The spate of recent CLEC consolidation is a clear signal that competitive carriers are repositioning in a business market now dominated by two national players, AT&T and Verizon, who both have completed their own respective mergers.

This month's merger of CTC Communications with Choice One, and Integra's acquisition of Electric Lightwave created two stronger regional players better able to court small and medium-sized businesses. However, neither AT&T nor Verizon is showing the kind of post-merger weakness that CLECs have been saying they hoped to exploit, according to industry analysts.

“Both the Choice One/CTC and the Integra/ELI mergers created stronger companies in a more tightly knit region,” said Craig Clausen of New Paradigm Research Group.

Integra/ELI is focused on the Western region while CTC/Choice One is focused primarily in the Northeast, with some extension into the upper Midwest and mid-Atlantic states. Similar mergers will continue to ripple through the CLEC community, Clausen said.

Brian Washburn, analyst with Current Analysis, said the mergers create “a regional independent CLEC that is head and shoulders above the rest in terms of being able to compete.”

“This is a response to the new economies of scale that the [Bell] mergers have created,” he said. “These companies are realizing they have to do something to be a better competitor.”

Competitive service providers have said they planned to target business customers during the post-merger period, when the newly merged companies were more focused on their internal operations and the process of merging.

There are no signs yet that this strategy is working. In fact, Verizon, in its own post-merger activity, seems determined to thwart competitive initiatives, announcing its new Verizon Business unit and introducing a barrage of new business products.

Verizon's IP Flexible T-1 service is directly aimed at CLECs, Washburn said. The service enables companies to put smaller corporate sites, which today operate with a key system, on an integrated IP network without changing out voice gear. The service is intended both to retain customers looking to use VoIP to save money and to attract new customers, said John Barnes, director of voice over IP product development for Verizon.

Washburn expects competitive carriers to find some success courting small and medium-sized businesses. “It makes common sense that a $90 billion company is not going to provide the same level of service to a small business that a smaller company could, particularly out of franchise,” he said.

But Clausen said there's been no visible customer shift yet. “What we are observing is happening is a lot of business as usual,” he said. “[Verizon and AT&T] are still run by smart people, and they know enough to keep their people focusing on what's important.”