Start a New CLEC? What Are You Thinking?

It's still fresh into a new year and time to take that idea to create a local telecommunications company out of the closet. After all, you've been successful in other ventures and always wanted to be in charge of a local exchange carrier. The telecommunications space took that major hit last year and, who knows, those venture capitalists may want to leap upon your idea of creating and growing a competitive local exchange carrier.

You ask yourself "what is so hard?" You simply convince potential customers that your price and response for local service is better. They pay you and life is grand. The incumbent Local exchange carriers have to let you into their market, the government said so back in 1996. The bugs in the process have certainly been worked out by now.

But what would your local company do to drive customers to it? What will be your gimmick (value proposition) that will make someone move from the comfortable, no-hassle service that they are used to, to your fantastic offer? Are you planning to service residential or business customers? Will you offer cheap rates, combine local and long distance or provide internet services? Or, will you offer e-mail news, pager, wireless or customized services along with the local service? Or be everything to everyone at ridiculous prices that a potential customer would be foolish not to accept?

And how might you deliver your service? Will you contract with strong vendors to resell their services or will you attempt to be a storefront/agent for vendors meeting your product delivery needs? What about developing your own network? The new network devices arriving in the marketplace are less expensive and feature rich.

How might you market your company? Using the latest and greatest Internet e-mail campaigns, a Web presence that allows the potential customer to order and set-up all the services they wish or send money to potential customers buying their way to your service? Or, do you convince other Web presences to add you as a link on their site? There is always the latest in telemarketing or advertising, but in this day and age, I wouldn't bet the farm on it.

What kind of people do you hire? The answer may depend upon what and how you plan to deliver, market, provision, bill and service. The delivery method may require a totally different set of people if you resell services versus creating a network. The manner of marketing could dictate the skill set between traditional and new age marketing techniques. Provisioning takes on a completely different level of skill between a resell and facilities process. Billing and customer service also takes on new meaning if you plan to electronic bill versus paper.

Don't forget about the information technology, regulatory or financial staffs that understand the business model, and more importantly understand the telecommunications business and can develop the processes to support you. These behind the scenes functions are more important than many people think. They are also the glue that holds together your operation and keeps your customers pleased that they made the choice they did.

There is the language of Universal Service Operation codes (USOCs). These codes determine what services and the price of those services a customer may have. They be different between Regional Bell Companies and even within a single Regional Bell territory. Compound these differences with price differences and you can easily see the effort in translating what you may want to do with reality.

The effort in creating a Competitive Local Exchange Carrier is fraught with failures and highly publicized successes. It is a hard business to break, harder still due to the uniqueness of the local environment and the methods employed to make a simple move of service harder than it needs to be.

This tirade is not meant to discourage someone form starting a CLEC, but only lays out a few of the many issues to be discussed and reviewed prior to any activity. As in any good business plan, the more you know about the venture you wish to start the more sound that business will be once implemented. In the coming months, we'll discuss in more detail the finer points of running a CLEC and more importantly, avenues to becoming a profitable business.

Jim Marsh is a senior consultant for The Management Network Group, a telecom consulting organization.  Jim has worked in telecom for 15 years and is an expert in revenue assurance, risk management and fraud. Jim speaks and writes on improving operational systems and functions to improve bottom lines.