Packet Switching Alternative Leads to Efficient Network Platform

DALLAS, TEXAS, May 3, 2000 - Allegiance Telecom, Inc. (Nasdaq: ALGX) announced today the official deployment of softswitch technology as a complement to its existing network infrastructure. Based on equipment already placed in its collocations and central offices and use of the softswitch technology, Allegiance Telecom will now be able to utilize packet switching - in addition to the traditional circuit-switched technology already deployed in its 21 U.S. markets.

In the first quarter, the Company deployed a Nortel-based softswitch in its Dallas market, which is certified for interconnection with Southwestern Bell, and plans to continue expansion of the softswitch platform throughout the rest of its markets. The Company expects to deploy softswitch technology from Lucent Technologies, Nortel Networks, Cisco Systems and other vendors.

"Traditional circuit switching has served us well in providing voice services to our business customers, and additional packet switching will allow for greater capital efficiencies and rapid deployment of enhanced services required by our customers," said Dan Yost, president and chief operating officer of Allegiance Telecom. "The softswitch technology is the next step in the evolution of Allegiance's smart build strategy in building a cost-effective and customer-oriented network infrastructure. Our complementary circuit and packet-switch platform will allow us to efficiently provide an integrated package of communications services to small and medium-sized businesses."

Circuit switching is a reliable technology in which the entire circuit is dedicated to the transmission of a single user's phone call, whereas packet switching "packetizes" or converges bursts of data for more efficient use of the telecommunications line used for the call. Allegiance's digital subscriber line (DSL) service supports voice and data services on either a packet or circuit-switched infrastructure.

In Dallas, the Company began offering virtual private network (VPN) services to its existing Internet Service Provider (ISP) customers from the softswitch platform - saving switch capacity for voice customers on the traditional circuit-switched network.

Based in Dallas, Texas, Allegiance Telecom is a facilities-based competitive local exchange carrier (CLEC) 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 36 major metropolitan areas in the U.S. with its "one-stop shopping" approach. Allegiance is currently operational in 21 markets including: Atlanta, Baltimore, Boston, Chicago, Dallas, Denver, Detroit, Fort Worth, Houston, Long Island, Los Angeles, New York, Northern New Jersey, Oakland, Orange County, Philadelphia, San Diego, San Francisco, San Jose, St. Louis 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.

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," "will be" and "plans" 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, the Company's continued access to necessary capital and the potential adverse impact of state and federal regulatory developments. 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 aresult of new information, future events or otherwise.