Oxygen founder Neil Tagare's new startup will allow carriers around the world to buy, sell, and swap capacity. Is it an idea whose time has come?
The first time I heard about Neil Tagare was back in the go-go '90s, when he was the man behind the international fiber network FLAG Telecom. FLAG went public in 2000, but by then Tagare was already onto his next big idea: building a $1.5 billion global network that would carry Internet traffic from most of the major nations over a giant fiber backbone.
It was called Project Oxygen, and it not only received a ton of media coverage but also backing from the likes of Lucent Technologies and Bechtel. But it also suffered from vision overload, and as the broadband bubble burst, Tagare, like many big telecom industry names, faded from the scene. Still, we've kept in touch, occasionally exchanging e-mails and notes. Last week, he let me know about the launch of his new startup, BuySellBandwidth.com, through which carriers around the globe are able to buy, sell, and swap capacity.
Economical way to get capacity
You're probably saying to yourself, "Haven't I heard of this before?" Indeed, even Enron tried to start a bandwidth platform. But BuySellBandwidth.com is more akin to private exchanges or ECNs on the stock market, where membership is by invitation only. The way it works, as Tagare explains, is as follows:
"With current cables being able to deliver terabits of bandwidth, most of which remain unused for years, you can swap capacity with other carriers or cables, either eliminating or significantly decreasing the need for additional Capex investment. You control and decide who to swap with and all the terms and conditions. You can even swap fiber-optic cable capacity with satellite circuits, WiMAX, or 3G spectrum."
Yes, he's talking about swapping bandwidth, the very thing that a few years back got a lot of broadbandits into trouble—even landing some of them in jail. "Swapping got a bad rap in 2000 because of the illegal accounting transactions certain carriers like Global Crossing were involved in," Tagare acknowledged. But he went on to say, "In light of the current economic climate, swapping represents the most economical way to acquire new capacity, especially considering the fact that most fiber cables have plenty of spare capacity."
Tagare said he first started to think about BuySellBandwidth.com earlier this year, when five cables were simultaneously cut in the Middle East. "I wanted to give the ability to every carrier in the world to have a reliable mesh network similar to what I was trying to do in Project Oxygen," he explained. By the same token, he knew that raising billions of dollars wasn't going to be possible this time around, so he started to think small. And out of that thinking came BuySellBandwidth.com.
Carriers already on board
"The problem with consortium cables is the use of huge notional capacities to warehouse capacity until the big boys want to use it," he wrote on his blog recently. "Instead, why not allow this warehoused capacity to be swapped with warehoused capacities of other cables? This will create massive efficiencies and remove bottlenecks which are exasperated by the long lead times to build cables."
And Tagare isn't the only one seeing the need for such a service. Hamadoun Touré, secretary general of the International Telecommunications Union, told the International Herald Tribune last month that it was his dream to see someone build a system that would allow people to trade capacity. As the IHT reported:
"Touré said he had recently discussed the idea with telecommunications companies at an annual meeting organized by Intelsat, which operates communications satellites for use by media and telecommunications companies and governments. At these gatherings, network operators already trade capacity through bilateral agreements, without the structure of an exchange, when, for instance, a European operator puts in place an arrangement to deal with an anticipated spike in traffic to China or India."
So far a dozen carriers—including PCCW, KPN, PLDT, Globe Telecom, Cable & Wireless, Reach, and Tata Communications&have signed up with Tagare's exchange, which at this point is free. Bandwidth brokers, by comparison, currently perform this service at 10% to 15% of the sale price. "Over time I will charge a small membership fee," Tagare told me. He's hoping each transaction will be worth millions of dollars.
Tagare believes the private exchange will allow anyone to come in and get the preorders needed to get a cable or infrastructure project off the ground. Tagare himself is pursuing two cables and two data centers using the exchange: The cables include SingIndia, a submarine cable that would run from India to Singapore, and DostIndia, which would run from India to the Persian Gulf; the proposed data centers are known as NetVaastu1, in Mumbai, India, and as NetVaastu2 in Chennai, India.
"Once the presales are in place, which is what I'm trying to do now, funding will come," he explained. "I have sounded out a few of them and I have enough interest to put a deal together once I have an anchor tenant in place." Such interest is likely attributable to Tagare's many years in the telecom business, or to the fact that Yasuhiko Niiro, ex-president of KDD Submarine Cable Systems, is the chief engineer of the proposed cable product.
While I think Tagare might be able to raise funds once the presales are in place, I think he's being optimistic about the ability of others to do the same. That being said, however, a global exchange platform for bandwidth seems like a good idea whose time has finally come.