Covad Purchases Assets of InternetConnect to Offer Ongoing Service for Customers; Purchase Only Includes Lines, Accounts Receivable, Cash, Equipment and Other Assets.

Business Editors

SANTA CLARA, Calif.--(BUSINESS WIRE)--Jan. 4, 2002

Covad Communications (OTCBB:COVD), the leading national broadband services provider utilizing digital subscriber line (DSL) technology, bought substantially all of the assets of InternetConnect in an auction supervised by the US Bankruptcy Court for the Central District of California. This purchase assures all InternetConnect customers on the Covad DSL network will be offered virtually uninterrupted broadband service for their business and residential use.

The purchase price for the assets of InternetConnect, a Torrance, Calif.-based Internet Service Provider (ISP) which has been in bankruptcy since May 2001, was $7.35 million. Covad did not assume any liabilities or obligations of InternetConnect but will fund any shortfall in operating revenue during the period in which customers will be transitioned to Covad. Assets include accounts receivable, cash, equipment and other assets and approximately 9,250 lines, which include digital subscriber line and T1 broadband connections, along with virtual private network (VPN) customers. The majority of these lines are currently on Covad's network. There will be a 90-day transition period for all assets to come under Covad's control.

The end users on the Internet Connect lines will be offered similar Covad services and will experience minimal service disruption. It is expected that customers will be able to maintain their email address and other services offered by Internet Connect during the transition period and beyond. Communications to customers telling them about the easy integration process will be sent by mid-January. Approximately 60 percent of Internet Connect customers are in the Los Angeles, San Diego, San Francisco, Chicago, Boston and Washington, D.C. areas.

"Our number one priority is that these customers now have the assurance of high quality service continuity from a company that is here for the long run," said Chuck Haas, executive vice president of Marketing and Strategy. "It is also good for Covad as we are able not only to preserve these customers and get InternetConnect off our distressed ISP list, but these lines will now be higher revenue and profit for us as direct customers. It is a win-win situation all around."

"Covad will continue to manage its distribution channels which have seen significant consolidation in 2001," said Haas. "Through the year, we have proven that Covad is the safety net for broadband customers that have lost their ISP, and we will continue to strengthen our sales channels where appropriate."

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 and PC OEMs 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 ability to migrate end users from InternetConnect and offer uninterrupted service to these end users, ability to continue as a going concern, sufficiency of Covad's cash on hand, additional capital requirements, ability to become cash flow positive and achieve profitability and the statements made by the executive vice-president of Marketing and Strategy and 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 December 31, 2000, and in Covad's SEC Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.