Insider: The Backhaul Question
The report –- Mobile Backhaul & Cell Site Aggregation: State of the Art -- reveals how legacy backhaul systems are increasingly becoming a revenue bottleneck now that subscribers are starting to buy into 3G mobile data services. Data traffic cannot simply be addressed in the same way that voice is, report author Gabriel Brown finds.
"These new data-oriented radio networks will not map directly to the existing second-generation (2G) backhaul architectures with the simple addition of extra leased lines in a way that scales operationally or financially. The challenge, then, is to build backhaul networks that deliver the cost points at which mobile data services can be a profitable endeavor for operators, and which can gracefully migrate several generations of installed time division multiplexer (TDM)-based product to a common packet-based network."
Until recently this wasn't a huge issue for mobile operators simply because data didn't constitute any significant amount of their revenue. This has now changed. Sprint Corp. (NYSE: S), for instance, saw its mobile data revenues grow 66 percent year on year for the fourth quarter of 2006 and realizes nearly $12 in average data revenue from each of its monthly bill-paying CDMA subscribers. (See Sprint: Profits Up, Subs Stall.)
The backhaul situation is only going to be exacerbated as more services -– such as TV, video, and streaming music –- and data networks -- like mobile WiMax -- come online. Brown says that the pressure to support data traffic is leading many operators to increase investment in microwave radio backhaul because it is relatively cheap and easy to install quickly: "Microwave has undergone resurgence over the past few years and is a high-performance, reliable, and cost-effective connectivity option for cellular backhaul. As a rough estimate, 60 percent or more of the world's cell sites are connected by microwave, with many networks around the world having upwards of 80 percent of cell sites connected in this way. North America is a notable exception, with probably 10 percent or less of sites using this technology."
Brown argues that fiber is simply too expensive a solution for many operators:
"Getting fiber to a cell site solves a number of problems and costs a lot of money. Estimates vary for how many sites worldwide are connected by fiber, although it's likely less than 5 percent. It has always been hard to make the business case for trenching fiber, and given that revenue per cell site is flat and that mobile operators want more capacity for less money, there is little incentive for the incumbent fixed-line carriers to deploy this technology."
He notes, however, that hybrid network architectures are growing more interesting for carriers that wish to handle more data traffic while keeping a lid on the costs.
"Given some of the limits of packet transmission for cellular backhaul, there is substantial interest in the idea of hybrid architectures that would see delay-sensitive traffic sent over T1/E1 lines, with best-effort data is sent over some other IP access network, such as DSL, cable, or Ethernet. This way, some of the shortcomings of the technologies can be worked around."
This is leading to a new class of network device, Brown writes. "Given the costs of emerging data services; the diversity of base stations and interfaces installed at cell sites; the mix of best-effort and delay-sensitive traffic; and the requirement for network-based synchronization, there is an increasing need for dedicated cell site equipment to provide aggregation between the site and the backhaul network. Such devices may also be located at remote aggregation sites. These are typically 1U-sized pizza boxes with a mixture of T1/E1, OC-3/STM-1, Gigabit Ethernet, and Ethernet ports. They perform multiple functions, including grooming, traffic optimization, QOS marking, data offload, pseudowire encapsulation, and more."
Suppliers of this type of equipment profiled in the report include Carrier Access Corp. (Nasdaq: CACS), Celtro Inc. , Ceterus Networks Inc. , Kentrox LLC , NMS Communications Corp. , RAD Data Communications Ltd. , Sycamore Networks Inc. (Nasdaq: SCMR), and Verso Technologies Inc. (Nasdaq: VRSO). The presence of large, integrated telecom vendors such as Cisco Systems Inc. (Nasdaq: CSCO) and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) also brings credibility to the market.
On the microwave side, vendors such as Harris Stratex Networks Inc. (Nasdaq: HSTX) and NEC Corp. (Tokyo: 6701) are developing specialized aggregation equipment to extend the life of existing links and prepare carrier networks for the next big thing in microwave: adaptive modulation and wireless Ethernet transport.
— Dan Jones, Site Editor, Unstrung
The report, Mobile Backhaul & Cell Site Aggregation: State of the Art, is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.unstrung.com/insider.