On VAN Interconnections, briefly…

Alan D. Wilensky, Analyst, bizQuirk Product Strategies

Interconnections are special. They are more than essential features of networked marketplaces – Interconnections create a connected industry’s total value. The profundity of this revelation is not new, nor are the issues related to the abuse of interconnections, transforming such sublime virtual pathways into implements of leverage in order to limit competition. These strategies have always been unmasked as being extremely shortsighted, limiting, and uninformed. Limiting a subscriber’s reach across competitive networks via interconnection subterfuge destabilizes end-user pricing, and limits the sum total scale of the  market for both incumbents and new entrants alike. Fresh competition brings diversity of services, equitable access, and keeps the incumbents on their toes. Losing the independent innovators who advance the state of the art  has always been a downer – we saw this in the AT&T era before the divestiture.

Interconnection abuses led to AT&T’s multi-decade monopoly – an era of artificially constrained services delivered in a  stultifying atmosphere of scarcity. A similar mindset marks current B2B IT services which some companies view as a pond stocked with a finite number of fish, and to others as a limitless ocean of whale-sized opportunities.

The missing element that distinguishes these two industry perspectives is innovation – an asset and attribute of a corporate persona that is unattainable by wielding the ostentatious power of Private Equity alone. Innovations is where the worldview of perceived scarcity, or conversely, that of abundance and limitless opportunities, diverge.

Even the most prestigious VAN clients can seem like unwitting captives held hostage behind a network’s routing border. Such artificial borders are created by executives who are far, far removed from their industry and the professionals they deign to serve.

This type of scarcity-based thinking is outmoded in our era of ubiquitous connectivity, where the costs of transporting data packets is becoming vanishingly inexpensive.

The best antidote to the malady of interconnections abuses, or routes arbitrage, is the establishment and strengthening of easily implemented and equitable interconnection standards applied and adopted by all VANs and specialty EDI networks. The collegial corps of EDI networks and B2B communications system operators who specialize in EDI will all benefit for what tomorrow’s analyst’s may call by the name, “e-commerce cloud communications’.

So, what are the issues at stake?

1) Refusals to carry EDI messages between consenting trading partners located on selected EDI networks’ (in the present instance, a refusal to interconnect the TGMS VAN with ECGrid®) on the same terms granted to other commerce networks, fundamentally distorts the e-commerce market.

2) Applying selective, uneven transit settlements to specific network providers dishonors a trading partner’s right to choose a provider freely among the EDI networks or service providers, as they see fit. Interconnection denials by any one influential network (grown by PE, not smarts) created an enduring legacy of limited consumer choices and delayed innovation during the AT&T era – we now have an identical situation at GXS holding the keys to the EDI Communications market.

3) Dishonoring the intrinsic importance of every EDI transaction. Each message traversing the supply chain is as important, regardless of network destination or origin, to buyers and sellers. Eventually, someone at the FCC will see the competition crippling actions perpetuated by GXS on the VAN market, and take action (we’ll keep briefing FCC Bureau Chiefs, Commissioners, and staff until they GET IT).

4) Allowing the creation and sustaining of a lopsided and harmful (to innovation) market dynamic via the transformation of VAN interconnections into instruments of competitive leverage, by exploiting the relationship between the big bad VAN’s, its  large corporate clients, and the trading partners who have freely chosen to transact on a service provider on Loren Data ECGrid. GXS does not want these service providers in the market, and they are attacking them through the proxy of Loren Data Corp’s connectivity. If this were a tariffed market as it should be for the larger VANs, this would not even be an issue, as interconnects (more accurately reciprocal traffic exchange agreements) would be sacrosanct and mandated.

To Loren Data Staff, and to its President, Todd Gould, the interconnection is just about sacred, and we have freely interconnected with many networks that had the minimum bona fides. The policy has worked well.

All of the foregoing are urgent in their own right, but the keystone issue remains Interconnection Denial, aka routing interference, i.e., using the prestige of one’s  network tenants (the big trading partners on TGMS) to influence and disadvantage an innovative competitor. Not good. Immoral in this author’s opinion, and also proven in the long-run (in numerous historical examples) to be counter productive to the interconnection arbitrageur, i.e., GXS. They (GXS) will eventually, if we are diligent and virtuous, draw the attention and ire of the DOJ back upon them, and the FCC and FTC will come back and realize that the supply chain communications business is a vital economic force and a piece of our national communications infrastructure, and these agencies will eventually act.

And, after all the weeping and gnashing of teeth over granting (I hate that word), lets say rather cooperating with Loren Data Corp to enable the exchange of trading partner transactions between TGMS and ECGrid? What will the world look like? It will be same world, just as GXS-TGMS reciprocally routes with Sterling and Easylink, they will route with Loren data Corps ECGrid – and GXS revenues will actually be positively impacted by this change in routing configuration.

GXS’ Epitaph as the largest B2B place sitter? “They attained rank with the purchasing power of others, and harbored no pride in the stewardship gained by a default. In an industry with unlimited potential,  no leadership was provided, nor a will to compete on their own merits”.

Loren Data Corp, 1/450th the size of GXS in all measures, yet in possession of a portfolio of technological firsts and distinguished engineering feats that have been placed in the service of the EDI Communications industry. “if only there were ten more like us”, says Todd Gould referring to his vision of a truly competitive EDI transit market – Todd is willing to license and otherwise enable his colleagues with ECGrid technology – because he knows that the innovations he is cooking up in the lab build atop his platform oriented architecture. Who ese, again, has an EDI Network management Web Services API? Who you say.,.,….not GXS that’s for sure.

GXS does not permit ECGrid message traffic to cross their boundary, in spite of the fact that the trading counter parties have chosen to be served by….. Service Providers on ECGrid. Well Over One Thousand Trading Partners, and a great deal of data, is being subjected to GXS  arbitrage, due to its management’s lack of industry stewardship. This does not speak well of the leadership of GXS Inc.. The Troubled TGMS VAN, subject to so much negative sentiment on Yahoo EDI-L, could be modernized overnight if GXS contracted Loren Data to run its EDI transit communications and interconnects like a professional communications company – Loren Data Corp’s handful of professional netops engineers are far more adept than GXS 3rd line support, who continually underperform analyst’s expectations since the Inovis acquisition.

What happened guys? I know what happened – profits have not scaled with the acquisitions and GXS cannot bring new thinking to market – whereas Loren Data Corp’s owner writes his own code, and innovates and delivers, at the speed he can code and debug. See a future article for the kind of partners Todd Gould is attracting to ECGrid and ECGridOS – thought-leaders all in EDI Tools and Software are flocking to work with Loren Data Corp.

For when an enterprise is no longer enterprising, when it is out of ideas, and its purchases – its acquisitions, fail to gel within the structure of an overheated and unwieldy organization, then the next step is often to resort to the less imaginative means of manipulating a networked marketplace.

In other words, blocking or cutting network pathways that are host to two mutually contracted trading parties is the action of a desperate and fearful, but over-sized actor, one who has run out of ideas, including the ideas of what to do next with the unspent Sovereign Capital of its Financiers.