DALLAS, TEXAS, April 21, 1999 -- Allegiance Telecom, Inc. (Nasdaq:ALGX), a leading competitive local exchange carrier (CLEC) to small and medium-sized businesses, today formally announced that it has added digital subscriber line (DSL) services to the product line of voice, data and Internet services it offers its customers.

The move places the Company squarely in the center of a fast-growing market, in which it anticipates it will have major competitive advantages based on its widespread collocation within Regional Bell Operating Company (RBOC) central offices, its core competencies in Operations Support Systems (OSS) for provisioning unbundled loops and its nationwide direct sales force.

"DSL is a significant new enabling technology that provides Allegiance with a valuable tool to improve margins for its voice services and increase penetration of Internet services with its medium and small business customers," said Royce Holland, chairman and chief executive officer of Allegiance Telecom. "Given that we are collocated in over 152 central offices, addressing over 5.3 million business lines, we are uniquely positioned among CLECs to offer this enhancement to an existing universe of customers."

DSL allows the copper telephone lines of the type serving most homes and businesses to carry content digitally at high speeds, significantly increasing available bandwidth over existing infrastructure and providing an alternative to the T1, ISDN and cable modem technologies usually employed for high-capacity Internet applications.

According to the Yankee Group, the number of DSL lines will grow from 4,561 lines in 1998 to more than 308,000 in 2002, with potential revenues from the small business segment rising in value to $302 million during the next 44 months. Allegiance said such a market could significantly enhance the Company's gross margins, as DSL offerings allow it to integrate voice, data and Internet services over a single unbundled loop (instead of multiple loops) for multi-line small and medium sized businesses.

"We believe DSL is a very important area for CLECs to enter," said Holland. "And we are determined to take the lead in offering DSL to our customers because we believe it is a breakthrough enabling technology that will allow small and medium-sized businesses an affordable alternative as they become more Web-enabled."

The Company said that the success of its collocation strategy and OSS is at the core of its move into DSL. The Company had achieved 152 collocations as of March 31, 1999, representing 5.3 million addressable business access lines. By the end of the year 2000, the Company expects to have achieved over 500 collocations.

"Our experience in selling, provisioning and installing service in the local loop environment, using collocation and unbundled loops, is unmatched in the industry," said. Dan Yost, president and chief operating officer of Allegiance Telecom. "These are precisely the skills necessary to be successful in providing DSL on a significant scale."

The Allegiance DSL offering, which will be known as AccessDirect DSL, will deliver a wide range of high-speed data services for applications such as Internet access, electronic mail, e-commerce and bulk data transfer. Consistent with its strategy of serving as a one stop shop for its customers, the Allegiance DSL offering will be symmetric, allowing it to accommodate both the customer's traditional telephone service and high-speed data services. The scaleable and competitively priced services will be offered in many levels, with initial speeds ranging from 144 kbps to 1.5 Mbps. At the upper end, the service packages will support high-end, upstream (i.e. from the customer) applications such as site hosting and e-commerce applications, as well as more traditional downstream (i.e., to the customer) uses, such as high-speed Web access and e-mail.

"DSL fits in well with our one-stop-shopping approach, because we will be able to offer our customers who require the bandwidth a complete product line of voice, data and Internet services over their DSL facility, further enhancing its cost effectiveness," said Yost.

The Allegiance DSL offering will be rolled out initially in Dallas, New York, Atlanta, Chicago and San Francisco. Allegiance said it expects to have DSL services available in 100 central offices by the end of the year.

Allegiance Telecom offers businesses a complete package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services. Allegiance is targeting 24 metropolitan areas in the U.S. with its "one-stop shopping' approach. The Company's web address is www.allegiancetele.com.

Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. The words "believes," "expects," "estimates," "anticipates" and "will be" and similar words or expressions identify forward-looking statements made by or on behalf of the Company. These forward-looking statements are subject to many uncertainties and factors which may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Examples of such uncertainties and factors include, but are not limited to, the extent to which the Company can achieve "electronic bonding" with ILECs, the Company's ability to timely and effectively provision new customers and the Company's continued access to necessary capital. Additional factors are set forth in the Company's Annual Report on Form 10-K. The Company does not undertake any obligation to update or revise any forward-looking statement made by it or on its behalf, whether as a result of new information, future events or otherwise.