As consumers and businesses start to take wireless carriers up on their offers of data services, and the carriers themselves put up ever-faster networks to support the demand they’re trying to create, backhaul capacity requirements are poised to increase dramatically-and backhaul providers are anticipating a boom in the marketplace.
“The market is about to explode,” said Michael Gallagher, president and chief executive officer of First Avenue Networks. “[Carriers] are all spending billions of dollars on their networks to really support the high-capacity data services.”
Cingular Wireless L.L.C., for example, has been touting its major expenditures on its network. The carrier said it spent about $6.5 billion on its network last year and plans to spend that much again this year. In the first quarter of 2006 alone, Cingular put $1.4 billion into capital expenditures, including improvements to its current network and the continued rollout of its high-speed UMTS/HSDPA network.
Gallagher estimated that backhaul currently accounts for between one quarter and one third of carriers’ network operating expenses, and new, data-heavy services could require twice as much backhaul capacity-so carriers will be seeking to control the costs of the additional requirements. Across the industry, there seems to be two general points of agreement on backhaul: more is needed to support the new services, and a mix of technologies will provide the additional capacity.
Historically, U.S. carriers relied on T1 access lines from incumbent local exchange carriers to provide backhaul for their networks. However, companies across the industry that specialize in backhaul agree that a mix of technologies will provide the additional needed capacity for the new networks and services.
“The whole market’s going to grow, and there’s plenty of room for everybody,” said Gallagher. He noted that First Avenue, which provides fixed wireless backhaul, sees a particular opportunity in that space; according to Gallagher, about 80 percent of backhaul in Europe is via fixed wireless, but less than 1 percent of U.S. backhaul uses fixed wireless technology.
Which backhaul method wins out in any given market will most likely be a function of economics and what existing infrastructure is in place. In a recent report, ABI Research identified six possible technology options for cellular backhaul: T1 over copper lines; microwave and other radio technologies; Ethernet over copper or fiber; WiMAX and cable.
“The push from these new video and data services, combined with mobile operators’ ongoing priority of reducing operating expenses, is making everyone realize that something has to be done soon,” analyst Michael Arden of ABI wrote in a recent research note. He added that the industry appears to prefer Ethernet over fiber for a long-term solution, although WiMAX has been attracting attention.
Location impacts decision
Arden also predicted that regional differences-such as the differences in the primary backhaul technologies used in the U.S. compared with Europe-will continue to play out when it comes to backhaul, and that U.S. carriers “will look for new solutions that leverage existing copper infrastructure, before investing in alternate technologies.”
ABI concluded that different parts of the world will see a more varied mix of backhaul methods.
While U.S. carriers prefer to use fast, high-capacity fiber backhaul whenever possible, Tom Gruba, senior director of marketing for Motorola Inc.’s Motowi4 portfolio, noted that wired backhaul using fiber or copper connections has several issues: it requires owning or acquiring the right to install, it can be quite expensive to put in, and it can take a long time to deploy.
“If I can put up a wireless link in half a day and have a base site up and getting revenue cranking now, then I’m much farther ahead and not as susceptible to competition,” said Gruba.
Choice limited by location
In rural areas or developing countries where wired infrastructure is limited or nonexistent, wireless backhaul is being examined as a viable alternative-especially since those markets are expected to be booming within the next few years. Pyramid Research recently predicted that mobile markets in the Middle East and Africa will grow the fastest over the next five years, at a rate of nearly 14 percent, followed by Asia and Latin American with a growth rate of about 11 and 9 percent, respectively. Gruba called wireless backhaul “a great way to increase the connectivity” in countries looking to expand access to voice and data services.
Current plans strain backhaul systems
On the other hand, Gallagher echoed recent warnings to carriers about all-you-can-eat data plans and their potential for causing serious disruptions to the networks and their backhaul systems.
“A voice call is a drop of water, and data calls are like a swimming pool full of water,” he said. “You’ve got to be very careful. If you open that up, it could potentially put you in a situation where you could crash your access network and destroy your backhaul network.”
Jon Hambidge, vice president of global marketing for wireless broadband company IPWireless Inc., said that T1 lines simply won’t cut it for backhaul when it comes to bandwidth-hungry applications such as mobile television-which IPWireless is trialing with several carriers worldwide, including Orange in the United Kingdom. The company, which garnered a $10 million round of venture capital funding last year led by Sprint Nextel Corp., has 15 commercial deployments of its mobile broadband platform-most of which rely on wireless backhaul, unless it involves a city where relatively cheap fiber is available for backhaul, Hambidge said.
