Covad Announces Wholesale Service Agreement With America Online to Provide Broadband Services.

Business Editors/High-Tech Writers

SANTA CLARA, Calif.--(BUSINESS WIRE)--Sept. 5, 2002

Covad Communications (OTCBB:COVD) announced today that it has signed a five-year agreement with America Online, Inc. that provides America Online with the ability to purchase wholesale Digital Subscriber Line (DSL) consumer services throughout Covad's nationwide network.

America Online will now have access to Covad's nationwide network, which currently covers more than 40 million U.S. homes and businesses and includes service in 94 of the top Metropolitan Statistical Areas (MSAs) across the United States. As a result, the agreement will increase the number of options available to America Online in offering broadband services to its members.

"The addition of America Online as a wholesale partner enhances our distribution channel enabling us to provide services to the largest Internet service provider in the country," said Charles E. Hoffman, Covad CEO and president. "It also gives America Online the flexibility and scalability of a single, national resource for their millions of customers who want to upgrade from dial-up to a high-speed, always on broadband connection."

In addition, Covad issued warrants to America Online to purchase a total of 3.5 million shares of Covad common stock, which is equal to approximately 1.5 percent of Covad's currently outstanding common stock. America Online will have the option to purchase Covad's common stock at exercise prices ranging from $1.06 to $5.00. Covad has determined that the warrants have an aggregate estimated value of approximately $3.5 million. Covad expects to record this value as a deferred customer incentive and charge it against revenue over the term of the service agreement.

About Covad Communications:

Covad is a leading national broadband service provider of high-speed Internet and network access utilizing Digital Subscriber Line (DSL) technology. It offers DSL, T1, managed security, IP and dial-up services directly through Covad's direct sales force and web and telephone sales and through Internet Service Providers, value-added resellers, telecommunications carriers and affinity groups 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 3420 Central Expressway, Santa Clara, CA 95051. 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 sales to America Online, revenue, and growth, and the statements made by the president and CEO and the assumptions underlying such statements. 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 continue as a going concern, to continue to service and support its customers, to successfully market its services to current and new customers, to manage the consolidation of sales to a fewer number of wholesale customers, to successfully migrate end users, Covad's ability to generate customer demand, to achieve acceptable pricing, to respond to competition, to develop and maintain strategic relationships, to manage growth, to receive timely payment from 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 Dec. 31, 2001 and its Reports on Form 10-Q for the periods ended March 31, 2002 and June 30, 2002. For further information on the agreement and the warrants, please see Covad's Current Report on Form 8-K, filed with the Securities and Exchange Commission on Sept. 5, 2000.