Posted: 12/1999
Continued Bandwidth Rate Leveling
RateXchange's index methodology for U.S. east-west bandwidth rates reinforces the market's conclusion that prices are stabilizing. This is a repeat trend identified in the past two issues of PHONE+, as traded contracts on average have remained stable (and even slightly increased) over the past month.
The Real-Time Bandwidth Exchange*Revealed Price Index (RTBX*RPI), which tracks the current weighted average price, is applied to DS-3 bandwidth for major U.S. east-west routes in the accompanying chart for RateXchange trades since June 1998. For this period, the average rate for a DS-3 has declined by 39 percent to $41,487 per month. Measuring the RTBX*RPI since September, the October average rate for a DS-3 has not changed.
The RTBX*Revealed Forward Price Index (RTBX*RFP), which reveals prices the market sets for future dates according to contract term commitments, also is applied to two critical periods. The RFP*60 in May, when the RPI was $42,725, reveals the price the market was betting on two months later to be $36,467. As we come close to the end of this term, the discounted pricing seems more than reasonable. The data continues to push the window of revealed price stability, supporting our assumption that the market may be creating temporal arbitrage opportunities for U.S. east-west routes.
As we mentioned last month, the "No Temporal Arbitrage" principle simply states, for a liquid bandwidth market, if the market bets future prices incorrectly, it creates arbitrage opportunities. The price stabilization in U.S. east-west routes may indicate that regional domestic routes have yet to create temporal arbitrage opportunities. While the market is betting that U.S. east-west rates will not decline significantly in the next year, regional rates have yet to stabilize.
The much-prophesized "bandwidth glut" has yet to be identified when looking at rates as an indicator. Selling carriers now must speculate if their rate setting is as reasonable today as it was in June 1998 and weigh the potential impact of new supply.
International termination rates may be used as a litmus for future bandwidth rate setting, using Mexico rates since October 1998, when the rate was 12 cents. Currently, Mexico rates have declined by 50 percent to 6 cents. Similar to the U.S. east-west bandwidth market, Mexico rates have not changed September to October.
DS-3 Bandwidth RTBX*RPI and RTBX*RFP-360 Indices
Top International Spot Rates
| Australia | 5 cents |
| Brazil | 6 cents |
| China | 15 cents |
| Colombia | 8 cents |
| Dominican Republic | 10 cents |
| France | 4 cents |
| Germany | 4 cents |
| Hong Kong | 4 cents |
| India | 4 cents |
| Israel | 10 cents |
| Italy | 7 cents |
| Japan | 1 cent |
| Korea, Democratic People's Republic of | 12 cents |
| Korea, Republic of | 9 cents |
| Mexico | 6 cents |
| Netherlands | 5 cents |
| Philippines | 17 cents |
| Taiwan, Province of China | 12 cents |
| United Kingdom | 2 cents |
The top international spot rates-per-minute cost of terminating a call from the United States to a given country are the best offers to sell voice minutes capacity at RateXchange as of Oct. 28, 1999. Information is provided to the publisher by RateXchange and is believed to be accurate. RateXchange nor PHONE+ assume any liability for inaccuracies or decisions made by readers based on the information.
