A Competitive Local Exchange Carrier, known as a CLEC, is a mini telephone company. IT establishes a local network connection with Incumbent Local Exchange Carriers and other LECS to ensure local exchange telecommunications services can happen. CLECs often compete with each other and other already established carriers.
As Bandwidth writes, there are nearly 15,000 of these carriers in the US. They account for about 20 – 25% of the nations’ terminated telephone lines. In this article, we’ll share everything you need to know about CLECS. We’ll cover the following sections:
- The History of CLECs
- Why You Should Consider Becoming a CLEC
- CLEC Regulations and Guidelines
- What is the Difference Between an ILEC and CLEC
The telecommunications act of 1996 had provisions in it designed to spark competition between local and long-distance telephone carriers. The telecom act divided the landscape of telephone competition into Incumbent Local Exchange Carriers—the traditional phone companies and CLECs. These carriers 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 them. If they claim that there is no room in their central office, they must show the carrier the central office itself; furthermore, obsolete equipment must be disposed of in order to keep room available for local phone service providers.
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 competitive local exchange carriers. Not only that, but ISPs are able to offer more services for end-users, including VoIP, by becoming a CLEC. ISPs can repurpose existing modem banks or buy new ones that are capable of external call control.
Becoming one of these carriers also offers businesses access to UNEs. As Bandwidth writes, these are “unbundled network services, such as network switches, colocation, phone and fiber lines and loops was another requirement of the Telecommunications Act.” ILECs are typically required to offer these services at a discount for these carriers. These telephone service providers can also become resellers.
There are two types of CLECs, facilities-based, or resale. Facilities-based carriers are peers with the ILEC. Resellers sell their infrastructure to other carriers, 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 its own network, which the carrier 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.
An Incumbent Local Exchange Carrier, also known as an ILEC, is a local telecommunications provider According to DifferenceBetween, ILECs own the majority of the loops and facilities in the area they service. CLECs are an alternate option for service as they are a combination of new competitors in the field.
DifferenceBetween states, “One basic difference between an Incumbent Local Exchange Carrier and a Competitive Local Exchange Carrier is that the ILEC provides service to the public, and the CLEC has the right to compete for that business but is not indebted to provide the same plane of service.”
Conclusion: Becoming a CLEC is an Efficient Way to Expand Your Business
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 subscribers, including other CLECs.