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STEP SEVEN: Use Machines To Make Extreme Profits From Extreme Frequency |  STEP SIX: Flatten Communications Costs With Cable Connections |  STEP FIVE: Co-locate. Even With Your Competitor. |  STEP FOUR: Time is Money. Make Millions From Every Millisecond |  STEP THREE: Spend Green, Go Green, Save Green |  STEP TWO: Hands Off: Automating Reconciliation Can Dramatically Lower Costs |  STEP ONE: The 70 Percent Solution: Cut Costs Upfront and As You Go, With Cloud Computing |  Seven-Step Survival Guide: How to Thrive in Tough Times

STEP SIX: Flatten Communications Costs With Cable Connections

July 6, 2009
By Thomas Hoffman

This could be big, as Verizon might put it.

Some Wall Street firms are cutting costs by taking their data traffic from companies that traditionally supplied communication services such as Verizon Business and AT&T to companies that traditionally supplied television services, including Cablevision Systems Corp. and Time Warner Cable.

Cablevision, for instance, has been marketing fiber-based communication services to New York area firms with a service it calls Optimum Lightpath. Just as in cable TV, the company offers services on flat-rate billing structures, according to Mike Sevret, vice president of sales. That means Jericho, N.Y.-based Optimum Lightpath can save securities firms as much as 50% off their broadband, voice, video and other communications costs through a flat-rate billing structure. He claims most regional phone companies and long-distance carriers don't offer flat rates.

"It's a budget-able product where the costs will not change during the life of the service," says Sevret.

"A lot of our competitors who don't truly own their backbones or last mile footprints can't offer the same type of savings," he adds.

Sevret would not provide specific prices, however, for Lightpath's 1 gigabit and 10 gigabit Ethernet services.

For its part, Time Warner Cable, which provides fiber optic connections to Barclays, Citigroup and J.P. Morgan Chase, claims that most of its customers are seeing 20% or greater annual communications cost savings by switching to cable Ethernet connections, says Ken Fitzpatrick, president of Time Warner Business Class in New York.

Brian Washburn, an analyst at Current Analysis, a competitive analysis research firm in Sterling, VA, says his company's financial services customers seem less interested in obtaining cost savings than in the "ease of doing business" with companies such as Optimum Lightpath and Time Warner Cable.

Most communications customers "have to go through a process to negotiate (with carriers) before you get a price quote," says Washburn. By contrast, Optimum Lightpath is "straightforward with their pricing. It's a really attractive way of doing business."

Rob Kirchberger, who leads one of AT&T's financial services sales teams in New York, said that while securities industry clients are "clearly" looking to reduce their costs and improve efficiencies through their use of technology, AT&T is "winning substantial services (deals) every single day or every week across the spectrum of financial services firms." He added that the company counts every member of the Fortune 1000 among its clients.

Broker-dealers, hedge funds and other types of securities firms are most interested in replacing their Internet Protocol connections with a communications bridging technology known as Layer 2 Ethernet. Such links are generally less expensive, more efficient and allow the use of such communication protocols as IBM's System Network Architecture. In turn, that can give firms greater control the execution of trades, back office operations and messages with customers, says Washburn.

One of the key benefits of Layer 2 Ethernet connections is speed and reliability, says Sevret.

Yet he points to a new customer that was building a data center in New Jersey who even wanted a Layer 1 fiber optic connection between its facilities.

That would provide the algorithmic trading shop in New York with "extremely aggressive microsecond latency" for trade execution. A Layer 1 link is a physical link, the fastest possible, as if you turned on a hose.

Washburn says one of his clients, a large New York-based financial information services firm, recently contracted with Optimum Lightpath to take advantage of faster provisioning and time-to-market with its market data services by utilizing the company's low latency metro-area Ethernet connection.

The client told Washburn that its decision to go with Optimum Lightpath "is about knowing where the financial services industry is going and shaving microseconds off delivery."

Time Warner Cable's Fitzpatrick claims that securities firms which have adopted its Ethernet services haven't encountered any technical integration issues since its network runs on the same type of gear utilized by Verizon Business and other carriers.

Plus, cable communications providers such as Time Warner Cable are certified by the Metro Ethernet Forum, a global industry alliance of more than 150 telecommunications companies which sets equipment standards.