Subject: Bandwidth Trading Forum
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Date: Tue, 28 Mar 2000 10:20:00 -0800 (PST)

Telecom Companies Mtg To Discuss Bandwidth Trading
 By Michael Rieke
   
 03/23/2000 
 Dow Jones Energy Service 
 (Copyright (c) 2000, Dow Jones & Company, Inc.) 

 HOUSTON -(Dow Jones)- A group of telecommunications companies is meeting 
Thursday to open discussions
 on industry standards for bandwidth trading. 

 Set up by CompTel, a Washington, D.C., trade association that represents the 
competitive telecommunications
 industry, the meeting will initiate discussion among companies that are or 
probably will be active in a nascent
 bandwidth trading market that could be worth billions or trillions of 
dollars a year.

 Bandwidth is the capacity to move data over telecommunications networks. 

 Russell Frisby Jr., president of CompTel, told Dow Jones Newswires that the 
trade group's members asked it to
 get involved in the discussion of bandwidth trading. 

 The fact that CompTel is involved in discussion on bandwidth trading shows 
that people are taking the idea
 seriously, said Steven Kamman, a telecommunications analyst with CIBC World 
Markets. 

 "This year bandwidth trading will move from a theory to practice," he said. 

 Before that can happen, the industry needs to set ground rules for trading, 
and that will be a major topic of
 discussion at the meeting. 

 It comes as no surprise that Enron Corp. (ENE) will be at the meeting. For 
nearly a year, the company has been
 promoting the idea of setting up a liquid market for trading bandwidth under 
standard terms and conditions. 

 Tom Gros, vice president of global bandwidth trading for Enron, has two 
items he thinks should be at the top of
 the meeting's agenda. 

 The first is establishing an industry organization to set the standard terms 
and conditions for trading bandwidth as
 a commodity. The second is setting a North American benchmark for trading. 

 The bandwidth trading organization, or BTO, should consist of companies 
"with actual financial risk" in
 bandwidth trading, Gros said. That means the group would consist mainly of 
major telecommunications carriers,
 the bandwidth producers. 

 But others also have financial risk in bandwidth, he said, including some 
major Wall Street players and bandwidth
 consumers. 

 Gros said some Wall Street players have already begun trading bandwidth, but 
he wouldn't identify them. A
 source with a Wall Street investment bank, who didn't want to be identified, 
said Gros's claim was a stretch. 

 Banks with trading operations are consumers, using telecommunications 
bandwidth to move stock market and
 commodity trading data internationally among offices, he said. But they 
aren't actively trading bandwidth as they
 do established commodities. 

 Major consumers of bandwidth would include large Internet service providers, 
or ISPs. Gros said they should
 also be included in the BTO. 

 Before bandwidth can be quickly and easily traded domestically, the market 
needs a North American benchmark
 that sets technical specifications, Gros said. 

 In domestic crude oil trading, the benchmark is West Texas Intermediate, 
which must meet standards for
 American Petroleum Institute specific gravity and for sulfur content. 

 In the bandwidth market, standards would be set for quality-of-service 
issues like errored seconds, severely
 errored seconds and unavailable seconds, Gros said. Those standards would 
cover corruption of data
 transmitted over bandwidth as well as the availability of bandwidth. 

 Enron has suggested that the benchmark cover the route between New York and 
Los Angeles, which ranks
 among the routes with the most data traffic in North America. 

 Agreeing on standards will be the toughest job to accomplish at the meeting, 
said Ken Epps, senior vice
 president for strategic marketing for Williams Communications Group (WCG), 
which will also be represented at
 the meeting. 

 The technical standards for bandwidth trading can't be set so high that they 
limit the number of companies that
 will trade, Epps said. If the standards limit liquidity, the market won't 
develop. 

 "Everybody needs to walk away feeling that it's a standard they can live 
with, that they can build their business
 around," Epps said. 

 That goal can be met - it's just a question of how long it will take, he 
said. "I don't expect it will be settled at the
 first meeting of the CompTel group, but it will be the kickoff." 

 Williams plans to keep those discussion going next month at its own "carrier 
forum" to discuss bandwidth trading
 standards, Epps said. 

 About a year ago, when Enron first proposed trading bandwidth as a 
commodity, Williams officials were quoted
 as being skeptical about the idea. 

 But last month, the company announced it would take a leading role in 
developing a market for trading
 bandwidth. The Williams carrier meeting shows that the company is now 
serious about bandwidth trading. 

 Williams is inviting "the real players, the MCI WorldComs (WCOM), the Qwests 
(Q), the AT&Ts (T)," Epps
 said. "It's about people who have the assets and how we use these to 
advantage the marketplace, how we build
 a good powerful market model." 

 CompTel's Frisby, Enron's Gros and Williams's Epps wouldn't discuss which 
other companies were attending the
 meeting in Washington. But Dow Jones Newswires was able to obtain a list of 
attendees. 

 Among the invitees are companies with experience trading energy commodities 
- Dynegy Inc. (DYN); El Paso
 Energy Corp. (EPG); Columbia Transmission Communications, a unit of Columbia 
Energy Group (CG); and
 Koch Industries, which has investments in energy and telecommunications. 

 A surprise on the list is MCI WorldCom. Some industry sources have said the 
company opposes the idea of
 bandwidth trading under standard terms and conditions. 

 An industry analyst, who didn't want to be identified, said MCI WorldCom's 
participation in the meeting is
 indicative of changing attitudes in the telecom carrier industry about 
bandwidth trading. 

 Retail marketing groups within telecommunications carrier companies don't 
like the idea of a liquid bandwidth
 trading market, the analyst said. 

 Such a market could turn retail customers into wholesale customers. For 
example, a retail customer like an ISP
 could go to a liquid bandwidth market and buy at wholesale prices, he said. 

 Also on the attendee list are telecom carriers Teleglobe (TGO) and Global 
Crossing Ltd. (GBLX); NTT
 America, a wholly owned subsidiary of Nippon Telegraph and Telephone Corp.; 
and Progress Telecom, a unit
 of the electric utility Florida Progress Corp. (FPC). 

 Also on the list is recent IPO Universal Access Inc. (UAXS), a company that 
matches carriers that have excess
 capacity with carriers that need extra capacity. 

 LighTrade, a start-up company setting up pooling points to allow bandwidth 
trading, was also invited. 

 Commodity traders are represented by Sakura Dellscher, Amerex, Prebon 
Yamane, AIG Telecom and the New
 York Mercantile Exchange. 

 Two consulting companies, Andersen Consulting and PricewaterhouseCoopers, 
were also invited.