urs were setting up CLECs. Although the incumbent LECs, as monopolies, always attempted to be "all things to all people," CLECs could be specialists, and DSL was an inviting specialty. Collocation Did Not Come Cheap Covad Communications, the pioneer at competitive DSL, was founded in 1996 to be a data-oriented CLEC, a specialty sometimes nicknamed a "DLEC." Based in San Jose and founded by Intel veterans, it did not set out to offer any DLECs and ELECs: An Exercise in Oversupply kind of "dial tone" service or, for that matter, make use of the switched tele- phone network at all. As a CLEC, it gained the right to rent unbundled loops, to collocate its equipment in the central offices, and to lease (at UNE rates usually far below special access tariffs) unbundled bandwidth between central offices in order to interconnect its network [3]. The rules that Covad worked under in 1996 and 1997 largely defined its business. Although ILECs had to allow collocation, they initially required every collocator to erect a wireframe cage in the central office, usually of 100 square feet. By the time all the fees were paid, the nonrecurring charge for the cage was often on the order of $100,000! Atop this, the CLEC had to pay monthly rent on the floor space, plus the ILEC's fees for dc power. This type of investment only made sense in the largest central offices, where there was some chance of being able to amortize it among a large enough customer base. Another rule in effect at the time required the DLEC to pay the entire cost of the local loop. ADSL was designed for line sharing: ILEC consumer ADSL services made use of the high-frequency spectrum (the frequencies about 20 kHz) on a loop whose baseband (audio frequency) spectrum was already in use for analog telephony. So the ILEC had no incremental loop cost for ADSL. Covad did not provide the baseband telephone service, SO paying for the entire local loop would have made it uncompetitive in the ADSL marketplace. (Loop costs varied city by city, most ranging between $10 and $20