Wayne,

This my response to your question.

What is the regulatory analysis of peering arrangments?

Peering is an act of establishing a relationship to pass Internet traffic 
between one national internet backbone provider to another national provider. 
Peering is currently not subject to any industry-specific regulations and is 
governed by commericial requirements.  The reason that  peering is not 
regulated by Federal Communications Commission or any other agency is mainly 
due to two factors:

1)  data traffic has not been subjected to the same stringent regulation as 
voice traffic

2)  history of Internet -- Since it was the National Science Foundation (NSF) 
who founded the first backbone to encourage the exchange of information 
between different scientists and researchers, the open environment for 
peering was essential to the rapid growth of the Internet.  Currently, most 
of the Internet traffic is exchanged through private pooling instead of the 
public Network Access Point (NAP).  With private peering, traffic can be 
exchanged in the same city, which avoids the classic sydrome in which traffic 
that orignates and terminates in Houston would have to travel through NY or 
even India.

Please note that peering is not be be confused with Interconnection in the 
PSTN, which are very cumbersome and expensive.

May I also ask for what reason are you bringing up  the topic of peering, is 
there a deal involving this topic ?

Please let me know if you have any questions.

Xi Xi




	Wayne Gardner
	01/08/01 11:12 AM
		 
		 To: Alisa Christensen/Enron Communications@Enron Communications, Beth 
Wapner/Enron Communications@Enron Communications, Cynthia Harkness/Enron 
Communications@Enron Communications, David DeGabriele/Enron 
Communications@Enron Communications, David 
Merrill/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Derenda Plunkett/Enron 
Communications@Enron Communications, Donald Lassere/Enron 
Communications@Enron Communications, Gerry Willis/Enron Communications@Enron 
Communications, James Ginty/Enron Communications@Enron Communications, Jan 
Haizmann/LON/ECT@ECT, Jane Wilson/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Jeff 
Dasovich/NA/Enron@ENRON, Lara Leibman/Enron Communications@Enron 
Communications, Malini Mallikarjun/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, 
Michael.Norris@enron.com, Michelle Hicks/Enron Communications@Enron 
Communications, Mike Dahlke/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Rajen 
Shah/LON/ECT@ECT, Richard Anderson/Enron Communications@Enron Communications, 
Robbi Rossi/Enron Communications@Enron Communications, Sue 
Nord/NA/Enron@ENRON, Xi Xi/Enron Communications
		 cc: Angie Buis/Enron Communications@Enron Communications
		 Subject: Proposed Tarl Agenda - Meeting for 9 am Thursday, January 11 
(location/call-in to be announced)

I propose a 1 hour meeting to try to regroup from the holidays and hopefully 
come up with a framework that will allow us to pick up the pace for future 
meetings.  Below is a proposed agenda:

1.  Establish what we have learned to date:
Trading of private line and lambda service terminating in Japan unavoidably 
requires a local license held by local entity
-  therefore, trading of private line and lambda service terminating in Japan 
must be done by a local entity
-  exposure to high Japanese tax and potential double tax reduced if Japan 
only has half-circuit
-  but this requires having multiple EBS parties to a trade
-  and trading half-circuits may not even be a commercial alternative
-  a Master and a confirm must be bilateral, i.e., there can be only be one 
counterparty on each side of the agreement
-  thus, a customer that wishes to trade an entire segment (e.g., Tokyo to 
San Jose) will have to execute two Masters and two confirms if the 
half-circuit alternative is used
US tax guidelines to avoid double tax on Japanese trading
Trading of Australian bandwidth entails no license requirements
Trading of Western European bandwidth entails no license requirements 
provided that no physical fiber is owned
Trading US telecom capacity requires an FCC 214 license
-  EBS, Inc. has an FCC 214 license
-  No other affiliate of EBS, Inc. needs to acquire an FCC 214 license IF 
that affiliate is directly or indirectly wholly-owned by EBS, Inc.
With regard to any IP transport deal, we must have the counterparty enter 
into a separate Master agreement and confirm with each EBS entity involved in 
the transaction.
-  Thus, in an IP transport deal involving numerous countries that require 
licensed local entities to provide local IP services, the counterparty will 
be required to execute a Master with each of the local entities
-  This is the ONLY feasible way from a legal standpoint to structure an IP 
transport deal, but is not a very good solution.
None of the foregoing points raise significant accounting issues.
Other?

2.  What are the important near term questions that remain to be answered and 
how long will it take to answer them:
Does private line and lambda trading of segments terminating in Hong Kong, 
Singapore, and India unavoidably require local license held by local entity?
-  If so, is there any way to limit the problem?
Does IP transport constitute a telecommunications service that requires a 
license in Sao Paulo, Tel Aviv, Japan, Singapore, Hong Kong, and India?
-  If so, must that license be held by a local entity?
Does IP transit constitute a telecommunications service that requires a 
license in Sao Paulo, Tel Aviv, Japan, Singapore, Hong Kong, and India?
-  If so, must that license be held by a local entity?
What is the legal relationship of parties to peering arrangements?
What is the regulatory analysis of peering arrangments?
What is the tax analysis of peering arrangments?
Other?

3.  Update on Singapore Pioneer Status application

4.  Are there things should we be doing to try to get ahead of the curve?

I encourage questions and comments on the agenda.

W. Wayne Gardner
Enron Broadband Services
1400 Smith Street
Houston, TX  77002-7361
Phone:  713 853 3547
Fax:  713 646 2532