Posted: 02/2001
ITCC Enters Minutes, Bandwidth Exchange
By Bruce Christian
Insisting that its plan to rely on a single switch manufacturer allows for a more simplified global exchange, International Telecommunications Clearing Corp. (ITCC, www.itclearingcorp.com) has announced it will begin in March to trade telecommunications minutes and bandwidth capacity.
"The most important thing from our position is that we have a very strong switch manufacturer, a leader at developing and maintaining switches in Ericsson [www.ericsson.se]," says ITCC's CEO Bonaventure C.K. Wong.
"The predominant difference in us and the others out there, is that we chose to come into the market at this time because of the technology."
Wong says he does not believe the technology has been available until now for a "real exchange model to work."
The ITCC neutral trading model will link the trading floor, and the network and billing components, Wong says, adding, "It's really about the provisioning when the trade has been made. How quickly can that be done?"
Wong emphasizes that when carriers sell capacity or minutes, they want to complete the deal quickly.
"They don't want to wait on the sidelines for a couple of months, which you have seen from a couple of others in the market," Wong explains.
"Currently, reaching agreements among carriers for buying and selling of minutes and bandwidth can take months to complete, causing carriers to lose millions of dollars of potential business as their networks sit idle. The development of ITCC's minutes-based trading floor signifies a positive change from the lengthy and inefficient trade process to an automated, real-time trade process."
While the trading platform of ITCC is minutes based, Wong says capacity is vital.
"We actually believe that bandwidth is a very strong product in America and coming into Europe, but two-thirds of the world population still is in the minutes business. Bandwidth hasn't even arrived to much of the world.
"The Internet is still very poor quality in certain places, so we had to look at a platform where we didn't have to separate the minutes and bandwidth, because we do believe the future is in bandwidth," Wong says.
He adds that within the next five to 10 years, bandwidth capacity trading could outstrip minutes.
"So the technology we have with Ericsson allows a platform to trade both bandwidth and minutes. Previously, you had to have a separate machine for each, which means more cost to carriers who connect to you.
"More importantly, the reason why we connected all the switches together and created one single switch is because of liquidity. A lot of the exchanges today are very regional," he explains. "When I say regional, a good example is to look at the New York Stock Exchange [www.nyse.com] and imagine that only people from New York can trade on it. How liquid would that market be?
"Basically, we had to create this liquidity, and the payoff is the world in one connection," Wong says. "Literally, by connecting to any of the hubs in the world, you can actually trade with everyone else in the prime network. That brings liquidity. That is the model that we believe will play a significant role in creating a truly global exchange."
Wong says Ericsson's involvement is in developing and maintaining this global network with hubs in Hong Kong, London, Los Angeles, Miami and New York. The cities already have Ericsson switches.
"We will have at least a line sitting there, and all the switches will be on an ATM backbone to create one global switch managed by what we call a central brain, that will look after the global network from one central point."
That point will be London, Wong says.
A single global loop, with a single switch manufacturer represents a step toward efficiency, according to Wong, who explains that competitors operate on a regional basis and have to rely on different kinds of switches depending on the regions.
"Others don't have their hubs connected to each other. If a carrier is a New York player and wants to bring a London player to New York, it is kind of limiting and not cost-effective," Wong says. "The idea is not to lower the cost of termination or bandwidth purchase, it is to lower the cost of doing business."
Ericsson brings something else to the partnership, Wong says.
Because the switch maker has been working in the telecom industry worldwide for a long time, it understands the global business.
"There are other technologies in the market, and other players have been battling on different technologies," Wong explains. "They have been buying one vendor and switching to another.
"We stuck with Ericsson because it allows the routing table to be separated from all the other switches, so the routing table and its dynamic switching occurs independently."
But according to RateXchange's (www.ratexchange.com) senior vice president Russ Matulich, Wong's comments are not exactly true. In fact, he says having a single hardware solution can be problematic.
"The only way to approach the global market successfully, as we have, is by allowing companies to connect wherever they want. The actual transaction is over our secure trading software, and to become a member, one only needs to sign our contract," Matulich says.
RateXchange is one of the industry's leading bandwidth traders, and Matulich says the idea that it is not global is way off base.
"Companies can either deliver through our hubs in Europe and North America or on their own--that's the beauty of it," he says.
ITCC, a Bermuda-registered company headquartered in Dubai, United Arab Emirates. Wong says the ITCC model was developed as he and his co-founder Linh Nguyen left the prepaid market in Hong Kong. He explains that when the market began to open, his profits began to fall. "We tried to find a more efficient way of doing business, of getting market share and terminating around the world," Wong says. "We were a 40-man operation. We had people flying around the world, floating deals for termination. It was inefficient and cost us a lot of money."
