Battered but not broken, the industry's largest remaining CLECs are sharpening their focus on the enterprise and promising WAN services to those corporate buyers who must piece together coverage across dispersed organizations.

Only a handful of national CLECs have survived the onslaught of financial and regulatory misfortune that has hit the industry since the 2001 telecom heyday. In fact, these providers - which strive mightily against the former Bell giants - recently suffered another regulatory setback.

The FCC this spring softened the rules around network unbundling, making it harder and more expensive for the CLECs to gain access to network infrastructures that belong to ILECs (incumbent local exchange carriers). Add to this the fact that the big competitors of CLECs keep getting bigger, as evidenced by the looming SBC/AT&T and Verizon/MCI mergers.

This FCC decision is probably a death knell for CLECs clinging to the hope that regulators will pave the way for reselling cheap local access. "If you are a CLEC whose entire strategy is built around selling unbundled network services, you probably ought to find other work," says Mitchell Brecher, an attorney specializing in FCC matters at the Washington, D.C., law firm Greenberg Traurig.

On the other hand, alternate carriers touting enhanced services and positioning themselves as national providers stand a much better chance of surviving. Specifically, experts predict that a few of the larger, facilities-based CLECs, such as XO Communications, WilTel Communications, and Global Crossing , will hang on and turn increasingly to business customers for much-needed revenue.

"Most of the larger CLECs are doing OK and are keeping their heads above water," says Gartner analyst Alex Winogradoff. But he warns the remaining CLECs not to depend on subsequent regulatory relief. "Don't say, 'Woe is me,'" he advises. "Go out there and try to get contracts."

Many CLECs are doing just that and are finding that corporate deals seem to be there for the taking. Especially ripe are organizations with far-flung outposts that force buying officials to come up with patchwork coverage.

Bill Franklin, manager of Fedders Corp's IS infrastructure, says his company considers the entire spectrum of carrier options when planning coverage. "We generally check the market for all carriers, including alternative providers operating in the target markets." Global Crossing is one of the carriers supplying services to Fedders, a Liberty Corner, N.J., manufacturer of air conditioners and humidifiers.

Because corporate telecom executives often must include multiple geographic areas when charting connectivity strategies, many reduce buying decisions to a set of basic criteria. "When we decide on a telecom provider, there are a few things we consider; namely, quality of service, cost and market availability," says John Archer, vice president of operations at XM Satellite Radio.

Size matters

Enterprise buyers also consider a carrier's size, as measured by the number of circuits in that provider's infrastructure. For instance, XM has pulled XO into its pool of carriers, largely because in particular markets, XO was able to make available an abundance of circuits and beat such competitors as Verizon and Qwest on price. "Mostly we look at availability and cost and the parallel between the two," Archer says.

Growing large enough to handle enterprise accounts, however, can be difficult for a CLEC. "After all, the two biggest CLECs were AT&T and MCI, so the average size of these carriers has decreased substantially," says Bob Rosenberg, president of Insight Research.

In many cases, the largest CLECs, such as Global Crossing and WilTel, grew to their current size by building out facilities once used almost exclusively to sell wholesale voice and data service to other carriers, a market the two providers still mine alongside other players such as Level 3 .

Slightly different was DSL provider Covad's strategy, which involved expanding its focus after constructing major business and residential DSL infrastructures. Covad now offers corporate customers such services as VoIP and virtual Private Branch Exchange. Meanwhile, other CLECs swelled through acquisition, such as Broadwing Communications, which snapped up Corvis Equipment and Focal Communications.

Finally, there are alternative providers, such as XO, which went after smaller corporate customers in second-tier markets. "We built our own network by first focusing on those customers with five or six or even less lines. Our focus has changed in the last two years, and we've moved to larger customers," says CEO Carl Grivner. He describes XO's typical customer now as a business with 300 to 400 retail outlets near the carrier's networks.