To CLEC or Not to CLEC?

A lawyer, a consultant, and a salesman walked into a room at ISPCON and gave valuable advice on whether or not an ISP should get CLEC status.

by Alex Goldman ISP-Planet Managing Editor [November 14, 2006]

The ISPCON session "To CLEC or Not to CLEC? That is the Question" featured Kristopher Twomey, who runs his own law office as moderator. Speakers were Michael Tague of American CLEC, a business that teaches ISPs how to become CLECs; and Andy Randall, vice president of marketing at Metaswitch.

Tague spoke first, touting the advantages of CLEC status for wireline service providers. He explained that as a CLEC, the ISP he runs, Win.net, saved money on T-1s, on PRIs, and it wasn't just a little bit of money either. Prices dropped from over $1,000 per month for a T-1 to below $100 in many cases. The distance component of the pricing also dropped. We wrote up Tague's operation in detail last year (see A CLEC Operations Consultant).

Since last year, he has found additional benefits to being a CLEC. He's learned that as a utility, he can condemn a building (he hasn't, yet).

More importantly, he can get phone number. For ISPs that have deployed or are deploying VoIP, obtaining phone numbers is a real problem. He said that Level 3 and others—even other CLECs—want to charge ISPs a monthly fee for each phone number. Instead, why not get your own phone numbers. "They don't come in onesie-twosies," said Tague. "They come in batches of 1,000 or 10,000."

With that many numbers, Twomey said, you might be able to rent some back to Level 3.

All of this advice applies generally, but you need to consult a lawyer to learn the exact rules that apply to your LATA.

Looking at the law
Kris Twomey said that the election, which had occurred the night before, would be good for business. "ISPs tend to feel that no regulation is best, but ISPs are regulated because the FCC keeps pushing policies that force ISPs to have a carrier relationship, because the FCC says that ISPs offering VoIP need to also offer E911."

In the Q&A session, a member of the audience pointed out that the elections will not change the FCC. "That's true," Twomey said. "But at this point we have gridlock at the FCC. We'll have gridlock in Congress if the President vetos the laws that Congress passes. Can the FCC screw you any more? They're applying the USF to VoIP (but you still cannot use the USF to serve rural customers). They've driven you out of DSL. They like wireless, but that's only because the existence of wireless means they can say they don't need to have competition in wireline services."

Looking at VoIP
It was left to Randall of Metaswitch to point out the possible pitfalls of CLEC status. "Don't overbuild. Don't try to recreate the Bell."

Instead, ISPs should build a nimble system that can compete for small business customers with better service and faster deployment.

Randall also warned ISPs that customer expectation are higher for voice than they are for data. ISPs have received irate phone calls when a customer loses e-mail connectivity—but customers are even more irate when they lose their phones.

As to expenses:

• If you build a switching center, your power requirements will change.
• If you change what you do, you need to hire new technical staff and also lawyers.
• If you buy expensive equipment, you need to upgrade your physical security.

Wireless
So there I was in the session, sitting next to Matt Larsen of Vistabeam, a WISP. Larsen is a polite guy, but I guessed that he felt the session did not apply to him. So I asked whether CLEC status would make sense for an ISP.

The answer is that if you're using T-1s for backhaul, or if you need phone numbers, it definitely makes sense.

In some cases, CLEC status may allow you to colocate on the roof of a CO.

But many WISPs will not want to pay the price and take the time required.

Twomey pointed out that some ISPs take time to take advantage of CLEC status. He knows of one that got the CLEC license in 2000 but did not install a softswitch until 2004.

In conclusion: you should learn what your options are, but you should not do this unless you know it's right for you.