CNS Responds to PrimeXM Statement
Posted by Barry Bahrami on 19 June 2014 12:53 PM
NOTE: The document below is from 2014. The CNS response to this current PXM episode can be found here.
I'm not sure how PrimeXM could possibly be subsidizing any VPS company. In our case, the opposite is true. We have been providing PrimeXM with free ON NET access to thousands of CNS traders for some time - at our own expense. This has made PrimeXM more attractive to end brokers - PrimeXM customers - who have mutual subscribers with CNS. Certainly there are many traders who would not be with any PrimeXM broker if it was not for CNS. If Mr. Diethelm can't understand that then maybe his brokers will help him grasp it. At the end of the day, he is degrading their quality of service too while giving a competitive advantage to our other connected brokers at the same time.
If you look at the Comcast/Netflix dispute, it was the ISP connecting all the end-users to the content provider that demanded - and received - a fee from the content provider. In this case, I believe Mr. Diethelm got it backwards. It is CNS who is bringing thousands of traders to PrimeXM, not the other way around.
Mr. Diethelm has told me that their hosting end has made losses and they need to break even. While I can understand that, I don't believe he fully understands his own business and how this technology works. We do not charge brokers to connect to ON NET because it makes good business sense – but it is very costly.
He also does not understand that in his business, hosting may be a loss leader. That is, they would not have the back-end – from which they are likely making hundreds of thousands of dollars each month for a decent sized broker - if it were not for the hosting. Instead, Mr. Diethelm wants to split it and somehow make the hosting side pay for itself. If real world business could only be so easy…. It would be like KFC charging for napkins.
Instead of saving money during a cash crunch, Mr. Diethelm seems determined to waste it. By cutting the free connection PrimeXM is receiving from CNS, IP traffic will simply route around to their paid Internet interfaces - increasing their Internet transit costs. On the other hand, our network will directly connect to nearly 5000 ISP's and corporate networks by end of this month and so all he is really doing is saving CNS money on x-connect fees and shooting himself in the foot at the same time. If there is a complaint to be levied regarding networking costs, it should be coming from us. The cost of operating our network likely dwarfs what PrimeXM pays to operate theirs.
Mr. Diethelm has the real-world model all backwards and I don't believe any VPS hosting provider will agree to pay these fees. Certainly any new fees will need to be covered by the end-traders and I'm not willing to do that. It would be wrong. At this point, CNS will dispute a new fee from PrimeXM to any currently connected VPS provider. It would set a very bad precedent in which the only possible outcome is higher fees to end-traders. We are just not willing to go down that road.
I just read Mr. Swann's response in its entirety. Our previous response only addressed the points in the article. I should address a couple points:
Despite their claims, I don't believe any VPS provider has agreed to their fee. We also do not pay fees for any of our other x-connects to other providers. They obviously appreciate the mutual business we bring each other.
When Mr. Diethelm contacted me that morning, he informed me that they would be cutting the x-connects this coming weekend. Clearly - we have an obligation to inform our subscribers and partner brokers, most especially after his reckless reply of a "disconnect this weekend". It demonstrates some concerning and unpredictable behavior. And so I believe informing our subscribers and partner brokers was the proper course of action. (1-1.5ms is a lot to some traders.)
I can post the entire transcript of our email conversation if it becomes necessary. I prefer they rescind the decision so we can all get on with more productive business.
Finally - as it relates to support: Really the only time CNS Support needs to contact PrimeXM is due to a technical issue on their side. It's usually initiated by a trader with one of their brokers. They should be happy to resolve their issues. The fact is our connections save PrimeXM money and bring in traffic that generates revenue for them. Trades start at the traders terminal, not PrimeXM. PrimeXM should welcome the connectivity we provide.
The moment any VPS hosting company agrees to pay fees to brokers or companies like PrimeXM is when VPS hosting costs for end-traders will begin rising to no end.
If PrimeXM is allowed to collect a fee, others will also demand fees. VPS costs could rise an additional $15/month very quickly and then continue to trickle up after that indefinitely. It will make no difference which hosting company as it will be an industry trend. And finally – it’s morally wrong. PrimeXM is trying to double dip at the expense of traders. Their brokers should be very angry.