Companies build business on peer-to-peer networking. (Up Front).

As Napster searches for a legal way to stay in business, two L.A. companies are finding legitimate applications for the popular technology.

Blue Falcon Networks and Uprizer Inc. have been using the peer-to-peer networking concept that attracted 65 million users to Napster's music-sharing Internet site before it was shut down last year by a federal court.

Simply put, peer-to-peer, also called distributed networking, connects individual computers so that users can share files and unused power.

Blue Falcon has tailored its software to appeal to streaming-media companies, while Uprizer has tailored its KARMA (key accessed redundant memory architecture) software to multinational corporations.

Both companies are backed by venture money and look to break into the black by 2003.

Connecting Radio Free Virgin

Blue Falcon, which started as Static Online in 1996, raised $5 million from Zone Ventures in 1999 and is receiving additional funding from Zone Venture's affiliated firm, Draper Fisher Jurvetson.

Uprizer, formed in 2000, raised $4 million, mainly from Kline Hawkes & Co., Shugart Venture Fund and Intel Capital. Uprizer President and Chief Executive Dave Scantling said the company is raising a second round of at least $8 million, which it will use to hire a sales staff.

Blue Falcon already has licensed its software for a short-term beta test to two Internet broadcasters -- Radio Free Virgin and local Christian broadcaster KKLA Communications Group.

Blue Falcon claims its software allows broadcasters to cut by as much as 50 percent the cost of streaming music over the Internet by directing end users' computers to transmit the broadcaster's digital media signal along to other end users. This frees up the broadcaster's bandwidth and quickens the streaming.

Radio Free Virgin, a wholly owned subsidiary of Richard Branson's Virgin Group, is involved in a beta test that streams music to the computers of as many as 3 million Radio Free Virgin listeners. Blue Falcon's software makes each listener's computer into a point of contact for other listeners, thereby decreasing traffic between listener computers and Radio Free Virgin servers.

Radio Free Virgin has been testing Blue Falcon's software on as many as 10 of its 46 streaming music feeds. Radio Free Virgin General Manager Zack Zalon couldn't estimate the expected cost savings because bandwidth costs change frequently, but noted that Radio Free Virgin has been operating with 40 to 70 percent less bandwidth during the beta test.

LAN connection

Besides streaming-media broadcasters, another application would be for local area networks, enabling a computer within an office or home, for example, to access information from another computer on the premises, rather than digitally accessing the information from an off-premises source that requires more bandwidth.

Uprizer's software works along the same lines, but within a company's intranet. An employee in Hong Kong who wanted to access a Webcast stored on a server in New York would direct his computer to information already accessed and stored temporarily on other computers in the Hong Kong office.

"What customers are finding is a much larger growth in rich media content than they had counted on," Scantling said. "Our software will allow them to buy a lot less (hardware and bandwidth) on a go-forward basis."

Uprizer's software is based on Freenet, an Internet application similar to Napster and launched about the same time. In fact, Freenet creator Ian Clarke is one of the do-founders of Uprizer and serves as its chief technology officer.

Clarke said KARMA operates on the same principles as a newspaper that uses remote printing facilities to publish copies that are prepared somewhere else. The individual computers on a company's network act as nodes distributing the digital information, Clarke said. The more popular a file becomes, the more computers are storing it temporarily and pieces can be pulled from multiple sources.

The number of nodes then becomes the means by which companies are charged for using the software. Scantling, a Hewlett-Packard refugee, declined to discuss specific pricing for the software, which is scheduled for launch in March. He said he expects licenses on a per-node basis would range from $250,000 to $2.5 million per year.

KARMA also is intuitive to the degree that it can recognize information most commonly needed in certain areas of a company's network. When the roughly five kilobytes of space reserved for temporary storage on a particular computer is full, the software replaces the least-accessed data on an individual hard drive with any new information.