X Marks the Bandwidth Spot Price

Tired of hearing about a bandwidth "glut" for telcos, but still paying the same old prices? It might be time to check out Band-X and its brokerage activities, designed to protect your ISP from being locked into one contract.

by Jim Wagner ISP-Lists Managing Editor [November 16, 2001]

Most ISPs know the trials and tribulations involved in nailing down a fairly decent bandwidth contract with a big telco, and ends with a contract that locks them in to years-long commitments at the same rate during that time period. And any ISP that's been around long enough knows the acidic taste in their mouth when they hear about the pricing dropping 20 percent just after they finish signing off on their deal.

Band-X, a four-year-old outfit based out of London, is looking to change the way ISPs look at bandwidth. Acting as bandwidth brokers, the company is a neutral trading floor for providers to buy and sell capacity on a month-by-month basis, called bandwidth on demand.

Originally conceived and operated in a resdiential home, the business began by brokering switched phone minutes. Since then, the company has spread throughout Europe and Asia and is looking to make headway in the U.S. with plans to open up shop in New York last year.

The company boasts 15,000 members throughout the world, and has roughly 80 Internet service providers (ISPs), application service providers, and streaming media outfits using their services. The company also acts as a broker between 30 carriers and the worldwide bandwidth buying community.

The company has undergone a huge change in just four years. In addition to its original service offering, Band-X now acts as a broker for IP traffic and even co-location facility space. They've bought out several key European companies to fuel that growth, and have even swallowed up the highly-regarded backbone analysis firm TeleGeography.

The company has been quietly successful over the years, averaging 20 percent growth month over month, officials said. Last year, the company got a healthy dose of capital in financing led by Goldman Sachs, Morgan Stanley Private Equity and Madison Dearborn Partners. The $40 million was the second round of financing, it's first netted them $10 million.

Committing to X
Band-X does require that an ISP sign up for a 12-month commitment. Band-X that gives providers a ticket to an online trading board which lists the most up-to-date prices and quality rankings for the desired bandwidth in their area. It should be just a matter of looking at the board for the best deal and signing up with the carrier.

Through Band-X, of course.

The brokerage firm gets a straight 15 percent commission from every deal, in what officials say is the best way to maintain neutrality with all the carriers and buyers. The bandwidth is bought anonymously, so the ISP doesn't know which carrier they are actually buying bandwidth.

This anonymity "enables free competition as sellers are willing to supply capacity via Band-X at below their retail list prices," a company fact sheet claims. Of course, it's no coincidence that this same anonymity prevents the ISP from cutting out the middleman and striking a deal with the carrier on their own.

The advantage to this system is the ISP's ability to switch carriers after just one month if they so desire. That way, if you lock in with one carrier at $1,000 per month for a T-1 in Tacoma, Wash. in December, and find a better deal two weeks later, you can switch to the new carrier in January. An ISP can switch once a month for all 12 months, if that's what they want to do, officials said.

Elena Curtis, Band-X U.S. vice president for IP Routed traffic, said that freedom is the beauty of the Band-X system.

"All you have to do is look at the market to see that prices are dropping all the time," Curtis said. "With Band-X, you can switch to another carrier that has a better deal every month if you want."

There's no doubt that finding and buying bandwidth via Band-X, or any other bandwidth broker in the country, is a good deal for ISPs.

As any ISP knows, exceeding the cap requirements on your bandwidth contract carries stiff penalties. That's hard for ISPs who are continually growing their customer base and needing more capacity. Bandwidth-on-demand services like Band-X are a perfect way to bolster capacity caps without worrying about going over the limit.

Carrier X is not Carrier U
One serious knock against Band-X is its carrier portfolio, which has some big players but not all of them. While ISPs can find the best deal for carriers like Level 3, Cable & Wireless, and Telia, they won't be able to get coverage deals with UUNet.

That's a problem for some people, Curtis admits, but points out that its roster of carriers blankets the U.S.

"There are some people that only buy on brand, and there are customers that only buy on quality and price," Curtis said. "For those customers that are concerned about the quality and the life cycle of their network, that's the benefit of our platform. They're not sitting down and listening to a rep talk about their internal backbone. Because the backbone can be fabulous, but if you don't have significant peering behind it, then there's congestions and latencies and the end user's experience is less than stellar."

Band-X officials point to their proprietary rating system to determine the best carriers to make a deal, and it doesn't always deal with price. After all, people that buy a Chrysler Reliant shouldn't expect the handling and speed of a Porsche.

Four criteria make up the Band-X quality index:

• Number of hops on the backbone.
• Number of packets lost.
• Packet round trip time in milliseconds.
• Speed of transfer rate for replies to HTTP requests, or throughput.

According to its website, Band-X conducts these tests every 30 minutes using a dedicated statistics server sitting on the carrier's network. Using an algorithm to determine the severity of packet loss or transit time, number crunchers put together the index figure, with zero the lowest. Officials would not reveal the statistics of any of the carriers they work with, saying it was privileged information.

In the end, it comes down to a matter of trust. If carrier contracts are gouging your bottom line with hefty rates and long-term contracts, it might be worth the risk to see what Band-X has to offer.

—End