Dow Jones to launch bandwidth index
The company plans to create a new commodity index tomorrow dedicated to tracking the rise and fall of telecommunications network bandwidth prices.
The move is another sign that the young market for network capacity is reaching the level of mature markets, such as oil, gas or pork belly futures. The index will be maintained with the help of bandwidth exchange house RateXchange.
Bandwidth exchanges have developed as dozens of new network companies have crisscrossed the United States and the oceans with fast data networks. Companies need access to these data networks quickly, and the old system of signing lengthy contracts after weeks or months of negotiation often doesn't move quickly enough.
The exchanges are designed as neutral swap meets, where companies can sell access to their networks to other companies that need the space quickly and at a market-driven price.
RateXchange is one of several companies that have tried for years to push the concept of a neutral bandwidth market, where big communications companies can buy or sell excess capacity on their networks. Some carriers have resisted the notion, however, loathe to see the billions of dollars they've invested in their networks become a commodity.
Still, the number of new carriers on the market, offering more space on their networks every day, has pushed down the price for bandwidth substantially. Carriers are beginning to test the model, both at RateXchange and at similar services run by Arbinet and Enron Communications, for example.
The Dow Jones index initially will provide prices for three long-haul data routes. Companies will be able to use these figures to peg the changing prices of contracts when they are buying access to networks.
As more carriers put access to their networks into the marketplaces run by RateXchange, Arbinet or others, investors will be able to speculate on the future prices of bandwidth, just as investors in the pork belly or oil futures do today.
"This is the index of the raw material of the new economy," said Ross Mayfield, president of RateXchange. "Finally the industry has evolved to the point where bandwidth trading is a reality."
The index is scheduled to launch May 1.