Becoming a Competitive Local Exchange Carrier: What, How

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Becoming a Competitive Local Exchange Carrier
What, How Why

• October, 2003
• APPA Legal Seminar

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Background - Municipal entry into
telecommunications

• In many cases, public sector is single largest
  user of telecom services, and faces (a) growing
  demand combined with (b) higher rising prices
  for each unit of communications.
• Ownership may break the use more, pay more
  paradigm.

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Background - Municipal entry into
telecommunications

• Business sector may be underserved - particularly
  the small business sector.
• Community may be underserved, generally -- and
  good infrastructure may be key for economic
  development.
• Existing government activities may already
  include resources required to support
  high-quality services.

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Background - Municipal entry into
telecommunications

• Examples
• wholesale telecom service models the UTOPIA
  network in Utah
• retail-to-sector models Portland, D.C.
• Internet model Long Beach, California

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What is a CLEC?

• CLEC competitive local exchange carrier
• Local exchange carrier (47 U.S.C. Sec. 153(26)
  any person that is engaged in the provision of
  telephone exchange service or exchange access
  (with exception for CMRS).

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What is a CLEC?

• BUT CLEC is NOT limited to provision of voice
  service COVAD is an example.
• A CLEC is a telecommunications service
  provider, meaning it provides transport
  services for customers on a common carriage
  basis, although it is not limited to providing
  common carrier services.

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What is a CLEC?

• At the federal level and at the state level,
  CLECs are typically subject to substantially less
  regulation than dominant incumbents
• Many of the traditional elements of regulation
  associated with local exchange service
  (tariffing, extensive public interest
  certification review, duty to provide universal
  service) have been eliminated or radically
  reduced.

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What is a CLEC?

• One does not necessarily avoid state or federal
  obligations by avoiding classification as a CLEC
  (example Alaska).
• But, what one does do is obtain a series of
  benefits and burdens that affect the economics of
  an enterpriseand which may maximize revenue
  opportunities and operational flexibility.

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How does one become a CLEC?

• Varies from state to state, but forms are
  generally relatively simple to fill out, and
  require limited information.
• Various operational issues --interconnection,
  telephone numbering, tariffing (as required),
  registration.

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Sample CLEC Application (double click icon below)
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Why become a CLEC/telecommunications service
provider?

• MAIN ANSWER provides access to network of
  incumbent providers at SUBSTANTIALLY reduced
  costs.
• MAY be necessary if part of business plan
  involves provision of voice services using the
  PSTN

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Why?

• Interconnection -- (Section 251a1 see also
  Sections 201a and 251c2)
• Unbundled access to ILECs facilities, (Sections
  251c3, -d2 (impairment standard)
  Section 251(g) (exchange access and
  interconnection obligations of LECs).
• Collection of terminating access charges,
  (Section 251b5)
• Colocation rights (Sections 251c6 259

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Other benefits

• Pole and conduit attachments (Section 224)
• USF support for eligible telecommunications
  carriers (Sections 214d, 254).
• Apportioned NANP and number portability costs
  (Section 251e2, Section 52.1 et seq.).

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Other benefits?

• Eminent domain (state law)
• Eligibility for radio frequencies allocated to
  common carrier service (Parts 21 and 22).
• Preemption of state and local prohibitions to
  entry (Section 253).

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Examples of burdens - the flip side of benefits

• Interconnection
• State regulation that would not otherwise apply
  as to poles and conduits?
• Number portability (Section 251b2 Section
  52.23 et seq.)
• Dialing parity, as defined in Section 3(15)
  (Section 251b3)
• Reciprocal compensation for transport and
  termination (Section 251b5)
• 2. Duty to serve
• 3. Ten-digit numbers (Section 64.3004).
• 4. Discontinuance of interstate service
• 5. 911 and E911 costs (Section 251e3
  Section 3b of Wireless Communications and
  Public Safety Act of 1999 P.L. 106-81).
• 6. Consumer protections, subscriber privacy,
  customer billing, disabled access, EEO, secrecy
  (Sections 222, 255, 258, 705, 710)

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Burdens

• Duty to serve?
• Ten-digit numbers (Section 64.3004).
• Regulation of discontinuance
• 911 and E911 costs (Section 251e3 Section
  3b of Wireless Communications and Public Safety
  Act of 1999 P.L. 106-81).

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Burdens

• Universal service contributions
• Consumer protections, subscriber privacy,
  customer billing, disabled access, EEO, secrecy,
  CALEA (Sections 222, 229 255, 258, 705, 710)

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The shifting tide

• Dont assume that because you are not a
  CLEC/telecommunications provider, you are NOT
  subject to regulation. Example FCC has extended
  USF obligations to all interstate
  telecommunications providers
• Dont assume the benefits will remain as
  significant

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The shifting tide

• But, recognize that you may obtain substantial
  flexibility by becoming a carrier.
• The key is how does this help me maintain a
  flexible business plan?