The law, intended to open a historically monopolistic industry, allows the competitors to resell the Baby Bells' phone lines while offering new services to differentiate themselves. In recent weeks, analysts have expressed concern that many providers would have difficulty recouping large capital investments in their networks. The equipment required to offer advanced voice features and Internet services is costly, but profits from those same services are quickly declining as consumers demand more for their money. All of the communications giants are getting bigger. Analysts say the money needed to upgrade communications networks is so substantial that many CLECs will need to consolidate to survive.
Telecom is also massively capital intensive up front.
While the economy was screaming and capital was flowing, it was a perfect incubation situation for CLECs. But frankly there's an oversupply. Elliott Hamilton, a communications analyst at market research firm The Strategis Group , agrees. They kept coming back to the markets every six months for more cash. That's OK when everything is rosy, but then the markets took a dive and capital dried up.