Band-X lands in the right place at a perfect time

Nothing signals the utter transformation of the telecommunications market here more succinctly than the arrival last week of Band-X.

Band-X is a fast-growing, London-based online bandwidth exchange that operates a virtual trading floor for excess telecommunications capacity and related services such as co-location (where companies locate their Web networks at a specialised facility but manage it themselves).

It's a curious business, made possible by the global rush to build out capacity (particularly broadband capacity for the highspeed transmission of data over the Internet, as opposed to voice lines), and one that works exceedingly well in the anonymous space of the Internet. Businesses that want to sell capacity, including many of the biggest names in the telecommunications business, list what they have to offer on Band-X's website, www.bandx.com.

The seller provides details about the nature and quality of the lines, and Band-X verifies these facts. This is an important aspect of the business for buyers and sellers, because the companies offering capacity or services are not identified - obviously, they don't want their contract customers to know they are auctioning bandwidth they have sold at a much higher retail price elsewhere.

Buyers can go online - also anonymously - and make bids. Band-X acts as a neutral third party to seal the deal and takes a percentage cut for itself.

In a usefully illustrative coincidence, Band-X announced its arrival in the Irish market during the same week that the Department for Public Enterprise announced the first round purchasers of bandwidth on the Global Crossing transatlantic fibre-optic cable.

The six companies that bought capacity - Eircom, WorldPort, Net Intelligence, AboveNet, Irish Multichannel and Formus Communications - have taken a total of 161 STM-1 lines - fibre lines each capable of carrying 155 megabits of data per second.

The Government retains options on another 79 lines, of which first-round purchasers already claim 30. The Government is likely to offer up to 39 lines in a second offering of capacity in several months and retain the remainder for public projects, according to a Government source. And Global Crossing itself also retains at least a similar amount of capacity on the line, which it too will be selling.

Much of that capacity is now live, and, added to existing broadband connections, that means we have one heck of a lot of broadband connectivity in the country. Throw in a second transatlantic fibre cable under construction by 360 networks, due to be completed next spring, and - well, as Band-X Ireland's managing director, Mr Jan Bosch, says, "There is a huge market here".

While some might view BandX primarily as a scavenger for bandwidth, Mr Bosch, a former Eircom executive, says this is not the case.

"We are regarded as one of their primary channels to market," he says. Certainly, that must be true at the moment. The companies that recently purchased capacity will want to put it to work immediately. However, most will only just be starting to market capacity to potential clients and will be sitting on megabits of unused connectivity. Through a market like Band-X, they can offer some lines for a defined period, until they think they will have a ready market - companies don't sell on the lines permanently.

Then, there's a second reason why there will be plenty of spare bandwidth sloshing about. Half of the purchasers of Global Crossing bandwidth are not telecommunications companies per se, but Web hosting and network management companies. Because they are in the process of building facilities to utilise their capacity, there's little they can do with it at the moment.

Those three - WorldPort, Net Intelligence and AboveNet - will be using their bandwidth as part of a package, where they house and manage corporate Websites and their high-bandwidth networks in their own facilities. The three are complete newcomers to the Irish telecommunications field and most people will be unfamiliar with their names.

WorldPort is US-based, while Net Intelligence is an Irish company, and both plan to move into the European market using Dublin as a base for their hosting facilities. AboveNet - perhaps the most unexpected and interesting of the participants - is one of the American giants in the hosting/management field.

These three, along with Formus and Irish Multichannel, have become international telecommunications operators virtually overnight. This turn of events promises to radically shake up the telecommunications market here in ways that do not yet seem to have been widely recognised. "It changes the paradigm," says Mr Bosch. "On the international scene, (the Irish telecommunications market) is now completely open again."

The amounts of capacity bought by the various purchasers also demonstrate how new the ballgame is going to be. As one would expect, the largest purchaser of bandwidth was Eircom, with a £29m (€36.8m) investment in 56 STM-1s, 10 options on the next round, and two lines of "dark fibre" (valuable, unlit fibre that the purchaser will manage, rather than the seller).

But Net Intelligence picked up a whopping 50 lines and 20 options, while AboveNet - who, as far as I can discover, don't even have a presence in the Republic yet - bought 19 STM-1s and two dark fibre lines. The other three bought the standard 5 package of 12 STM-1s - eight going to Europe and four to the US. That, on its own, is a huge amount of bandwidth.

The obvious, immediate consequence of the availability of all this connectivity should be a quick drop in price for businesses, although one study done by WorldPort indicates that prices should hold above the purchase price for the participants for 18 to 24 months, says WorldPort director David Hickey.

Formus says it intends to push prices down as low as they can go, and therefore may well serve as a check to other companies' plans. Beyond that - who knows? Everything's there to play for in our big new broadband market.

klillington@irish-times.ie