Bandwidth Trading Offers Gas, Power Parallels

As bandwidth trading moves from idea to reality, its evolution is looking more like the development of trading in the power and natural gas markets, according to Nick Cioll, senior vice-president for trading operations at RateXchange. Cioll spoke last Wednesday at NGI's GasMart/Power 2001 conference in Tampa, FL. He was joined by Louis Hunsucker, a bandwidth trader with Williams Communications, on a panel called "The Complete Utility: Adding Broadband."

"I would put [the current state of bandwidth trading] somewhere close to probably 1995 with power, probably 1990 in gas," he said. Cioll noted that most telecom companies last year spent a lot of time trying to digest the idea that bandwidth is a commodity and figuring out how to trade it. "This year, where they are today, they're basically saying 'OK, we understand that's where it's coming to; we understand that this is going to happen; we understand it's going to be a commodity,'" the executive added.

Cioll noted that the trading of monthly contracts in bandwidth is a recent phenomenon. "We don't see daily trading yet," he continued. As far as hourly trading goes, the executive said it will probably take three to four years before that type of trading materializes in broadband.

For his part, Hunsucker said he believes in the feasibility of bandwidth trading. "I'm not going to be one of those guys who says telecom's not like power and gas, you can't do it," Hunsucker said. "It can be done," he added. But the trader also highlighted several hurdles facing today's bandwidth market that need to be overcome. Those obstacles include issues related to interconnectivity and quality of service, among others.

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