CLEC (Competitive Local Exchange Carrier)

What is a CLEC?

A CLEC (Competitive Local Exchange Carrier) is a local voice service carrier that establishes local network interconnection with ILECs (Incumbent Local Exchange Carriers) and/or other LECs to enable local exchange telecommunications services. 

History of CLECs

The telephone network in the US was originally established and maintained by a handful of large carriers.  These carriers established a network of “substations” containing equipment to serve smaller areas, or “exchanges.”  These are known as Local Exchanges, and until the industry was deregulated in 1996, these would have been operated by one of the “Baby Bells,” or by AT&T.

With the introduction of legal avenues to enable competitive carriers’ entry in 1996, many new regional, national, and long distance carriers emerged and the FCC established a regulatory framework that required the larger carriers to lease their lines and exchanges to these newer carriers.   The result was to provide more choices for consumers through more stringent regulations of telecommunications monopolies.  

Benefits of becoming a CLEC

Access to UNEs

Access to UNEs, or unbundled network services, such as network switches, colocation, phone and fiber lines and loops was another requirement of the Telecommunications Act.  ILEC operators have traditionally been required to offer these services for resale at a reasonable discount to possible CLECs.  Resellers may choose from among the range of regulated services that may continue to be offered but only those services they need. PRIs, fiber line access, switching, etc.   

Resale

Under the ‘96 Telecommunications Act, ILECs  have been required to allow resellers to buy services and line access at a discounted rate that also allows the ILEC some margin.  Any entity that obtains the approval of the applicable public service or utilities commission is eligible to become a reseller. .  In the case of long distance carriers, approval must also be obtained from the FCC.

It should be noted that the ILECs  have been hard at work, attempting to limit or eliminate the resale requirement, with some degree of success.  Generally speaking, ILECs are only currently required to provide local loop (number termination) services, though some ILECs still provide switching and other services.  A wider range of services can generally be acquired through other competitive carriers. 

How many CLECs operate in the US?

Because of the opportunities presented to competitive carriers by the Telecommunications Act, initially there was a boom in new local and long distance carriers.  In fact, it exceeded the capacity of existing ILECs.   It is currently estimated that CLECs account for about 20 – 25% of the nations’ terminated telephone lines.

Currently, there are approximately 15,000 CLECs nationwide.  

While Verizon and AT&T do still offer a wide range of services to CLEC customers, other competitors have managed to secure respectable market share, such as CenturyLink, Windstream, and Frontier Communications by offering services regionally and nationally. And with Companies like Cincinatti Bell, and Hawaiian Telcom offering limited regional services.  The bulk of CLECs serve business customers, while some CLECs, such as Magic Jack, have pursued the residential market, with mixed success. 

CLEC Technology

Historically the most well known aspect of the CLEC business was the “local loop,” also known as the “copper loop” or “last mile connection.”  This is essentially the local network  termination point that is facilitated by switching substations operated by the ILEC, and serving local area codes and exchanges in the PSTN.  While we ordinarily associate the “copper loop” with the analog public switched telephone network, currently the “last mile” expression can also describe DSL, ISDN, cable, fiber, or other digital services.    Traffic exchange on the PSTN is going between blocks of numbers that are managed by the North American Numbering Administration.  There are over 6.1 billion different 10 digit combinations available in the US, for example.  Numbering resources can be managed and distributed  by the ILECs, CLECs, and Interconnected VoIP service providers.  

Currently, the vast majority of interconnection between CLECs and ILECs is via fiber optic connections and   the services  offered are primarily digital services, including digital voice services.  

Guidelines/Regulations surrounding CLECs

Generally speaking Sections 251 – 253 of the Telecommunications Act of 1996 “[sought] to foster competition in the local telephone market by requiring incumbent local exchange carriers (ILECs) to make their facilities available to competing local exchange carriers (CLECs).”[1]  In short, ILECs, like AT&T or the regional Bells, were required to sell any service they provided at retail cost to small competitors at a wholesale cost to allow for competitive entry into the local telecommunications market.

It should be noted that currently the big ILECs have consolidated their market share by restricting a lot of the access to their infrastructure and services that was originally required by the ‘96 Act., limiting their offerings to CLECs, and lobbying to end the leasing rule by 2021.  

References

1. National Telecommunications and Information Administration, THE TELECOMMUNICATIONS ACT OF 1996