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Technology Stocks : Covad Communications - COVD -- Ignore unavailable to you. Want to Upgrade?

To: Alan Bell who wrote (164)	7/12/1999 12:56:00 PM
From: lml	Respond to of 10485

Alan: You ask an extremely important question that I have yet to resolve myself. However, at first brush my conclusion is that this is an area where the CLECs may have a difficult time competing. First, note that the CLECs' primary market is the business sector. They have laid fiber loops in many commercial areas in an effort to deliver improved hi-bandwidth services that was necessarily available over ILEC-provisioned copper loops. Under the Telecommunications Act of 1996, the CLECs were granted the right to co-locate their switching & multiplexing equipment at the incumbent's CO, which provided the impetus to invest in fiber loops to service high-density business establishments. The economics of such investment is obvious. To the extent their co-location equipment can serve residential premises, the CLECs have offered residential customers ADSL, SDSL, or IDSL due to distance or line quality constraints. Here, their investment has been minimal. Six months ago I e-mailed the head of engineering at COVD in an effort to "create an incentive" for my ILEC to bring DSL to my neighborhood. My hypothesis was to redesign the loop whereby the neighborhood, presently served by a CO 7.5 miles away, would be served by DSLAMs installed in a more closely situated CO within the tariffed limit but outside the area code. The COVD engineer responded the under the 1996 Act, COVD was prohibited from installing any of its own equipment beyond the incumbent's CO, namely doing any plant engineering along the loop. So, at first brush, the present answer is that CLEC's have no "co-location" rights along the loop. Now, the foregoing is not to say that such rights may not be granted as the present environment evolves. But consider the more restrictive space limitations that exist at a remote site. If an incumbent opts to invest in a NGDLC system by laying fiber to a remote site & installing expensive boxes on small parcels of real estate along the loop, how easy would it be for a CLEC to purchase its own boxes & co-locate on the site? The co-location model would grant the CLEC to install its own boxes at the site. But how easy would it be to provision a hybrid fiber-copper loop using multiple plant equipment? Are they willing to lay their own fiber along the loop & install similar equipment on their own real estate? Would such real estate be available close enough to connect to the existing copper that leads to the customer premises? I think the answer at present is that it would be very difficult for the CLECs to compete at the farthest reaches of the loop. Is this an area that the CLECs want to channel their financial resources? I reiterate CLEC core strategy as focusing on the business market. Again, its a good question.