounting for stock-based compensation, when the exercise price of options
granted to employees is less than the estimated fair value of the
underlying stock on the date of grant, deferred compensation is recognized
and is amortized to compensation expense over the applicable vesting
period.

    Segment Reporting

   The Company has determined its reportable segments based on the
Company's method of internal reporting, which disaggregates its business by
product category. The Company's reportable segments are product sales and
consulting services, and network services. The product sales segment
provides sales of selected equipment from manufacturing partners. Engineers
select product solutions based upon customized network designs to improve
the customers' operations and network efficiencies. The consulting services
segment provides nonrecurring service activation and installation, network
integration, on site network management, network security consulting and
professional services. In addition, the consulting services segment
provides maintenance and installation of equipment, some of which may be
provided through third party providers under contract. The network services
segment provides local, metropolitan and wide area data communications
services to customers. This segment also provides a wide variety of other
services to customers, including remote network management and monitoring,
network security, virtual private networks, e-commerce and CopperNet, the
Company's high-speed, continuously connected DSL access to
telecommunications networks. The Company's business is currently conducted
principally in the eastern United States. There are no foreign operations.

    Recent Accounting Pronouncements

   In July 1999, the Financial Accounting Standards Board (FASB) issued

<PAGE>
<PAGE>
                                                                         79
Statement of Financial Accounting Standards (SFAS) No. 137, "Deferral of
the Effective Date of FAS 133" which defers the effective date of SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities."  SFAS
No. 133 is effective for all quarters of fiscal years beginning after
January 1, 2001.

   In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," which amended SFAS
No. 133.  The amendments in SFAS No. 138 relates to such matters as normal
purchases and normal sales, the definition of interest rate risk, hedging
recognized foreign-currency-denominated assets and liabilities, and
intercompany derivatives.  The Company adopted this standard effective
January 1, 2001, and the effect was not material.

   In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin (SAB) Number 101, "Revenue Recognition in Financial
Statements."  This bulletin was effective for the quarter ended December
31, 2000.  This bulletin established more clearly defined revenue
recognition criteria than previously existing accounting pronouncements,
and specifically addresses revenue recognition requirements for non-
refundable fees, such as activation fees, collected by a company upon
entering into an arrangement with a customer, such as an arrangement to
provide telecommunications services.  As of December 31, 2000,
implementation of SAB 101 did not have a material effect on the financial
position, results of operations or cash flows.

3. Initial and Secondary Public Offerings

   In June 1999, the Company completed an initial public offering (IPO) of
7,500,000 shares of common stock. Total proceeds to the Company were
$81,853,900, net of underwriting discounts and commissions of approximately
$5,500,000 and offering costs of $1,846,100. Concurrent with the IPO,
$5,000,000 of the Company's Series A preferred stock was converted into
416,667 shares of common stock at $12.00 per share, the public offering
price, with the remaining shares of Series A preferred stock and all
accrued dividends and accretion amounting to $1,238,096 canceled without
additional payment to the holders of those shares. In addition, $10,000,000
of the Company's 8% convertible notes (see Note 7) were converted into
833,334 shares of common stock at $12.00 per share, the public offering
price.

   On December 22, 1999, the Company filed a registration statement on
Form S-1 for the sale of shares of their common stock in a secondary public
offering that was subsequently withdrawn on April 17, 2000, due to
unfavorable market conditions. In connection with the preparation and
filing of this registration statement the Company incurred costs of
$574,000, all of which has been paid as of December 31, 2000.

4. Short-term Investments

   As of December 31, 2000 and 1999, the Company had invested in

<PAGE>
<PAGE>
                                                                         80
marketable securities with original maturity dates exceeding 90 days. These
marketable securities, which principally consist of debt securities with
corporations and foreign governments, are due in one year or less and are
considered "available for sale" and, as such, are stated at fair value. The
aggregate amortized cost of these marketable securities was $53,080,590 and
$24,575,893 at December 31, 2000 and 1999, respectively. Given the decrease
in interest rates from the purchase date of these securities the Company
has recorded an unrealized gain of $157,047 and an unrealized loss of
($51,960) for the years ended December 31, 2000 and 1999, respectively.
These net unrealized gains and losses are reported as a part of accumulated
other comprehensive loss. Realized gains and losses from the sale of
marketable securities are based on the specific identification method.
There were no gross realized gains and gross realized losses on sales of
available for sale securities during the years ended December 31, 2000 and
1999.

5. Accounts Receivable

   Accounts receivable at December 31, 2000 and 1999 are as follows:

                                                  As of December 31,
                                              ---------------------------
                                                 2000           1999
                                              ------------  ------------
   Accounts receivable. . . . . . . . . . .  $   5,841,663  $   3,424,984
   Unbilled revenue . . . . . . . . . . . .      1,509,855        208,619
   Allowance for doubtful accounts. . . . .     (1,450,866)      (376,399)
                                              ------------   ------------
                                             $   5,900,652  $   3,257,204
                                              ============   ============
   The provision for doubtful accounts was $1,325,384, $324,441 and
$28,133 for the years ended December 31, 2000, 1999 and 1998, respectively.

6. Property and Equipment

   Property and equipment consists of the following:

                                                  As of December 31,
                                              ---------------------------
                                                 2000           1999
                                              ------------  ------------
   Network placed in service. . . . . . . .  $  78,885,313  $  40,291,575
   Network development in process . . . . .      7,177,509     12,790,617
   Office and computer equipment. . . . . .     29,285,884      5,925,278
   Furniture and fixtures . . . . . . . . .      5,121,658      1,428,356
   Less accumulated depreciation. . . . . .    (30,013,874)    (5,338,156)
                                              ------------   ------------
   Property and equipment, net. . . . . . .  $  90,456,490  $  55,097,670
                                              ============   ============

   The Company's DSL-based network includes equipment under capital

<PAGE>
<PAGE>
                                                                         81
leases, equipment, installation, and collocation fees. Collocation fees
represent nonrecurring fees paid to obtain central office space for
location of certain equipment. When a new portion of the Company's network
has been completed and made available for use, it is transferred from
network development to network placed in service.

   As of December 31, 2000 and 1999, the recorded cost of the equipment
under capital leases, consisting primarily of network equipment, was
$52,698,436 and $22,939,012, respectively. Accumulated amortization for
this equipment under capital leases was $18,204,834 and $2,998,446 as of
December 31, 2000 and 1999, respectively.

   The Company capitalized costs associated with the design and
implementation of the Company's systems including internally and externally
developed software.  As of December 31, 2000 and 1999, the recorded cost of
software and software-in development was $15,741,057 and $2,546,669,
respectively.

   Network development in process is net of a transfer of assets to SBC of
$23.7 million.  This transfer was part of the Series B preferred stock
conversion agreement in which the Company agreed to assign substantially
all of the central office sites built by the Company in the southeastern
and western regions of the United States.  See Note 11 for additional
information.

   In 2000, the Company recorded a loss on impairment of $300,000 which is
included in selling, general and administrative expense in the Statement of
Operations.

7. Note Payable

   On October 16, 1998, the Company entered into a $10,000,000 line of
credit agreement and a $30,000,000 equipment financing agreement (see Note
9) with Ascend Communications, Inc. (Ascend). Under the terms of the line
of credit, the Company could draw on the line of credit in $1,000,000
increments up to a maximum of $5,000,000. The Company could draw the
remaining $5,000,000, also in $1,000,000 increments, upon (i) completing
the purchase or lease of equipment in excess of $15,000,000 from Ascend and
(ii) demonstrating that at least 70% of such equipment is being used by the
Company to generate revenue. The Company was required to make interest only
payments at an annual rate of 8.25% on the amounts advanced for the first
nine months from the date of the advance. For the next thirty-three months
the Company was required to make principal and interest payments in
accordance with a sixty-month amortization schedule using an interest rate
of 8.25% for the first eighteen months at a rate equal to the prevailing
high yield bond index for the next fifteen months. The remaining unpaid
interest was due forty-two months after the related advance. The credit
agreement required immediate repayment in the event of an initial public
offering or debt offering in excess of $40,000,000 or a change in control,
as defined.

   On May 4, 1999, the Company amended its financing agreement with

<PAGE>
<PAGE>
                                                                         82
Ascend. The amendment reduced the line of credit available for working
capital loans from $10,000,000 to $5,000,000 and relieved the Company's
obligation to repay these loans upon the Company's IPO. As of December 31,
2000 and 1999, the Company's total obligation under this agreement for
working capital was $2,453,211 and $2,932,136.

   Principal payments due under this note payable as of December 31, 2000
are as follows:

      Year ending December 31,                               Amount
      ------------------------                            ------------
         2001 . . . . . . . . . . . . . . . . . . . . .   $    532,312
         2002 . . . . . . . . . . . . . . . . . . . . .      1,920,899
                                                          ------------
                                                          $  2,453,211
                                                          ============

   On March 31, 1999, the Company entered into a financing agreement
whereby certain holders of its Series A preferred stock agreed to invest an
additional $10,000,000 in the Company. Under the agreement, the Company
received $5,000,000 on April 1, 1999 and an additional $5,000,000 on May
11, 1999 by issuing 8% convertible notes. Concurrent with the IPO, these
notes, including principal and accrued interest, were converted into
833,334 shares of common stock.

   On February 4, 2000, in connection with the Company's strategic
financing agreement with SBC and Telmex, SBC and Telmex loaned the Company
a total of $30 million ($15 million each) until the Company received the
necessary regulatory approvals to complete a preferred stock offering.  The
loans bore interest at a rate of prime plus 2%. Upon completion of the
preferred stock offering on March 7, 2000, the Company exchanged the loans
and accrued interest of $229,726 for preferred stock.

8. Deferred Compensation Liability

   The Company has an unfunded deferred compensation plan for certain key
executives. Under the plan, executives deferred a portion of their
compensation by electing future payments in three equal installments in
June 1999, December 1999 and June 2000. At December 31, 2000 and 1999, the
deferred compensation liability was $0 and $166,667, respectively. Interest
accrues on deferred amounts on a quarterly basis at a rate determined by
management which is currently 6% based on the rate of interest for three-
year Federal treasury notes. Accrued interest related to these amounts was
$0 and $25,833 at December 31, 2000 and 1999, respectively.

9. Commitments and Contingencies

    Leases

   The Company leases or subleases office space in Maryland,
Massachusetts, New York, Pennsylvania and Virginia and collocation space in


<PAGE>
<PAGE>
                                                                         83
central offices under the terms of the interconnection agreements with
Verizon and other vendors. On October 27, 1999, the Company executed a
lease for space in Herndon, Virginia. The Company entered into a Letter of
Credit agreement, in the amount of $1,600,000 with a financial institution,
that will serve as collateral for this lease. Commitments for minimum
rental payments under noncancelable leases and subleases at December 31,
2000 are as follows:

      Year ending December 31,                               Amount
      ------------------------                            ------------
         2001 . . . . . . . . . . . . . . . . . . . . .   $  3,562,406
         2002 . . . . . . . . . . . . . . . . . . . . .      2,798,796
         2003 . . . . . . . . . . . . . . . . . . . . .      2,815,095
         2004 . . . . . . . . . . . . . . . . . . . . .      2,720,740
         2005 . . . . . . . . . . . . . . . . . . . . .      2,215,478
         Thereafter . . . . . . . . . . . . . . . . . .      7,209,679
                                                          ------------
      Total minimum rental payments . . . . . . . . . .   $ 21,322,194
                                                          ============

   Rent expense for the years ended December 31, 2000, 1999 and 1998 was
$5,600,240, $1,580,211 and $113,600, respectively.

   During 2000 and 1999, the Company entered into capital leases related
to the acquisition of property and equipment, consisting primarily of
network equipment. Initially, the Company entered into a master lease
agreement with Ascend to finance purchases of up to $30,000,000 through
capital lease agreements. During 1999, this agreement was amended and
increased to $95,000,000. In addition, the Company has an arrangement with
Paradyne Corporation whereby the Company can finance equipment purchases of
up to $8,000,000 subject to vendor approval. The Company entered into
sale/leaseback transactions in the amount of $5,502,720 and $530,000 during
2000 and 1999.  The leaseback transactions were accounted for as capital
leases. The present value of future minimum capital lease payments as of
December 31, 2000, is as follows:

      Year ending December 31,                               Amount
      ------------------------                            ------------
         2001 . . . . . . . . . . . . . . . . . . . . .   $ 17,543,348
         2002 . . . . . . . . . . . . . . . . . . . . .     17,306,127
         2003 . . . . . . . . . . . . . . . . . . . . .     11,284,801
         2004 . . . . . . . . . . . . . . . . . . . . .      1,996,701
                                                          ------------
                                                            48,130,977
      Less amounts representing interest. . . . . . . .     (6,310,768)
                                                          ------------
      Present value of net minimum lease payments . . .     41,820,209
      Less current portion of capital lease obligations     14,075,691
                                                          ------------
      Long-term portion of capital lease obligations. .   $ 27,744,518
                                                          ============


<PAGE>
<PAGE>
                                                                         84
    Purchase commitments

   On November 24, 1998, the Company entered into an agreement with a
software and service provider to support its DSL services. The Company's
single largest shareholder is also a shareholder of this software and
service provider. Under the terms of the agreement, software licensing and
service fees were $1,023,700 which were payable through a $185,000 deposit
which was made upon signing the agreement, $402,700 due upon project
completion, and $436,000 payable within twenty-four months of project
completion. Amounts not paid within 30 days of project completion accrue
interest at a rate of 10%. The Company commenced implementing the software
and support service in 1999. As of December 31, 1999, all fees under this
agreement had  been paid.

    Employment agreements

   The Company has entered into an employment agreement with certain of
its executive officers. Each agreement has an initial term of four years,
subject to earlier termination upon 30 days prior notice. These agreements
are automatically extended for additional one year terms unless the Company
or the employee elects to terminate the agreement within 30 days before the
end of the current term. Under these agreements, these employees are
eligible to receive an initial annual base salary that will be increased by
at least 5% each year, based upon performance objectives set by the Board
of Directors. The employees are also eligible to receive an annual bonus of
up to 20% of the executives' then current salary. The bonus is payable in
cash, stock or a combination of both at the election of the board of
directors.

    Liquidity and capital resources

   During 2000 and 1999, the Company incurred operating losses of
$120,589,115 and $41,431,064, respectively, and negative cash flows from
operations of $77,590,832 and $20,183,676, respectively. The Company has an
accumulated deficit of $160,635,363 at December 31, 2000 and expects to
incur operating losses for the foreseeable future.  Management has taken
actions to significantly reduce both operating and capital expenditures.
These actions include restructuring operations to more closely align
operating costs with revenues, reducing selling, general and administrative
expenses through workforce reductions, and reviewing and revising network
expenditures.  Currently, the Company has sufficient cash, cash equivalents
and short-term investments to fund operations until early 2002. Management
is exploring debt, equity and other strategic options to provide additional
funding for operations in future periods.  There can be no assurance that
such additional funding will be available on terms attractive to the
Company, or at all.

    Pending litigation

   The Company is currently involved in a number of legal proceedings,
some of which, as described below, could have a material adverse effect on

<PAGE>
<PAGE>
                                                                         85
the Company's business, financial position, results of operations or cash
flows.   Additionally, the Company's present and possible future legal
proceedings and claims, whether with or without merit, could be expensive
to defend, divert management's attention, and consume the Company's time
and resources.  There can be no assurance concerning the outcome of current
or future legal proceedings or claims.

   The Company is a defendant, along with two directors and a principal
stockholder, and a counter-claimant, in a case filed in the United States
District Court for the Eastern District of Virginia in November 2000 by
former officer Christopher J. Melnick.  Plaintiff alleges several causes of
action including breach of contract and securities fraud, and seeks both
monetary damages in an amount to be proven at trial and a declaratory
judgment.  The Company has filed an answer substantially denying
Plaintiff's allegations and has also filed a counterclaim against Mr.
Melnick.  Mr. Melnick's motion for a temporary restraining order was
denied. The case is now in discovery.

   InterConnX Inc. initiated an action against the Company in the United
States District Court for the Eastern District of Virginia in November
2000.  Plaintiff alleges claims for breach of contract and seeks monetary
damages in the amount of approximately $955,000.  The Company has filed an
answer substantially denying Plaintiff's allegations.  The case is now in
discovery.

   Vitria Technology, Inc. initiated an action against the Company in the
Fairfax County Circuit Court, Virginia in November 2000.  Plaintiff alleges
several causes of action and seeks monetary damages in the amount of
approximately $540,000.  The Company has filed an answer substantially
denying Plaintiff's allegations.  The case is now in discovery.

   Additionally, the Company is subject to state telecommunications
regulators, FCC and court decisions as they relate to the interpretation
and implementation of the 1996 Telecom Act, the Federal Communications Act
of 1934, as amended, various state telecommunications statutes and
regulations, the interpretation of competitive telecommunications company
interconnection agreements in general and the Company's interconnection
agreements in particular. In some cases, the Company may be deemed to be
bound by the results of ongoing proceedings of these bodies or the legal
outcomes of other contested interconnection agreements that are similar to
the Company's agreements. The results of any of these proceedings could
have a material adverse effect on the Company's business, financial
condition, results of operations and cash flows.




<PAGE>
<PAGE>
                                                                         86
10.   Income Taxes

   The provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                              For the years ended December 31,
                                                                          ------------------------------------------
                                                                             2000           1999           1998
                                                                         ------------   ------------    ------------
<S>                                                                      <C>            <C>            <C>
  Current tax provision (benefit) . . . . . . . . . . . . . . . . . . .  $     49,892   $    (71,292)  $    (105,119)
  Deferred tax provision. . . . . . . . . . . . . . . . . . . . . . . .           -              -            77,146
                                                                         ------------   ------------    ------------
     Total provision (benefit) for income taxes . . . . . . . . . . . .  $     49,892   $    (71,292)  $     (27,973)
                                                                         ============   ============    ============

  Deferred tax assets are comprised of the following:

<CAPTION>
                                                                                     As of December 31,
                                                                          ------------------------------------------
                                                                             2000           1999           1998
                                                                         ------------   ------------    ------------
<S>                                                                      <C>            <C>            <C>
  Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . .  $    978,550   $     64,367   $     349,956
  Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . .        73,622         15,139          19,149
  Accrued other expenses. . . . . . . . . . . . . . . . . . . . . . . .     1,443,769         69,712             -
  Bad debt expense. . . . . . . . . . . . . . . . . . . . . . . . . . .       560,325        145,365          20,066
  Net operating loss. . . . . . . . . . . . . . . . . . . . . . . . . .    59,329,828     15,446,718         444,160
  Depreciation expense. . . . . . . . . . . . . . . . . . . . . . . . .    (5,573,473)    (2,691,163)         (2,083)
  Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . .   (56,812,621)   (12,928,552)       (709,662)
                                                                         ------------   ------------    ------------
  Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . .  $        -     $    121,586   $     121,586
                                                                         ============   ============    ============

</TABLE>
   As of December 31, 2000, a valuation allowance has been established
against the Company's net deferred tax assets.  This allowance reflects
management's determination that such benefits will more than likely not be
realized.  The increase in the valuation allowance of $43,884,069 for 2000
is primarily related to additional net operating losses in the United
States.

   A reconciliation between the provision for income taxes from operations
computed using the federal statutory income tax rate and the Company's
effective tax rate is as follows (there are no material changes to the
Company's effective tax rate for 2000):

<TABLE>
<CAPTION>
                                                                                  Years ended December 31,
                                                                          ------------------------------------------
                                                                             2000           1999           1998
                                                                         ------------   ------------    ------------
<S>                                                                      <C>            <C>            <C>
  Income tax provision (benefit) at Federal statutory rate. . . . . . .     (34.0)%        (34.0)%        (34.0)%
  State income taxes, net of federal provision (benefit). . . . . . . .      (4.6)          (4.6)          (2.7)
  Change in valuation allowance . . . . . . . . . . . . . . . . . . . .      39.9           30.4           33.7
  Business meals, entertainment, penalties and other. . . . . . . . . .       0.3            1.1            1.5
  Amortization of deferred compensation on stock options
      disallowed for tax purposes . . . . . . . . . . . . . . . . . . .      (1.5)           6.9            0.0
                                                                         ------------   ------------    ------------
     Income tax provision (benefit) . . . . . . . . . . . . . . . . . .       0.1%          (0.2)%         (1.5)%
                                                                         ============   ============    ============

</TABLE>

<PAGE>
<PAGE>
                                                                         87
   At December 31, 2000, 1999 and 1998, the Company had a U.S. net
operating loss carryforward of approximately $153,624,620, $39,996,680 and
$1,150,077, respectively, which may be used to offset future taxable
income.  These carryforwards begin to expire in 2018.

11.   Mandatorily Redeemable Preferred Stock and Stockholders' Equity

   On August 3, 1998, the Company was recapitalized with authorized
capital stock that included 15,000,000 shares of preferred stock.  As of
December 31, 2000, the Company had 3,500,000 shares of undesignated
preferred stock, none of which was issued or outstanding.

    Mandatorily Redeemable Preferred Stock

   On August 6, 1998, the Company issued 10,000,000 shares of Series A
preferred stock and 22,050,000 shares of common stock for total proceeds of
$10,004,900, excluding direct issuance costs of $55,798. The Company had
allocated $5,074,042 and $4,875,060 of the net proceeds to the Series A
preferred stock and common stock, respectively, based on the Company's
estimate of fair value of the Series A preferred stock and common stock.

   At the time of the IPO, $5,000,000 of Series A preferred stock was
converted into 416,667 shares of common stock at $12.00 per share, the
public offering price, with the remaining shares of Series A preferred
stock and all accrued dividends and accretion, amounting to $1,238,096,
canceled without additional payment to the holders of those shares.

   On March 7, 2000, the Company issued 1,500,000 shares of Series B
preferred stock for total proceeds of $150,000,000 excluding direct
issuance costs of $208,818. The convertible Series B preferred stock is
non-voting and pays a 7.0% dividend, which can be satisfied with either
additional stock or cash. Each $100.00 share of Series B preferred stock is
convertible at any time at the election of the holder into 3.2258 shares of
the Company's common stock, or a total of 4,838,700 common shares. The
Series B preferred stock may be called by the Company for mandatory
conversion into its common stock at any time between two and five years
after the original issue date, provided the Company's common stock is
trading above $31.00 per share. On each anniversary of the issue date,
beginning on the second anniversary and ending on the seventh anniversary,
the holders of the Series B preferred stock may request that the Company
redeem the shares for a cash amount equal to $100 per share plus unpaid
dividends. The Company may postpone such right until the following year for
all but the seventh year if its common stock share price is below $31.00
for a specified period preceding the anniversary date.  The Series B
preferred stockholders have the right to maintain their percentage equity
ownership interests in the Company's common stock through a right of
primary offer mechanism in the financing agreement. This right permits them
to purchase, in any subsequent offering of the Company's stock, on the same
terms and conditions as the stock is offered to third parties, an amount of
stock that will allow them to maintain their respective percentage 
<PAGE>
<PAGE>
                                                                         88
ownership interests. Through a separate agreement with the Company's
present principal stockholders, Spectrum Equity Investors II, L.P. and
Jonathon P. Aust, the Company's Chief Executive Officer, the Series B
preferred stockholders also have a right of first offer to purchase, in
certain circumstances, any shares that these stockholders may wish to sell
in the future.

   On December 22, 2000, the Company signed an agreement with SBC
Communications, Inc. (SBC), a Series B preferred stockholder, to convert
their shares of Series B preferred stock plus accrued dividends which
totaled $79,171,235, at $31 per share, the original conversion price, into
2,554,375 shares of common stock.  The conversion was part of a series of
agreements whereby the Company induced SBC to convert their shares of
Series B preferred stock into shares of common stock of the Company.  The
series of agreements included: (i) the transfer of property, plant and
equipment comprised of 397 central office sites in the southeastern and
western regions of the United States with a carrying value of $22,141,000;
(ii) the sale of 19 central office sites for $1,600,000; (iii) the purchase
by SBC from the Company of certain third-party network equipment; (iv) the
provision of a $5,000,000 line of credit to finance costs associated with
the transfer of the central offices noted above; (v) the assumption of
certain of the Company's rights and obligations or alternatively,
subletting of the fourth and fifth floors of the Company's headquarters
facility in Herndon, Virginia; and (vi) reimbursement for $300,000 of
future leasehold improvements or moving expenses.  The inducement is
recorded as a reduction to stockholders' equity and an increase to net loss
applicable to common shareholders.

   The preferred stock activity is summarized as follows:


<PAGE>
<TABLE>
<CAPTION>
                                                                               Series A                      Series B
                                                                       ---------------------------   ---------------------------

                                                                         Shares         Amount         Shares          Amount
                                                                       ------------   ------------   ------------   ------------
<S>                                                                             <C>            <C>            <C>            <C>
   Balance, December 31, 1998 . . . . . . . . . . . . . . . . . . . .    10,000,000  $   5,640,651            -     $        -
   Accrued dividends. . . . . . . . . . . . . . . . . . . . . . . . .           -          339,726            -              -
   Accretion to redemption price. . . . . . . . . . . . . . . . . . .           -          257,719            -              -
   Conversion of preferred stock to
          common stock. . . . . . . . . . . . . . . . . . . . . . . .    (5,000,000)    (5,000,000)           -              -
   Cancellation of preferred stock. . . . . . . . . . . . . . . . . .    (5,000,000)    (1,238,096)           -              -
                                                                       ------------   ------------   ------------   ------------
   Balance, December 31, 1999 . . . . . . . . . . . . . . . . . . . .           -              -              -              -
   Issuance of shares . . . . . . . . . . . . . . . . . . . . . . . .           -              -        1,500,000    150,000,000
   Issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . .           -              -              -         (208,817)
   Accrued dividends. . . . . . . . . . . . . . . . . . . . . . . . .           -              -              -        8,471,919
   Accretion to redemption price. . . . . . . . . . . . . . . . . . .           -              -              -          145,896
   Conversion of preferred stock to
          common stock. . . . . . . . . . . . . . . . . . . . . . . .           -              -         (750,000)   (79,171,235)
                                                                       ------------   ------------   ------------   ------------
   Balance, December 31, 2000 . . . . . . . . . . . . . . . . . . . .           -    $         -          750,000   $ 79,237,763
                                                                       ============   ============   ============   ============
</TABLE>


<PAGE>
<PAGE>
                                                                         89
    Stock Repurchase

   On August 6, 1998, the Company repurchased 8,550,000 shares of common
stock for $1,900,000 from certain founders of the Company. During 2000, the
Company repurchased an aggregate of 17,369 shares of common stock from two
employees for an aggregate of $1,546.  These treasury stock transactions
were accounted for at cost.

12.   Stock-Based Compensation

   On July 23, 1998, the Company adopted the 1998 Stock Incentive Plan
(the "Plan"), under which incentive stock options, non-qualified stock
options, stock appreciation rights, restricted or unrestricted stock
awards, phantom stock, performance awards or any combination thereof may be
granted to the Company's employees and certain other persons in accordance
with the Plan. The Board of Directors, which administers the Plan,
determines the number of options granted, the vesting period and the
exercise price. The Board of Directors may terminate the Plan at any time.
With respect to options granted prior to February 15, 2000, options granted
under the Plan are exercisable into restricted shares of the Company's
common stock upon award and expire ten years after the date of grant.  The
restricted common stock generally vests over a three- or four-year period.
Subsequent to exercise, unvested shares of restricted stock cannot be
transferred until such shares have vested. Upon voluntary termination,
unvested shares of restricted stock can be repurchased by the Company at
the lower of fair value or the exercise price. Options granted subsequent
to February 15, 2000, under the Company's "Year 2000 Program" of
administering the Plan, vest and are exercisable cumulatively over a three-
year period commencing with the first anniversary of the date of grant, and
expire ten years after the date of grant.  At December 31, 1998, 9,000,000
shares were reserved for issuance under the Plan. Effective November 1,
1999 (as approved by the Company's stockholders on June 6, 2000), the Board
of Directors increased the number of shares of common stock reserved for
issuance under the Plan to 13,250,000.

   On April 1, 1999, the Company entered into a stock option agreement
that granted a member of the board of directors an option to purchase
250,000 shares of the Company's common stock at an exercise price of $6.67
per share. On June 3, 1999, the board member exercised the stock option by
paying $1,667,500 to the Company. In addition, the agreement stipulated the
board member be issued an additional option to purchase 407,500 shares of
common stock at an exercise price of $3.00 per share, which option was
granted and is unexercised as of December 31, 2000. These options
immediately vested upon the Company's IPO. As a result, the Company
recognized $3,504,375 of compensation expense during the year ended
December 31, 1999.

   The following table summarizes the company's stock option activity:


<PAGE>
<PAGE>
                                                                         90

<TABLE>
<CAPTION>
                                                                                       Weighted
                                                                                       Average
                                                                          Stock        Exercise
                                                                         Options         Price
                                                                       ------------   ------------
<S>                                                                             <C>            <C>
   Outstanding, December 31, 1997 . . . . . . . . . . . . . . . . . .           -    $         -
      Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .     7,093,550  $        0.09
                                                                       ------------
   Outstanding, December 31, 1998 . . . . . . . . . . . . . . . . . .     7,093,550  $        0.09
      Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .     4,691,200  $        4.52
      Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . .      (531,996) $        3.29
      Canceled. . . . . . . . . . . . . . . . . . . . . . . . . . . .      (268,295) $        4.59
                                                                       ------------
   Outstanding, December 31, 1999 . . . . . . . . . . . . . . . . . .    10,984,459  $        1.71
      Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .     5,161,300  $        8.45
      Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . .    (3,187,102) $        0.29
      Canceled. . . . . . . . . . . . . . . . . . . . . . . . . . . .    (2,504,329) $        9.54
                                                                       ------------
   Outstanding, December 31, 2000 . . . . . . . . . . . . . . . . . .    10,454,328  $        3.60
                                                                       ============
   Exercisable, December 31, 1998 . . . . . . . . . . . . . . . . . .     7,093,550  $        0.09
                                                                       ============
   Exercisable, December 31, 1999 . . . . . . . . . . . . . . . . . .    10,984,459  $        1.71
                                                                       ============
   Exercisable, December 31, 2000 . . . . . . . . . . . . . . . . . .     6,452,678  $        1.79
                                                                       ============
</TABLE>

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

<TABLE>
<CAPTION>
                            Options Outstanding                                          Options Exercisable
---------------------------------------------------------------------------     -----------------------------------
                                           Weighted
                                            Average             Weighted                                Weighted
   Range of                                Remaining             Average                                 Average
   Exercise             Number            Contractual           Exercise             Number             Exercise
    Prices            Outstanding            Life                 Price            Exercisable            Price
---------------     ---------------     ---------------     ---------------     ---------------     ---------------
<S>                 <C>                 <C>                 <C>                 <C>                 <C>
$ 0.09 -   1.41           5,299,239           7.7           $          0.11           5,199,439     $           0.09
$ 1.42 -   3.52           2,637,600           9.6           $          1.75             433,300     $           3.00
$ 3.53 -   8.79             701,229           9.0           $          6.33             356,329     $           5.74
$ 8.80 -  21.97           1,539,213           9.2           $         13.04             363,563     $          13.87
$21.98 -  34.50             277,047           9.1           $         28.54             100,047     $          26.85
                    ---------------                                             ---------------
                         10,454,328           8.6           $          3.60           6,452,678     $           1.79
                    ===============                                             ===============
</TABLE>


<PAGE>
<PAGE>
                                                                         91

   In certain instances, the Company has determined the fair value of the
underlying common stock on the date of grant was in excess of the exercise
price of the options. As a result, the Company recorded deferred
compensation of $7,013,122, $23,092,080 and $3,681,750 for the years ended
December 31, 2000, 1999 and 1998, respectively. This amount was recorded as
an increase to additional paid-in capital and is being amortized as a
charge to operations over the vesting periods which range from three to
four years of the underlying restricted common stock. The Company
recognized stock compensation expense of $7,509,168, $8,165,293 and
$218,997 for the years ended December 31, 2000, 1999 and 1998,
respectively.

   SFAS No. 123, Accounting for Stock-Based Compensation, encourages
adoption of a fair value-based method for valuing the cost of stock-based
compensation. However, it allows companies to continue to use the intrinsic
value method for options granted to employees and disclose pro forma net
loss and loss per share. Had compensation cost for the Company's stock-
based compensation plans been determined consistent with SFAS No. 123, the
Company's net loss and loss per share would have been as follows:

<TABLE>
<CAPTION>
                                                                              For the years ended December 31,
                                                                          ------------------------------------------
                                                                             2000           1999           1998
                                                                         ------------   ------------    ------------
<S>                                                                      <C>            <C>            <C>
  Net loss applicable to common stockholders, as reported . . . . . . .  $149,258,586   $ 40,885,352   $   2,642,547
  Pro forma net loss applicable to common stockholders. . . . . . . . .   159,131,889     42,227,971       2,667,309
  Net loss per share applicable to common stockholders,
     as reported, basic and diluted . . . . . . . . . . . . . . . . . .         (3.18)         (0.99)          (0.10)
  Pro forma net loss per share applicable to common
     stockholders, basic and diluted. . . . . . . . . . . . . . . . . .         (3.39)         (1.02)          (0.10)


</TABLE>

   The weighted average fair value of options granted during the years
ended December 31, 2000, 1999 and 1998 was approximately $9.09, $7.23 and
$1.04, respectively, based on the Black-Scholes option pricing model. Upon
termination, unvested shares of restricted stock may be repurchased by the
Company at the lower of the exercise price or fair market value.

   The fair value of each option is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants during the years ended December 31, 2000, 1999
and 1998:  Dividend yield of 0%; expected volatility of 0% to 137%; risk-
free interest rates of 5.21% to 6.74%; and expected term of five years.


<PAGE>
<PAGE>
                                                                         92
13.   Employee Benefit Plans

   Profit Sharing Plan and Trust.  On September 16, 1998, the Company
adopted the Network Access Solution, Inc. 401(k) Profit Sharing Plan and
Trust (the Plan). As allowed under Section 401(k) of the Internal Revenue
Code, the Plan provides tax-deferred salary deductions for eligible
employees. Participants must be at least 21 years of age and may make
voluntary contributions to the Plan of up to 15% of their compensation not
to exceed the federally determined maximum allowable contribution. The
Company is not obligated to make contributions or to match participant
contributions. Participants incrementally vest in Company contributions on
a straight-line basis over their first three years of employment. The
Company did not make contributions to the Plan during 1998. During 2000 and
1999, the Company contributed $615,606 and $403,726 to the Plan.


   Employee Stock Purchase Plan.  On March 1, 2000, the Company adopted
the 2000 Employee Stock Purchase Plan (ESPP).  The ESPP, which is intended
to qualify under Section 423 of the IRS Code, is implemented by a series of
overlapping offering periods of 12 months' duration (other than the first
offering period), with new offering periods (other than the first offering
period) commencing on January 1 and July 1 of each year.  The purchase
price per share at which shares will be sold in an offering under the ESPP
will be the lower of 85% of the fair market value of a share of the
Company's common stock on the first or last day of an offering period. The
fair market value of the Company's common stock on a given date will be
equal to the closing price of the Company's common stock on such date on
The Nasdaq Stock Market, as reported in The Wall Street Journal.  Eligible
employees, or participants, may elect to set aside, through payroll
deductions, up to 15% of their compensation to purchase common stock of the
Company, although no participant may accrue payroll deductions exceeding
$10,000 during any offering period.  In January 2001, participants
purchased 123,571 shares at a price of $0.53, related to the offering
period ended December 31, 2000.  The Company has reserved 500,000 shares of
common stock for the ESPP, of which 376,429 were available for future
issuance as of December 31, 2000.

14.   Segment Information

   In accordance with SFAS No. 131, the Company discloses certain segment
information. The financial results of the Company's segments are presented
on an accrual basis. The Company evaluates the performance of its segments
and allocates resources to them based on gross profit. There are no
intersegment revenues. The table below presents information about the
reported gross profit (loss) of the Company's reportable segments for the
years ended December 31, 2000, 1999 and 1998. Asset information is not
reported for the product sales and consulting services segments, as this
data is not considered by the Company in making its decisions regarding
operating matters.


<PAGE>
<PAGE>
                                                                         93

<TABLE>
<CAPTION>
                                                                         Product
                                                                        Sales and
                                                                       Consulting       Network      Reconciling
                                                                        Services        Services        Items           Total
                                                                       ------------   ------------   ------------   ------------
<S>                                                                             <C>            <C>            <C>            <C>
                                                                                   (unaudited; dollars in thousands)
   As of and for the year ended December 31, 2000:
      Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $      19,914  $      10,703  $         -     $     30,617
                                                                       ============   ============   ============   ============
      Gross profit (loss) (1) . . . . . . . . . . . . . . . . . . . . $       1,662  $     (11,938) $         -     $    (10,276)
                                                                       ============   ============   ============   ============
   Property and equipment, net. . . . . . . . . . . . . . . . . . . . $         -    $      61,245  $      29,211   $     90,456
                                                                       ============   ============   ============   ============
   As of and for the year ended December 31, 1999:
      Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $      15,619  $       1,820  $         -     $     17,439
                                                                       ============   ============   ============   ============
      Gross profit (loss) (1) . . . . . . . . . . . . . . . . . . . . $       2,592  $      (2,993) $         -     $       (401)
                                                                       ============   ============   ============   ============
   Property and equipment, net. . . . . . . . . . . . . . . . . . . . $         -    $      49,240  $       5,858   $     55,098
                                                                       ============   ============   ============   ============
   As of and for the year ended December 31, 1998:
      Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $      11,328  $         311  $         -     $     11,639
                                                                       ============   ============   ============   ============
      Gross profit (1). . . . . . . . . . . . . . . . . . . . . . . . $       1,928  $         270  $         -     $      2,198
                                                                       ============   ============   ============   ============
   Property and equipment, net. . . . . . . . . . . . . . . . . . . . $         -    $       4,652  $         379   $      5,031
                                                                       ============   ============   ============   ============
</TABLE>
__________

(1)   Adjustments that are made to the total of the segments gross profit
      in order to arrive at income (loss) before income taxes are as
      follows:

<TABLE>
<CAPTION>
                                                                              For the years ended December 31,
                                                                          ------------------------------------------
                                                                             2000           1999           1998
                                                                         ------------   ------------    ------------
<S>                                                                      <C>            <C>            <C>
                                                                              (unaudited; dollars in thousands)
  Gross profit (loss) (exclusive of depreciation and
     amortization presented below). . . . . . . . . . . . . . . . . . .  $    (10,276)  $       (401)  $       2,198
  Operating expenses:
     Selling, general and administrative. . . . . . . . . . . . . . . .        78,128         27,670           4,017
     Amortization of deferred compensation. . . . . . . . . . . . . . .         7,509          8,165             219
     Depreciation and amortization. . . . . . . . . . . . . . . . . . .        24,676          5,195             130
                                                                         ------------   ------------    ------------
  Loss from operations. . . . . . . . . . . . . . . . . . . . . . . . .      (120,589)       (41,431)         (2,168)
     Interest income. . . . . . . . . . . . . . . . . . . . . . . . . .         6,536          2,095             145
     Interest expense . . . . . . . . . . . . . . . . . . . . . . . . .        (3,823)        (1,023)            (81)
  Follow-on offering costs. . . . . . . . . . . . . . . . . . . . . . .          (574)           -               -
                                                                         ------------   ------------    ------------
  Loss before income taxes. . . . . . . . . . . . . . . . . . . . . . .  $   (118,450)  $    (40,359)  $      (2,104)
                                                                         ============   ============    ============
</TABLE>


<PAGE>
<PAGE>
                                                                         94
                   REPORT OF INDEPENDENT ACCOUNTANTS ON
                       FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of
Network Access Solutions Corporation:

Our audits of the financial statements referred to in our report dated
March 22, 2001, appearing in this Form 10-K also included an audit of the
financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In
our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in
conjunction with the related financial statements.

                                 PricewaterhouseCoopers LLP

McLean, Virginia
March 22, 2001


<PAGE>
<PAGE>
                                                                         95
                                SCHEDULE II

                     VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
                                                                       Balance at     Charged to                     Balance at
                                                                       Beginning       Costs and                       End of
                                                                       of Period       Expenses      Deductions        Period
                                                                       ------------   ------------   ------------   ------------
<S>                                                                             <C>            <C>            <C>            <C>
                                                                                            (in thousands)
Tax valuation allowance:
   Year ended December 31, 2000 . . . . . . . . . . . . . . . . . . . $  12,928,552  $  43,884,069  $         -     $ 56,812,621
   Year ended December 31, 1999 . . . . . . . . . . . . . . . . . . . $     709,662  $  12,218,890  $         -     $ 12,928,552
   Year ended December 31, 1998 . . . . . . . . . . . . . . . . . . . $         -    $     709,662  $         -     $    709,662

Allowance for doubtful accounts receivable:
   Year ended December 31, 2000 . . . . . . . . . . . . . . . . . . . $     376,399  $   1,325,384  $    (250,917)  $  1,450,866
   Year ended December 31, 1999 . . . . . . . . . . . . . . . . . . . $      51,958  $     324,441  $         -     $    376,399
   Year ended December 31, 1998 . . . . . . . . . . . . . . . . . . . $      23,825  $      28,133  $         -     $     51,958

</TABLE>


<PAGE>
<PAGE>
                                                                         96
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 required by this Item is incorporated by reference to
the sections of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on June 5, 2001, entitled "Election of
Directors - Board of Directors and Nominees for Election as Directors,"
"Directors and Executive Officers" and "Section 16(a) Beneficial Ownership
Reporting Compliance," to be filed with the Commission.

Item 11. Executive Compensation.

   The information required by this Item is incorporated by reference to
the sections of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on June 5, 2001, entitled "Directors and
Executive Officers - Directors' Compensation" and "Executive Compensation,"
to be filed with the Commission.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

   The information required by this Item is incorporated by reference to
the section of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on June 5, 2001, entitled "Security
Ownership - Security  Ownership of Directors, Executive Officers and
Certain Beneficial Owners," to be filed with the Commission.

Item 13. Certain Relationships and Related Transactions.

   The information required by this Item is incorporated by reference to
the sections of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on June 5, 2001, entitled "Election of
Directors - Board of Directors and Nominees for Election as Directors" and
"Directors and Executive Officers - Compensation Committee Interlocks and
Insider Participation," to be filed with the Commission.

                                 PART  IV

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

(a)      (1)   Financial Statements

         See the Index included in Item 8 on Page 71 of this Form 10-K.



<PAGE>
<PAGE>
                                                                         97
   (2)   Financial Statement Schedules

         See the Index included in Item 8 on Page 71 of this Form 10-K.

   (3)   Exhibits

         3.1      Amended and Restated Certificate of Incorporation of the
                  Company (2)

         3.2      Amended and Restated By-Laws of the Company (2)

         3.3      Certificate of the Designations, Voting Powers,
                  Preferences and Relative, Participating, Optional or
                  Other Special Rights of Preferred Stock and
                  Qualifications, Limitations or Restrictions Thereof
                  dated February 4, 2000 (4)

         4.1      Specimen stock certificate for shares of Common Stock of
                  the Company (2)

         4.2      Specimen stock certificate for shares of Series B
                  Preferred Stock of the Company (4)

         10.1     Master Equipment Lease Agreement dated November 17,
                  1998, by and between the Company and Paradyne Credit
                  Corporation (2,3)

         10.2     Purchase and Sale Agreement dated as of October 16,
                  1998, by and between the Company and Ascend
                  Communications, Inc., as amended (2,3)

         10.3     Master Lease Agreement dated October 9, 1998, by and
                  between the Company and Ascend Credit Corporation (2)

         10.4     Promissory Note dated October 16, 1998, by and between
                  the Company and Ascend Communications, Inc., as
                  amended (2)

         10.5     Commercial Lease dated February 24, 1997, by and between
                  the Company, Sterling/Gunston Limited Partnership and
                  Bernstein Management Corporation (2)

         10.5.1   First Lease Amendment dated June 26, 1998, by and
                  between the Company and Sterling/Gunston LLC (2)

         10.5.2   Third Lease Amendment dated February 1, 1999, by and
                  between the Company and Sterling/ Gunston LLC (2)

         10.6     Sublease dated August 31, 1998, by and between the
                  Company and U.S. Interactive, Inc. (2)



<PAGE>
<PAGE>
                                                                         98
         10.7     Letter of Intent dated March 2, 1999 by and between the
                  Company and Trans Dulles Center, Inc. (2)

         10.8     Employment Agreement dated as of August 16, 1998, by and
                  between the Company and Jonathan P. Aust (2)

         10.9     Employment Agreement dated as of July 13, 1998, by and
                  between the Company and Christopher J. Melnick (2)

         10.10    Employment Agreement dated as of July 13, 1998, by and
                  between the Company and Scott G. Yancey, Jr. (2)

         10.11    Employment Agreement dated as of August 18, 1998, by and
                  between the Company and James A. Aust (2)

         10.12    Employment Agreement dated as of March 1, 1999, by and
                  between the Company and John J. Hackett (2)

         10.13    1998 Stock Incentive Plan, as amended (2)

         10.14    Incentive Stock Option Grant Agreement dated July 23,
                  1998, by and between the Company and Scott G. Yancey,
                  Jr., as amended (2)

         10.15    Incentive Stock Option Grant Agreement dated July 23,
                  1998, by and between the Company and Christopher J.
                  Melnick, as amended (2)

         10.16    Incentive Stock Option Grant Agreement dated November 1,
                  1998, by and between the Company and James A. Aust (2)

         10.17    Incentive Stock Option Grant Agreement dated March 30,
                  1999, by and between the Company and John J. Hackett (2)

         10.18    Deferred Compensation Agreement dated June 1, 1997, by
                  and between the Company and Jonathan P. Aust (2)

         10.19    Deferred Compensation Agreement dated June 1, 1997, by
                  and between the Company and James A. Aust (2)

         10.20    Repurchase Agreement dated August 6, 1998, by and
                  between the Company and Longma M. Aust, Jonathan P.
                  Aust, James A. Aust and Stephen L. Aust (2)

         10.21    Investor Rights Agreement dated August 6, 1998, by and
                  between the Company, Spectrum Equity Investors II, L.P.,
                  SEA 1998 II, L.P., FBR Technology Venture Partners L.P.
                  and W2 Venture Partners, LLC, as amended (2)



<PAGE>
<PAGE>
                                                                         99
         10.22    Series A Preferred Stock Purchase Agreement dated August
                  6, 1998, by and between the Company, Spectrum Equity
                  Investors II, L.P., SEA 1998 II, L.P., FBR Technology
                  Venture Partners L.P. and W2 Venture Partners, LLC (2)

         10.23    Amended and Restated Note Purchase Agreement dated as of
                  March 31, 1999 and amended as of May 11, 1999, by and
                  between the Company, Spectrum Equity Investors II, L.P.
                  and FBR Technology Venture Partners L.P. (2)

         10.24    Amended and Restated Convertible Note dated as of March
                  31, 1999, by and between the Company and Spectrum Equity
                  Investors II, L.P. (2)

         10.25    Amended and Restated Convertible Note dated as of March
                  31, 1999, by and between the Company and FBR Technology
                  Venture Partners L.P. (2)

         10.26    Nonqualified Stock Option Grant Agreement dated April 1,
                  1999, by and between the Company and Dennis R.
                  Patrick (2)

         10.27    Deed of Lease dated April 8, 1999, by and between the
                  Company and TransDulles Center, Inc. (2)

         10.28    Letter Agreement dated May 6, 1999, by and between the
                  Company and SBC Communications Inc. (2)

         10.29    Letter Agreement dated May 7, 1999, by and between the
                  Company and Telefonos de Mexico, S.A. de C.V. (2)

         10.30    Letter Agreement dated May 10, 1999, by and between the
                  Company and DSL Solutions, Inc. d/b/a DSL Networks (2)

         10.31    Employment Agreement dated as of September 13, 1999 by
                  and between the Company and Worth D. MacMurray (3)

         10.32    Nonqualified Stock Option Grant Agreement dated August
                  9, 1999 by and between the Company and Worth D.
                  MacMurray (3)

         10.33    Lease Agreement by and between Dulles Tech, Inc. and the
                  Company dated October 27, 1999 (4)

         10.34    Stock Purchase Agreement dated February 4, 2000 by and
                  between the Company and SBC Communications Inc. (4)

         10.35    Stock Purchase Agreement dated February 4, 2000 by and
                  between the Company and Telefonos de Mexico, S.A. de
                  C.V. (4)



<PAGE>
<PAGE>
                                                                        100
         10.36    Summary of Operating Agreement dated February 4, 2000 by
                  and between the Company and each of SBC Telecom, Inc.
                  and Telefonos de Mexico, S.A. de C.V. (4)

         10.37    2000 Employee Stock Purchase Plan (4)

         10.38    Settlement Agreement and Mutual General Release dated
                  December 22, 2000 by and between the Company and SBC
                  Communications Inc.

         10.39    Settlement Agreement and Mutual General Release dated
                  December 22, 2000 by and between the Company and
                  Telefonos de Mexico, S.A. de C.V.

         10.40    First Amendment to Stock Purchase Agreement dated
                  December 22, 2000 by and between the Company and SBC
                  Communications Inc.

         10.41    Notice of Conversion letter dated December 21, 2000 to
                  the Company from SBC Communications Inc. exercising its
                  right to convert its Series B preferred stock to common
                  stock of the Company

         10.42    Equipment Purchase Agreement dated December 22, 2000 by
                  and between the Company and SBC Telecom, Inc.

         10.43    Procurement Spend Agreement dated December 22, 2000 by
                  and between the Company and SBC Communications Inc.

         10.44    Master Collocation Agreement dated December 22, 2000 by
                  and between the Company and SBC Communications Inc.

         10.45    Senior Note dated December 22, 2000 from the Company to
                  SBC Communications Inc.

         10.46    Lease Termination and Assumption Agreement dated
                  December 22, 2000 by and between the Company and SBC
                  Asset Management Inc.

         10.47    Assignment and Assumption Agreement dated December 22,
                  2000 by and between the Company and SBC Telecom Inc.
                  concerning certain GTE Corporation, d/b/a Verizon
                  Communications, central offices.

         10.48    Assignment and Assumption Agreement dated December 22,
                  2000 by and between the Company and SBC Telecom Inc.
                  concerning certain BellSouth Telecommunications, Inc.
                  central offices.



<PAGE>
<PAGE>
                                                                        101
         10.49    Assignment and Assumption Agreement dated December 22,
                  2000 by and between the Company and SBC Telecom Inc.
                  concerning certain Qwest Communications central offices.

         10.50    First Amendment dated February 28, 2001, to Master
                  Collocation Agreement dated December 22, 2000 by and
                  between the Company and SBC Communications Inc.

         10.51    First Amendment dated February 28, 2001, to Assignment
                  and Assumption Agreement dated December 22, 2000 by and
                  between the Company and SBC Telecom Inc. concerning
                  certain GTE Corporation, d/b/a Verizon Communications,
                  central offices.

         10.52    First Amendment dated February 28, 2001, to Assignment
                  and Assumption Agreement dated December 22, 2000 by and
                  between the Company and SBC Telecom Inc. concerning
                  certain BellSouth Telecommunications, Inc. central
                  offices.

         10.53    First Amendment dated February 28, 2001, to Assignment
                  and Assumption Agreement dated December 22, 2000 by and
                  between the Company and SBC Telecom Inc. concerning
                  certain Qwest Communications central offices.

         23.1     Consent of PricewaterhouseCoopers, LLP
__________

   (1)   Confidential portions omitted and supplied separately to the
         Securities and Exchange Commission.
   (2)   Incorporated by reference to the Company's Registration Statement
         on Form S-1 (No. 333-74679).
   (3)   Incorporated by reference to the Company's Registration Statement
         on Form S-1 (No. 333-93455).
   (4)   Incorporated by reference to the Company's Annual Report on Form
         10-K for the year ended December 31, 1999.

(b)      Reports on Form 8-K

         On January 31, 2001, the registrant filed a Current Report on
         Form 8-K reporting that the registrant had reached an agreement
         with SBC on the conversion of its Series B preferred stock and
         that, as a result, the registrant would take a reduction to paid-
         in capital of approximately $24 million in the fourth quarter of
         2000.



<PAGE>
<PAGE>
                                                                        102
(c)      Exhibits

   See the list of Exhibits in Item 14(a)(3) beginning on Page 106 of this
Form 10-K.

(d)      Financial Statement Schedules

   See the Index included in Item 8 on Page 71 of this Form 10-K.

<PAGE>
<PAGE>
                                                                        103
                                SIGNATURES

   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, in the
City of Herndon, Commonwealth of Virginia.

                                     Network Access Solutions Corporation


Dated:  March 30,2001                By:        /s/  Jonathan P. Aust
                                          --------------------------------
                                                  Jonathan P. Aust,
                                                    Chairman and
                                               Chief Executive Officer

     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.

         Signature                   Title                        Date
         ---------                   -----                        ----


   /s/ Jonathan P. Aust      Chairman and                    March 30, 2001
---------------------------  Chief Executive Officer
     Jonathan P. Aust        (Principal Executive Officer)
                             and a Director

 /s/ Nicholas J. Williams    President and                   March 30, 2001
---------------------------  Chief Operating Officer
   Nicholas J. Williams      and a Director


     /s/ Mark E. Scott       Chief Financial Officer         March 30, 2001
---------------------------  (Principal Financial and
       Mark E. Scott         Accounting Officer)


  /s/  Brion B. Applegate    Director                        March 30, 2001
---------------------------
    Brion B. Applegate


 /s/  Robert A. Nicholson    Director                        March 30, 2001
---------------------------
    Robert A. Nicholson


                             Director                        March 30, 2001
---------------------------
     Dennis R. Patrick

<PAGE>
<PAGE>
                                                                        104
                               EXHIBIT INDEX

   Exhibit No.       Description

      3.1      Amended and Restated Certificate of Incorporation of the
               Company (2)

      3.2      Amended and Restated By-Laws of the Company (2)

      3.3      Certificate of the Designations, Voting Powers, Preferences
               and Relative, Participating, Optional or Other Special
               Rights of Preferred Stock and Qualifications, Limitations
               or Restrictions Thereof dated February 4, 2000 (4)

      4.1      Specimen stock certificate for shares of Common Stock of
               the Company (2)

      4.2      Specimen stock certificate for shares of Series B Preferred
               Stock of the Company (4)

      10.1     Master Equipment Lease Agreement dated November 17, 1998,
               by and between the Company and Paradyne Credit
               Corporation (2,3)

      10.2     Purchase and Sale Agreement dated as of October 16, 1998,
               by and between the Company and Ascend Communications, Inc.,
               as amended (2,3)

      10.3     Master Lease Agreement dated October 9, 1998, by and
               between the Company and Ascend Credit Corporation (2)

      10.4     Promissory Note dated October 16, 1998, by and between the
               Company and Ascend Communications, Inc., as amended (2)

      10.5     Commercial Lease dated February 24, 1997, by and between
               the Company, Sterling/Gunston Limited Partnership and
               Bernstein Management Corporation (2)

      10.5.1   First Lease Amendment dated June 26, 1998, by and between
               the Company and Sterling/Gunston LLC (2)

      10.5.2   Third Lease Amendment dated February 1, 1999, by and
               between the Company and Sterling/ Gunston LLC (2)

      10.6     Sublease dated August 31, 1998, by and between the Company
               and U.S. Interactive, Inc. (2)

      10.7     Letter of Intent dated March 2, 1999 by and between the
               Company and Trans Dulles Center, Inc. (2)



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                                                                        105
      10.8     Employment Agreement dated as of August 16, 1998, by and
               between the Company and Jonathan P. Aust (2)

      10.9     Employment Agreement dated as of July 13, 1998, by and
               between the Company and Christopher J. Melnick (2)

      10.10    Employment Agreement dated as of July 13, 1998, by and
               between the Company and Scott G. Yancey, Jr. (2)

      10.11    Employment Agreement dated as of August 18, 1998, by and
               between the Company and James A. Aust (2)

      10.12    Employment Agreement dated as of March 1, 1999, by and
               between the Company and John J. Hackett (2)

      10.13    1998 Stock Incentive Plan, as amended (2)

      10.14    Incentive Stock Option Grant Agreement dated July 23, 1998,
               by and between the Company and Scott G. Yancey, Jr., as
               amended (2)

      10.15    Incentive Stock Option Grant Agreement dated July 23, 1998,
               by and between the Company and Christopher J. Melnick, as
               amended (2)

      10.16    Incentive Stock Option Grant Agreement dated November 1,
               1998, by and between the Company and James A. Aust (2)

      10.17    Incentive Stock Option Grant Agreement dated March 30,
               1999, by and between the Company and John J. Hackett (2)

      10.18    Deferred Compensation Agreement dated June 1, 1997, by and
               between the Company and Jonathan P. Aust (2)

      10.19    Deferred Compensation Agreement dated June 1, 1997, by and
               between the Company and James A. Aust (2)

      10.20    Repurchase Agreement dated August 6, 1998, by and between
               the Company and Longma M. Aust, Jonathan P. Aust, James A.
               Aust and Stephen L. Aust (2)

      10.21    Investor Rights Agreement dated August 6, 1998, by and
               between the Company, Spectrum Equity Investors II, L.P.,
               SEA 1998 II, L.P., FBR Technology Venture Partners L.P. and
               W2 Venture Partners, LLC, as amended (2)

      10.22    Series A Preferred Stock Purchase Agreement dated August 6,
               1998, by and between the Company, Spectrum Equity Investors
               II, L.P., SEA 1998 II, L.P., FBR Technology Venture
               Partners L.P. and W2 Venture Partners, LLC (2)



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                                                                        106
      10.23    Amended and Restated Note Purchase Agreement dated as of
               March 31, 1999 and amended as of May 11, 1999, by and
               between the Company, Spectrum Equity Investors II, L.P. and
               FBR Technology Venture Partners L.P. (2)

      10.24    Amended and Restated Convertible Note dated as of March 31,
               1999, by and between the Company and Spectrum Equity
               Investors II, L.P. (2)

      10.25    Amended and Restated Convertible Note dated as of March 31,
               1999, by and between the Company and FBR Technology Venture
               Partners L.P. (2)

      10.26    Nonqualified Stock Option Grant Agreement dated April 1,
               1999, by and between the Company and Dennis R. Patrick (2)

      10.27    Deed of Lease dated April 8, 1999, by and between the
               Company and TransDulles Center, Inc. (2)

      10.28    Letter Agreement dated May 6, 1999, by and between the
               Company and SBC Communications Inc. (2)

      10.29    Letter Agreement dated May 7, 1999, by and between the
               Company and Telefonos de Mexico, S.A. de C.V. (2)

      10.30    Letter Agreement dated May 10, 1999, by and between the
               Company and DSL Solutions, Inc. d/b/a DSL Networks (2)

      10.31    Employment Agreement dated as of September 13, 1999 by and
               between the Company and Worth D. MacMurray (3)

      10.32    Nonqualified Stock Option Grant Agreement dated August 9,
               1999 by and between the Company and Worth D. MacMurray (3)

      10.33    Lease Agreement by and between Dulles Tech, Inc. and the
               Company dated October 27, 1999 (4)

      10.34    Stock Purchase Agreement dated February 4, 2000 by and
               between the Company and SBC Communications Inc. (4)

      10.35    Stock Purchase Agreement dated February 4, 2000 by and
               between the Company and Telefonos de Mexico, S.A. de
               C.V. (4)

      10.36    Summary of Operating Agreement dated February 4, 2000 by
               and between the Company and each of SBC Telecom, Inc. and
               Telefonos de Mexico, S.A. de C.V. (4)

      10.37    2000 Employee Stock Purchase Plan (4)



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                                                                        107
      10.38    Settlement Agreement and Mutual General Release dated
               December 22, 2000 by and between the Company and SBC
               Communications Inc.

      10.39    Settlement Agreement and Mutual General Release dated
               December 22, 2000 by and between the Company and Telefonos
               de Mexico, S.A. de C.V.

      10.40    First Amendment to Stock Purchase Agreement dated December
               22, 2000 by and between the Company and SBC Communications
               Inc.

      10.41    Notice of Conversion letter dated December 21, 2000 to the
               Company from SBC Communications Inc. exercising its right
               to convert its Series B preferred stock to common stock of
               the Company

      10.42    Equipment Purchase Agreement dated December 22, 2000 by and
               between the Company and SBC Telecom, Inc.

      10.43    Procurement Spend Agreement dated December 22, 2000 by and
               between the Company and SBC Communications Inc.

      10.44    Master Collocation Agreement dated December 22, 2000 by and
               between the Company and SBC Communications Inc.

      10.45    Senior Note dated December 22, 2000 from the Company to SBC
               Communications Inc.

      10.46    Lease Termination and Assumption Agreement dated December
               22, 2000 by and between the Company and SBC Asset
               Management Inc.

      10.47    Assignment and Assumption Agreement dated December 22, 2000
               by and between the Company and SBC Telecom Inc. concerning
               certain GTE Corporation, d/b/a Verizon Communications,
               central offices.

      10.48    Assignment and Assumption Agreement dated December 22, 2000
               by and between the Company and SBC Telecom Inc. concerning
               certain BellSouth Telecommunications, Inc. central offices.

      10.49    Assignment and Assumption Agreement dated December 22, 2000
               by and between the Company and SBC Telecom Inc. concerning
               certain Qwest Communications central offices.

      10.50    First Amendment dated February 28, 2001, to Master
               Collocation Agreement dated December 22, 2000 by and
               between the Company and SBC Communications Inc.



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                                                                        108
      10.51    First Amendment dated February 28, 2001, to Assignment and
               Assumption Agreement dated December 22, 2000 by and between
               the Company and SBC Telecom Inc. concerning certain GTE
               Corporation, d/b/a Verizon Communications, central offices.

      10.52    First Amendment dated February 28, 2001, to Assignment and
               Assumption Agreement dated December 22, 2000 by and between
               the Company and SBC Telecom Inc. concerning certain
               BellSouth Telecommunications, Inc. central offices.

      10.53    First Amendment dated February 28, 2001, to Assignment and
               Assumption Agreement dated December 22, 2000 by and between
               the Company and SBC Telecom Inc. concerning certain Qwest
               Communications central offices.

      23.1     Consent of PricewaterhouseCoopers, LLP
__________

   (1)         Confidential portions omitted and supplied separately to
               the Securities and Exchange Commission.
   (2)         Incorporated by reference to the Company's Registration
               Statement on Form S-1 (No. 333-74679).
   (3)         Incorporated by reference to the Company's Registration
               Statement on Form S-1 (No. 333-93455).
   (4)         Incorporated by reference to the Company's Annual Report on
               Form 10-K for the year ended December 31, 1999.