TeraBeam wins confidence vote from Lucent

TeraBeam Networks spent the last month, particularly last week, adding credibility to its name.

It began in March, when the start-up snagged Dan Hesse, former president and CEO of AT&T Wireless, to be its new CEO. Then last week, TeraBeam secured its third round of financing, garnering $105 million from investors, including five unnamed telecom providers.

Last week TeraBeam also created a separate infrastructure company, TeraBeam Internet Systems. Lucent Technologies will pay $450 million for a 30% ownership stake in the new company. TeraBeam Networks will continue separately as a service provider.

Aside from giving the new company a financial boost, Lucent's involvement is an important vote of confidence in TeraBeam's technology. "I expect to look back and consider this one of Lucent's most significant investments in the optical space," said Rich McGinn, chairman and CEO of Lucent.

Initial industry reaction to TeraBeam's concept was positive, but Lucent's backing adds credibility. "The fact that Lucent has stepped up as a partner reaffirms that this is real," said Charles Gerlach, director of eStrategy at Mainspring.

TeraBeam's technology carries data over invisible light instead of using RF or fiber. The first generation product will deliver 1 Gb/s per piece of customer equipment, and because there are no interference issues, equipment can be added to increase bandwidth. "So today's capacity to individual customers is unlimited theoretically," Hesse said.

In addition, TeraBeam uses open data industry standards such as IP and Ethernet and can employ wireline fiber optic advancements. For example, TeraBeam can deploy wave division multiplexing, an enhancement created for the fiber optics industry, to increase capacity.

Hesse and others believe TeraBeam will have advantages over fixed broadband wireless because it doesn't have to buy expensive licenses or negotiate for roof rights. TeraBeam's hub and customer premises equipment sit behind windows in a regular office.

"This approach to freespace optics is far superior than the radio-based systems we've seen deployed," McGinn said.

"This is something that pushes [broadband wireless players] out of the way," Gerlach added.

The new company's equipment, which will carry the Lucent brand, initially will be sold only to TeraBeam Networks the service provider. At some point, when TeraBeam Networks is convinced the manufacturing company can keep up with its demand, products may be sold to other companies.

TeraBeam aims to roll out 100 markets internationally in four years. Hesse also hinted that the service provider and manufacturing company could go public. Making such high bandwidth available to users will spur the development of new services, he said.

Lucent doesn't believe that potential competitors can reach the level of development that Lucent and TeraBeam combined have achieved. "We have the deepest and broadest [intellectual property] portfolio that exists that we are aware of," McGinn said. "We think we have a dramatic lead over competition."

Lucent already has developed and deployed a product called OpticAir, which employs a similar concept but in a point-to-point configuration. TeraBeam's technology is point-to-multipoint, so the two development paths will fit together nicely, Hesse said.

TeraBeam can use the point-to-point configuration for backhaul or hub-to-hub connectivity.

Despite the interest and excitement surrounding TeraBeam, there are some doubters. While TeraBeam employs a dramatically different technology, it still can be lumped in with fixed broadband wireless players, said Rolf de Vegt, vice president for Renaissance Strategy. "They'll have the same hurdles to overcome," he said. The biggest roadblocks are the meteorological impact on performance and reliability, he said.

TeraBeam currently is testing the technology in Seattle where the company hopes to learn about overcoming the effects of weather conditions such as fog and rain. TeraBeam can employ smaller cells and position them closer together to overcome adverse conditions, Hesse said.

TeraBeam may find it challenging to convince customers to accept a new wireless technology, though, de Vegt said. "It's a harder, more difficult value proposition than wiring a building with fiber, which is more reliable and accepted," he said. "There are a lot of choices to a buyer that are closer to home in terms of comfort zone."