Analysts: Facilities-Based CLECs on the Upswing

The Competitor Segment is Continuing to Grow

Like the universe, the telecommunications industry continues an outward expansion; telecom’s expansion, however, is driven by economic forces of market competition, in which facilities-based CLECs continue to be a growing force, with a variety of market strategies.

In the Beginning

For the first century of its existence, the telecommunications industry was tightly packed and monolithic. At its center was American Telephone & Telegraph, AT&T – more affectionately known as "Ma Bell." This core was shattered in 1984 by Judge Greene's gavel and the ensuing injection of competition in long distance markets. AT&T’s break-up, though, was just the warm-up act.

In the late 1980s and early '90s, competitive forces struck the very core of the U.S. telecommunications industry: the local exchange. Seemingly overnight, local exchange carriers – primarily the "Baby Bells" – were thrust into a marketplace battle few industry observers anticipated. The first competitive entrants were cleverly dubbed "Competitive Local Exchange Carriers," commonly known now as "CLECs." By 2000, there were approximately 170 facilities-based CLECs operating in the U.S. with a steady stream of new entrants following.

This initial generation of facilities-based CLECs smashed the last remnants of the thought that the telecommunications market could be insulated from competition's grasp. These CLECs were vital to setting the stage for the vast array of competitive carriers we see in today's market. These competitive carriers range from fixed wireless operators to pure-play VoIP providers, all of which follow on the trail blazed by the CLEC sector.

The CLEC Sector At a Glance (2009)

The Continued Importance of the CLEC Sector

Today’s facilities-based CLECs are significant in the communications industry for three reasons. First and foremost, they have a physical presence — actual network infrastructure — that is fundamental for the provisioning of service to customers. Companies without facilities can also provide service, but such operators are wholly dependent on the network facilities of another provider.

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