The wireless dream of TeraBeam

June 1, 2000

By Stephen N. Brown

A Seattle-based firm proposes free-space laser-optic communication as the new local loop, dubbed a "fiberless" optical network, pronounces fiber dead-in-the-loop, and garners national attention.

More power to TeraBeam if it lives up to its claim of delivering gigabit speeds in a wireless local loop and being an effective substitute for fiber optics in the "last mile." In March, the company made a presentation to investors at the PC Forum meeting in Scottsdale, AZ, where its chairman and chief technology officer, Greg Amadon, said, "The TeraBeam fiberless optical network signals the end of the last-mile bottleneck for today's high-speed communications networks." The company's credibility was enhanced by its recruitment of Daniel Hesse (formerly CEO of AT&T's wireless division) as TeraBeam's CEO. He pronounced fiber-in-the-loop as dead on arrival: "What TeraBeam has done to break the last-mile bottleneck is an amazing feat of ingenuity. By eliminating the need for fiber, the company is rewriting the laws of broadband connectivity."

Among TeraBeam's supporters are George Gilder and David Isenberg. Guilder, former speech writer for President Reagan and technology writer for Forbes Magazine, was charmed, saying the company's technology is "truly revolutionary, shatter[ing] the last-mile bottleneck into shards of light." Isenberg, proponent of the "stupid network" and a former AT&T employee, describes TeraBeam as "satellite" science and says he has been "advising TeraBeam for several months" and that the company "doesn't have to pay kilobucks per PoP [point of presence] in an FCC auction. It just sets up its equipment and transmits." Strangely, TeraBeam did not say its technology threatens digital-subscriber-line technology, a weaker prey than fiber optics.

There is a silver lining: Hesse acknowledged the need for fiber-in-the-loop, unlike the FCC and incumbent phone companies. But before it buries fiber, TeraBeam must deal with skeptics.

Claims like TeraBeam's have been made before. In February 1997, the then-president of AT&T's wireless div ision, John Walter, told the National Assoc iation of Regulatory Utility Com missioners, "We are announcing the creation of what we believe will be the communications medium for the 21st century." The then-chief technology officer at AT&T Wireless Services, Nick Kauser, said, "We are combining the high speeds, large capacities, and top voice quality that people have come to expect from fiber optics, but we're doing it over radio waves...In effect, we've created a wireless fiber-optic system-something no one else has done."

But AT&T chose not to pursue this strategy and instead bought cable companies such as TCI and MediaOne. That is a sobering counter example to TeraBeam, despite its association with Lucent, whose CEO, Richard McGinn, played a supporting role to Amadon at the PC Forum.

There are other issues. TeraBeam's downstream capacity is shared among users, thus capacity per user declines as more users are added. Since a discussion of symmetric two-way capability (a characteristic of fiber) was notably absent from a description of the product, its upstream capability per user is apparently small.

The product appears to be asymmetric like digital-subscriber-line technology and cable networks. TeraBeam uses a diffuse laser beam to broadcast signals and employs special software to compensate for interference caused by building motion and weather. Receivers have to be located in a structure so signal blockage is prevented, easily accomplished in a tall commercial building where there is a floor high above street traffic and other physical objects. The placement issue is problematic in low-rise office complexes that dot suburban areas. The issue gets more complicated when residential areas and well-treed terrain are considered.

In tall commercial buildings, capacity must meet the needs of a growing workforce. The pat answer is to add more receivers, but each addition has to be multiplexed into the building's wired distribution network, unless TeraBeam's system is independent of the fiber or Category 5 and 6 cables installed in the risers of large commercial buildings. There is the question of the Occupational Health and Safety Ad ministration (OSHA) requirements.

TeraBeam's product complies with them, but compliance means a reduction in the radiated energy sent from the laser and a consequent reduction in capacity. Thus, there is a tradeoff between OSHA safety terms and laser capacity. If free-space laser communication is a market success, expect the industry to paint the safety terms as a hindrance to progress and in need of reform.

Despite these considerations, wireless options have a lure dangling in front of investors: Installation costs are supposedly minimal in comparison to costs incurred by wired systems tearing up streets and getting local construction permits. That is the exact pitch the company made in its media blitz. A reporter on "CBS Market Watch WeekEnd" took the bait and gave a glowing report: "TeraBeam does not have to deal with the cost of having to install cable lines, savings that could eventually be passed onto customers." But another reporter slammed the company for having too much capacity, saying "the speed TeraBeam is talking about [is] buying a jetliner to go grocery shopping. You don't need all that power. It's just an overkill." Fiber-in-the-loop has been slammed the same way for years. In that sense, there is an odd kinship between the two technologies-the incumbents have no intention of fashioning their loops to handle gigabit speeds.

Consider SBC Communications' comments in the FCC's Notice of Inquiry and continuation of CC Docket No. 98-146, "Inquiry Concerning Deployment of Advanced Telecommunications Capability to All Americans." The company said that "higher speeds are generally used for downstream transmissions. SBC's basic [asymmetric digital-subscriber-line] ADSL service [has] downstream speeds of between 384 kbits/sec and 1.5 Mbits/sec...[and] an upstream speed of 128 kbits/sec."

TeraBeam's targeting of fiber optics instead of DSL is ironic because in the Notice of Inquiry, the FCC asked, "Should be we be promoting fiber-to-the-home [FTTH]?" Even if TeraBeam's or fiber's economics were favorable regarding DSL, the incumbents would not be swayed because they intend to preserve the value of their plant, a point drawn from a Telecommunications Industry Association filing of Aug. 2, 1999 in the FCC's docket CC 96-98 "Implementation of local competition provisions in the Telecom Act of 1996."

The Telecommunications Industry Association (TIA) intended to hammer down the notion that a door-to-door fiber network is more expensive than DSL. The filing had plenty of evidence and showed that FTTH is certainly no more expensive than DSL and perhaps less expensive. The TIA said, "The low level of 'fiber-for-copper' substitution in new builds and rehabs should be troubling...because it cannot be easily explained away by cost[s]."

Since fiber is superior to DSL, the TIA concluded that the FCC's unbundling policy must be the reason for incumbents avoiding fiber-in-the-loop-they do not want to share a fiber loop with anyone. The TIA asked the agency to relax its policy, but that did not happen. The FCC went ahead with its DSL line-sharing rules (see Lightwave, March 2000, page 15). Surprisingly, the rules have not deterred incumbents from investing in DSL plant. According to SBC, it is spending $6 billion on "Project Pronto," which will "provide DSL capability to 80% of its wireline customers by 2002." Neither economics and nor unbundling are major influences on incumbents' DSL investment, which leaves preservation of plant value and market share as the most likely motivations.

TeraBeam faces the same constraints that confront every other technology trying to break into the local loop: physical impediments, incumbent intransigence, and government compromises. The company will probably find niche markets for military applications but is a long way from being a near-term threat to DSL or fiber.

Except-maybe TeraBeam could be the last mile of the Teledesic satellite system proposed by Microsoft. They are in the same town, something Isenberg says he was "forbidden" from divulging before the PC Forum. Maybe the companies are already dating.

Stephen N. Brown writes on public policy in telecommunications. He can be contacted by e-mail at [email protected] or telephone: (615) 399-1239.