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Friday, Mar 29, 2024

LASERS—Laser Technology Creates New Broadband Highway

From the window of his 12th-floor office in Woodland Hills, Jim Delany can see most of his customers. One day last week, the CEO and co-founder of Broadband Highway Inc. stood next to a telescope-like contraption pointed directly at another multi-story building. “They get their Internet access from this,” he said, pointing to the laser-powered transmitter that is connecting Valley businesses to the Internet. Delany is counting on laser technology to usher in a new era of high-speed Internet access and he’s starting with the firms he can see from his office. “This is a whole new thing that’s being tried in the Valley,” he said, “and we’re one of the few (in the U.S.) doing it commercially.” High-speed Internet traffic is carried over invisible laser beams from one transmitter to another placed atop buildings. Because neither underground nor overhead cables are required, the technology is considerably cheaper to install than those involving fiber optics. Unlike Digital Subscriber Lines (DSL), which can take days or weeks to install, the service provided by laser-based technology can be up and running in one day, Delany says. With an initial $8 million in startup funding (from MRV Communications Inc. in Chatsworth), most of which remains unused, Broadband Highway hopes to post about $1 million in revenue and show a profit by year’s end. Delany expects revenue for 2002 to be about $3 million as it expands farther north in the Valley. “We will pick up DSL customers in buildings where we can gain an anchor tenant, but we’re not primarily focused on buildings that can provide DSL. The revenue just isn’t there,” said Rick Galloway, company co-founder and chief financial officer. Instead, Broadband Highway is targeting companies with lots of employees who need lots of terminals with Internet access, companies that would typically pay thousands of dollars a month for high-speed lines. Joe Hasson, vice president of the horse race betting web portal Youbet.com, said his company was persuaded by Broadband Highway’s reliability and relatively low cost. “We stream audio and video of horse races from all over the country and they’ve been great,” Hasson said. One false start Broadband Highway began installing laser-transmitting equipment in Valley buildings last October when it began operations. Plans stalled, however, when company sales efforts in those buildings yielded few customers. “We found that, after we paid to get all that equipment in those buildings, 30 percent of the buildings don’t pay at all. We couldn’t even get people to sign up for $39 a month,” Delany said, noting that most potential customers had already signed contracts with other providers. Strategy quickly changed as sales representatives went to work signing up potential heavy-use customers before any equipment was installed. “The concept is to have a good anchor tenant in the building and then be able to move out from there to the rest of the building,” Delany said. Since then, Broadband Highway has signed up 300 business subscribers and secured contracts with 60 buildings in an arc stretching from Van Nuys to Westlake Village. Many of their new customers did not already have dedicated lines for DSL service. Delany, who had worked for another broadband technology firm in the Valley before starting Broadband Highway, said, “I had a lot of contacts here and this is where I wanted to start.” Chris Nicoll, an analyst with Current Analysis, said laser technology could prove a tough competitor to existing high-speed networks. “It’s a technology that has a lot of potential and is very cost-effective,” Nicoll said. Companies that need high-speed Internet access generally rely on DSL, which averages between 200 and 600 kilobits per second, or the much faster and more expensive T-1 lines, which can cost up to $2,000 per line. Broadband sales director Daniel Dahan says the company’s prices are much lower than others charge for 1.5-megabyte-per-second T-1 lines, about $2,000 per month, and 20-megabyte DS-3 lines can usually cost between $15,000 and $18,000 per month. “The DS-3 customers are the ones we’re targeting. We charge much less than what people are paying now,” Dahan said. Broadband’s system can handle up to 100 megabits per second, but it still has its drawbacks. Fog can slow things down, if not shut the system down altogether, Delany admitted. So, luckily, the Valley is virtually fog-free, making it ideal for the service. “Water droplets can sometimes block the light waves and that can put a damper on our system, but that’s not something that will happen very often. We do have backups,” Delany said, including access to traditional fiber optic cabling when necessary. Used by the military The laser, first developed in 1960, has been used by the military for communications for decades, but only now is it being applied to broadband networks. John Ellis, EarthLink Inc. director of broadband products, said laser technology is viable, especially in certain remote areas where DSL or other high-speed services are impractical. “But from an access standpoint, we’re looking at other viable technologies to serve our products,” he said. Ellis said EarthLink remains committed to its cable and telephone-based network, but it is evaluating laser technology in urban areas too. EarthLink, with about 3.8 million subscribers and 300,000 broadband users nationwide, will begin targeting small to medium-sized firms later this year, Ellis said. Lucent Technologies Inc. and Nortel Networks Corp. also are in the early stages of developing laser-based high-speed Internet service. Lucent says it is developing a network in San Francisco while Nortel plans to test its system in Tokyo, Madrid and Dallas. Nevertheless, Delany believes he has a head start on the competition and can connect most of the Valley in the next two years at least as much of it as he wants. “The other players in the market were being judged on how many buildings they could light up rather than how much revenue they were getting, and you can’t really live like that anymore,” he said. “We’re looking to sign up tenants rather than light up buildings.”

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