Competitive Local Exchange Carrier (CLEC)

A Competitive Local Exchange Carrier (CLEC), in the United States, is a telecommunications provider company (sometimes called a "carrier") that competes with other, already established carriers (generally the incumbent local exchange carrier (ILEC)). Local exchange carriers (LECs) are divided into incumbent (ILECs) and competitive (CLECs).

CLECs evolved from the Competitive Access Carriers (CAPs) that began to offer private line and special access services in competition with the ILECs beginning in 1985. The CAPs (such as Teleport Communications Group (TCG)and Metropolitan Fiber Systems (MFS)) deployed fiber optic systems in the central business districts of the largest US cities (New York, Chicago, Boston, etc). A number of state public utility commissions, particularly New York, Illinois and Massachusetts, encouraged this competition. By the early 1990s, the CAPs began to install switches in their fiber systems. Initially, they offered a "shared PBX" service with these switches and interconnected with the ILECs as end-users rather than as co-carriers. However, the New York Public Service Commission authorized the nation's first CLEC when it required the New York Telephone Co. (the ILEC) to allow Teleport's switches in New York City to connect as peers. Other States followed New York's lead so that by the mid-1990s most of the large states had authorized local exchange competition.

The Telecommunications Act of 1996 incorporated the successful results of the state-by-state authorization process by creating a uniform national law to allow local exchange competition. This had the unintended consequence of stimulating the formation of many more CLECs than the markets could bear. The formation of these CLECs, with easy financing from equipment vendors and IPOs, was a significant contributor to the "telecom bubble" of the late 1990s which then turned into the "bust" of 2001-2002.