Posted: 11/1999
Local Competition Spreads Out
By Kim Sunderland
The nation's number of local service competitors is rapidly rising, but they remain a small portion of the overall market as the incumbents hold claim to more than 90 percent of the local market.
In its local competition update, the Federal Communications Commission (FCC) bases the new entrants' share of the nationwide local market on fiber deployment. In 1998, the incumbent local exchange carriers (ILECs) added roughly 2.1 million fiber miles, "an amount larger than the local competitor inventory at the end of 1997," the FCC says. Local competitors have had much faster annual growth rates of deployed fiber (see chart, below). Because of that, local competitors have increased their amount of fiber in place about five fold from 1995 to 1998. At the end of 1998, local competitors had at least 16 percent of the total fiber optic system capacity potentially available to carry calls within local telecom markets and to deliver calls to long distance carriers.
Graph: Percentage Growth in Fiber Mileage
The FCC notes this fiber deployment comparison "overstates the relative size of competitive local networks ... because it ignores the copper-based facilities of the ILECs. While the new entrants primarily install fiber, the ILECs' local networks consist primarily of copper-based facilities."
Three revenue trends emerge in the FCC's report. First, the revenues of the nation's competitive LECs (CLECs) continue to increase, up to 2.4 percent of local service revenues in 1998. Secondly, revenues of other carriers--mostly large carriers via resale--also continued growing and accounted for 1.1 percent of 1998 local service revenues. Thirdly, the FCC says both of these factors show that "the fringes of the local market are being nibbled by firms of substantial size, primarily long distance and wireless carriers with billions of dollars of non-local revenues."
The pattern of competitive entry into the local telephone market also is changing, largely due to demographic and regulatory factors, according to the report. The FCC data indicates that local competition also is becoming more geographically widespread. At the end of 1998, for instance, CLECs had acquired the numbering resources necessary to provide service over their own facilities in all states.
"The new data does not substantially change the broad conclusions set out in the [Dec. 1998] report," an FCC spokesperson says. "Local competitors continue growing at a rapid pace. Starting from a small base, however, their presence remains less than 5 percent of the local market."
