LONDON -– Backhaul Strategies for Mobile Operators: Europe -– Mobile carriers are still holding back from deploying Ethernet-based backhaul systems because they're still too concerned about the potential quality of service impact on their lucrative voice services, according to a survey of cellular network operators by research house Heavy Reading.

That message was delivered to a 150-strong audience of mobile operator executives who attended the Light Reading Live event, Backhaul Strategies for Mobile Operators: Europe, at London's swanky Cumberland Hotel Thursday.

In the one-day event's opening presentation, Heavy Reading senior analyst and backhaul specialist Patrick Donegan said his research showed that migration from costly, legacy TDM E1/T1 leased lines to new, higher-capacity, Ethernet-based backhaul infrastructures is happening very slowly, even though data traffic volumes are growing fast as HSPA (high speed packet access) services are rolled out and mobile users start to enjoy the benefits of real mobile broadband, with downlink speeds of 3 Mbit/s and above. (See Vodafone's Blazin' 3G Upgrade and GSMA Boasts HSPA Rollout .)

"If HSPA is to be successful, and if users are to continue to enjoy the experience they're getting today, then backhaul capacity will have to be increased, with operators needing up to 50 Mbit/s links to high volume business district cell sites -– these are the numbers carriers are talking about to support HSDPA successfully," said the analyst.

And that will have to be done in a cost efficient way -- it would be uneconomical to continue to add E1/T1 leased line connections to cell sites as data traffic volumes grow.

Donegan said there are an estimated 50 million HSPA service users in the world, of which about 25 million are estimated to be in Europe. While these users may represent a small percentage of the total global mobile user community of nearly 3 billion, they're causing a major problem with the volume of traffic they're creating.

That view was backed up by Tereje Jensen, R&D manager at Telenor Group (Nasdaq: TELN), which, with 147 million subscribers in 12 markets, is the world's seventh-largest mobile operator in the world. He told the audience that, at one of Telenor's operations, the introduction of HSDPA services lead to a nine-fold increase in data traffic volumes within three months.

Despite such immediate pressures and the ever-increasing deployments of HSPA by mobile operators, carriers aren't racing ahead with the deployment of Ethernet-based backhaul infrastructures, even in Europe, which, in terms of global trends, is "the first mover with Ethernet backhaul" in the world, noted Donegan. Asia/Pacific is adopting it only in pockets, while there is significant delay in North America, due to carrier consolidation and the relatively low price of T1 leased lines.

"In Europe, the Ethernet transition is going very slowly, much slower than expected, and much slower than hoped for," said Donegan, who noted that of the [approximately] 500,000 cell sites in Europe, only about 5,000, or 1 percent, have Ethernet backhaul connections, and even then nearly all of them are being used for HSPA (high speed packet access) data traffic handoff, while the cell site's TDM voice traffic is still backhauled across a traditional E1 leased line.

And that's because the operators are afraid to put their highly valuable voice traffic onto Ethernet links.

Lack of confidence in Ethernet
Overall, stated Donegan, there's a general lack of confidence among mobile operators in wireline Ethernet services, especially among independent mobile operators that aren't affiliated with the local wireline carrier. They believe it's too expensive, provides inadequate coverage, and cannot meet their service level agreement (SLA) requirements.

BT Group plc (NYSE: BT; London: BTA) is the exception here, having struck Ethernet-based managed backhaul services deals in the U.K. with Telefónica UK Ltd. , Vodafone UK , and T-Mobile (UK) . Those mobile operators have a degree of confidence in BT that mobile carriers in other markets just don't have in their national wireline operator, noted Donegan. (See BT Wins New O2 Deal and BT Sells PBT-Based Backhaul Service.)

As a result of that lack of confidence, most mobile operators plan to build and manage their own backhaul networks rather than outsource.

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Donegan said all 5,000 cell sites in Europe that are hooked up to an Ethernet backhaul link are self-built and split roughly between copper (ADSL or SHDSL) and fiber connections -- there are no microwave Ethernet backhaul deployments in Europe yet.

And Heavy Reading's research shows that European mobile operators intend to retain control of their own backhaul networks.

In a survey of European wireless carriers conducted in December 2007, 76 percent said they wanted to build their own backhaul networks wherever possible, while just 12 percent want to lease their backhaul network from third parties wherever possible. The remaining 12 percent said they had no preference, and would choose whichever option was most appropriate at the time. (See Ethernet Backhaul: DIY on the Rise.)

Ethernet backhaul's hurdles
The main issues holding back Ethernet backhaul's acceptance, said Donegan, are technical -- interoperability challenges, the lack of maturity and scalability of Ethernet for carrier grade voice services, and an increasing number of alternative synchronization solutions (something that is causing confusion among operators) -- and business-oriented, caused by conflicting interests within and among carriers, and conflicting interests among vendors.

And the main headache for operators is making the right choice at the right time. Donegan noted that while many people view the move to Ethernet backhaul as the result of a capacity crunch, it's really a "profitability crunch. Operators need to figure out whether backhaul costs can be reduced rapidly enough to allow the current rate of HSPA traffic growth to continue without jeopardizing either the user experience or the profitability of mobile broadband," stated the analyst.

And he concluded by noting that some mobile operators might make the wrong decisions – and pay for it. "There is nothing inevitable about the operator community being able to successfully overcome this challenge," stated Donegan, who said some carriers may end up getting their strategy wrong and either losing money or severely impacting the customer's data service experience, which would result in lost business.

That challenge was also noted by Arnaud Cauvin, mobile backhaul project manager at Orange (NYSE: FTE)'s mobile operation, the Orange Group: "We need to find the magic strategy that decouples backhaul costs from the subscriber and data traffic growth. The impact of HSPA on backhaul is very significant."

— Ray Le Maistre, International News Editor, Light Reading