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Trading Desk: Sphera Influence: Metro Carrier Backs Virtual Trading Hub

Posted: 11/2001

Trading Desk

Sphera Influence: Metro Carrier Backs Virtual Trading Hub
By Josh Long and Khali Henderson

Executives at metropolitan carrier Sphera Optical Networks Inc. say they are executing a plan, the MetroHub Initiative, to put the “virtual pooling point” concept into practice.

Their goal is to overcome end-point connectivity at the metro level, which has been a chief obstacle to widespread trading adoption. They believe their initiative and neutral pooling points are solutions to the same problem.

Neutral pooling points serve as aggregation points for physical delivery and network monitoring, which are needed for successful and liquid trading. The problem is that a carrier and its trading partners have to get to the same hub within a city. This can be an onerous requirement for carriers located in one or more multiple carrier hotels in a city, according to
Sphera.

Even if the pooling point provider puts a hub in every carrier hotel throughout a single city, the problem of building-to-building interconnection remains.

MetroHub works in a different way, Sphera executives say, explaining that their proposal is a connect-once strategy whereby a service provider can link to the Sphera network from the carrier hotel where it is located, and it can then trade with any service provider in any building connected to the Sphera network.

Sphera says it will install an optical distribution frame (ODF) into a carrier’s point of presence (PoP) and interconnect the ODF back to the MetroHub network through fiber optic pairs. It already has installed ODFs into many carrier PoPs through relationships with wholesale customers.

Sphera executives say the company’s advanced network management platform, SpheraCore, will allow it to offer the same level of quality of service monitoring capabilities as a physical pooling point.

In September, they said they were gathering input from industry experts on how to implement their trading initiative and planned to launch a product offering within a few months.

To prepare for the offering, Sphera will draw up contract terms associated with pricing, liquidated damages and service delivery times among other conditions necessary in the trading market.

Although negotiations began last summer, traders never have agreed upon industrywide guidelines — a milestone that would be expected to facilitate ubiquitous trading.

Sphera executives say that when the trading market moves into high gear, its company will have the switching vehicle in place to ensure a smooth ride. Through its traditional wholesale business, the company already has interconnected with a number of energy-industry bandwidth traders and carriers.

Sphera executives say their solution would be more affordable and flexible than a physical pooling point arrangement, allowing a participant to deliver bandwidth to customers residing in a number of carrier hotels within a metropolitan region.

They add that they will bring their network directly to a customer at no cost, essentially granting the service provider access to networks that are connected to Sphera’s metropolitan rings. The company plans to charge initial membership fees to gain access to Sphera’s network at various points within cities, according to Jonathan Brown, director of marketing communications and sales support.

In contrast, today a carrier might pay a one-time fee of $50,000 to $100,000 to interconnect to a physical pooling point in New York City, Brown says.

Doug Minster, vice president of corporate development at Washington D.C.-based physical pooling point provider LighTrade Inc., disagrees.

Minster says he has not “seen anything along those lines in terms of cost.” He explained that fees can range from a “fairly negligible cost” to tens of thousands of dollars depending on the interconnection complexity and how far away a carrier is located from a pooling point.

Minster says trades are being made through LighTrade’s pooling points, although he declined to discuss specific deals or companies involved.

He adds that LighTrade has solved the last-mile disconnect in long-haul trading by forging interconnection agreements with metro providers, including Looking Glass Networks Inc., NEON
Communications Inc. and Con Edison Communications Inc.

Critics argue that virtual pooling points don’t provide the same performance and provisioning advantages as a physical pooling point, in which carrier A can link directly to carrier B, because all the service providers connect their networks into one giant switch.

In contrast, virtual pooling points may be dispersed throughout a city’s telecom fiefdom. Since no network is ubiquitous, Sphera might have to lease capacity from another network service provider to facilitate a connection.

During a September interview, Brown said the carrier could service 55 commonly traded routes. He added, the company is establishing a presence in the major carrier hotels throughout the nation.

Sphera operates networks in Atlanta, Chicago, Dallas, Los Angeles, Miami, New York/New Jersey and Washington D.C./Northern Virginia and in Amsterdam and London.

However, Minster says that physical pooling points have the advantage of neutrality over virtual pooling points. He explains that carriers are not neutral providers because their clients also buy transport services. LighTrade is not a service provider.

But like other carriers that manage collocation facilities or network access points, Sphera maintains it is neutral.

Regardless of the debate, other metro carriers are expected to introduce initiatives similar to MetroHub, according to The Yankee Group wholesale analyst Seth Libby.

Libby says whether service providers build to a virtual pooling point or to a physical pooling point, they must incur fixed and monthly recurring costs. And, few companies are buying and selling capacity in a trading model, raising doubt regarding the economic feasibility of such bandwidth hubs.

Still, pooling point providers and companies that want to provide network connectivity are forging agreements with energy-industry bandwidth traders, such as Dynegy Inc., Enron Corp. and network service providers, such as Cable & Wireless plc and Williams Communications LLC.

“I think they are going to have to scrap it out to see which one the industry likes,” Libby says.


Sphera Optical Network’s MetroHub
Source: Sphera Optical Networks Inc. (www.spheranetworks.com)


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