The company, in pre-announcing its earnings, said it expects a loss of between 25 cents and to 28 cents per share, compared with a loss of 31 cents per share one year ago.
The company expects revenues to be between $31 million and $33 million for the quarter, up from $24.2 million a year ago.
Expected growth in the wholesale network services business is being constrained by delivery delays for primary rate interface telecommunications facilities required to meet customer demand, the company said.
PSINet's expected loss is larger than predicted by Wall Street. First Call estimates a loss of 21 cents per share for the quarter.
In a statement, the company said that another problem was lower-than-anticipated sales during the summer season from retail corporate services.
However, growth in international revenue generally has continued in accordance with plan, the company said.
The announcement comes after the company recently decided to let small Internet service providers interconnect with its network for free.
That move has been welcomed with open arms by small ISPs, which recently have been forced to pay to "peer" with at least one large ISP, like UUNet Technologies.
PISNet said it will report third-quarter earnings on October 21.
Reuters contributed to this report.