CLECs vs. Bells

1996 Telecom Act gave CLECs and customers false hope for increased competition

It’s been more than a decade since Congress passed the 1996 Telecommunications Act  with the intent of helping competitive exchange carriers compete against the regional Bell companies. In that time, however, competition for local phone services has gotten significantly weaker.

The 1996 telecom legislation mandated that incumbent carriers allow CLECs to use their existing infrastructure to provide last-mile connectivity to their customers. Additionally, the act charged the FCC with deciding what bundles the incumbent carriers would be required to provide CLECs, as well as the wholesale rates they could charge for access to their networks.

The Bells, however, were not ready to play nice. Employing a two-pronged strategy of simply refusing to comply with the act and of challenging the act’s constitutionality in court, the Bells were largely successful in warding off competition from CLECs, which also suffered from poor market conditions in the early part of the decade. Between 2000 and 2003, roughly one-third of all CLECs nationwide filed for bankruptcy, leaving the incumbents firmly in command of most local telephone service markets.

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It’s been more than a decade since Congress passed the 1996 Telecommunications Act  with the intent of helping competitive exchange carriers compete against the regional Bell companies. In that time, however, competition for local phone services has gotten significantly weaker.

The 1996 telecom legislation mandated that incumbent carriers allow CLECs to use their existing infrastructure to provide last-mile connectivity to their customers. Additionally, the act charged the FCC with deciding what bundles the incumbent carriers would be required to provide CLECs, as well as the wholesale rates they could charge for access to their networks.

The Bells, however, were not ready to play nice. Employing a two-pronged strategy of simply refusing to comply with the act and of challenging the act’s constitutionality in court, the Bells were largely successful in warding off competition from CLECs, which also suffered from poor market conditions in the early part of the decade. Between 2000 and 2003, roughly one-third of all CLECs nationwide filed for bankruptcy, leaving the incumbents firmly in command of most local telephone service markets.

CLECs have been reasonably successful in the more urban markets, however, where having potential customers clustered closely together made it profitable for CLECs to build out their networks. In the cases where CLECs have gained significant market share, incumbents have indeed felt obliged to offer more discounts for customers, just as the ’96 telecom act envisioned. However, recent incumbent-friendly rulings issued by the FCC, which limit what network elements the incumbents are required to share, indicate that the going might not get any easier for CLECs for some time.

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