Competitive local exchange carrier
Encyclopedia
A competitive local exchange carrier (CLEC), in the United States
, is a telecommunications provider company (sometimes called a "carrier
") competing with other, already established carriers (generally the incumbent local exchange carrier
(ILEC)).
Local exchange carrier
s (LECs) are divided into incumbent (ILECs) and competitive (CLECs). The ILECs are usually the original, monopoly
LEC in a given area, and receive different regulatory treatment from the newer CLECs. A data local exchange carrier (DLEC) is a CLEC specializing in DSL services by leasing lines from the ILEC and reselling them to Internet service provider
s (ISPs).
CLECs evolved from the competitive access providers (CAPs) that began to offer private line and special access services in competition with the ILECs beginning in 1985. The CAPs (such as Teleport Communications Group
(TCG) and Metropolitan Fiber Systems
(MFS)) deployed fiber optic
systems in the central business districts of the largest US cities (New York, Chicago, Boston, etc.). A number of state public utilities commission
s, particularly New York, Illinois, and Massachusetts, encouraged this competition. By the early 1990s, the CAPs began to install switches in their fiber systems. Initially, they offered a "shared PBX" service with these switches and interconnected with the ILECs as end-users rather than as co-carriers. However, the New York Public Service Commission authorized the nation's first CLEC when it required the New York Telephone
(the ILEC) to allow Teleport Communications Group
's switches in New York City to connect as peers. Other states followed New York's lead so that by the mid-1990s most of the large states had authorized local exchange competition.
The Telecommunications Act of 1996
incorporated the successful results of the state-by-state authorization process by creating a uniform national law to allow local exchange competition. This had the unintended consequence
of stimulating the formation of many more CLECs than the markets could bear. The formation of these CLECs, with easy financing from equipment vendors and IPO
s, was a significant contributor to the "telecom bubble" of the late 1990s which then turned into the "bust" of 2001-2002.
The original CAP/CLECs spent the decade from 1985-1995 deploying their own fiber optics networks and digital switches so that their only reliance on the ILEC was leasing some DS-1
loops to locations not served by the CLEC's own fiber and interconnecting the CLEC's switches with the ILECs' on a peer-to-peer basis. While not trivial dependencies, the original "facilities-based" CLECs such as TCG and MFS were beginning to become profitable by the time the Telecom Act was adopted. In contrast, many CLECs formed in the post-Telecom Act "bubble" operated using the unbundled Network Element Platform (UNE-P), in which they resold the ILECs' service by leasing the underlying copper and port space on the ILEC's local switch. This greater dependency on the ILECs made these "UNE-P CLECs" extremely vulnerable to changes in the UNE-P rules.
In the meantime, the largest facilities-based CLECs, MFS and TCG, had IPOs and then were acquired by Worldcom and AT&T, respectively, in 1996 and 1998 as those long distance companies prepared to defend their business customers from the Regional Bell Operating Companies' (RBOC) incipient entry into the long distance business.
With the Triennial Review in August 2003, the FCC began to rewrite a large portion of the rules implemented by the Telecommunications Act of 1996. One alternative to the UNE-P is unbundled network element loop (UNE-L), in which the CLEC has access to or operates their own local switch. The underlying copper (loop) that runs to your house is then leased by the CLEC, and cross-connected to the CLEC's switch. Both UNE-P and UNE-L have their own unique advantages and disadvantages. Other CLECs bypass the ILEC's network entirely, using their own facilities. These facility-based LECs include cable companies offering phone service over coaxial cable
.
In October 2004, the U.S. Supreme Court allowed a lower court's ruling to stand (by refusing to hear the appeal
) that voided
rules requiring ILECs to lease
certain network elements (such as local switching or the high-frequency portion of the loop) at a cost-based regulated wholesale
price to CLECs. The FCC agreed earlier in the year to rewrite rather than appeal the validity of the rules. In December, 2004, the FCC released another set of rules which phase out, over a year, all CLEC leasing of ILEC local switching, while preserving access to most copper local loop
s and some interoffice facilities.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, is a telecommunications provider company (sometimes called a "carrier
Common carrier
A common carrier in common-law countries is a person or company that transports goods or people for any person or company and that is responsible for any possible loss of the goods during transport...
") competing with other, already established carriers (generally the incumbent local exchange carrier
Incumbent local exchange carrier
An ILEC, short for incumbent local exchange carrier, is a local telephone company in the United States that was in existence at the time of the breakup of AT&T into the Regional Bell Operating Companies , also known as the "Baby Bells." The ILEC is the former Bell System or Independent Telephone...
(ILEC)).
Local exchange carrier
Local exchange carrier
Local Exchange Carrier is a regulatory term in telecommunications for the local telephone company.In the United States, wireline telephone companies are divided into two large categories: long distance and local...
s (LECs) are divided into incumbent (ILECs) and competitive (CLECs). The ILECs are usually the original, monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
LEC in a given area, and receive different regulatory treatment from the newer CLECs. A data local exchange carrier (DLEC) is a CLEC specializing in DSL services by leasing lines from the ILEC and reselling them to Internet service provider
Internet service provider
An Internet service provider is a company that provides access to the Internet. Access ISPs directly connect customers to the Internet using copper wires, wireless or fiber-optic connections. Hosting ISPs lease server space for smaller businesses and host other people servers...
s (ISPs).
CLECs evolved from the competitive access providers (CAPs) that began to offer private line and special access services in competition with the ILECs beginning in 1985. The CAPs (such as Teleport Communications Group
Teleport Communications Group
Teleport Communications Group was the first Competitive local exchange carrier in the U.S.It was formed as Teleport Communications in 1985 by Merrill Lynch as the private sector participant in the Port Authority of New York and New Jersey's "Teleport Project." The Teleport Project envisioned a...
(TCG) and Metropolitan Fiber Systems
Metropolitan Fiber Systems
Metropolitan Fiber Systems Inc, later known as MFS Communications Company, was a last mile provider of business grade telecommunication products such as long distance, and Internet access through its own fiber rings in major central business districts throughout North America and Europe...
(MFS)) deployed fiber optic
Optical fiber
An optical fiber is a flexible, transparent fiber made of a pure glass not much wider than a human hair. It functions as a waveguide, or "light pipe", to transmit light between the two ends of the fiber. The field of applied science and engineering concerned with the design and application of...
systems in the central business districts of the largest US cities (New York, Chicago, Boston, etc.). A number of state public utilities commission
Public Utilities Commission
A Utilities commission, Utility Regulatory Commission , Public Utilities Commission or Public Service Commission is a governing body that regulates the rates and services of a public utility...
s, particularly New York, Illinois, and Massachusetts, encouraged this competition. By the early 1990s, the CAPs began to install switches in their fiber systems. Initially, they offered a "shared PBX" service with these switches and interconnected with the ILECs as end-users rather than as co-carriers. However, the New York Public Service Commission authorized the nation's first CLEC when it required the New York Telephone
New York Telephone
The New York Telephone Company was organized in 1896, taking over the New York City operations of the American Bell Telephone Company.-Predecessor companies:...
(the ILEC) to allow Teleport Communications Group
Teleport Communications Group
Teleport Communications Group was the first Competitive local exchange carrier in the U.S.It was formed as Teleport Communications in 1985 by Merrill Lynch as the private sector participant in the Port Authority of New York and New Jersey's "Teleport Project." The Teleport Project envisioned a...
's switches in New York City to connect as peers. Other states followed New York's lead so that by the mid-1990s most of the large states had authorized local exchange competition.
The Telecommunications Act of 1996
Telecommunications Act of 1996
The Telecommunications Act of 1996 was the first major overhaul of United States telecommunications law in nearly 62 years, amending the Communications Act of 1934. This Act, signed by President Bill Clinton, was a major stepping stone towards the future of telecommunications, since this was the...
incorporated the successful results of the state-by-state authorization process by creating a uniform national law to allow local exchange competition. This had the unintended consequence
Unintended consequence
In the social sciences, unintended consequences are outcomes that are not the outcomes intended by a purposeful action. The concept has long existed but was named and popularised in the 20th century by American sociologist Robert K. Merton...
of stimulating the formation of many more CLECs than the markets could bear. The formation of these CLECs, with easy financing from equipment vendors and IPO
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
s, was a significant contributor to the "telecom bubble" of the late 1990s which then turned into the "bust" of 2001-2002.
The original CAP/CLECs spent the decade from 1985-1995 deploying their own fiber optics networks and digital switches so that their only reliance on the ILEC was leasing some DS-1
Digital Signal 1
Digital signal 1 is a T-carrier signaling scheme devised by Bell Labs. DS1 is a widely used standard in telecommunications in North America and Japan to transmit voice and data between devices. E1 is used in place of T1 outside North America, Japan, and South Korea...
loops to locations not served by the CLEC's own fiber and interconnecting the CLEC's switches with the ILECs' on a peer-to-peer basis. While not trivial dependencies, the original "facilities-based" CLECs such as TCG and MFS were beginning to become profitable by the time the Telecom Act was adopted. In contrast, many CLECs formed in the post-Telecom Act "bubble" operated using the unbundled Network Element Platform (UNE-P), in which they resold the ILECs' service by leasing the underlying copper and port space on the ILEC's local switch. This greater dependency on the ILECs made these "UNE-P CLECs" extremely vulnerable to changes in the UNE-P rules.
In the meantime, the largest facilities-based CLECs, MFS and TCG, had IPOs and then were acquired by Worldcom and AT&T, respectively, in 1996 and 1998 as those long distance companies prepared to defend their business customers from the Regional Bell Operating Companies' (RBOC) incipient entry into the long distance business.
With the Triennial Review in August 2003, the FCC began to rewrite a large portion of the rules implemented by the Telecommunications Act of 1996. One alternative to the UNE-P is unbundled network element loop (UNE-L), in which the CLEC has access to or operates their own local switch. The underlying copper (loop) that runs to your house is then leased by the CLEC, and cross-connected to the CLEC's switch. Both UNE-P and UNE-L have their own unique advantages and disadvantages. Other CLECs bypass the ILEC's network entirely, using their own facilities. These facility-based LECs include cable companies offering phone service over coaxial cable
Coaxial cable
Coaxial cable, or coax, has an inner conductor surrounded by a flexible, tubular insulating layer, surrounded by a tubular conducting shield. The term coaxial comes from the inner conductor and the outer shield sharing the same geometric axis...
.
In October 2004, the U.S. Supreme Court allowed a lower court's ruling to stand (by refusing to hear the appeal
Appeal
An appeal is a petition for review of a case that has been decided by a court of law. The petition is made to a higher court for the purpose of overturning the lower court's decision....
) that voided
Void (law)
In law, void means of no legal effect. An action, document or transaction which is void is of no legal effect whatsoever: an absolute nullity - the law treats it as if it had never existed or happened....
rules requiring ILECs to lease
Lease
A lease is a contractual arrangement calling for the lessee to pay the lessor for use of an asset. A rental agreement is a lease in which the asset is tangible property...
certain network elements (such as local switching or the high-frequency portion of the loop) at a cost-based regulated wholesale
Wholesale
Wholesaling, jobbing, or distributing is defined as the sale of goods or merchandise to retailers, to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services...
price to CLECs. The FCC agreed earlier in the year to rewrite rather than appeal the validity of the rules. In December, 2004, the FCC released another set of rules which phase out, over a year, all CLEC leasing of ILEC local switching, while preserving access to most copper local loop
Local loop
In telephony, the local loop is the physical link or circuit that connects from the demarcation point of the customer premises to the edge of the carrier or telecommunications service provider's network...
s and some interoffice facilities.
See also
- LiberalizationLiberalizationIn general, liberalization refers to a relaxation of previous government restrictions, usually in areas of social or economic policy. In some contexts this process or concept is often, but not always, referred to as deregulation...
- DeregulationDeregulationDeregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
- Regional Bell operating companyRegional Bell Operating CompanyThe Regional Bell Operating Companies are the result of United States v. AT&T, the U.S. Department of Justice antitrust suit against the former American Telephone & Telegraph Company . On January 8, 1982, AT&T Corp. settled the suit and agreed to divest its local exchange service operating...
- Mobile virtual network operatorMobile virtual network operatorA mobile virtual network operator is a company that provides mobile phone services but does not have its own licensed frequency allocation of radio spectrum, nor does it necessarily have all of the infrastructure required to provide mobile telephone service...
- Local loop unbundlingLocal loop unbundlingLocal loop unbundling is the regulatory process of allowing multiple telecommunications operators to use connections from the telephone exchange to the customer's premises...
- Cable telephonyCable telephonyCable telephony is a form of digital telephony over cable TV networks. A telephone interface installed at the customer's premises converts analog signals from the customer's in-home wiring to a digital signal, which is then sent over the cable connection to the company's switching center. The...
External links
- FCC Carrier Search -- select "CAP/CLEC" under Principal Communications Type for a complete list of CLECs