Econ Focus

Different Views of the Telecom Market

A broad array of telecommunications firms seamlessly connect telephones, pagers, and computer terminals in the Fifth District. Sometimes, it can be difficult to discern the individual threads in this web of interconnected and overlapping companies. Here are a couple of ways to divide the industry into more understandable parts.

By Geography
Local exchange carriers (LECs) handle voice and data transmissions within a designated region called a local access and transport area, or LATA. Usually, they connect homes and businesses in the LATA to a major switching point at a central office.

After the passage of the Telecommunications Act of 1996, state and federal regulators designated two kinds of LECs. An incumbent local exchange carrier (ILEC) was historically the sole provider of local telecommunications services in LATAs. Competitive local exchange carriers (CLECs) were the anointed challengers for the ILECs, assisted by federal requirements for incumbents to provide access to their network connections to people's homes and businesses.

The universe of ILECs can be further subdivided into two types... the regional Bell operating companies (RBOCs) created from the 1984 breakup of AT&T's local phone network, and smaller incumbents including rural cooperatives and other companies.

None of the CLECs or ILECs could function unless their central offices communicated with each other. That is where the interexchange carriers (IXCs) come in. The networks operated by these firms carry voice and data traffic between two LECs within a particular LATA (intraLATA) or between two points in different LATAs (interLATA or long distance).

By Network Type
A local loop carries voice and data traffic from homes and businesses within a community to a central switching station. This web of connections can be classified as a local area network, or LAN.

Short haul networks cover a broader geographic area, carrying voice and data traffic between local loops and other types of LANs. One type of short haul system is a metropolitan area network (MAN), which connects LANs within a large city and its suburbs.

Long haul networks span metropolitan areas, states, and even countries to connect MANs and other major networks. Interexchange carriers like AT&T and WorldCom typically operate these networks, but many other carriers that used to operate only one type of network now provide services over all three types.

By Function
Telecommunications carriers operate and maintain switching and transmission facilities that provide direct communications via landlines, satellites, wireless technology, or any combination of the three. Their networks provide a full range of services, from paging to cellular telephone service to Internet access.

Resellers purchase network access and capacity from telecommunications carriers at wholesale prices, then sell voice and data services to businesses and households at the retail level. These establishments do not operate and maintain switching and transmission facilities.