By Craig M. Clausen and Joseph J. Kestel

Over the past decade and a half, we have witnessed the CLEC sector mature from infancy and enter adulthood. The evolution in the past few years has been particularly dramatic. This is a sector that has gone from one initially characterized as “crumb-catchers” — scurrying around to catch a few special access dollars here and there — to one that is now comprised of an increasingly diverse set of carriers offering myriad services to a range of customer classes. About the only thing in common among these providers is the continuously evolving competitive threat they represent to incumbents.

The Early Years

The CLEC sector as we’ve come to know it was born in the market laboratories of the States.¹ A handful of public utility commissions had the foresight (and guts) to recognize the power of market competition to inject further innovation, provide pricing discipline, and improve services.² Following the Telecom Act of 1996, hundreds of competitive carriers (or “pseudo carriers”) sprang up, employing a variety of strategies. Some looked to create a national presence, while others focused deeply on specific metros. Some built out networks of their own, while others relied on services leased from incumbent carriers. In this infancy period, CLECs were all about getting funding and launching their business — and not always about creating a

sustainable business model. Then came an era akin to childhood. The new carriers got to work building their operations, including physical networks. They launched services and added markets, often uncertain of realistic risks and rewards. But as a new type of business in a wholly new competitive environment, everyone was learning and willing to make some mistakes along the way.