The technology - known as free space optics (FSO)- costs up to 10 times less than fixed optical infrastructure and could be used to link company Lans in city centres, as a back-up system between business units, or as a connection into the public network.
It has attracted attention following the 11 September attacks as a cheap means of disaster recovery. In the wake of the attacks Merrill Lynch took the decision to maintain its FSO link as a back-up network.
Analyst Iain Stevenson of Ovum, said, "It is very much a niche application - it needs line of sight and is affected by weather. Having said that, it is a good idea for city centre buildings and gives the network manager lots of bandwidth for a reasonable cost. As a back-up it could be a fruitful idea, though it will not be attractive to those who have critical bandwidth limitations."
Such networks are quick to set up and, according to Yankee Group figures, the cost comparison in large cities is £300,000 per mile for fixed optical as against £50,000 for FSO.
To establish an FSO link transceivers are fitted to roofs within line of sight. Effective distance ranges from 300m to 5km depending on weather conditions.
The signal is degraded by fog and rain to between 99.9% and 99.999% reliability, which limits use in such circumstances to shorter distances and to users who can handle such reliability levels.