Telecom companies are experiencing a share price meltdown as the bandwidth explosion has created huge supplies of new capacity

March 14, 2001

1 Min Read

LONDON -- Telecoms companies are experiencing a share price meltdown. Valuations were based on the assumption that carrier networks could deliver the required levels of cashflow, but the reality is that the bandwidth explosion has created huge supplies of new capacity, and bandwidth prices are in freefall, says Ovum, the analyst and consulting company. Some say the trading of bandwidth will not happen and that telecoms is not like other commodities. There are not enough players to create a liquid market, the product is not sufficiently standardised, delivery is based on best efforts, and carriers have been reluctant to embrace commoditisation and trading. But jittery financial markets will force carriers to find new ways to do business, including how they buy and sell capacity. For bit transport, the name of the game is lower costs and higher volumes: trading commoditised bandwidth is one way to get there.

"While business-to-business neutral physical exchanges have attracted the lion's share of publicity, it is other market players that will precipitate the trading of commoditised bandwidth" said Young. "The business-to-business exchanges will act as 'pathbreakers' in the market for trading minutes, but the most significant impact of commoditisation will be in the market for managed transmission, in the form of 'fat pipes' between major cities. It's no longer a question of if, but of when commoditisation and trading take place."

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like