There are signs of renewed interest in bandwidth trading in some quarters of the capacity business, a development that might be mildly surprising after the complete meltdown of the so-called practice by Enron, its foremost proponent, in 2001.

 It wouldn’t be the first time a concept that was “before its time” got a second chance in the market. Tablet computers have been produced, without mass adoption, for at least a decade. “Application service providers” mostly failed during the Internet bubble, but have assumed new life in the ‘software as a service” business.

 Might bandwidth trading get another shot at success? Some appear to hope so. A new site provides some evidence. Some believe exchanges provide evidence for the notion. Band-X and Arbinet, in addition to Enron, tried to create bandwidth exchanges. Others argue that “lit capacity” and “bandwidth” cannot be traded like commodities. Neil Tagare, at buysellbandwidth.com, is among those who haven’t lost faith in the concept.

 Primus Telecommunications, which now owns Arbinet, also is among firms that never abandoned the concept. Andreas Hipp, Epsilon Telecommunications CEO, also is among those who believe a market exists for anonymous, managed, set-rate exchange of network capacity. Cable & Wireless Worldwide plc and Sprint Nextel Corp. appear to have signed as anchor tenants for the Epsilon Capacity Exchange, the company's bandwidth trading platform.

For some observers, the biggest problem is that capacity is not really “liquid” enough to be generally traded, even if that might be true on some routes, to some locations, at some times.

 There also are reasons suppliers might not be anxious to support bandwidth trading. Any online exchange, selling any “commodity,” will tend to experience higher price competition when those products are sold on an exchange.

 And in a business where price competition is vigorous, anything that makes competition even more intense will tend to find significant resistance, in some quarters. As often is the case, the interest might well bifurcate along "buyer and seller" lines. Buyers might well welcome the chance to buy in a more liquid fashion, in the expectation that prices will be lower. 

Sellers, just as obviously, will not want to risk a move that could lead to higher pricing pressure and therefore lower margins.


Edited by Brooke Neuman