FREE SPACE OPTICS FIRMS GEAR UP TO COMPETE WITH FIBER

BOSTON -- Free space optics (FSO) equipment makers and service providers at Wireless Communications Assn. 2002 conference here Wed. said they expected last-mile connectivity from lasers to get boost from planned backhaul systems for cellular towers and interconnections for high- speed wireless LANs. Panelists largely agreed on high-speed data applications for FSO such as campuswide connections and extent to which technology was poised to compete against fiber. But officials of several companies differed on details such as expected market share, impact of pending FCC rules for fixed wireless service above 70 GHz and how to overcome current lack of residential demand for very high- speed access. “There’s certainly a market out there,” said Scott Searle, dir.-wireless technology, SG Cowen. “I think that the rollout related to free-space optics depends on the maturation of the technology and capacity from a cost and reliability standpoint.” He and others said reliability related to signal attenuation that systems could suffer in fog simply pointed to limitations of some addressable markets.

Several FSO developers remained optimistic about potential consumer demand, despite economic downturn. David Britz, principal technical staff member for FSO communications at AT&T, cited current generation of college students that were “sated” with high-speed Internet access from cable modems and DSL. “When they leave college and become employed, they will drive the market over the next 5 years,” he said. “This is just the beginning of the wave.” On residential access side, fiber-to-curb technology won’t reach consumers for “a very, very long time,” Britz said. That last 100 m to home access point will be critical market for FSO operators, he said. Several executives also touted potential viability of hybrid systems that would combine millimeter wave technology at 60 GHz with FSO to increase range and reliability of system. But others raised concerns about impact on FSO when fixed wireless systems began operating above 70 GHz. FCC approved notice of proposed rulemaking earlier this month that would open 3 bands above 70 GHz to nongovt. uses for first time. “Once 70-80 GHz opens up, it will be difficult for free-space optics to be a viable technology in the very long term,” said Scott Bloom, chief technology officer (CTO) of AirFiber. Others disagreed, saying technology above 70 GHz could remove some momentum from FSO market but wouldn’t displace it.

Eric Korevaar, CTO of Optical Access, cautioned that analyst estimates of potential FSO market had been overblown in some cases. “A lot more money has been spent on product development than has been attained revenue-wise,” he said, and equipment still is ready for applications such as wireless LAN-to-LAN links. Korevaar said his own estimates for market size for FSO had been $10-$30 million per year between 2001 and 2003. By contrast, he said, Strategis Group has projected that range for those years would be $118-$425 million, curving out to $2 billion in 2006. While he said he agreed market existed for campus environments such as providing wireless data links between buildings on hospital grounds, he didn’t think same level of interest would be shown by cellular tower operators for backhaul because new 3G towers would be too far apart. He and others said big issue for FSO in consumer broadband market was whether technology could match prices of other forms of access. Stephen Mecherle, chief scientist of fSONA Communications and chmn. of Free Space Optical Alliance, took more bullish view. He said FSO was only wireless technology to provide same benefits as fiber and equipment typically yielded return on investment in 3-6 months.

In countries such as Mexico, fixed wireless access is poised for growth because of lack of regulatory restrictions over incumbent Telmex, said Bruce Wells, engineering dir. of Avantel, joint venture of WorldCom and CitiBank in Mexico. Existing regulatory structure makes purchasing access from incumbent “fairly cost prohibitive,” he said. While that makes fixed wireless access more compelling, Mexico City has major frequency congestion, with most rooftops sporting multiple antennas, he said. Avantel has been debating strategy of building network and then attracting customers versus expanding infrastructure as demand increases, he said. Venture now is analyzing buildings in which it has large customer penetration. Point is to analyze economics of building small node and using FSO high-speed pipe to handle existing customers. That would free up capital expenditures for radios that could be used elsewhere and would relieve some frequency congestion in larger cities, he said. Avantel also is “toying with the idea” of creating SONET ring in the sky that would use FSO as transport and switching at synchronous digital hierarchy transmission level. Wells said that would give Avantel ability to start addressing areas in which it has interest but hasn’t been able to reach market with other technology.

John Mazur, analyst with Gartner Dataquest, cautioned industry to expect concerns to be raised by incumbents over issues such as laser safety and reliability of weather conditions. “We expect the incumbents to start a grass-roots campaign to protect their turf,” he said. Laser safety is “absolutely, positively critical,” he said. “It would behoove carriers in a metro market to kind of grease the skids with the local government to make sure that issue is not raised as a major concern.” Industry has largely defended concerns over eye safety, particularly for newer systems that use higher wavelengths.

Mazur stressed importance of 99.999% reliability for carrier-class equipment. But several developers said so- called five-9 reliability wasn’t what all customers wanted. TeraBeam Lasercom CEO John Schuster said: “We have found that customers are happy with three-9 reliability if it’s real because they know they aren’t getting five-9s from the incumbents.” TeraBeam is both equipment manufacturer and service provider, with FSO systems now operating in Seattle, Denver, Dallas, L.A.

Potential markets for FSO technology include growing number of landlords interested in offering residential broadband access to multitenant dwellings, Mazur said. Others include backhaul of cellular, especially with 3G systems in which more cell sites are required. Bad news for FSO sector on cell site construction is that 3G rollout has been slower than expected, SG Cowen’s Searle said. Good news is that in 2003, next-generation networks will launch in greater numbers, he said. “Right now what we're hearing is that there’s a tremendous amount of interest from mobile carriers in exploring this,” he said.

Consumer demand was cited repeatedly as challenge. “It’s very clear that demand didn’t go away,” AT&T’s Britz said. “The real question to ask is where are expansions in bandwidth going to be occurring.”