Vulcan Ventures to Purchase 1.5 Million Shares of Allegiance Common Stock Option to Purchase Up to 5 Million Additional Shares

DALLAS, TX, August 4, 1999-Allegiance Telecom, Inc. (Nasdaq: ALGX) today announced that it has signed an agreement with Vulcan Ventures, Inc., the investment organization of Paul G. Allen. Vulcan Ventures will purchase 1.5 million shares of Allegiance common stock from Allegiance's existing private equity investors at $50 per share upon receipt of antitrust clearance. The agreement also grants Vulcan an option to purchase up to an additional 5 million shares, at $56 per share, on or before November 1, 1999, from existing private equity investors and certain other investors. Vulcan Ventures has the right to appoint a director to the board of Allegiance.

Allegiance Telecom is a competitive local exchange carrier (CLEC) based in Dallas, Texas. Allegiance provides businesses with local, long distance, high-speed data and Internet services, including digital subscriber line (DSL) services. The Company is currently operational in 16 markets and has plans to offer its Òone-stop shopÓ approach in 24 major metropolitan areas in the U.S. by mid-year 2000. Vulcan Ventures has investments in over 100 companies, which include many of the leaders in the Internet content and e-commerce sectors. As a result of the investment, Allegiance and Vulcan plan to explore strategic alliances to enhance Allegiance's product portfolio of Internet and e-commerce applications and provide a state-of-the-art distribution channel for Vulcan's portfolio companies.

ÒWe are very excited that a sophisticated investor and visionary like Paul Allen would take an interest in what Allegiance is doing to help make Allens vision of a ÔWired World' a reality,Ó said Royce Holland, chairman and chief executive officer of Allegiance Telecom. ÒOur agreement with Vulcan Ventures may accelerate our rollout of Internet content and e-commerce services to existing and future customers. This relationship should help make Allegiance a leader in commercializing Internet applications in the medium and small business market.Ó

ÒAllegiance's extensive network footprint and its aggressive strategy of providing businesses with Internet, DSL and data services are what interested us in adding Allegiance to our portfolio of companies,Ó said William Savoy, president of Vulcan Ventures. ÒThe broad array of Internet content and e-commerce services of the Vulcan portfolio companies, when combined with the significant distribution capability and large direct sales force of Allegiance should be a powerful force in the continued growth of the Internet.Ó

About Vulcan Ventures
Vulcan Ventures, Inc. of Bellevue, Washington, was founded by Paul G. Allen in 1986. Through Vulcan Ventures, Allen invests in companies that offer products, services or technologies that fit his wired world strategy. William D. Savoy is president of Vulcan Ventures and represents Allen in his professional and personal financial transactions as well as managing the Vulcan analysts who investigate the secure investment opportunities. Allen remains chairman of Vulcan. Vulcan Ventures' web address is: www.paulallen.com.

About Allegiance Telecom
Based in Dallas, Texas, Allegiance Telecom is a facilities-based competitive local exchange carrier that offers businesses a complete package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services. The Company is targeting 24 major metropolitan areas in the U.S. with its Òone-stop shoppingÓ approach. Allegiance is currently operational in 16 markets, including Atlanta, Boston, Chicago, Dallas, Fort Worth, Houston, Los Angeles, New York, Northern New Jersey, Oakland, Orange County, Philadelphia, San Diego, San Francisco, San Jose and Washington D.C. The Company's web address is: www.allegiancetele.com. Allegiance's common stock is traded on the Nasdaq National Market under the symbol ALGX.