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Lead Manufacturers seek opportunity in ‘last mile’ of telecom traffic

Data Flows Smoothly Until It Reaches Its Destination Point

The two or three city blocks that separate office buildings from high-speed fiber optic lines are easy to cross , for a person on foot.

But when it comes to moving rivers of data, a few city blocks might as well be a chasm the size of the Grand Canyon.

Tenants can simply be out of luck when their building is that far from a fiber-optic network.

In telecom talk, that distance is called the “last mile.” Large amounts of data can stream across the country efficiently in fiber-optic networks, but the data needs a big pipe to flow into a building.

Telecom equipment firms see this last mile as an opportunity. San Diego has several companies settling down into this niche.

Ensemble Communications Inc. makes “fixed wireless” systems. Using equipment that stays in place, carriers can exchange telecom signals between buildings in the form of microwaves.

– Headquarters A Network Hub

Ensemble’s headquarters at the end of Towne Centre Drive is the hub of a network serving several nearby buildings in University City and on Torrey Pines Mesa.

A second technology involves laser beams.

Sorrento Mesa-based LightPointe makes laser equipment to get a high-bandwidth signal from fiber to a building, and back.

Another equipment maker that uses a similar , but not identical , laser technology is AirFiber, Inc., headquartered in Rancho Bernardo.

The companies are private, venture-funded entities.

The need for last-mile access is there. An Ensemble spokesman estimated between 4 and 5 percent of office buildings have direct access to fiber.

Ensemble and LightPointe officials emphasize their equipment goes in fast and is cheap to install. There is no heavy construction involved: no digging trenches or knocking holes in building walls.

Yet, the middle of 2001 might not be the best time to sell telecom gear.

Potential customers, at least domestically, are having money problems. A case in point is the independent carrier Teligent, now in Chapter 11 bankruptcy and scaling back services in San Diego.

– Telecoms Are Scaling Back

A May 10 study by Merrill Lynch & Co. in New York suggests domestic telecom companies’ spending has peaked. The study, put together by analysts Adam Quinton, Linda Mutschler, Ken Hoexter and Thomas Watts, predicted telecom company capital spending in the United States would decline 6.4 percent in 2001, then decline 8.1 percent in 2002.

Telecom equipment maker Nortel Networks Corp. recently posted what the Wall Street Journal called “one of the largest quarterly losses in corporate history,” amounting to $19.2 billion. Officials at the Brampton, Ontario-based company said the loss was due in part to a downturn in telecom spending.

“There’s very little of ‘Build it and they will come’ going on , and there was a lot of that last year,” said Carlton O’Neal, vice president for marketing at Ensemble.

Nevertheless, the San Diego company announced this spring that two carriers will use its products.

In April, Ensemble announced butlerNetworks A/S of Copenhagen, Denmark, had agreed to buy the San Diego company’s equipment. Company officials said Pennsylvania-based Adelphia Business Solutions became a customer in May and would be rolling out Ensemble equipment in five East Coast cities.

Ensemble officials characterized the deals as multimillion-dollar commitments.

“None of the guys that are in Chapter 11 were in our financial plan for this year, and of course they remain not in our financial plans,” O’Neal said. Additionally, he said, Ensemble is putting an emphasis on international business.

Still, Ensemble has not been immune to market conditions. The company went through staff cuts in April, laying off 15 percent of its 260-member staff. Rami Hadar, a co-founder and executive vice president, said at that time the company was responding in part to the near-term health of the smaller, independent U.S. carriers.

– Forging Ahead With Technology

Yet Ensemble forges ahead.

Its publicists say their products represent a new generation of technology. The company has one patent, and about 40 more filed. Upside Magazine’s June issue lists Ensemble as one of its “Hot 100” private companies.

Ensemble customers actually need more than the San Diego company’s hardware and software to operate. They also need federal radio spectrum licenses.

LightPointe, by contrast, uses “free-space optics” , laser beams routed across the open air between buildings. The company says the beams are safe to the eye.

The last mile is important to LightPointe. Yet company spokesman Kevin Brass said customers use its products to do more than span the last mile. They use them to connect large, in-house computer and telecom systems.

The Smithsonian Institution uses the San Diego company’s equipment for building-to-building communications. One LightPointe laser unit sits behind windows in the Smithsonian’s distinctive, castle-like headquarters in Washington, D.C. The company promotes the fact its products may be positioned in windows as well as on rooftops.

Other entities using the products include the New York City-based law firm of Cadwalader, Wickersham & Taft, and New School University, also in New York.

Brass said LightPointe products are used in 600 installations in 23 countries.

One recent achievement for LightPointe is a patent on its technology. Company publicists said the technology would “allow for the seamless, all-optical integration of (free space optical technology) with existing optical network infrastructure.”

Optical technology does have its hurdles. Fog can obscure the signals.

LightPointe’s products also include a radio frequency backup system. Brass said the frequency used there does not require a Federal Communications Commission license.


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