Evaluate a CLEC

Even in these turbulent times, many companies are still interested in using competitive local exchange carriers. In addition to examining price, infrastructure, technical expertise and support, would-be CLEC customers should obtain as much information as possible about providers’ financial viability.

Granted, this isn’t straightforward for privately held carriers, but it can often be inferred by studying a variety of factors, such as:

— The types of customers served. CLECs that primarily serve the wholesale or ISP market, or whose revenue stream heavily relies on reciprocal compensation payments, are more vulnerable financially than those who serve retail customers;

— The types of services offered. Carriers that offer a broad portfolio of retail business-class services are of obvious interest to companies, and have a better chance of weathering these tough economic times, compared with say, a provider that only offers one type of access and one type of service;

— The number of lines installed and their rate of change;

— Changes in coverage (geographical expansions or contractions);

— Personnel considerations, such as layoffs; and

— The number of rounds (and timing) of venture capital financing or borrowing.

Customers should develop a policy regarding use of CLECs at the corporate level. Important evaluation factors include specifying: a minimal set of required services and features; required levels of customer support, at every phase of using the service; the minimum level of acceptable savings the CLEC should guarantee in a contract; the official process for making such commitments across multiple sites; and identifying the personnel and processes necessary to oversee switching providers.

In developing this type of policy, some additional rules of thumb include:

— If you wish, allow local branches to experiment with a short list of first-cut CLECs for a short, specified period, but sign contracts at the corporate level;

— Don’t switch carriers for less than 20 per cent guaranteed savings, net of all costs, both internal and external.

Widely dispersed companies often prefer to use a single CLEC across multiple sites, and should request to be treated as a national account with a single point of contact and greater aggregate savings (30 per cent or more) compared with the best deal the incumbent local exchange carrier (ILEC) says it will provide. This is one strong benefit of switching carriers; I’ve spoken with many customers who are still waiting to receive the same type of treatment from their ILECs.

As some customers have experienced, even some large alternate providers neglect to state firm installation due dates. Additionally, promised due dates are not always met. And customers often assume the alternative provider’s quality is on par with the incumbent’s, but this is not always the case. For these reasons, expect to migrate to a new CLEC over one to three months and retain full access to the ILEC for at least 30 to 60 days after the migration is completed.

It’s prudent to retain some amount of access to the ILEC. The greater the risk associated with the CLEC, the more access diversity is required.

Pierce is a research fellow at Giga Information Group. She can be reached at lpierce@gigaweb.com.