Message-ID: <1285850.1075843081835.JavaMail.evans@thyme> Date: Mon, 14 Feb 2000 03:46:00 -0800 (PST) From: scott.bolton@enron.com To: sue.nord@enron.com, susan.landwehr@enron.com, jeff.dasovich@enron.com, marchris.robinson@enron.com, lisa.yoho@enron.com, aleck.dadson@enron.com, dlassere@enron.com, tracy.mclaughlin@enron.com Subject: More trading news.... Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit X-From: Scott Bolton X-To: Sue Nord, Susan M Landwehr, Jeff Dasovich, Marchris Robinson, Lisa Yoho, Aleck Dadson, dlassere@enron.com, Tracy McLaughlin X-cc: X-bcc: X-Folder: \Jeff_Dasovich_Dec2000\Notes Folders\Eci X-Origin: DASOVICH-J X-FileName: jdasovic.nsf LighTrade Aims For Bandwidth Boom With "Points" Monday, February 14, 2000 03:29 PM ?Mail this article to a friend By Michael Rieke HOUSTON (Dow Jones)--Washington, D.C. entrepreneur Ted Pierson is betting on a boom in bandwidth trading. His company, LighTrade Inc., will spend $20 million-$25 million this year to install and operate hardware to trade bandwidth, or space on telecom lines, in Atlanta, Chicago, Denver, Dallas, Miami, San Francisco, San Jose, Seattle and Washington, D.C. Bandwidth trading is growing, driven by increased demand by businesses for the Internet. In a report released last December, CIBC World Markets estimated that 20% of total bandwidth traffic, or $12 billion in revenues, could be traded in some manner within five years. Last week, Oklahoma energy company Williams Communications Group Inc. (WCG, news, msgs) announced plans to open a bandwidth trading unit. LighTrade will be the first company not affiliated with a larger energy or telecommunications concern to develop the trading sites, known as pooling points, Pierson told Dow Jones Newswires. The points connect telecommunications carriers, allowing data to move from one network to another. They are installed in "telecom hotels," buildings that house carrier facilities, and essentially consist of a Lucent Technologies Inc. (LU, news, msgs) bandwidth manager about the size of a tall, narrow refrigerator. Enron Broadband Services, a unit of Enron Corp. (ENE, news, msgs), established the first two points last year in New York and Los Angeles. It plans to build another in London this year. Last year, Enron Corp. proposed trading bandwidth under a standardized contract. It executed the first trade under the contract in December, buying space on a monthly basis on a New York-Los Angeles line from Global Crossing Ltd. of Bermuda. Forrester Research Inc., a Cambridge, Mass.-based technology research firm, has charged that Enron's ownership of pooling points prevents neutrality in bandwidth trades. Having an independent company like LighTrade operate points will help the bandwidth trading market get off the ground, said Stephen Kamman, a telecommunications industry analyst for CIBC World Markets. It's a "very positive" development for the bandwidth trading market, said Tom Gros, vice president of international bandwidth trading for Enron. "This is the first of what I think will be at least a few others who are interested in building pooling points that meet the Enron specifications for the open trading of bandwidth," Gros said. The industry has been trading bandwidth without a standardized contract for years. Deals have typically taken weeks or months to negotiate. Companies must start from scratch with each deal, negotiating price, quantity, length of contract and quality of service. In the past, deals have been long-term, sometimes as long as 20 years. But with the cost of bandwidth along some routes declining 15%-20% a year, such terms are less attractive. Enron has also called on telecommunications companies to form a bandwidth trading organization, an independent body that will decide on standard terms and conditions for trading. Two groups in London and one in the United States are vying to form such a group. LighTrade chose pooling point sites based on telecommunications traffic, Pierson said. Long-range plans call for the company to have sites in the 50 U.S. cities that develop the most traffic. But the company's pace building a network of points will depend on how quickly the telecommunications industry can decide on standards for trading bandwidth as a commodity. LighTrade wants to install points in Boston, Houston, Las Vegas, Memphis and Phoenix in 2001, Pierson said. It is eyeing a move into international markets as early as next year, if the market will support it. Western Europe is a likely starting point, with Paris and Frankfurt possible sites. Eventually, LighTrade could connect Miami to a South American city like Rio de Janeiro or Sao Paulo, and build Asian pooling points in sites like Tokyo and Osaka. The company raised financing from private investors in two rounds last year and is now looking for investment from venture capital companies. In addition to reaching an agreement with Lucent Technologies to use its bandwidth managers, LighTrade has another connection to the high-tech company. William Plunkett, a senior vice president at Lucent, is on LighTrade's board of directors. Pierson declined to say whether Lucent would invest in his company. LighTrade isn't Pierson's first startup company. The telecommunications attorney founded Advanced Radio Telecom (ARTT, news, msgs), a NASDAQ-traded company that owns and operates broadband wireless metropolitan area networks. That company now has market capitalization of $800 million. Pierson has commitments to tie pooling points into the networks of three major telecommunications carriers, he said. He wouldn't identify the companies. He said he doesn't know of any competitors building pooling points, but he expects others to enter the market. He and his investors are taking a chance starting a company to develop pooling points because they don't know how quickly the market will develop, he said. "But I wouldn't be in it if ... I did not think this would be a very significant economic return," Pierson said. -By Michael Rieke 1-713-547-9207 michael.rieke@dowjones.com