The CLEC Era and The UMC

For a 2 year period, our largest account was a CLEC (Competive Local Exchange Carrier) – Winstar Communications. I know a lot about this because Winstar was not big fans of our Sales Management and John Schofield asked me to work the account personally. I spent 18 months going from SFO to Dulles just about every week. I had various travel partners: Tom Giunta, Adam Shelton, John Faxio and Mark Abrams. We had a very small sales team: Debbie Bunn, TJ Kendall, and Jeff Kidd. But the account was great business, in 2000 we did $65M at 60% gross margins. This was a great piece of business that ended badly.

Winstar became a customer through Tellabs and built out their network with Lucent money. The heady days of vendor financing. Winstar was supposed to use Lucent product but could substitute “Best in Class” products when it made sense. Tellabs was able to sell the 5500 and the UMC to Winstar. In those days, AFC could sell Cablespan and Tellabs could sell the UMC. This came out of the joint venture that created Cablespan. Occasionally, we would compete for business and so we decided that Tellabs would only sell Cablespan and AFC would only sell DLCs. Winstar transitioned to an AFC customer as part of this deal.

So, if you think about markets and whether the UMC was “Best in Class” then why not other CLECs? The reason is pretty simple. Most CLECs leased single T-1 lines from the ILEC (Incumbent Local Exchange Carrier) and put a box called an Integrated Access Device (IAD) at the customer location. This box provided data (normally Ethernet) and voice to that one customer. At the time, the data might run up to 768 Kb/s and then have 12 voice lines as well. Winstar was different. They were building their own network based on fixed wireless. Most of the buildings that we supported ran of 4xT-1 radios. A few buildings were connected with DS-3. Winstar would then put a UMC in the basement of a building and offer service to any customer in the building. This was call “On-Net” operations and AFC/Winstar did approximately 3.500 buildings this way. Most IADs could not support more than 1 T-1 line nor could they drive up a riser supporting all tarrifed voice services and Basic Rate ISDN (BRI).

The UMC might have been “Best in Class” for Winstar but not for everyone.

The relationship between AFC and Winstar was good. In particular, we met with Bob Lawson and Joe Wehar every week to discuss issues and changes. For two years, Winstar deployed 2 shelves in each basement with 4 T-1s and 16 UVG (Universal Voice Grade) cards. They were going to switch to an IAD model where g.SHDSL would be used to connect to the customers and an IAD would be placed in a customer location. AFC bought GVN to supply the IADs and build a g.SHDSL card for the UMC. The plan was to interoperate with the CopperCom voice gateway to bring the voice back to the Class 5 switch. Winstar went bankrupt before we could deploy this model with them. We finished the work, but nobody else was interested in deploying that way with the UMC.

One other note about this era was a discussion held at the FCC in being able to open up remote cabinets. Thank goodness it never went forward as cabinets were not built to have multiple users within them. The idea was to allow CLECs to put equipment into street cabinets owned by ILECs. It was unclear how a CLEC would get access to them (cabinets are locked). If a CLEC went in on its own and screwed up an ILECs equipment by mistake, how would that work? On top of that power, battery, and cooling are all limited in street cabinets. How those resources would be allocated was unclear. The Project Pronto Model (another topic I will blog about) was invented to try to work around these issues and that was not successful either.

Eventually, most of the CLECs went out of business. It is not clear that you can build a scalable model around using other people’s networks. It does seem to work on the small scale as there are working CLECs and MVNOs(Mobile Virtual Network Operators). I wonder if the idea of the FCC trying to regulate a market into existence will ever happen again?

Jim Sackman
FocalPoint Business Coaching
http://www.jimsackman.focalpointcoaching.com/
We focus on your business – Time, Team, Money, Exit
Coaching, Sales Training, Web Marketing, Behavioral Assessments, Financial Analysis

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