The cast of characters:

  • ILEC – Incumbent Local Exchange Provider, The Phone Company, the Incumbent
  • CLEC – Competitive Local Exchange Carrier, Reseller, Competitor
  • Local Access – Local loop, last mile, the circuit that connects a business to their carrier’s point of presence.
  • Agent – Independent party or organization that resells carrier services
  • Direct Rep – A sales person that works for an incumbent or a CLEC

telecom consulting service providersThe myth:

Resellers add to the cost of business phone and internet services.

The myth debunked:

CLECs utilize the incumbent’s network to deliver phone and internet services, so some customers believe they will charge more than the incumbent.  The term “reseller” isn’t totally accurate because most CLECs maintain their own network and only a portion of their service, the local loop, is derived from the incumbent provider.  CLECs enter into wholesale agreements with the incumbents and receive loop rates that are lower than what the incumbent charges their end users.  So CLECs offer their network services coupled with discounted loops; they don’t have to subsidize lower income residential customers or service anyone that wouldn’t deliver a ROI.  Subsequently, their costs can be lower than an incumbent’s.

The myth:

Incumbents’ rates are lower than their competition.

The myth debunked:

Although, incumbents could charge less, that’s normally not the case.  Incumbents profit if you purchase your services directly from them or from one of their competitors.  That’s true because their competitors pay to access the businesses connected to their network.  Think of a network as a capital investment.  A company paid X amount of dollars to create or acquire a phone service network.  Then they charge companies and individuals a fee to access to their network.  They charge for the local access to businesses, to terminate long distance calls and to collocate in their wire centers.  It wouldn’t make sense for incumbents to undersell their competitors because they would be hurting a profitable segment of their customer base.  Also, they wouldn’t be maximizing their revenue.  A single business might spend thousands of dollars a month for business phone and internet services but CLECs pay incumbents hundreds of thousands of dollars.

The myth:

Agents are middlemen and add to the cost of the services they sell.

The myth debunked:

If this were true, why would the two largest carriers in the country, AT&T and Verizon, do everything possible to block agents?  The two companies with the most power and control over the market place are anti agent.  AT&T and Verizon are this way because agents tend to drive down the cost of business phone and internet services.  Typically, an agent will obtain quotes from a number of different providers, in order to deliver the best possible pricing to their clients.  Carriers have a range of pricing to offer.  They save their best pricing for the most competitive situations.  The individual selling their services would need to provide aggressive pricing examples from the competition in order to secure a carrier’s lowest rates.  That’s most likely to happen when an agent’s involved because the agent is usually the one gathering the pricing.  If there were no agents involved, carriers would have more control of the process and be better able to maximize their pricing.

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