Financial aid

Holding a competitive local exchange carrier trade show on the Las Vegas strip makes for good column cliche: The big CLEC gamble. Betting on big dreams.C-Luck. A high stakes game. Long shots. Vegas, baby.

Actually Vegas is an ironic and somewhat disturbing locale for ALTS '98, the growing annual CLEC gathering that took place there earlier this month. In many ways, Vegas represents hopelessness, loss and hollow noise much more than it does luck or prosperity. It's a land of second-run entertainers and last chances, where most people are going down for the count to the accompaniment of incessant clanging. Hardly a welcoming environment for pushing a developing business sector.

But because everything in Vegas seems to be about cold, hard cash, maybe the setting for ALTS is appropriate after all. In the CLEC business it's still all about the money-who's making it, who's taking it and who's loaning it out-and it will be for a long, long time.

Ask the hardware and software vendors, both those that were at this year's event and those that steered clear: Got a new product? Want to sell it to the CLECs? Then you'd better strip it down to the bare necessities to make it fit the needs of the incoming players and be ready and able to make them a special deal.

The many badges at ALTS '98 that tagged attendees as investment bankers showed that the competitive carriers aren't the only ones looking to benefit from all the perceived opportunity in the local service market. The problem is, everyone's still trying to figure out the odds, and as they feel the aftereffects of some volatile surges on the street, everyone's still walking around looking a little shell-shocked.

"The investment community is a lot more introspective now and a lot more cautious," said David Ruberg, president and CEO of Intermedia, during one of the panel discussions at ALTS.

Here they are, after the financial market all but struck them dumb earlier this year, back on their feet, still a little wobbly and looking for someone to trust. Covad Communications CEO Robert Knowling summed up the telco executive perspective best during the same panel discussion. One of the things that lured him from U S West to a relatively risky new CLEC position, he said, was the financial security-in particular, not having to worry about the burdens of raising money. An alleged sure thing, and an unusual characteristic for a CLEC. "Then August came," he said.

One thing CLECs do have going for them is that in a world of intense competition, none of them seems to be too concerned about each other. The idea seems to be that despite what level of backing they may have, all of these players are in it together, fighting friendly against the entrenched.

"It's not tennis-it's the game of golf, and we can all shoot below par," said Robert Taylor, president and CEO of Focal Communications.

The CLECs that are far enough ahead and have the funding to be operational already are at a critical juncture. They've paid to play; now they have to pay more to keep from getting tossed. They must be able to make a strong entry into the local fray, then at least maintain and at best consistently increase the value of the services they provide. They also need to be able to support those services with strong and distinctive customer care organizations and project the appearance of having state-of-the-art provisioning and billing systems. And they need help to accomplish all that.

Help is out there, and it's not just in the form of capital or debt. Every equipment vendor with its head on straight knows this is a valuable place to be and will do what it takes to get here. They will build products to suit, they will price them to move and some of them will even offer up a loan. That's the case with both hardware and software-and it is in fact software where it is probably the most critical.

CLECs should examine all the options available to them, but they should take a lesson from the wireless industry as they do. Some of the most promising wireless start-ups leaned too heavily on vendor support and ended up saddled with technologies that didn't work or wouldn't sell. Some of them ended belly up.

To prevent their own untimely deaths, CLECs need to choose their allies wisely, weighing marketability and longevity against the lure of immediate assistance.

Place your bets.