[BETA] Fortnightly

To listen to some, EDI stands for "Everybody's Doing It." But there's more to it than that. The natural gas market is not simply about electronic bulletin boards (EBBs) or electronic data interchange (EDI), which reconciles potentially inconsistent data, protocols, and trading customs among pipelines, shippers, distributors, and end users. Instead, it should be about solutions (em solutions that work across regions, across enterprises.

EDI is tough. It's a pain in the neck. Every pipeline is different. Every trading partner is different. Within those differences lie some meaningful and preposterous anomalies. As a distributor of market data, we at TransCapacity must deal with all of them.

The 80 percent of players that present data in a more or less standardized format don't present any problem. The problem comes from the remaining 20 percent. For every inconsistency, no matter how small, we must capture and dispose of the data in a organized fashion. It is our job in the EDI business to be the experts on all the little dribs and drabs of the gas pipeline business. After all, the point of the Gas Industry Standards Board (GISB) (em and the point of EDI (em is to deliver information to shippers, traders, marketers, buyers, and sellers in the form they need. It is our job to manage both ends (em the minutia in the data, and the big changes in the markets.

We estimate that gas industry players spend over 750,000 man-hours each month on nominations, largely because the system requires three separate entries for each transaction: Once into your own system, once to the pipeline as a nomination, and once from the pipeline back into your own system as a confirmation of scheduled volumes. If each key entry takes the same amount of time, we're talking about a half-million (two-thirds of the total effort) in wasted hours of work per month. Imagine what that means when you add in allocations and billing reconciliation. The work is staggering.

At most companies, these tasks represent up to 11 weeks per year of worker time (em time that can and ought to be freed up for those that perform nominations scheduling and related work.

A Parable: Natural Gas, Video, and Open Access

In 1979 VHS and Beta emerged as competing technologies for recording and playback in the videocassette recorder (VCR) business. Beta was backed by Sony, then the biggest, most vertically integrated and concentrated electronics firm in the world. VHS drew its backing from JVC, a small Korean upstart that was by all accounts no match for Sony. The Wall Street Journal reported that JVC had agreed to license its technology to all comers. (JVC agreed to license both the tape and the recording technology to everyone willing to sign a contract.) The Journal heralded the JVC strategy as the desperate act of a desperate company (em an act clearly signaling the eventual victory of Sony's superior Beta technology.

Wrong.

What everyone missed was that the content providers were driving the market. That segment, the movie studios and the creative types, felt reluctant to fall