Competitive Carriers

These telecom companies are facing many obstacles

Fighting for survival, competitive local exchange carriers are calling for an ambulance, but regulators may send a hearse instead.

Five years after the landmark Telecommunications Act of 1996 opened the door to competition, the local landscape is regaining its original shape — a regional Bell curve — and Congress is considering re-entering the picture.

"Maybe we need to tinker with the act," Sen. Herb Kohl, D-Wis., the ranking Democrat on the Senate Judiciary subcommittee, said at a recent hearing.

So far, the government deck appears stacked against the competitive carriers, with Federal Communications Commission Chairman Michael Powell taking a hands-off approach to competition and Congress heavily influenced by the regional Bells.

The competitive carriers — or CLECs — have even suffered the indignity of being called opportunists for taking revenue from the regional Bells in exchange for completing connections to Internet service providers. That slap came despite the fact that the connection fees, known as reciprocal compensation, were created at the behest of the Bells. Nevertheless, the FCC took measures to drastically reduce reciprocal compensation — a move seen as a final nail in the CLEC coffin.

Even so, some CLECs could survive. Best bets include suburban-Denver-based Time Warner Telecom, a separate entity from AOL Time Warner, and Focal Communications in Chicago.

Analysts consider any effort to provide DSL service to residential customers as doomed to failure.

"Most consumers will find it easier to deal with their cable company or just keep using their dial-up modems a little longer," says John Girard, an analyst at Gartner.