cal com- pensation rates for eligible CLECs were also capped at a level declining to $0.0007 by 2004. Later that year, the eligible minutes cap was lifted. And thus by several means, in several steps, the CLECs' single most profit- able business was shut down because the ILECs had the rules changed when they realized who was winning. This happened just as the telecom sector in CLECs Winning Strategies Are Met by Rule Changes general was collapsing, when the CLECs were hard-pressed to find funding with which to reorient their businesses. It was a portent of further regulatory difficul- ties to face the CLECs. New Generation Switching Equipment Lowered Capital Costs The introduction of local telephone competition after the Telecom Act of 1996 led to the birth of the competitive local exchange carrier sector. Although some of the CLECs were simply resellers, essentially commissioned agents of the ILECs whose services they resold, many facilities-based carriers built their own networks. This created additional demand for telephone equipment. When the Telecom Act let loose a flood of CLECs, those that planned to offer ordinary telephone service had little choice as to what switch vendors to use. Between 1980 and 1995, the number of central office switch manufacturers serving the domestic market had declined. This had a few likely causes. Computer-controlled switching systems were less costly to build, but it cost as much to develop software for a 3% market share as for a 50% share, and soft- ware was most of the cost of a switch. In that era of minicomputers and slow microprocessors, switch software was usually a complex mass of embedded purpose-built code. So when CLECs began to look for switches, Lucent offered the 5ESS fam- ily that it had been selling to ILECs for the preceding 15 years. Its best deal was the 5ESS VCDX, the "very compact digital exchange," which consisted of one node of its modular 1980-era flagship switch, modernized by replacing its pro- prietary main processor with a Sun Microsystems server. "V