The Bandwidth Traders

Ten years ago Enron had the bright idea of trading bandwidth, as if it was a commodity like gold.

The proposition was crazy, of course, and the idea was buried along with the company. Now, though, we’re starting to see similar ideas emerge.

Last year, fresh from a successful sales career at Cable & Wireless, Carl Gough started Mobsource. The idea was straight forward; lots of carriers have excess capacity, they contribute it to a ‘dark pool of bandwidth’, which Mobsource sells on to customers at below-market rates. In the next phase he hopes to turn it into a real-time trading platform, where the price of bandwidth can change by the minute based on what the market determines.

As you’ll hear on this week’s CrossTalk podcast, Geoff Huston, Chief Scientist at APNIC isn’t convinced. He describes it as ‘one of these marginal ideas that emerges when times are good’. He says difficulties emerge when routing IP traffic because TCP is not a path protocol. You can build a dedicated VPN, but that’s not the best use of available capacity.

The efficient use of bandwidth is, perhaps, less of a concern when there is a glut. That’s why Gough claims he can deliver IP traffic between Mobsource nodes considerably below the rates charged by carriers.

In Singapore, Andreas Hipp is a year into his trading platform for carriers. The Epsilon Capacity Exchange enables carriers to buy Layer 1 and 2 bandwidth from each other. Hipp says it hasn’t subdued the price – in fact, on some routes he thinks it is helping to raise the price.

When I asked him whether real-time trading of bandwidth could inhibit investment (after all, why build when you can buy for the lowest possible price), he said it could, but that has to be a good thing. After all, the industry wants to avoid overbuild. That way we avoid the excess capacity that sees people dumping bandwidth for the lowest possible price. Perhaps he has a point!

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