ts Chapter 8 In this chapter we dissect the telecommunications marketplace and exam- line, in detail, the segments that it comprises. They include the following: The incumbent local exchange carriers (ILECs) The competitive local exchange carriers (CLECs) The interexchange carriers (IXCs) The cable multiple system operators (MSOs) The wireless providers The content providers The component manufacturers (including optoelectronics) The system manufacturers We will discuss the characteristics of the players in each segment, the key challenges they face as the industry recovers from its recent melt- down, and the positioning moves they will make as they once again begin to redefine their role in the industry. We begin our discussion with the ILECs. The ILECs The ILECs have had a tumultuous ride since their inception in 1984, following the divestiture of AT&T. At that time, AT&T, through its negotiated settlement with the Justice Department, fought to retain control of its Western Electric manufacturing arm and spin off the local service providers because it was clear at the time that the real money was in hardware and that the local telephone companies would not be long for the world. In retrospect, perhaps they should have kept the local telephone companies (the Regional Bell Operating Companies, or RBOCs) and divested themselves of Western Electric. Amazing thing, 20-20 hindsight. Today, of course, we know that the ILECs are in positions of significant market power. The four that remain-Verizon, SBC, Bellsouth, and Qwest-control 90 percent of the roughly 200 million access lines in the United States today. The remainder of these lines are served by CLECs -small independent telephone companies, cable providers, and wireless providers. Much to the chagrin of the ILECs, that 90 percent market share that they enjoy is declining at the rate of about 2.1 percent per year, and has been for the last couple of years, while "lineshare" for the other sectors has increased incrementally-but increased. It is critical Downloaded