Exchanges Revisited

By Khali Henderson

The multilateral exchange has gone through many mutations over its short life but now seems to find itself at the meet-me point for clearinghouses and interconnection providers. There now are options for the exchange of IP data traffic that likely will spill over into IP voice, and each tackles the problem from a different direction and set of tools.

The traditional TDM minutes traders like Arbinet and Band-X are going the peering providers one better with a trading, routing and settlement service. On the other side, a neutral interconnection provider has rolled out a similar product that expands beyond physical interconnection to include automated billing and settlement.

In late September, Arbinet acquired Band-X’s IP Trading Exchange, enhancing its own nascent offer - data on thexchange launched July 22 in Los Angeles - with nearly 200 buyers and sellers in three additional PoPs in Edinburgh, Scotland; London; and New York City.

Band-X opened the first IP capacity exchange in London in February 2000; the first U.S. facility, in New York City, opened in October of the same year. “We made a commitment to data on thexchange and [Band-X’s] offerings were complementary,” says Chris Reid, vice president of marketing for Arbinet, explaining one reason for the acquisition.

Arbinet members can buy and sell three types of service on data on thexchange:

Roger Kim, vice president, data on thexchange, says data on thexchange addresses five major problems for service providers, content aggregators, ISPs, cable operators, e-commerce businesses, gaming providers and enterprises that buy Internet routes.

The first is the need for high-performance access without investment in expensive route control or optimization equipment. The second is the need to accommodate bursty, variable traffic volumes with usage based pricing instead of 95th percentile pricing (based on the 95 percent of the peak usage).

“A third area is for companies that need to manage costs in line with growth,” he says, noting Arbinet offers flexible commercial terms in short-term increments.

A fourth area is diversity of supply. “That’s resource intensive to manage,” says Kim, “We allow management over a single connection,” without adding internal resources.

Finally, data on thexchange allows for paid peering arrangements. Reid says Arbinet’s TDM trading business always has found its greatest competition from traditional ways of doing business; the same is true for data on thexchange. “If someone is peering or buying transit, our service is a substitute for that,” he says.

“No one else does trade, route and settle, but they do peering. We are not just physical but transactional. From that perspective, [data on thexchange] is an evolutionary step from the current business environment,” Reid says, explaining that it adds a single contract and clearing and settlement - all in an automated system.

But at least one peering provider may be offering IP capacity buyers and sellers a similar alternative. In April 2003, Equinix Inc. introduced Equinix Direct, which automates provisioning, multihoming and billing to multiple upstream networks through a single interface.

The service, accessed over a single connection, offers a choice of bandwidth providers with short-term - 30-day - contracts and no bandwidth commitments. Through an Internet portal, customers control the routing of their traffic to multiple networks, and the service provides a single monthly invoice identifying all ISPs and capacity used.

The differences between Equinix Direct and data on thexchange, says Equinix founder and CTO Jay Adelson, are that routing is based on BGP (the border gateway protocol used to exchange routing information between ISPs) not Layer 3, and trading is neither anonymous nor fronted with a bid-ask board.

According to product literature, Equinix Direct enables IP networks to provide businesses with visibility to their branded offerings and SLAs. By preserving the direct relationship between business and the network, each provider retains its unique value, with different quality, services and pricing, the company notes.

At least 30 enterprises and content companies now use Equinix Direct to reach about 20 bandwidth providers, such as America Online, Cox Communications, Global Crossing Ltd., Level 3 Communications Inc. and Teleglobe.