Sycamore Feels Heat as Rivals Tap Customer
The Wall Street Journal, 04/19/01

Enron India To Meet Dabhol Pwr Proj Lenders Apr 23
Dow Jones International News, 04/19/01

INDIA: Enron's India unit says lenders meet on April 23.
Reuters English News Service, 04/19/01

Wessex Water parent plans major surgery
The Daily Telegraph, 04/19/01

Real-time pricing cuts both ways
UPSIDE Today, 04/19/01

COMMODITIES & AGRICULTURE: Aluminium smelting faces meltdown in north-west 
US: Fears are growing that the BPA's strategy of conserving energy could 
drive industry from the region, writes Gillian O'Connor: Financial Times; Apr 
19, 2001

Nevada regulator seeks delay of $3.1 billion utility purchase
Associated Press Newswires, 04/18/01

USA: Bandwidth trade struggles to gain footing.
Reuters English News Service, 04/18/01



Technology Journal
Sycamore Feels Heat as Rivals Tap Customer
By David Armstrong
Staff Reporter of The Wall Street Journal

04/19/2001
The Wall Street Journal
B6
(Copyright (c) 2001, Dow Jones & Company, Inc.)

SINCE OPENING its doors in 1998, fiber-optic equipment maker Sycamore 
Networks Inc. has depended on one customer, Williams Communications Group, 
for nearly all of its sales. 
In announcing a huge, two-thirds decline in expected revenue in its current 
quarter earlier this month, Sycamore said one reason for the drop-off was a 
decrease in business with Williams, an event that it added wasn't unexpected 
because most of the work required under a contract between the two companies 
is nearly complete.
That explanation, however, omitted the fact that some competitors are winning 
new business with Williams as Sycamore struggles to bring new products to the 
market. 
In the rapidly evolving and brutally competitive optical-networking game, 
delays of this kind can be punishing. 
"There is a major advantage to being the first mover in this marketplace," 
said Salomon Smith Barney analyst B. Alex Henderson. Although Sycamore may 
have new offerings of its own before long, "getting in the game late doesn't 
solve their share-loss position." 
Sycamore, Chelmsford, Mass., sells products that transmit data and voice 
using light, rather than electricity, greatly increasing the capacity of 
existing fiber networks. Earlier this month, the company said shipment of a 
more powerful version of its SN16000 optical switch has been delayed because 
the company can't get enough of an essential part from suppliers. Sycamore 
wouldn't disclose the exact part in short supply, but said it affects the 
"grooming fabric" that allows carriers to break up their networks into 
smaller chunks. 
The delay is critical because rival Ciena Corp., of Linthicum, Md., has been 
in the market for nearly a year with a competing device that is winning new 
customers, including Williams. 
Robert Traill, vice president of contracts, logistics and engineering 
economics for Williams, confirmed that the Tulsa, Okla., data carrier now is 
making commercial purchases of Ciena's CoreDirector, but wouldn't quantify 
the buying. Also, Corvis Corp., of Columbia, Md., already is selling 
high-capacity, long-distance transport devices to Williams that compete with 
a Sycamore product scheduled for release this quarter. 
Mr. Traill said the contracts with Sycamore rivals aren't the result of any 
dissatisfaction with Sycamore, but part of a multivendor approach to 
outfitting the company's fiber-optic networks. He also said Williams 
continues to have a strong relationship with Sycamore. While Sycamore won't 
say how much business it currently does with Williams, that customer alone 
accounted for more than 90% of Sycamore's sales in fiscal 2000. 
But Sycamore's dramatic decline in business with its top customer at the same 
time its rivals are capturing new contracts concerns analysts. "I think there 
is dissatisfaction with their product," said Seth Spalding, of Epoch 
Partners, in San Francisco. "Their problems are deeper than a weakened" 
telecommunications spending environment. 
After talking to Sycamore and Ciena customers late last year, Michael K. Ma, 
the portfolio manager of the PBHG Global Technology & Communications mutual 
fund, dumped his entire position in Sycamore and tripled his stake in Ciena 
to about four million shares. Mr. Ma's fund held 2,868,000 shares of Sycamore 
last Sept. 30, making it one of the largest institutional owners at the time. 
"We did some industry checks and talked to customers and got the sense that 
[Ciena] was winning the rat race," Mr. Ma said. 
Sycamore executives declined to be interviewed for this story. A spokesman 
said Sycamore would have more to say about its strategy and financial 
situation on May 15 when it releases results for its fiscal third quarter 
ending April 28. The spokesman, however, said any product delays aren't 
fatal. "Sycamore's position is this game is just beginning, and to declare 
victory this early on is premature," he said. 
Scott Clavenna, president of PointEast Research, a telecommunications 
research firm, said delays with devices like the SN16000 are costly, but 
agreed that there is time for a rebound. The fiber-optic network market, he 
adds, "is just getting started." 
Sycamore is well-fortified to withstand a downturn. As of Jan. 27, the 
company reported having $1.4 billion in cash, cash equivalents and marketable 
securities -- a residual benefit from the highflying days following its 
initial public offering and a follow-on secondary offering made before the 
technology market collapsed. 
The company is led by Chairman Gururaj "Desh" Deshpande and Chief Executive 
Daniel Smith, a seasoned pair who previously ran Cascade Communications 
Corp., a networking-gear company they sold for $3.7 billion in 1997. 
Sycamore's 1999 IPO was one of the most successful of the decade. The shares 
rose 386% on the first day of trading and eventually peaked at about $190. As 
of 4 p.m. in Nasdaq Stock Market trading, Sycamore climbed 71 cents, or 7.9%, 
to $9.74. 
Sycamore bucked the trend set by many start-ups by becoming profitable before 
expected, and it beat Wall Street estimates by reporting net income of $13.8 
million, or five cents a diluted share, in its fiscal second quarter ended 
Jan. 27. But instead of the expected $151 million in revenue, and a 
five-cent-a-share profit in the current period, Sycamore said revenue would 
be only $50 million to $60 million, with a loss of 16 cents a share, 
excluding restructuring costs and stock compensation. The company, which also 
cut its work force by 12% earlier this month, warned of further losses in the 
next several quarters. 
Sycamore doesn't yet have a well-diversified customer case. Last July, it 
said it had a contract valued at as much as $400 million with 360networks 
Inc. of Vancouver. A spokeswoman for 360networks, which recently announced it 
was cutting its capital spending this year by $500 million to a range of $3.5 
billion to $4 billion, declined to specify how much the company is spending 
with Sycamore but noted the $400 million figure was a maximum. 
Sycamore also announced an agreement last year with Enron Broadband Services, 
the Internet division of Enron Corp., for as much as $200 million over three 
years. An Enron spokeswoman, however, said spending on Sycamore products 
hasn't approached the figure quoted in the news release. In its most recent 
quarterly report, Sycamore disclosed that its two largest customers after 
Williams weren't contractually committed to purchase a minimum quantity of 
products.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 



Enron India To Meet Dabhol Pwr Proj Lenders Apr 23

04/19/2001
Dow Jones International News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW DELHI -(Dow Jones)- U.S. energy major Enron Corp.'s (ENE) Indian unit 
Dabhol Power Co. will meet with its lenders April 23 to update them on the 
2,184-megawatt electric power project in the western Indian state of 
Maharashtra, Dabhol's spokesman told Dow Jones Newswires Thursday. 
"I can confirm that a meeting of Dabhol Power Co. lenders is taking place in 
London April 23. The meeting has been called at the initiative of Dabhol 
Power to update its lenders on the current situation of the project. DPC has 
nearly 40 lenders that include Indian and international financial 
institutions," Enron India Ltd.'s spokesman, Jimmy Mogul, said.
DPC has a controlling 65% stake in the controversial $2.4 billion project 
which supplies power to the State Electricity Board. The project is India's 
biggest foreign investment. 
The tussle between Dabhol Power Co., India's Maharashtra state government, 
the Maharashtra State Electricity Board and the government of India is still 
ongoing. 
As reported, DPC Wednesday served two notices of arbitration on the 
Maharashtra state government. 
In a statement, Enron India said the notices were served because the 
Maharashtra government had failed "to honor its obligations under the 
government of Maharashtra State Support Agreement and Supplemental State 
Support Agreement," signed in 1994 and 1996, respectively. 
DPC said in the agreements, the Maharashtra government had pledged to 
"support and encourage the further development and completion of the Dabhol 
project." It added that "without justification," the Maharashtra government 
has gone back on these agreements, which has "adversely and materially 
impacted DPC's ability to perform under its contractual agreements." 
The statement added that as part of the arbitration process, an independent 
three-person panel will be set up to determine whether the Maharashtra 
government has "failed to comply with its obligations." 
Under a 1996 counter guarantee agreement, the federal government is obliged 
to pay Enron when MSEB defaults. 
Enron invoked that guarantee in February, marking the first time in India's 
history that a company has invoked a federal guarantee, when the state 
utility said it couldn't afford to pay DPC. The state government finally paid 
$17 million in outstanding bills. 

DPC and the federal government recently started a conciliation process, to be 
governed by the provisions of the U.N. Commission on International Trade Law, 
with the aim of resolving DPC's latest dispute with MSEB. 
DPC says MSEB owes it 1.02 billion rupees ($1=INR46.8250) for power supplied 
in December 2000. For its part, the MSEB said it wanted the power bill to be 
offset against a INR4 billion fine it levied on DPC for what it said was the 
non-supply of power for intermittent periods between October 2000 and the end 
of January. 
Dabhol, India's largest private power plant currently under construction, was 
scheduled for commissioning in two phases. The project's first phase, a 
740-megawatt power plant, has already been commissioned and phase two is due 
to be completed later this year. 
Critics object to Dabhol charging INR7.1 a kilowatt-hour for its power, 
compared with INR1.5/KWh charged by other suppliers. 
The various partners in DPC include: Enron Corp. with a 65% stake, 
Maharashtra State Electricity Board with 15%, General Electric Co. (GE) with 
10%, and Bechtel (X.BTL) with 10%. 
-By Himendra Kumar, Dow Jones Newswires; 91-11-461-9427; 
himendra.kumar@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


INDIA: Enron's India unit says lenders meet on April 23.

04/19/2001
Reuters English News Service
(C) Reuters Limited 2001.

BOMBAY, April 19 (Reuters) - U.S. energy giant Enron Corp's Indian unit has 
called a meeting of its lenders on April 23 to discuss the ongoing payment 
row with India's Maharashtra state government, a company spokesman said on 
Thursday. 
The meeting will be in London and will be attended by international as well 
as local lenders of the Dabhol Power Company (DPC), he added.
The move comes amidst escalating tensions between Enron and Maharashtra over 
the inability of the state's utility to pay its monthly bills. 
The Maharashtra State Electricity Board (MSEB) has been defaulting on 
payments since last October for electricity purchased from Dabhol's 740 MW 
power plant on the state's west coast. The amount outstanding totals 2.26 
billion rupees ($48.24 million). 
In an effort to compel payment, Dabhol has twice invoked a federal government 
guarantee to cover payment defaults by the state utility. 
Last week, Dabhol also issued a notice of political force majeure to 
Maharashtra. Force majeure is an event beyond the control of a contractual 
party that could not have been prevented. 
The dispute has already caused Enron to freeze most of its investment plans 
in India and has also affected foreign investment in India's power sector. 
"This meeting has been called to update the lenders about the situation," the 
DPC spokesman said. 
The Business Standard newspaper reported that Maharashtra no longer intends 
to buy power produced by the second phase of the Dabhol project, which is 
nearing completion. The $1.86 billion addition will nearly triple the plant's 
output capacity to 2,184 MW. 
"As far as Maharashtra is concerned, phase two is as good as scrapped," the 
financial daily quoted the state chief minister Vilasrao Deshmukh as telling 
reporters in Bombay on Wednesday. 
The state government signed a contract in the mid-1990's to buy the plant's 
entire power output. But a rise in the cost of naphtha, the fuel currently 
used to power the plant, and a decline in the value of the Indian rupee 
against the dollar, has inflated the cost of the power produced by the Dabhol 
plant beyond the price expected at the time the contract. 
That has made the power produced by the Enron plant twice the cost of power 
produced by other suppliers in the state, fuelling popular and political 
pressure to scrap the contract. ($1=46.84 Indian rupees).

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Wessex Water parent plans major surgery
Sophie Barker

04/19/2001
The Daily Telegraph
Copyright (C) 2001 The Daily Telegraph; Source: World Reporter (TM)

WESSEX Water parent company Azurix has decided to break itself up, six months 
after the troubled American water group was taken private. 
The company, which is wholly owned by energy group Enron, has appointed 
investment bank JP Morgan to handle the break-up. Azurix is keen to sell its 
North and South American water interests and its German engineering business, 
Lurgi, first.
Wessex Water, widely considered as the jewel in Azurix's crown, would be put 
on the block at a later stage, probably in a year's time. 
Azurix hopes to attract foreign bidders for Wessex, which could act as a 
launch pad for limited consolidation in the west and south west of England, 
where three small water-only companies operate. 
However, several leading foreign utility groups such as Germany's RWE and 
French group Suez Lyonnaise des Eaux already own large water companies and 
are barred from making any further major acquisitions under competition 
rules. 
Enron took Azurix private at $7 ( pounds 4.92) a share last October - just 
over one third of the water company's $19 float price in 1998. 
Apart from the Bath-based Wessex Water, Azurix owns small water businesses in 
the United States and concessions in Latin America, including a $489m 
franchise to supply water services to Buenos Aires. It was widely considered 
to have overpaid for the Buenos Aires contract in 1999, which has since been 
hit by trouble, including a pollution incident. 
Azurix declined to comment.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Real-time pricing cuts both ways
Ryan Tate

04/19/2001
UPSIDE Today
Copyright (c) 2001 Upside Media Inc. All Rights Reserved.

Want to receive Executive Briefing in your email inbox? Subscribe to our free 
daily newsletter. 
Get-rich rip: Walk the tightrope of real-time pricing -- if you dare.
It's working for eBay (EBAY). The Internet auctioneer is making a bundle 
bringing together buyers and sellers in a vast -- and vastly profitable -- 
secondhand market. Now it's driving growth in another niche: simple 
discounting. 
Anonymously sourced news reports Wednesday had the company expanding its 
Half.com division to consumer electronics and sporting goods from books, 
music, movies and video games. Half.com sells goods for at least half their 
original retail price and, unlike Priceline (PCLN), does not let buyers bid 
on goods. Still, it allows a kind of macro-haggling, allowing manufacturers 
to respond when customers at large ignore their products. 
Having a harder time playing low-margin broker is Enron (ENE), a leading 
builder of bandwidth-trading systems. Bandwidth markets are a boon to buyers 
right now, when a capacity glut has pushed down prices, and the trading 
networks have accelerated that process. 
But sellers and brokers like Enron are hard-hit and Enron fired 20 percent of 
its broadband staff earlier this month. Not only is demand and trading volume 
down, but overhead is growing, too, as telecom companies slide and credit 
quality becomes an issue. 
MORNING NEWS, OVER EASY 
Did Salomon Smith Barney give bad advice? 
The New York Times reported that advisers from Salomon Smith Barney gave bad 
advice to Microsoft (MSFT) employees about what to do with their stock 
options, resulting in lost money and hefty tax bills. Among the more 
egregious allegations is that the brokerage, which is Microsoft's "preferred 
broker," advised workers to pay tax bills by turning their options into stock 
and then borrowing against the shares -- a high-risk practice generally 
employed by speculators and one that generates large interest payments for 
brokerages. 
Covisint names Street vet CEO 
Online auto-parts exchange Covisint named Wall Street veteran Kevin English 
as its CEO. English had worked as managing director at Credit Suisse First 
Boston and CEO at TheStreet.com (TSCM). The site was founded by GM (GM), Ford 
(F) and DaimlerChrysler (DCX), who until now had each contributed a co-CEO to 
the venture. Some in the auto industry were shocked that Covisint did not 
choose someone with more manufacturing experience. 
VeriSign to accept non-English symbols in domain names 
Master Internet registrar VeriSign (VRSN) said it would begin registering 
domain names with symbols used in languages in the Middle East, Southeast 
Asia and the Indian subcontinent. The .com, .net and .org top-level domains 
will be able to carry domains with hundreds of symbols from nearly two-dozen 
language scripts. 
EXTRA SHOTS 
Pink slips 
Hewlett-Packard (HWP) tripled its job cut plan to include 4,700 employees, or 
5 percent of its workforce, as international sales weakened and as the 
company worked to slim management. 
SportsLine (SPLN), the Web sports network, said it would fire 90 employees, 
or about 19 percent of its workforce, as it reported a widening first-quarter 
loss. 
Tellabs (TLAB), which makes switching equipment for phone networks, said it 
planned to cut 500 workers and leave vacant 1,100 open positions as spending 
on network equipment dwindles. 
Daily deals 
LoudEnergy , an online music company, will give an undisclosed sum for 
Riffage , a diversified digital music play. 
The European Union agreed to drop charges against Microsoft (MSFT) after the 
software company agreed to alter technology pacts with two European cable TV 
companies to give the companies more freedom to choose settop box technology. 
Gateswatch 
Bill Gates made about $2.8 billion in the big rally as Microsoft shares rose 
6 percent. The Upside.com 150, an unweighted, all-tech index, was up 8.5 
percent. The chief software architect was worth $47.2 billion at the end of 
trading, based on his company stock holdings.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 



		

		
		

		
		COMMODITIES & AGRICULTURE: Aluminium smelting faces meltdown in north-west 
US: Fears are growing that the BPA's strategy of conserving energy could 
drive industry from the region, writes Gillian O'Connor: Financial Times; Apr 
19, 2001
By GILLIAN O'CONNOR

		The Bonneville Power Administration, the US federal agency responsible for 
providing low-cost power to customers in the north-western US, appears to be 
in danger of killing the US aluminium smelting industry it helped to create 
more than 60 years ago. 
		Last week, Steve Wright, the BPA's acting administrator, presented the 
region's smelters - which account for one-quarter of total North American 
smelting capacity - with an unpalatable choice. 
		Either they agreed not to take power from the BPA for two years from October, 
when their new contracts start, or they faced trebled or quadrupled power 
prices under the new contracts. 
		Since the smelters would not be able to operate economically at such prices, 
either suggestion in effect means that the smelters will be out of business 
for two and a half years. 
		Mr Wright said the BPA did not intend to drive the smelters from their 
traditional base in the region - but analysts fear that this may be the 
result. 
		The continuing power crisis on the US west coast has meant that over the past 
year, roughly 90 per cent of the 1.6m tonnes a year smelting capacity in the 
north-west has been closed down, on a "temporary" basis. 
		The rising cost of power on the free market - which has surged from Dollars 
25 a megawatt hour to Dollars 300 - forced them to close some potlines. 
Moreover, the fact that the aluminium groups could make more money by 
reselling their low-cost BPA power than by using it to produce metal tempted 
them to close most of the remainder. 
		As the power crisis has tightened, the terms proposed by the BPA for the 
smelters' new five-year contracts have got steadily worse. 
		Last autumn, the BPA said it would cut the quantity of power available to 
1,500MW - about half the smelters' total requirements - and increase the 
price by around a third. 
		Then in January it said the price increase would be around 60 per cent 
overall, and possibly as much as 95 per cent in the first year of the new 
contracts. 
		Now the agency is talking of price increases of about 200-300 per cent, which 
suggests rates of between Dollars 70 and Dollars 90/MWh. 
		CRU, the independent analysts, has calculated that most smelters could not 
operate economically at above Dollars 40/MWh. 
		The North-west's power problems were triggered by last year's crisis in 
California, as shortages and ensuing high wholesale prices in the south 
sucked in power from other states. 
		But they have been exacerbated by the unusually low levels of winter rain and 
snow in the region, which has left reservoir levels unusually low. 
		The BPA generates around 3,000MW less power than the 11,000MW its customers 
want to buy. It can either plug the gap by buying in free-market power - thus 
raising the cost of its own - or persuade its customers to cut their demands. 
		Its strategy is to put the utilities, which supply individuals and small 
businesses, first. 
		The agency last week asked the utilities to cut usage by 5-10 per cent. The 
aluminium companies are being asked to go off-line for two years, saving the 
whole of the 1,500MW provisionally allotted to them. In effect, they are 
being told that power prices will be available, as long as they don't try to 
buy any. 
		The situation after October will be substantially worse for the smelters than 
it has been so far, because they will not be able to profit by re-selling BPA 
power. From October the BPA's proposed compensation amounts to little more 
than giving the aluminium companies enough money to pay their laid off 
workers. 
		In the long term, the BPA's strategy is to wean the smelters off BPA power 
altogether and encourage them to build alternative power sources. 
		Golden Northwest, which has two smelters in the area, recently agreed a 
Dollars 1.6m deal with the BPA under which the agency would build and operate 
a new gas-fired turbine plant. 
		McCook Metals has acquired a smelter from Alcoa and shut it down while it 
makes it more energy-efficient and develops a new turbine energy plant with 
Enron. 
		Assuming that enough additional energy capacity is built, West Coast power 
prices could ease in a couple of years. But analysts say that does not 
necessarily mean that aluminium companies will reopen all their idle 
capacity. 
		In the short term, the reduction in US aluminium output - it is now about 30 
per cent lower than at the start of 2000 - will merely balance the expected 
cuts in demand, and prevent the market swinging into surplus. 
		But "in 2002 and 2003 the market could be extremely tight", says Jim Lennon 
of Macquarie Equities. 
		Copyright: The Financial Times Limited
		
		




Nevada regulator seeks delay of $3.1 billion utility purchase

04/18/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

Copyright 2001. The Associated Press. All Rights Reserved.

LAS VEGAS (AP) - Nevada's top utilities regulator is asking the Securities 
and Exchange Commission to delay the proposed $3.1 billion sale of an Oregon 
utility to Nevada's Sierra Pacific Resources. 
Don Soderberg, chairman of the state Public Utilities Commission, said 
Tuesday he asked the federal agency to postpone action because of pending 
Nevada state legislation that would affect the deal.
Sierra Pacific agreed in late 1999 to purchase Portland, Ore.-based General 
Electric from Enron Corp., but has struggled to satisfy financial 
requirements that the SEC might impose. Sierra Pacific has until May 5 to 
complete the deal. 
Meanwhile, the Nevada state Assembly passed and the Senate amended 
legislation that would require PUC approval of all acquisitions after Jan. 1. 
The Legislature also is moving to halt the sale of all Nevada power 
generating plants and to scrap energy deregulation. 
Sierra Pacific Resources is the parent company of Sierra Pacific Power Co. in 
Reno and Nevada Power Co. in Las Vegas. Sierra Pacific had planned to use its 
sale of its generating stations to help finance the acquisition of General 
Electric in Oregon. 
Faye Andersen, company spokeswoman, said the utility opposes legislation that 
would require PUC approval of acquisitions.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


USA: Bandwidth trade struggles to gain footing.
By David Howard Sinkman

04/18/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW YORK, April 18 (Reuters) - Hailed as a new frontier for financial 
markets, bandwidth trading is struggling to get a footing as capacity piles 
up, prices fall and expectations float back to earth. 
A supply glut, especially on long distance routes between large cities, is 
dragging down prices and investment on new capacity has slowed considerably 
as demand flags. But trading will pick up in two to three years as the market 
matures, say analysts.
"There is nothing going on out there. The business is viable, but we are 
ahead of the curve," said Merrill Lynch analyst Donato Eassey. 
Bandwidth is the transmission capacity of an electronic line used to send 
data from one point to another, as on the Internet. The trading of bandwidth 
helps facilitates deals and hedges against risk. 
While the bandwidth market was all the rage the previous three years, this 
year has seen a fallout in the industry. 
Enron Corp., billed as the biggest bandwidth trader, said April 6 it would 
cut 20 percent of the jobs at its broadband unit because of slow demand for 
streaming media products to personal computers. 
"There will be some shake-out in demand, growth and pricing, but long-term 
demand and growth will be there," said Seth Libby, analyst at consulting firm 
The Yankee Group. 
MARKET FAILURES 
Market inefficiencies, such as unresolved issues like credit and market 
enforcement, have retarded trading. 
What is needed, according to San Francisco-based online exchange RateXchange 
Corp. , is a standardized contract that would provide the framework for 
commodity-like trading. 
Without such agreement, buyers and sellers of bandwidth need to agree on new 
terms for each transaction, said Michael Rose, RateXchange's director of 
business development. 
"We do not yet have a fully functioning market," said Rose. 
However, analysts liken today's trading market to the power market, which 
took more 10 years to get off the ground. 
"Today's market problems are just growing pains," said Rod Kuckro, managing 
editor of the Bandwidth Market Report, which is published by McGraw Hill Co. 
Kuckro sees growth picking up over the next three years. 
FALLOUT 
Market inefficiencies are not the only problem bandwidth trading faces. A 
supply glut has dragged down prices. 
Exact numbers are hard to come by in the bandwidth trading market. But 
industry experts say only about 10 percent, or even less, of existing fiber 
optic capacity for bandwidth is lit, or in use in the United States. 
"Obviously there is some capacity problems out there. And there will be 
funding problems going forward," said Credit Lyonnais Securities analyst 
Gordon Howald. 
It is now cheaper to buy or lease lines than to take the risk of digging in 
the ground and laying new lines. 
As a result companies are not investing as much in construction. For example, 
Enron slashed its capital spending on its fiber optic network to about $250 
million this year from an earlier estimated budget of $750 million. 
Demand for capacity has also fallen short of expectations. 
"The traditional bandwidth business plan read 'just build it and they will 
come,' but this did not pan out," said Libby. 
Consequently, today's market has more sellers than buyers. And as new players 
enter the market, like Global Crossing Ltd. and energy companies Dominion 
Resources and Dynegy Inc. , competition has heated up. 
But this might just be what the doctor ordered. 
As prices keep falling, carriers, who were reluctant to embrace bandwidth 
trading, are taking a long-look because of the increased efficiencies offered 
by trading. 
"Somewhat perversely, this fallout might hasten trading as companies are 
forced to compete more fiercely with new players," said Kuckro. 
LAST MILE HURDLE 
Think of driving from New York to Washington. The highway is mostly free of 
congestion, but traffic jams abound in the cities. 
The same holds true for bandwidth connections. Bottlenecks in the last mile 
have kept prices high, despite a glut in long-haul capacity and unused 
dark-fibers 
Bandwidth trading, which does not always provide a loop-to-loop service, 
suffers as a result. 
"Nobody want to buy long-haul capacity and then haggle and worry about the 
local loop," warns Seth Libby, who said he is unaware of any bandwidth trades 
that included the final link. 
However, analyst see the last mile problem as just another hurdle bandwidth 
trading will get around to deal with. 
"Somebody is going to step up to plate," said Libby. 
While analysts expect the majority of bandwidth deals to remain 
carrier-to-carrier, the trading market is expected to blossom as the kinks in 
the system get ironed out. 
"Everyone is dressed for a party, but there is no party to go to yet," said 
Donato Eassey. "But once we get the paths and the customers down the party 
starts."

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.