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For many small telephone companies and cooperatives, entering the competitive local exchange carrier (CLEC) industry is a daunting prospect. It's as if they've run a successful, thriving ferry service on a small, calm lake for years, but now they have the opportunity to expand their market and offer ocean liner trips, except this time there's no guaranteed rate-of-return on their investment and the seas can be fraught with peril.
Even those who have launched successful CLECs admit that they're in unchartered waters and report that it's not always smooth sailing. When the 1996 Telecommunications Act granted small telcos and co-ops the right to compete against their incumbent local exchange carriers (ILECs), such as the regional Bell operating companies (RBOCs), and national carriers, it introduced competition to once-monopolized areas. Many telcos and co-ops are finding that the competitive arena is a whole new game with new rules and players who often don't want to play by the rules.
Six years after the Telecom Act, no formal survey has been done to quantify how many small telcos and co-ops have opted to go into the CLEC (competitive local exchange carrier) business, but Michael Fox, founding principal and vice president of sales and marketing for the Competitive Communications Group (CCG), a telecommunications consulting firm in Riverdale, Md., said the decision for many of his clients is a no-brainer. "Most companies feel that by being a CLEC, they are able to provide more service offerings [primarily long-distance] to their customers," he said. "It's about being a one-stop shop."
As a CLEC, telcos and co-ops can opt to be a facilities-based carrier, a switchless reseller, or they can provide service through the deployment of an unbundled network element platform (UNE-P), which is a combination of the first two. With a UNE-P the incumbent provider unbundles components of its network to allow the CLEC to collocate some of its own equipment in the incumbent's central office and lease other elements of the incumbent's network.
Crunching the Numbers
Matthew Brown, president of CLEC Strategies Inc., a telecommunications consulting firm in Tampa, Fla., said facilities-based CLECs generally can expect a 75% discount in trunking costs versus CLEC resellers, which typically get only a 14% to 25% discount.
"Every company must crunch their...