12/20/2010Interconnection Denial and Anti-Competitive Practices by GXS Inc. A Briefing for regulators and observers of the EDI communication industry by Alan D. Wilensky, Contributing Analyst, (412) 353-9269 abmadw@gmail.com

At Issue: Value Added Network InterconnectionsAt Issue: Competition Amidst ConsolidationThe Basic Principals Governing Competition Among Peer NetworksThe “Network Effect” - exploiting network scale to squelch competitionEDI’s deficient routing architecture is easily exploited by one bad actor with capital backingHierarchical routing plus agnostic access made the InternetEDI VANs: problematic routing policies, and traffic handling deficienciesAccelerated adoption of B2B automation stresses the VAN interconnect systemEDI’s closed paths - not good for competition in an Enterprise 2.0 worldCompetition: B2B Web Applications, Cloud Computing, and Enterprise 2.0Enterprise 2.0 and EDI - dancing while the matchmaker is under assaultSafeguarding alternative EDI innovators is the best strategy in the regulator’s playbookThe Simple RemedyAppendices

UK EDI Service Providers: NetEDIOpinions of market participants and evidence of interconnection refusals and procedural Interference by Tradanet UK:

Supporting Partial ChronologyInterconnection Denial Cases files: of ECGrid Network Operations

Where OFT and others erred in gauging the availability of communication alternativesUK Market Share Pie Chart

At Issue: Value Added Network Interconnections GXS Inc., the world’s largest provider of B2B EDI Communications services, is being challenged in an antitrust action by Loren Data Corp in the US Federal Courts. The suit seeks redress against GXS, who has denied peer interconnection to Loren Data Corp’s ECGrid® EDI Network. The civil action also extends to GXS carrying on a protracted campaign of procedural and tortious interference in Loren Data Corp’s operations. The company has informed regulators at USDOJ, FCC, FTC, and Great Britain’s OFT, regarding GXS practices that are deleterious to the EDI communications market.1 Typical of other industries that have suffered the travails of interconnection arbitrage2, we are again witness to an interconnection dependent market being adversely affected by a principal actor leveraging private capital in order to assemble large subscriber populations. GXS has gained an immense EDI user population weighted towards influential retailers and manufacturers occupying the top tier (buyers end) of their respective supply chains. Competitive VANs and specialized EDI service providers must interconnect with the GXS behemoth in order to serve an ever-expanding and eclectic mix of trading partners that are wholly dependent on these upstream commerce connections. In EDI, communications monopolies are not solely defined in numerical terms (network subscribers, market share, revenue, etc.), but by type, weight, and the influence of its connected trading parties. Conjoined with a large account pool, GXS’ monopoly power is actualized by its willingness to foreclose and arbitrage interconnections to competitive VANs. As GXS had no compunction in using such non-settlement peer interconnections to gain its market stature, it is a piquant irony that the permissive system of VAN interconnects, designed at its root to service the trading partners above all, is now being exploited by GXS to quash its competitors. The power conferred by the ownership of such massive user populations would make any network powerful, but access to GXS Networks has simply become indispensable. By expressing its willingness to sever or withhold peer interconnection to a small, competitive innovator such as Loren Data Corp, GXS has established a dangerous precedent into otherwise predictable EDI routing calculus. Being a viable competitor in the EDI Communications market means being interconnected with GXS-owned commerce networks, including: a) TGMS, b) Inovisworks, c) IE (nee-IBM), and d) Tradanet UK (nee-Freeway / Inovis). With its +50,000 account ID’s biased towards large retail and manufacturing buyers, the GXS hegemony seems to comport with the company’s collateral trumpeting itself as the ecommerce market share leader.

1EDI Communications are provided by Value Added Networks, Electronic Commerce Service Providers (web commerce applications on-demand), and Enterprise 2.0 SAAS (on-line accounting, inventory, and horizontal web apps). 2Interconnect Arbitrage: the opaque practice of granting and withholding peer access to influence a connected marketplace. The practice was perfected by AT&T, freight terminal operators, and petro-pipeline monopolies until the laws of common carriage were applied.

Standing silently at the nexus of this disputation are the commercial trading parties, customers of Loren Data Corp ECGrid and GXS TGMS (and the aforementioned) EDI transaction networks; although commonly overlooked amidst periodic network upheavals, and the tides of disruptive technology changes, their standing as parties engaged in mutual commerce, submitting communications with the expectation of delivery, should be considered sacrosanct. Blatant market manipulation via a hostile hegemony does not serve the purposes of free trading, or the evolution of innovative technologies. With a sober study of the issues at hand, the author is confident that concerned parties will agree that the concept of beneficial monopoly is undesirable and inherently toxic to technology driven markets. Safeguarding competition and preserving a climate of innovation within the B2B technology marketplace requires stern vigilance against the formation of reconstituted, AT&T style monopolies. The breaking of the EDI Communications industry’s practice of granting permissive, collegial interconnection serves no one, and threatens to cripple further growth of the sector. Industry stakeholders and regulators alike should work together to insure that the trading partners are not forgotten in the midst of this frothing controversy.

At Issue: Competition Amidst Consolidation

The issues in Loren Data Corp vs. GXS Inc. are encompassed by a few simple questions: 1) Is it legal for a company to grow itself into an indispensable private messaging facility, via the acquisition of immense subscriber populations gained via private equity, and then, proceed to summarily deny interconnections to otherwise qualified network operators? 2) Should a major EDI network operator offer selective non-settlement3 interconnection access to most competitors, while selectively refusing interconnection to others - such as Loren Data Corp or other established, legitimate EDI networks? Is there a rationale for defending against Sherman and / or Clayton act charges? What is the rationale of such a policy at the regulatory level? 3) What is good for the Electronic Commerce Market? Is it healthy or advisable to allow the squelching of the independent innovators, providers offering new technologies, and contemporary communications modalities? What do we get for allowing private capital to enable a laggard to roll up an industry? If one trading party to a transaction is homed to a competitive EDI network, is it reasonable for a GXS, or any large EDI Network, to summarily refuse the interconnection, when the incremental costs is near Zero? DO the trading partners have any standing whatsoever? 4) What will the EDI communications sector look like under a monopoly or duopoly? There has been considerable consolidation in the past five years, and the industry seems to be heading into a stratified tri-layer market - Mega VANs, mid-VANs, and marginal operators.

3uncompensated bi-directional Communications

5) Where do the eCommerce Service Providers (ECSPs) fit in? - These companies offer an on-demand model. They are the new power in supply chain automation, wielding more aggregate influence than any VAN. Paradoxically, service providers are reluctant to actualize their power, as they are transitionally dependent on one or another VAN for their temporal EDI communications. The Electronic Service Provider’s hesitancy to act prevents them from gaining the upper hand they deserve as established players in the B2B technology market. ECSP’s could dominate the ecommerce sector4, yet collectively play a conservative hand; a subliminal fear of GXS-instigated communications discontinuity as retaliation prevents these powerful companies from determining their own EDI communications destinies. The undeclared intentions of many ECSPs could sway the entire industry, including the outcome of the present antitrust case. Each service provider that makes a move from a VAN to ECGrid as a major client materially sends a message: there is a competitive alternative. The ECSPs are the prohibitive winners in the EDI market, but seem reluctant to assert their collective leadership.

The Two Litigants: Loren Data Corp, Incorporated in CA - Founded 1987, 5 Employees, 18,000 Trading Partners, 2 Data Centers, Branded as ECGird® Since 2001. Gross Revenue <2.0MM / year. No debt on books. GXS Inc., Incorporated in MD, with several registered entities, formerly GEIS, 1800 employees, multiple debt instruments and private equity obligations outstanding. GXS has acquired the IBM IE and Inovis VANs, and has at least 50,000 or more trading partners on its TGMS network. Gross Revenue ~400MM / year as of 2009.

The Basic Principals Governing Competition Among Peer Networks

The “Network Effect” - exploiting network scale to squelch competition

The rudimentary concept of ‘network effects’ is important in the case at hand5. Networks grown via accretion (buyouts) may eventually encompass such reach, including immense subscriber populations, that they become essential facilities. Without established ground-rules mediating access to these large networks, competition is hampered, or foreclosed upon altogether. Whether such rules are

4eCommerce service providers like SPS Commerce and DI Central have won the SME supplier market from GXS and the other top 4 VANs. This fact lies at the crux of Loren Data Corp’s interconnection woes. 5http://www.justice.gov/atr/public/speeches/3889.htm

enshrined in titled regulations, or via informal industry conventions, the goal should be to preserve the climate of competition and fair access. Regulators and industry leaders should work to preserve the positive attributes of connected networks (ability to reach subscribers on any network, ability to use any application), while guarding against the deleterious effects of monopolies exploiting network interconnection access. The cooperative practice of non-settlement peering as the predominant policy of interconnecting ISPs has functioned admirably during the Internet’s arc of spectacular growth; similarly, EDI networks (VANs) cooperated via collegial, non-settlement interconnection for the sake of maintaining the viability of a growing EDI communications market. Each of these markets mustered resources to create viable legacies of their assumed reliability. As the EDI market experiences its first antitrust action, we can discern a pattern from the often repeated history of connected industries. Network effects have played an integral role in influencing the competitive landscape6 in both markets, however, the differences in routing methodologies and access policies have created contrasting results.

EDI’s deficient routing architecture is easily exploited by one bad actor with capital backing

Architectural deficiencies in the EDI routing system made it easy for a dominant VAN (GXS, in this case) to leverage the network effects of rolling up the GEIS, IBM-IE, and Inovis VANs. A brief explanation regarding the differences between the hierarchical routing used by ISPs, and layer 7 explicit path routing of VANs will be instructive:

Hierarchical routing plus agnostic access made the Internet Internet providers, (backbone transit or ISPs), rely on a hierarchical routing system to provide subscribers with ubiquitous access to all resources on the global Internet. Furthermore, ISPs and Internet transit providers are attachment agnostic - this means that access policies are permissive, allowing any conforming operator, business, or systems (web servers, SMTP mail, FTP, VOIP) to attach and operate any service. If an application communicates via TCP/IP and higher level protocols (UDP, POP,) based and sort of well behaved, up to a point, no one cares who you are and what one is doing with such network access. The hierarchical routing system used for Internet transport is know as the Border Gateway Protocol7, (BGP), which allows TCP/IP (transport layer) messages to traverse routes offered by competitive transit providers and ISPs. In BGP, routes are propagated autonomously, and we rarely hear about

6Schazebach, DOJ, et al 7The Border Gateway Protocol (BGP) is the routing protocol used to exchange routing information across the Internet. BGP is the only protocol that is designed to deal with the Internet's scale, and the only protocol that allows multiple connections to unrelated routing domains.

interconnection denials or striving between ISPs and backbone connectivity providers. Peering controversy's do happen, though, and the FCC’s rule-making on network neutrality has made the news. These are exceptional circumstances, and the basic mechanism of replicable routes open to all conforming systems and subscribers has not been altered. The BGP routing system provides for multiple alternate message paths8. An agnostic connection model ensures that any service may connect via ISPs, backbone transit providers, or network exchange points, and freely operate any system while conforming to well published standards. There are exceptions, but these have to do with content specific providers requiring specialized traffic handling (video, high-performance, low latency, etc., and Content Delivery Networks). The most important application to run atop this mesh of hierarchical routes is the Domain Naming System (DNS), the largest distributed, standards-based directory service for converting names to network address numbers. DNS, BGP, and connection agnostic attachement policies have created an economically vibrant ecosystem of businesses, applications, and some would say, the magic of the Intenet.

EDI VANs: problematic routing policies, traffic handling deficiencies

EDI Networks (VANs and ECSPs) forgo hierarchical routing, instead opting for explicit path routing. Routing between VANs is archaic. Whereas Internet transport protocols allow for intermediate network hand-offs (typically under three, but sometimes more), EDI networks set routes as 1:1, i.e., one route for one interconnection. Each VAN is the guardian of its gateway borders, and subscriber IDs are not easily ported between providers (migrations of large user populations are monumentally problematic without API accessible directories). An informal system of explicit interconnection worked while there were few VANs serving early automated supply chains. File-based message transfers and a simple control protocol (X12.56) allowed VANs to hand off messages to each other. It seemed, on the surface, a workable system. For almost two decades, VANs grew their constituent communities of trading partners, expanded their catalogs of services, and kept interconnection politics off the table by granting interconnection access when the need was documented by any two mutual trading partners. The VANs knew that the bottom line was at stake, and played well together.

Accelerated adoption of B2B automation stresses the VAN interconnect system

While Interconnection issues were ironed out in the regulated (common carrier) markets, i.e., telecoms, freight, utilities, pipeline, etc., wholesale Internet transit services matured under the telecommunications

8http://www.bgp4.as/

reform act of 1996. This reform removed the oversight of ISP’s and transport providers from the purview of the FCC, until recently, where the final chapter on Network Neutrality has not (yet) been written. VANs currently operate free of common carrier regulations. Although EDI is a replacement for mail, couriers, and wire-line (telex) transactions, the establishment of VANs as agents of bailment has not been addressed. EDI messages are valuable, demand unique handling, and are concerned with tangible trade and the subsequent pecuniary losses due to mishandling or loss of messages in transit - all of these elements enter into the fundamental issues of common carriage, including bailment, and therefore merit consideration when a highly financed VAN exploits network effects acquired via purchase, as opposed to fair competition, innovation, and industry leadership. Supply chains depend on EDI for the transmission of B2B transactions valued in billions of dollars annually. The efficiencies gained are sought after by businesses who are implementing EDI compatible systems in increasing numbers. For many businesses, EDI is required to join a supply chains as a seller / supplier. The last decade’s twenty-fold increase in EDI enabled trading partners is at odds with the fragile, outdated routing architecture used by all of today’s VANs. A parenthetical note on AS2 direct-connect technology would be appropriate here. AS2 allows trading partners to eschew VANs in favor of non-routed, peer connections. However, AS2 has not addressed the central issues of ubiquitous access to diverse trading communities. As2’s adoption within certain industries (retailers, transoceanic shipping, etc.) is symptomatic of a long-term, fermenting trend of dissatisfaction with VANs, on many levels (pricing, poor support, etc.). It is interesting to note that the most vociferous proponents of AS2 are specialist administrators and engineers who maintain and operate large, closed, AS2 trading hubs. There is no such concomitant advocacy on the part of As2 end users. More can be said on the topic of AS2 being the EDI industry’s red herring9. A more fundamental question: Can As2’s attributes of autonomy and self-management adapt to the on-demand, infrastructure as a service market, sharing the beneficial features of VAN’s, i.e. as a workable component in the widely interconnected global commerce marketplace, and as ubiquitous as modern email systems? That’s a question worth answering. And, as it turns out, EDI adoption by small and medium enterprises (SME) exacerbates the fragile nature of an aging, primitive 1-1 routing structure. VANs have created a system ripe for anti-competitive abuse, as a default condition of non-innovation. In its Lawsuit, Loren Data Corp charges GXS with violating the Sherman and Clayton acts by intentionally exploiting weaknesses in the VAN routing and ID migration systems. The converging forces of 1) EDI market adoption, 2) bad routing / weak network architecture, and

9AS2 is a stand-alone, end user installed protocol adapter. There are few examples of successful add-on adapters that enjoyed wide popularity among the a diverse cohort of small and medium businesses.

3) entry of B2B electronic commerce service providers, have collided in a massive wreck. Trading partners, the end users of the network, cannot take their business elsewhere due to lack of ID portability10, and competitive EDI communications providers cannot be assured of access to the GXS leviathan. Competitive providers shall simply wither if GXS does not bless their Interconnect. That is precisely how AT&T cemented its monopoly - via the capital of J.P. Morgan and the technique of interconnection arbitrage.

EDI’s closed paths - not good for competition in an Enterprise 2.0 world

VANs are closed messaging systems working at the application layer, so while VANs can move to other transit providers, they retain control over their user’s EDI messaging traffic. Consolidation and rapid changes among a few key competitors offers little hope that VAN’s services repertoire will include directory services or ID portability anytime soon. This seemingly well ordered system is paid for dearly, at the cost of the trading partners suffering such built in deficiencies. The sub-par routing and lack of directory services have impeded end-user freedoms and delayed the adoption of new technologies. If the reader has doubts regarding these important issues, please consider the following: It was simply a matter of time until one VAN deployed sufficient capital to purchase control of the largest subscriber ID pool in the EDI industry, making the GXS bundle of VANs11 ‘must have’ routes. Agencies allowing GXS to persist in committing Interconnection arbitrage are establishing an industry-wide precedent for even more problematic behavior - when GXS has eliminated most alternative EDI providers.... Questions regarding intent are largely philosophical. However, any analyst or professional with a broad view of our industry can speak to the truth of the current situation:

1. GXS is now, in effect, a monopoly. The company’s decisions on interconnection determine the fates of its competitors - an enviable perch for an AT&T style monopoly of the 21st century.

2. GXS is a required route. The present VAN routing regime offers no alternatives. 3. GXS has purchased its user population with a bias towards the largest supply chain members,

becoming a numerically large, must-have network path for all smaller12 trading partners.4. GXS has periodically refused peer access to competitors, forcing paid transit or retail service

arrangements13. 5. Loren Data Corp, a network optimized for on-demand cloud commerce, is simply the latest,

most egregious example of GXS interconnection arbitrage. GXS is unhappy that Cloud

10Without great inconvenience - one or two ID’s, fine, an entire user population, very difficult.11TGMS, IE, Inovisworks and Tradanet, 12smaller in current EDI parlance could mean suppliers with gross revenues between 10M-250M.13The State of MI introduced legislation to prevent VAN interconnection refusals (by GXS) to sabotage the supply chains that are so import to the automotive industry.

Commerce Service Providers are competing successfully for mid market B2B EDI users.

6. Loren Data Corp ECGrid is the preferred network for certain on-demand commerce providers; GXS expresses its institutional displeasure via interconnection denial, degrading services, and interfering in ECGrid inter-network administrative operations.

7. The success of electronic commerce service providers has caused GXS to strike peremptorily at a communications network favored by these service providers, ECGrid, operated by Loren Data Corp.

Competition: B2B Web Applications, Cloud Computing, and Enterprise 2.0

Competition is essential in maintaining a vibrant climate of innovation, and for efficient, stable markets. Business that depend on electronic commerce should expect nothing less than for their EDI networks to adhere to pragmatic interconnection policies - such policies are fertile soil for marketplaces enhanced by network enabled commerce applications. The benefits of rational interconnection policies are manifold. EDI is but one important, central component of systems used to automate the supply chain and drive costs out of high volume transactions. Until a few short years ago, EDI systems were considered the exclusive province of the Fortune 1000. Now, thanks to on-demand B2B service providers, EDI communications are available in all sectors of the business community. Championed by companies like SPS Commerce, an ecommerce application-on-demand service provider, there is an alternative. The cloud truly benefits small businesses formerly priced out of B2B-EDI solutions under the old equation of expensive software joined to costly integration services.

Enterprise 2.0 and EDI - dancing while the matchmaker is under assault

Ubiquitous web access has fostered the growth of Enterprise 2.0 applications, such as Salesforce, Freshbooks, and many other on-demand variants of ERP, CRM, and accounting self-service applications. Finally, small, medium, and even tiny businesses can engage in automated ecommerce. Subtle differences may currently exist between service providers in the classic EDI supply chain and Enterprise 2.0 applications, but the divergences are cultural rather than substantive, centering on a trading community’s work flow models and methods of access. Some of the more ambitious web applications for supplier ecommerce, logistics, and inventory management, have tried to take the sting out of EDI implementations. The pitch may take the form of an “anti-VAN-anti-EDI” slant, but the common motivation is to quickly enable B2B data exchange between partners. To get there, we need to augment web application innovators with savvy messaging system innovators, i.e., network scientists. Transport level innovation has been dismally absent in the EDI industry, unfortunately. As a class, the Value Added Networks have focused almost entirely on the data translation and integration processes;

important as these are, translation is not as essential to the Enterprise 2.0 model. Interfacing with trading partners on VANs (with weeping and gnashing of teeth) is an adjunct service of modern trading hubs, not a central service. Until there is a new revelatory architecture embraced by classic B2B supply chains and the Enterprise 2.0 models alike, we will be at the mercy of a fragile and aging EDI routing architecture. The pain stems from a lack of credible communications science adept at enabling transactions across the entire spectrum of VANs, eCommerce Service Providers, and direct connections. The creation of such a services requires vision and research plus the taking on of substantial risks. If the new B2B innovators seeking anchor in Enterprise 2.0 are continually squeezed by a hostile GXS holding its network boundaries hostage, then a final sad chapter will be written in the history of electronic commerce, followed with an epilogue signed by Francisco Partners, LLC.

Safeguarding alternative EDI innovators is the best strategy in the regulator’s playbook The network that enabled leading-edge B2B providers is Loren Data Corp’s ECGrid. The mere existence of this robust competitor, delivering advanced communications, API’s, and tailored support for the B2B cloud operators, has kept the growing GXS MegaVAN barely in check, retarding the market’s surrender to a hostile monopoly. But, the survival of any small competitor is by no means assured. If GXS remains unfettered to arbitrage interconnections to its network, the game is over, and there are precious few to take up the gauntlet. The act of denying interconnections allows GXS to push powerful users (service providers) towards its own networks; when GXS delays inter-network administrative tasks (subscriber moves, verifications, etc.), this distorts the industry’s perception of those competitors that GXS wishes to disadvantage. Such is the unbalanced, unchallenged power of an actual monopoly.

The Simple Remedy

The author would suggest that regulators gauge the conduct of GXS in the market, disregarding any analysis pertaining to the previous GXS mergers; GXS is now large enough by any reasonable measure, and is presently harming competitors via interconnection arbitrage. An unbiased appraisal of GXS’ market power and the unaccountable size mismatch14 of the litigants should lead a critical observer to conclude that this case of interconnection denial centers on limiting the EDI industry’s natural momentum towards Web Commerce Applications and Enterprise 2.0. On-demand application providers may be a legitimate, competitive concern for an old-line EDI VAN like GXS competing as it does against cloud commerce B2B providers. Therefore, grants of interconnection access to an agile EDI backbone network whose aim is to serve these B2B clouds, is simply anathema.

14Why would a company with 400MM in revenue risk antitrust action by a plaintiff with less than 1MM in revenue?

However, the legal response would be for GXS to innovate, compete, and grant fair, peered, non-settlement interconnection to Loren Data Corp ECGrid or other bona fide EDI operators, and may the best networks win. After all, GXS currently grants interconnects to dozens of VANs that it deems nonthreatening15. As an important side note in the present case,while GXS is denying interconnection to ECGrid (a dedicated communications facility), Loren Data Corp does not otherwise compete in any other B2B related software or services, integration consulting, or other competitive sectors crossing GXS revenue lines. GXS Executives must earnestly believe that disadvantaging Loren Data Corp will preserve their grip on the B2B industry, otherwise, why else would this +400MM corporation instigate such egregious actions, if the threat was not so palpable? Such value judgements have no place in connection dependent markets where one participant has availed itself of hundreds of millions in private equity to buy its way to the top. Therefore, the plea is that Great Britain’s OFT, and our domestic FCC, FTC, and DOJ, implement stabilizing measures to ensure the vitality of the EDI Communications sector:

● Order fair interconnect access, ala the RIO16 model pioneered by ITU● Apply such standards to VANs holding or deploying reserve private sector equity● Consider defining size limits, measured by the number of trading partners, revenue, and trading

partner weighting in the supply chains they occupy.● Offer a period of voluntary compliance, reinforced by inspection and review. ● If the probationary networks violate, impose administrative requirements to order reasonable

interconnection policies.● Consider Facilitating Industry Interconnection Exchange Points, similar to CIX that allowed the

Internet to flourish

The author and principals of Loren Data Corp are available for comment on the above issues. Alan D. Wilensky, AnalystBizquirk412-353-9269abmadw@gmail.com

15GXS has granted interconnection to most VANs that are clones of its own model. That Loren Data ECGrid serves the Web Application sector as an interconnect management provider is uncomfortable to the ecommerce giant.16Reference Interconnect offer: a standardized policy governing fair network access policies that protect both sides of the interconnect.

Appendices

UK EDI Service Providers: NetEDI

Opinions of market participants and evidence of interconnection refusals and procedural Interference by Tradanet UK:

The following quote is from Marc Nelson, a principal of NetEDI of the UK. It has been edited for clarity. Mr. Nelson has submitted the unedited submission to OFT directly. The case is included here for reference.

NetEDI is an independent UK EDI service provider on the Loren Data Corp ECGrid Network. NetEDI is developing a new, advanced EDI Messaging Infrastructure to the UK market based on Loren Data Corp’s Programmable Network API. The availability of an API on ECGrid’s interconnection platform, lies at the root of a ten year campaign to keep Loren Data Corp locked out of the GXS TGMS and Tradanet Systems. ECGrid has native Interconnection to Inovisworks and the IBM legacy IE systems, two VANs that GXS now owns; unfortunately, GXS management refuses to “unify” the data pathways of all GXS networks. The refusal to unify its networks is not a technical challenge for GXS - it keeps these networks isolated from each other to better exploit its competitive power. NetEDI had dire concerns regarding the GXS/Inovis merger. NetEDI founder’s foretold the complete spectrum of deleterious effects that would occur as a result of GXS consolidation in the UK EDI market, as well operational abuses on Tradanet (the UK GXS VAN). As predicted by several independent UK EDI services providers (Transalis, Atlas, NetEDI, and others), GXS, at the behest of its executives in Gaithersburg MD, instituted not only monopolistic market controlling behaviors via interconnections arbitrage, but also via procedural interference in inter-network administrative procedures, procedural slow-downs, refusal to deal, and dissembling on competitive network contract status. The Principals of NetEDI are very experienced B2B technology professionals. An independent verification of the founder’s CV’s bears this out. The NetEDI founder’s selected Loren Data Corp ECGridOS as their preferred network infrastructure. NetEDI has been the victim of merciless procedural interference from GXS Tradanet. NetEDI’s main concern is with VAN communications infrastructure, not software or professional services. At issue are restrictions on interconnections and GXS’ handling of client requested migrations from a GXS to alternative VANs, and the cost of configuring connections to Tradanet and TGMS. GXS, in the present case, is interfering with message transit routed via Loren Data Corp ECGrid. The procedural interference is targeted at the inter-network relationships that are considered a normal, proforma part of any two EDI networks conducting business. By instigating this administrative sabotage, client work is delayed, and eventually, some clients cannot tolerate such procedural complications. The following list provides a brief overview of our main issues with the GXS/Inovis merger and subsequent running of the New Co:

1. Obstructive nature of the New Co in setting up Interconnects between GXS and other VAN’s.

2. Costs related to data transit to a GXS VANs – transferring interconnect data to other VAN’s is commonly termed non-settlement. ECGrid, the network used by NetEDI, is being effectively surcharged by forcing Loren Data Corp onto the then independent Inovis, which GXS acquired. GXS has placed Loren Data Corp on notice that interconnection will not be forthcoming, and that its two existing interconnects to IE

and Inovis works will be rolled into a unified commercial agreement. This is occurring while GXS grants non-settlement peering to most other VANs. It is precisely to bar companies, like NetEDI, from accessing the global EDI communications system (on an equal footing), that GXS is interfering in ECGrid Network operations, interconnection denial, and denying existing contractual agreements).

3. Costs for end-users to move away from a GXS VAN at the end of a contract. (Please note: A major UK EDI Service Provider was recently strong armed into a new contract by GXS under the implied threat of disconection or service interruption, we hope that this service provider takes our advice and contacts OFT).

Obstructive Nature of GXSThe concern is that GXS operates TGMS, Information Exchange, Tradanet and Inovisworks in the UK, wielding the power to restrict EDI interconnects to alternative providers (Loren Data and NetEDI) thus preventing them from competing on equal terms. Tradanet is the main VAN used by the major retailers in the UK (e.g. Tesco, John Lewis, Boots, Marks and Spencer's, etc). All of the suppliers allied with these top retailers need to communicate over Tradanet in order to trade freely. Although there are alternative VAN’s, the crux of the matter is that GXS may restrict trade by simply obstructing interconnections (arbitraging), or by acting slowly in executing interconnection, user initiated migrations, and other proforma administrative action items. GXS has a hold on the large retailers, while smaller EDI providers (including transaction networks like Loren/NetEDI) specialize in the smaller suppliers and buyers on the smaller end of the traditional supplier base. Small to mid suppliers need EDI as a condition of trading with the larger retailers. Therefore, these SME’s seek out more accessible and cost-effective alternatives via competitive EDI Service Providers - often therse innovators offer on-demand web based applications models. GXS holds the keys to accessing major retailers, and the ultimate survival of alternative networks has been placed in jeopardy by the leverage GXS has gained via access to private equity. Supplier are being directed (as a requirement) to trade electronically. These SME class naturally gravitate to alternative EDI providers, who then must gain interconnects to one or another GXS VAN. GXS obstructs and delays requests made by the users competitive network, (or institutes a punitive fee structure). From the perspective of a supplier, these setbacks are their new EDI providers fault, therefore, they play it safe, and switch to GXS, but pay a much higher price for the service. Does this comport with regulated services? No, but are there valid comparisons?. if a Vodafone restricted access to other mobile networks or classes of subscribers, and blocking inter-network connections in the midst of acquisitions – this is effectively what GXS is doing – restricting access to the largest and most powerful class of EDI enabled retailers, trading partners gained via access to private equity, and selectively blocked or allowed to other networks (classes of users) via the opaque calculus of interconnection denial (arbitraging). Client migrations from GXS to other networksWe have a specifically documented case whereby GXS intentionally obstructed a client from migrating from Tradanet UK to NetEDI. GXS Tradanet used delaying tactics, charged high penalties and additional fees to the migrating subscriber. The sum of these anti-competitive practices caused the end-user to reluctantly remain on Tradanet. A documented timeline of this specific case is attached, and there are others. This has had an enormous impact on NetEDI/Loren Data Corp’s reputation in the UK, and has restricted both company’s ability to compete with GXS - even if remedies are forthcoming via legal or regulatory means, it remains to be seen whether any EDI provider can recover its reputation sufficiently to regain market position, EDI being so crucial to line of business operations (as a subtle ‘taint’ remains). Costs of data transferGXS is the only EDI messaging service that has halted the inter-VAN system of permissive, collegial interconnections, charging for the transfer of data into their Network. Sterling, Easylink, and other VANs have readily, for years, interconnected with Loren Data Corp ECGrid. GXS, has, however, conducted a decade long campaign of denying interconnection to ECGrid, except for interconnects belonging to the two networks is has acquired: IBM IE, and Inovis, where Loren Data Corp ECGrid is bi-directionally peered. But, as GXS has intentionally not unified it’s acquired VANs, they remain as islands to ECGrid, and therefore, to NetEDI and other UK EDI Service providers desirous of alternative, innovative, and competitive EDI message transit services. GXS is the heavy weight in the UK market, holding key assets , i.e. major retailers who require suppliers to trade

electronically. Therefore the ultimate formula is quite simple from a GXS perspective: Have all partners on GXS, or on the VANs we preselect for interconnection. Opinions on the OFT Findings and Report on GXS / Inovis mergerThe OFT report states GXS and Inovis do not operate UK Data Centres; while true, this does not mean that the equivalent functions are not used within the UK. Geography simply does not figure prominently in messaging services, such EDI routing. What does matter is the size and weight of the connected clients residing on a particular VAN. The larger and more influential trading partners occupying top slots along the Supply Chain (e.g. Tesco), confers all the more leverage that GXS can wield, as they do, with a none-to-subtle hand. For reference the OFT report I am referring to is http://www.oft.gov.uk/shared_oft/mergers_ea02/2010/GXS-Inovis.pdf RE: Paragraph on data centres is quoted below for reference:43. The OFT considers that in this case it is possible that the geographic boundaries of the upstream market for EDI messaging infrastructure are wider than the geographic scope of the market for EDI messaging services. In particular, the OFT notes that neither GXS nor Inovis have data centres in the UK (nor indeed do some of their competitors such as Sterling Commerce). However, the OFT does not need to conclude as to the precise scope of the geographic market for EDI infrastructure as its competitive assessment does not change on any plausible candidate geographic market. Point 78 of the report also states that Freeway rented EDI messaging services from GXS, which is partly true, however, they also used BT messaging services as well. Apportioning subscriber services among multiple backbone networks is prudent, with the caveat of availability of interconnections, as discussed above. The use of multiple EDI backbone networks does nothing to solve migration issues. Point 95 concludes that costs related to switching EDI messaging providers are not particularly high and do not restrict competition; the attached document details a case where the converse is true – and there are several such cases (having occurred before and after the Inovis merger), awaiting the further solicitation of aggrieved parties by the various regulators. Point 109 in the OFT report above, statesThe OFT has no evidence that the post merger firm could credibly commit to refusing access to EDI infrastructure, because resellers could turn to other suppliers of EDI infrastructure. Indeed, the OFT notes that resellers [ ] multi-source their infrastructure from a number of providers. The above surmise is entirely mistaken. Although providers may avail of varying components of an EDI infrastructure via alternate or supplementary providers – i.e. mailboxes, translation systems, etc., the requirement for interconnection to the GXS VANs is absolute for gaining access to the large retailers and other top slotted trading partners homed on Tradanet, TGMS, IE, and Inovisworks. EDI infrastructure needs to be fully meshed at 1:1. This is exactly analogous to clients on one Mobile network not being able to connect to subscribers on another network. The restriction and architectural deficiencies confounds competition and damages smaller EDI providers in their ability to compete with the larger providers, and most notably, the one provider breaking the EDI industry’s long standing practice of granting collegial interconnections. Stated throughout the OFT report is the assumption that switching EDI communications providers is trivial. This assumption holds true only if all VAN’s follow consistent interconnection practices, no matter how informal. GXS is simply exploiting interconnection in order to influence the market#. The attached document illustrates the present example. Presently, only GXS charges for the privilege of subscriber migration. The overall industry wide practice of locking clients into contracts and pressuring to renew before the natural occurring end of agreements is symptomatic of an ailing industry on the verge of price war leading to unsupportable service levels. Finally Point 93 of the report states:“...some of the parties' competitors are marketing the ease with which firms can switch providers...”.

Although NetEDI is referenced (in a news item about the GXS / Inovis merger), stating the ease of switching, it is the commercial impact of the delaying and interfering tactics employed by GXS that cause such migrations to be troublesome or costly. In the referenced case, GXS was extraordinarily intransigent when called upon to assist in executing a customers wish to to migrate from GXS to ECGrid (NetEDI). NetEDI was mentioned in the report, more than once, to provide a justification that competition does exists in the UK EDI Communications services sector. In fact, NetEDI only began operations in April of 2010, as such, should probably not have been used as a competitive reference. NetEDI had only 5 customers at the time of the reports release!

Supporting Partial ChronologyClient: Savers Health and BeautyDate Migration initiated: 30th July 2010OverviewSavers were looking to migrate their EDI messaging service from Tradanet (GXS) over to ECGrid (Loren Data Corp.) with NetEDI acting as the UK Reseller of ECGrid Services. 30th July 2010 – Authorisation letter from Savers received and forwarded to GXS9th August 2010 – Email of authorisation to migrate sent by client (Savers) to GXS)10th August 2010 – Agreement (email) that GXS are ok with the migration12th August 2010 – Email from GXS saying they can’t locate the migration request13th August 2010 – Email from GXS: “Sorry for the late reply, I have checked your request to our EMEA Migrations Team and I was advised that the migration is scheduled to be on the 7th of September 2010. Should you have any more questions or clarifications, Kindly direct it to Sara Torrome, GXS AM handling this account.1st September 2010 – Email from GXS 1) “” Now stating that there is no commercial agreement between Tradanet and Loren Data.2) “” However the interconnects between Loren and Tradanet have been done before the merger – notably with a client called Helix. It also took GXS 3 weeks to send this email which delayed the process even further. Because of the delays and restrictions that GXS implemented the client had no choice but to stay with GXS for the time being, after initially agreeing to move over to Loren/NetEDI.

Interconnection Denial Cases files: of ECGrid Network Operations Additional instances of this file of administrative interference in expanded form is available Example: This is an excerpt from a long email thread demonstrating tradanet UK (GXS) denying a contractual route from Inovisworks (a GXS Company, which Loren ECGrid has a contract with), to ECGrid: From:Todd Gould [mailto:tgould@ld.com]Sent: Thursday, October 28, 2010 11:17 AMTo: Rob.Minns@gxs.comCc: awilensky@ld.com; john.staunton@inovis.com; shelleyd@ecgrid.com; customercare; Electronic_Trading@johnlewis.co.uk; andrius@qualita.co.uk; Crystal Kuczynski; Steve Brewer; lakeisha.jones@inovis.com; vicki.nielsen@gxs.comSubject: Re: Request EDI guides for John Lewis PLCImportance: High “Dear Mr. Minns:I appreciate that you are in a difficult position in regards to instructions are you being given from Gaithersburg on how to deal with Loren Data. Perhaps I can put this in a perspective that will work for both of us.We have a commercial contract for VAN services from Inovis. It contains no exclusions to any particular interconnects. It allows us transit to any interconnects that InovisWorks has, not only TGMS.If other Inovis customers have interconnect traffic with Tradanet, then we have a valid commercial contract for services to interconnect to Tradanet. Perhaps the path we were told does not exist and data should be routed another way. It makes little difference to me the path it takes within GXS as long as the data goes through between trading partners. What I need you to do is allow the interconnection between your Tradanet customers and your Inovis customer (us) to be started immediately. I strongly urge you to not block the valid EDI communications between your customers and not interfere with transaction of international commerce. The only people being hurt by these actions are your customers and their trading partners. I really don't believe that GXS is in business to prevent electronic commerce between trading partners.Thank you for taking care of this as quickly as possible.” Regards, Todd GouldPresidentLoren Data Corp.tgould@LD.com From:Rob.Minns@gxs.com [mailto:Rob.Minns@gxs.com]Sent: Thursday, October 28, 2010 6:14 AMTo: john.staunton@inovis.com; shelleyd@ecgrid.com; customercare@covalentworks.com; Electronic_Trading@johnlewis.co.ukCc: andrius@qualita.co.uk; crystalk@ecgrid.com; SBrewer@covalentworks.comSubject: Re: Request EDI guides for John Lewis PLC

John is correct. There is no commercial connection from Loren data into Inovis works and then interconnecting into Tradanet. We have explained this previously to Loren Data representatives. We formall ask Loren Data and their representatives not to make requests with this intent in mind and please don't set expectations with your prospective customers that it is a commercially available service.

Where OFT and others erred in gauging the availability of communication alternatives The OFT (and USA agencies) were unaware of the 1:1 routing authority of VANs. VANs are not IP pure transport systems, but are messaging systems at Layer 7, with routing boundaries that are inviolable, where alternatives simply do not exist. Therefore, EDI industry requires an Industry Exchange Point, otherwise known as a NAP (Network Access Point) to normalize access across VANs, provide ID portability to end-users, and to additionally insure fair competition for the smaller, specialized service providers17.

UK Market Share Pie Chart The market survey is being compiled from several sources natice to the UK EDI Communications market.

17EDI service providers distinguished from VANs, do not maintain their own, naively peered interconnects.