Wholesale Mobile Backhaul: There’s Gold in Them There Hauls

(Jun 29 2011) Backhaul , Yankee Group

1. By Jennifer Pigg, VP of Research, Yankee Group

   The pace of change is accelerating for mobile network operators (MNOs). Unlike any other period in telecommunications history, the ability to impact network traffic volume today is not in their control (e.g., what lines to deploy and how rapidly to add voice customers). It is subject to the market whims and enthusiasms of the content owners, over-the-top players and consumers. In addition to the groundswell of consumers moving to smartphones, consider the following:

   • Yankee Group data shows the total number of mobile devices in use hit 5.19 billion in 2010 and will grow to 6.69  billion by 2015.
   • Average macrocell backhaul requirements were 10 Mbps in 2008 (seven T1s, five E1s). In less than three years, they have more than tripled to 35 Mbps in 2011, and by 2015, Yankee Group predicts they will demand 100 Mbps. 
   • There were 2.4 million macro cell site backhaul connections worldwide in 2010, growing to 3.3 million by 2015.
   • Two of out every three rural cell towers already house at least two mobile operators. Suburban towers house up to six antennas, while urban towers can house 12 to 20. These may belong to multiple operators and represent different mobile service generations. 

   MNOs are struggling to anticipate and meet demand, lower network costs and cobble together a business model that makes sense for their bottom line. Wholesale mobile backhaul is one tool offering them a hand in all three areas. 

   But mobile backhaul places unique demands on the wholesale operator. For example, the provider must offer real features, including: 

   • Ethernet
   • Synchronization
   • Robust operation, administration, maintenance and provisioning (OAM&P)
   • External Network-to-Network Interface (ENNI) support

   Still, the market is there. MNOs must have backhaul, and backhaul is a distraction from their core competency and business focus on the customer, the RAN and the mobile core. Ubiquitous demand and marginal desire or infrastructure to do it themselves equals a very fertile wholesale backhaul market in which everyone with access infrastructure or fiber in the ground is eager to participate. Top contenders include:

   • Tier 1s: All, including AT&T, Verizon, CenturyLink, BT, DT, Orange 
   • Tier 2s: Frontier Communications, Colt, FairPoint Communications, Windstream 
   • Traditional wholesalers: Zayo Bandwidth, Interoute, Level 3 and Global Crossing, 360 Networks
   • Cable operators: Cox Communications, Comcast 
   • Mobile Backhaul Specialists: Telecom Transport Management, Inc. (TTM), FiberTower, Tower Cloud
   • Virtual Backhaul Providers: Nitel, CFN Services

   The market for wholesale backhaul services in North America is growing at a healthy clip, from $2.45 billion in 2010 to $3.9 billion in 2015, with most of this growth in Ethernet backhaul services. While TDM services are expected to decline, our current reports from wholesale providers indicate MNOs are relying on a cap-and-grow strategy, leaving their existing backhaul for 2G and 3G voice services on TDM and using Ethernet for their mobile data and 4G services where the bandwidth and statistical multiplexed technology realize their greatest advantage. 

   Some wholesale providers question how long this bonanza will last. There are a finite number of macrocell sites, even with growth in cell sites that 4G/LTE, with their smaller coverage areas, bring. However, Yankee Group estimates show that only 22 percent of North American cell sites are currently fiber-fed, and 55 percent are still copper. These numbers suggest that, between the addition of new cell sites and the upgrade of existing backhaul, the market will be robust for the next five years. 

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