[Seattle P-I: TeraBeam turns to lasers for better Net access]
seattlep-i.com
TeraBeam Networks, a 30-month-old Seattle start-up that until recently lurked undetected in a drab building near Interstate 5, was thrust into the national spotlight earlier this month when it landed Dan Hesse, a telecommunications star, as its chief executive.
Then, just this week, TeraBeam closed on $100 million in financing, one of the largest investments this year by venture capitalists in any Washington business.
Just who are these guys, and what are they up to?
In brief, they are 150 people who claim their technology can quickly and cheaply solve a nettlesome problem for urban businesses: providing high-capacity Internet access by bridging the gap between businesses' fast Ethernet networks and the nation's fast fiber-optic infrastructure.
They plan to do it by beaming lasers through office-building windows. TeraBeam says it will offer cost-competitive Internet services at up to 1 gigabit per second, with 99.99 percent reliability, over invisible "Wireless Fiber."
Sound far-fetched? Not to George Gilder, who runs an influential consultancy in Housatonic, Mass. Gilder rhapsodized in his March newsletter, "(Microwave) was mostly a default paradigm. But now that episode is over, and the TeraBeam era begins."
Having an era named after you can be hard to live up to. But TeraBeam founder, chairman and chief technology officer Greg Amadon is equal to the challenge.
"Our technology is very different, and potentially very disruptive," he said, meaning it changes technology in a profound way.
Investors buy TeraBeam's vision, too. This week's investment round came from venture capitalists and commercial partners including Softbank Venture Capital and Oakhill Venture Partners. TeraBeam also raised $21 million in two earlier rounds, partly from Softbank and Oakhill.
The technology that is tantalizing the investors entails beaming out encrypted data on lasers from a downtown hub that serves up to 24 customers in each of its four 90-degree arcs.
Hubs can be located up to 1.25 miles away from customers' buildings but must be in a direct line of sight from the customer's transceiver. That unit, about the diameter of a modern satellite TV dish, can sit on a window sill, pointing to the hub and connected to the customer's local area network by a cable.
The potential market is huge. The United States has roughly 700,000 office buildings housing 100 or more employees. But the data gap means few businesses in those buildings are enjoying the fruits of high-speed Internet service, features such as high-definition videoconferencing, training or the ability to quickly send and receive huge data files and immense amounts of Internet traffic.
All the last-mile alternatives to TeraBeam's technology are slower or harder to implement, more expensive, or all three, the company says.
By far the most common way to bridge the gap is through leased copper phone lines. Those can be expensive when the goal is to move large amounts of data -- up to $45,000 a month for 45 megabits per second (mbps) of Internet connectivity. That's roughly 1,000 times faster than the 56 kilobits per second (kbps) most of us get on our home computer modems. But it's about 22 times slower than the 1 gigabit per second (gbps) TeraBeam promises.
An alternative is to dig up city streets, extending fiber-optic pipes into and throughout office buildings. That is also expensive. Wiring a building with fiber-optic cable can cost as much as $300,000, estimates technologist George Gilder. It is also time-consuming and inconvenient.
The most popular alternative to fiber is microwave. It is far less expensive than fiber but reaches speeds of only 100 mbps, one-tenth the speed of TeraBeam.
TeraBeam's Amadon has built a staff led by a powerhouse new chief executive, Dan Hesse. A highly esteemed 23-year veteran of the telecommunications industry, Hesse, 46, earlier this month left AT&T Wireless Services, abandoning stock options worth more than $50 million for his position and a 5 percent stake in TeraBeam.
Amadon, 48, describes himself as "a serial entrepreneur who's had one success, one failure, and one company in the middle." The success, he says, was Cellular Technical Services Co., which offered fraud control for the cellular phone industry.
The failure was Virtual i/O Inc., a Seattle company he co-founded in 1993 to produce virtual-reality headsets when that technology was expected to boom.
But Amadon says four former investors in Virtual i/O, two of them former board members, are also investors in TeraBeam, a demonstration of their confidence in his vision.
The company's chief technologist for laser communications, John Schuster, was a founder of TeraBeam rival AstroTerra Corp.
The eight-man board of directors includes Gary Rieschel, the president of Softbank Venture Partners; Keith Grinstein, president of Nextel International; and Vern Fotheringham, chief executive of Bizilions.
The company has applied for two master patents, one on system technology including optical components and the hub and transceiver designs, the other on how the company creates its IP networks.
Skeptics, including some technology-agnostic carriers, rattle off a long list of challenges TeraBeam must meet.
Those include its own costs, limited demand for such high bandwidth, laser safety, the need for multiple partnerships with ISPs and Internet backbone providers, heavy competition from both wireless and other laser technologies, making the technology cost-competitive, and limits on the technology's range that include fog, dirty windows, window washers and flocks of birds.
Hesse says none of these are serious obstacles. The demand will be "very, very big," he says, just as the AT&T one-rate plan he created unleashed a huge demand no one thought existed.
As for safety, the powerful 5-watt laser's 1,550-nanometer wavelength is "so safe our equipment doesn't even have to carry warning labels, like those tiny laser pointers do," he said.
Hesse says birds flying through the beam will not interrupt the data flow, which continues until 85 percent of the beam is occluded. Heavy fog may do that, so the company will provide a wire-line backup. Thick reflective coatings, even when dirty, have not prevented the beam from penetrating windows, though window washers do, Hesse said.
As for cost, Hesse says, "We can build out entire city of Seattle, with about a dozen cells, for about what (wireless) for the entire city would cost, which would be $30 million to $40 million," Hesse said.
TeraBeam's business plan figures customers will pay $6,300 per month for 1 gbps and that TeraBeam's break-even point will come when eight customers sign on in each cell. A fully loaded cell, with 24 customers, will bring TeraBeam $151,000 in revenue per month.
The heart of the window sill units cost only $150 to build. Shares of Meade Instruments Corp., of Irvine, Calif., soared 77 percent last week when that company got the nod to build pieces of those units, for assembly at TeraBeam's 100-person research, development and manufacturing facility in Redmond.
Executive offices will move next month from Belltown into 25,000 square feet at Seventh Avenue and Bell Street.
Though the company has not announced partners yet, it will have "very close and strong relationships" with long-distance carriers, and will either wholesale or retail Internet connectivity through ISPs and major Internet backbones like Global Crossing and Level 3.
It will try to let businesses retain the current ISPs, he said. Voice services lie in the future. As a service provider, TeraBeam will compete with Teligent, WinStar, GTE and US West, he said.
Only one company is currently using TeraBeam's technology: Avenue A, a Seattle-based Internet advertising agency. Scott Lipsky, a co-founder and the chief technology officer at Agency A, said it provides the bandwidth the company requires, was easy to implement, and would be simple to extend if the company expands into another building.
He is so enamored that "it was a no-brainer" to invest in TeraBeam personally, Lipsky said.
Hesse has said the company will go public and will remain independent. "No one will be able to afford us," he said during a recent televised interview. |
