Fibre-optics technology has many advantages. Most important, it can carry large quantities of data very quickly over long distances. But its name also highlights one of its biggest failings.

The fact that it is a fibre-based system means that telecommunications network operators and other service providers must dig up roads and land to lay cables. While this is generally not a problem for inter-city or trans-oceanic communications, within cities it creates a logistics problem that has prevented widespread deployment.

What many operators would like to offer is the speed and bandwidth of fibre-optics but without the restrictions posed by the fibres. Now some companies are starting to develop systems based on 'free space optics' (FSO).

FSO is a simple technology in theory. Using the same wavelengths of light used in conventional fibre optics, the system beams data using a laser to its intended recipient, usually from one rooftop to another. Although not having the same range as fibre optics, in optimal conditions the beam can travel several kilometres before becoming too weak to convey data accurately. And it is fast – 1.25Gbit/sec and upwards, in comparison to the typical 0.5Gbit/sec of cable and digital subscriber line networks.

The technology's main selling points are the short time it takes to install the equipment and the licence-free frequencies it uses – in contrast to most wireless technologies. In New York, for example, FSO was used as a replacement for other systems in the weeks following the terrorist attacks of 11 September 2001, when some of the city's communications systems were destroyed.

Yet there is one significant drawback. The technology needs a true line of sight between the laser and receiver to pass the data, unlike cable-based technology or marginally more versatile wireless systems. Data cannot get through even if the laser beam is obstructed by birds, raindrops or fog. Building sway caused by winds and vibrations from traffic can also divert the beam a critical few centimetres away from the receiver.

Vendors are using various strategies to fix these problems. Many use multiple beams, so that if one is blocked the others can still get through. Auto-tracking features in the lasers and receivers can adjust for building sway. LightPointe, Optical Access and several other vendors also offer back-up microwave transmissions in case of bad weather. "With automated switching, the laser will be in operation the vast majority of the time, and the microwave system becomes the primary link for only a few minutes a year, says Allen Brandt, vice president of business development for Optical Access. "With our product, the end user may sometimes have a lower data rate, but they will virtually always maintain the link availability."

Service providers are generally taking two approaches to network rollout.

First, they are using transmitters to beam data to distant office rooftops. Alternatively, there are using 'mesh'-type architectures, in which different systems can act as signal relays, 'hopping' data from one to another when the most direct route is not available. But this will only work if there are other customers nearby or the customer is near to the source transmitter.

Given the technological problems, some service providers may want to adopt the latter approach because it does not require a significant upfront investment – the peer-to-peer network expands only as operators sign up more users. Brandt is a proponent of this rollout strategy.

Strategis Group analyst James Mendelson predicts the market will grow to $2 billion (€2.2bn) in global equipment revenues between now and 2006. But Giga Group analyst Jim Slaby is less bullish, suggesting that FSO is only of real interest to companies that need the speed of fibre, cannot get it and have few alternatives. "They are doing it because they just don't have many choices," he adds. FSO has many advantages. But it may ultimately remain a niche solution to the 'last mile' problem.