Yesterday I was reading this piece on the threat to the incumbent telcos and cable operators plans for the SME from independent cloud-based VoIP and UC from service providers like '8x8, Aptela, Fonality, and Nextiva', and it occurred to me that there was something missing. There's someone else out there who used to fight for these customers, but has faded a bit from the view of Wall Street. Yep, I'm talking about the CLECs.
I'm not talking about the competitive fiber operators with deep metro and high fiber counts that have already found a path to success. I mean the ones who once thought it a good idea to go toe to toe with the ILEC while renting the ILEC's own assets and little else. The classical CLEC model has mostly been left for dead over the past few years, and with good reason after losing regulatory fights over UNEs to the ILECs and marketshare to cable MSOs entering the SME space with actual last mile assets. Even the survivors don't look quite like CLECs anymore. But that's the point: something is emerging from the ashes of what used to be the CLEC model. Something with more fiber, services it actually fully controls via its own colo/cloud assets and network infrastructure, and more access options than were ever available in the past. Something that we don't yet have a name for perhaps.
The clearest example of this is what's going on over at Earthlink (NASDAQ:ELNK, news, filings), which is currently deep-integrating the assets of One Communications, Deltacom, and several smaller pieces. Their CEO, Rolla Huff, is adamant that they are not out there trying to show everyone that the CLEC model can really work this time. Instead, Earthlink says it is putting together an entirely new beast, one which leverages those CLEC customer relationships and access infrastructure, a fair amount of fiber, and cloud-based applications and managed services. Dialup is long gone from their plans, they're aiming a brand new challenge at the SME.
They aren't the only ones out there putting the pieces of the past together in a new, more resilient way. cbey bought several cloud providers last year and has been busy migrating everything it can to Ethernet - and getting no credit for their plan yet. Out west we have privately held TelePacific, which in addition to expanding to Texas bought colo and cloud assets in California last year. Integra has been putting together a similar package too, expanding its cloud portfolio while simultaneously pushing out its fiber to more key buildings.
Each of these has its own way of going about it, but the common factors reflect the emergence of a new business model. And it's one that we don't yet have a name for, because they aren't CLECs anymore - or if their transformation continues then they soon won't be at least. If it works, those customers of theirs will be stickier and their margins higher.
So as we watch CenturyLink, Verizon, AT&T, Windstream, Comcast, TW Cable, and other giants maneuver for the pot of gold at the end of the cloud-services rainbow, it isn't just new opponents that they will be facing. There may be some old ones, back from obscurity and ready to rumble. But the markets aren't really watching these guys yet, it's still under the radar.
Actually, Windstream is playing both sides of the fence here given the PAETEC purchase -- too early to say what they're going to look like this time next year I think.
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