CLECs: Back From The Dead?

from the is-it-possible? dept

For the past few years, conventional wisdom has said that the Telecommunications Act of 1996 was set up so badly that it killed off the competitive local exchange carriers (CLECs), who were supposed to be the "new, competitive phone companies" that would grow the telecom world by offering newer and better services through competition with the baby bells. Of course, now most of them are out of business. Instead of blaming the telecom act, however, this article says it was just good old fashioned competition and bad decision making that killed off so many CLECs - and that the remaining few are poised to do well over the next few years. They point out that, with the opening up of the Baby Bell's networks, many CLECs started offering undifferentiated services, and it's tough to stay in business without any compelling competitive advantage. Meanwhile, during the boom years, they also invested heavily in capacity and back-office systems, and when they couldn't find enough customers for their services, they started discounting everything to the point where they were losing money on every deal they signed. This basically suggests that the CLECs competed themselves out of business. However, now, the article predicts, with the competitive market cleaned out, CLECs have a real opportunity to build a strong business.