Transcript What Is a CLEC?

How & Why
to Become a CLEC
Jim Hollis, President
Internet Finance & Equipment, Inc.
&
Joseph Isaacs/CEO
ISG-Telecom
Copyright 1999 IF+E (800-919-4521)
www.internetfinance.com & ISG-
Introduction
Joseph Isaacs (ISG-Telecom)
Jim Hollis (IF+E)
727-738-5553
800-919-4521
President/CEO
President
IF+E & ISG-Telecom
•Specializes in ISP to ISP/CLEC turn-key solution
•Strategic Partnerships with Nortel, ReCom, Cisco, 3Com
Newbridge Networks, Siemens, Lucent, Foundry
Networks, Cobalt & Others
•Complete Integration Package
•Complete Financing & Funding Package
Copyright 1999 IF+E (800-919-4521)
www.internetfinance.com & ISG-
What Is a CLEC?
• Competitive Local Exchange Carrier
• Essentially, a new local dial-tone provider
 A CLEC has the same rights & responsibilities as the
ILEC (Incumbent Local Exchange Company)
 Important: becoming a CLEC enables a large retail
customer to become a peer wholesale customer
Copyright 1999 IF+E (800-919-4521)
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Why Become a CLEC?
• CLEC's are peers of ILEC's, not just customers
• Arbitration ability in front of Public Utility Commission and
FCC
• Inter-company reimbursements and settlements
• Access and reciprocal compensation revenues
• Opportunity to build fiber networks on local rights of way
• Ability to buy UNE (unbundled network elements) from ILEC
at regulated low rates
• Allows for more flexible set-up of services than regular
customers of the ILEC can get via ILEC tariffed offerings
Copyright 1999 IF+E (800-919-4521)
www.internetfinance.com & ISG-
Benefits of Being a CLEC
•State by State mandated 13 to 25 percent below-tariff
wholesale rates on circuits and services for switchless
reseller CLECs;
•Greater discounts of 20 to 45 percent below- ILEC tariff
retail rates on circuits and services for facility-based CLECs;
•Availability of carrier class services and UNE’s unavailable
at retail levels;
•Most importantly, the ability to profit from the telecom
services used by your existing customer base and community
by taking on the billing and marketing functions
Copyright 1999 IF+E (800-919-4521)
www.internetfinance.com & ISG-
CLEC Versus ILEC
• Unlike ILEC's, CLEC's are not restricted
to local and intraLATA business
• CLEC's can offer long distance service
bundled with local service and
additional telecom services
• ILEC's have years of cost studies posted
with PUC/PSC to justify their high
rates....now they can't lower them to
compete with CLEC pricing
Copyright 1999 IF+E (800-919-4521)
www.internetfinance.com & ISG-
Why ISPs Should be a CLEC?
The best news is ISPs are superbly positioned to move into the
Competitive Local Exchange (CLEC) business. ISPs have a built-in
customer base, particularly for data access which naturally leads
to gleaning new revenues from the existing customer base by
selling data circuits at retail while paying the wholesale rate and
by adding voice services and features on a consolidated bill.
Furthermore, additional and auxiliary services that the ISP can
resell include long distance, conference calling, calling cards, and
their own internet service, on a single bill broken out by customer
identification codes and other management reports.
Copyright 1999 IF+E (800-919-4521)
www.internetfinance.com & ISG-
Why ISP’s are
Positioned to be a CLEC
ISPs have advantages in local, long distance, and data services through strategic
alliances, bulk purchasing of long distance minutes, voice over IP deployment,
consolidated billing, and the ability to deploy the latest in switching equipment
without the expense of legacy equipment that the ILEC’s have that may not be able
to deliver high speed digital services.
Access to existing ILEC network at discounts on a pure resale basis as well as in
converting their current circuits from retail pricing to wholesale pricing. ISPs can
additionally configure their systems to deploy tandem switches in each LATA to gain
free inbound T-1s from the ILEC while consolidating their modem pools at the
tandem for cloud access. Virtual co-location is also available.
No existing baggage and relatively low regulatory requirements compared to the
ILECs’ regulated rate of return and cost study legacies for pricing.
Information services for LAN/WAN customers including web page design and
hosting, help desk services, configuration, and maintenance services for company
internal communications systems.
Copyright 1999 IF+E (800-919-4521)
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Basic Local Call
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Basic Long Distance Call
Copyright 1999 IF+E (800-919-4521)
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Tandem Switch vs. Class 5 Switch
• Tandem Switch (class
4)
Built for incoming/outgoing
calls to a central point in
the LATA for Data Carriers
& Long Distance
ILEC's must provide
inbound trunking at no
charge to the CLEC’s
tandem switch with CLEC’s
running return fiber to
ILEC's tandem
• Class 5 Switch
Built to handle all voice &
data
• Modules available to
partition switch into voice
switch plus tandem ID
Many CLEC's have one (1)
main switch with small
remotes in the COs
ILEC's tend to have full
class 5 switches in each CO
Copyright 1999 IF+E (800-919-4521)
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Equipment Needed
• For Voice:
 Class 5 Switch
 (x) Co - Located xDLCs
 Fiber - installed @ $10 Per
foot (or leased)
• For Data Only:
 Class 4 Tandem Switch
 Fiber
 Router
 (x) CO - Located xDLCs
Copyright 1999 IF+E (800-919-4521)
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Support Services Needed
• For Voice:
• For Data Only:
Operator Services
Customer Service
Billing
Back Office
Directory Assistance
Repair/Install
E911
Numbering Resources
Switch Maintenance
Regulatory Maintenance
Tax Compliance
Customer Service
Billing (simplified)
Back Office
Repair/Install
E911
Numbering Resources
Switch Maintenance
Regulatory Maintenance
Tax Compliance
Copyright 1999 IF+E (800-919-4521)
www.internetfinance.com & ISG-
Hubs and Routers
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Creating a CLEC
• Step 1-
Form (new) separate corporation
- This prevents the co-mingling of regulated
income from non-regulated income
-Allows the ISP company to be first and largest
customer of CLEC company
• Step 2-
Determine which types of services are
to be offered;
-Data only..........Long Distance, too?
-Voice only........Conference calling?
-Voice & Data....Other telecom services?
Copyright 1999 IF+E (800-919-4521)
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Creating a CLEC
• Step 3- Gather necessary checklist items for state
PUC certification application
-Financials & proforma
-Background of principals
-Corporate data
• Step 4- Draft a tariff based on state PUC's
requirements
-Level of detail varies significantly
-Timing varies significantly
-States have individual requirements for free DA
calls & Lifeline services
Copyright 1999 IF+E (800-919-4521)
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Creating a CLEC
• Step 5- Determine prior to tariff preparation if
CLEC will be switchless or facilities based
• Step 6- Prepare state's form for certification and
file with state PUC/PSC either prior to sending or
with the completed tariff
• Step 7- Negotiate or opt-in to an Interconnection
Agreement - connects new CLEC's network &
switch to ILEC's or other CLEC's, spells out how
payments, trouble tickets, network alarms, etc.
will be handled
- sets rates for Resale or Unbundled Network
Elements from ILEC
Copyright 1999 IF+E (800-919-4521)
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Creating a CLEC
• Step 8- For Non-Facilities Based (switchless)
Resellers, a decision must be made as to whether
to buy out of the wholesale tariff or negotiate a
term and Volume Agreement with the ILEC’s
and/or CLEC’s
• Step 9- If long distance is to be offered, carrier
and rate must be established
• Step 10- If switchless reseller, procedures and
training are established
Copyright 1999 IF+E (800-919-4521)
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Creating a CLEC
• Step 11-
If Facilities-Based, the following
services must be obtained via ISG Partners:
• -Customer service E911
• -Back Office & SS7 connectivity
• -Billing BB Interconnection to ILEC
• -Operator services Connection to Tandem(s)
• -Numbering Resources Equipment set-up
• -Repair/Installation Switch Maintenance/Repair
Copyright 1999 IF+E (800-919-4521)
www.internetfinance.com & ISG-
Creating a CLEC
• Step 12-
Beta Test System and Update LERG
with new switch ID (3 months)
• Beta test billing
• Beta test new order processing (back office)
• Sales, Marketing & Product training
Copyright 1999 IF+E (800-919-4521)
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17 support categories every
ISP/CLEC needs to consider
•Business Office
•Accounting Office
•Customer Service Center
•Equipment Provisioning
•Service Activation
•Network Administration
•Network Data
•Administration Maintenance
•Maintenance (Switching / Transport / Access)
Copyright 1999 IF+E (800-919-4521)
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Support Categories (Cont’d)
•STP / SCP (Signal Transfer Point / Signal Control Point A.K.A. SS7)
•Repair Service Bureau
•Disaster Recovery
•Directory Assistance
•Operator Services
•Security
•Facilities
•911
Copyright 1999 IF+E (800-919-4521)
www.internetfinance.com & ISG-
Process Timing
Phase I - Generally, Tariffs can be prepared and filed within 30 days
from the time all corporate information is available. State PUC
approval time varies from 1 day to 6 months.
Phase II - The timing here varies tremendously depending on the
equipment selection method and speed at which the ISP decides on
the equipment type and vendor. Delivery time on switches varies
from 1 month to 4 months depending on the complexity of the
configuration. This can be done simultaneously with Phase I.
Phase III - Again, this is done during the equipment selection and
deployment process. When the switch is being set up,
configuration tie in to various support vendors is established.
Copyright 1999 IF+E (800-919-4521)
www.internetfinance.com & ISG-
Conclusion
Becoming a Switchless Reseller or a facilities-based
CLEC has many benefits - financially as well as to
ensure survivability in a very competitive market
environment, it is not a simple process that can be done
overnight.
Financially, the best operational margins come from being a
facilities-based CLEC, which can require a significant
capital investment in a switch or tandem/voice switch.
Fortunately, this investment is often more than covered by
the savings gained from reduced ISP telecom costs.
Copyright 1999 IF+E (800-919-4521)
www.internetfinance.com & ISG-