CLEC business models Sample Clauses

CLEC business models. To become a CLEC, entrepreneurs required certification with the Public Service Commission (PSC) in each state where they operated. Certification required clear designation by founders of the business models that they would be pursuing with their ventures. The selection led to separation of the ventures into two qualitatively different models. One was a “resale-only” model, which was less complex and involved leasing the entirety of a CLEC's services from the incumbent provider and reselling them to end users; these CLECs owned no portion of their own facilities. The other was a “facilities-based” model, which was more complex and involved owning at least a portion of a CLEC's own facilities (e.g., a fiber network, switching capacity). The vast majority of facilities-based CLECs (90%) also had a resale component to their business that complemented their facilities (e.g., to reach markets where they did not have facilities); thus, not only were they required to understand the resale business, which was largely oriented around the administrative processes of sales, ordering, and billing management, they also required an understanding of the complexities of owning and constructing their own facilities. Each model had its own unique challenges and opportunities. Founding teams with similar background characteristics pursued both models, and both exhibited similar ex-post success rates, with approximately half of all CLECs surviving their first five years of operation. Low Complexity: Resale Only CLECs. As pure resellers, CLECs were not required to own any of their own facilities; they purchased the incumbents' service offerings at a wholesale rate and then resold the same incumbents' services to their end customers. This model appealed to many aspiring CLEC entrepreneurs with its low entry barriers. Fewer than 2% of all applications for PSC certification were denied. As one founder I interviewed explained, “If you had any industry knowledge, any business background, knew how to work with the regulatory agencies, knew how to talk “Bell,” and then had money to put the deposits in, it was pretty low to get into the market.” The wholesale discount was determined by the state commissions where CLECs were certified and was designed to be compensatory for the costs (e.g., sales, administrative, billing) that CLECs assumed by servicing customers in lieu of the incumbents; discounts were approximately 17% off the retail rate (XxXxxxxxx III, 2002: 55). Several of the res...