Covad Announces First Alliance to Deliver Voice Over DSL Services to Small Business; Covad Targets $45 Billion Local Phone Market.

SANTA CLARA, Calif.--(BUSINESS WIRE)--July 21, 1999--

Small businesses and consumers seeking alternatives to their incumbent local exchange carrier (ILEC) services are a significant step closer to enjoying voice service alternatives.

Covad Communications (Nasdaq:COVD), a leading broadband access provider, today announced that it has reached an agreement with Integrated Communications Provider (ICP) GST Telecommunications Inc. (Nasdaq:GSTX) to develop integrated voice over digital subscriber line (DSL) services using asynchronous transfer mode (ATM) transport technology.

The two companies have agreed to jointly develop service offerings to small businesses that will allow customers to utilize one DSL line for integrated data service and up to 16 voice lines.

The development agreement is the first in the industry in the emerging market for integrated voice and data DSL services. Covad will work directly with GST to develop voice over DSL service offerings in the geographic regions where GST provides communications service. GST has already signed an agreement with Covad to provide Covad's DSL service to GST's end users.

GST and Covad envision service trials of voice over DSL service by the end of 1999.

"Securing development agreements with voice CLECs is an important step toward providing true competition and choice to the $45 billion dollar small business voice communications market," said Robert Roblin, executive vice president of Marketing for Covad. "By working with aggressive, nimble voice CLECs such as GST, Covad plans to break the local phone service monopoly for voice services."

The agreement closely follows Covad's successful completion of voice over DSL technical trials using Covad's existing gateways and related voice equipment from both Jetstream Communications Inc. and CopperCom Inc. In June, Covad completed more than 200,000 phone calls over DSL lines using its ATM transport network.

Covad envisions a manageable solution for small businesses that will enable them to apportion up to 16 voice lines and data through one DSL connection. The technical trials proved the feasibility of this plan and demonstrated the high quality of voice over DSL via ATM.

"Although the technology behind the service is impressive by any standard, voice over DSL is really about leveraging a DSL line to provide voice products with better service delivery and better customer service," added Roblin.

"Our research indicates that small businesses have strong dissatisfaction with their current service providers. Covad aims to provide alternatives for voice and data services to small businesses that have never had a choice of providers."

Joe Basile, president and chief executive officer of GST Telecommunications, said, "By expanding our alliance with Covad, GST will be able to offer its extensive voice services over the same lines deployed for Internet access. Integrated DSL services are a cost-effective alternative for small businesses to take advantage of new network capabilities which can help make them more competitive.

"DSL gives GST a broader geographic reach within our major metropolitan markets, and is another way for us to bypass the incumbent local exchange carriers (ILECs), allowing us to provide faster provisioning intervals, more responsive customer service, and lower prices than those available when working through an ILEC connection."

GST Telecommunications Inc., an Integrated Communications Provider (ICP) headquartered in Vancouver, Wash., provides a broad range of integrated telecommunications products and services including local dial tone, Internet, long distance, and enhanced data services throughout the United States with a robust presence in California and the West.

Facilities-based GST continues to focus on its western regional strategy by anchoring its next generation networks in local markets and connecting them via long haul fiber networks.

About Covad

Covad Communications is a leading broadband access provider of high-speed Internet and network access. It offers DSL services through Internet Service Providers to small and medium-sized businesses and home users, and direct to large enterprise customers. Covad services are currently available in 16 regions, encompassing 37 Metropolitan Statistical Areas (MSA).

Service is available in the regions encompassing the San Francisco Bay, Los Angeles, Seattle, Sacramento, New York, Boston, Washington D.C., Baltimore, Chicago, Philadelphia, San Diego, Atlanta, Detroit, Minneapolis/St. Paul, Denver, and Portland, Ore. Covad has announced its plans to offer its services in a total of 22 regions, which would encompass 51 MSAs nationwide by Q4 1999.

Covad Communications and its affiliates, doing business as Covad Communications Company, are wholly owned subsidiaries of Covad Communications Group Inc. (Nasdaq:COVD). Corporate headquarters is located at 2330 Central Expressway, Santa Clara, Calif., 95050. Telephone: 888/GO-COVAD. Web Site: www.covad.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

The statements contained in this release, which are not historical facts may be deemed to contain forward-looking statements, including, but not limited to, deployment of the company's network in new and existing regions and the timing and breadth of coverage in each region. Actual results may differ materially from those anticipated in any forward-looking statements as a result of certain risks and uncertainties, including, without limitation, the company's dependence on strategic third parties to market and resell its services, intense competition for the company's service offerings, dependence on growth in demand for DSL-based services, availability of collocation space and facilities, ability to manage and scale operations, and other risks and uncertainties detailed in the company's Securities and Exchange Commission filings. The company disclaims any obligation to update information contained in any forward-looking statement.