With names like Band-X, Min-X and InterXion, the array of young Internet companies looking for business in Dublin last week sounded like they might be selling online sex, or perhaps downloadable music. But the truth is much odder. They sell minutes.
For these companies, minutes are the excess chunks of time available on under-used telecommunications networks which the network owner would like to sell, and usually, another company wants to buy.
Because globally, telcos are all rushing to install new networks - particularly networks constructed of fibre-optic cable with its mammoth capacity to carry voice and data - nearly everyone, from small to large players, has spare capacity to sell.
As a result, companies like London-based Band-X have found a niche acting as intermediaries to the telecommunications carriers, conducting online auctions of excess bandwidth in forums that have become known as "virtual minute markets".
"Band-X was created from the belief that bandwidth [the capacity of telecommunications networks to carry voice and data] would be more like a commodity - exchangeable and widely available," says Mr Richard Elliot, the company's founder and director. Because this has turned out to be the case, minute traders came to Dublin last week to pitch their services to the telecommunications carriers that had come for the biannual
Carrier Wholesale Market conference and trading floor.
According to Mr Alex Mashinsky, founder of New York minute-market company Arbinet, large carriers typically only use 20 to 30 per cent of capacity on their networks on average, while smaller carriers might use at most, 50 per cent. But a carrier may find it needs extra capacity to a particular destination at particular times of the day. Or, perhaps a client company has requested the installation of a network and the carrier needs a set of lines, fast. In such cases, more and more carriers are turning to the minute markets to buy and sell capacity.
Minute traders offer spare capacity through a system of anonymous bids placed on their company website. Anonymity is important, say the traders, because carriers know many of their own customers may be looking for capacity on the minute markets and the carriers don't wish to be seen selling it off for less than the deals they've negotiated face to face.
Buyers going to the web-sites to shop for capacity can view a list of offerings along with details on the quality of the line - for example, the percentage of calls which are completed on the first attempt to put them through. Buyers can also check when the line will be available, how long the term of contract is for, any additional costs associated with installing the line, and other information, which sometimes includes a guide price. Bids are made online and if the capacity is sold, the minute traders get a percentage, usually about 2 per cent of the total value of the deal.
While numerous bidders going after a particular offering can push prices upwards, a new carrier entering the market can offer its capacity at a lower price, pushing costs downwards.
That kind of volatility has turned the formerly slow-moving wholesale capacity market on its head, say traders. Deals that used to stretch out over weeks and months are now completed in minutes.
Some dealers even operate their own network switching centres, so that they can turn the newly bought connection on between the two parties to the deal as soon as it's closed.
Other dealers have set up virtual networks that allow them to route traffic over the lines they've brokered. Either way, traders say carriers save money by not having to create lots of one-to-one connections with other carriers. Instead, the traders serve as a single point of access to other carriers' networks.
The traders say they are the ideal neutral brokers because their goal is to close deals, not to benefit one party over another.
"We don't make money based on the margin. We make money based on how many transactions we do," says Mr Mashinsky.
Many carriers, though, are wary of minute traders because the fledgling industry has no formal standards and no way of guaranteeing the quality of the lines it brokers anonymously. Some carriers are cautious still about using lines which run over the Internet. And carriers have to be convinced that minute traders are trustworthy.
But, says Mr Philip Low, a deputy director of telecommunications analysts the Philips Group, carriers "feel that they will have to use [minute markets] inevitably, as prices for capacity continue to fall". And in the future, he says, it won't just be voice capacity offered by minute markets, but Internet and satellite capacity as well. He predicts that by 2002, the volume value of minutes bought and sold on the minute exchanges will reach at least $4.6 billion (€4.46 billion).
And that kind of money will cause competition in the sector to reach a boiling point, he says, warning that today's minute traders should keep in mind a comment from a recent Ernst and Young report on the telecommunications sector: "Competition will intensify to the point that the industry will look like Dodge City with automatic weapons."
