Thinking Differently - Industry Trend or Event

Telecommunications, April, 2001

This month's cover story is on the challenges facing CLECs, and I'm sure every CLEC that went bust or faces difficult times has a pretty good idea where things went wrong. While the endgame is all about acquiring customers--astonishingly some CLECs might have lost sight of that--some of their problems may have involved being seduced by new technology, or maybe they just had bad timing where technology was concerned. Take for example the CLECs that invested in Class 5 switches. Would some of them still be in business today if the new softswitch technology, just starting to mature, was available to them back then at a fraction of the cost of traditional circuit-switching gear?

At a broader level, IP technology, in combination with the seemingly endless amount of bandwidth that optical networking promises to create, has nearly obviated the concept of charging for services based on distance. Today, this applies mostly to data traffic, but tomorrow long-distance voice service may not be the moneymaker it is now if the move to VoIP gathers steam. Therefore, attempting to provide the same services with newer, cheaper technology will, I believe, be a weak strategy for a CLEC in the long term. While the SMB (small and midsize business) and residential markets remains largely untapped as far as delivering broadband access goes, a copycat strategy of providing the usual smorgasbord of services (e.g., local, long distance, Internet access, Web hosting) won't translate into a success story for every CLEC.

Meanwhile, as a keen reader pointed out in a recent letter, we seem to be in an inherently contradictory situation where the Internet is growing--and growing--even as CLECs and DLECs (data LECs) struggle. Some service providers will find their way out of the mess through a horizontal merging strategy. Other existing and emerging players will have to start thinking vertically--e.g., not thinking of the softswitch as a low-cost substitute for traditional telephony, but as an enabler of new features and services that blur the line between data and telephony. Likewise, while so-called IP service switches can make for a secure Internet (and provide additional revenue streams) through VPNs, firewalls and virus detection, this perhaps ought not been an end in itself but rather steps toward evolving the Internet into an improved platform for delivering content and richer applications.

More than ever, businesses and consumers still want voice, data and Internet access. The only thing a CLEC has to figure out is how to deliver those economically and in a way that differentiates its brand from all the others.

Sam Masud

Senior Technology Editor