Before the Telecommunications Act of 1996, there was no such thing as an ILEC or a CLEC. There was simply an LEC, or Local Exchange Carrier. LEC is really nothing but a fancy regulatory term for a local phone company.
The local exchange is the place where all local residential and business phone lines terminate. It's also known as the central office or the end office. Several local exchanges can be connected together to form a Local Access and Transport Area (LATA), which covers a larger geographical region. Or a local exchange can connect to a long-distance carrier, also called an Interexchange Carrier (IXC) [source: SearchUnifiedCommunications.com].
Before 1996, an LEC was only responsible for connecting its customers to the local exchange and routing calls to either another local exchange or a long-distance carrier. The operative words here are "its customers." With the passage of the Telecommunications Act of 1996, local exchanges became a shared space.
Suddenly, the original owner and exchange operator was called an "incumbent" or ILEC and had to sell space on its local exchange equipment to competitors called CLECs. Now ILECs were responsible for maintaining equipment and services not only for their own customers, but for their competitors' customers.
Under the new law, ILECs must sell access to their network hardware as an unbundled service. Unbundled simply means that a CLEC can choose to pay for specific network elements -- like loops, switches and lines -- without having to pay for all of them. These separate components are known as unbundled network elements (UNE).
ILECs must also offer access to their hardware components at a discounted or wholesale rate, so that the barrier of entry or cost of entry into the telecommunications business isn't too high for start-up companies. This process is called resale. Under the Telecommunications Act of 1996, any service that an ILEC sells to its subscribers at retail prices must be offered to a CLEC at wholesale. An example could be routing a call to the subscriber's long-distance provider of choice.
Another responsibility of ILECs, as dictated by the Telecommunications Act of 1996, is to provide space in their local exchange offices for CLEC equipment. When a CLEC installs its own networking hardware in an ILEC's local exchange facility, that's called a physical collocation. In this arrangement, the ILEC connects its networking equipment to the CLEC hardware, which is installed in a separate secure area. The CLEC has 24-hour access to its equipment for repairs and maintenance.
Then there's something called virtual collocation, in which the CLEC uses the original ILEC equipment to run its telephone network. In this case, the ILEC is responsible for the hardware's physical maintenance. CLEC network administrators can only monitor and tinker with the network remotely, without physical access to the local exchange office.
Since telecommunications networking is a highly complicated and continuously evolving technology, it's important that everyone is on the same page. An ILEC can't change any component of its network configuration or equipment without warning any CLECs that rely on that equipment to run their networks. Under the law, this is called notification of changes and must be carried out in a timely and fair manner as not to disrupt the CLECs' telephone service.
In the next section, we'll look at the often contentious relationship between ILECs and CLECs and whether the Telecommunications Act of 1996 has proven a success or a failure.