A new world is emerging, in which bandwidth is traded as much as other commodities -- wheat, corn, and electricity, for example -- said Professor Samuel Chiu of Stanford University's Department of Management Science and Engineering. He led a workshop on the topic Monday at the Carriers World Congress here in Barcelona.

As telecommunications markets are deregulated, carriers need to learn how to manage risk in planning their purchase and leasing of bandwidth capacity, said Chiu. "If you're in a regulated world, there's not much risk. But if it's becoming a market, there's a risk of fluctuation." Carriers are developing futures markets for bandwidth in order to lock in a price, he said, much as bakers have long relied on commodities markets in order to maintain stable prices for flour and sugar, for example.

Risk management is also useful, he continued, in a field where technology advances or changing pricing models can result in unexpected changes in demand. He cited the examples of America Online Inc., which faced major capacity shortages after introducing fixed-price Internet access; the rapid emergence of a "bandwidth-hungry" application like Napster Inc.'s music downloading software; or a sudden shortage of capacity that could be caused by the failure of a communications satellite. By buying their capacity on a futures market he said, carriers can avoid sudden price spikes in such a scenario.

Emerging exchanges like Arbinet-thexchange Inc. and Band-X Ltd. are taking the role that long-established institutions like the Chicago Mercatile Exchange have filled for older commodities, said Chiu.

Some of the carriers represented at the workshop are actively involved in bandwidth exchanges of their own. Roger Hultman, product manager for capacity services at Sweden's Telia AB, said his company has been operating an IP (Internet Protocol) bandwidth clearinghouse for about a year. "As a member you have a way in the network, and then you are able to both offer and buy bandwidth," he said, adding that both ISPs (Internet service providers) and voice carriers can use the service. "I think it's growing and that it's a new type of service," said Hultman.

But others said the theory offered by Chiu still faces some technical challenges in practice. Sharon Crow, vice president for bandwidth trading of Williams Communications Group Inc., said the idea that bandwidth markets will develop the same way those for electric power, for instance, is an analogy with limits. "The difference is that the infrastructure in electricity is static -- you've essentially been making wires the same way for 100 years." But bandwidth is a complicated market, she said, with multiple types of fiber and cable, plus constant revolutions in technology.

Her company, an active player in the bandwidth commodities market, prefers to trade bandwidth over the counter, she said, dealing with known partners rather than the anonymity of a commodities exchange. "Being a carrier and having the type of customer base we have, it's very preferential for us to deal with someone we know is reliable," she said.

Arbinet-thexchange, in New York, can be reached at +1-917-320-2000, on online at http://www.thexchange.com/. Band-X, in London, is at +44-20-7932-8800 or http://www.band-x.com/.

Telia, in Stockholm, is at +46-8-713-6255 or http://www.telia.com/. Williams, in Tulsa, Oklahoma, is at +1-918-573-2000 or http://www.williams.com/.