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A competitive local exchange carrier (CLEC) is a telephone company competing with established local telephone businesses by providing their own network and switching. CLECs arose as a result of the Telecommunication Act of 1996, which was intended to promote competition among long distance and local phone service providers. The term is used to differentiate between new or potential competitors and established local exchange carriers.
The Telecommunication Act of 1996 permits companies with CLEC status to use the incumbent local exchange carrier (ILEC) infrastructure in two ways: access to unbundled network elements and resale. The availability of unbundled network elements is an important factor for CLEC telecommunication. These include the equipment used and the function, capabilities and features provided by the equipment. The most important unbundled network elements available for CLEC are local loops, which connect ILEC switches to ILEC present customers.
Resale strategy is yet another option presented to a CLEC. The Act states that any telecommunications service that an ILEC offers at retail must be offered to a CLEC at a wholesale discount. This saves the CLEC from investing in switches, fiber optic transmission facilities and collocation arrangements.
CLECs depend on a competitive price and use of the ILEC's infrastructure. This also makes small and medium-sized cities geographically distinct market areas, even if they are suburbs of large metropolitan areas.