|Pros and Cons of CLEC registration|
|By Joseph Isaacs
Until recently, the physical connection to the business (the
"local loop") has been the sole responsibility of the
incumbent local exchange carrier (ILEC). An ILEC is whom you currently
purchase your telecom trunks from such as T-1ís, T-3ís and local
loops. Some of the US ILECís are Southwestern Bell, BellSouth,
Verizon, etc. However, the telecommunications Act of 1996 enabled new
telephone companies called Competitive Local Exchange Carriers
(CLECís) to be formed in order to compete with the ILECís and
change the face of local service. Many companies with huge telecom
costs have become Competitive Local Exchange Carrierís (CLECís) to
cut costs and declare their independence from retail pricing and from
the incumbent LECs (ILECís) they must otherwise rely on for access.
They're cashing in on the benefits of reciprocal compensation and
taking advantage of wholesale carrier pricing to resell services and
reduce their own line costs. It's a strategy for success that can pay
Why should ISPís, "TAKE THE PLUNGE" and file to become a CLEC? Here are a few of the reasons:
State by State mandated 15 to 24 percent below-tariff wholesale rates on circuits and services for switchless reseller CLECs;
Greater discounts of up to 45 percent below-tariff wholesale rates on circuits and services for facility-based CLECs;
Lower long distance costs as an interstate/intrastate/international IXC (Inter-exchange Carrier)
Reciprocal Compensation (fees paid between carriers for traffic on their networks)
Availability of carrier class services (UNE's) unavailable at retail levels;
Ability to be a "Peer" to the ILEC instead of just a customer.
Your telecommunications costs are way out of control and account for the single largest company expense.
There are basically two types of CLECís. The first is a switchless reseller and the second is a facility based provider.
Becoming a CLEC/IXC is very beneficial because it allows the Switchless Reseller CLEC, under itís Resale Agreement (Agreement to purchase services at wholesale prices with a predetermined discount structure) to obtain discounts on the lines purchased by the CLEC. Much greater discounts would be obtained as a facility based CLEC/IXC or by entering into a term and volume agreement with the long distance carrier at lower prices than available as merely a retail customer. In a facility based environment, the CLEC also has the opportunity to receive all of their inbound trunks, to the Tandem Access Switch, at no cost from the ILEC and/or CLEC. A savings of 15 to 24 percent across the board under a negotiated agreement or by the use of switching facilities. This puts the client in a much more competitive position within its markets. The savings on local loop and long distance charges will translate into higher profits and/or lower price, both of which are key ingredients for a growing and competitive organization.
Furthermore, as a facility based CLEC, the client can now participate in reciprocal compensation with the carriers and further reduce their line costs. Reciprocal compensation is the term used to describe the fees that interconnecting local carriers pay to terminate traffic on each other's network.
Looking at the CLEC arena from the bigger perspective, the direction of the telecom industry suggests that any firms who want to remain competitive must take a serious look at becoming an CLEC/IXC. Becoming a CLEC will be a critical step in positioning itself competitively.
Why Become A CLEC?
-You have advantages in local, long distance, and data services
-Access to existing ILEC network at discounts
-No existing baggage
-In 1996 there were 50 CLECs. -By 2006, there will be at least 500.
-Lower entry cost -- Avoid equipment expenditure and many operations costs
-Less complex -- Avoid the 6-9 months wait to complete an interconnect agreement with the ILEC
-Potential xDSL entry strategy data only service option
-Difficult to add value to core services
-Differentiation depends on envelope functions: sales & marketing, customer service, etc.
-Dependent on difference between wholesale and end user pricing
-Balance of power lies with ILEC
Define the business: business case, market strategy, and service
Define legal issues: choose counsel, review legal factors
Define regulatory issues: choose counsel and review state, federal,
Bellcore requirements, negotiate interconnect agreements
Define the operational process: network model, resource
Prepare the business plan: market characterization, strategy, risk
Detailed network design: detailed architecture, personnel
Procurement: acquire access, switching & transport facilities,
operations support systems, and human resource acquisition
Installation: site selection, site readiness, equipment
installation and provisioning
Operations and Integration: sales and marketing, operations support systems
Although CLEC status has been achieved in as little as three
months, in general you should anticipate a 6 to 9 month process
depending upon the individual states that you intend to establish
service. Some states require only that you satisfy the requirements of
the Telecom Act of 1996 and may have no other filing requirements. You
should consider seeking experienced and knowledgeable legal counsel to
help expedite this process and ensure proper filings are done on a
Section 214(e) of the Telecom Act requires that you register as an
"eligible telecommunications carrier" entitling you to
"universal service" support. If you do not choose to
register your serving area will be limited. Also, several states have
additional requirements for providing service. You must request a copy
of these requirements from each state's PUC where you plan to provide
-Speed you through the filing process
-Assist in post-certification filing
-File annual updates about your company and its operations
-Respond to requests for miscellaneous information
-Protect your right to privacy when filing confidential information
Becoming a Competitive Local Exchange Carrier (CLEC) is not as difficult as one would expect. Although there are a myriad of state and federal regulations to adhere to, ISG-Telecom takes the hassle and burden out of becoming a CLEC or an IXC. This article has a follow-up to Part One.
Part 2: The steps to take
The following steps are
designed to give the a firm who wishes to plunge into the telecom
business an idea of the processes and procedures necessary to become a
How much are the ISPís current trunking needs
What type of technical staff does the ISP currently have
How solvent is the ISP Ė do they have large positive cash
What types of services are to be offered to the general public
after CLEC licensing is obtained
What types of credit lines are currently in place
What type of existing is
in place. How many remote POPís are there. How many LATAís do they
currently cover. How many markets are they in and what type of market
concentration is there.
PHASE II: (For facility
What billing systems and
software are in use? Can
this be outsourced? What
is the $5,000 for?
Typically speaking most state certifications can be achieved in approximately ninety (90) days. Federal certifications can be achieved in approximately forty-five (45) days. For a complete listing of all state certification time tables go to http://www.isg-telecom.com/puc.htm
|ABOUT THE AUTHOR:
is President of ISG-Telecom Consultants, a consulting firm
specializing in state and federal certifications, tariffs,
resale and interconnection agreements, collocation issues/
applications and obtaining operating codes for both CLEC's &