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Battling Mobile Backhaul Costs

Light Reading
3/22/2006
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There are a lot of expectations surrounding the revenue-generating potential of new broadband cellular technologies such as 1xEV-DO for CDMA carriers and HSDPA for W-CDMA carriers. Can they deliver?

EV-DO is already delivering on those expectations, with more than 24 million subscribers worldwide. First launched by Cingular Wireless at the end of 2005, HSDPA will now be rolled out by W-CDMA carriers in a number of parts of Europe and Asia/Pacific over the course of this year. The revenue-generating potential is clear. In the U.S, for example, the major carriers have locked horns at a price point of $59.99 for "all you can eat" access to HSDPA and EV-DO services.

What's not so clear is the profit potential in deploying these capabilities. One critical factor that will determine what the numbers actually look like is the impact on the mobile carriers' backhaul networks. As discussed in Heavy Reading's latest report, Backhaul Strategies for Mobile Carriers, carriers are typically raising their backhaul spending by 15 to 25 percent to prepare their networks for the higher volumes of traffic that these air-interface enhancements are driving. This entails deploying more transport capacity at the cell sites, typically in the form of more E1/T1 leased lines or more point-to-point microwave links.

Scaling the backhaul network on the basis of this TDM-based network topology will do for now as a means of getting these services off the ground. But with data traffic volumes liable to increase two- or threefold within the next couple of years, relying on this same TDM model risks seeing the cost of carrying this traffic outweigh the new revenue potential.

The key to lowering the cost per bit of carrying data through the mobile network is the adoption of packet technology in the backhaul. While it runs counter to the trends of the wireline networking world, in the case of W-CDMA carriers, ATM is the key to reducing their backhaul costs. Many carriers have deployed ATM aggregation nodes in their backhaul networks. These serve to reduce the length -- and therefore the cost -- of leased lines or microwave links connecting the cell sites to the network.

Another approach is to terminate GSM traffic onto these ATM networks using Circuit Emulation. Within the radio access network (RAN) software, most vendors are only now starting to deploy the more data-oriented ATM QOS features that W-CDMA carriers consider the single most important tool for lowering backhaul costs.

The so-called IP RAN has already been deployed on a large scale by EV-DO carriers. Although W-CDMA base stations don't support IP interfaces yet, the world's first IP RAN for W-CDMA is already in live commercial service in Hong Kong using MPLS-based pseudowire technology. This encapsulates GSM and W-CDMA TDM and ATM traffic streams and transmits them as a pseudowire over lower-cost Ethernet backhaul. Several leading carriers are involved in trials, with the first significant commercial deployments expected in the next 12 months.

These solutions are promising but usually require additional optimization -- such as customized engineering of the Ethernet network, OAM, base station synchronization, and DSL CPE at the cell site -- in cases where carriers are looking to use DSL.

Carriers believe that the current spikes they are seeing in backhaul expenditure can be reined in again with the efficient deployment of such capabilities. The trouble is that data-savviness in mobile carrier circles is still in relatively short supply. They are pretty much on top of their packet core networks now -- their PDSNs in CDMA, their GGSNs and SGSNs in GPRS/UMTS. They are in the relatively early stages of rolling out softswitches in the voice core, with dedicated call servers separated out from media gateways.

Some carriers have deployed ATM for backhaul aggregation, but many of these continue to struggle with integrating this new layer with their SDH/Sonet networks, particularly from a network management and network provisioning perspective. For the most part, mobile carriers don't understand Layer 3 multiservice routers or Ethernet -- and certainly not enough to go running revenue-paying traffic over them with anything other than a lot of caution. And while the network planners continue to grapple with these challenges, EV-DO and HSDPA will be driving a relentless increase in traffic volumes while competition drives lower end-user prices.

The most data-savvy of the mobile carriers are probably right -- they probably can rein in these backhaul costs and make a positive contribution to sustaining current levels of profitability. The risk for others is that they will see their backhaul costs spike upwards and then stay there.

— Patrick Donegan, Senior Analyst, Heavy Reading

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