Competitive Local Exchange Carriers
From the 1880's to the late 1980's, the American Telephone and Telegraph
Company (AT&T), was providing local, long-distance and international
telephone service to almost all residents of the United States of America
under a regulated monopoly arrangement, which allowed a certain amount of
guaranteed profit in return for an obligation to serve all areas.
Following a lengthy court proceeding, AT&T agreed to break up into 8
companies: 7 regional companies that would provide local telephone service
(the regional Bell companies), and a long-distance company (AT&T),
which would be de-regulated and subject to competition.
In the technical and legal discussions, these companies are
known as Local Exchange Carriers (LEC's) and Inter-Exchange Carriers (IXC's)
We are now entering a new phase of re-structuring, under which new
companies are invited to compete in the local service areas,
subject to rules set forth in the Telecommunications Act of 1996.
This transition is very complicated, and all parties are trying to
"tweak" the interpretation of the rules to gain a unique advantage.
The local telephone system represents a very large investment. It is
impractical to expect that several new companies each would lay
new cables to all residential areas. In order to allow new companies to
start gradually, the rules
- require the incumbent Local Exchange Carrier (ILEC) to allow new
competitors (Competitive LEC's or CLEC's) to rent the wires from
the subscriber's house to the central office at a discounted price
- require the ILECs to negotiate interconnection agreements
so that when an ILEC subscriber calls a CLEC subscriber the call
will be connected, and can be profitably be connected without
charging the subscriber extra for these calls between companies
- require the ILEC to allow the CLEC to install their own equipment
in the ILEC's central office building at reasonable space rental rates
- suggest that when one LEC hands a call to another, they should pay
the other LEC a modest fee per call to complete the call
to the other LECs customer.
One interesting consequence of these rules has been that it is
profitable to be a specialized LEC serving a class of customers
that receive a lot of calls but make no calls of their own.
Internet Service Providers.
Three years ago, the telephone companies did not want ISPs as
customers, and tried to charge them unreasobaly high rates.
Today, some CLECs are offering ISPs to install free lines
in order to collect the call termination fees.
This website discusses
these issues in some detail.
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Revision 1.1 1999/08/13 06:29:00 lars
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