Telecommodities Indices

Posted: 12/1999

Continued Bandwidth Rate Leveling

RateXchange’s index methodology for U.S. east-west bandwidth rates reinforces the
market’s conclusion that prices are stabilizing. This is a repeat trend identified in the
past two issues of PHONE+, as traded contracts on average have remained stable (and even
slightly increased) over the past month.

The Real-Time Bandwidth Exchange*Revealed Price Index (RTBX*RPI), which tracks the
current weighted average price, is applied to DS-3 bandwidth for major U.S. east-west
routes in the accompanying chart for RateXchange trades since June 1998. For this period,
the average rate for a DS-3 has declined by 39 percent to $41,487 per month. Measuring the
RTBX*RPI since September, the October average rate for a DS-3 has not changed.

The RTBX*Revealed Forward Price Index (RTBX*RFP), which reveals prices the market sets
for future dates according to contract term commitments, also is applied to two critical
periods. The RFP*60 in May, when the RPI was $42,725, reveals the price the market was
betting on two months later to be $36,467. As we come close to the end of this term, the
discounted pricing seems more than reasonable. The data continues to push the window of
revealed price stability, supporting our assumption that the market may be creating
temporal arbitrage opportunities for U.S. east-west routes.

As we mentioned last month, the "No Temporal Arbitrage" principle simply
states, for a liquid bandwidth market, if the market bets future prices incorrectly, it
creates arbitrage opportunities. The price stabilization in U.S. east-west routes may
indicate that regional domestic routes have yet to create temporal arbitrage
opportunities. While the market is betting that U.S. east-west rates will not decline
significantly in the next year, regional rates have yet to stabilize.

The much-prophesized "bandwidth glut" has yet to be identified when looking
at rates as an indicator. Selling carriers now must speculate if their rate setting is as
reasonable today as it was in June 1998 and weigh the potential impact of new supply.

International termination rates may be used as a litmus for future bandwidth rate
setting, using Mexico rates since October 1998, when the rate was 12 cents. Currently,
Mexico rates have declined by 50 percent to 6 cents. Similar to the U.S. east-west
bandwidth market, Mexico rates have not changed September to October.

DS-3 Bandwidth RTBX*RPI and RTBX*RFP-360 Indices

Top International Spot Rates

The top international spot rates-per-minute cost of terminating a call from the
United States to a given country are the best offers to sell voice minutes capacity at
RateXchange as of Oct. 28, 1999. Information is provided to the publisher by RateXchange
and is believed to be accurate. RateXchange nor PHONE+ assume any liability for
inaccuracies or decisions made by readers based on the information.