PROSPECTUS SUMMARY (Part 1 of 3)
This summary highlights certain important information regarding our business
and this offering. You should read this entire prospectus, including the "Risk
Factors" and the financial statements and all related notes, before deciding to
purchase our common stock. All share information reflects all stock splits
effected prior to the date of this prospectus. Except as otherwise indicated,
the information in this prospectus assumes that:
. the underwriters will not exercise their over-allotment option; and
. all outstanding shares of our preferred stock will be converted into
35,759,794 shares of our common stock.
DSL.net
Our Business
We provide high-speed data communications and Internet access services using
digital subscriber line, or DSL, technology to small and medium sized
businesses. We target select second and third tier cities, generally with
populations of less than 900,000. Our networks enable data transport over
existing copper telephone lines at speeds of up to 1.5 megabits per second. Our
services, marketed under the NetGAIN brand name, offer customers high-speed
digital connections at prices that are attractive compared to the cost and
performance of alternative data communications services.
We offer our customers a single point of contact for a complete business
solution that includes all of the necessary equipment and services for high-
speed data communications. Our primary services include Internet access, e-mail
and hosting our customers' Web sites. We also support networks that connect
customers' various offices and connect our customers with their suppliers,
customers and others. In addition, through independent suppliers, we intend to
offer Web site design and development and applications enabling customers to
engage in electronic commerce. Key elements of our services include:
. high-speed digital connections at prices that are attractive compared to
the cost and performance of alternative data communications services;
. connections that allow for data transmission to and from the customer at
the same high speed, known as symmetric connections;
. connections that allow customers to access the Internet continuously
without having to dial into the network for each use;
. a network designed to reduce the possibility of unauthorized access and
to permit the secure transmission of sensitive information and
applications; and
. high quality customer support 24 hours a day, seven days a week, with
continuous network and customer connections monitoring.
We install our equipment in and provide our services from the offices of
traditional telephone companies from which local telephone service is provided,
known as central offices. Our network design allows us to monitor network
components and customer traffic from our network operations
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center located in New Haven, Connecticut. This enables us to enhance network
quality, service and performance and to identify and address network problem
promptly. We have designed our network so that new capacity is added
incrementally with each new customer.
We began providing service in Stamford, Connecticut in May 1998. As of June
30, 1999, we provided service or had installed equipment in 24 cities. We
intend to continue our network expansion into a total of more than 60 cities by
the end of 1999. We market our services through our direct sales organization
and through marketing partners located in our service areas, such as
integrators of computer networks and systems and consultants.
Our Market Opportunity
We believe that a substantial business opportunity has been created by the
convergence of several factors:
. growth in demand for high-speed data communications;
. increased demand for Internet access by small and medium sized
businesses;
. limitations of existing telecommunications services to meet these
demands; and
. emergence of low-cost, DSL-based solutions.
Data communications is the fastest growing segment of the telecommunications
industry. Forrester Research, Inc. projects that the total market for data
networking services and Internet access will grow from $6.2 billion in 1997 to
approximately $49.7 billion by 2002, with approximately $27.9 billion to come
from services to businesses.
Several DSL service providers have taken advantage of this opportunity in
large metropolitan areas. However, the limited availability of these services
outside of large metropolitan areas has created an opportunity to provide DSL-
based services to a significant, underserved market--small and medium sized
businesses in second and third tier cities.
Our Strategy
Our objective is to become the leading provider of DSL-based services to
small and medium sized businesses in second and third tier cities throughout
the United States. Key elements of our strategy are to:
. be the first DSL-based service provider in select second and third tier
cities throughout the United States;
. utilize our rapid deployment model and leverage our centralized network
management to implement our rollout plan quickly and cost effectively;
. establish relationships in each local market with select local and
regional integrators of computer networks and systems and consultants who
can help market our services and provide us with customer referrals;
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. develop direct relationships with customers in order to better understand
and serve their needs; and
. leverage our systems and network design to capitalize on the cost
efficiencies of DSL technology.
Another key component of our strategy is to develop relationships wit
companies that provide complementary products and services or that can assist
us in attracting our target customers. In July 1999, we entered into separate
strategic arrangements with Staples, Inc. and Microsoft Corporation. As part of
our strategic relationships, Microsoft and Staples invested $15 million and
$3.5 million, respectively. Staples has also indicated its interest in
purchasing $5 million of common stock directly from us at the initial public
offering price in connection with this offering, although it is not bound to do
so. The Staples marketing agreement designates us as their exclusive supplier
of the types of DSL services we provide in each of our markets. Our services
will be co-branded and made available to Staples customers through their
stores, catalogs, direct sales force and Web site. In turn, we have agreed that
we will not sell our services through any other national office supplies
company. In our Microsoft arrangement, we will jointly market a co-branded
version of the Microsoft Network (MSN) service to our customers and Microsoft
intends to use its existing channels and sales force to augment our own
marketing efforts.
Our History
We were incorporated in Delaware on March 3, 1998. Our principal executive
offices are located at 545 Long Wharf Drive, New Haven, Connecticut 06511, and
our telephone number is (203) 772-1000. We maintain a corporate Web site at
www.dsl.net. The contents of our website are not part of this prospectus.
We own applications for federal registration and claim rights in the name
DSL.NET. This prospectus also refers to trade names and trademarks of other
companies.
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The Offering
Common stock offered........
9,600,000 shares
Common stock to be
outstanding after the
offering...................
59,639,556 shares
Use of proceeds............. To continue building our network and for working
capital and other general corporate purposes. We
may also use a portion of the proceeds to acquire
complementary businesses.
Proposed Nasdaq National
Market symbol..............
DSLN
The shares of common stock to be outstanding after the offering exclude, as
of July 21, 1999:
. 12,364,200 shares of common stock reserved for issuance under our stock
option plan, of which 5,259,352 shares with a weighted average exercise
price of $0.54 per share were subject to outstanding options;
. 300,000 shares of common stock reserved for issuance under our employee
stock purchase plan; and
. 194,554 shares of common stock issuable upon exercise of outstanding
warrants with a weighted average exercise price of $0.68 per share.
Staples has indicated an interest in purchasing $5,000,000 of common stock
directly from us at the initial public offering price in connection with this
offering, although it is not bound to do so.
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