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Summary:
Whether or not we call it a commodity, bandwidth is just that. Once network speed and quality of service are constant, the bandwidth capacity that transports a specific packet is indistinguishable from any other bandwidth capacity. It's also perishable, just like seats on an airplane. Once the cabin door closes, all the empty seats on the plane have perished and spoiled. Similarly, any 'dark' or unutilized capacity on the carrier is also wasted.
As of today, India has an acute shortage of available bandwidth to cater to its rapidly burgeoning market requirements. Estimates reveal that the bandwidth poverty stood at around 69 per cent in 1995 when Internet services were launched and subsequently has increased to about 88 per cent now. However, as discussed in some detail later in the paper, this situation is likely to remedy itself. In fact, I would go so far as to say that this country would have sufficient bandwidth available within the next 5-7 years.
Given such a situation, it is my contention that bandwidth will be treated as a pure commodity even in the Indian markets, closely mirroring the practice in the US markets. In such an eventuality, there will be two major implications for the market players. The first is that the price structure of bandwidth will realign itself with market supply and demand situation, and bandwidth providers who have value added services would have competitive advantage over other players.
The other implication is that a scenario will emerge (which will be somewhat analogous to the developments in the energy sector) wherein bandwidth will be traded as a pure commodity and trading 'exchanges' will be created. The features of such an exchange and developments in the Western markets have been discussed in this paper.
The article has been subdivided in the following category:
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