Extensive Service Portfolios Can Give Competitive Local Exchange Carriers an Edge in the Residential Markets

To keep pace with consumer demand for bundled voice, data, and Internet services, competitive local exchange carriers (CLECs) should keep enlarging their product portfolio. Access to local, long distance, and Internet is a part of the bundle for residential markets, but CLECs need to focus on development and deployment of advanced services such as voice over Internet protocol (VoIP), especially with the phasing out of unbundled network element platform (UNE-P). For the business sector, CLECs have to outdo or at least match the offers of incumbent local exchange carriers (ILECs). For instance, since incumbent carriers offer wireless data connectivity, CLECs can follow suit by collaborating with wireless carriers to provide services such as wireless-fidelity (Wi-Fi).

This Frost & Sullivan research service provides an overview of and an outlook for the U.S. CLEC strategies. The study focuses on CLEC activities in both residential and business service sectors. The research service offers detailed quantitative information including market size forecasts for both consumer and business CLEC markets. It also provides pricing information for various CLEC services. The research enables companies to align their positioning strategies to benefit from the changing markets and obtain maximum return on investments.

Inadequacies of Existing Providers Create Opportunities for Various CLECs

If the increase in wholesale access lines experienced by the regional Bell operating companies (RBOCs) is anything to go by, incumbent local phone service providers are likely to be increasingly replaced by others. End users have been dissatisfied with existing telecom companies due to various reasons. Some of the factors include higher prices, perceived inadequacy of value for money, aggressive pricing by competitors, inferior customer service, and the inability to offer either multiple or customized services.

All these reasons have built up discontent among consumers, making it easier for CLECs to attract them away from the incumbent telephony providers. "Notably, a majority of ILECs' retail access line loss is attributable to two consumer CLECs - AT&T’s Consumer and MCI’s The Neighborhood," says the analyst of this research. "While the RBOCs have begun to offer similar local and long distance bundles as these two CLECs, they have been unable to stop end-user migration to CLECs."

Commercial Sector Likely to Prove More Profitable for CLECs

CLECs are expected to enjoy huge demand for their services from the business services sector, which includes commercial enterprises and wholesale segments. The residential sector, on the other hand, is consistently experiencing competitive pressures and price erosion. Several CLECs owe their success in the enterprise segment to their tactic of targeting customers as well as wholesale buyers through their own facilities for fiber, switches, and private networks. This strategy makes these providers less susceptible to changes in the regulatory environment.

"Within the residential markets, CLECs such as AT&T Consumer, MCI, and Sprint have realized success over the past 24 months," notes the analyst. "However, in future, their ability to sustain this success is likely to largely depend on a ‘favorable’ regulatory environment."