Hold on to your britches -- online bandwidth trading is back!
The first name that pops into peoples' minds when near real-time "bandwidth trading" gets mentioned is Enron, a rather tainted (or could we say toxic?) brand that hardly provides a positive starting point for any company wanting to revive this market.
Andreas Hipp, the CEO of managed network exchange firm Epsilon Telecommunications , is well aware of that and ready to point out how things have moved on during the past decade. He's also confident that a market exists for the anonymous, managed, set-rate exchange of network capacity and has attracted some major names -- Cable & Wireless Worldwide plc (London: CW) and Sprint Nextel Corp. (NYSE: S) -- as anchor tenants for the Epsilon Capacity Exchange (eCX), the company's bandwidth trading platform.
Hipp tells Light Reading that all of Epsilon's existing customers and suppliers (more than 400 in total) will have access to the portal. "They all can participate since they already have a contract with us -- but that doesn't mean all will, of course," he noted in an emailed response to questions.
The new service is an automated extension of what Epsilon does already, which is hook up network operators in neutral exchanges (about 60 POPs globally) and act as a broker for service providers looking to extend their reach and/or boost their wholesale business. By automating the process, Epsilon believes it can broker and settle a deal in hours instead of the weeks it takes to provision with existing processes. (See Epsilon Makes Metro Move With BTI and Epsilon Deploys More BTI Gear.)
"We have already been trading 'manually' for over two years and have about $1.7 million current revenue for 2012. ... [The] Epsilon Global Network Exchange has been in operation for many years and is therefore well tested. The portal is essentially just a mechanism to automate and scale the process of buying and selling and we are confident that it will provide the speed and efficiency trading demands. The online portal itself is brand new and will be fully available in six weeks when we have completed the data fill and functionality testing," states Hipp.
So what's in it for Epsilon? "We will be taking on the operational delivery, service management and the commercial risk for the services we trade on the portal. The amount Epsilon takes varies depending on the monthly value of the transaction but we have not finalized the percentage brackets yet," adds the CEO.
Epsilon has set up a system designed to handle service level and contract agreements and manage real-time inventory and trading of standardized capacity assets, using a simplified set of trading processes and rules. A tricky set of criteria, but one that Hipp believes Epsilon is well placed to provide.
But what of the negative legacy from the previous botched attempts to trade bandwidth as a commodity? Epsilon believes there were a number of factors -- poor interconnectivity, no easily tradable product, lack of standard contracts and processes, some operators believing their bandwidth was worth more than others', and so on -- that made bandwidth trading such a failure first time around. Hipp and his team believe they have overcome these issues.
Why this matters
It failed the first time mainly because the technology wasn't up to the job and because the bandwidth was treated like a regular commodity, which it isn't. If Epsilon can deliver on its promises, such an exchange would be valuable to many international operators looking to maximize their efficiencies.
This could be a market that makes Epsilon an invaluable partner to hundreds of operators. It's also a strategy that could leave Epsilon licking its wounds.
This article first appeared on Light Reading on May 14, 2012. All rights reserved. It was written by Ray Le Maistre, International Managing Editor, Light Reading.