Summary Risk Factors

An investment in our common stock involves a high degree of risk. The following risks, as well as the other risks discussed in “Risk Factors”, should be carefully considered before participating in this offering:

Material weaknesses in our internal control over financial reporting. In connection with the preparation of our 2005 consolidated financial statements as of December 31, 2005, and during the course of preparing for this offering, our independent registered public accounting firm reported ten control deficiencies, which represent material weaknesses in our internal control over financial reporting. These material weaknesses contributed to the need to restate our 2003, 2004 and 2005 annual consolidated financial statements to correct our accounting for debt issuance costs, stock based compensation expense and discontinued operations.

Net losses. We have incurred losses since our inception and have an accumulated deficit of $209.8 million as of September 30, 2006. Until 2003, we did not generate cash from operations.

Leased properties. We do not own the buildings in which our properties are located and could be forced by our landlords to vacate such facilities.

Service interruptions. We have service level commitment obligations to substantially all of our customers and have at times in the past given credits to our customers as a result of service interruptions due to equipment failures.

Customer retention. Our customer contracts for space and power typically have terms of one to three years and interconnection services are typically provided either on a month-to-month basis or over a one year term. Some of our customers, including our largest customer, based upon our revenues for the year ended December 31, 2005, have elected not to renew their contracts.

Corporate Reorganization

In connection with this offering, Switch and Data, Inc., a Delaware corporation, the shares of which are being sold to the public in this offering, will be the successor to Switch & Data Facilities Company, Inc., our current holding company, following a reorganizational merger that will take place before the completion of this offering. As part of the merger, Switch and Data, Inc. will change its name to Switch & Data Facilities Company, Inc. The certificate of merger will be filed, and the merger and reorganization will become effective shortly before the closing for the sale of the shares in this offering. The reorganization will include the following:

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See “Certain Relationships and Related Party Transactions—Corporate Reorganization.”

Company Information

We were incorporated on July 31, 2006 as a Delaware corporation. Our predecessor, Switch & Data Facilities Company, Inc., also a Delaware corporation, was incorporated on March 15, 2000. The original predecessor of Switch & Data Facilities Company, Inc. was organized in Delaware on March 10, 1998, as Switch & Data Facilities Company, LLC. We currently conduct certain operations through our wholly-owned subsidiaries. Our principal executive offices are located at 1715 North Westshore Boulevard, Suite 650, Tampa, Florida 33607 and our telephone number is (813) 207-7700. We maintain a website at www.switchanddata.com where general information about our business is available. Information contained on our website or that can be accessed through our website is not part of this prospectus, and investors should not rely on any such information in making the decision whether to purchase our common stock.

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RISK FACTORS

If you purchase shares of our common stock, you will assume a high degree of risk. In deciding whether to invest, you should carefully consider the following risk factors, as well as the other information contained in this prospectus. Any of the following risks as well as other risks and uncertainties discussed in this prospectus could have a material adverse effect on our business, financial condition, results of operations or prospects and cause the value of our stock to decline, which could cause you to lose all or part of your investment. Additional risks and uncertainties of which we are unaware, or that are currently deemed immaterial by us, also may become important factors that affect us.

Risks Related to Our Business

Material weaknesses identified in our internal control over financial reporting may result in our inability to file periodic reports within the time periods required by federal securities laws.

As further described in the section of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in connection with the preparation of our 2005 consolidated financial statements as of December 31, 2005, and during the course of preparing for this offering, our independent registered public accounting firm reported ten control deficiencies, which represent material weaknesses in our internal control over financial reporting. These material weaknesses resulted in, or contributed to, adjustments to our financial statements and, in certain cases, restatement of prior financial statements. In instances where adjustments were only required for the 2005 financial statements, the related material weakness existed only in that fiscal year. Any failure to implement new or improved controls in order to remediate the material weaknesses reported by our independent registered public accounting firm, or any difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations.

The rules of the Securities and Exchange Commission (the “SEC”) require that, as a publicly-traded company following the completion of this offering, we file periodic reports containing our financial statements within a specified time following the completion of quarterly and annual fiscal periods. Any failure by us to timely file our periodic reports with the SEC may result in a number of adverse consequences that could materially and adversely impact the value of your investment, including, without limitation, delisting of our stock from The Nasdaq Global Market, potential action by the SEC against us, possible defaults under our credit arrangements, stockholder lawsuits and general damage to our reputation.

Material weaknesses in our internal control over financial reporting may result in the inability of investors to rely on our financial statements.

Control deficiencies in our internal control over financial reporting could result in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected. Upon completion of this offering, we will have had only limited operating experience with the remedial measures we have made to date, and we have significant additional remedial measures that we must undertake. We cannot provide assurance that the measures we have taken to date or any future measures will adequately remediate the material weaknesses reported by our independent registered public accounting firm. In addition, we cannot be certain that there are no additional material weaknesses in our internal control over financial reporting. Our failure to maintain effective disclosure controls and procedures or internal control over financial reporting could require us to restate our financial statements or otherwise cause investors to lose confidence in our reported financial information and could adversely impact our stock price. Any such failure could also adversely affect the results of the

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periodic management evaluations of our disclosure controls and procedures and internal control over financial reporting that will be required under the Sarbanes-Oxley Act of 2002.

We have incurred substantial losses in the past and may continue to incur losses in the future.

We have never been profitable and have incurred losses since our inception. For the years ended December 31, 2004 and 2005, we incurred net losses of approximately $13.5 million and $11.3 million, respectively. For the nine months ended September 30, 2006, we incurred net losses of approximately $10.1 million. Until 2003, we did not generate cash from operations. As of September 30, 2006, we had an accumulated deficit of $209.8 million. There can be no guarantee that we will achieve profitability. Even if we achieve profitability, given the competitive and evolving nature of the industry in which we operate, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our operating results have fluctuated historically and could continue to fluctuate in the future, which could affect our ability to maintain our current market position or expand.

Our operating results have fluctuated in the past and may continue to fluctuate in the future as a result of a variety of factors, many of which are beyond our control, including the following:

Any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition. Although we have experienced growth in revenues in recent quarters, this growth rate is not necessarily indicative of future operating results. A relatively large portion of our expenses are fixed in the short-term, particularly with respect to lease and personnel expenses, depreciation and amortization expenses, and interest expense. Therefore, our results of operations are particularly sensitive to fluctuations in revenues. As such, comparisons to prior periods should not be relied upon as indications of our future performance.

Our ability to maximize the utilization of our facilities is limited by the availability and cost of sufficient electrical power and cooling capacity.

The availability of an adequate supply of electrical power and cooling capacity, and the infrastructure to deliver that power and cooling, is critical to our ability to provide our services. Even though physical space may be available in a facility, the demand for electrical power may exceed our designed capacity. We may be unable to meet the increasing power and cooling needs of our customers if our customer mix does not match our expectations or our customers

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further increase their use of high density electrical power equipment, such as blade servers. In

addition, the amount of saleable space within our facilities is reduced to the extent that we house generators and batteries to provide back-up power. Further, certain of the leases for our

facilities also contain provisions that limit the supply of electrical power and cooling capacity to

such facilities, as a result of which our ability to reach full utilization may be constrained in

these facilities. If the availability of power limits our ability to fully utilize the space within our

facilities, we may be unable to accept new customers at our facilities and our revenue growth

will decline or we may incur additional costs to increase the power supply or acquire space at an additional facility.

The high utilization of our facilities may limit our ability to grow in certain key markets, and we may be unable to expand our existing facilities or locate and secure suitable sites for additional facilities.

Our facilities have reached high rates of utilization in many of our key markets. Our ability to meet the growing needs of our existing customers and to attract new customers in these key markets depends on our ability to add additional capacity by incrementally expanding our existing facilities or by locating and securing additional facilities in these markets that meet specific infrastructure requirements such as access to multiple telecommunications carriers, a significant supply of electrical power, high ceilings and the ability to sustain heavy floor loading. In many markets, the supply of facilities with these characteristics is limited and subject to high demand. If we are unable to expand our capacity in a timely and cost-effective manner, our business and results of operations may be adversely affected.

We are continuing to invest in our expansion efforts, but we may not experience sufficient customer demand in the future to realize expected returns on these investments.

We are considering the acquisition or lease of additional properties, including the construction of new facilities. We would be required to commit substantial operational and financial resources to these facilities, generally up to 18 months in advance of securing customer contracts, and we may not experience sufficient customer demand in those markets to support these facilities once they are built. In addition, unanticipated technological changes could affect customer requirements, and we may not have built such requirements into our new facilities. Any of these contingencies, if they were to occur, could make it difficult for us to realize expected or reasonable returns on these investments and could have a material adverse effect on our operating results.

We do not own the buildings in which our facilities are located. Instead, we have chosen to lease our facility space, and the non-renewal of leases poses significant risk to our ongoing operations.

We would incur significant costs if we were forced to vacate one of our facilities due to the high costs of relocating the equipment in our facilities and installing the necessary infrastructure in a new facility. In addition, if we were forced to vacate a facility, we could lose customers that chose our services based on our location. Our landlords could attempt to evict us for reasons beyond our control. Further, we may be unable to maintain good working relationships with our landlords, which would adversely affect our customer service and could result in the loss of current customers.

In addition, our business would be harmed by our inability to renew leases at favorable terms. Most of our leases provide two five-year renewal options with rents set at then-prevailing market rates. We expect that the then-prevailing market rates will be higher than present rates. To maintain the operating profitability associated with our present cost structure, we must

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increase revenues within existing facilities to offset the anticipated increase in lease payments at the end of the original and renewal terms. Failure to increase revenue sufficiently to offset these projected higher costs would adversely impact our operating income.

Additionally, ten of our leases do not contain renewal options. Renewing these leases at favorable terms will be critical to continuing those operations in the Los Angeles, Atlanta, New York, Philadelphia and Seattle markets. Even those leases which contain renewal options do not ensure long-term operations at those facilities.

If our contracts with our customers are not renewed or are terminated, our business could be substantially harmed.

Our customer contracts for space and power typically have terms of one to three years. Interconnection services are typically provided either on a month-to-month basis or over a one-year term. Our customers may not elect to renew these contracts. Furthermore, our customer contracts are terminable for cause if we breach a material provision of the contract, including the failure to provide power or connectivity for extended periods of time, or violate applicable laws or regulations. We may face increased competition and pricing pressure as our customer contracts become subject to renewal. Our customers may negotiate renewal of their contracts at lower rates, for fewer services or for shorter terms. If we are unable to successfully renew our customer contracts on their current terms, or if our customer contracts are terminated, our business could suffer.

We have been sued by several landlords for breaches of our lease agreements. An adverse determination in any of these proceedings could result in significant liabilities.

We have three ongoing cases with respect to disputes arising out of alleged breaches of our abandoned lease agreements. One of these is a suit filed in West Palm Beach, Florida in May 2002, in which the plaintiff is seeking damages of approximately $29.7 million, consisting of alleged lost rents, lost profits, lost business opportunities, transaction costs relating to our alleged forced sale and attorney’s fees. In a suit filed in Milwaukee, Wisconsin in May 2006, the plaintiff is seeking damages of $4.6 million consisting of alleged lost rents, losses on the sale of the building and attorney’s fees. The third suit was filed in New Orleans, Louisiana in October 2001, and involves a plaintiff that is seeking damages of approximately $3.6 million consisting of alleged lost rent, restorative expenses and lease commission. In the past, we have experienced adverse outcomes in litigation proceedings arising out of similar facts, and we have also settled similar disputes for significant sums. The potential liabilities resulting from these claims may not be covered by our insurance policies or may be disputed by our insurers. Moreover, even if the claims brought against us are unsuccessful or without merit, the cost of defending these suits may result in a material adverse effect on our liquidity. See “Business—Legal Proceedings” for more information.

Any failure of our physical infrastructure or services could lead to significant costs and disruptions that could reduce our revenues, harm our business reputation and have a material adverse effect on our financial results.

Our business depends on providing customers with highly reliable service. The services we provide are subject to failure resulting from numerous factors, including:

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Problems at one or more of our facilities, whether or not within our control, could result in service interruptions or equipment damage. We have service level commitment obligations to substantially all of our customers. As a result, service interruptions or equipment damage in our facilities could result in credits for service interruptions to these customers. We have at times in the past given credits to our customers as a result of service interruptions due to equipment failures. We cannot assure you that our customers will accept these credits as compensation in the future. Also, service interruptions and equipment failures may expose us to additional legal liability and impair our brand image. We depend on our landlords and other third-party providers to properly maintain the buildings in which our facilities are located. Improper maintenance by such landlords and third parties increase the risk of service interruptions and equipment damage.

Additionally, certain of our facilities, including those in California, Florida and the Pacific Northwest, are located in areas particularly susceptible to natural disasters such as earthquakes, hurricanes and tornadoes. The occurrence of any natural disaster could shut down one or more of our facilities and result in a material adverse effect upon our results of operations. Moreover, we may not have adequate property or liability insurance to cover catastrophic events.

We may not be able to compete successfully against current and future competitors.

We compete with network neutral interconnection and colocation service providers and other telecommunications service providers, including U.S.-based telecommunications carriers and Internet service providers, managed service providers and web hosting companies. Many of our competitors have longer operating histories and significantly greater financial, technical, marketing and other resources than us, and some have a greater presence in our markets and in other markets across the United States and around the world.

Because of their greater financial resources, some of our competitors have the ability to adopt aggressive pricing policies. As a result, we may suffer from pricing pressure that would adversely affect our ability to generate revenues and adversely affect our operating results. In addition, certain of these competitors currently offer network neutral interconnection and colocation services in the same markets where we have facilities, and other competitors may start doing so in the future. Some of these competitors may also provide our current and potential customers with additional benefits, including one-stop shopping options through bundled interconnection and colocation services, and may do so in a manner that is more attractive to our potential customers than our services. These competitors may be able to provide bundled interconnection and colocation services at prices lower than our cost structure allows. If, as a result of such efficiencies, these competitors are able to adopt aggressive pricing policies for interconnection and colocation services, our ability to generate revenues would be materially and adversely affected.

In addition, our competitors may operate more successfully or form alliances to acquire significant market share. Once businesses locate their networking and computing equipment in competitors’ facilities, it may be extremely difficult to convince them to relocate to our facilities. Furthermore, a business that has already invested substantial resources in such arrangements may be reluctant or slow to replace or limit its existing services by becoming our customer.

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Finally, we may also experience competition from our landlords. Rather than leasing available space in our buildings to us or other large single tenants, they may decide to convert the space instead to smaller units designed for multi-tenant interconnection and colocation use. Landlords may enjoy a cost advantage in providing services similar to those provided by us, and this could also reduce the amount of space available to us for expansion in the future.

If we fail to differentiate our facilities and services from the services provided by our current or future competitors, we may not be able to compete successfully and our business and results of operations may be adversely affected.

Our failure to meet performance standards under our service level agreements could result in our customers terminating their relationship with us and the damage to our reputation could limit our ability to retain existing customers and attract new customers.

We have service level agreements with substantially all of our customers in which we provide various guarantees regarding our levels of service. We may have difficulty meeting these levels of service if we experience service interruptions. If we fail to provide the levels of service required by these agreements, our customers may be able to receive service credits for their accounts or terminate their relationship with us. In addition, our inability to meet our service level commitments may damage our reputation and could consequently limit our ability to retain existing customers and attract new customers, which would adversely affect our ability to generate revenues and negatively impact our operating results. We have issued credits to customers on several occasions in the past due to our failure to meet our service level commitments, and we may do so in the future. We cannot assure you that our customers will accept these credits as compensation in the future.

We are dependent upon third-party suppliers for power and certain other services, and we are vulnerable to service failures of our third-party suppliers and to price increases by such suppliers.

We generally do not control the amount of power our customers draw from their installed circuits. We rely on third parties to provide power, and we cannot ensure that these third parties will deliver such power in adequate quantities or on a consistent basis. If the amount of power available to us is inadequate to support our customer requirements or delivery of power does not occur in a timely manner, we may be unable to provide our services to our customers and our operating results and cash flow may be materially and adversely affected. In addition, our facilities are susceptible to power shortages and planned or unplanned power outages caused by these shortages such as those that occurred in California in 2001, in New York City and the Northeast in 2003 and in Miami in 2005. The overall power shortages in California, where three of our facilities, including our Palo Alto facility, are located, have increased the cost of energy, which we may not be able to pass on to our customers. We also believe that the Northeast remains particularly vulnerable to power shortages. We attempt to limit exposure to power shortages by using backup generators and batteries. Power outages, which may last beyond our backup and alternative power arrangements, would harm our customers and our business. In the past, a limited number of our customers have experienced temporary losses of power. We could incur financial obligations or be subject to lawsuits by our customers in connection with a loss of power. In addition, any loss of services or equipment damage could reduce the confidence of our customers in our services and could consequently impair our ability to attract and retain customers, which would adversely affect both our ability to generate revenues and our operating results.

We are dependent upon third-party suppliers for the resale of Internet access and other services, and we have no control over the quality and reliability of the services provided by

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these suppliers. In the past, some of these providers have experienced significant system failures. Users of our services may in the future experience difficulties due to service failures unrelated to our systems and services. If for any reason these suppliers fail to provide certain services to us, our business, financial condition and results of operations could be adversely affected.

We depend upon a limited number of network service provider customers in certain of our facilities, and the loss of one or more of these customers in those facilities could adversely affect business.

Because we do not own or operate our own network, we depend upon network service providers to colocate and/or interconnect as customers in our facilities and contribute to the network density that attracts our other customers. In several of our smaller markets, we have agreements with only a limited number of network service providers. In these small market facilities, we expect that we will continue to rely upon a smaller number of network service provider customers to maintain network density within those facilities. Our agreements with these network service providers will expire over a one to three-year period if not renewed. A loss of one or more of these customers could have a material and adverse effect on the operations of one or more of our facilities.

Our ability to grow depends on a diverse customer base, and our failure to develop and maintain a diverse customer base could harm our business and adversely affect our results of operations.

Our ability to grow depends on our ability to develop and maintain a diverse customer base, consisting of a variety of businesses, including telecommunications carriers, Internet service providers and enterprises. We believe creating a diverse customer base in each facility will generate incremental interconnection revenues in the long-term and increase our overall revenues. Our ability to attract and retain these customers will depend on a variety of factors, including the presence of multiple telecommunications carriers in our facilities, the mix of services offered by us, our overall customer mix, the operating reliability and security of our facilities and our ability to market our services effectively across different customer segments. If we fail to develop and maintain a diverse customer base, our business and results of operations may be adversely affected.

We intend to make future acquisitions, which pose integration and other risks that could harm our business.

Since March 2003, we have made the following five acquisitions: the acquisition of the assets and certain liabilities of PAIX.net, Inc. in March 2003; the acquisition of the stock of Meridian Telesis in January 2004; the acquisition of the stock of the RACO Group in March 2004; the acquisition of the limited partnership interests of the Site II partnership in 2004; and the acquisition of the stock of LayerOne Holdings in January 2005. We may acquire complementary businesses, product or service lines and technologies in the future. There can be no assurance that we will be able to successfully integrate our acquisitions. To finance these acquisitions, we may incur additional debt and issue additional shares of our stock, which will dilute existing stockholders’ ownership interests in us and may adversely affect our business and operations.

Specific challenges we have encountered in our prior acquisitions include the following:

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Future acquisitions may expose us to the challenges set forth above and other risks such as:

The failure to successfully integrate acquired businesses, operations or technologies could have a material adverse effect on our business, results of operations and financial condition. Successful integration will depend on our ability to manage acquired operations, realize revenue growth from an expanded customer base and eliminate duplicative and excess costs, among other factors.

Our costs will increase significantly as a result of operating as a public company, and our management will be required to devote substantial time to complying with public company regulations.

We have never operated as a public company. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as recent rules subsequently implemented by the SEC and The Nasdaq Stock Market, have imposed various new requirements on public companies, including changes in corporate governance practices, and these requirements will continue to evolve. Our management and other personnel will need to devote a substantial amount of time to comply with these evolving requirements. Moreover, these rules and regulations relating to public companies will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain and periodically evaluate our internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to satisfy the ongoing requirements of Section 404.

Failure to design, implement and maintain effective internal controls could have a material adverse effect on our business and stock price.

As a public company, we will have significant requirements for enhanced financial reporting and internal controls. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the

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economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our financial statements and harm our operating results. In addition, we will be required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which will require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent auditors that both addresses management’s assessments and our internal controls. We must complete our first Section 404 annual management report as of December 31, 2007, and our auditor must complete its first attestation report as of December 31, 2008 and we must include these reports in our 2007 and 2008 Form 10-Ks, (to be filed in early 2008 and 2009, respectively). As described above, during the course of our internal control testing, we identified deficiencies and we may discover additional deficiencies, which we may not be able to remediate in time to meet our deadline for compliance with Section 404. Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 or our independent auditors may not issue a favorable assessment. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or their effect on our operations. If either we are unable to conclude that we have effective internal control over financial reporting or our independent auditors are unable to provide us with an unqualified report, investors could lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

Our services have a long sales cycle that may have a material adverse effect on our business, financial condition and results of operations.

A customer’s decision to license rack, cabinet or cage space in one of our facilities and to purchase interconnection services typically involves a significant commitment of our time and resources. Many customers are reluctant to commit to purchasing our interconnection and colocation services until they are confident that our facility has adequate available carrier connections and network density. As a result, we experience a long sales cycle for our services. Furthermore, we may expend significant time and resources in pursuing a particular sale or customer that does not generate revenue. Delays due to the length of our sales cycle or costs incurred that do not result in sales may have a material adverse effect on our business, financial condition and results of operations.

Our success largely depends upon retaining the services of our management team.

We are highly dependent on our management team. We expect that our continued success will largely depend upon the efforts and abilities of members of our management team. The loss of services of any key executive for any reason could have a material adverse effect upon us. Our success also depends upon our ability to identify, develop and retain qualified employees. The loss of some of our management and other employees could have a material adverse effect on our operations.

Our brand is not as well known as that of some of our competitors. Failure to develop and maintain brand recognition could harm our ability to compete effectively.

Many of our competitors are large telecommunications service providers that promote their brands with significantly larger budgets than we have for brand promotion. If we fail to develop

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and maintain brand recognition through sales and marketing efforts and a reputation for high quality service, we may be unable to attract new customers and risk losing existing customers to competitors with better known brands.

We have not been successful in attracting customers in several regional markets. We have closed several facilities and our failure to attract sufficient customers in our remaining regional markets could cause us to close one or more of our facilities and lose prospective customers and may adversely affect our business.

We maintain a presence in select regional markets across the U.S. and, in several of those markets, we have not been successful in attracting customers to our facilities. We have also exited certain markets. In connection with our exit from these markets and in other markets, we have taken significant asset impairment and discontinuation charges. We presently intend to exit the Kansas City market within the next 9 to 12 months. We are also currently considering exiting another market which currently represents less than 1% of our revenues.

We have significant debt obligations which include restrictive covenants that limit our flexibility to manage our business; failure to comply with these covenants could trigger an acceleration of our outstanding indebtedness.

As of September 30, 2006, outstanding indebtedness under our credit facilities totaled approximately $144.8 million. Our credit facilities require that we maintain specific financial ratios and comply with covenants, including various financial covenants, which contain numerous restrictions on our ability to incur additional debt, pay dividends or make other restricted payments, sell assets, enter into affiliate transactions and take other actions. Furthermore, our existing financial arrangements are, and future financing arrangements are likely to be, secured by all of our assets. If we are unable to meet the terms of the financial covenants or if we breach any of these covenants, a default could result under one or more of these agreements. We have in the past violated certain covenants under our credit facilities, including a violation of the fixed charge covenant in March 2006 and violations of the leverage coverage, interest coverage and fixed charge covenants in September 2006, each of which were subsequently waived by our lenders pursuant to amendments to the credit facilities. A default, if not waived by our lenders, could result in the acceleration of outstanding indebtedness and cause our debt to become immediately due and payable.

If we are unable to generate sufficient cash available to repay our debt obligations when they become due and payable, we will have to refinance such obligations, or otherwise we will not be able to repay our debt. If new financing is made available, its terms may not be favorable to us and our business may be adversely affected.

We could incur substantial costs as a result of violations of or liabilities under environmental laws.

We are subject to various environmental and health and safety laws and regulations, including those relating to the generation, storage, handling and disposal of hazardous substances and wastes. Certain of these laws and regulations impose liability, without regard to fault or the lawfulness of the disposal activity, for the entire cost of the investigation and cleanup of contaminated sites on current and former owners and operators of real property and persons who have disposed of or released hazardous substances at any location. Our facilities contain tanks for the storage of diesel fuel and significant quantities of lead acid batteries to provide back-up power. We maintain an environmental compliance program that includes the implementation of required technical and operational procedures designed to minimize the potential for leaks and spills, maintenance of records and manufacturers’ recommended preventative maintenance. However, we cannot guarantee that these systems will remain free

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from leaks or that the use of these systems will not result in spills. Any leak or spill of hazardous materials could result in interruptions to our operations and expenditures that could have a material adverse effect on our business, financial condition and results of operations. Moreover, hazardous substances or regulated materials of which we are not aware may be present at facilities we operate and lease. To the extent any such contaminants are discovered at our facilities, we may be responsible under applicable laws, regulations or leases for any required removal or cleanup at substantial cost. In addition, non-compliance with or liabilities under existing environmental or health and safety laws and regulations, or the adoption of more stringent requirements in the future, could result in fines, penalties, third-party claims and other costs that could be material.

Risks Related to Our Industry

Our business depends on general economic performance and the continued use of the Internet, as well as the increasing adoption and usage of bandwidth intensive services.

Acceptance and use of the Internet may not continue to develop at historical rates and a sufficiently broad base of consumers may not continue to use the Internet and other online services as a medium of communication, commerce and entertainment. Demand for Internet services and products is subject to a high level of uncertainty and such services and products are subject to significant pricing pressure. As a result, we cannot be certain that a viable market for our services will be sustainable in many of our markets. If the market for our services grows more slowly than we currently anticipate, our revenues and operating results will be materially and adversely affected.

Industry consolidation may have a negative impact on our business.

The telecommunications industry is currently undergoing consolidation. For example, two of our significant customers, Qwest and Level 3, acquired OnFiber and Progress Telecom, respectively, both of which are also significant customers. As our customers consolidate, there may be fewer telecommunications service providers available in our facilities and, with less network density in our facilities, our network neutral interconnection and colocation services may become less attractive to our customers. Further, our customers may require less interconnection and colocation services as they combine businesses. Given the competitive and evolving nature of this industry, further consolidation of our customers and competitors may present a risk to our network neutral business model and have a material adverse effect on our revenues and results of operations.

Changes in technology could adversely affect our business.

The markets for the services we offer are characterized by rapidly changing technology, evolving industry standards, frequent new service introductions, shifting distribution channels and changing customer demands. We may not be able to adequately adapt our services or acquire new services that can compete successfully. We risk losing customers to our competitors if we are unable to adapt to this rapidly evolving marketplace.

In addition, our large telecommunications service provider customers that may be colocated at our facilities and our competitors’ facilities may, for reasons that are beyond our control, decide to upgrade the equipment in our competitors’ facilities but not at our facilities. This could lead to the phasing out of our facilities as a marketplace for telecommunications services, making our services less desirable for our customers. Such an occurrence would adversely affect our financial condition, our ability to retain existing customers and our ability to attract new customers.

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Government regulation of data networks is largely unsettled, and depending on its evolution, may adversely affect our business.

The telecommunications industry is currently undergoing a transformation in technology as it moves from a traditional dedicated circuit network architecture to a design where all forms of traffic—voice, video, and information—are transmitted as digital bits over IP-based networks. With the advent of these digital data transmissions and the growth of the Internet, data networks are becoming the networks over which all communications services can be offered. Determining the appropriate regulatory framework for these data networks is one of the most significant challenges facing federal and state telecommunication policy makers. As a result of this fundamental shift in the telecommunications industry’s underlying technology, various laws and governmental regulations in Canada and at the federal, state and local level in the U.S., governing IP-based services, related communications services and information technologies remain largely unsettled.

We are currently regulated by the Federal Communications Commission and the Canadian Radio Television and Telecommunications Commission regarding our provision of International Private Line interexchange services. We are also regulated by the New York State Department of Public Service regarding the provisions of intrastate interexchange services. Due to changing technology and applications of that technology it is uncertain whether and how existing laws or regulations or new laws or regulations will be applied by the Federal Communications Commission and other regulatory agencies in the future to other currently unregulated services we offer, or to new services or products that we may offer in the future.

Terrorist activity throughout the world and military action to counter terrorism could adversely impact our business, particularly in regards to our operations located in the San Francisco Bay Area and New York City.

The September 11, 2001 terrorist attacks in the U.S., the ensuing declaration of war on terrorism, the war in Iraq and the continued threat of terrorist activity and other acts of war or hostility appear to be having an adverse effect on business, financial and general economic conditions internationally. These effects may, in turn, increase our costs due to the need to provide enhanced security, which would have a material adverse effect on our business and results of operations. These circumstances may also adversely affect our ability to attract and retain customers, our ability to raise capital and the operation and maintenance of our facilities. We may not have adequate property and liability insurance to cover catastrophic events or attacks brought on by these factors. In addition, we depend heavily on the physical infrastructure, particularly as it relates to power, that exists in the markets in which we operate. Any damage to such infrastructure in these markets, and particularly in New York City and the San Francisco Bay Area, markets where we operate that are likely to be more prone to terrorist activity as the principal financial and technology centers of the United States, respectively, may materially and adversely affect our business.

Risks Related to the Offering

Certain of our stockholders have sued us demanding appraisal rights in connection with our corporate reorganization.

Two of our stockholders filed a lawsuit against us in a Delaware state court on January 29, 2007. This lawsuit seeks a declaratory judgment that those of our predecessor’s stockholders who did not sign our predecessor’s fourth amended and restated investors agreement are entitled to appraisal rights with respect to our corporate reorganization. It also sought a preliminary injunction against our corporate reorganization and this offering until the appraisal

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rights issue was resolved. The plaintiffs sought expedited consideration for the preliminary injunction. On February 2, 2007, the Delaware court denied the plaintiff’s motion for expedited consideration. This denial was based upon our agreement that the plaintiffs, and any other holder of our predecessor’s capital stock who has not signed our predecessor’s fourth amended and restated investors agreement, may participate in the offering as a selling stockholder and not waive any right to an appraisal remedy (if any such right exists) with respect to the shares not sold by such stockholder, even if such stockholder has previously consented in writing to the corporate reorganization. Although the motion to expedite has been denied, thereby mooting the motion for preliminary injunction, the lawsuit remains outstanding.

The Delaware General Corporation Law (the “DGCL”) provides that stockholders have the right to seek an appraisal of their stock in connection with certain mergers. We believe that, under the DGCL, any of our predecessor’s stockholders who are not parties to the investors agreement and who do not consent to our corporate reorganization (and who are not subject to any other defenses) would have the right to seek an appraisal of their stock if our corporate reorganization is completed and all of the requirements of the DGCL are satisfied by such holders. One holder of the following approximate number of shares of our predecessor’s capital stock may not be a party to the investors agreement and may have the right to dissent from our corporate reorganization and seek to exercise appraisal rights: (i) 60,521 shares of Common Stock (or, approximately 0.1% of such class); (ii) 217,296 shares of Series B Common Stock (or, approximately 0.3% of such class); and (iii) 108,648 shares of Series C Redeemable Preferred Stock (or, approximately 0.3% of such class).

The fourth amended and restated investors agreement contains a waiver of appraisal rights in connection with a corporate reorganization. Although we intend to vigorously contest the Delaware lawsuit, we cannot assure you how the Delaware court will rule on the validity of such waivers. Holders of the following approximate number of shares of our predecessor’s capital stock signed prior versions of our predecessor’s investors agreement but did not sign our predecessor’s fourth amended and restated investors agreement: (i) 25,516,782 shares of Common Stock (or, approximately 60.3% of such class); (ii) 10,224,386 shares of Series B Common Stock (or, approximately 15.7% of such class); (iii) 5,786,358 shares of Series B Convertible Preferred Stock (or, approximately 26.2% of such class); (iv) 5,112,197 shares of Series C Redeemable Preferred Stock (or, approximately 15.7% of such class); (v) 1,640 shares of Series D-1 Preferred Stock (or, approximately 0.5% of such class); (vi) 706,258 shares of Series A Special Junior Stock (or, approximately 100% of such class); (vii) 265,033 shares of Series B Special Junior Stock (or, approximately 100% of such class); and (viii) 219,812 shares of Series C Special Junior Stock (or, approximately 100% of such class).

If any of the holders of our predecessor’s stock that have or may have appraisal rights satisfy the remaining requirements of the DGCL for assertion of such rights, and it is determined that such holders have not waived their appraisal rights, such holders would be entitled to receive payment equal to the fair value of their stock determined in accordance with the DGCL. We cannot assure you how the Delaware court will determine the fair value of our predecessor’s stock, and the values determined in an appraisal proceeding could result in substantial liabilities. If the fair value were determined to be at the midpoint of the range set forth on the cover of this prospectus, the fair value of all of the stock of all of the holders that have or may have appraisal rights would be approximately $29.0 million. Our credit facilities limit our ability to make payments in respect of our equity interests, including appraisal payments. If we are required to make such payments we would need to seek an amendment or waiver of our credit facilities. Failure to obtain an amendment or waiver could result in the acceleration of outstanding indebtedness under the credit facilities. The cost of any appraisal proceedings or payments, as well as the inability to borrow under, or the acceleration of, our credit facilities, could result in a material adverse effect on our liquidity. See “Business—Legal Proceedings” for more information.

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We may face additional litigation with certain of our stockholders.

Several years ago, we were sued by certain of our stockholders related to minority stockholder issues. As noted above, we were sued on January 29, 2007 by two of our minority stockholders. We have also recently received communications from other stockholders related to minority stockholder issues, including our corporate reorganization. Our predecessor’s capital needs necessitated a number of rounds of financing and the terms and conditions of such financing varied. The later rounds of financing generally contained more favorable terms for the investors than the earlier rounds. Although many of our predecessor’s stockholders hold multiple classes of stock, a number hold few or none of the classes that were issued in the later rounds. In particular, pursuant to an investors agreement between our predecessor and virtually all of its stockholders and under our predecessor’s certificate of incorporation, a formula is set forth establishing the amount of shares of common stock that the holders of each class of securities in our predecessor will receive in connection with our corporate reorganization. The result of the application of this formula is that holders of our predecessor’s Common Stock, Series B Common Stock and Series A, B and C Special Junior Stock will not receive any of our common stock or any other consideration in connection with our corporate reorganization and holders of our predecessor’s Series B Convertible Preferred Stock will receive less than their original investment in us. One stockholder has alleged that we are incorrectly allocating the merger consideration. Other stockholders have alleged that they were entitled to purchase shares in later rounds of financing and were wrongly refused this opportunity. It is possible that minority stockholders will commence litigation challenging our corporate reorganization, this offering or alleging some other damages. In such actions, stockholders might seek damages and other expenses and potentially other forms of relief, including, but not limited to, injunctive relief. Although we intend to vigorously oppose any litigation claims that may be raised, there is no assurance that we will prevail. If we do not prevail, the damages awarded and our other costs and expenses could be material and any injunctive relief awarded could cause significant or permanent delays in our corporate reorganization and the offering of our common stock contemplated in this prospectus. Even if we prevail, the distraction of management could result in a material adverse effect upon our business and results of operations, and we could incur substantial legal expenses.

There is no existing market for our common stock, and you cannot be certain that an active trading market or a specific share price will be established.

Prior to this offering, there has been no public market for shares of our common stock. Our common stock has been approved for listing on The Nasdaq Global Market, subject to official notice of issuance. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market on The Nasdaq Global Market or otherwise or how liquid that market might become. The initial public offering price for the shares of our common stock will be determined by negotiations between us and the underwriters, and may not be indicative of the price that will prevail in the trading market following this offering. The market price for our common stock may decline below the initial public offering price, and our stock price is likely to be volatile.

If our stock price fluctuates after this offering, you could lose a significant part of your investment.

The market price of our stock may be influenced by many factors, some of which are beyond our control, including those described above under “Risks Related to Our Business” and the following:

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As a result of these factors, investors in our common stock may not be able to resell their shares at or above the initial offering price. These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance.

The market price of our common stock could be negatively affected by sales of substantial amounts of our common stock in the public markets.

Following our corporate reorganization and adjusted for this offering, there will be 33,787,475 shares of our common stock outstanding and 2,679,339 options to purchase common stock based on shares and options outstanding (including 1,289,797 options that will be exercisable). Of our outstanding shares, all the shares of our common stock sold in this offering will be freely transferable, except for any shares held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”).

Although we and our officers, directors, existing stockholders and existing option holders who will hold more than 90% or more of our outstanding common stock following our corporate reorganization have agreed with the underwriters that for a period of at least 180 days after the date of this prospectus, we and they will not directly or indirectly offer, pledge, sell, contract to sell, sell any option or contract to purchase or otherwise dispose of any shares of common stock

or any securities convertible into or exercisable or exchangeable for shares of common stock, or in

any manner transfer all or a portion of the economic consequences associated with the ownership

of shares of common stock, or cause a registration statement covering any shares of common stock

to be filed, without the prior written consent of Deutsche Bank Securities Inc. and Jefferies & Company, Inc., these agreements are subject to important exceptions. In addition, Deutsche Bank Securities Inc. and Jefferies & Company, Inc. may waive these restrictions at their discretion.

In addition, following the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register an aggregate of 5,119,546 shares of our common stock that will be available for issuance under our 2007 Stock Incentive Plan, including 1,365,382 shares reserved for issuance upon exercise of options that will be issued to holders of options to purchase our predecessor’s Series D-2 Preferred Stock at a weighted average exercise price of $2.97 per share. Additionally, we expect that 1,313,957 shares will be reserved for issuance upon exercise of options to purchase shares of our common stock at an exercise price equal to the public offering price that we expect to issue under our 2007 Stock Incentive Plan to our employees and non-employee directors prior to completion of this offering. Shares registered under the registration statement on Form S-8 will be available for immediate sale into the public markets upon the exercise of any such options subject to the 180-day lock-up agreements described above and certain volume limitations applicable to our directors and executive officers.

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Investors in this offering will suffer immediate and substantial dilution.

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock outstanding immediately after this offering. On a pro forma basis, after giving effect to the completion of our corporate reorganization, our net tangible book value deficit per share as of September 30, 2006 was approximately $(3.49), based on total assets less goodwill, net other intangible assets and total liabilities of $(86.4) million divided by 24,787,475 shares of common stock.

Investors who purchase our common stock in this offering will pay a price per share that substantially exceeds the pro forma net tangible book value per share of our common stock after giving effect to our corporate reorganization. If you purchase our common stock in this offering, you will experience immediate and substantial dilution of $13.93 in the net tangible book value per share of our common stock based on our net tangible book value as of September 30, 2006 after giving effect to the completion of our corporate reorganization, on an as-adjusted basis, based upon an assumed initial public offering price of $15.00 per share. Additional dilution will occur upon the exercise of outstanding options. Investors who purchase our common stock in this offering will have purchased 35% of the shares outstanding immediately after the offering, but will have paid 61% of the total consideration for those shares.

The issuance of additional stock in connection with acquisitions, our stock incentive plan or otherwise will dilute all other stockholdings.

After this offering, we will have an aggregate of 159,727,597 shares of common stock authorized but unissued and not reserved for issuance under our 2007 Stock Incentive Plan or otherwise. We may issue all of these shares without any action or approval by our stockholders. We intend to continue to actively pursue strategic acquisitions. We may pay for such acquisitions, partly or in full, through the issuance of additional equity. Any issuance of shares in connection with our acquisitions, the exercise of stock options or otherwise would dilute the percentage ownership held by the investors who purchase our shares in this offering.

Your ability to influence corporate matters may be limited because a small number of stockholders beneficially own a substantial amount of our common stock.

After giving effect to this offering, assuming no exercise by the underwriters of their over-allotment option and assuming an initial public offering price at the midpoint of the range set forth in the cover of this prospectus, affiliates of The CapStreet Group will beneficially own between approximately 7,480,198 and 7,539,458 shares, or 22% in either case, of our common stock, affiliates of Seaport Capital will beneficially own between approximately 5,977,137 and 6,024,490 shares, or 18% in either case, of our common stock and affiliates of Tudor Ventures will beneficially own between approximately 1,807,468 and 1,821,788 shares, or 5% in either case, of our common stock. Two of our directors, George Kelly and William Luby, are associated with The CapStreet Group and Seaport Capital, respectively. As a result, these investors could exert significant influence over our management and policies and may have interests that are different from yours and may vote in a way with which you disagree and which may be adverse to your interests. In addition, this concentration of ownership may have the effect of preventing, discouraging or deferring a change of control, which could depress the market price of our common stock. The percentage and number of shares owned by each of these stockholders after giving effect to this offering will vary based upon the initial public offering price and the elections of other stockholders to sell in this offering. See “Certain Relationships and Related Party Transactions—Corporate Reorganization” and “Principal and Selling Stockholders.”

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Our authorized but unissued common stock and preferred stock may prevent a change in our control.

Our amended certificate of incorporation authorizes us to issue additional authorized but unissued shares of our common stock or preferred stock. In addition, our board of directors may classify or reclassify any unissued shares of our preferred stock and may set the preferences, rights and other terms of the classified or reclassified shares. As a result, our board may establish a series of preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

Anti-takeover provisions in our amended certificate of incorporation and amended and restated by-laws could delay a change in management and limit our share price.

Certain provisions of our amended certificate of incorporation and amended and restated by-laws could make it more difficult for a third party to acquire control of us or for us to acquire control of a third party even if such a change in control would increase the value of your common stock.

We have a number of anti-takeover devices in place that will hinder takeover attempts and could reduce the market value of our common stock or prevent sale at a premium. Our anti-takeover provisions include:

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