Business owners know that it’s no secret — bills and invoices from service providers can be beyond confusing. It’s almost as if they purposely use acronyms, abbreviations, and jargon that the rest of us don’t understand!
The telecommunications industry especially loves to use this complicated terminology, so we’re taking a deep look into some of the most confusing keywords you might need to understand to get your telecom spending under control.
We previously explored local exchange carriers, looking briefly at the two types in today’s market — ILECs and CLECs. Today, we’re focusing on Incumbent Local Exchange Carriers (ILECs) and what the Telecommunications Act of 1996 meant for these companies.
An incumbent local exchange carrier (ILEC) is a specific type of local exchange carrier (LEC) that held a monopoly on local telecom services at the time of the Telecommunications Act of 1996, mostly including companies that stemmed from one of the Regional Bell Operating Companies.
These companies are responsible for connecting local calls within their local access and transport area. ILECs are the original operators that provided local telecom services and, therefore, own the majority of the physical landline telephone system. The law now requires them to share their networks with new competition at a fair wholesale price.
Before the Telecommunications Act of 1996 was established, we had only one type of local exchange carrier. At this point in time, Regional Bell Operating Companies, or Baby Bells, had a monopoly as local phone providers. These seven new local phone companies were created during the division of AT&T in 1984.
After the Telecommunications Act of 1996, these existing companies became known as Incumbent Exchange Carriers or tier-one providers. Because they own most of the phone lines and switches in the United States, the act requires that they lease their telecommunication services to other carriers or suppliers. This deregulation was made to increase competition, allow new businesses to enter the market, and expand the offerings of existing ones.
Initially, these companies’ only responsibility was connecting customers to the local exchange or transferring them to another local exchange or long-distance carrier. They have the same duties as LECs, such as number portability, dialing parity, and access to right-of-way. However, thanks to the Telecommunications Act of 1996, incumbent telecom operators now have additional duties.
ILECs are required to provide unbundled access to any other telecommunications company, known as competitive local exchange carriers (CLECs). That means a CLEC should have access to any network element without being required to purchase all of them. In addition to unbundled network elements, the ILECs must offer discounted or wholesale rates.
Since CLECs need to use ILECs’ equipment, there are also certain duties regarding access, upkeep, and communication. An ILEC is responsible for the maintenance of the hardware. They must allow access for both physical and virtual colocation to CLECs. No changes may be made to the systems or equipment without notifying any CLECs that would be affected.
Considering the goal of the Telecommunications Act of 1996 was to encourage competition among telecom providers, it makes sense to think that a CLEC would provide a less expensive service. But tier-one carriers still have a majority share in the local exchange carrier market.
There are some significant benefits to working with an incumbent local exchange carrier rather than a reseller:
Initially, the first ILEC companies were the Regional Bell Operating Companies that came from the breakup of AT&T Corporation. Since then, thanks to mergers and acquisitions, the original Baby Bells have regrouped into three remaining companies.
Other ILECs are primary carriers in some states and regions but are not Regional Bell Operating Companies.
While contracting with an ILEC may be the right move for some businesses, others may benefit more from the lower pricing of a CLEC. But trying to diversify or change your telecom service portfolio is a daunting task that many business owners don’t know how to navigate.
If you think you’re overspending on telecom, let the experts at P3 run a telecom expense audit for you. We are constantly saving our clients an average of 15-30 percent on telecom overcharges. By looking through your current invoices, we can pinpoint any refunds you should be receiving and compare your rates with current market pricing to ensure that you’re not overpaying.
The largest remaining ILEC companies have expanded to offer a huge selection of telecom services. With a heavy focus on wireless and internet services, it seems as if landlines might be on their way out. However, legislation in some states makes it difficult for providers to stop this service.
That being said, many states have now approved the cancellation of landlines so that telecommunication companies can focus their time and money on improving newer technology.
Only time will tell if there is still a future for landlines in business.