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Frequently Asked Questions about CLECs

The Telecom Act of '96 has created more opportunities for the "Next Generation Teleco's" than any other opportunity in the history of telecommunications. These opportunities have never been more pursued than the movement by Internet Service Providers (ISPs) to profit from both Competitive Local Exchange Carrier (CLEC) status and InterExchange (IXC) status and by moving into the ISP/CLEC arena. CLEC Strategies has teamed up with industry leaders to provide the ISP/CLEC "Total Solution"


What is a CLEC?

A CLEC is a telephone company regulated by the same rules and regulations as the local operating company presently serving the community. It is a Competitive Local Exchange Carrier in competition with the ILEC or Incumbent Local Exchange Carrier (usually the Regional Bell Operating Company (RBOC) or other Independent Telephone Company such as GTE, ALLTEL etc ). The CLEC offers the same type of services to its customers as previously provided by the ILEC.

How do I become a CLEC ?

The process is a long and complex procedure requiring the services of a Regulatory Attorney or Consultant. The first item required is to file for a CLEC license from the State Public Utilities Commission within your operational area. The PUC will require a list of service costs or Tariff Charges for each service you will provide. The easiest way to do this is to offer services at a set discount from the published ILEC list of tariff charges.

Then What?        Example Interconnect

The next step after you obtain your CLEC authorization is to file an interconnection or resale agreement with the local ILEC or other CLEC. This allows the CLEC to connect to customers via ILEC or other CLEC facilities, often called UNEs or Unbundled Network Elements. Copies of some completed Interconnection Agreements are usually available from the ILEC to use as a guideline for your filing. These are public documents.  Along with this procedure is the ILEC or CLEC Account, which includes many elements based on what the needs of your operation are going to be!  Please call ICAN Communicate! for more information.  

How do I turn this CLEC operation into profit for my investors?

This is a complex question with many answers. Before deciding to enter into the CLEC arena, the investors should have a plan of interconnection to an existing customer base that will start the income process.  The prospective CLEC should already begin to offer services on a "Switch-as-is" basis before their switch is in service. This establishes a customer base to move onto the switch after it is operational.

Everyone LOVES RECIP is the hottest slogan in the industry at this time! Reciprocal Compensation is a fee paid by the ILEC to the CLEC for all calls completed into the CLEC network. Since most ISP traffic terminates within the CLEC switch to an ISP connection, RECIP can be in the thousands of dollars each month. Unfortunately, RECIP is going to " go away" very soon. There is a pending decision before the FCC to discontinue RECIP payments within the Public Switched Network (PSN). According to the National Association of Regulatory Utility Commissioners (NARUC) in Washington DC, RECIP will be gone by June 1999 at the latest. Any CLEC that builds itís business base upon RECIP is doomed to failure.                   

What is a "backhaul" service?

In the CLEC environment, a backhaul service is a connection to an end user or customer outside of your serving area. As an example, a CLEC in Orlando wants to provide a circuit to Boston Massachusetts for a customer ( usually at a DS-1 or DS-3 rate ). The CLEC does not have an operation in Boston. So, the CLEC contracts with Time Warner Communications ( TWC ) to provide the connectivity from Orlando to the customer premise in Boston. This connection is " sold " to the Orlando CLEC at a reduced price allowing the CLEC to make a small profit while still undercutting the IXC standard offering. If the CLEC has an office at both the "A" location (beginning) and the "Z" location ( end ), then this is NOT referred to as backhauling since the CLEC would simply establish a trunk group to "point" calls between itís two cities.

Another example of backhaul services is when an ISP wants to provide a customer a direct number from another calling region or LATA. Again, the CLEC would obtain a "DS-1 pigtail" from the "Z" location IXC with a local dial-up telephone number. This number would be "call forwarded" to the "A" location by pointing the traffic to the DS-1 pigtail for connection. This is a way of bypassing the FCC regulations regarding call forwarding between calling regions since the number is not really call forwarded, it is actually directed to a special TRUNK within the IXC connecting to the CLEC.

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