THE FALL AND RISE OF AN AUSTRALIAN BANDWIDTH EXCHANGE – JULY 2003
The trading of bandwidth in Australia has traditionally been a complicated, time-consuming and costly exercise for both carriers and service providers – based on individual contracts that varied on a case-by-case basis. Overseas telecom markets have been experiencing online bandwidth trading for a few years, resulting in much cheaper prices for consumers.
Enron’s collapse in 2002 also marked the end of Enron Broadband Services (EBS), its wholly owned telecommunications subsidiary and bandwidth trader. One of the company’s key assumptions was that bandwidth was a commodity, but this was not widely adopted in the industry. In March 2002, the Yankee Group even reported some industry relief about EBS’’ fall.
The whole business model is based on price, but with bandwidth prices falling the world over, such trading is limited in its profitability.
In Australia, the field of bandwidth exchange was explored by the eSwitch start-up. ESwitch was Australia’s first Internet-based bandwidth exchange, launched in April 2000 as an independent marketplace intended to improve the competitiveness and efficiency of the telecommunications industry through an open and transparent forum for the trading of bandwidth and other telecommunications assets.
eSwitch established a Web-based exchange that simplified the process of trading bandwidth. Transactions occur via the eSwitch web site where the prevailing best available wholesale rates are posted anonymously and where online trades can be made. To deliver the bandwidth, eSwitch established centrally located exchanges (pooling points) through which telecom companies can connect and take immediate delivery of the bandwidth. eSwitch developed standard contracts and technical specifications between the buyer and seller in order to simplify transactions. In addition, other wholesale offerings can be traded on the site such as Point-to-Point capacity as well as industry-specific information and services such as recruitment and telecom news. eSwitch’s revenue came from a small commission taken for each transaction (4% to sellers, and 6% to buyers).
By September 2001, the company was seeking $5 million in venture capital to continue operating. This was never realised as the eSwitch network was not carriers-grade and the company closed down.
However, from it ashes rose the Australian Telecoms Exchange Pty Ltd (ASX). This company arrived in July 2003. While it also uses web-based technologies, it has been built from scratched based on the latest technology, providing both the level of flexibility and robustness required in the market. They were at the time of their launch the only commercial, independent bandwidth exchange in Australia.
ATX is offering wholesale trading of voice minutes at daily market rates and is currently developing wholesale Internet trading and point-to point bandwidth trading.
The company indicated that investors back it with considerable experience in the financial services and telecommunications industries.
See also:
Australia – Industry – Wholesale Services
Australia – Datacentres
Australia – Internet Wholesale Market
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