Level 3 to Provide Allegiance with Rings in Three Cities and Long Haul Connections Linking Boston, New York and Washington D.C.

DALLAS, TEXAS, January 3, 2000 - Allegiance Telecom, Inc. (Nasdaq: ALGX) has signed an agreement with Level 3 Communications, Inc. (Nasdaq: LVLT) to acquire the use of dark fiber on Level 3 rings in Denver, Detroit and San Diego. In addition, Level 3 will provide Allegiance with a long distance fiber route connecting Boston, New York and Washington D.C. The agreement is valued at approximately $20 million.

Level 3 is building the first continuously upgradeable international network optimized for Internet Protocol (IP) technology. The Level 3 Network, with both intercity and intracity segments, is able to connect customers end-to-end across the U.S. in Europe and Asia.

Construction of the high bandwidth fiber optic rings has already begun, with delivery to be completed in the year 2000. Using this fiber as an alternative local loop infrastructure to connect major central offices in designated metropolitan areas, Allegiance will be able to provide its business customers with an efficient and reliable fiber-based network. Optical fiber is fast, secure and capable of supporting the most advanced telecommunications technologies available today.

Allegiance has similar fiber arrangements in place in three other markets, Dallas, New York and Houston.

Allegiance's line growth and the availability of dark fiber at favorable costs makes these networks very attractive. The Company's continuing growth and the emergence of reliable dark fiber suppliers have encouraged Allegiance to accelerate its plans to acquire dark fiber and deploy SONET equipment, the second phase of the Company's "Smart Build" strategy.

"The three high volume cities where we are adding fiber capacity represent some of the most competitive telecommunications markets in the country," said Dan Yost, president and chief operating officer of Allegiance Telecom. "These fast growing cities attract a number of new high-tech and information dependent finance and service organizations, driving increased demand for complex communications services. Increased fiber capacity enhances Allegiance's capability to provide our customers with a variety of telecommunications services at competitive prices," said Yost.

About Allegiance Telecom
Allegiance Telecom offers businesses a complete package of telecommunications services, including local, l ong distance, international calling, high-speed data transmission and Internet services. Its common stock is traded on the Nasdaq National Market under the symbol ALGX. The Company's web address is: www.allegiancetele.com.