Picture this: it’s 2003. You’re a hard-working telecommunications executive with one of the 100,000 competing carrier companies worldwide. No doubt about it-the telecom business isn’t what it used to be. Remember the good old days when there were only 200 phone companies around the globe and often just one for each country? But that was before the World Wide Web, global deregulation and an ever-growing supply of bandwidth changed everything.
Your job is to manage data and voice-carrying capacity between Asia and Europe. Hourly, you check the spot market prices for long-distance minutes on the London-Hong Kong route with one of the 15 or so Web-based bandwidth exchanges that have sprung up all over the world. Indeed, as of 2003, bandwidth has become a commodity traded as easily as crude oil, cocoa beans or copper. Good news! Looks like those futures contracts you picked on the Macao-Berlin connection will pay off handsomely. Time to call your boss over the Internet telephone network and gloat.
Sound improbable? Well, this scenario is rapidly becoming reality thanks to continuing deregulation, new technology, a growing number of telecom market entrants (approximately 3,000 registered carriers in the United States alone as of 1998 vs. 200 or so worldwide in 1990) and a healthy application of elbow grease by some risk-loving entrepreneurs.
The unlikely setting for the world’s first electronic market for trading bandwidth is a 19th-century townhouse near London’s Victoria & Albert Museum, repository for many of Constable’s paintings, Raphael’s sketches and Donatello’s sculptures. Perhaps it was the tradition-steeped landscape that convinced Richard Elliott and Marcus de Ferranti that they had a reasonable chance of becoming “part of the history of markets” alongside the New York Stock Exchange and the Chicago Board of Trade.
It may also be that, until Elliott and de Ferranti came along, the telecom industry lacked an equivalent exchange. Historically, carriers such as AT&T and MCI have bartered information-carrying capacity through an informal network of personal contacts, explains Stephen Young, a senior telecom analyst with London’s Ovum Ltd. But now, given what Young calls “all the new varieties of telecom fauna”-callback operators, Internet service providers (ISPs), submarine cable companies-the old-boy network can’t keep up.
Seeing telecom’s need for a common trading ground, Elliott, a former banker, and de Ferranti, an IT pro and onetime RAF fighter pilot, decided to create one. Their online marketplace, called Band-X, went live in July 1997 and the pair run it from Elliott’s West London home. Band-X still isn’t a true commodities exchange. For the moment, the company operates more like a dating service, where traders can post anonymous bids and offers, but deals are consummated offline in the real world.
On Band-X’s Web site, bandwidth, or raw transmission capacity, appears in all its flavors-copper wires, fiber-optic cables, satellite links or wireless microwave transmission.