Covad Announces Operating Statistics for the Second Quarter 2001.

Business/Technology Editors

SANTA CLARA, Calif.--(BUSINESS WIRE)--July 11, 2001

Covad Communications, Group, Inc. (Nasdaq: COVD), the leading national broadband services provider utilizing DSL (Digital Subscriber Line) technology, today announced second quarter operating statistics as of June 30, 2001.

-- Covad has 333,000 lines in service on its network, a four percent increase from March 31, 2001. This figure does not include lines deployed on the BlueStar network, which are no longer included in Covad's line count. It also reflects the continued disconnection of subscribers as Covad ended its relationships with some of its financially troubled resellers.

-- Approximately 51 percent of Covad's total lines are business lines and 49 percent are consumer lines.

-- Covad's direct channel represents two percent of its total lines. The other 98 percent of Covad's lines are provided through a Covad reseller. The decrease in the percentage of lines served through Covad's direct channel results from the exclusion of lines sold by BlueStar.

-- Fourteen percent of Covad's total lines are served through resellers for which Covad recognizes revenue when it is paid, a two percent reduction from the previous quarter. This group includes Covad lines sold by BlueStar. These BlueStar subscribers have been offered the opportunity to switch to Covad's direct service, Covad.net.

"We are taking measures to reduce the costs associated with our business, which includes disconnecting subscribers from financially distressed Internet service providers," said Chuck McMinn, Covad chairman. "We are making very good progress in cleaning up our distressed line issues, which shows up in the lower net line growth for the second quarter that we predicted. The demand for broadband is still strong and we continue to install many new lines. Our lower net increase in lines also reflects the elimination of lines in BlueStar central offices where we no longer offer service. These lines will be disconnected or migrated to other service providers in the coming months.

"Our focus is on growing a strong, healthy business and focusing on our strongest channel partners," continued McMinn. "A healthy reseller channel is very important to us as it continues to deliver the majority of our sales. We will continue our efforts to control costs and increase our subscriber base to maintain our position as the leading national DSL provider."

About Covad Communications

Covad is the leading national broadband service provider of high-speed Internet and network access utilizing Digital Subscriber Line (DSL) technology. It offers DSL, IP and dial-up services through Internet Service Providers, telecommunications carriers, enterprises, affinity groups, PC OEMs and ASPs to small and medium-sized businesses and home users. Covad services are currently available across the United States in 94 of the top Metropolitan Statistical Areas (MSAs). Covad's network currently covers more than 40 million homes and business and reaches approximately 40 to 45 percent of all US homes and businesses. Corporate headquarters is located at 4250 Burton Drive, Santa Clara, CA 95054. Telephone: 1-888-GO-COVAD. Web Site: www.covad.com.

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

The statements contained in this press release that are not historical facts are "forward-looking statements," including statements concerning Covad's anticipated reduction of costs and direct sales model, ability to continue as a going concern, ability to migrate end users and other operating results, success of strategic relationships, sufficiency of Covad's cash on hand and the statements made by the chairman in this release. Actual events or results may differ materially as a result of risks facing Covad or actual results differing from the assumptions underlying such statements. Such risks and assumptions include, but are not limited to, Covad's ability to raise additional capital, to continue as a going concern, to successfully market its services to current and new customers, the consolidation of sales to a fewer number of wholesale customers, Covad's ability to generate customer demand, to achieve acceptable pricing, to respond to increasing competition, to manage growth, to receive timely payment from our Internet service providers and other customers, to access regions and negotiate suitable interconnection agreements, all in a timely manner, at reasonable costs and on satisfactory terms and conditions, as well as regulatory, legislative, and judicial developments and the absence of an adverse result in litigation against Covad. All forward-looking statements are expressly qualified in their entirety by the "Risk Factors" and other cautionary statements included in Covad's SEC Annual Report on Form 10-K for the year ended December 31, 2000 and in Covad's SEC Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.