CLEC: An Insiders Look at the Rise and Fall of Competition in the Local Exchange Competition

CLEC is an insider’s view of the rise and fall of competition in the local exchange business. Competition was legislated by Congress and funded by Wall Street. The years from 1996 to 2000 saw the creation of more than 250 facilities based companies operating in more than 100 American cities. Spending more than $300 billion in capital, by the end of 2000, these companies had combined revenues of $44 billion and served more than 16 million access lines in more than 100 cities. The future looked bright.

Suddenly, what looked like such a promising business became a money pit. In the blink of an eye, investors lost confidence. CLEC networks were producing revenue but no profits. Companies couldn’t afford to pay the interest on their notes. Pundits were saying that management didn’t know what it was doing. Worse, it looked as if the industry was falling apart. Was it all managements’ fault?

CLEC begins with the industry’s history and the part that Congress played in legislating competition. It then looks at the role that the investment community played by funding all sorts of business plans. Finally, it details the inside operations of CLEC companies as they struggled first to build their networks, then to operate them and finally their struggle to survive in order to answer the question of whether competition in telecommunications is going to be able to survive.

Martin McDermott has had a ringside seat as Chief Marketing Officer for two CLECs, e.spire and KMC Telecom. An industry pioneer who previously helped found both the Interconnect and long distance industries, he has been in senior management in all three competitive industries and has been on the board of directors of several industry trade associations. He is an industry speaker and author. He is currently President & CEO of Management Profiles Inc., a management consulting firm.