<PAGE>


   As filed with the Securities and Exchange Commission on July 6, 1999

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

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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

                               FORM 10-Q/A

  AMENDMENT NO. 1 TO QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934

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

For the Quarterly Period Ended March 31, 1999  Commission file number 333-49397

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

                       Focal Communications Corporation
            (Exact name of registrant as specified in its charter)

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

                Delaware                        36-4167094
         (State of incorporation)    (IRS Employer Identification Number)

                             200 N. LaSalle Street
                                  Suite 1100
                               Chicago, IL 60601
                   (Address of principal executive offices)

                                (312) 895-8400
                        (Registrant's telephone number)

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

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:


                               Yes   X    No
                                    ---       ---

  The number of shares outstanding of the issuer's common stock, as of May 1,
1999:

                  Common stock ($.01 par value) 97,764 shares

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>

                                     INDEX

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
 <C>     <S>                                                               <C>
 PART I--FINANCIAL INFORMATION

 Item 1. Financial Statements (Unaudited)

         Consolidated Statements of Operations--Three months ended March
         31, 1999 and 1998..............................................     1

         Consolidated Balance Sheets--March 31, 1999 and December 31,
         1998...........................................................     2

         Consolidated Statements of Cash Flows--Three months ended March
         31, 1999 and 1998..............................................     3

         Condensed Notes to Unaudited Interim Consolidated Financial
         Statements.....................................................     4

         Management's Discussion and Analysis of Financial Condition and
 Item 2. Results of Operations..........................................     9

 Item 3. Quantitative and Qualitative Disclosures About Market Risk.....    15

 PART II--OTHER INFORMATION

 Item 1. Legal Proceedings..............................................    15

 Item 2. Changes in Securities and Use of Proceeds......................    15

 Item 4. Submission of Matters to a Vote of Security Holders............    16

 Item 6. Exhibits and Reports on Form 8-K...............................    16

 SIGNATURES..............................................................   17
</TABLE>
<PAGE>

                         Part I--Financial Information

Item 1. Financial Statements

               FOCAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                      For the three months
                                                         ended March 31,
                                                     ------------------------
                                                        1999         1998
                                                     -----------  -----------
<S>                                                  <C>          <C>
REVENUES............................................ $26,003,897  $ 5,102,448
EXPENSES:
  Customer service and network operations...........  10,369,319    1,826,893
  Selling, general and administrative...............   5,665,896    1,307,625
  Depreciation and amortization.....................   4,026,750      890,871
  Non-cash compensation expense.....................   1,559,576      325,000
                                                     -----------  -----------
    Total operating expenses........................  21,621,541    4,350,389
                                                     -----------  -----------
    Operating Income................................   4,382,356      752,059
                                                     -----------  -----------
OTHER INCOME (EXPENSE):
  Interest income...................................   1,306,082    1,015,902
  Interest expense..................................  (5,403,584)  (2,109,152)
                                                     -----------  -----------
  Total Other Expense...............................  (4,097,502)  (1,093,250)
NET INCOME(LOSS).................................... $   284,854  $  (341,191)
                                                     ===========  ===========
BASIC NET INCOME (LOSS) PER SHARE OF COMMON STOCK... $      3.24  $     (3.86)
                                                     ===========  ===========
DILUTED NET INCOME (LOSS) PER SHARE OF COMMON
 STOCK.............................................. $      2.75  $     (3.86)
                                                     ===========  ===========
BASIC WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
 STOCK OUTSTANDING..................................      87,922       88,307
                                                     ===========  ===========
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
 STOCK OUTSTANDING..................................     103,606       88,307
                                                     ===========  ===========
</TABLE>

                                       1
<PAGE>

               FOCAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                      March 31, 1999 and December 31, 1998

<TABLE>
<CAPTION>
                                                 March 31,
                                                    1999      December 31, 1998
                                                ------------  -----------------
<S>                                             <C>           <C>
                    ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................... $106,598,881    $126,041,001
  Short-term investments.......................    7,460,850       7,959,940
  Accounts receivable, trade (net of allowance
   for doubtful accounts of $1,960,000 and
   $1,189,000 at March 31, 1999 and December
   31, 1998, respectively).....................   15,975,803       9,792,532
  Other current assets.........................    1,149,104         843,793
                                                ------------    ------------
    Total current assets.......................  131,184,638     144,637,266
FIXED ASSETS, at cost:.........................  100,595,860      76,119,650
  Less--Accumulated depreciation and
   Amortization................................    9,872,098       6,146,530
                                                ------------    ------------
    Fixed assets, net..........................   90,723,762      69,973,120
  Other Non-Current Assets (net)...............    4,662,711       4,963,894
                                                ------------    ------------
                                                $226,571,111    $219,574,280
                                                ============    ============
      LIABILITY AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable............................. $  5,152,815    $  8,365,470
  Accrued liabilities..........................    2,513,581       1,941,377
  Income taxes payable.........................          --        4,055,000
  Current maturities of long-term debt.........    4,108,935       2,887,036
                                                ------------    ------------
    Total current liabilities..................   11,775,331      17,248,883
LONG-TERM DEBT, net of current maturities......  191,436,957     182,408,757
                                                ------------    ------------
OTHER NONCURRENT LIABILITIES...................    1,644,128         588,228
                                                ------------    ------------
STOCKHOLDERS' EQUITY:
  Common Stock, Class A, $.01 par value,
   100,000 shares authorized, 75,746 and 75,374
   issued and outstanding at March 31, 1999 and
   December 31, 1998...........................          757             753
  Common Stock, Class B, $.01 par value; 35,000
   shares authorized, 22,000 shares issued at
   March 31, 1999 and December 31, 1998........          220             220
  Additional paid-in capital...................   37,117,360      35,413,345
  Deferred compensation........................   (4,339,022)     (4,736,432)
  Accumulated deficit..........................  (11,064,620)    (11,349,474)
                                                ------------    ------------
    Total stockholders' equity.................   21,714,695      19,328,412
                                                ------------    ------------
                                                $226,571,111    $219,574,280
                                                ============    ============
</TABLE>

                                       2
<PAGE>

               FOCAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                     For three months ended
                                                            March 31,
                                                    --------------------------
                                                        1999          1998
                                                    ------------  ------------
<S>                                                 <C>           <C>
Cash Flows From Operating Activities:
Net Income (loss).................................  $    284,854  $   (341,191)
Adjustments to reconcile net income (loss) to net
 cash provided by (used in) operating activities--
  Depreciation and amortization...................     4,026,750       890,871
  Deferred lease costs............................       389,234        89,741
  Deferred compensation...........................     1,559,576       325,000
  Amortization of discount on Senior Discount
   Notes..........................................     4,952,327     2,062,174
  Provision for losses on accounts receivable.....     1,145,000       577,000
  Changes in operating assets and liabilities--
    Accounts receivable...........................    (7,328,271)   (3,418,065)
    Related-party receivables.....................           --        (85,466)
    Other current assets..........................      (305,311)     (238,072)
    Accounts payable and accrued liabilities......    (2,640,451)    3,883,263
    Income taxes payable..........................    (4,055,000)          --
    Other non-current liabilities.................       666,666           --
                                                    ------------  ------------
      Net cash provided by(used in) operating
       activities.................................    (1,304,626)    3,745,255
                                                    ------------  ------------
Cash Flows From Investing Activities:
  Capital expenditures............................   (24,476,209)   (7,593,061)
  Change in short-term investments................       499,090           --
                                                    ------------  ------------
      Net cash used in investing activities.......   (23,977,119)   (7,593,061)
                                                    ------------  ------------
Cash Flow From Financing Activities:
  Proceeds from issuance of long-term debt........     5,807,191   144,083,351
  Payments on long-term debt......................      (509,419)   (3,533,153)
  Proceeds from the issuance of Class A Common
   Stock..........................................       541,853    13,800,000
                                                    ------------  ------------
      Net cash provided by financing activities...     5,839,625   154,350,198
                                                    ------------  ------------
Net Increase (Decrease) In Cash And Cash
 Equivalents......................................   (19,442,120)  150,502,392
Cash and Cash Equivalents, beginning of period....   126,041,001     2,256,552
                                                    ------------  ------------
Cash and Cash Equivalents, end of period..........  $106,598,881  $152,758,944
                                                    ============  ============
</TABLE>

                                       3
<PAGE>

               FOCAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES

    CONDENSED NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                       Three months ended March 31, 1999

1. Basis of Presentation

  The accompanying unaudited interim consolidated financial statements reflect
all adjustments, consisting of normal recurring accruals, which management
believes are necessary to present fairly the financial position, results of
operations, and cash flows for Focal Communications Corporation and
Subsidiaries (the "Company") for the respective periods presented. Certain
information and footnote disclosures normally included in the annual financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission for Form 10-Q. These
unaudited interim consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, filed on March 31, 1999, as amended by Form 10-K/A filed on
April 7, 1999. The consolidated balance sheet at December 31, 1998 included
herein was derived from the Company's audited consolidated financial
statements, but does not include all disclosures required under generally
accepted accounting principles.

2. Risks and Uncertainties

  Reciprocal compensation payments are amounts paid by one carrier to send
particular traffic to another carrier's network. Reciprocal compensation is
currently a significant component of the Company's total revenues representing
approximately 73% and 77% of our total revenues for the three month periods
ended March 31, 1999 and 1998, respectively.

  Ameritech is disputing its obligation to pay the reciprocal compensation
owed to the Company. This dispute was ruled on in favor of the Company by the
Illinois Commerce Commission in March 1998 and by a federal court in July 1998
and most recently by the Seventh Circuit Court of Appeals. Substantially all
of the disputed amounts have been collected. There is a risk that prior
decisions and any future appeal regarding the settlement of this dispute in
favor of the Company could be revisited, which could allow the carrier to
obtain a refund of prior reciprocal compensation payments.

  As a result of several trends in our business and the current regulatory
environment, the Company expects revenues from reciprocal compensation to
decline significantly. A reduction in or elimination of revenues attributable
to reciprocal compensation which is not offset by increases in other revenues
generated by the Company may have a material adverse effect on the Company.

3. Property and Equipment

  Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                        March 31,    December
                                                           1999      31, 1998
                                                       ------------ -----------
   <S>                                                 <C>          <C>
   Buildings and improvements......................... $  2,350,000 $ 2,350,000
   Communications Network.............................   57,015,325  44,774,965
   Construction in progress...........................   23,496,685  15,103,564
   Computer Equipment.................................    4,550,282   3,503,512
   Leasehold Improvements.............................   11,089,518   8,577,724
   Furniture and fixtures.............................    2,041,502   1,790,596
   Motor vehicles.....................................       52,548      19,289
                                                       ------------ -----------
                                                        100,595,860  76,119,650
   Less--Accumulated Depreciation and Amortization....    9,872,098   6,146,530
                                                       ------------ -----------
                                                       $ 90,723,762 $69,973,120
                                                       ============ ===========
</TABLE>

                                       4
<PAGE>

               FOCAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES

   CONDENSED NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS--
                                  (Continued)


4. Debt

  Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                       March 31,   December 31,
                                                          1999         1998
                                                      ------------ ------------
   <S>                                                <C>          <C>
   12.125% senior discount notes due 2008, net of
    unamortized Discount of $98,944,689 and
    $103,897,016 at March 31, 1999 and December 31,
    1998, respectively............................... $171,055,311 $166,102,984
   Secured equipment term loan, maximum borrowing
    level at $25,000,000.............................   24,490,581   19,192,809
                                                      ------------ ------------
                                                       195,545,892  185,295,793
   Less--current maturities..........................    4,108,935    2,887,036
                                                      ------------ ------------
                                                      $191,436,957 $182,408,757
                                                      ============ ============
</TABLE>

  In December, 1998, the Company obtained a secured equipment term loan (the
"Facility") from a third party with a maximum borrowing level of $25,000,000.
The Facility provides for, among other things, equipment drawdowns through
December 30, 1999, and requires repayment based on 60 equal monthly
installments of principal and interest for each drawdown. All drawdowns under
the Facility bear interest at the five-year swap rate percent plus additional
basis points, as defined in the Facility. Total drawdowns of $24,490,581 and
$19,192,809 were outstanding under the Facility as of March 31, 1999 and
December 31, 1998, respectively. The Facility provides for certain restrictive
financial and nonfinancial covenants. Among other things, these covenants
require the maintenance of minimum cash flow and revenue levels. The Company
was in compliance with these covenants as of December 31, 1998 and March 31,
1999.

  In April 1999, the Company amended the Facility to provide a maximum
borrowing level of $50 million.

5. Earnings Per Share

  In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share". SFAS
No. 128 changed the methodology of calculating earnings per share and renamed
the two calculations to basic earnings per share and diluted earnings per
share. Basic earnings per common share are based on the average quarterly
weighted average number of shares of common stock outstanding. This
calculation includes all Class A shares and the vested portion of the Class B
shares. Diluted earnings per common share are adjusted for the assumed
exercise of dilutive stock options and unvested class B Common shares. Since
the adjustments required for the calculation of diluted weighted average
common shares outstanding are anti-dilutive, this calculation has been
excluded from the loss per share calculation for the first quarter of 1998.
Under the requirements of SFAS No. 128 the Company's basic and diluted
weighted average number of shares outstanding at March 31, 1999 and 1998 is as
follows:

<TABLE>
<CAPTION>
                                                           March 31, March 31,
                                                             1999      1998
                                                           --------- ---------
   <S>                                                     <C>       <C>
   Basic Weighted Average Number of Common Shares
    Outstanding...........................................   87,922    88,307
   Dilutive Stock Options and unvested Class B common
    stock.................................................   15,684    13,304
                                                            -------   -------
   Dilutive Weighted Average Number of Common Shares
    Outstanding...........................................  103,606   101,611
                                                            =======   =======
</TABLE>

  Diluted weighted average common shares outstanding are anti-dilutive and
have been excluded from the loss per share calculation for the first quarter
of 1998.


                                       5
<PAGE>

               FOCAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES

   CONDENSED NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS--
                                  (Continued)

6. Commitments and Contingencies

  Under the terms of various short and long-term contracts, the Company is
obligated to pay office rents and rent for leasing fiber optic transmission
facilities. The Company is obligated to pay office rents through 2012. The
office rent contracts provide for certain scheduled increases and for possible
escalation of basic rentals based on a change in the cost of living or on
other factors. The Company expects to enter into other contracts for
additional office space, other facilities, equipment and maintenance services
in the future.

  A summary of such fixed commitments at March 31, 1999 is as follows:

<TABLE>
<CAPTION>
           Year                                Amount
           ----                              -----------
           <S>                               <C>
           1999............................. $ 4,110,359
           2000.............................   5,820,645
           2001.............................   5,677,135
           2002.............................   5,795,391
           2003.............................   5,876,725
           Thereafter.......................  29,440,140
                                             -----------
                                             $56,720,395
                                             ===========
</TABLE>

  On March 25, 1999, the Company amended its product purchase agreement with a
vendor, which provides for, among other things, a minimum commitment to
purchase $25 million in communications network equipment every 12 months, or
an aggregate over the term of the agreement of $75 million, at pre-established
prices.

  In April and May of 1999, the Company entered into two agreements for the
rights of use for fiber transport capacity with a combined total minimum
commitment of $87.9 million (Note 9).

7. Stock Options

  The Company has chosen to account for stock based compensation using the
intrinsic value method prescribed in Accounting Principals Board Opinion
("APB") No. 25, "Accounting for Stock Issued To Employees." Accordingly, no
compensation expense has been recorded for its stock option awards, but
rather, the Company has determined the pro forma net loss amount for the first
quarter of 1999 as if compensation expense had been recorded for options
granted during 1998 and the first quarter of 1999 under the fair value method
described in SFAS No. 123, "Accounting for Stock-Based Compensation."

  The Company utilizes the Black-Scholes option pricing model to estimate the
fair value of options at the date of grant. Had the Company adopted SFAS No.
123, pro forma net loss applicable to common stockholders and pro forma basic
and diluted net loss per share of common stock would have been approximately
$226,000 and $2.57 and $2.18, respectively, for the quarter ended March 31,
1999.

  The Black-Scholes option model estimated the weighted average fair value at
the date of grant of options granted for the three months ended March 31, 1999
to be approximately $1,113 per option. Principal assumptions used in applying
the Black-Scholes model were as follows:

<TABLE>
<CAPTION>
                                                                      For the
                                                                    Three Months
                                                                       Ended
                                                                     March 31,
                                                                        1999
                                                                    ------------
   <S>                                                              <C>
   Risk-free interest rates........................................      4.57%
   Expected life...................................................   5 years
   Expected volatility.............................................     87.29%
   Expected dividend yield.........................................       --
                                                                      =======
</TABLE>

                                       6
<PAGE>

               FOCAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES

   CONDENSED NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS--
                                  (Continued)


  The following summarizes option activity:

<TABLE>
<CAPTION>
                                                                      Weighted
                                               Shares of              Average
                                                Class A    Exercise   Exercise
                                                Common      Prices     Price
                                               --------- ------------ --------
   <S>                                         <C>       <C>          <C>
   Outstanding at December 31, 1998...........   7,190   $ 290-$1,500  $1,090
   Activity for the three months ended March
    31, 1999:
     Options Granted..........................   1,034   $      1,575  $1,575
     Options Exercised........................     (72)     290-1,500     962
     Options Canceled.........................     (30)   1,500-1,575   1,530
                                                 -----   ------------  ------
   Outstanding at March 31, 1999..............   8,122   $  290-1,575  $1,165
                                                 =====   ============  ======
</TABLE>

  The following table summarizes information about fixed stock options
outstanding at March 31, 1999:

<TABLE>
<CAPTION>
                                    Options Outstanding        Options Exercisable
                              -------------------------------- --------------------
                                           Weighted
                                            Average   Weighted             Weighted
                                           Remaining  Average              Average
                                Options   Contractual Exercise   Options   Exercise
   Range of Exercise Prices   Outstanding    Life      Price   Exercisable  Price
   ------------------------   ----------- ----------- -------- ----------- --------
   <S>                        <C>         <C>         <C>      <C>         <C>
   $  290-$335.............      1,767        8.3      $  311       596     $  307
   $1,050-$1,575...........      6,355        9.4       1,384       494      1,504
                                 -----        ---      ------     -----     ------
   At March 31, 1999.......      8,122        9.4      $1,165     1,090     $  850
                                 =====        ===      ======     =====     ======
</TABLE>

8. Equity Transactions

  During the first quarter of 1999, the Company granted 1,034 stock options to
employees and directors in which, giving effect to the Company's proposed
initial public equity offering (Note 10), the estimated fair market value of
the Company's common stock exceeded the exercise price of the options granted.
The Company also sold 300 shares of Class A Common Stock to a director at a
price below the estimated fair market. Total non-cash compensation related to
these transactions of approximately $3,821,000 will be recognized, of which
$985,000 will be recorded during the first quarter of 1999, and $2,836,000
will be ratably charged to operations over the four year vesting period of the
options. Non-cash compensation expense totaling approximately $1,162,000 has
been recorded for the three months ended March 31, 1999.

  On April 1, 1999 and July 1, 1999, employees were granted 1,267 and 1,641
stock options, respectively. Giving effect to the Company's proposed initial
public equity offering, the estimated fair market value of the Company's
common stock exceeded the exercise price of the options granted. Total non-
cash compensation related to these grants of approximately $3,789,000 and
$5,314,000, respectively, will be ratably charged to operations over the four-
year vesting period of the options. In addition, during the second quarter of
1999, the Company granted 2,443 stock options to employees which grant would
be effective only upon the closing of the Company's initial public equity
offering (IPO). The estimated fair market value of the Company's common stock
on the date of the IPO is expected to exceed the exercise price of these
options. Based upon estimates received from the Company's underwriters, total
non-cash compensation of approximately $8,631,000 may be incurred upon the IPO
date. This amount would be ratably charged to operations over the four year
vesting period of the options.

                                       7
<PAGE>

               FOCAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES

   CONDENSED NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS--
                                  (Continued)

9. Segment Information

  In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company is organized primarily on the
basis of strategic geographic operating segments that provide communications
services in each respective geographic region. All of the Company's geographic
operating segments have been aggregated into one reportable segment,
"Communications Services," as of and for the three months ended March 31, 1999
and 1998.

  The Company's chief operating decision maker views earnings before interest,
taxes, depreciation and amortization ("EBITDA") as the primary measure of
profit and loss. The following represents information about revenues and
EBITDA (which excludes non-cash compensation), total assets and capital
expenditures for the Communications Services reportable segment as of and for
the year ended December 31, 1998, and the three months ended March 31, 1999
and 1998:

<TABLE>
<CAPTION>
                                                          March 31,   December
                                                            1999      31, 1998
                                                         ----------- -----------
   <S>                                                   <C>         <C>
   Revenues............................................. $26,003,897 $43,531,846
   EBITDA...............................................  10,000,062  15,161,031
   Total assets.........................................  94,287,205  73,436,768
   Capital expenditures.................................  24,476,209  64,229,247
                                                         =========== ===========
</TABLE>

  The following reconciles total segment EBITDA to consolidated net income
(loss) before income taxes for the three months ended March 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                    Three months   Three months
                                                       ended          ended
                                                   March 31, 1999 March 31, 1998
                                                   -------------- --------------
   <S>                                             <C>            <C>
   Total EBITDA for reportable segment............  $10,000,062    $ 1,851,736
   Corporate EBITDA...............................      (31,380)       116,194
   Depreciation and amortization..................   (4,026,750)      (890,871)
   Interest expense...............................   (5,403,584)    (2,109,152)
   Interest income................................    1,306,082      1,015,902
   Non-cash compensation..........................   (1,559,576)      (325,000)
                                                    -----------    -----------
     Net income (loss) before income taxes........  $   284,854    $  (341,191)
                                                    ===========    ===========
</TABLE>

  The following reconciles segment total assets to consolidated total assets
as of March 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                      March 31,   December 31,
                                                         1999         1998
                                                     ------------ ------------
   <S>                                               <C>          <C>
   Total assets for reportable segment.............. $ 94,287,205 $ 73,436,768
   Cash, cash equivalents and short-term
    investments.....................................  114,059,731  133,307,515
   Other current assets.............................      199,235    1,125,124
   Fixed assets, net................................   13,362,229    6,740,979
   Other noncurrent assets..........................    4,662,711    4,963,894
                                                     ------------ ------------
     Total consolidated assets...................... $226,571,111 $219,574,280
                                                     ============ ============
</TABLE>

                                       8
<PAGE>

  The Company currently only operates in the United States. Revenues by major
customer for the three months ended March 31, 1999 and 1998, are as follows:

<TABLE>
<CAPTION>
                                                    Three months   Three months
                                                       ended          ended
                                                   March 31, 1999 March 31, 1998
                                                   -------------- --------------
   <S>                                             <C>            <C>
   Revenues from major customer A.................  $13,265,330     $3,694,508
   Revenues from major customer B.................  $ 5,761,531     $      --
                                                    ===========     ==========
</TABLE>

10. Subsequent Events

  On April 15, 1999, the Company amended the Facility to increase the maximum
borrowing level from $25 million to $50 million.

  On April 28, 1999, the Company signed an agreement for the acquisition of
indefeasible rights of use for fiber transport capacity for a minimum of 8,300
fiber miles. The term of the agreement is 20 years and the total minimum
commitment is approximately $17.9 million. The agreement requires an initial
payment of approximately $3.6 million in the second quarter of 1999.

  On May 4, 1999, the Company signed an agreement with another carrier for the
lease of fiber transport capacity for a five year term and a minimum
commitment of $70 million. The Company has committed to $10 million in year
one; $13.2 million in year 2; and $15.6 million for each of the remaining
three years of the agreement.

  On May 24, 1999, the Company entered into an agreement for the lease of the
rights to use fiber transport capacity for a minimum of 2,500 fiber miles. The
term of the agreement is 20 years with a renewal option, as defined. The total
minimum commitment is approximately $53.3 million over the lease term.

  On July 6, 1999, Amendment No. 2 to the Company's Registration Statement on
Form S-1 (initial public equity offering) was filed with the Securities and
Exchange Commission. In connection with the process of filing this
registration statement, the Company has determined that the fair market value
of its common stock exceeded the exercise price of: (a) stock options granted
to employees and directors during the first quarter of 1999 and (b) Class A
Common stock issued to a director during the first quarter of 1999.
Accordingly, the Company has computed total non-cash compensation related to
these transactions of approximately $3,821,000 and charged $1,162,000 of this
to operations in the first quarter of 1999. The Company's first quarter 1999
Form 10-Q, as originally filed on May 7, 1999, did not include any charge to
non-cash compensation expense for these transactions based on management's
best assumption of the fair market value of the Company's common stock at that
time.

  In addition, the Company issued stock options to employees during the second
and third quarters of 1999 that will also result in additional non-cash
compensation in those quarters (Note 8).

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

Overview

  General. We provide data, voice and colocation services to large,
communications-intensive users in major cities. We began operations in 1996
and initiated service first in Chicago in May 1997. We currently serve a total
of 12 markets, which encompass a total of 31 metropolitan statistical areas,
or MSAs, and plan to serve 16 markets, or 42 MSAs, by the end of 1999 and 20
markets, or 50 MSAs, by the end of 2000. We believe our market expansion will
allow us to reach a critical mass of geographic coverage and service
capability for our target customer base of communications-intensive users. As
of March 31, 1999, we had sold 85,329 access lines, of which 70,572 were
installed and in service.

                                       9
<PAGE>

  Our operating results are expected to change over the next 15 months as a
result of several trends in our business and in the regulatory environment.
First, we anticipate that the mix of lines we sell will shift from being
dominated by ISP customer lines to being more evenly balanced among ISP,
corporate and VAR customer lines due to expanded marketing efforts. Second, we
expect our revenue from and margin on ISP lines to decline as our
interconnection agreements in each state in which we operate come up for
renewal. In response to these trends, we intend to emphasize the sale of new
products that leverage our network to maximize revenues per line and operating
margins. These products include high-speed access to the Internet and LANs
using DSL technology. Third, our continued expansion may result in negative
operating cash flow and operating losses for a period of time. If this occurs,
we expect to again produce positive operating cash flows once these trends
stabilize and operating activities in our newer markets are established and
mature. If, however, these trends do not stabilize or our operating activities
are not established or do not mature as expected, we may continue to sustain
negative operating cash flow and net losses.

  Revenue. Our revenue is comprised of monthly recurring charges, usage
charges and initial, non-recurring charges. Monthly recurring charges include
the fees paid by our customers for lines in service, additional features on
those lines, and colocation space. Monthly recurring charges are derived only
from end user customers. Usage charges consist of fees paid by end users for
each call made, fees paid by the ILEC and other CLECs as reciprocal
compensation, and access charges paid by the IXCs for long distance traffic
that we originate and terminate. Non-recurring revenues are typically derived
from fees charged to install new customer lines.

  We earn reciprocal compensation revenue for calls made by customers of
another local exchange carrier to our customers. Conversely, we incur
reciprocal compensation expense to other local exchange carriers for calls by
our customers to their customers. Reciprocal compensation has historically
been a significant component of our total revenue due to the preponderance of
inbound applications utilized by our customers. Reciprocal compensation
represented approximately 73% and 77% of total revenues for the three months
ended March 31, 1999 and 1998, respectively.

  We expect the proportion of revenues represented by reciprocal compensation
to substantially decrease in the future as a result of the expiration and
subsequent renegotiation of our existing interconnection agreements with the
ILECs and as a result of our focus on increasing the percentage of our lines
that are sold to non-ISP customers. We expect the most significant impact of
the reduction in reciprocal compensation to occur when our existing
interconnection agreement with Ameritech Illinois, which expires during the
fourth quarter of 1999, is renegotiated. Although we expect to renew our
existing interconnection agreements on satisfactory terms, we expect that the
new agreements will result in lower negotiated interconnection rates for
future reciprocal compensation. Revenues from reciprocal compensation could
also decline as a result of adverse judicial or regulatory determinations.

  Operating Expenses. Our operating expenses are categorized as customer
service and network operations, selling, general and administrative,
depreciation and amortization, and non-cash compensation expense. Settlement
costs are a significant portion of customer service and network operations
expense and are comprised of leased transport charges and reciprocal
compensation payments. Leased transport charges are the lease payments we make
for the use of fiber transport facilities connecting our customers to our
switches and for our connection to the ILECs' and other CLECs' networks. Our
strategy of initially leasing rather than building our own fiber transport
facilities has resulted in our cost of service being a significant component
of total costs. To date, we have been successful in negotiating lease
agreements that match the duration of our customer contracts, thereby allowing
us to avoid the risk of incurring expenses associated with transport
facilities that are not being used by revenue generating customers.

  Historically leasing rather than building our transport network has resulted
in capital expenditures which we believe are lower than those of CLECs of
similar size that own their fiber networks. Our capital expenditures have been
driven by customer service demands and projected near-term revenue streams
from our established markets. In addition, we believe that the percentage of
these "success-based" capital expenditures is higher than those of fiber-based
CLECs. In contrast, we incur operating expenses for leased facilities that are
proportionately

                                      10
<PAGE>

higher than those incurred by fiber-based CLECs. The margin impact of these
higher, anticipated operating expenses is expected to be mitigated, in part,
by a higher revenue per line, which we anticipate as a result of our focus on
communications-intensive users. In April and May of 1999, we entered into a
number of agreements to use fiber transport facilities for a combined minimum
commitment of $87.9 million over five years. See Note 9 to Unaudited Interim
Consolidated Financial Statements. These commitments will result in increased
operating expenses for future periods, which we believe should be more than
offset by future revenues associated with new services made possible, in part,
by these agreements.

  Our business plan contemplates selected purchases of our own local fiber
transport capacity to support our customer network and service demands. We
expect that our purchase of local fiber transport capacity as part of
developing our hybrid network will partially mitigate the increase in
transport expense previously discussed.

  Other customer service and network operations expense consists of the costs
of operating our network and the costs of providing customer care activities.
Major components include wages, rent, power, equipment maintenance, supplies
and contract employees.

  Selling, general and administrative expense consists of sales force
compensation and promotional expenses as well as the cost of corporate
activities related to regulatory, finance, human resources, legal, executive,
and other administrative activities. We expect our selling, general and
administrative expense to be lower as a percentage of revenue than that of our
competitors because we have relatively high sales productivity associated with
our strategy of serving communications-intensive customers. These customers
generally utilize a large number of switched access lines relative to the
average business customer, resulting in more revenue per sale. Further, fewer
sales representatives are required to service the relatively smaller number of
communications-intensive customers in a given region.

  We record monthly non-cash compensation expense related to shares issued to
some of our executive officers in November 1996, in connection with the
September 30, 1998 amendments to vesting agreements with some of our executive
officers and in connection with stock options granted to employees and
directors and shares issued to a director during the first quarter of 1999. We
will continue to record non-cash compensation expense in future periods
relating to these events through the third quarter of 2003.

                                      11
<PAGE>

Quarterly Results

  The following table sets forth unaudited financial, operating and
statistical data for each of the specified quarters of 1998 and 1999. The
unaudited quarterly financial information has been prepared on the same basis
as our Consolidated Financial Statements and, in our opinion, contains all
normal recurring adjustments necessary to fairly state this information. The
operating results for any quarter are not necessarily indicative of results
for any future period.

<TABLE>
<CAPTION>
                                               1998                             1999
                           ------------------------------------------------  -----------
                             First       Second       Third       Fourth        First
                            Quarter     Quarter      Quarter      Quarter      Quarter
                           ----------  ----------  -----------  -----------  -----------
<S>                        <C>         <C>         <C>          <C>          <C>
Revenues.................  $5,102,448  $8,078,043  $12,755,293  $17,596,062  $26,003,897
EBITDA...................  $1,967,930  $3,326,828  $ 4,348,713  $ 6,393,913  $ 9,968,682
Lines sold to date.......      21,082      30,385       41,316       68,184       85,329
Lines in service to
 date(1).................      14,528      24,357       33,188       52,011       70,572
Estimated data lines
 (% of installed lines)..          83%         81%          69%          71%          71%
Lines on switch (%)......         100%        100%         100%         100%         100%
Customer lines colocated
 (%).....................         N/A         N/A          N/A          N/A           48%
ILEC central offices
 interconnected..........         N/A         249          297          340          443
ILEC central office
 colocations in service
 and under development...           0           0            0            0           23
Average monthly revenue
 per line................  $      155  $      139  $       148  $       138  $       141
Quarterly minutes of use
 switched (in millions)..         402         683        1,039        1,444        2,033
Markets in operation.....           2           2            6           10           12
MSAs served..............           6           6           13           29           31
Switches operational.....           2           2            4            6            7
Focal customer colocation
 space in service (square
 feet)...................         N/A       2,938        9,882       23,302       29,282
Capital expenditures (in
 millions)...............  $        8  $       13  $        24  $        21  $        24
Employees................          82         131          186          233          312
</TABLE>
--------
(1) Does not include approximately 12,000 access lines in Boston that are
    being managed by us on behalf of Level 3 Communications as a result of our
    purchase of Level 3's switch in January of 1999. These lines are expected
    to eventually migrate to Level 3's network.

  Although we have generated positive EBITDA in the most recent six quarters,
we anticipate that as a result of the recent operating and regulatory trends
described above, we may experience negative EBITDA for a period of time until
these trends stabilize and operating activities in our newer markets mature.

Three Months Ended March 31, 1999 Compared to Three Months Ended March 31,
1998

  Total revenues for the three months ended March 31, 1999 were $26.0 million
compared to $5.1 million for the three months ended March 31, 1998. This $20.9
million increase is primarily due to our rapid growth in our Chicago and New
York markets. Customer service and network operations expenses totaled $10.4
million for the first quarter of 1999 compared to $1.8 million for the first
quarter of 1998. This increase resulted from our rapid expansion and related
costs for leased facilities, usage settlements, customer care and operational
personnel, equipment maintenance and other operating expenses. Selling,
general and administrative expense also increased due to our expansion from
$1.3 million during the three months ended March 31, 1998 to $5.7 million
during the most recent three month period. Similarly, depreciation and
amortization increased from $0.9 million to $4.0 million in the comparative
periods as a result of a significant increase in the level of fixed assets we
put into service between April 1, 1998 and March 31, 1999. Non-cash
compensation expense was $1.6 million for the first quarter of 1999 compared
to $0.3 million for the first quarter of 1998. The increase in non-cash
compensation expense is the result of the September 30, 1998 amendments of
vesting agreements with some of our executive officers and stock options
granted to employees and directors and shares issued to a director during the
first quarter of 1999.

                                      12
<PAGE>

  Interest income increased from $1.0 million in the three months ended March
31, 1998, to $1.3 million in the three months ended March 31, 1999 due to our
receiving interest income from the Notes proceeds for only half of the first
quarter of 1998. Interest expense increased from $2.1 million in the first
quarter of 1998 to $5.4 million in the first quarter of 1999. This increase is
due to an additional $2.9 million of amortization of our Notes and $0.4
million of interest expense on our secured equipment term loan that was
entered into during December 1998. Interest on the Notes is not payable in
cash until August 2003.

Liquidity and Capital Resources

  We intend to continue to increase our coverage of major U.S. cities by
expanding our services to four additional markets in 1999 and another four
markets in 2000. This business plan will require that we expand our existing
networks and services, deploy our own fiber capacity in a majority of our
markets and fund our initial operating losses. We will require significant
capital to fund the purchase and installation of telecommunications switches,
equipment, infrastructure and fiber facilities and/or long-term rights to use
fiber transport capacity. The implementation of this plan requires significant
capital expenditures, a substantial portion of which will be incurred before
significant related revenues from our new markets are expected to be realized.
These expenditures, together with associated early operating expenses, may
result in our having substantial negative operating cash flow and substantial
net operating losses for the foreseeable future, including in 1999 and 2000.
Although we believe that our cost estimates and the scope and timing of our
build-out are reasonable, we cannot assure you that actual costs or the timing
of the expenditures, or that the scope and timing of our build-out, will be
consistent with current estimates.

  Our capital expenditures were approximately $24.5 million for the first
quarter of 1999, primarily reflecting capital spending for the build-out of
our planned markets, including the $7.7 million acquisition of network assets
and associated infrastructure from Level 3 Communications for our Boston
market. We estimate that our capital expenditures in connection with our
business plan will be approximately $125 million for the remainder of 1999.
The 1999 expenditures are expected to be made primarily for the build-out of
additional markets, the expansion of our existing markets and services,
including high-speed data services, and the purchase of local fiber transport
capacity in a majority of our markets.

  We estimate that the implementation of our business plan, as currently
contemplated, including the remaining 1999 capital expenditures previously
described, operating losses in newer markets and working capital needs, will
require approximately $230 million from April 1, 1999 through the third
quarter of 2000. We plan to fund these capital requirements with cash, cash
equivalents and short-term investments currently on hand, borrowing capacity
under our $50 million equipment term loan facility (described below),
anticipated cash flows from future operations and the net proceeds from
potential future equity or debt offerings.

  Our business plan, and our expectations of our future capital requirements
and cash flows from operations, are based on current estimates. Our actual
capital expenditures and cash flows could differ significantly from these
estimates. If we require additional capital to complete our budgeted expansion
or if customer demand significantly differs from our current expectations, our
funding needs may increase. In addition, we may be unable to produce
sufficient cash flows from ongoing operations or net proceeds from equity or
debt financings to fund our business plan and future growth. This would
require us to alter our business plan, including delaying or abandoning our
future expansion or spending plans, which could have a material adverse effect
on our business. In addition, we may elect to pursue other attractive business
opportunities, including accelerating the pace or expanding the geographic
scope of our build-out, that could require additional capital investments in
our networks. If any of these events were to happen, we could incur additional
borrowings, issue additional debt or equity securities or enter into joint
ventures.

  We cannot assure you that we will be successful in producing sufficient cash
flows or raising sufficient debt or equity capital on terms that we will
consider acceptable. Further, there can be no assurance that expenses will not
exceed our estimates or that the funds needed will not likewise be higher than
estimated. Failure to generate sufficient funds may require us to delay,
abandon or reduce the scope of our future expansion or expenditures, which
could have a material adverse effect on the implementation of our business
plan and our results of operations.

                                      13
<PAGE>

  Net cash used in operating activities for the three months ended March 31,
1999 was $1.3 million, a decrease of $5.0 million from the same period in
1998. This decrease is primarily the result of the $3.7 million in income
taxes we paid during the first quarter of 1999 and the increase in the change
in accounts receivable between comparable periods totaling $3.3 million, which
was offset by increased depreciation and amortization of $3.1 million during
the first quarter of 1999. Net cash used in investing activities for the first
quarter of 1999 was $24.0 million compared to $7.6 million in the first
quarter of 1998. This increase of $16.4 million from the first quarter of 1998
is primarily due to our build-out of additional markets and includes the $7.7
million acquisition of network assets and associated infrastructure from Level
3 Communications for our Boston market. Net cash provided by financing
activities for the first quarter of 1999 was $5.8 million, a decrease of
$148.5 million from the first quarter of 1998. This decrease is primarily the
result of our receipt of $144.1 million in net proceeds from the issuance of
the Notes during the first quarter of 1998.

  Our Credit Agreement provides that NTFC Capital Corporation will make term
loans to us in an aggregate principal amount of up to $50 million. These loans
are to be used solely for the purchase of telecommunications equipment and
related software licenses. To secure the loans, we have granted a security
interest in the assets acquired with the loans. Loans must be repaid over a
five-year period from the date of the borrowing, which must be on or prior to
December 31, 1999. Principal and interest payments are due monthly, and
interest accrues based on the five-year swap rate, plus additional basis
points. Interest will accrue at a lower rate if we meet specified financial
tests. As of March 31, 1999, we had $24.5 million outstanding under this term
loan facility.

  We have historically incurred net losses and have an accumulated deficit of
$9.9 million as of March 31, 1999. Most recently, we funded a large portion of
our future operating losses and capital expenditures through the 1998 offering
of the Notes and by other financings. On February 18, 1998, we received $150
million in gross proceeds from the sale of the Notes. The Notes will accrete
to an aggregate stated principal amount of $270 million by February 15, 2003.
As of March 31, 1999, the principal amount of the Notes had accreted to
approximately $171.1 million. No interest is payable on the Notes prior to
August 15, 2003. Thereafter, cash interest will be payable semiannually on
August 15 and February 15 of each year.

Impact of the Year 2000 Issue

  The year 2000 issue results from computer programs being written using two
digits rather than four to define the year. Any of our computer programs or
systems, or those of our suppliers, that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculation causing disruption of
operations, including, among other things:


  .  A temporary inability to process transactions

  .  A temporary inability to send invoices

  .  A temporary inability to engage in normal business activities

  .  Interruptions of customer service

  Our Year 2000 compliance program can be divided into several phases. These
phases include:

  .  Assessing our material information systems and hardware for Year 2000
     readiness

  .  Assessing the Year 2000 readiness of third parties with whom we have
     significant business relationships and on whose systems and hardware we
     rely

  .  Contingency planning

  As part of our internal assessment phase, we examined our material
information systems, including our DMS-500 SuperNode central office switches,
and hardware to determine whether these systems and hardware are Year 2000
compliant. However, we have not nor do we plan to identify, validate as
compliant or remediate integrated circuits in any other systems or hardware.
We have received assurances from all of our major software and hardware
vendors that the products we use are Year 2000 compliant in all material
respects and will function adequately after December 31, 1999.

                                      14
<PAGE>

  Our services are also dependent on network systems and transport facilities
maintained by other carriers, including incumbent local exchange carriers and
interexchange carriers. We are in the process of assessing the Year 2000
compliance status of other carriers with whom we have material relationships.
Our assessment relies, without any independent verification, on the statements
and assumptions underlying the statements these carriers have made in their
periodic reports filed with the Securities and Exchange Commission. The risks
associated with the failure of these carriers' systems or transport facilities
include potential interruption of service, including blocked calls and delayed
call completion. Interruptions of this type would heavily impact our customers
and, if prolonged, could have a material adverse effect on our business,
financial condition or results of operations.

  Because we currently lease 100% of our transport facilities, we are
dependent on the availability of fiber transport facilities owned by other
carriers. There are few, if any, contingency measures we can take if Year 2000
problems cause these carriers' facilities to fail. We lease transport
facilities from multiple carriers in each market in which we operate in an
attempt to provide redundancy and diversity in service. However, we cannot
assure you that there will not be multiple network failures in a particular
market. If our transport vendors experience facilities failures, our business
may be disrupted and we may suffer a material adverse effect.

  To date, we have spent approximately $0.2 million on our Year 2000
compliance program. We expect future Year 2000 remediation expenditures to
total approximately $0.3 million. All of these costs will be expensed as they
are incurred.

  We intend to continue our Year 2000 compliance assessment of our software.
If it comes to our attention that any of our software is not Year 2000
compliant, we intend to develop an action plan and further assess the risks of
non-compliance and the resources that would be required to resolve the
problem. We also intend to develop contingency plans to the extent we believe
those plans would be useful.

  Based on our current schedule for completion of our Year 2000 compliance
program, we believe that our planning is adequate to secure Year 2000
readiness of our critical systems. Nevertheless, Year 2000 readiness is
subject to a number of risks and uncertainties, some of which, like the
readiness of other carriers upon whom we rely, are out of our control. We are
not able to predict all the factors that could cause actual results to differ
materially from our current expectations about Year 2000 readiness. The cost
of our Year 2000 compliance program is based upon our management's best
estimate. At this time, we believe that the major risks associated with an
inability of our systems or software to process Year 2000 data correctly are a
system failure or miscalculation causing a disruption of business activities
or interruptions in customer service. If we, or third parties with whom we
have significant business relationships, fail to achieve Year 2000 readiness
with respect to critical systems, there could be a material adverse effect on
our business, financial condition or results of operations.

  The discussions under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contain forward-looking statements. These
forward-looking statements are subject to risks and uncertainties, including
financial and regulatory developments and industry growth and trend
projections, that could cause actual events or results to differ materially
from those expressed or implied by the statements. The most important factors
that could impact the variability of future results include, but are not
limited to, our failure to:

  .  Prevail in legal and regulatory proceedings regarding reciprocal
     compensation for Internet-related calls or changes to laws and
     regulations that govern reciprocal compensation

  .  Raise sufficient capital on terms we consider acceptable and on a timely
     basis

  .  Successfully expand our operations into new geographic markets on a
     timely and cost-effective basis

  .  Successfully introduce and expand our data and voice service offerings
     on a timely and cost-effective basis

  .  Respond to competitors in our existing and planned markets

  .  Execute and renew interconnection agreements with incumbent carriers on
     terms satisfactory to us

                                      15
<PAGE>

  .  Maintain our agreements for transport facilities

  .  Maintain acceptance of our services by new and existing customers

  .  Attract and retain talented employees

  .  Obtain and maintain any required governmental authorizations, franchises
     and permits, all in a timely manner, at reasonable costs and on
     satisfactory terms and conditions

  .  Respond effectively to regulatory, legislative and judicial developments

  .  Manage administrative, technical and operational issues presented by our
     expansion plans

  .  Address Year 2000 remediation issues

Quantitative and Qualitative Disclosures about Market Risk

  We are exposed to minimal market risks. We manage sensitivity of our results
of operations to these risks by maintaining a conservative investment
portfolio, which primarily consists of debt securities, typically maturing
within one year, and entering into long-term debt obligations with appropriate
pricing and terms. We do not hold or issue derivative, derivative commodity or
other financial instruments for trading purposes. Financial instruments held
for other than trading purposes do not impose a material market risk on us.

  We are exposed to interest rate risk, as additional financing is
periodically needed due to the large operating losses and capital expenditures
associated with establishing and expanding our network coverage. The interest
rate that we will be able to obtain on debt financing will depend on market
conditions at that time, and may differ from the rates we have secured on our
current debt.

  While all of Focal's long-term debt bears fixed interest rates, the fair
market value of our fixed rate long-term debt is sensitive to changes in
interest rates. We have no cash flow or earnings exposure due to market
interest rate changes for our fixed long-term debt obligations. The table
below provides additional information about our Notes. For additional
information about our long-term debt obligations, see Note 4 to our Unaudited
Interim Consolidated Financial Statements.

<TABLE>
<CAPTION>
                     As of December 31, 1998
              --------------------------------------
                                            Average
                  Expected        Fixed     Interest
                  Maturity         Debt       Rate
              ---------------- ------------ --------
              <S>              <C>          <C>
                    1999       $    --         --
                    2000            --         --
                    2001            --         --
                    2002            --         --
                    2003            --         --
                 Thereafter     270,000,000  12.125%
                               ------------  ------
                               $270,000,000  12.125%
                               ============  ======
              Fair Market
               Value           $146,000,000
                               ============
</TABLE>

                          PART II--OTHER INFORMATION

Item 1. Legal and Administrative Proceedings

  With the exception of the matters discussed in our December 31, 1998 Annual
Report on Form 10-K, filed on March 31, 1999, as amended by Form 10-K/A filed
on April 7, 1999, we are not aware of any material litigation against us. In
the ordinary course of our business, we are involved in a number of regulatory
proceedings before various state commissions and the FCC.

                                      16
<PAGE>

Item 2. Changes in Securities and Use of Proceeds

  On March 15, 1999, we issued 300 shares of our Class A Common Stock to one
of our Directors for an aggregate purchase price of $472,500. No underwriter
was engaged in connection with this sale, and the sale was exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to Section 4(2) of the Securities Act, as a transaction not
involving any public offering.

  On March 27, 1999, we issued 72.25 shares of our Class A Common Stock to one
of our employees upon the exercise of stock options granted under our 1997
Non-Qualified Stock Option Plan for an aggregate purchase price of $69,352.50.
No underwriter was engaged in connection with this sale, and the sale was
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to Section 4(2) of the Securities Act, as a
transaction not involving any public offering, or Rule 701 of the Securities
Act, as a sale of securities pursuant to certain compensatory benefit plans.

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

  Pursuant to a written consent of our stockholders dated February 16, 1999,
effected in accordance with the General Corporation Law of the State of
Delaware, our stockholders voted to increase the number of authorized shares
of our Class A Common Stock from 85,567 to 100,000.

Item 6. Exhibits and Reports on Form 8-K

  (a) Exhibits

  Each of the following exhibits was previously filed with the Company's Form
10-Q for the quarterly period ended March 31, 1999 on May 7, 1999.

<TABLE>
<CAPTION>
   Exhibit
   Number                         Exhibit Description                             Location
   -------                        -------------------                             --------
   <C>     <S>                                                                <C>
   10.1    Interconnection Agreement with Bell-Atlantic-District of           Previously filed
           Columbia dated October 1, 1998.

   10.2    Interconnection Agreement with Bell-Atlantic-Maryland dated        Previously filed
           October 2, 1998.

   10.3    Interconnection Agreement with Bell-Atlantic-Virginia dated        Previously filed
           October 2, 1998.

   10.4    Interconnection Agreement with U.S. West-Washington State dated    Previously filed
           January 15, 1999.

   10.5    Interconnection Agreement with Ameritech Information Industry      Previously filed
           Services, on behalf of and as agent for Ameritech Michigan dated
           February 10, 1999.

   10.6    Interconnection Agreement with Bell-Atlantic-Massachusetts dated   Previously filed
           February 15, 1999.

   10.7    Amendment No. 3 to Network Products Purchase Agreement with        Previously filed
           Northern Telecom Inc., dated March 25, 1999.*

   10.8    Purchase Agreement with XCOM Technologies, Inc., dated January     Previously filed
           6, 1999.*

   10.9    Fifth Amendment to Lease Agreement for property located at 200     Previously filed
           North LaSalle, Chicago, IL, dated October 14, 1998.

   10.10   Sixth Amendment to Lease Agreement for property located at 200     Previously filed
           North LaSalle, Chicago, IL, dated February 18, 1999.

   10.11   First Amendment to Lease Agreement for property located at 650     Previously filed
           Townsend Street, San Francisco, CA, dated March 3, 1998.

</TABLE>


                                      17
<PAGE>

<TABLE>
<CAPTION>
   Exhibit
   Number                           Exhibit Description                            Location
   -------                          -------------------                            --------
   <S>       <C>                                                               <C>
   10.12     Second Amendment to Lease Agreement for property located at 650   Previously filed
             Townsend Street, San Francisco, CA, dated June 16, 1998.

   10.13     Third Amendment to Lease Agreement for property located at 650    Previously filed
             Townsend Street, San Francisco, CA, dated February 16, 1999.
   10.14     Lease Agreement for property located at 1950 Stemmons Freeway,    Previously filed
             Dallas, TX, dated December 15, 1998.

   10.15     Lease Agreement for property located at One Main Street,          Previously filed
             Cambridge, MA, dated January 6, 1999.

   10.16     Lease Agreement for property located at 250 Williams Street,      Previously filed
             Atlanta, GE, dated February 5, 1999.

   10.17     Lease Agreement for property located at Christopher Columbus      Previously filed
             Drive & Washington Street, Jersey City, NJ, dated February 19,
             1999.

   27.1      Financial Data Schedule.                                          Previously filed
</TABLE>
  --------
  *  Portions of this exhibit have been omitted pursuant to a request for
     confidential treatment, and the omitted portions have been filed
     separately with the Securities and Exchange Commission.

                                       18
<PAGE>

                                   SIGNATURES

  Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 1 to Form 10-Q to be signed on
its behalf by the undersigned, thereunto duly authorized.

                        Focal Communications Corporation

<TABLE>
<CAPTION>
              Signature                          Title                   Date
              ---------                          -----                   ----

<S>                                    <C>                        <C>
    /s/ Robert C. Taylor, Jr.          President and Chief           July 6, 1999
______________________________________  Executive Officer
        Robert C. Taylor, Jr.           (Authorized Officer)

       /s/ Joseph A. Beatty            Executive Vice President      July 6, 1999
______________________________________  and Chief Financial
           Joseph A. Beatty             Officer (Principal
                                        Financial Officer)

      /s/ Gregory J. Swanson           Controller (Principal         July 6, 1999
______________________________________  Accounting Officer)
          Gregory J. Swanson
</TABLE>


                                       19