TAKING NEW STEP IN ADVANCING HIGH-SPEED OPTICS NETWORKS PHOTONEX SECURES $80M IN FUNDING

Massachusetts can't seem to stop producing optical networkingstart-ups that draw tens of millions of dollars in venture capital,for products that promise to revolutionize Internet growth.

In the latest example, executives of PhotonEx, a 135-person firmbased in Bedford, are announcing today that they have secured $80million in new funding. The money will support their plans forproducts delivering super-high-capacity transcontinental opticalnetworks.

Founded 14 months ago by Kristin Rauschenbach, formerly of theMassachusetts Institute of Technologies' Lincoln Laboratory, and bytwo colleagues, PhotonEx is promising to unveil a device by next yearthat can transmit a 40-gigabit-per-second stream of data overthousands of miles.

Generally speaking, big network operators, such as AT&T, Qwest, orLevel 3, have had to make a tradeoff between speed and distance asthey have added optical capacity to handle relentless growth in Nettraffic.

To carry traffic farther without needing expensive signal-regeneration devices every 40 to 70 miles, networks would have toaccept transmitting at lower speeds.

One of PhotonEx's claims is that it can vault networks pasttoday's 2.5- and 10-gigabit standards while sending signals hundredsor thousands of miles between regeneration, by using intelligenceabout maximizing the flow of light over fiber strands.

This, in road terms, is analogous to increasing traffic flow overan existing highway by raising the speed limit to 300 miles per hour and by eliminating most of the traffic lights.

PhotonEx has licensed a dozen patents from MIT's Lincoln Lab. Itis also developing systems to support adjustments in bandwidthallocated to subscribers. The effect is to handle, for example,millions of people downloading movies and music over the Net, ormaking video conference calls.

Deb Mielke, a consultant with Treillage Networks outside Dallas,said: "They are aiming their product to begin where everybody else issort of ending. It's going to be bigger, badder, and better."

In addition to Nortel and Lucent, Mielke said, PhotonEx is likelyto compete with Corvis and the Chelmsford-based Sycamore Networks inthe network-core optical market.

The 40-gigabit standard is seen as the revolutionary next step foroptical players such as Nortel, which dominates the 10-gigabitmarket, and Lucent Technologies, which is widely seen as havingconceded that market by having stuck too long with 2.5-gigabitsystems.

Mielke said systems like PhotonEx could prove crucial as networkowners struggle to accommodate the explosive popularity of Napster-style "peer-to-peer" file-sharing services, or new plans by EnronBroadband and Blockbuster to deliver videos to homeowners over fiber-optic lines.

If the PhotonEx product lives up to its billing, Mielke said, itcould address a major question for network operators who face beingbombarded by huge new traffic growth: "How do you engineer a networkin a world of complete unpredictability?"

Investors in the $80 million VC round include Oak InvestmentPartners, Essex Investment Management, Matrix Partners, North BridgeVenture Partners, Intel Capital, and the Photonics Fund.

Other top executives of PhotonEx include a cofounder and the chieftechnology officer, Katherine Hall, a veteran of Lincoln Lab and BellLabs; another cofounder and executive vice president, Nanying Yin, aformer Nortel Networks router group director; and the marketing vicepresident, Philip M. Francisco, a former Lucent Technologies opticalnetworking marketing vice president.

Directors include Hassan M. Ahmed, president of Sonus Networks inWestford, and a veteran local telecommunications entrepreneur, PaulSeverino, now chairman of Netcentric.