Victims of Dirty Pool?

Believe it or not, despite the publics hunger for broadband, DSL CLECs continue to fail at a horrifying pace. Never has a technology so popular created such failure among its providers.

Need convincing? On Feb. 28, Teligent posted an EBITDA loss of $435.9 million for its 2000 fiscal year compared with a loss of $381.8 the previous year. Rhythms NetConnections is deferring dividend payments. And ConnectSouth Communications, with more than 270 central offices, is closing its doors by March 24 due to liquidity issues and market conditions.

How can that be? If you ask competitive local exchange carriers, the answer is easy: Its the regional Bell companies.

According to numerous CLECs, their top problem is that the independent local exchange carriers (ILEC) are playing dirty pool. Time after time in interviews, Sm@rt Partner has been told the ILECs arent doing an adequate job of installing CLEC equipment and lines; that ILECs are slower to respond to CLECs and their customers problems with ILEC lines; and that the ILECs try to talk customers into switching to their services.

Still, some of the DSL CLECs are keeping their heads up. Despite recent layoffs at Covad Communications, staff morale reportedly remains high. One Covad engineer, who requested anonymity, says that management “has done their homework” and is doing an excellent job of explaining its business logic.” He says the staff really believes those changes “will be good for the companys bottom line and us” and “at Covad we know were all in this together.”

Most CLECs also would agree that right behind the ILECs, comes cutthroat competition that has left CLECs playing a losing game of bleeding profit margins.

Many small Internet service providers that Sm@rt Partner spoke with say that while their customers love DSL service, they simply cant make enough money off DSL to survive.

Ultimately, the blame falls again on ILECs. CLECs believe that with their deeper pockets, ILECs are cutting prices to the bone not just to gain market share, but to force CLECs and independent ISPs out of business. There is no love lost here.

With can-do attitudes like that, resilient CLECs will remain players no matter how dirty they believe the datacom game is played. Still, some DSL providers surely will wind up behind the eight ball.