Rocking to the Band-X Rhythm

Pooja Garg

Calling itself a 'net market' for bandwidth, Band-X was founded in 1997. In 1998, it opened the first spot market for switched voice minutes; and, in 1999, it started to offer reverse auctions of bandwidth. In 2000, it has launched the trading of Net transit capacity.

Band-X has embarked on an expansion spree, having recently got $40 million from Goldman Sachs, Morgan Stanley Dean Whitter Private Equity, and the existing investor Madison Dearborn Partners Inc. Based in London, they are planning to open offices in the US too.

India is also on the charts. With broadband euphoria rocking the country and all the big players pitching in for a piece of the fibre cake, Band-X feels it's the right time to come to India. Says Pran Mehra, 28, CEO of the India Operations of Band-X: "We are planning to open five exchanges here in India. Delhi and Mumbai will take off shortly, with Bangalore, Chennai, and Hyderabad following suit." Predicting a 90 per cent drop in bandwidth prices worldwide, Mehra sees the Indian market growing by 75 per cent.

Will it work? Well, it appears that quite a few ISPs and bandwidth providers are looking at Band-X as an option to reach out of the country. BT learns that STPI, Delhi, Satyam Online and Wipronet are some of the companies considering buying bandwidth through Band-X.

Spectranet, the ISP subsidiary of Punj Lloyd, is also in talks with Band-X. Says Sachin Mehra, 27, CTO for Spectranet: "Band-X is one of the bandwidth options we are looking at. We are also taking bandwidth from private carriers." Band-X will take care of some 10 per cent of Spectranet's total bandwidth needs, when they go for the buy sometime in August, 2000. Says Mehra: "Right now, we are testing the concept to see how it works. We are very interested in what it offers in terms of transparency and flexibility of price and quality." To reach the London Telehouse of Band-X, Spectranet would have to take the route through a submarine carrier.

S. Koppikar, 45, CTO for S.Kumars, another potential buyer from Band-X, also finds the concept interesting, but sounds a cautious note. "It seems to be a good thing for buyers with its dynamic pricing and quality index. However, the prices could be reflective of some off-market deal. Band-X would have direct contact with the seller, we would not." The S. Kumars are also considering buying from other carriers like Eurostar and Pan-Am-Sat.

So, how does the Band-X exchange work? Let's look at the back-end operations:

You have carriers of bandwidth who may be buyers or sellers. Of course, a seller of bandwidth in a particular area may be a buyer in another area. Carriers of bandwidth--according to their size, volume, and spread--may be Tier I or Tier II carriers.

Band-X has a Telehouse in London, wherein all carriers--the buyers as well as the sellers--would come and physically connect their pipes to the Telehouse. This allows connectivity to the entire network of the seller and will allow any buyer access to the world of Net.

Band-X has a number of different trading floors, each trading a different aspect of telecom capacity. They are split into two categories--they may be agency-based (where the trades are completed manually), or facilities-based (where the trades take place via the automated systems).

The agency-based part looks after the business which is handled off-line, and where the trades are completed manually. This is the case with a) recruitment, where Band-X's Recruitment Division is trying to hire people for telecom industry; b) network, where Band-X offers pipes, point-to-point capacity, circuits, leases, and fibre; and c) co-location, where Band-X offer space in Telehouse capacity.

The facilities-based part looks after the areas where the trades take place via the automated systems. This looks after a) switched, based on the Band-X Switch infrastructure, telecom-switched minutes for voice and fax usage are traded through the exchange, b) Routed, based on Band-X IP Trading Exchange Network Infrastructure. Trading of IP capacity is again followed through the net mechanism.

Band-X's value proposition lies in bringing buyers and sellers together on the same platform minus the marketing hype. Because the sellers are selling in bulk, the prices on offer are wholesale prices. The buyer also has the pick of all the market prices available through all the sellers on the market. The prices are displayed on the site, and the buyer can choose accordingly.

The switch from one seller to the other is also easier and quicker where a seven-day notice is all that is needed to change, compared to the traditional model where the buyer and seller sign and seal a contract which is for a period of some months at the least.

For the seller, the advantage lies in the fact that he does not have to move his access circuit to the buyer's site. Also, he can change his prices in real time which ensures that the prices are always competitive and reflective of the market trends.

Band-X has a patented quality index where the quality of each seller is checked, based on the criteria of a) packet loss, b) throughput, c) hop count, and, d) round-trip time. So, the buyer also has the opportunity to test the quality of service offering by the seller before he ties up with him.

Band-X gives the buyer to choose the right seller through a reverse auction. For this, the buyer signs a contract with Band-X quoting the lowest price at which he would buy. Band-X then contacts the sellers and informs them about this price point. The interested sellers then log on at a specified time and bid for the contract. The bid starts from the price point specified by the buyer. As the sellers compete with each other for the contract, they drive the price down.

At the end of the day, buyer gets a better deal, and Band-X takes home 10 per cent of the savings. Of course, all that depends on how the concept catches on.

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