Vulcan Invests $75M in CLEC Allegiance

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Dallas -- Paul Allen's Vulcan Ventures Inc. has invested
$75 million for a 2 percent stake in Allegiance Telecom Inc., a competitive local-exchange
carrier based here.

The deal -- under which Vulcan will purchase 1.5 million
shares of Allegiance at $50 each -- also gives Vulcan the option to buy another 5 million
shares, or 8 percent of the company's outstanding stock, at $56 apiece on or before Nov.
1.

Vulcan also receives the right to appoint a member to
Allegiance's board of directors.

This is the first investment in a CLEC for Allen, who also
controls Charter Communications, the fourth-largest MSO in the country.

The investment should fit well with Allen's "Wired
World" strategy, which is aimed at providing consumers with electronic information
and entertainment content through a single device.

Allegiance currently provides local and long-distance
telephony, high-speed-data and Internet service to businesses in 16 metropolitan markets
across the country, and it plans to expand to 24 markets by the middle of next year. The
cash infusion from Vulcan is expected to help the company accelerate the rollout of its
services.

Vulcan spokeswoman Susan Pierson Brown said there are no
plans to bundle telephony service from Allegiance with cable offerings. However, she
added, Vulcan "encourages communications and synergies between its portfolio
companies."

Vulcan, based in Seattle, has more than 100 different
companies in its portfolio, ranging from educational-software firms to Internet-service
providers.

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