Free Space Optics Look for Share of Broadband Market

Free space optics (FSO), a technology that transports data from point to point and multipoint via laser technology, will grow from a nascent technology to a strong niche player in the broadband market in the next five years, according to a study by The Strategis Group.

The study, “Free Space Optics: Fixed Wireless Broadband,” estimates that global equipment revenues in the FSO market are projected to reach $2 billion in 2005, up from less than $100 million in 2000.

“There is a definite place for this technology in the market,” said James Mendelson, Strategis Group analyst. “With its benefits, such as quick deployment time and high-capacity links, FSO should have strong appeal for both new and established carriers. Carriers, like Allied Riser and XO Communications, may use FSO in conjunction with other technologies to expand their current networks, while others, such as Terabeam, see the technology as a means to break into the broadband market.”

FSO Equipment Revenue, 1999-2005
Year 1999 2000 2001 2002 2003 2004 2005
$1.7 $51.4 $111.7 $199.8 $354.1 $579.2 $864.9
Source: The Strategis Group

FSO equipment currently is being deployed for a variety of applications, including last-mile connections to buildings, mobile networks assist, network backup and emergency relief. Last-mile access provides the greatest opportunity because FSO provides provides the high-speed links customers need without the costs of laying fiber to the end user. In 2005, last-mile access will represent more than two-thirds of the total FSO equipment market, according to The Strategis Group.

FSO also has many hurdles it must overcome before it can be widely deployed. There are technology issues such as line-of-sight requirements and weather degradation. Vendors are addressing these problems using or shorter or repeating links, but the biggest obstacle facing FSO may be its reputation, or lack thereof.

“Many people just don’t know or trust the technology,” Mendelson said. “With other fixed wireless technologies, such as LMDS [definition] and MMDS [definition], people had a strong understanding of RF [radio frequency] technology because of the wide use of mobile phones. However, lasers still remain somewhat of a mystery. In order to be successful, FSO vendors must first educate the market. Then, they must quickly deliver on their promises of fast, reliable, high-bandwidth connections.”

The wireless broadband market is poised for major growth. According to eMarketer, the number of fixed wireless subscribers will grow to 3.86 million by 2003, a 1,500 percent increase from the 230,000 users projected at the end of 2000. By 2003, small and medium-sized businesses will represent 80 percent of the total fixed wireless market, where in 1999, business share was at 66 percent. Fixed wireless revenue will reach $3.35 billion, up from $230 million forecasted at year-end 2000, eMarketer found.

Related reading