About the LEC business... an article I wrote for NorthPoint...
Many small business customers, hungry for high-speed data communication but struggling along with analog modems, find themselves caught between marginally faster ISDN with its deceptive per-minute charges and prohibitively expensive T1 options. For these small-business customers, Digital Subscriber Line is a breakthrough technology which has been too long in coming. Finally, the regulatory climate created by the Telecommunications Act of 1996 is creating the opportunity for Competitive Local Exchange Carriers to make DSL services available to these customers.
Anytime such a window of opportunity presents itself, the entrepreneurial spirit tempts people in associated industries to get in the race, but in this case most will be left behind. The reason is the fallacious perception that the main requirement for delivery of DSL services is an understanding of DSL technology. While obviously important, DSL expertise is not the only criteria for success.
A successful co-location strategy is emerging as the top criteria for companies hoping to compete in the DSL market, and the companies with the most complete understanding of its unique problems will be the winners.
Regulatory Hurdles
The Telecommunications Act is a mandate for competition, not a blueprint; the reality is that we are exploring new territory here and many of the rules have yet to be written. Every co-location application is proving to be a unique situation with very little in the way of guidelines or precedent to help the process along.
First of all, regulations vary state by state and before a CLEC can petition the Incumbent Local Exchange Carrier for collocation status it must prove it is in compliance with that particular state's regulations for exchange carriers. In the majority of cases, local legal counsel is needed in each state to interpret those compliance regulations -- an obviously expensive and time-consuming process. Furthermore, at the state level initial compliance is often only the first step and yearly, or in some states even monthly, compliance reports are mandatory.
It is only after state approval that the CLEC candidate can approach the ILEC for collocation rights. Different ILECs have vastly different ways of adjudicating compliance for CLEC status and there are no standard processes or set tariff structures in place to guide the negotiations. There are also few if any precedent cases to consult. Negotiation points include the availability of space within the central office, what level of access will be allowed for the CLEC service personnel to the equipment installed in the central office, and to what level of the NEBS guidelines that equipment must comply.
This negotiation with the competition is usually a time consuming proposition. The ILECs have the obligation, according to the Telecommunications Act, to open up their networks to the competition in order to qualify them for the lucrative long distance market many of them crave to enter, but the Act itself has no guidelines to define the level of compliance the ILECs are required to attain. Some ILECs maintain that being in the negotiation process alone is enough to satisfy the requirement.
Running Out of Room
Simply put, the rule in collocation is that bigger is better. Like a game of Monopoly, the company with a point of presence in the most central offices has access to the most customers. Unfortunately, the regulatory hurdles for acquiring collocation rights are not only extremely difficult, but space is in short supply.
Last decade the FTC mandated deregulation of the airline industry with the intention of promoting competition. One complication they didn't foresee was the limited number of airports and gates. The incumbent airline carriers were only required to allow competitive access to available space, not give up any space they were currently using. It may not have reached the awareness of the potential CLEC market yet, but the same is true for central offices throughout the United States.
Pacific Bell has already closed its doors to petitions for collocation in 60 central offices claiming there is no more space available. Without putting out an exact figure, Bell Atlantic also says space is running out fast. Do the ILECs have an obligation to make space available to the competition whenever possible? In order to comply with the Telecom act, yes they do, but the Act contains no working provisions at the federal or state levels to force ILECs to provide collocation facilities if no space is available. ILECs do not make floor plans available, and there are no regulatory procedures to verify what space within a given central office qualifies to be collocation space.
In some cases, ILECs with central offices known to have very large areas of unimproved space claim to be saving the space for future use, but no regulations say when they must use it or for what purpose. A third party independent evaluator could be employed to arbitrate an impartial opinion, but once again, no statute forces this option. The only other alternative is an expensive and time-consuming lawsuit – an strategy we don't believe is viable.
The ILEC may give the CLEC candidate the option of improving unfurbished space. However, the CLEC will likely be assessed anywhere from $100,000 to $1 million for improvement costs with half the cost of the improvements and an application fee payable in advance. The time to make the improvements can be a year or longer and for the CLEC that means tying up a great deal of working capital.
Other Collocation Options
Virtual Collocation
Originally created to accommodate Competitive Access Providers installing standard telephone equipment already familiar to the ILEC, virtual co-location allows CLEC equipment to be installed alongside existing central office equipment wherever rack space is available. The problem is DSL requires several pieces of equipment that have never been used in a central office before. The equipment may qualify for placement in the central office through compliance with the NEBS standards, but that in no way implies anyone working for the ILEC will have the necessary experience to maintain it.
Still, access to the equipment in virtual-collocated space is denied to CLEC personnel, so setup and maintenance is in the hands of the ILEC -- which raises a host of issues. Who pays for the training of the ILEC employees responsible for maintaining the equipment? The CLEC might spend thousands of dollars training personnel who could be reassigned or relocated at anytime. If the ILEC is paying the technicians' salaries who sets the rate for the troubleshooting and maintenance service fees? Most distressing with this arrangement is that there is no inherent loyalty to the CLEC, the equipment is in the hands of the competition, and there is no guarantee of timely service, especially in the case of severe network outages -- CLEC equipment would likely receive the lowest priority.
For virtual co-location, enlisting a known company with extensive telco experience as a third party maintenance provider is an option that holds a great deal of promise, but first it must be proven that it does not cause personnel conflicts with the existing ILEC employees.
Shared Collocation
In the spirit of cooperation, one of the more creative ideas ILECs have produced is shared co-location. Smaller cages, sharing of cages and even cageless collocation are all aspects of this option. Cageless collocation is common floorspace set aside for the equipment of more than one competitive carrier with little security beyond a surveillance camera -- access to any and all competitor's equipment is open and unprotected.
Off-Premises Collocation
Another option is off premises collocation, also known as contiguous space, where CLEC equipment is installed in a building next-door or as close as possible to the central office. Some of the more humorous propositions have a trailer in the parking lot, clearly not an option in crowded quarters like Manhattan, but for those conditions there is always "manhole" collocation. Figure in the additional rent and the connection problems involved with extending the local loop copper to the off-premises location.
The Loops
The technological differences of each variety of DSL merit a great deal of discussion, but the choice of a DSL implementation can also affect CLEC status. Asymmetric Digital Subscriber Line (ADSL), the line code of choice by many LECs, has potential problems when it comes to central office installation because of its higher current. ADSL is known to cause cross talk, white noise, and even dead air in some binder groups, especially those containing T1 lines.
Although some ILECs have partially laid this controversy to rest with their own ADSL trials, many binder groups contain undocumented T1 lines deployed before the need for accurate record keeping was even realized. Especially critical is T1 service provisioned with HDSL -- known to conflict with ADSL when in the same binder group. If interference with ILEC customers is created by a CLEC turning up ADSL service they may have their service terminated without notice -- in extreme circumstances they may even have their CLEC status revoked. Unfortunately, there is rarely any way to know in advance if an ADSL line is going to cause interference.
NorthPoint employs Symmetric Digital Subscriber Line (SDSL) which uses the same 2B1Q encoding spectrum as ISDN. By definition, any line approved for ISDN is also approved for SDSL. Not only is it less risky to utilize technology already approved by the ILEC, the symmetric communication aspects of SDSL make more sense for the business market. This target business market is situated in the higher density locales of metropolitan areas with a greater concentration of generally shorter local loops. We have found the best copper to be in these areas -- without bridge taps, load coils, SLCs or DLCs.
Because we employ our own test equipment to verify the copper capability of each local loop we are confident in our connection reliability. Our test equipment and procedures have proven themselves to be the most reliable for compatibility testing the loops we include in our network..
Operations Support Systems
Parity of competitive advantage between the CLEC and the ILEC is central to the Telecommunications Act of 1996. CLECs are to have the same knowledge management for availability, ordering, billing, installation, and repair of the network elements as the ILEC. Unfortunately, there are no procedures to verify or enforce this parity and this is becoming one to most difficult issues to resolve as there is a wide divergence of procedures in place. For example, one ILEC might provide access to customer or network information through a terminal based application while another may do it through a WebSite. Several ILECs are charging a per-inquiry fee to the CLEC for access to their internal systems.
At NorthPoint, the Bell Operating Company experience of our select personnel is helping us create a complete operations support system of our own for full information independence form the ILECs. A truly valuable CLEC must have the resources to handle every customer need independently. At NorthPoint, neither our Service Provider customers nor their end-users will ever need to deal with anyone but us.
How do we get heard?
Today's small-business market has been struggling for years to compete with the larger companies who can afford more expensive, high-speed data communication, and just as the Telecommunications Act mandates parity in the spirit of competition, the small business market demands parity in the availability of faster data throughput, and while it's true that incumbency has its advantages, the small-business market we are aligned with makes up 60% of the U.S. economy, and that can be a powerful voice in today's regulatory climate.
But fighting battles doesn't create new opportunities. At NorthPoint we believe in fostering working relationships with the ILECs with the intention of adapting to their systems. Regulatory attacks waste time and we are far more interested in attaining the minimum elements we need to do business, collocation space and access to local loops. While some of our competitors seem to be creating adversarial relationships -- we are turning up DSL service.
Our growth rate has been phenomenal when compared to competitive carriers of the past; within a year we have established a presence in over a dozen states. This is largely due to our regulatory experience which we believe insures our customers a constantly growing presence in the competitive marketplace and even more customer potential going forward. |
