ILEC vs CLEC: Understanding the Options for Telco Services
ILEC vs CLEC? ISP? So many abbreviations and so much jargon, right?
The telecom industry is a complex matrix of companies and partners providing the hardware, connectivity, services and software required for Unified Communications, including phone, fiber, cable, advanced telephony functionality, and more.
Feel a bit overwhelmed?
For corporate decision-makers, a firm grasp of the industry will provide the insight and clarity required to make informed decisions. Knowing who the players are, their roles, and what they actually provide compared to other options goes a long way finding the best fit for your business.
The competitive layout of telecom is fluid and constantly affected by ongoing changes, acquisitions, and government regulation. Consider this article a snapshot of the current telecommunications landscape.
ILEC vs CLEC: The ABCs of The Telecom Industry
While understanding who the providers are for every area of telecom is valuable, we know it can feel like a lot to stay on top of. This is one of the reasons why we work with small and medium-sized businesses, nationwide, to help them determine the best services for their needs.
ILEC - (Incumbent Local Exchange Carriers) telephone companies that held a regional monopoly on providing local service when the Telecommunications Act of 1996 was enacted.
ILEC's are the legacy phone service providers that are mandated to provide and maintain copper services across the nation. While densely populated areas are moving to fiber optics and wireless services, rural areas still rely on ILECs to provide services which until recently were over copper wires and T1 lines.
ILECs are large regional providers (though the wireless side of their business is nationwide in scope), which means their infrastructure and size can become a weakness.
It's really no surprise that customer service is one of the most common complaints with these behemoth carriers.
For companies in rural areas, or with offices spread across the nation, no other type of carrier can provide the reach and services those companies may require.
Rather than have different providers at each location, many enterprises choose ILEC providers to provide service at all locations. This centralizes their telecom services and makes it easier to manage as a whole.
Major Players: Verizon, AT&T, and Lumen. AT&T and Verizon both deliver wireless service, too.
CLEC - (Competitive Local Exchange Carrier) is a telecommunications provider company (sometimes called a "carrier") competing with other, already established carriers (usually the ILEC).
After the Telecommunications Act of 1996, a lot of small local carriers burst onto the scene. Originally, they provided services, such as Internet or phone service, over copper lines they leased from the ILECs. They could generally provide better pricing to the end customer for a variety of reasons, such as lower infrastructure costs and operational overhead.
Since the rush of the Dot Com Era in the late 90s, a lot of CLECs have been consolidated into larger companies.
These companies are now starting to build their own fiber optic networks (or take over fiber already in the ground), providing services such as cloud-based phone service, fiber Internet connectivity, and data center services, outside of the ILECs copper landline network.
With advancements in fiber optics, wireless and voice-over-IP technology, CLECs are uniquely set up to provide the entire spectrum of telecommunications services to their regions. These companies are much smaller than the ILECs, which usually translates to newer, better-maintained technology and more personalized customer service and support.
Atlantech Online originally started out as an ISP but has grown into a registered CLEC. We are building our own fiber optic network in the Washington DC area, which allows us to provide direct-connect telecom services to our clients in the region, but we have options for businesses nationwide.
Direct-connect over fiber means fast Internet, crystal-clear cloud-based phone service, as well as data center services with point-to-point fiber connectivity. On top of all that, we are 100% dedicated to providing the best possible customer service and support.
Major Players: Atlantech Online, Windstream, and Zayo.
Internet Service Providers
ISP - (Internet Service Provider) provides access to the Internet through cable, fiber, wireless or other technology. In addition, some provide other services such as colocation and web hosting.
ISPs rely on connectivity from ILECs & CLECs, providing a public connection to the Internet. ISPs are a good fit for smaller businesses and residential internet service.
Major Players: A dying breed. Not many major players left.
Multiple System Operators
MSOs primarily provide TV services and sell advertising. They often bundle phone and Internet connectivity together with television service for residential users. Some small businesses also use them.
They operate via a franchise agreement with local jurisdictions to be the registered cable operator in a given geographic area and do not have nationwide footprints. Depending on the region, they can provide coverage to a patchwork of localities.
Major Players: Comcast, Cox, Shaw, Brighthouse.
Data Center Operators
Data Center Operator - Privately owned and operated facilities that house floor space for servers and equipment.
Data Center Operators usually don't have their own networks but offer ILEC, CLEC and ISP services in their data centers.
The primary business operation is to provide floor space for servers and switching equipment to be deployed with robust physical security, redundant power systems, complex HVAC systems, and "meet me" facilities for telecom carriers to terminate services.
Major Players: Dupont Fabros, Equinix, Digital Realty.
Agents are a major player in the telecom industry, although many businesses don't even know they exist. The agent provides customer referrals to carriers and service providers in exchange for a set percentage of their contract, perpetually.
The relationship can be very lucrative for the agent, earning as high as 25% per referral for the lifetime of the customer's service. It makes sense from a carrier's position as well, paying independent referral agents a perpetual commission is expensive, but it's a secondary option to paying a sales team to accomplish the same results.
Referral agents can be anyone, from tech support contractors to telecommunications consultants. Referrals are generally made with a, "I know a person at X company that can get you better Internet." The referral is made to a salesperson at the Internet provider, and the silent agent receives his commission.
The difference between an agent and a salesperson, of course, is that a sales team is paid an ongoing salary, and any commissions for sales are usually one-time sums.
An agent, on the other hand, receives a set percentage for as long as you have service. Until that customer changes carriers, the referral agent gets a percentage of the monthly bill.
The biggest difference, is for the customers that pay for the service. They can easily recognize a salesperson from "Acme Internet Inc." But they are usually completely unaware when an "agent" is selling to them.
For this reason, dealing with independent referral agents doesn't always benefit the customer. In some cases, agents are incentivized to sell for the highest commission, not necessarily the best match for the customer's needs.
It's important to realize that referrals are commission-based sales in most cases. Anytime you are considering going with a new carrier, shop around - regardless of which telecom provider you are being referred to. That way you can be sure you're getting the best possible service, rather than being an "easy sale."
Major Players: GTB, CNSG, ATB.
ILEC vs CLEC: What's Right For Your Business?
Choose a provider that offers the following:
- A scalable, flexible solution with easy growth opportunity
- Streamlined billing for direct services provided
- A trustworthy, established network with a track record of success
- An independent, top-level data center
- Access to cutting-edge telephony and connectivity services
- Customer service that is proactive, attentive, and responsive
The overwhelming amount of choices means there is an ideal solution for every customer. Look for the one that is just right.
If you choose a small-scale provider, chances are you'll be a big fish in a small pond. But there's also a chance you'll just be sold a commodity, or resold white-label services from a 3rd party carrier.
Choose too big, and you're just an account number in a maze of customer service ambiguity. Not to mention the big guys have legitimate issues with disaster recovery due to massive infrastructure requirements.
Choose a more complicated, multi-vendor solution and you've got a confusing bill, multiple providers and your money is going out every month to a varied group of carriers and resellers that aren't even directly providing you service or assistance.
If all this ILEC and CLEC, resellers, and agents talk is giving you a headache, we can help.
Give us a call and let us take a look at your current telecom setup and needs. If we're a good fit to provide you with services on our own network, we'll let you know what we can do. Otherwise, we will be able to point you in the right direction for your particular needs.