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Bandwidth Trading Hits the Big Time

Telecommunications capacity is starting to be treated like pork bellies, as commodities-style bandwidth exchanges gain momentum. Startups such as London’s Band-X and New York’s Arbinet Communications got the first bandwidth trading market off the ground last year (see “Bandwidth’s New Bargaineers,” TR
November/December 1998). Now the big boys are swooping in.

Energy giant Enron has announced plans for a competing trading system that would allow elecommunications companies and Internet service providers to rapidly buy and sell space on fiber-optic lines. Currently, leasing a high-speed data line can take weeks to negotiate and implement. Enron plans to shave that to seconds with standardized trading contracts and by building a switching facility able to route telecom traffic. Enron will recruit an independent accounting firm to run the bandwidth exchange,which is expected online by year’s end. Enron itself,which owns 16,000 kilometers of fiber lines, plans to
be a major user.

However, there will be plenty of competition. Arbinet just raised $12 million to expand its trading network. And with other startups expected to announce major venture capital funding soon, the battle to become the bandwidth trading post of choice is likely to grow fierce.

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