The two competitive legs of Gateway Telecom took strides last week to become leaders in their respective markets.

Competitive local exchange carrier (CLEC) Gateway Telephone celebrated the first phase of its network buildout and began adding customers. With the completion of its $15 million North Bay, Ontario, telecommunications facility, the company claims to be the first CLEC in Canada to launch in a secondary market.

The 13,000 square foot facility houses a call center, a central switching office and administrative offices. Gateway Telephone's next Ontario market, Sudbury, is 85% complete.

"We're in markets that aren't the first choice of a competitive service provider," said Jim Blumsom, president and CEO of Gateway Telecom Canada. "It allows us to go about our merry way in delivering end-to-end solutions."

Gateway Telephone avoided a mass marketing blitz, instead relying on direct sales to attract its long-distance customers to local service, away from incumbent Bell Canada, Blumsom said. He compared Gateway Telephone's method to that of another patient competitive carrier. "We're almost identical to a McLeod-style format, [which is to] go in and get your business market comfortable [and] get a point of presence the year before you go to service."

Gateway Telephone provides long-distance service to about 250 businesses in the North Bay area. The CLEC also is pushing those customers to accept local service.

"By the end of the month, we should have approximately 60% of [our customers cut] over," Blumsom said. The company expects at least a 90% conversion rate for its existing long-distance customers, with the remaining customers tied to long-term contracts.

Incumbent Bell Canada isn't worried.

"We can't comment on their business projection, but we have been in the North Bay community for more than 100 years," said a Bell Canada spokeswoman. "We have very strong ties with the major businesses in that community, and we have a strong rapport. We feel quite confident in our ability to provide service for the local businesses there."

Canada's competitive atmosphere reflects the early competitive environment in the U.S. "There is some nasty marketing going on, and unfortunately, customers get hurt because of it. If we as service providers had their best interests at heart, we wouldn't lock them into contracts they don't like six months later," Blumsom said.

Being the first to challenge Bell Canada's 100-year market lock is key to Gateway Telecom's strategy. "Secondary markets open big market shares. We know that over a three-year term, we can take 40% to 50% of a market. Getting in first and capturing that kind of market share really deters anyone else from wanting to come in," Blumsom said.

"There is a lot of potential business in that market. But if all service providers are good and reliable, being there first is crucial," said Steve Koppman, senior analyst for Dataquest.

Gateway Networks, the wholesale leg of Gateway Telecom, also is trying to be a leader in its market. Calling itself a multiservices carrier, Gateway Networks recently partnered with Tekelec, which will provide a migration path to IP/SS7 functionality and enable the company to offer number portability between the U.S. and Canada when the practice gets approved.

Gateway Networks also signed a $30 million contract with Lucent Technologies to provide central office (CO) and WAN equipment for its multiservice network. Lucent will provide its MAX TNT WAN access switches, Stinger DSL access concentrators, Internet call diversion and NavisAccess access management product.

Gateway's wholesale network will span 21 cities throughout the U.S. and Canada. North Bay will be its hub for the wholesale network and a CO for CLEC operations.

"Our wholesale model isn't your traditional carrier-to-carrier model in the sense of big bandwidth and long-distance," Blumsom said. "We look at all the nasty issues a service provider needs but must rely on a multitude of different parties to get, such as long-haul contracts, metro contracts, enhanced services, 800 service and more."

Gateway Networks also is expected to announce this week that it will deploy CacheFlow Internet caching appliances throughout its network. CacheFlow appliances will store and serve the Internet content requested most often by Gateway's Internet subscribers. The solution reduces Internet response time by monitoring the stored content source for changes.