Intel Invests in Optical Solutions
Optical Solutions' products combine voice, video, and data on an all-optical network that terminates at the customer premises. Its kit includes a transport system that takes voice, video, and data feeds from the service provider's central office and shuttles them as digital signals to the customer premises, where another device converts the optical signals to electrical signals compatible with the home's or business's existing phone, data, and TV wiring.
The company says it has raised $127 million in debt and equity financing since its inception. It employs 106 people and has 37 customer deployments so far, according to Chief Financial Officer James Stewart.
Stewart says it's a misconception that fiber-to-the-home (FTTH) technology is only useful to so-called greenfield carriers powering new housing developments. "About 60 percent of our customers are independent carriers and about 20 percent are small cities and municipalities," he says.
Optical Solutions competes with several PON vendors, not to mention other access technologies such as broadband wireless and cable (see PON Pushers Huff and Puff). Alcatel SA (NYSE: ALA; Paris: CGEP:PA) is the only vendor Stewart says his company sees in the field on a regular basis.
FTTH costs more to deploy than turning on existing cable or DSL broadband connections, but such deployments are seen as a large driver to PON technology, which uses passive splitters to deliver signals to multiple users on a fiber network (see Optical Access). FTTH installations are expected to climb to 315,000 homes passed in 2003 and between 800,000 and 1.4 million by 2004, according to one market research report from Render Vanderslice & Associates (see Home-Fiber Optimism).
"[Optical Solutions] has done reasonably well for that vintage of company," says Richard Mack, VP and general manager of KMI Corp.. Mack says the company was wise to focus on smaller, independent phone companies because, though there was a lot of RBOC interest in PON years ago, "they never did much about it."
It's not surprising that Intel Capital would hedge its access bets by investing in Optical Solutions. Intel Capital's other investments include wireless broadband gear maker Navini Networks Inc. and wholesale DSL provider New Edge Network Inc.
Optical Solutions' previous investors include Sprout Group, Coral Ventures, H.I.G. Capital, Boston Millennia Partners, Menlo Ventures, and St. Paul Venture Capital.
— Phil Harvey, Senior Editor, Light Reading