February 24, 2001
QuantumBeam Plans Product
To Use Lasers to Connect Homes
By Cecile Gutscher
WSJ.com
LONDON -- If Andrew Parkes has his way, a little-known wireless technology developed by the Soviet government during the Cold War will make its way into consumers' homes next year.
Mr. Parkes, the chief executive of U.K. start-up QuantumBeam (www.quantumbeam.com ), is proposing a new solution to the "last mile" problem in data communications: linking consumers' homes to broadband networks using lasers.
The Cambridge-based spinout of technology consulting, development and investment organization Generics Group AG is one of several U.K. start-ups racing to deliver high-speed connections through laser beams to Europe before their U.S. competitors move in. But it's the only "free-space optics" firm targeting consumers.
Free-space optics uses light rather than radio waves to transmit infrastructure data, video and sound from one point to another. It uses infra-red light sent through the air -- without the use of optical fiber.
QuantumBeam aims to market individual free-space optics transmitters to consumers for less than $100, a fraction of what his rivals are charging businesses for their equipment. And they will be on the market by the end of next year, the company says.
During the Cold War, both U.S. and Soviet governments used this technology to communicate up to five kilometers, between ground and satellite stations in space, and over vast open spaces because - unlike radio waves - it was safe from eavesdropping.
No Drilling Needed
These days it has its advantages as a solution for linking homes and businesses to broadband networks: There's no drilling needed, and no need to apply for third-generation licenses.
"The beauty of it is it would bypass any need for licensing," says Jake Saunders, London-based analyst at Strategis Group.
Long dismissed by analysts as bizarre, gimmicky and possibly even dangerous, free-space optical technology was suddenly thrust into the limelight last year when Lucent Technologies Inc. and Nortel Networks Corp. took stakes in two competing U.S. start-ups, Seattle-based TeraBeam Networks Inc. (www.terabeam.com ) and San Diego-based AirFiber (www.airfiber.com ).
"It put free-range technologies on the map," Mr. Parkes says. And some believe its presence will spread quickly.
Strategis estimates that telecoms and cable companies developing fiber-optic networks will spend $2 billion on free-space optical equipment by 2005 -- up from a paltry $100 million in 2000.
Skeptical Public
But before it can become widespread, the developers of the technology will have to convince a skeptical public that it actually works and that it's safe. For all the investment dollars they have attracted, neither of the U.S. companies, TeraBeam and AirFiber, had actually sold a laser -- until very recently.
In late February, TeraBeam announced it had three customers in downtown Seattle -- in deals for an undisclosed sum. The company is far from its year-end goal of deploying its network throughout downtown Seattle and six other U.S. cities this year.
AirFiber is expected to launch commercial services this year, according to the Strategis Group.
One company that is up and running, and has managed to sell lasers, is PAV Data Systems Ltd., a small company in Northwest England. PAV (www.pavdata.co.uk ) seems to have quietly stolen the lead over its rivals without big-name investors. It has been selling its lasers since the mid-1990s. The company started turning a profit in 1995, one year after its inception. It has offices in Dubai in the United Arab Emirates and Kuala Lumpur, Malaysia, as well as in the U.K.
PAV says it has deployed 500 systems in Britain, including networks in universities, such as Loughborough University, where its lasers extended the university Internet to the campus cybernet café.
The laser links are being used by companies to hook into broadband networks, for local area networks and for point-to-point communications between offices in the same city.
PAV has just been hired by Italian phone company Infostrada SpA to link its broadband network to residential customers and small businesses in Rome, Milan, Florence, Naples and Turin. The deal is expected to bring the British company 250,000 pounds of revenue over the course of the next 12 months.
But companies outside Europe have been a lot more receptive to PAV's lasers than their European counterparts.
Overseas Customers
PAV booked 4.2 million pounds of revenue during the fiscal year ending in August 2000, and three-quarters of that stemmed from overseas customers in Africa and Asia. Their clients include mobile service providers Mobinil in Cairo and Vodacom in Johannesburg, Indian internet service provider Dishnet, and Abu Dhabi Oil & Gas Co. in the United Arab Emirates.
"There's a whole load of preconceived ideology about [free-space optics]," says Richard Redgrave, the company's marketing director, who is at pains to reassure wary companies. PAV often has to dispell misconceptions about its lasers from companies in its own backyard.
"There are no fried pigeons or blinded pedestrians," Mr. Redgrave asserts.
The lasers are limited to 100 milliwats, compared to up to 500 milliwats used by the military, and have been deemed eye-safe. "You can do more damage by looking directly at the sun than by looking at one of these things," he says.
The lasers have to meet public safety standards for electro-magnetic fields and power level restrictions set by the European Commission.
The systems beam light from rooftops and through windows. The units that PAV sells are about the size of a closed-circuit TV, and transmit data at the speed of 100 megabits per second.
TeraBeam and QuantumBeam say their lasers are ten times faster, relaying information at one gigabit per second.
The potential for upgrades is already built into the technology: splitting the light beam results in faster transmission speeds, according to independent analyst Jamie Mendelson of Strategis Group.
But free-space optics does have its drawbacks. For the lasers to work in cities where the connection can be lost during inclement weather, for example high winds that move buildings or fog that blocks out light, links have to be much shorter -- less than 500 meters -- with redundant or repeating back-up links to create a mesh of light.
'Begging for the Service'
The U.S. start-ups are already eyeing Europe as their next market.
"We've had Europeans in here just begging for the service," says Lou Gellos, spokesman for TeraBeam. TeraBeam chief executive Dan Hesse formerly ran AT&T Corp.'s wireless unit, and sees untapped demand for its services in Europe, where town planners are loathe to drill wires into old and historical buildings.
Another potential competitor for the European firms could be Optical Access, the result of a recent merger between San Diego-based AstroTerra and Israel-based Jolt, which also has its eye on the European market.
But back in Cambridge, in the U.K., QuantumBeam says it has a new approach. It has engineered a laser that fits in the window of residential buildings and that will cost each consumer less than $100. Instead of its competitors' big central laser that acts as a hub and costs $20,000 to buy and a further $10,000 to install, the Quantum model uses smaller lasers at the receiving end, and uses a pixilated mirror as a central hub. Each small laser, costing around $2,000, can theoretically transmit to 60 customers.
"The sweet spot for us is the residential market and small and medium-sized enterprises," Mr. Parkes says. QuantumBeam is currently negotiating with at least one manufacturer and plans to start launching its service internationally in late 2002. Mr. Parkes thinks one of the most lucrative markets could be China, where the local infrastructure is less developed and there are vast tracts of land without telecommunications networks.
The company's backers are U.S. microprocessor giant Intel Corp., which took a stake of slightly less than 15% in mid-November of last year and New York investment group Sandler Capital. More than half the company's shares are held by its 16 employees and parent company Generics.
Investment in free-space optics has so far come from large companies, rather than the public market. TeraBeam dismisses speculation that it was seeking to float as a way to boost its profile ahead of the launch of its commercial services. The company has $400 million in the bank following the investment from Lucent, which is ample to finance its rollout, says TeraBeam's Mr. Gellos.
PAV, though profitable, is also seeking strategic partnerships with industry players to keep up with innovations in the market and keep up with its rapidly expanding competitors. "We'll probably be seeking a strategic partnership with one of the big players this year," Mr. Redgrave says.
QuantumBeam, too, will need to allign itself with one or more partners to commercialize its technology. Telecommunications-equipment maker Alcatel SA is one of the few remaining big players that has yet to invest in the sector. Alcatel officials weren't immediately available for comment on their plans for investing in the sector, but both PAV and QuantumBeam say they would be keen to bring such a partner on board.
Write to Cecile Gutscher at cecile.gutscher@wsj.com
Contestants in the Free-Space Optics Race Company Country Product Bandwidth
AirFiber OptiMesh U.S. Network 622 Mbps
AstroTerra U.S.-Israeli TerraLink 10-155 Mbps
Canon U.S. DT-50 25-622 Mbps
CBL GmbH Germany Laser Link 2-155 Mbps
fSona Canada SONAbeam 155-622 Mbps
LightPointe U.S. Lightstream 20-622 Mbps
LSA Photonics U.S. SupraConnect/Magnum 155 Mbps
OrAccess Israel WDM on Air up to 622 Mbps
PAV Data U.K. Sky Series up to 270 Mbps
Plaintree Systems Canada FT Series 100 Mbps
Silcom Canada Freespace Series 10-155 Mbps
TeraBeam U.S. Fiberless Optical Network up to 1 Gbps
QuantumBeam U.K. n/a up to 1 Gbps
Source: Strategis Group and WSJ.com research |
