A CLEC is a mini telephone company. CLEC stands for Competitive Local Exchange Carrier. The telecommunications act of 1996 had provisions in it designed to spark competition between local and long distance telephone carriers. The Act divided the landscape of telephone competition into Incumbent Local Exchange Carriers—the traditional phone companies, (then known as “Baby Bells,”) and CLECs. The CLECs were given special access to the ILEC’s equipment, particularly their phone lines, in order to bring prices down for consumers, increasing competition.
When the legislation was first passed, the ILECs fought it tooth and nail, arguing that they were subsidizing their competition. They refused to honor the act, and successfully drove many of their competitors out of business. But the courts upheld the ruling, and the FCC strengthened the language in further legislation. Current law states that ILECs must lease available space to CLECs. If they claim that there is no room in their central office, they must show the CLEC the central office itself; furthermore, obsolete equipment must be disposed of in order to keep room available for CLECs.
Many ISPs have expanded their business to become CLECs, including XO communications, Windstream, BullsEye Telecom, and Level(3), to name just a few. Many ISPs actually save money by becoming CLECs. Not only that, but ISPs are able to offer more services, including VoIP, by becoming a CLEC. ISPs can repurpose its existing modem banks or buy new ones that are capable of external call control.
There are two types of CLECs, facilities-based, or resale. Facilities-based CLECs are peers with the ILEC. Resellers sell their infrastructure to other CLECs, and the margins are so thin that most CLECs favor becoming facilities-based, or do both. In order to begin the process, the ISP sends a negotiation letter to the ILEC, sometimes with a fee, which begins a 135-day period for the two to negotiate with each other. After 135 days, if they have not reached an agreement, arbitration begins.
There are three most common methods to physically interconnect the two networks: end-point fiber meet, mid-span fiber meet, and leased facilities. In an end-point fiber meet, both the ILEC and ISP build connections to each others’ facility. Both the ISP and the ILEC build multiplexers, a device that selects one of several input signals and forwards the input into a single line, to connect to each other’s facility.
In a mid-point fiber meet, both the ILEC and CLEC build their own fiber optic cable to meet in the middle. The fiber is then spliced together. On occasion, the ILEC will connect the fiber because it is sometimes more trouble to splice the fiber than making the connection. In a leased facilities situation, the ISP builds an endpoint fiber meet for terminating its own traffic on the CLEC’s’ network, which the CLEC leases back to the ISP.
The ISP is responsible for a number of aspects of the service, including the physical hardware and the power to supply them. It must handle security for their new equipment, including fire safety. While an ISP is expected to be 99.9% reliable, a CLEC is expected to have 99.999% reliability. It must pay the proper fees, both to the government and to the ILEC. It must block out phone numbers. It must set up trunks to exchange local and long distance phone traffic between itself and the carrier.
Becoming a CLEC is no easy task. But ISPs already have many of the prerequisite equipment to make it possible. Often, even though there are fees and a lot of work, the benefits of becoming a CLEC outweigh the costs in less than a year. A CLEC can make money selling phone service to new customers, including other CLECs.