Basics Of Local Exchange Carriers

Local Exchange carriers or incumbents are common terms used in the telecommunication industry. While common customers may not understand the implication, the term the laggard incumbent is a common term used by market analysts to address the traditional telephone companies. There have been many changes over the years that have transformed the LECs.

The origins of LEC come from the divestiture of the original telephone companies into local exchange carriers (LEC) and interexchange carriers (IXC). The LECs handled the local telephone connections between the customer locations and the central office switches. The IXCs handled calls between regions and long distance.

As the industry advanced, the last mile became quite an important asset in delivering service and this is where LECs gained monopoly. However, regulatory rulings to foster competition led to unbundling of the last mile and have broken this monopoly. These LECs were later termed as incumbent LECs or ILECs to distinguish them from the competitor LECs of CLECs.

The CLECs are mainly operators that build and design their own core networks. They need to lease the last mile from the ILEC to deliver the service. The local loop unbundling regulations have mandated that CLECs get the leased facilities at a discount over the market rates making them profitable alternatives. However, ILECs continue to retain dominant market share in most wireline markets.

The CLECs have a more dominant presence in the residential arena. This is mainly because their service delivery and pricing are attractive to this segment. With the larger businesses and enterprises, there are many other factors over and above pricing that matter a lot. As a result, ILECs are typically preferred.



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