Document:

<PAGE>   1
                  Portions of this exhibit have been omitted
            and filed separately with the Securities and Exchange
                  Commission. These portions are designated

                                "[ *  *  * ]"

                                                                   EXHIBIT 10.28

[IXC LOGO]

                                      IXC
                            MASTER SERVICE AGREEMENT

This Agreement for telecommunications services is made as of the date of last
execution below (the "Effective Date") and entered into by and between IXC
COMMUNICATIONS SERVICES, INC., a Delaware corporation with its principal place
of business at 1122 Capital of Texas Hwy. South, Austin, Texas 78746-6426
("Supplier"), and PATHNET, INC., a Delaware corporation with its principal place
of business at 1015 31st Street Northwest, Suite 500, Washington, DC 20007
("Customer").

WHEREAS, Customer desires to obtain telecommunications services as described
below (the "Service") from Supplier, and Supplier is willing to provide the
Service for the rates attached hereto.

NOW, THEREFORE, Customer and Supplier hereby mutually agree as follows:

CREDIT REQUIREMENTS:

SERVICE, TERM AND RATES: Supplier agrees to provide and Customer agrees to
purchase Service(s) indicated below. This agreement, including any terms and
conditions, addenda, schedules, supplements or exhibits which are attached
hereto and incorporated herein, constitutes the entire agreement (the
"Agreement") by Supplier and Customer pertaining to the subject matter(s) hereof
and supersedes all prior and contemporaneous agreements and understandings in
connection herewith.

IXC - CONFIDENTIAL                                                      06/03/99

<PAGE>   2

<TABLE>
<CAPTION>
SERVICE TYPE:
------------
               <S>                                <C>
               SWITCHED SERVICE:                  BROADBAND SERVICE:
               /s/ KJB         Xclusive           /s/ KJB          ATM
               ----------------                   -----------------
                               Xnet LATA                           Frame Relay
               ----------------                   -----------------
                               Xnet LEx                            Network Management Services
               ----------------                   -----------------
               PRIVATE LINE SERVICE:                               Training
                       X       Digital            -----------------
               ----------------                   CUSTOMER INTERFACE:
                       X       Optical                             Rack Space & Power
               ----------------                   -----------------
                                                                   Shelf Space
                                                  -----------------
                                                                   Collocation
                                                  -----------------
</TABLE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date last
written below.

<TABLE>
<CAPTION>
IXC COMMUNICATIONS SERVICES, INC.            PATHNET, INC.
<S>                                          <C>

BY: /s/ LEO WELSH                            BY: /s/ KEVIN J. BENNIS
   ----------------------------------           --------------------------------------
NAME: LEO WELSH                              NAME: KEVIN J. BENNIS
     --------------------------------             ------------------------------------
TITLE: PRES-WHOLESALE                        TITLE: PRESIDENT - COMMUNICATION SERVICES
      -------------------------------              -----------------------------------
DATE: 6/17/99                                DATE: 6/4/99
     --------------------------------             ------------------------------------

FULL BUSINESS ADDRESS:                       FULL BUSINESS ADDRESS:
1122 CAPITAL OF TEXAS HWY. SOUTH             1015 31ST STREET NORTHWEST, SUITE 500
AUSTIN, TEXAS 78746-6426                     WASHINGTON, DC 20007
TELEPHONE: (512) 427-3700                    TELEPHONE: (202) 625-7284
FACSIMILE: (512) 328-7902                    FACSIMILE: (202) 625-7369
                                             BILLING CONTACT: BILL COTTA
                                                             -------------------------
                                             TELEPHONE: 202-295-3100
                                                       -------------------------------
</TABLE>

IXC - CONFIDENTIAL                                                      06/03/99

<PAGE>   3

                            MASTER SERVICE AGREEMENT
                               TERMS & CONDITIONS

1.   CREDIT. All Services ordered hereunder are subject to credit approval.
     Customer shall complete a credit application form attached hereto as
     Exhibit A.

2.   PROVISION OF BALANCE SHEET. Prior to commencement of Service, Customer
     shall provide Supplier with financial statements including a consolidated
     balance sheet of Customer as of the end of the most recent quarter and
     consolidated statements of income and retained earnings of such quarter and
     the fiscal year to date through such quarter, all in reasonable detail and
     certified by Customer's chief financial officer as having been prepared in
     accordance with generally accepted accounting principles, consistently
     applied. Customer shall provide updated financial statements as reasonably
     requested by Supplier.

3.   PAYMENT TERMS. Invoices for Service are due and payable within thirty (30)
     days of the receipt of invoice (unless otherwise indicated in the Credit
     Requirements section of the Master Service Agreement), without demand or
     set off by Customer. Payments not received within thirty (30) days of the
     receipt of invoice are considered past due. In addition to Supplier
     undertaking any of the actions set forth in this Agreement, if any invoice
     is not paid when due, Supplier may: (i) impose a late charge equal to
     1-1/2% (or the maximum legal rate, if less) of the unpaid balance per
     month; (ii) require an increase in the amount of Security Deposit, as set
     forth in Section 5.

4.   BILLING DISPUTES. If Customer in good faith disputes any portion of any
     Supplier invoice, Customer shall submit to Supplier, within thirty (30)
     days following the date of the invoice, full payment of the undisputed
     portion of the invoice and written documentation identifying and
     substantiating the disputed amount. If Customer does not report a dispute
     within the thirty (30) day period, Customer shall have waived its dispute
     rights for that invoice. Supplier and Customer agree to use their
     respective best efforts to resolve any dispute within fifteen (15) days
     after Supplier receives written notice of the dispute from Customer. Any
     disputed amounts resolved in favor of Customer shall be credited to
     Customer's account on the next invoice following resolution of the dispute.
     Any disputed amounts determined to be payable to Supplier shall be due
     within ten (10) days of the resolution of the dispute.

     Any dispute arising out of or relating to this Agreement which has not been
     resolved by the good faith efforts of the parties will be settled by
     binding arbitration conducted expeditiously in accordance with Section 16.

5.   ADDITIONAL ASSURANCES. If at any time during the term of this Agreement
     there is a material and adverse change in Customer's creditworthiness,
     which shall be determined by Supplier in its sole and absolute discretion,
     then Supplier may demand that Customer increase the amount of the/or
     provide a Security Deposit pursuant to Supplier's standard terms and
     conditions, by either requiring cash or a letter of credit, as security for
     the full and faithful performance of Customer of the terms, conditions and
     covenants of this Agreement; provided, however, that in no event shall the
     amount of the Security Deposit ever exceed two months' estimated Usage
     Charges and other amounts payable by Customer to Supplier hereunder.

6.   CERTIFICATION. If applicable, Customer and Supplier hereby represent and
     warrant that each of them is certified to do business in all jurisdictions
     in which it conducts business and is in good standing in all such
     jurisdictions. Customer and Supplier further represent and warrant that
     each of them is certified by the proper regulatory agencies to provide
     whatever interstate, intrastate and international long distance services to
     users in those jurisdictions where such services are to be provided.
     Customer and Supplier shall keep current during the term of this Agreement,
     copies of their Certificates of Public Convenience and Necessity or similar
     documents certifying interstate, intrastate, or international operating
     authority in any local, state, or federal jurisdiction (collectively,
     "Service Compliance Certificates") and furnish copies thereof to each other
     within ten days of written request. Supplier reserves the right to refuse
     or withhold Service in any jurisdiction in which Customer's Service
     Compliance Certificate has not been furnished to Supplier in a timely
     manner. Customer shall defend and indemnify Supplier from any losses,
     expenses, demands and claims in connection with Customer's failure to
     provide Supplier with such Service Compliance Certificates. Such
     indemnification includes costs and expenses (including reasonable
     attorney's fees) incurred by Supplier in settling, defending or appealing
     any claims or actions brought against it relating to Customer's failure to
     provide such Service Compliance Certificates. Supplier shall defend and
     indemnify Customer from any losses, expenses, demands and claims in
     connection with Supplier's failure to provide Customer with such Service
     Compliance Certificates. Such indemnification includes costs and expenses
     (including reasonable attorney's fees) incurred by Customer in settling,
     defending or appealing any claims or actions brought against it relating to
     Supplier's failure to provide such Service Compliance Certificates.

7.   GOVERNING LAW. This Agreement shall be construed and enforced in accordance
     with, and the validity and performance hereof, shall be governed by the
     laws of the State of Delaware without regard to its principles of choice of
     law.

8.   NOTICES. All notices and other communications hereunder shall be in writing
     and shall be deemed to have been duly given as of the date of delivery,
     facsimile transmission or mailing, and if mailed, first class postage
     prepaid, certified or registered mail, return receipt requested to the
     following persons, unless contrary instructions are given by the parties in
     writing:
     If to Supplier: IXC Communications Services, Inc.
                     1122 Capital of Texas Hwy. South
                     Austin, Texas 78746-6426
                     Attention: Contract Administration

IXC - CONFIDENTIAL                     1                                06/03/99
<PAGE>   4

     If to Customer: Pathnet, Inc.
                     1015 31st Street, NW, Suite 500
                     Washington, DC 20007
                     Attention: General Counsel__________

9.   WAIVER OF BREACH OR VIOLATION NOT DEEMED CONTINUING. The waiver by either
     party of a breach or violation of any provision of this Agreement shall not
     operate as or be construed to be a waiver of any subsequent breach hereof.

10.  BANKRUPTCY. In the event of the bankruptcy or insolvency of either party
     hereto or if either party hereto shall make an assignment for the benefit
     of creditors or take advantage of any act or law for relief of debtors, the
     other party to this Agreement shall have the right to terminate this
     Agreement without further obligation or liability on its part.

11.  BUSINESS RELATIONSHIP. This Agreement shall not create any agency,
     employment, joint venture, partnership, representation, or fiduciary
     relationship between the parties. Neither party shall have the authority
     to, nor shall any party attempt to, create any obligation on behalf of the
     other party.

12.  EVENTS OF DEFAULT:
     A "DEFAULT" shall occur if: (a) Customer fails to make any payment required
     to be made by it under this Agreement and any such failure remains
     uncorrected for five (5) business days after written notice of such
     failure; or (b) either party fails to perform or observe any material term
     or obligation (other than making payment) contained in this Agreement, and
     any such failure remains uncorrected for thirty (30) calendar days after
     written notice from the non-defaulting party informing the defaulting party
     of such failure.

13.  INDEMNITY.

     A. Each party shall indemnify, defend, release and hold harmless the other
     party and all of its officers, agents, directors, shareholders,
     subcontractors, subsidiaries, employees and other affiliates (collectively
     "Affiliates") from and against any action, claim, court cost, damage,
     demand, expense, liability, loss, penalty, proceeding or suit,
     (collectively, together with related reasonable attorneys' fees; including
     costs and disbursements, "Claims") imposed upon either party by reason of
     damages to property or injuries, including death, as a result of an
     intentional or a negligent act or omission on the part of the indemnifying
     party or any of its Affiliates in connection with: (i) the performance of
     this Agreement; or (ii) other activities relating to the property or
     facilities which are the subject of this Agreement, whether or not the
     Claims result from a sole negligent act or omission on the part of the
     indemnifying party, whether the Claims result from the concurrent negligent
     act or omission on the part of both parties, or whether the Claims result
     from the negligent act or omission of the indemnifying party and some other
     third party. In the event a Clam relates to the negligence of both
     parties, the relative burden of the Claim shall be attributed equitably
     between the parties in accordance with the principles of comparative
     negligence.

     B. In the event any action shall be brought against the indemnified party,
     such party shall immediately notify the indemnifying party in writing, and
     the indemnifying party, upon the request of the indemnified party, shall
     assume the defense thereof on behalf of the indemnified party and its
     Affiliates and shall pay all reasonable expenses and satisfy all judgments
     which may be incurred by or rendered against the indemnified party or its
     Affiliates in connection therewith, provided that the indemnified party
     shall not be liable for any settlement of any such action effected without
     its written consent.

     C. Notwithstanding the termination of this Agreement for any reason, this
     Section 12 shall survive such termination.

14.  INSURANCE. Throughout the term of this Agreement and any extension thereof,
     each party shall maintain and, upon written request, shall provide to the
     other proof of adequate liability insurance:
     (i) Worker's compensation insurance up to the amount of the statutory limit
     in the state or states where work is to be performed;
     (ii) Employer's liability insurance with a limit of not less than $200,000
     per claim with an all-states endorsement;
     (iii) Comprehensive general liability insurance with a limit of not less
     than $1,000,000 per occurrence for bodily injury liability and property
     damage liability, including coverage extensions for blanket contractual
     liability, personal injury liability and products and completed operations
     liability; and
     (iv) Comprehensive Auto Liability insurance with a limit of not less than
     $1,000,000 per accident for Bodily Injury Liability and Property Damage
     Liability arising out of the ownership, maintenance or use of any vehicle
     in the performance of this Agreement.

15.  AUTHORIZED USE OF NAME. Without Supplier's prior written consent, Customer
     shall not: (i) refer to itself as an authorized representative of Supplier
     in promotional, advertising or other materials; or (ii) use Supplier's
     logos, trade marks, service marks, or any variations thereof in any of its
     promotional, advertising or other materials or in any activity using or
     displaying Supplier's name or the Services to be provided by Supplier.
     Customer agrees to change or correct, at Customer's expense, any such
     material or activity which Supplier, in its sole judgment, determines to be
     inaccurate, misleading or otherwise objectionable in relation to using or
     marketing Supplier's services. Customer is explicitly authorized to only
     use the following statements in its sales literature: (i) "Customer
     utilizes the Supplier's network"; (ii) "Customer utilizes Supplier's
     facilities"; (iii) "Supplier provides only the network facilities"; and
     (iv) "Supplier is our network services provider". Without Customer's prior
     written consent, Supplier shall not refer to Customer in any promotional
     context, in any media. It is expressly understood that Supplier may refer
     to Customer as may be necessary for public company reporting purposes.

16.  ASSIGNMENT. Neither party hereto may assign this Agreement without the
     express written consent of the other party hereto, which consent shall not
     be unreasonably withheld. Notwithstanding the foregoing: (i) a security
     interest in this Agreement may be granted by Supplier to any lender to
     secure borrowings by Supplier or any of its

IXC - CONFIDENTIAL                     2                                06/03/99
<PAGE>   5

     affiliates; (ii) Supplier may assign all its rights and obligations
     hereunder to any Affiliate; and (iii) any subsidiary of Supplier may assign
     any amounts due from Customer under any Supplement to Supplier for billing
     purposes.

17.  BINDING ARBITRATION. The parties will attempt in good faith to resolve any
     controversy or claim arising out of or relating to this Agreement promptly
     through discussions between themselves at the operational level. In the
     event a resolution cannot be reached, such controversy or claim shall be
     negotiated between appointed counsel or senior executives of the parties
     who have authority to settle the controversy.

     The disputing party shall give the other party written notice of the
     dispute. If the parties fail to resolve such controversy or claim within
     thirty (30) days of the disputing party's notice, either party may seek
     arbitration as set forth below.

     Any controversy or claim arising out of or relating to this Agreement, or a
     breach of this Agreement, shall be finally settled by arbitration in
     Austin, Texas, and shall be resolved under the laws of the State of
     Delaware. The arbitration shall be conducted before a single arbitrator in
     accordance with the commercial rules and practices of the American
     Arbitration Association then in effect, with the exception that discovery
     shall be conducted in accordance with the Federal Rules of Civil Procedures
     with all discovery disputes to be resolved by the arbitrator.

     The arbitrator shall have the power to order specific performance if
     requested. Any award, order, or judgment pursuant to such arbitration shall
     be deemed final and binding and may be enforced in any court of competent
     jurisdiction. The parties agree that the arbitrator shall have no power or
     authority to make awards or issue orders of any kind except as expressly
     permitted by this Agreement, and in no event shall the arbitrator have the
     authority to make any award that provides for punitive or exemplary
     damages. All such arbitration proceedings shall be conducted on a
     confidential basis. The arbitrator may, as part of the arbitration award,
     permit the substantially prevailing party to recover all or part of its
     attorney's fees and other out-of-pocket costs incurred in connection with
     such arbitration. Customer may, at its option, continue to accept what it
     considers to be below-standard Services and pay the charges hereunder
     relating thereto during such pendency of such arbitration, without
     prejudice thereto.

18.  LEGAL CONSTRUCTION. In the event one or more of the provisions contained in
     this Agreement shall, for any reason be held to be invalid, illegal, or
     unenforceable in any respect, such invalidity, illegality or
     unenforceability shall not affect any other provision hereof, and this
     Agreement shall be construed as if such invalid, illegal or unenforceable
     provision had never been contained herein.

     In the event of any conflict between the provisions of these Terms &
     Conditions and the applicable Supplement and Exhibits, the conflict shall
     be resolved by reference to the following order of priority of
     interpretation: a) Exhibits; b) Supplement; and c) Terms & Conditions. Not
     withstanding the foregoing no Exhibit requiring execution shall be binding
     unless and until such Exhibit has been executed by an authorized officer of
     Customer.

19.  NO PERSONAL LIABILITY. Each action or claim of any party arising under or
     relating to this Agreement shall be made only against the other party as a
     corporation, and any liability relating thereto shall be enforceable only
     against the corporate assets of such party. No party shall seek to pierce
     the corporate veil or otherwise seek to impose any liability relating to,
     or arising from, this Agreement against any shareholder, employee, officer
     or director of the other party. Each of such persons is an intended
     beneficiary of the mutual promises set forth in this Section and shall be
     entitled to enforce the obligations of this Section.

20.  NOTICE OF BREACH OF AGREEMENT. To be effective, written notice of any
     material breach (except Payment Default) must prominently contain the
     following sentences in capital letters: "THIS IS FORMAL NOTICE OF A BREACH
     OF CONTRACT. FAILURE TO CURE SUCH BREACH WILL HAVE SIGNIFICANT LEGAL
     CONSEQUENCES."

21.  LIMITATION OF LIABILITY. Supplier's liability arising out of delays in
     restoration of the Services to be provided under this Agreement or out of
     mistakes, accidents, omissions, interruptions, or errors or defects in
     interruption of Services, shall be subject to the limitations set forth
     below and in the applicable Tariff. EXCEPT OTHERWISE PROVIDED HEREIN, IN NO
     EVENT SHALL SUPPLIER BE LIABLE TO CUSTOMER OR ANY OF THE CUSTOMER'S OWN
     CUSTOMERS OR ANY OTHER THIRD PARTY IN ANY RESPECT, INCLUDING, WITHOUT
     LIMITATION, FOR ANY DAMAGES, EITHER DIRECT, INDIRECT, CONSEQUENTIAL,
     SPECIAL, INCIDENTAL, ACTUAL, PUNITIVE, OR ANY OTHER DAMAGES, OR FOR ANY
     LOST PROFITS OF ANY KIND OR NATURE WHATSOEVER, ARISING OUT OF MISTAKES,
     ACCIDENTS, ERRORS, OMISSIONS, INTERRUPTIONS, OR DEFECTS IN TRANSMISSION, OR
     DELAYS, INCLUDING THOSE WHICH MAY BE CAUSED BY REGULATORY OR JUDICIAL
     AUTHORITIES, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
     OBLIGATIONS OF SUPPLIER PURSUANT TO THIS AGREEMENT; AND IN NO EVENT SHALL
     SUPPLIER BE LIABLE AT ANY TIME FOR ANY AMOUNT IN EXCESS OF THE AGGREGATE
     AMOUNT IT HAS PRIOR TO SUCH TIME COLLECTED FROM CUSTOMER WITH RESPECT TO
     SERVICES DELIVERED HEREUNDER. SUPPLIER MAKES NO WARRANTY TO CUSTOMER OR ANY
     OTHER PERSON OR ENTITY, WHETHER EXPRESS, IMPLIED, OR STATUTORY, AS TO THE
     DESCRIPTION, QUALITY, MERCHANTABILITY, COMPLETENESS OR FITNESS FOR ANY
     PURPOSE OF ANY SERVICE PROVIDED HEREUNDER OR DESCRIBED HEREIN, OR AS TO ANY
     OTHER MATTER, ALL OF WHICH WARRANTIES BY SUPPLIER ARE HEREBY EXCLUDED AND
     DISCLAIMED. For purposes of this Section, the term "Supplier" shall be
     deemed to include Supplier, its shareholders, directors, officers and
     employees, and any

IXC - CONFIDENTIAL                     3                                06/03/99
<PAGE>   6
     person or entity assisting Supplier in its performance pursuant to this
     Agreement.

22.  SYSTEM MAINTENANCE. In the event Supplier determines to interrupt Services
     for the performance of routine system maintenance, Supplier will use
     reasonable efforts to notify Customer prior to the interruption and to
     conduct such maintenance during non-peak hours. In no event shall
     interruption for system maintenance constitute a Failure of Performance by
     Supplier.

23.  MAINTENANCE & TROUBLE REPORTING. Supplier's standard fees for Customer
     maintenance support services are as follows:

     Maintenance services shall be defined as all work performed by Supplier on
     equipment provided by or on behalf of the Customer, or supervision of the
     Customer's work within Supplier's terminal facilities. Maintenance Service
     charges are not billed for troubles found within that portion of a circuit
     provided by Supplier. The following billing rates apply for these services:

     A. [* * *] per hour ([* * *] hour minimum - if dispatch is required) Monday
     through Friday during the business hours of 8:00 a.m. - 5:00 p.m. local
     time, exclusive of the following holidays: New Year's Day, President's Day,
     Memorial Day, Independence Day, Labor Day, Thanksgiving Day and the day
     after Thanksgiving and Christmas Day.

     B. [* * *] per hour ([* * *] hour minimum) for overtime work done after
     business hours (defined above) and/or on holidays (defined above) and/or
     all day on Saturdays and Sundays.

     C. As requests for maintenance services are typically made via telephone,
     Supplier must be advised in writing as to the person(s) who are authorized
     to request service. It is the Customer's responsibility to keep Supplier
     apprised of any changes to its list of representative(s).

     D. To request technical assistance and help under the maintenance services,
     a call must be made to Supplier's Network Control Center at 1-800-526-2488.
     This number should be used for Supplier technical assistance,
     troubleshooting or testing of circuits, not for service impairment or
     outages. The person calling in must be on the authorized list in order to
     commit for charges for this technical assistance. If that person is not on
     the list, the request cannot be accommodated.

     The Network Control Center personnel will take the call, record the
     caller's name and phone number along with facts concerning the assistance
     and support needed. The caller will then be given the number of the
     "Assistance Ticket."

     Upon completion of work, this "Assistance Ticket" will be given to
     Supplier's Accounting Department, and the Customer will subsequently be
     billed based upon the information on that ticket. A copy will be attached
     to the invoice.

     Except for emergencies, Supplier's technicians cannot be dispatched unless
     requests are made in accordance with the above call-out procedure.

24.  SUBJECT TO LAWS. This Agreement is subject to, and Customer agrees to
     comply with, all applicable federal, state and local laws, and regulations,
     rulings and orders of governmental agencies, including, but not limited to,
     the Communications Act of 1934, the Telecommunications Act of 1996, the
     Rules and Regulations of the Federal Communications Commission ("FCC") and
     state public utility or service commissions ("PSC"), tariffs and the
     obtaining and continuance of any required certification, permit, license,
     approval or authorization of the FCC and PSC or any governmental body,
     including, but not limited to regulations applying to feature group
     termination and Letter of Agencies ("LOAs").

25.  FCC PERMITS, AUTHORIZATION AND FILINGS. Supplier represents and warrants
     that it has taken all necessary and appropriate steps, and will continue to
     take all such steps as soon as possible, to procure from the FCC the
     necessary authorizations, if any, to deliver Services hereunder to
     Customer and whatever approvals are necessary from any other federal or
     state agency. Supplier will not voluntarily take or accede to any action,
     including the filing of a tariff, that would have the effect of materially
     modifying the rates contained herein without the prior written consent of
     Customer.

26.  COUNTERPARTS. This Agreement may be executed in any number of counterparts,
     each of which shall be deemed an original, and when taken together shall
     constitute one document.

27.  CONFIDENTIAL INFORMATION AND NONSOLICITATION. "Confidential Information"
     shall mean all information disclosed in writing by one party to the other
     party which is clearly marked "CONFIDENTIAL" by the disclosing party at the
     time of disclosure. "Confidential Information" shall also include certain
     oral information disclosed by one party to the other party, provided that
     the disclosing party designates such information as confidential at the
     time of disclosure and gives recipient a written summary of such
     information within five business days after the oral disclosure was made.
     Notwithstanding the foregoing, all information concerning the traffic
     volume/distribution of Supplier, pricing rates, and customer lists is
     hereby deemed to be Confidential Information regardless of whether it is so
     identified. The term "Confidential Information" does not include any
     information which: (i) was already known by the receiving party free of any
     obligation to keep it confidential at the time of its disclosure by the
     disclosing party, (ii) becomes publicly known through no wrongful act of
     the receiving party, (iii) is rightfully received from a third person
     without knowledge of any confidentiality obligation, (iv) is independently
     acquired or developed without violating any of the obligations under this
     Agreement, (v) is disclosed to a third person by the disclosing party
     without similar confidentiality restrictions on such third person rights,
     or (vi) is approved for release by written authorization of the disclosing
     party.

     Further, the recipient may disclose Confidential Information pursuant to
     any judicial or governmental

IXC - CONFIDENTIAL                     4                                06/03/99

<PAGE>   7
     request, requirement or order. The recipient, however, shall take
     reasonable steps to give the disclosing party sufficient prior notice to
     contest such request, requirement or order. Confidential Information shall
     remain the property of the disclosing party, and shall be returned to the
     disclosing party or destroyed upon request of the disclosing party.
     Supplier may make such Confidential Information available to its lenders.

     Accordingly, in the event of a breach or threatened breach of the foregoing
     provisions, Supplier shall be entitled to an injunction or restraining
     order, in addition to such other rights or remedies as may be available
     under this Agreement, at law or in equity, including but not limited to
     money damages.

28.  FORCE MAJEURE. Supplier shall not be liable for any failure of performance
     hereunder due to causes beyond its reasonable control, including, but not
     limited to: acts of God, fire, explosion, vandalism, cable cut, storm or
     other similar catastrophes; any law, order, regulation, direction, action
     or request of the United States government, or of any other government,
     including state and local governments having jurisdiction over either of
     the parties, or of any department, agency, commission, court, bureau,
     corporation or other instrumentality of any one or more of said governments
     (provided that Supplier uses best efforts to prevent such government
     actions, whenever possible); administrative delays by governmental
     agencies; national emergencies; insurrections; riots; wars; or strikes,
     lock outs, work stoppages or other labor difficulties.

29.  SURVIVAL. The covenants and agreements of Customer contained in this
     Agreement with respect to payment of amounts due, confidentiality and
     indemnification shall survive any termination of this Agreement. The rights
     and obligations under this Agreement shall survive any merger or sale of
     either party and shall be binding upon the successors and permitted assigns
     of each party.

30.  REGULATORY. Customer is responsible for payment of, or reimbursement to
     Supplier for, Universal Service Fund and Lifeline Assistance Charges
     (Presubscribed line charges) set forth in the National Exchange Carrier
     Association (NECA) Tariff FCC #5, sections 8.5., 8.5.2 and 17.1.4 (A) &
     (B), as the same may be amended from time to time, or any successor tariffs
     or sections, with respect to any Customer ANI's subscribed to Supplier and
     sold to End User customers (non-carrier sales). In addition, with respect
     to the Services, Customer is responsible for payment of, or reimbursement
     to Supplier for: (i) telecommunication relay service charges required by
     the Americans with Disabilities Act or otherwise (both federal and state);
     (ii) interexchange carrier fees payable to the FCC under the Omnibus Budget
     Reconciliation Act of 1993 or otherwise; (iii) payphone service provider
     compensation as determined by the FCC in CC Docket No.96-128; (iv)
     universal service fund charges, intraLATA compensation charges; and (v)
     other federal or state fees or charges imposed on Supplier, as required by
     law in connection with sales to end user customer's (non-carrier sales).
     Supplier will furnish, at Customer's request, documentation to support the
     fees or charges payable by Customer to Supplier pursuant to this Section
     29.

     Customer shall furnish to Supplier valid and appropriate tax exemption
     certificates for all applicable jurisdictions (federal, state and local) in
     which it performs customer billing. Customer is responsible for properly
     charging tax to its subscribers and for the proper and timely reporting and
     payment of applicable taxes to the taxing authorities and shall defend and
     indemnify Supplier from payment and reporting of all applicable federal,
     state and local taxes, including, but not limited to, gross receipts taxes,
     surcharges, franchise fees, occupational, excise and other taxes (and
     penalties and interest thereon), relating to the Services. Such
     indemnification includes costs and expenses (including reasonable
     attorney's fees) incurred by Supplier in settling, defending or appealing
     any claims or actions brought against it relating to said taxes. If
     Customer fails to provide and maintain the required certificates, Supplier
     may charge Customer and Customer shall pay such applicable taxes.

     The amounts payable by Customer under this Agreement do not include any
     state and local sales or use taxes, or utility taxes, however designated,
     which may be levied on the goods and services provided by Supplier
     hereunder. With respect to such taxes, if applicable, Customer shall
     furnish Supplier with an appropriate exemption certificate or pay to
     Supplier, upon timely presentation of invoices therefore, such amounts
     thereof as Supplier may be by law required to collect or pay. Any and all
     other taxes, including but not limited to franchise, net or gross income,
     license, occupation, and real or personal property taxes, shall be timely
     paid by Supplier. Customer shall pay to Supplier any such taxes that
     Supplier may be required to collect or pay.

31.  OBLIGATIONS SEVERAL AND NOT JOINT. Each party shall be responsible only
     for its own performance under the Agreement (including any attachments,
     exhibits, schedules or addenda) and not for that of any other party.

32.  AMENDMENTS. This Agreement may only be modified or supplemented by an
     instrument in writing executed by each party.

IXC - CONFIDENTIAL                     5                                06/03/99

<PAGE>   8

                        PRIVATE LINE SERVICE SUPPLEMENT
                                DIGITAL SERVICE

1.   SCOPE AND RATES. Supplier shall use its best efforts (considering the needs
     of its other customers) to provide Service for which a Purchase Order has
     been accepted. A form of Purchase Order is attached hereto as Exhibit A.
     The rates for Service are set forth in Exhibit D, unless otherwise
     specified in the applicable Purchase Order. Such rates are valid for the
     term of this Agreement. Supplier may thereafter change such rates, but not
     for any Circuit then in service. Customer may also order the services
     listed in Exhibit B, subject to availability. Supplier's On-Net City
     listing is attached hereto as Exhibit C.

2.   TERM. The Agreement is for a term of three (3) years commencing on the
     Effective Date and shall continue through the end of the Circuit Lease Term
     which is last to expire. If Service continues after such Circuit Lease
     Term, the applicable rates will be equal to 100% of the rates hereunder,
     and Service shall be automatically continued for automatic six (6) month
     extensions, unless either party provides 30 days' notice of its desire to
     discontinue such extension for the Circuit Lease Term.

3.   INVOICE. Customer will be invoiced monthly for: (i) the monthly lease rate
     (prorated for any partial month) for each Available Circuit; and (ii) the
     charges for other services received. The first invoice shall be for the
     first two months; each invoice thereafter shall be for the following month.

4.   TERMINATION. Customer may terminate any Circuit upon 45 calendar days prior
     written notice, provided that if termination occurs: (i) prior to the
     Activation Date, Customer shall reimburse Supplier for all costs of the
     implementation of such Circuit; or (ii) on or after such date Customer
     shall pay: (A) all charges for Service previously rendered; and (B) the
     amount due through the end of the applicable Circuit Lease Term (Supplier
     shall try to re-lease such Circuit for such term, refunding to Customer the
     amount so collected, if any). If Supplier fails to provide Service within
     sixty (60) days of the Firm Order Commitment, Customer may, as its only
     remedy, terminate the affected Circuit. If Supplier fails to cure a
     material breach hereof within 10 calendar days of written notice from
     Customer, Customer may terminate the affected Circuit.

5.   OUTAGE CREDITS. Supplier shall give Customer a credit in accordance with
     its then-current outage policy for periods in which any Circuit loses
     continuity and fails to comply with applicable specifications. Such credit
     shall be Customer's sole remedy with respect to such an event; provided,
     however, that no such credits shall be allowed and Supplier shall not be
     liable for any Service defect from causes outside its control, including
     accidents, cable cuts, fires, floods, emergencies, government regulation
     (provided that Supplier uses best efforts to prevent such government
     regulation, wherever possible), wars, or acts of God. SUPPLIER DISCLAIMS
     ALL EXPRESS AND IMPLIED WARRANTIES RELATING TO SERVICE, INCLUDING BUT NOT
     LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
     PURPOSE. CUSTOMER HAS NOT RELIED ON ANY REPRESENTATION NOT SET FORTH
     HEREIN. CUSTOMER SHALL INDEMNIFY SUPPLIER FROM ANY CLAIMS MADE BY ANY
     CUSTOMER OF CUSTOMER.

6.   DEFINITIONS. For purposes hereof: "Available" means all necessary Supplier
     equipment for a Circuit has been installed. "Activation Date" means the
     date a Circuit is first made Available to Customer. "Circuit" means a DS-0,
     DS-1, DS-3, OC-3 or a OC-12. "Circuit Lease Term" means the term of a
     Circuit specified in the applicable Purchase Order. "Circuit Mileage" means
     the length of a Circuit specified in the applicable Purchase Order. "DS-0"
     means a circuit complying with TR-TSY-000333 "Switched and Special Access
     Services - Transmission Parameter Limits and Interface Combinations" Issue
     1, July 1990. A "DS-1" is a signal conforming to the requirements set forth
     in Sections 9.3 and 10.2 of Bellcore TR-NWT-000499, Issue 5, December,
     1993. A "DS-3" is a signal conforming to the requirements set forth in
     Section 9.6 and 10.5 of Bellcore TR-NWT-000499, Issue 5, December, 1993. A
     "Firm Order Commitment" means the written confirmation provided to Customer
     which confirms the specific date that the Circuit is available to Customer.
     An "OC-3" is a signal based on the SONET frame structure as specified in
     Bellcore GR-253-CORE, Synchronous Optical Network (SONET) Transport
     Systems: Common Criteria Physical Layer, and ANSI T1.105, Digital
     Hierarchy-Optical Interface Rates and Formats Specifications. An "OC-12" is
     a signal based on the SONET frame structure as specified in Bellcore
     GR-253-CORE, Synchronous Optical Network (SONET) Transport Systems: Common
     Criteria Physical Layer, and ANSI T1.105, Digital Hierarchy-Optical
     Interface Rates and Formats Specifications. "Purchase Order" means any
     Customer purchase order accepted by Supplier. "Requested Service Date"
     means the date Service on a Circuit is requested to commence specified in
     the applicable Purchase Order. "Service" means transmission service
     provided between North American DSX standard cross-connect panels located
     in Supplier's terminal locations.

IXC - CONFIDENTIAL                     1                                06/03/99

<PAGE>   9
                                  EXHIBIT A

                 [FORM OF PURCHASE ORDER/MARKET SERVICE ORDER]
<PAGE>   10
                                   EXHIBIT B
                     PRIVATE LINE SERVICE ANCILLARY PRICING

                                 [Superceded]
<PAGE>   11
                                  EXHIBIT C

                      On Net City Listing for Private Line*

<TABLE>
<CAPTION>
Location                    LATA                Address/(NPA) NXX
--------                -----------             -----------------
<S>                     <C>                        <C>
[ *  *  * ]             [ *  *  * ]                [ *  *  * ]
</TABLE>

* Subject to Availability
<PAGE>   12
                                  EXHIBIT D

                              Private Line Pricing

                                 [ Superceded ]
<PAGE>   13
                                   Exhibit E

                      Taxes on Telecommunications Service

                                    [ * * * ]
<PAGE>   14
                             AMENDMENT NO. 1 TO IXC
                            MASTER SERVICE AGREEMENT

[IXC COMMUNICATIONS LOGO]

This Amendment No. 1 to the Master Service Agreement is made and entered into
by and between IXC COMMUNICATIONS SERVICES, INC., a Delaware corporation with
its principal place of busines at 1122 Capital of Texas Hwy. South, Austin,
Texas 78746-6426 ("Supplier"), and PATHNET, INC., a Delaware corporation with
its principal place of business at 1015 31st Street Northwest, Suite 500,
Washington DC 20007 ("Customer").

For purposes of this Amendment, the rates, terms and conditions set forth
herein shall become effective on the first day of the next IXC billing cycle
following the last date of execution below (the "Amendment Effective Date").

This Amendment is made with reference to the following facts:

    A.   Customer and Supplier are parties to that certain Master Service
Agreement dated as of June 17, 1999 (the "Agreement").

    B.   The parties desire to amend the Agreement pursuant to the terms set
forth below.

                               TERMS OF AMENDMENT

Accordingly, in consideration of the mutual promises set forth below, the
parties agree as follows:

    1.   Exhibit D -- Private Line Pricing, shall be modified and reinstated
with Exhibit D, Private Line Pricing, attached hereto.

    2.   The following shall be added in its entirety as Section 33, Year 2000
Compliance, to the Master Service Agreement Terms and Conditions:

     33. YEAR 2000 COMPLIANCE. Each party represents that its Services will
         operate on and after January 1, 2000, in the same manner, and with the
         same functionality, as the Services would and do on or before December
         31, 1999. Each party represents that its monitoring and maintenance
         capabilities accommodate the four-digit data field requirement for the
         year 2000 and beyond and will lose no functionality with respect to
         the introduction of records containing dates falling on or after
         January 1, 2000.

    3.   Section 6, Definitions, of Private Line Service Supplement shall be
modified and reinstated as follows:

     6.  DEFINITIONS. For purposes hereof: "Activation Date" means the date a
         Circuit is first made Available to Customer. "Available" means all
         necessary Supplier equipment for a Circuit has been installed.
         "Circuit" means a DS-0, DS-1, DS-3, OC-3, OC-12 or an OC-48. "Circuit
         Lease Term" means the term of a Circuit specified in the applicable
         Purchase Order. "Circuit Mileage" means the length of a Circuit
         specified in the applicable Purchase Order. "DS-0" means a circuit
         complying with TR-TSY-000333 "Switched and Special Access Services -
         Transmission Parameter Limits and Interface Combinations" Issue 1, July
         1990. A "DS-l" is a signal conforming to the requirements set forth in
         Sections 9.3 and 10.2 of Bellcore TR-NWT-000499, Issue 5, December
         1993. A "DS-3" is a signal conforming to the requirements set forth in
         Section 9.6 and 10.5 of Bellcore TR-NWT-000499, Issue 5, December 1993.
         "FOC" means Firm Order Confirmation, the form Supplier submits to
         Customer indicating the date that an ordered Circuit will be activated.
         An "OC-3c" is a signal based on the SONET frame structure as specified
         in Bellcore GR-253-CORE, Synchronous Optical Network (SONET) Transport
         Systems: Common Criteria Physical Layer, and ANSI T1.105, Digital
         Hierarchy- Optical Interface Rates and Formats Specifications. An
         "OC-12c" is a signal based on the SONET frame structure as specified in
         Bellcore GR-253-CORE, Synchronous Optical Network (SONET) Transport
         Systems: Common Criteria Physical Layer, and ANSI TI.105, Digital
         Hierarchy-Optical Interface Rates and Formats Specifications. An
         "OC-48c" is a signal based on the SONET frame structure as specified in
         Bellcore GR-253-CORE, Synchronous Optical Network (SONET) Transport
         Systems: Common Criteria Physical Layer, and ANSI T1.105, Digital
         Hierarchy-Optical Interface Rates and Formats Specifications. "On-Net"
         means a Circuit(s) provided on Supplier's network between two cities.
         "Purchase Order" means any Customer purchase

IXC-CONFIDENTIAL IXC CONTRACT NO. 7188 PAGE 1 OF AMENDMENT NO.1 TO MSA  08/12/99

<PAGE>   15

         order accepted by Supplier. "Requested Service Date" means the date
         Service on a Circuit is requested to commence specified in the
         applicable Purchase Order. "Service" means transmission service
         provided between North American DSX standard cross-connect panels
         located in Supplier's terminal locations or when provided via IXC LDX
         Optical cross-connect panels located in Supplier's terminal locations.

    4.   Section 7, Billing Commencement Date, below shall be added in its
entirety to the Private Line Service Supplement:

      7. BILLING COMMENCEMENT DATE. If Circuit is made available prior to the
         FOC date, billing shall commence on the Circuit Activation Date after
         Customer has tested and accepted Circuit, or on the scheduled FOC
         date, provided Circuit has been made available to Customer. In no
         event shall billing commence prior to the FOC date without Customer
         acceptance.

    5.   All other terms and conditions, provisions, supplements and exhibits
of the Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
last written below.

<TABLE>
<CAPTION>
IXC COMMUNICATIONS SERVICES, INC.                                PATHNET, INC.
<S>                                                              <C>
BY: /s/ DAVE HUGHART                                             BY: /s/ MICHAEL A LUBIN
   -------------------------------                                  -------------------------------

NAME:   Dave Hughart                                             NAME:   MICHAEL A LUBIN
     -----------------------------                                    -----------------------------

TITLE:  President, Sales                                         TITLE:  Vice President
      ----------------------------                                     ----------------------------

DATE:   8/26/99                                                  DATE:   8/19/99
     -----------------------------                                    -----------------------------

FULL BUSINESS ADDRESS:                                           FULL BUSINESS ADDRESS:
1122 CAPITAL OF TEXAS HWY. SOUTH                                 1015 31st STREET NORTHWEST, SUITE 500
AUSTIN, TEXAS 78746-6426               APPROVED AS TO FORM       WASHINGTON DC 20007
TELEPHONE:  512-427-3700                   LEGAL DEPT.           TELEPHONE: 202-625-7284 OR 202-295-3988
FACSIMILE:  512-328-7902                                         FACSIMILE: 202-625-7368
                                                                 BILLING CONTACT: BILL COTTA
                                                                 TELEPHONE: 202-295-3100
</TABLE>

IXC-CONFIDENTIAL IXC CONTRACT NO. 7188 PAGE 2 OF AMENDMENT NO. 1 TO MSA 08/12/99

<PAGE>   16
                                  EXHIBIT D

                              Private Line Pricing

                                 [ Superceded ]
<PAGE>   17

[IXC COMMUNICATIONS LOGO]             AMENDMENT NO.2 TO IXC
                                     MASTER SERVICE AGREEMENT

This Amendment No. 2 to the Master Service Agreement is made and entered into
by and between IXC COMMUNICATIONS SERVICES, INC., a Delaware corporation with
its principal place of business at 1122 Capital of Texas Hwy. South, Austin,
Texas 78746-6426 ("Supplier"), and PATHNET, INC, a Delaware corporation with its
principal place of business at 1015 31st Street Northwest, Suite 500,
Washington DC 20007 ("Customer").

For purposes of this Amendment, the rates, terms and conditions set forth
herein shall become effective on the first day of the next IXC billing cycle
following the last date of execution below (the "Amendment Effective Date").

This Amendment is made with reference to the following facts:

    A.   Customer and Supplier are parties to that certain Master Service
Agreement dated as of June 17, 1999 and subsequent Amendment No. 1 dated August
26, 1999 (as amended, the "Agreement").

    B.   The parties desire to amend the Agreement pursuant to the terms set
forth below.

                               TERMS OF AMENDMENT

Accordingly, in consideration of the mutual promises set forth below, the
parties agree as follows:

    1.   Exhibit B, Private Line Service Ancillary Page, shall be replaced in
its entirety with Exhibit B, Private Line Service Ancillary Page, attached
hereto.

    2.   Exhibit D, Private Line Pricing, shall be replaced in its entirety with
Exhibit D, Private Line Pricing, attached hereto.

    3.   All other terms and conditions, provisions, supplements and exhibits
of the Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date last
written below.

<TABLE>
<CAPTION>
IXC COMMUNICATIONS SERVICES, INC.                               PATHNET, INC.
<S>                                    <C>                      <C>
BY: /s/ DAVID HUGHART                                           BY: /s/ MICHAEL A LUBIN
   -------------------------------                                  -------------------------------

NAME:   David Hughart                                           NAME:   MICHAEL A LUBIN
     -----------------------------                                    -----------------------------

TITLE:  President-Sales                                         TITLE:   Vice President
      ----------------------------                                     ----------------------------

DATE:     10/13/99                                              DATE:     10/8/99
     -----------------------------                                    -----------------------------

FULL BUSINESS ADDRESS:                                          FULL BUSINESS ADDRESS:
1122 CAPITAL OF TEXAS HWY. SOUTH                                1015 31st STREET NORTHWEST, SUITE 500
AUSTIN, TEXAS 78746-6426               APPROVED AS TO FORM      WASHINGTON DC 20007
TELEPHONE:  512-427-3700                   LEGAL DEPT.          TELEPHONE: 202-625-7284 OR 202-295-3988
FACSIMILE:  512-328-7902                                        FACSIMILE: 202-625-7368
                                                                BILLING CONTACT: BILL COTTA
                                                                TELEPHONE: 202-295-3100
</TABLE>

IXC-CONFIDENTIAL IXC CONTRACT NO. 7188 PAGE 1 OF AMENDMENT NO. 2 TO MSA 09/29/99
<PAGE>   18
                                  EXHIBIT B

                    Private Line Services Ancillary Pricing

<TABLE>
<CAPTION>
                                                      DS-0        DS-1        DS-3        OC-3        OC-12       OC-48
                                                    ---------   ---------   ---------   ---------   ---------   ---------
<S>                                                 <C>         <C>         <C>         <C>         <C>         <C>
RECURRING
Minimum Circuit Charge                              [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]

NON RECURRING
New Order Installation                              [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
Change of requested service date - 1st              [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]*  [ * * * ]*  [ * * * ]*
Change of requested service date -- 2nd and more    [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]*  [ * * * ]*  [ * * * ]*
Order Change (pre-engineering)                      [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
Order Change (post-engineering)                     [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
Order Cancellation (pre-engineering)                [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
Order Cancellation (post-engineering)               [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
ASR (new or disconnect) Special Access**            [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
ASR Supplement                                      [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
Order Expedite                                      [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
Reconfiguration                                     [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
</TABLE>

* Customer must notify IXC of service date changes ten (10) days prior to due
date. Service date changes can be extended a maximum of (thirty) 30 days after
due date. Service date changes for OC3, OC12, and OC48 bandwidths are
restricted to one change, after which order will be subject to billing.
** If Customer is ordering Integrated Access Service with multiple applications
(i.e., any combination of Xclusive/Xnet Voice frame, Private Line and/or
Internet) the ASR fee will be $250 for any and all applications instead of $250
per application.

<TABLE>
<CAPTION>
                                                                  DS-1        DS-3        OC-3        OC-12       OC-48
                                                                ---------   ---------   ---------   ---------   ---------
<S>                                                             <C>         <C>         <C>         <C>         <C>
CROSS-CONNECT CHARGE
Recurring                                                       [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
Non Recurring                                                   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]

INTERCONNECT CHARGE
Recurring                                                       [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
Non Recurring                                                   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]   [ * * * ]
</TABLE>

Cross-connect: Local access or customer collocation facility to Supplier local
access or bypass facility within the same Supplier POP. Cross-connect charges
do not apply to Long Haul Circuits purchased from Supplier if bandwidth being
cross-connected is 1-to-1 bandwidth relationship or less. Interconnect charges
apply to connections between Supplier POPs in the same city or between Supplier
suite to another suite in the same building. Since costs vary widely by
location, the interconnect charges indicated above are the minimum amount that
will be charged monthly. All I.C.B. charges incurred by Supplier will be passed
through to the Customer.

<TABLE>
<CAPTION>
                                                         RECURRING         NON RECURRING
                                                         ---------         -------------
<S>                                                      <C>                 <C>
MULTIPLEX CHARGES FOR DS-1 TO DS-3
    1 Year Term                                          [ * * * ]
    2 Year Term                                          [ * * * ]
    3 Year Term                                          [ * * * ]
DACS Charge (Switching Only) per DSO                     [ * * * ]
DACS Port Charge (Bell Access to DACS) per DSO           [ * * * ]
DS-1 DACS Port                                           [ * * * ]

Echo Canceller (Per Circuit End; see Note 5 below.)      [ * * * ]           [ * * * ]
Second End Loop (Ex; for ADPCM)                          [ * * * ]           [ * * * ]

MAINTENANCE CHARGES
Trouble Assistance Ticket per dispatch:
    Monday through Friday, 8 am to 5 pm                                      [ * * * ]
    After Hours (Work limited to recovery of downed
       circuits or equipment, not new installations.)                        [ * * * ]
</TABLE>

Notes
1.  All charges incurred by Supplier on Customer's behalf from any Local
    Exchange Carrier, Competitive Access Provider or Competitive Local
    Exchange Carrier will be directly passed on to the Customer.
2.  Services not described above will be considered special handling and charges
    will be assessed on an Individual Case Basis (I.C.B.).
3.  All of the above charges are subject to changes with a 30-day notice.
4.  All Private Line ancillary service charges to cities not listed will be
    priced on an individual case basis and will be subject to the terms and
    charges of the underlying carrier.
5.  Echo canceller charges apply to each end or Circuit. There is no expressed
    Circuit length minimum for Private Line; when echo cans are required,
    Supplier installs them and charges for them.

All products, cross-connects and interconnects will be provided based upon
availability.
<PAGE>   19
                                  EXHIBIT D

                           Private Line Service Rates

<TABLE>
<CAPTION>

  Rate per V&H DS-O-Mile/Circuit Lease Term
  ----------------------------------------
Service Type     1 Year     3 Year    5 Year
------------     ------     ------    ------

<S>              <C>        <C>       <C>
DS-0              I.C.B.     I.C.B.    I.C.B.
DS-1              [    *       *         *  ]
DS-3              [    *       *         *  ]
OC-3              [    *       *         *  ]
OC-12             [    *       *         *  ]
OC-48             [    *       *         *  ]

</TABLE>

Minimum Circuit Charges:
<TABLE>
<CAPTION>

<S>              <C>        <C>       <C>
DS-0             $[    *       *         *  ]
DS-1              [    *       *         *  ]
DS-3              [    *       *         *  ]
OC-3              [    *       *         *  ]
OC-12             [    *       *         *  ]
OC-48             [    *       *         *  ]

</TABLE>

Minimum Circuit Term:
<TABLE>
<CAPTION>
<S>              <C>        <C>       <C>
DS-0             $[    *       *         *  ]
DS-1              [    *       *         *  ]
DS-3              [    *       *         *  ]
OC-3              [    *       *         *  ]
OC-12             [    *       *         *  ]
OC-48             [    *       *         *  ]

</TABLE>

NOTES:

1.   All private line service to cities not on Supplier's On-net City
     List will be priced on an individual case basis and will be subject to the
     terms of the underlying carrier.

2.   These rates shall apply to new service orders. Existing service may be
     renewed at these rates upon expiration of a circuit's current lease terms.<PAGE>   1
     Portions of this exhibit have been omitted and filed separately with the
Securities and Exchange Commission. These portions are designated "[ * * * ]".

                                                                   EXHIBIT 10.29

[FRONTIER LOGO]

                               CAPACITY AGREEMENT

                                     BETWEEN

                    FRONTIER COMMUNICATIONS OF THE WEST, INC.

                                       AND

                                  PATHNET, INC.

08/16/99                                                            CONFIDENTIAL
<PAGE>   2

                               CAPACITY AGREEMENT

This Capacity Agreement ("Agreement") is entered into between the provider of
service, Frontier Communications of the West, Inc. on behalf of itself and its
affiliates that may provide a portion of the services hereunder ("Frontier"), a
California corporation located at 90 Castilian Drive, Goleta, CA 93117 and
Pathnet, Inc. ("Pathnet" or "Purchaser"), a Delaware corporation with its
principal place of business located at lOl5 31st Street NW, Washington DC 20007
(hereinafter, Frontier and Pathnet may be referred to in the aggregate as
"Parties", and each singularly as a "Party".)

                                     PURPOSE

Pathnet desires to purchase dedicated circuit capacity from Frontier for the
transport of Pathnet's telecommunications traffic. For valuable consideration,
receipt of which is hereby acknowledged, the Parties hereto agree as follows.

     DEFINITIONS (not otherwise defined in the body of this Agreement or an
     attachment).

     A.   "Affiliate" means any entity directly or indirectly controlling,
          controlled by or under common control with a Party.

     B.   "Billing Cycle" is the Frontier billing cycle to which Pathnet's
          account hereunder is assigned by Frontier (a full billing cycle
          approximates 30 days).

     C.   "Business Day" is Monday through Friday, 8:00 am to 5:00 PM EST,
          excluding nationally recognized holidays. Unless otherwise stated,
          "days" refers to calendar days.

     D.   "Delinquent" (whether capitalized or not) means any invoiced amounts
          not properly disputed under Section 4 of this Agreement and remaining
          unpaid on the due date of the invoice.

1.   SERVICES; CIRCUIT TERM; CIRCUIT AVAILABILITY DATE:

     1.1  Frontier shall, in accordance with the terms of this Agreement,
          provide Pathnet with DS-1, DS-3, OC-3 and OC-12 circuit capacity as
          the same may be ordered by Pathnet and the order accepted by Frontier
          hereunder from time to time. All such circuit capacity collectively
          referred to as the "Services" or "Private Line Services.

     1.2  Unless one Party provides the other with at least 90 days prior
          written notice of its intent not to renew a circuit after the
          circuit's minimum commitment period expires, then, unless the Parties
          agree otherwise in writing, a circuit shall automatically renew on a
          month to month basis at Frontier's then-current rates and charges for
          that circuit type or as the parties may mutually agree in writing.

08/16/99                               3

                                                                Initials  MAL
                                                                        --------
                                                                Initials
                                                                        --------
<PAGE>   3

     1.3  Frontier shall provide a 48 hour turnaround response to a Pathnet
          feasibility request. Response shall include provider's POP to POP
          capacity availability and detailed price quote for the POP to POP
          service. Once Frontier fully defines a process for quoting local loops
          on DS1 and DS3 level circuits, Frontier agrees to provide Pathnet with
          a detailed price quote in writing and in a time frame agreed to by the
          Parties. Interval calculation shall commence upon the issuance of a
          completed order by Pathnet and acceptance by Frontier. Frontier shall
          provide notification and appropriate circuit provisioning information
          on the following provisioning dates:

          a.   ORC -- Order Receipt Date: The date upon which Frontier shall
               notify Pathnet that Pathnet's firm order request has been
               received and accepted and any standard interval quote has
               commenced.

          b.   FOC -- Firm Order Confirmation: The date upon which Frontier
               shall notify Pathnet of the firm due date as well as final
               pricing details for both POP to POP and any third party access.

          c.   DLRD -- Design Layout and Design: The date upon which Frontier
               shall notify Pathnet regarding specific circuit configuration to
               include POP to POP locations, Circuit ID, Circuit ID of each
               access line and provider as well as any demarc/interconnect
               information.

          d.   Service Turnup -- The date upon which Frontier will notify
               Pathnet when the end to end circuit including any third party
               access ordered and coordinated by Frontier has passed the circuit
               acceptance criteria.

               Pathnet will be responsible for accepting/rejecting the end to
               end service within 48 hours of Service Turnup from Frontier.
               Frontier will not start billing of any part of the end to end
               (Pathnet premises to Pathnet premises) service until acceptance
               of the service from Pathnet which shall occur within 48 hours. If
               Pathnet does not communicate a good faith rejection of the
               circuit within 48 hours, it shall be deemed to have been
               accepted. Upon receipt of a complete and accurate service order
               for a circuit, Frontier shall notify Pathnet of its target date
               for the delivery of each circuit (the "Estimated Availability
               Date"). Any Estimated Availability Date given by Frontier to
               Pathnet shall be subject to Frontier's then-current standard and
               expedited interval guidelines. Frontier shall use reasonable
               efforts to install each circuit on or before the Estimated
               Availability Date, but the inability of Frontier to deliver a
               circuit by such date, or within the interval guidelines, shall
               not be deemed a breach of this Agreement by Frontier. If Frontier
               fails to make any circuit available within 90 days after
               acceptance by Frontier of the service order with respect to such
               circuit (or such greater time as is set forth in the interval
               guidelines), Pathnet's sole remedy shall be to cancel the service
               order which pertains to such circuit upon ten days prior written
               notice to Frontier.

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     1.4  At each end of the city pairs on which Pathnet orders circuits,
          Frontier shall provide appropriate equipment in its SONET POP
          locations necessary to connect the circuits to Pathnet's
          Interconnection Facilities. If Pathnet desires to install its own
          equipment in one or more SONET POP, and Frontier, in its sole
          discretion, agrees to such installation, the Parties shall execute a
          collocation agreement acceptable to both Parties. Pathnet agrees that
          its Interconnection Facilities shall connect to the circuits provided
          by Frontier hereunder at the network interface points located in the
          Frontier SONET POPs. As used herein, the term "Interconnection
          Facilities" shall mean transmission capacity provided by Pathnet or
          its third party Frontier to extend the circuits provided by Frontier
          from a SONET POP to any other location (e.g., a local access telephone
          service provided by a local telephone company).

     1.5  For DS-3 and lesser capacity circuits, Frontier shall use reasonable
          efforts to order Interconnection Facilities on behalf of Pathnet from
          Pathnet's designated Frontier, provided that Pathnet furnishes
          Frontier with an acceptable letter of agency. Pathnet shall be billed
          directly by Frontier of such Interconnection Facilities, and shall
          defend and indemnify Frontier from any loss or liability incurred by
          Frontier as a result of Frontier's ordering Interconnection Facilities
          from any third party on Pathnet's behalf. Pathnet may, at its
          election, but subject to Frontier's prior written approval, order its
          own Interconnection Facilities. If any party other than Frontier
          provides Interconnection Facilities, then unavailability,
          incompatibility, delay in installation, or other impairment of
          Interconnection Facilities shall not excuse Pathnet's obligation to
          pay Frontier all rates or charges applicable to the circuits, whether
          or not such circuits are useable by Pathnet. Frontier will not order
          Interconnection Facilities on behalf of Pathnet for OC-N circuits.

2.   TERM OF THE AGREEMENT:

     This Agreement is binding on the Parties upon the date of execution by
     Frontier ("Effective Date") and, subject to the termination provisions of
     this Agreement, shall continue in effect for a period of three (3) years
     from the Effective Date (the" Initial Term"). If a circuit remains
     installed beyond the term of this Agreement, then this Agreement shall
     remain in effect as long as a circuit is installed hereunder.

3.   BILLING AND PAYMENT; MINIMUM COMMITMENTS:

     3.1  Pathnet shall pay Frontier for the Services at the rates and charges
          set out in Exhibit A or as the Parties may otherwise agree in writing.
          Pathnet is also liable for applicable taxes and governmental
          assessments with respect to its use of the Services. If Pathnet is
          required to provide security for payment hereunder, then Frontier is
          not obligated to accept orders, or provide or continue to provide any
          Services or circuits, until the required security is received by
          Frontier. That commencement may be delayed by Pathnet for a cumulative
          period of 30 days from Firm Order Confirmation date without penalty.
          All invoices shall include the itemized detail of price elements
          comprising each service, including all charges and credits. The
          Pathnet circuit ID entered on the originating Service Order request
          shall be cross-referenced on a separate report setting forth the
          appropriate Frontier circuit ID. All discounts and promotions, if any,
          and taxes, will be included in the monthly invoice. All pro-rated
          monthly charges will be based upon a 30 day month. Billing for a POP
          to POP circuit shall commence upon the earlier to occur of (i) 30 days
          following the date Frontier notifies Pathnet, in writing or via
          electronic transmission, that the ordered circuit capacity is
          available from Frontier (regardless of whether or not Pathnet's
          Interconnection Facilities are installed and operational), and (ii)
          the date the ordered circuit capacity is first utilized by Pathnet
          (the "Service Date").

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     3.2  Pathnet shall provide Frontier with financial security in the amount
          of $0.

     3.3  Pathnet's initial credit limit hereunder shall be [ * * * ]. If
          Pathnet's monthly charges for the Services exceed its credit limit,
          Frontier may require security of its choice from Pathnet in an amount
          equal to Pathnet's highest invoice over the prior six month period (or
          such lesser period if this Agreement has not been in effect for six
          months) as a condition to continuing to provide the Services. In
          addition, if Pathnet is delinquent in payment of an invoice and
          Frontier does not have security from Pathnet in an amount equal to
          Pathnet's highest invoice over the prior six month period (or such
          lesser period if this Agreement has not been in effect for six
          months), Frontier may require additional security of its choice from
          Pathnet in such amount. Any such additional security shall be provided
          by Pathnet to Frontier within 48 hours (if the security is to be other
          than a letter of credit and within ten Business Days if the security
          is to be a letter of credit) from its receipt of Frontier's written
          request for additional security.

     3.4  Monthly recurring charges ("MRC") shall be invoiced by Frontier on a
          monthly basis in advance and non-recurring charges shall be invoiced
          in arrears. If the Service Date for any circuit falls on other than
          the first day of any Billing Cycle, the initial charge to Pathnet
          shall consist of: (i) the pro-rata portion of the applicable monthly
          charge covering the period from the Service Date to the first day of
          the subsequent Billing Cycle, and (ii) the monthly charge for the
          following Billing Cycle. Payment terms are net 30 days from the
          invoice date. Any invoice not paid by its due date shall bear late
          payment fees at the rate of 1-1/2% per month (or such lower amount as
          maybe required by law) until paid.

     3.5  The pricing in this Agreement and any attached Exhibits applies only
          to the Private Line Services provided between the "on-net" nodes set
          out in the Frontier SONET POP List attached hereto as Exhibit B or as
          amended and is valid for the term of this Agreement. If Frontier's
          cost in providing the Private Line Services is increased due to
          circumstances beyond its reasonable control, or Frontier elects to
          pass through any governmental or regulatory assessments related to its
          provision of the Private Line Services, then Frontier may revise the
          rates and charges in this Agreement and any attached Exhibits upon 30
          days written notice to Pathnet. Pathnet may cancel any circuits
          subject to a rate/charge increase upon written notice to Frontier
          given no later than 30 days after Pathnet's receipt of the increase
          notice.

     3.6  Commencing with the twelfth (12th) month following the Effective
          Date, Pathnet shall be liable for a monthly minimum usage charge for
          the Services of $150,000 (the "Minimum Charge"). If during the term of
          the contract, Pathnet's net charges for the Services are less than the
          Minimum Charge, Pathnet shall pay rates as outlined in Exhibit A
          Standard Pricing. If this Agreement is terminated prior to the time
          the Minimum Charge becomes effective (other than termination by
          Pathnet for an uncured breach by Frontier), Pathnet shall be liable
          for an amount equal to the Minimum Charge for the remaining portion of
          the unexpired term of this Agreement.

     3.7  Pathnet shall be liable for the applicable minimum circuit terms and
          minimum circuit commitment charges set out in Exhibit A.
          Notwithstanding the foregoing, should Pathnet fail to place an order
          for the two OC-12 circuits (as stated in Exhibit A) (the "Pathnet
          Specific Circuits") by September 30, 1999, then the Pathnet Specific
          Circuits shall be considered null and void and will require
          re-negotiation between the Parties.

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          Frontier agrees to provide the Special Pricing for circuits ordered
          with one year terms during Pathnet's ramp up period and shall continue
          at such pricing level provided Pathnet is attaining its Minimum Charge
          obligation under this Agreement. In the event, Pathnet is not meeting
          its Minimum Charge obligation, then Pathnet will be charged the
          Standard Pricing for any circuits ordered.

     3.8  If a circuit is canceled prior to expiration of its minimum term
          commitment, except if canceled by Pathnet under Section 3.5 hereof, or
          this Agreement is terminated for Frontier's uncured breach, Pathnet
          shall be liable for, and shall pay to Frontier upon demand, an early
          termination fee in an amount equal to the applicable monthly per
          circuit minimum charge times the number of months remaining on the
          unexpired term commitment (whether the initial or a renewal term) for
          the circuit.

     3.9  Pathnet agrees that any minimum charge shortfall and any early
          termination fees for which it may be liable under this Agreement are
          based on agreed upon minimum commitments on its part and corresponding
          rate concessions on Frontier's part, and are not penalties or
          consequential or other damages under Section 6.3 hereof.

     3.10 Pathnet agrees that a breach of any other agreement it may have with
          Frontier or a Frontier Affiliate shall be deemed a material breach of
          this Agreement.

4.   BILLING DISPUTES: Pathnet shall have the affirmative obligation of
     providing written notice of any dispute with an invoice within 90 days
     after receipt of the invoice by Pathnet (which notice shall include
     sufficient detail for Frontier to investigate the dispute). Pathnet may
     withhold payment only on amounts so disputed within 30 Business Days after
     Pathnet's receipt of the invoice. Pathnet may not withhold payment of
     amounts disputed after such 30 Business Day period. Pathnet shall not be
     responsible for the payment of any charges nor shall Frontier invoice any
     charges for Services that were not invoiced within 90 days after the
     Service for the charge was actually rendered other than third party charges
     not invoiced within the same 90 day period. If Pathnet does not report a
     dispute with respect to an invoice within the 90 day period, Pathnet is
     deemed to have waived its dispute rights for that invoice and to have
     agreed to pay the same. Provided Pathnet has provided sufficient detail for
     investigation of the dispute, Frontier will use reasonable efforts to
     resolve and communicate its resolution of the dispute within 30 Business
     Days of its receipt of the dispute notice. If the dispute is resolved in
     Frontier's favor any amounts to be paid by Pathnet shall be subject to the
     late payment charges under Section 3.4 hereof retroactive to the due date
     of the disputed invoice. Notwithstanding anything herein to the contrary,
     Pathnet shall not withhold any disputed amounts while its Frontier account
     is delinquent.

5.   TERMINATION RIGHTS:

     5.1  Either Party may terminate this Agreement upon the other Party's
          insolvency, dissolution or cessation of business operations.

     5.2  Frontier may, upon written notice, only immediately terminate this
          Agreement for (i) Pathnet's failure to pay any delinquent invoice, or
          (ii) to pay any security or additional security within the time-frame
          required under this Agreement.

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     5.3  In the event of a breach of any material term or condition of this
          Agreement by a Party (other than a failure to pay or provide security
          which is covered under Section 5.2 hereof), the other Party may
          terminate this Agreement upon 30 days written notice, unless the
          breaching Party cures the breach during the 30 day period. A breach
          that cannot be reasonably cured within a 30 day period may be
          addressed by a written waiver of this paragraph signed by the Parties.
          In addition to any other rights hereunder, Pathnet may terminate this
          Agreement and/or the affected Service without early termination fee or
          penalty, except for unpaid charges as of the effective date of
          termination, as follows:

          Pathnet shall have the right to terminate a circuit, without incurring
          early termination liability, upon ten days written notice to Frontier
          that the circuit has experienced repeated or chronic Service Outages
          (as defined below). For purposes of this Section, "repeated or chronic
          Service Outages" is defined as the occurrence of four (4) or more
          Pathnet reported service interruptions or outages (excepting planned
          maintenance and force majeure events) in the same circuit of more than
          one (1) hour duration each in any month.

     5.4  If this Agreement is terminated prior to expiration of a circuit's
          term commitment, except if terminated by Pathnet under Section 5.3
          hereof, then Pathnet shall pay to Frontier upon demand an early
          termination fee in an amount equal to the aggregate sum of each
          existing circuit's monthly minimum commitment, times the number of
          months remaining on each circuit's minimum commitment period.

6.   WARRANTIES AND LIMITATION OF LIABILITY:

     6.1  The Services shall be provided by Frontier in accordance with the
          applicable technical standards established for dedicated circuit
          capacity by the telecommunications industry for a digital fiber optic
          network. FRONTIER MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, WITH
          RESPECT TO TRANSMISSION, EQUIPMENT OR SERVICE PROVIDED HEREUNDER, AND
          EXPRESSLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY
          PARTICULAR PURPOSE OR FUNCTION.

     6.2  The entire liability of Frontier for all claims of whatever nature
          arising out of its provision of the Private Line Services (including
          its negligence), and not caused by (i) Pathnet or third parties, or
          (ii) a scheduled or emergency interruption, shall be a credit for
          service interruptions greater than 120 continuous minutes for linear
          routes and 60 continuous minutes for protected routes (hereafter an
          "Outage"). The amount of the credit is computed in accordance with the
          following formula (the "Outage Credit"):

<TABLE>
          <S>      <C>
          Example: Outage Credit = Hours of Outage - 2 hours x Total MRC for Affected Circuit
                                   -------------------------
                                                  720 hours
</TABLE>

          A.   The Outage Credit shall apply to the charges for any circuit
               affected by an Outage; provided, however, that if any portion of
               the affected circuit remains useable by Pathnet, the Outage
               Credit shall not apply to that pro-rata portion of the mileage.
               The duration of each Outage shall be calculated in hours and
               shall include fractional portions thereof. An Outage shall be
               deemed to have commenced one hour after verifiable notification
               thereof by Pathnet to Frontier, or, when indicated by network
               control information actually known to Frontier network personnel,
               whichever is earlier for SONET protected routes and after two
               hours for linear routes. Each Outage shall be deemed to terminate
               upon restoration of the affected circuit as evidenced by
               appropriate network tests by Frontier. Frontier shall give notice
               to Pathnet of any scheduled interruption as early as is
               practicable.

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          B.   Outage Credits shall not be granted if the malfunction of any
               end-to-end circuit is due to an outage or other defect occurring
               in Pathnet's Interconnection Facilities.

          C.   All Outage Credits shall be credited on the next monthly invoice
               for the affected circuit after receipt of Pathnet's written
               request for credit. The total of all Outage Credits applicable to
               or accruing in any given month shall not exceed the amount
               payable by Pathnet to Frontier for that same month for the
               affected circuit.

          D.   The Outage Credit described in this Section shall be the sole and
               exclusive remedy of Pathnet in the event of any Outage or other
               failure in the Services, and under no circumstance shall an
               Outage or other such failure be deemed a breach of this Agreement
               by Frontier.

     6.3  In no event shall either Party be liable to the other Party for
          incidental and consequential damages, loss of goodwill, anticipated
          profit, or other claims for indirect damages in any manner related to
          this Agreement or the Services.

7.   INDEMNIFICATION: Each Party shall defend and indemnify the other Party and
     its directors, officers, employees, representatives and agents from any and
     all claims, taxes, penalties, interest, expenses, damages, lawsuits or
     other liabilities (including without limitation, reasonable attorney fees
     and court costs) relating to or arising out of (i) acts or omissions in the
     operation of its business, and (ii) its breach of this Agreement; provided,
     however, Frontier shall not be liable and shall not be obligated to
     indemnify Pathnet, and Pathnet shall defend and indemnify Frontier
     hereunder, for any claims by any third party, including Pathnet's
     customers, with respect to services provided by Pathnet which may
     incorporate any of the Services.

8.   REPRESENTATION: The Parties acknowledge and agree that the relationship
     between them is solely that of independent contractors. Neither Party, nor
     their respective employees, agents or representatives, has any right, power
     or authority to act or create any obligation, express or implied, on behalf
     of the other Party.

9.   FORCE MAJEURE: Other than with respect to failure to make payments due
     hereunder, neither Party shall be liable under this Agreement for delays,
     failures to perform, damages, losses or destruction, or malfunction of any
     equipment, or any consequence thereof, caused or occasioned by, or due to
     fire, earthquake, flood, water, the elements, labor disputes or shortages,
     utility curtailments, power failures, explosions, civil disturbances,
     governmental actions, shortages of equipment or supplies, unavailability of
     transportation, acts or omissions of third parties, or any other cause
     beyond its reasonable control.

10.  WAIVERS: Failure of either Party to enforce or insist upon compliance with
     the provisions of this Agreement shall not be construed as a general waiver
     or relinquishment of any provision or right under this Agreement.

11.  ASSIGNMENT: Neither Party may assign or transfer its rights or obligations
     under this Agreement without the other Party's written consent, which
     consent may not be unreasonably withheld, except that Frontier may assign
     this Agreement to its Affiliates or successors in interest without
     Pathnet's consent. Any assignment or transfer without the required consent
     is void.

08/16/99                               9

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<PAGE>   9

12.  CONFIDENTIALITY: Each Party agrees that all information furnished to it by
     the other Party, or to which it has access under this Agreement, shall be
     deemed the confidential and proprietary information or trade secrets
     (collectively referred to as "Proprietary Information") of the Disclosing
     Party and shall remain the sole and exclusive property of the Disclosing
     Party (the Party furnishing the Proprietary Information referred to as the
     "Disclosing Party" and the other Party referred to as the "Receiving
     Party"). Each Party shall treat the Proprietary Information and the
     contents of this Agreement in a confidential manner and, except to the
     extent necessary in connection with the performance of its obligations
     under this Agreement, neither Party may directly or indirectly disclose the
     same to anyone other than its employees on a need to know basis and who
     agree to be bound by the terms of this Section, without the written consent
     of the Disclosing Party.

13.  INTEGRATION: This Agreement and all Exhibits and other attachments
     incorporated herein, represent the entire agreement between the Parties
     with respect to the subject matter hereof and supersede and merge all prior
     agreements, promises, understandings, statements, representations,
     warranties, indemnities and inducements to the making of this Agreement
     relied upon by either Party, whether written or oral.

14.  GOVERNING LAW: Frontier currently maintains regional service and operations
     centers to support customer accounts in New York, California and Michigan.
     This Agreement will be construed and enforced in accordance with the law of
     the state where Pathnet's account is supported, as designated by Frontier
     in this Agreement or as designated in Exhibits or amendments to this
     Agreement, without regard to that state's choice of law principles. The
     Parties agree that any action related to this Agreement shall be brought
     and maintained only: (i) in the Superior court of the State of California
     for the County of Santa Barbara, if the designated customer support center
     is located in California; (ii) in a Federal or State court of competent
     jurisdiction located in Monroe County, New York, if the designated customer
     support center is located in New York; or (iii) in the Federal District
     Court for the Eastern District of Michigan or a State court of competent
     jurisdiction located in Oakland County, Michigan, if the designated
     customer support center is located in Michigan. The Parties each consent to
     the jurisdiction and venue of such courts and waive any right to object to
     such jurisdiction and venue.

15.  NOTICES: All notices, including but not limited to, demands, requests and
     other communications required or permitted hereunder (not including
     Invoices) shall be in writing and shall be deemed given: (i) when delivered
     in person, (ii) 24 hours after deposit with an overnight delivery service
     for next day delivery, (ii) the same day when sent by facsimile
     transmission during normal business hours, receipt confirmed by sender's
     equipment, or (iii) 72 hours after deposit in the United States mail,
     postage prepaid, registered or certified mail, return receipt requested,
     and addressed to the recipient Party at the address set forth below:

     If to Frontier:  Frontier Communications
                      180 South Clinton Ave.
                      Rochester, NY 14646
                      Attn: Brian Fitzpatrick or Vice President Carrier Services
                      Facsimile #: (716) 232-9168

     with a copy to:  Frontier Communications
                      90 Castilian Drive
                      Goleta, CA 93117
                      Attn: Peggy Palak Manager, National Contract Admin.
                      Facsimile #: (800) 689-2395

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                                                                Initials MAL
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                                                                Initials
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<PAGE>   10
     If to Pathnet                 Pathnet, Inc.
                                   1015 31st Street, NW
                                   Washington, DC 20007
                                   Attn: General Counsel
                                   Facsimilie #: (202) 625-7369

16.  COMPLIANCE WITH LAWS: During the term of this Agreement, the Parties shall
     comply with all local, state and federal laws and regulations applicable to
     this Agreement and to their respective businesses.

17.  SURVIVAL OF PROVISIONS: Any obligations of the Parties relating to monies
     owed, as well as those provisions relating to confidentiality, limitations
     on liability and indemnification, shall survive termination of this
     Agreement.

18.  UNENFORCEABLE PROVISIONS: The illegality or unenforceability of any
     provision of this Agreement does not affect the legality of enforceability
     of any other provision or portion. If any provision or portion of this
     Agreement is deemed illegal or unenforceable for any reason, there shall be
     deemed to be made such minimum change in such provision or portion as is
     necessary to make it valid and enforceable as so modified.

19.  CUMULATIVE RIGHTS AND REMEDIES: Except as may otherwise be provided herein,
     the assertion by a Party of any right or the obtaining of any remedy
     hereunder shall not preclude such Party from asserting or obtaining any
     other right or remedy, at law or in equity, hereunder.

20.  AMENDMENTS: This Agreement is voidable by Frontier if the text is modified
     by Pathnet without the written or initialed consent of a Frontier Vice
     President. Except as may otherwise be provided herein, any amendments or
     modifications to this Agreement must be in writing and signed by a Frontier
     Vice President (or higher level officer) and an authorized officer of
     Pathnet.

21.  NON-SOLICITATION: Pathnet agrees that while this Agreement is in effect,
     and for a period of 12 months following expiration or termination of this
     Agreement, neither it nor its representatives will directly or indirectly
     solicit Frontier employees to leave their employment with Frontier.

22.  AUTHORITY: Each individual executing below on behalf of a Party hereby
     represents and warrants to the other Party that such individual is duly
     authorized to so execute, and to deliver, this Agreement. By its signature
     below, each Party acknowledges and agrees that sufficient allowance has
     been made for review of this Agreement by respective counsel and that each
     Party has been advised by its legal counsel as to its legal rights, duties
     and obligations under this Agreement.

Frontier Communications of the West, Inc.              Pathnet, Inc.

By:/s/ BRIAN V. FITZPATRICK 8/20/99            By:/s/ MICHAEL A. LUBIN
   ----------------------------------           --------------------------------
   Brian v. Fitzpatrick, SVP Carrier Sales      Michael A. Lubin, Vice President
     Frontier Carrier Services Group

Date:                       8/20/99            Date:
     ---------------------------------              ----------------------------

                                       11

                                                           Initials  MAL
                                                                   -------
                                                           Initials
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<PAGE>   11
                                  EXHIBIT A

                               RATES AND CHARGES

                                                                       Exhibit A
                                                                     Page 1 of 1

Special Ordered Circuits (Unprotected)

<TABLE>
<CAPTION>
Circuit Capacity
<S>              <C>        <C>       <C>     <C>
(1) OC-12        [***]      [***]     [***]   [***]
(1) OC-12        [***]      [***]     [***]   [***]

</TABLE>

Special pricing - Pricing is based on Pathnet maintaining its $150,000
Minimum Charge commitment.

<TABLE>
<CAPTION>
Circuit Capacity
<S>              <C>        <C>
DS-1             [***]      [***]
DS-3             [***]      [***]
OC-3             [***]      [***]
OC-12            [***]      [***]
</TABLE>

Standard pricing - In the event Pathnet fails to meet their $150,000 Minimum
Charge commitment, Pathnet will receive the standard pricing which is based upon
the length of the circuit term commitment.

<TABLE>
<CAPTION>
Circuit Capacity
<S>              <C>        <C>       <C>     <C>
DS-1             [***]      [***]     [***]   [***]
DS-3             [***]      [***]     [***]   [***]
OC-3             [***]      [***]     [***]   [***]
OC-12            [***]      [***]     [***]   [***]

</TABLE>

Notes: Pricing is per DS-0 mile times V & H mileage for specific city pairs.

<TABLE>
<CAPTION>

<S>                       <C>               <C>               <C>           <C>
Non-Recurring Charges      Installation*     Rearrangement**    Expedite     Drop & Insert

DS-1                          [***]                [***]          [***]         [***]
DS-3                          [***]                [***]          [***]         [***]
OC-3                          [***]                [***]          [***]         [***]
OC-12                         [***]                [***]          [***]         [***]

</TABLE>
 *Installation charges are per end.
**Rearrangement is defined to be any move, change or rearrangement of a circuit.
Rearrangement charges are per end.

If Pathnet should cancel an ordered circuit prior to the Service Date,
Pathnet will be assessed the applicable cancellation charge.

<TABLE>
<CAPTION>
Circuit Cancellation Charges
<S>              <C>
DS-1             [***]
DS-3             [***]
OC-3             [***]
OC-12            [***]
OC-48            [***]
</TABLE>

                                                                Initials /s/ MAZ
                                                                   Initials ____

                                       12
<PAGE>   12
                                  EXHIBIT B

                  Natural Fiber Network POP Location (By Site)

<TABLE>
<CAPTION>
               Expected
Site         Service Date      State     LATA    POP Location     Zip Code   NPA-NXX
----         ------------      -----     ----    ------------     --------   -------
[***]           [***]          [***]     [***]      [***]           [***]     [***]
<S>          <C>              <C>       <C>     <C>              <C>        <C>

</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00003-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00003-of-00352.parquet"}]]