New Life for FSO?

Free-space optics, technology that uses lasers to connect buildings to fiber at high data rates, is once again getting some publicity. Earlier this week, Terabeam Corp., one of the most hyped startups in this market, announced its largest deployment of FSO gear to date. And over the past couple of months several other FSO startups have announced new products, funding, and partnerships.

On Monday, Terabeam announced that Great Wall Broadband Network Service Co. Ltd. (GWBN), an Internet service provider in China, will deploy 250 of its FSO products in 15 cities throughout China over the next two years (see Terabeam Climbs the Great Wall). Details of the deal weren’t released, but Dan Hesse, Terabeam’s CEO, says that this is the biggest contract the company has won to date. Depending on which products actually get deployed in the rollout, Hesse estimates the contract to be worth a minimum of $5 million, small by most carrier standards, but a significant start for a niche technology.

Although, Terabeam maintains it is still focused on the U.S. carrier market, it says that Asia is its biggest opportunity internationally. In March it announced a deal with China Railcom Co. Ltd. to outfit its network with about 50 FSO links (see China Railcom Deploys Terabeam FSO). It has also won a few unnamed deals in Japan, says Hesse.

Terabeam isn’t the only FSO startup making noise lately. There's been a flurry of announcements from FSO vendors over the past six months.

On July 2, Laserbit Communications Corp. announced it had raised an additional $7 million in its third round of funding. Dominion Lasercom Inc., LightPointe Communications Inc., and Sunflower Technologies Ltd. have all announced reseller partnerships.

And Dominion, LightPointe, Cablefree Solutions Ltd., and fSona Communications Corp. have also announced enhanced or brand new products. Even incumbents like Alcatel SA (NYSE: ALA; Paris: CGEP:PA) are getting into the free-space optics game. During the bubble, companies like Terabeam and AirFiber received millions in funding from Lucent Technologies Inc. (NYSE: LU) and Nortel Networks Corp. (NYSE/Toronto: NT), respectively. Analysts’ expectations for the technology were also going mad. In 2001, Merrill Lynch & Co. Inc. published a report on access technologies predicting sales would grow from $100 million in 2000 to $2 billion in 2005 (see The New Reality of FSO).

So far, those predictions have not come to fruition. And with the bursting of the bubble, many analysts have sobered up and significantly reduced their predictions. Along the way, the industry has lost a few startups, including market notable AirFiber, which officially shut its doors in February.

But could these new contracts, new products, and new funding mean that FSO is finally turning the corner?

David Gross, an analyst with Communications Industry Researchers Inc. says there’s no reason for folks to get their knickers in a knot.

“It sounds like a good win for Terabeam,” he says. “But I wouldn’t call it a shift in the market.”

In fact, his outlook on the technology is still pretty dismal. He says the total optical access market in North America is expected to grow from $2.1 billion in 2003 to just over $3 billion in 2007 (see CIR: Access Worth $3B in '07). FSO is only expected to account for about 5 percent of those revenues. And he adds that of that 5 percent, the majority will still come from sales to enterprise customers, and not carriers.

He says the biggest problem for FSO is pricing. Although FSO vendors claim to offer a more affordable alternative to fiber, optical transceivers still cost between $30,000 and $50,000. Newer radio frequency switches based on standards such as 802.11 and 802.16 offer less expensive or comparably priced gear with a lot less potential hassle. One of FSO’s biggest limitations is weather, especially fog.

But there is a small light at the end of the FSO tunnel. Wireless backhaul could be the answer to FSO vendors’ prayers.

“We’ve already started to see companies like fSona coming out with products designed specifically for wireless backhaul,” says Gross. “It requires much higher bandwidth than RF can provide, and it can travel longer distances, making it an ideal technology for cell phone operators and other wireless carriers.”

All the same, there are lots of vendors targeting a relatively small market for FSO equipment. No fewer than 29 manufacturers are listed in the FSO section of Light Reading's "Who Makes What" report, the first stage in a branding survey of telecom equipment vendors and products.

— Marguerite Reardon, Senior Editor, Light Reading

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SS7 12/4/2012 | 11:45:08 PM
re: New Life for FSO? This company is going to take much more that some deployments in China to convince me. Management has all but left, products are me-too and very expensive, and it was a classic pump and dump of the late 90's.

Why would anyone use Terabeam over a well run Cisco backed Lightpointe?
52620 12/4/2012 | 11:45:06 PM
re: New Life for FSO? Sorry fella. Cisco chose not to participate in Lightpointe's last funding round - no backing or sales channel there. Alcatel chose fSONA Communications as its OEM partner and is selling and installing its gear worldwide.
joestudz 12/4/2012 | 11:44:59 PM
re: New Life for FSO? who I believe have supplied over 6000 links (and I believe hold over 50% market share)?.

Is it because no one at LR bothered to even get their input? Did LR get input from anyone or just do the article based on previous articles?
FSOFSO 12/4/2012 | 11:44:57 PM
re: New Life for FSO? From many sources, Lightpointe is doing very well in Asia Pacific. Recently they have won a contract with Taiwan ChungHwa Telecom (Taiwan stated own ILEC), Singapore M1 (Singapore 2nd mobile operator), Thailand, China Unicom, China Netcom etc and etc.. Lightpointe also have OEM agreement with Siemen and Hwawei...

However it's rather surprising that Lightreading is not awared of such news..

Furthermore, hereby in china, every vendor knows Terabeam stories with China Railcom and ChinaGreatwall are false.. Why Lightpointe doesn't verify such news at all??
52620 12/4/2012 | 11:44:51 PM
re: New Life for FSO? Horse Hockey. Lightpointe does not have an OEM agreement with Siemens - they have a flakey co-marketing (share the leads) program. Nothing with Huawei either. Where do you get this nonsense?
lightpimp 12/4/2012 | 11:44:45 PM
re: New Life for FSO? That was the first thought I had too. Why wasn't one of the biggest players in the FSO market even mentioned in this article? Lack of knowledge and research on the topic I suppose.
mbw 12/4/2012 | 11:44:45 PM
re: New Life for FSO? Our author forgot to mention that the fog issue is also being address by newer technologies such that being developed by companies like SCore Networks. These guys have an interesting patented technology and are developing subsystems that use commercial components such as CO2 lasers to G«ˇburnG«÷ a hole through fog (actually they shrink the fog particles using a eye-safe low power beam) and then insert standard 1310/1550 wavelengths coaxial through the center of the beamG«™ simple but wildly innovative. IG«÷m not sure if SCoreG«÷s technology will ever see the commercial light of day but the point is that there are a number of non-hybrid innovations happening out there and its only a matter of time. G«£New life for FSOG«• implies it died... wrong... its only starting.
Peter Heywood 12/4/2012 | 11:44:42 PM
re: New Life for FSO? Can you point me at SCore Networks' website, or give me contact info? I would like to check them out.
Peter Heywood 12/4/2012 | 11:44:42 PM
re: New Life for FSO? This is a news article, wrapping up recent developments in the FSO market.

It's not attempting to be a comprehensive survey of vendors and products. As there around 30 vendors in this space, that would be quite an undertaking - and not something that could be tackled in a news story.

I'm not aware of MRV announcing anything new about its FSO developments recently. Having said that, we probably should have mentioned that Optical Access, its FSO company, is now been integrated back into MRV. I'm not sure when this happened. I can't find an announcement about it on MRV's website.

GINO 12/4/2012 | 11:44:41 PM
re: New Life for FSO? Regarding yesterday's article on FSO by Marguerite Reardon New Life for FSO she mentions how wireless backhaul may be the main application for FSO products but does not mention any FSO company yet doing this because of weather limitations. I would like to draw her attention to 2 recent articles in Unstrung about the work of a UK company called Sceptre Communications Ltd and its new LED (not laser) infrared wireless products: http://www.unstrung.com/docume... - Russian Roots Inspire Start-Up and http://www.unstrung.com/docume... - Much Ado About Hutch
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