CLEC/ISP Opportunities Take off Internationally 

By Joel Maloff
Maloff Group International

In the United States, the Telecommunications Act of 1996 allowed CLECs to compete with RBOCs and ILECs for local traffic. In Canada, Western Europe, Latin America and parts of Asia Pacific, CLECs also compete with traditional telephone companies for local voice and data services. International CLECs frequently partner with ISPs, or attempt to become ISPs, and most focus on business customers rather than consumers.

This article explores the CLEC/ISP evolution going on outside of the United States. Opportunities for CLECs-especially those that recognize the significance of becoming ISPs-are enormous. Have you considered expanding internationally? Do you know who is already doing so? An examination of some industry leaders will be helpful.

For many of us involved with CLEC and ISP activity in the U.S., it is easy to overlook the exciting developments going on internationally. As the world becomes more and more connected, these organizations will play an even larger role than they have in the U.S. This is because telecommunications infrastructure in many parts of the world is seriously deficient and unable to accommodate broadband services. CLECs are filling this vacuum and bringing access to Internet. The examples shown in this article are just the tip of the iceberg and in no way meant to be comprehensive.

CLEC/ISP Activity North of the Border
Just north of the U.S., there are at least three CLECs actively pursuing Internet services: Cannect Communications, Group Telecom, and Norigen.

Cannect Communications, established in 1998 and currently comprised of 250 employees, is an Internet and local services provider serving business customers in Ontario, British Columbia, and Alberta. Utilizing a proprietary fiber optic network, two Cannect Network Operations Centers, and facilities from Canada's largest carriers, Cannect offers high-capacity Internet access, local phone lines and long-distance solutions that are bundled into service offerings for business customers.

Group Telecom (GT), headquartered in Toronto, was established in 1996 and has grown to 700 employees. GT now operates nationally in 7 Canadian provinces, including Canada's major metropolitan centers of Toronto, Vancouver, Calgary, Montreal and Edmonton.

Norigen Communications was established in 1996 and now has more than 165 employees.

Although Canada's population is smaller than the U.S., I certainly expect to see more and more alternatives to traditional Telco services. The inclusion of Internet services is critical. By becoming ISPs, these Canadian CLECs have been able to offer value-added services and further establish their bases of business clients.

Looking East and South
Tokyo Metallic styles itself as Japan's first CLEC. Although the service was due to launch in November 1999, problems in concluding the contract for access lines with NTT East delayed the start of its service. In April 2000, the company had 5 billion Yen of capital and planned to invest this money into an equipment and network build for a commercial DSL trial, which was to cover 6 central offices in Tokyo. As in the U.S., DSL is a prime access vehicle for Internet access and will be a major part of Tokyo Metallic's ISP strategy.

Clearly, the opportunity to use the U.S. CLEC/ISP model has great potential in Japan and other Asian metropolitan locations.

Another interesting venture is underway from Fusion Telecommunications International. Fusion is a U.S.-based Network Communications Service Provider (NCSP) whose services include CLEC operations, long distance, data, Internet, carrier wholesale and international private lines. Fusion is focused on partnering with in-country organizations in specific Asian countries as well as developing countries in Latin America and the Middle East. Currently underway is a major project in India with joint venture partner Estel Communications. This will consist of building CLEC facilities in several major Indian cities. These are expected to include Delhi, Bangalore, Hyderbad, Mumbai (Bombay), and Chennai (Madras).

The Government of India has granted Fusion licenses as an International Internet Gateway Provider to build intracity/intercity transmission facilities. In addition to traditional CLEC services, Fusion will be acting as an IP carrier's carrier within India as well as providing hosting, collocation, and network security services. Initial network services are expected to become active by the end of the year 2000. In addition to India, Fusion also has plans to build similar services in other parts of Asia, the Middle East, and Latin America.

Pensat International Communications, headquartered in Washington, DC, is an international integrated communications provider with licensed operations in the US, Spain, Brazil and Syria and provides a wide array of telecommunications and network services, including CLEC operations, long distance, data, Internet, prepaid calling cards, carrier wholesale and international private line. Additionally, Pensat has developed a Global Consortium Network (GCN), comprised of strategic alliances and interconnected with carriers in Venezuela, Chile, Korea, The Netherlands Antilles and Peru. Pensat maintains offices and operations in Omaha, NYC and San Francisco, where it operates a national ATM network. Pensat also has international offices and network operations in Spain, Brazil, and Syria.

In most of the countries targeted by Fusion and Pensat, Internet penetration is low per capita. By building enhanced communication facilities and Internet access, these organizations will take advantage of the unique opportunities presented by changing regulatory environments, burgeoning demand, and adoption of Internet for business and recreation.

Expanding Horizons
CLECS operating in the United States are the equivalent of professional athletes playing in major metropolitan markets like New York or Los Angeles. They get tremendous press coverage and notoriety while their equally talented colleagues playing in Milwaukee or Sacramento are much less noticed. The same is true for CLECs and ISPs building in lesser-developed markets. It is important to keep in mind, however, where growth is likely to be over the next ten years. There certainly is much work still to be done in the developed countries of North America and Europe, yet China and India possess a substantial percentage of the world's population and have been thus far overlooked. Human resources are critical for the information age of the Twenty-first Century, and network infrastructure allows these resources to become accessible.

The world is becoming much smaller. The millions of engineers, business people, and consumers living in under-developed technology areas is huge. CLEC/ISPs are beginning to recognize this opportunity. Governments are bringing down decades-old regulatory barriers and encouraging competition. For those with the vision to see the potential, the business resources to obtain the licenses, the capital to go forward, and the management skill to succeed, the market window is wide open internationally for CLEC/ISPs.

Joel Maloff is founder of Maloff Group International, an Internet business consulting organization. Maloff has been an executive in local exchange and interexchange telecommunications since 1973, and has been involved in various aspects of the Internet since 1987. Maloff is the author of four books and hundreds of articles regarding Internet.