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  Storming the Castle  New carriers claim to offer better pricing on services purchased ˆ la carte than an incumbent provider can offer. With bundling, the pricing incentive gets even better: A single contract might get you local dial tone, long distance, private line, transparent LAN services, Internet access and private frame relay. Yet for some managers, there's more to the attraction than simple cost-reduction--new carriers light a fire under the incumbent provider. We spoke to one potential customer who said he was willing to pay more only if he could get better service from the new carrier than that offered by the incumbent (in his case, NYNEX). Unfortunately, many of the challengers can operate only in certain limited geographic areas. Still, the very presence of competition has acted like a splash of cold water forcing some ILECs to wake up. To stave off competition , these ILECs have established their own metropolitan Sonet rings and migrated many of their traditional services to them. Some--among them Bell Atlantic, BellSouth, U S West, NYNEX and SNET--have gone so far as to offer LAN-port interfaces. The CAPs continue to expand their range of services, and some offer almost everything incumbents do (see "Competitive Local Exchange Carriers," on page 78). Because they provide much more than just access--including local dial tone, private lines, long distance, ATM, native Sonet and a range of value-added services--CAP has become an outmoded term. These carriers are more accurately called competitive local exchange carriers (CLECs). Having a choice sounds good, but using a CLEC is not without risks and limitations. These carriers are the new kids on the block, going up against well-funded and entrenched opponents. They face significant financial, regulatory and cu ltural challenges that customers would be wise to recognize when considering any alternative carrie r. To assist in this endeavor, we have outlined the major issues and examine the offerings of the most prominent CLECs. Alligators in the Moat First and foremost is the specter of risk. Telecommunications contracts represent a medium-term investment in a provider whose financial health and corporate culture can affect your service. Every one of these providers reported substantial losses in 1996. Each carries a significant amount of long-term debt, and as a group they'll need to pump billions of dollars into their infrastructure to compete nationwide. Those with strong local offerings--like Teleport Communications Group (TCG)--must invest in long-haul services such as frame relay (utilizing ATM backbones) to bridge the islands of connectivity they've built. In contrast, all of the ILECs, as well as AT&T, MCI and Sprint, reported profits in 1996. Granted, they're also carrying significant long-term debt--as high as $14.3 billion in the case of U S West. But they've had sufficient resource s to conduct technology trials for new services, such as video-on-demand and Asynchronous Digital Subscriber Line (ADSL), though new service deployment is maddeningly slow. Some have diversified into other areas. For example, U S West and Ameritech market data services over their cable TV holdings. The regional Bell operating companies and GTE have enjoyed strong demand for local access lines, which increased an average 3.9 percent in 1996.
The Big THREE set out to tackle Local markets This Issues other Feature Hardcore ATM Switches for the WAN By David Willis Updated October 8, 1997 
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