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Enron Mail |
Telecom Companies Mtg To Discuss Bandwidth Trading By Michael Rieke 03/23/2000 Dow Jones Energy Service (Copyright © 2000, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- A group of telecommunications companies is meeting Thursday to open discussions on industry standards for bandwidth trading. Set up by CompTel, a Washington, D.C., trade association that represents the competitive telecommunications industry, the meeting will initiate discussion among companies that are or probably will be active in a nascent bandwidth trading market that could be worth billions or trillions of dollars a year. Bandwidth is the capacity to move data over telecommunications networks. Russell Frisby Jr., president of CompTel, told Dow Jones Newswires that the trade group's members asked it to get involved in the discussion of bandwidth trading. The fact that CompTel is involved in discussion on bandwidth trading shows that people are taking the idea seriously, said Steven Kamman, a telecommunications analyst with CIBC World Markets. "This year bandwidth trading will move from a theory to practice," he said. Before that can happen, the industry needs to set ground rules for trading, and that will be a major topic of discussion at the meeting. It comes as no surprise that Enron Corp. (ENE) will be at the meeting. For nearly a year, the company has been promoting the idea of setting up a liquid market for trading bandwidth under standard terms and conditions. Tom Gros, vice president of global bandwidth trading for Enron, has two items he thinks should be at the top of the meeting's agenda. The first is establishing an industry organization to set the standard terms and conditions for trading bandwidth as a commodity. The second is setting a North American benchmark for trading. The bandwidth trading organization, or BTO, should consist of companies "with actual financial risk" in bandwidth trading, Gros said. That means the group would consist mainly of major telecommunications carriers, the bandwidth producers. But others also have financial risk in bandwidth, he said, including some major Wall Street players and bandwidth consumers. Gros said some Wall Street players have already begun trading bandwidth, but he wouldn't identify them. A source with a Wall Street investment bank, who didn't want to be identified, said Gros's claim was a stretch. Banks with trading operations are consumers, using telecommunications bandwidth to move stock market and commodity trading data internationally among offices, he said. But they aren't actively trading bandwidth as they do established commodities. Major consumers of bandwidth would include large Internet service providers, or ISPs. Gros said they should also be included in the BTO. Before bandwidth can be quickly and easily traded domestically, the market needs a North American benchmark that sets technical specifications, Gros said. In domestic crude oil trading, the benchmark is West Texas Intermediate, which must meet standards for American Petroleum Institute specific gravity and for sulfur content. In the bandwidth market, standards would be set for quality-of-service issues like errored seconds, severely errored seconds and unavailable seconds, Gros said. Those standards would cover corruption of data transmitted over bandwidth as well as the availability of bandwidth. Enron has suggested that the benchmark cover the route between New York and Los Angeles, which ranks among the routes with the most data traffic in North America. Agreeing on standards will be the toughest job to accomplish at the meeting, said Ken Epps, senior vice president for strategic marketing for Williams Communications Group (WCG), which will also be represented at the meeting. The technical standards for bandwidth trading can't be set so high that they limit the number of companies that will trade, Epps said. If the standards limit liquidity, the market won't develop. "Everybody needs to walk away feeling that it's a standard they can live with, that they can build their business around," Epps said. That goal can be met - it's just a question of how long it will take, he said. "I don't expect it will be settled at the first meeting of the CompTel group, but it will be the kickoff." Williams plans to keep those discussion going next month at its own "carrier forum" to discuss bandwidth trading standards, Epps said. About a year ago, when Enron first proposed trading bandwidth as a commodity, Williams officials were quoted as being skeptical about the idea. But last month, the company announced it would take a leading role in developing a market for trading bandwidth. The Williams carrier meeting shows that the company is now serious about bandwidth trading. Williams is inviting "the real players, the MCI WorldComs (WCOM), the Qwests (Q), the AT&Ts (T)," Epps said. "It's about people who have the assets and how we use these to advantage the marketplace, how we build a good powerful market model." CompTel's Frisby, Enron's Gros and Williams's Epps wouldn't discuss which other companies were attending the meeting in Washington. But Dow Jones Newswires was able to obtain a list of attendees. Among the invitees are companies with experience trading energy commodities - Dynegy Inc. (DYN); El Paso Energy Corp. (EPG); Columbia Transmission Communications, a unit of Columbia Energy Group (CG); and Koch Industries, which has investments in energy and telecommunications. A surprise on the list is MCI WorldCom. Some industry sources have said the company opposes the idea of bandwidth trading under standard terms and conditions. An industry analyst, who didn't want to be identified, said MCI WorldCom's participation in the meeting is indicative of changing attitudes in the telecom carrier industry about bandwidth trading. Retail marketing groups within telecommunications carrier companies don't like the idea of a liquid bandwidth trading market, the analyst said. Such a market could turn retail customers into wholesale customers. For example, a retail customer like an ISP could go to a liquid bandwidth market and buy at wholesale prices, he said. Also on the attendee list are telecom carriers Teleglobe (TGO) and Global Crossing Ltd. (GBLX); NTT America, a wholly owned subsidiary of Nippon Telegraph and Telephone Corp.; and Progress Telecom, a unit of the electric utility Florida Progress Corp. (FPC). Also on the list is recent IPO Universal Access Inc. (UAXS), a company that matches carriers that have excess capacity with carriers that need extra capacity. LighTrade, a start-up company setting up pooling points to allow bandwidth trading, was also invited. Commodity traders are represented by Sakura Dellscher, Amerex, Prebon Yamane, AIG Telecom and the New York Mercantile Exchange. Two consulting companies, Andersen Consulting and PricewaterhouseCoopers, were also invited.
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