Fw: Re: IP: Fw: Re: enron bandwith trading

[David Farber <dfarber () earthlink net>]

-----Original Message-----
From: "Mike O'Dell" <mo () ccr org>
Date: Sat, 12 Jan 2002 12:30:02 
To: farber () cis upenn edu
Subject: Re: IP: Fw: Re: enron bandwith trading


Charles omitted one additional problem from 
his list of Enron's problems:

        (4) "Bandwidth Trading" is a largely absurd notion
            that could only be created by financiers who
            define their understanding of anything from the
            standpoint of "monetization", and who have no
            notion of how bandwidth is actually used in building
            real networks.

the problem is seldom "getting bandwidth" - the biggest
problem is usually getting to it where ever it exists.
the fiber comes out of the ground in only so many places
and they are seldom where you need it, so you have to
get from where you are to where it is, which involves
building or buying local fiber tails, etc, etc.

there is one other problem with Enron's fundamental business
model.  They essentially declared themselves to be middle-men
who would take a piece of the action from inserting themselves
into the middle of every transaction.  

the problem is that the margin in a deal is pretty-much fixed
due to market price competition, when you divide it up between
more entities who are trying to make a profit, they all have
a harder time surviving. 

or more likely, the price charged to the end user goes up to
cover everyone's margin requirements.

so one tends to destablize the participants in a 
previously-successful competitive environment, and 
the other raises prices to the end user.

what part of this is am i supposed to enjoy?

        cheers,
        -mo


(Sent from Dave's Blackberry.)

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