In the early days of the telecom boom, everyone was concerned about market share and line counts. Nu- merous hours were spent in backrooms trying to figure out how much a line was worth and how many were needed to make everyone rich. Very little concern was given to profits or cash flow.

Wow - how times have changed. After the meltdown of 2000, companies woke up and found themselves in a real dilemma. They needed to change their way of thinking; suddenly, operating profitable is essential to long-term success. Many organizations had to restructure; for some, this included bankruptcy. The good news was that UNE-P was still around. A CLEC could generate acceptable margins by offering great customer service and good working relationships with the customer and flexibility; particularly to customers that RBOCs were not focused on.

However, recent rulings from the Third District Court and the FCC have made it clear that UNE-P is no longer a viable solution for CLECs. However, they do have options in continuing to provide service to cus- tomers. The more adroit CLECs are growing their revenues, while expanding their operating margins largely by good fundamental business practices, and employing creative serving strategies such as:

1. Facility-based solutions
   1. UNE-L with Time Division Multiplexing (TDM) - This requires build out of colloca- tions, purchase of a switch (DMS100 or 5E), network infrastructure, and develop- ment of an operational support system (OSS).
   2. UNE-L with Soft Switch - This requires build out of collocations, purchase of a soft switch, network infrastructure, and development of an operational support system (OSS). By using a broadband loop carrier, the CLEC is able to offer high speed Internet service as well as voice.
2. A VoIP solution - There are many options available to CLECs if their customers already have access to a broadband connection. The CLEC leases an end-to-end customer service platform from a wholesale broadband provider. A modem router is located at the customer site. There is an incremental capital cost for each new customer. Other companies such as STS Telecom and ACCXXVoIP can provide service without an existing Internet connection in place.
3. Carrier service agreement with the RBOCs - Some of the RBOCs such as Verizon, Southwest- ern Bell, BellSouth, and SBC Communications are offering service packages similar to UNE-P. These packages are running anywhere from $3 to $9 more per line. Most of these agreements have minimum line count requirements. If these requirements are not met, high penalties will be incurred. These agreements can also give a CLEC the opportunity to offer high speed Internet ser- vice. Several CLECs have opted into these types of agreements, including MetTel and Trinsic.
4. Buying wholesale services from large carriers - Some of the larger facilities-based CLECs such as Xspedius, XO Communications, and ITC DeltaCom are offering various product offerings for CLECs. These are going to be limited geographically. Examples of where Xspedius, XO Com- munications, and ITC DeltaCom can offer service are shown on the following maps:

The biggest issue most CLECs have in changing platforms is cost; more importantly taking cash flow away from other aspects of the business. Capital markets are still limited for telecommunication compa- nies which is particularly so for small to mid-size companies. However, there are opportunities to lever- age the assets a CLEC has and/or will acquire. Equipment leasing opportunities may be available with equipment vendors or leasing companies. Also, look at receivables factoring opportunities which, in many cases, can be accomplished without encumbering the other assets of the company.

Once a decision is made as to how to provide service, a CLEC can then turn its attention back to growing the business. If you look at what the RBOCs are doing, you will see they are bundling services. This model has been very successful for them and it can be even more successful for CLECs. They can use the flexibility they have to offer different programs to customers. They can also attack niche markets.

It has been said before, but it is worth mentioning here as well. As a CLEC grows its business, quality and concentration of customers and the ability to generate positive cash flow are the keys to success. Good-paying clients in a concentrated area have tremendous value. For one, they are easier to service and the opportunity to provide a facilities-based product is increased. Lowering the cost of service by outsourcing service can be a cost-effective means of lowering operating costs and avoiding capital ex- penditures that are normally associated with a facilities-based model.

The opportunity to prosper in the CLEC industry is still great. Business models are adapting to the changes in the industry and the time to seize this opportunity is NOW!

Resources

Consultant The Northridge Group Sue Platner President The Northridge Group 9700 W. Higgins Rd., Ste. 690 Rosemont, IL 60018 (847) 692-6722 sue.platner@northridgegroup.com	VoIP Providers ACCXXVoIP Mike Conway President 4035 Tampa Rd., Ste. 6000 Oldsmar, FL 34677 (866) 499-0808 conway@accxx.com
Wholesale Providers Xspedius Communications Benjamin Edmond Director of Product Marketing 5555 Winghaven Blvd., Ste. 300 O'Fallon, MO 63368 (636) 625-7111 benjamin.edmond@xspedius.com	STS Telecom Keith Kramer Vice President 12233 SW 55th St., Ste. 811 Cooper City, FL 33330 (800) 610-7600 kkramer@ststelecom.com
Interstate FiberNet An ITC DeltaCom Company Tom Schroeder Senior VP of Carrier Services 1791 OG Skinner West Point, GA 31833 (706) 385-8020 tschroeder@itcdeltacom.com	UNE-L Solutions Cienna Gated Resources Gary Bolton VP of Product Services 1201 Winterston Road Linthicum, MD 21090 (800) 207-3714 gbolton@ciena.com
XO Communications Joya Trivette National Account Manager 4000 Highlands Parkway SE Smyrna, GA 30082 (678) 444-4324 joya.trivette@xo.com	OSS Solutions Concretio Telecom Solutions Kevin Williams President 1952 McDowell Rd., Ste. 202 Naperville, IL 60563 (630) 369-9668 kwilliams@concretio.com