Tellaire Trades Equity for Rooftops

Tellaire Corp., a new Dallas-based service provider, says the sky’s the limit for using point-to-point lasers to connect businesses to the local loop. That's only true, however, if the firm can get access to the right rooftops in cities where it wants to sell its services.

Tellaire hopes to serve some 9,000 buildings by 2005. But how will they get on so many rooftops? The company plans to hand out stock options, one of the optical networking industry’s favorite kinds of currency, to building owners to secure strategic access points in big cities.

“We’ve set aside a significant portion of the company for that purpose,” says Leah Bailey, Tellaire’s president and CEO.

Rooftop access -- the permission required to install the pieces of equipment that function as network nodes -- only comes when service providers successfully negotiate with the building owners in major cities. Landlords, after all, have the final say over what services can be sold to tenants. In the competitive landscape, service providers are sweetening deals with building owners, the ultimate gatekeepers of multitenant offices (see Multi-Tenant Services On the Rise).

Not everybody thinks it's a brilliant idea. “Why would a building owner take warrants when BroadBand Office Inc., and Allied Riser Communications Corp. (Nasdaq: ARCC) could give them cash?” wonders Chris Nicoll, director of infrastructure analysis at Current Analysis.

Tellaire has already raised a $3.3 million round from Caravelle, an investment fund managed by CIBC World Markets. It’s trying to raise a second round, of around $25 million, soon. The company, which plans to use only point-to-point laser technology, is currently buying equipment from fiberless optics vendors Astro Terra (now Optical Access) and LightPointe Communications and is currently in talks to buy from AirFiber. Tellaire sees an advantage in being able to buy from multiple vendors, unlike service providers such as TeraBeam, which is currently locked up in an exclusive arrangement with Lucent Technologies Inc. (NYSE: LU). Terabeam, it should be noted, doesn’t require rooftop access for its technology (see Nortel And Lucent Compete For Air Time ).

So far, Tellaire’s gear has been deployed on four buildings in Austin, Texas, since the beginning of this year. It is also putting equipment on ten buildings in Houston and is in discussions with Vornado Realty Trust, which controls 23 office buildings in New York.

-- Phil Harvey, senior editor, Light Reading http://www.lightreading.com

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