This project is funded under the National Science Foundation's (NSF) Small Business Innovation Research (SBIR) program, which is designed to provide an opportunity for small business, particularly the small high technology firm, to participate in NSF research. Phase I of the SBIR program serves as a filter to select promising proposals and determine if the firm can do high quality research. Phase II is the principal research project. Phase III is the conversion of the NSF-funded research into commercial applications and technological innovation supported by follow-on private venture capital or other non-federal financing. The objective of this Phase I project is to develop a cost-effective multiwavelength local area network based on combining the best attributes of both wavelength-division multiplexing and Fiber Distributed Data Interface into a unique network referred to as Highly Parallel Wavelength Distributed Data Interface (HPWDDI). The research emphasis is on the technological choices and economic evaluation of the physical layer implementation. An exploratory multi-channel single-mode HPWDDI system is being designed, built and evaluated to demonstrate the feasibility of the concept and its capability for interactive multimedia communications.