With the introduction of 3G and 4G mobile services, mobile data usage has increased by 250 per cent over the past two years. This trend has had its highest impact on telecom backhaul, which is forcing operators to revise their strategies. AT&T, for example, in one of its filings with the Federal Communications Commission related to the failed attempt to acquire T-Mobile USA, cited capacity constraints as the chief reason behind the merger. The US-based company noted that smartphones consumed 24 times the data of conventional handsets, and that the overall mobile data consumption on its network increased by 8,000 per cent between 2007 and 2010.

Cisco’s Visual Networking Index (VNI) has reported that global mobile data traffic increased by 2.3 times in 2011. In addition, the VNI reports that smartphones account for only 12 per cent of the global handset market, but for 82 per cent of the global handset traffic. As the share of smartphones grows, Cisco expects the increase in mobile data traffic to grow by  18 times between 2011 and 2016.

To address the need for higher capacity, operators across the world are revising their backhaul strategies. However, in doing so, mobile operators are facing the key challenges which are also the drivers of bandwidth demand. These include enhancing coverage in dense urban, suburban and rural areas, and in markets like the Middle East where prepaid services are dominant, value-added data services need to be geared to lower-speed bandwidth. Another challenge faced by operators is that the exponential increase in data traffic may not necessarily translate into higher data ARPUs.

These challenges mean that service providers need to offer scalable bandwidth, but at tariffs that are in sync with revenue expectations.

Therefore, carriers across the world are building a scalable all-IP backhaul. According to Infonetics Research, the global mobile backhaul equipment market grew by 8 per cent to $7.4 billion in 2011. IP/Ethernet equipment accounted for more than 90 per cent of all mobile backhaul equipment investments. Also, a total of $39 billion will be spent on mobile backhaul equipment during 2012-16.

Emerging technology trends

Operators can select from four mediums – copper, fibre, microwave and satellite – to meet backhaul requirements. However, depending on the terrain, budget, data demand and customer concentration, an operator’s backhaul strategy comprises a mix of these mediums, though in different proportions for different carriers.

Microwave continues to be the most widely deployed backhaul technology globally. According to Infonetics Research, about 55 per cent of the world’s physical mobile backhaul connections are currently on microwave, and more than half of all mobile backhaul equipment revenue in 2011 was contributed by dual-time division multiplex (TDM)/Ethernet microwave and packet-only microwave equipment.

The use of copper networks, which constitute less than 20 per cent of all backhaul deployments, is declining due to their limited capacity support and inability to scale up in a cost-efficient manner. Fibre is increasingly replacing copper-based wireline connections but not microwave.

Mobile data growth is generating strong demand for fibre-based backhaul and carriers are increasing investments to capture this opportunity. According to iGR, a market research consultancy focused on the wireless and mobile industry, the demand for mobile backhaul in the US market would witness a compound annual growth rate (CAGR) of nearly 58 per cent between 2011 and 2016, with the overall demand growing by 9.7 times. Fibre backhaul, which is the preferred medium for providing mobile backhaul, is expected to record a CAGR of nearly 85 per cent during the same period.

Though telecom carriers continue to deploy 3G and 4G networks in cities which are linked to terrestrial infrastructures, providing high speed broadband services in remote areas remains a major challenge. In these areas, mobile backhaul via satellite has emerged as a cost-efficient medium to deliver voice and data services.  The high cost of terrestrial infrastructure in the Kenyan telecom market can be attributed to the low density of network users. As a result, satellites still serve as a reliable backup system for international services, especially during events that could damage submarine network systems. This reflects in the network strategy of Kenya’s leading telecom operator, Safaricom – communication satellites play a critical role in mobile backhaul and wireless network communications, especially in the northern part of the country.

Another major player in Africa and the Middle East, the MTN Group relies on satellites and mobile backhaul to serve West Africa.

Migration to Ethernet

While circuit switched transport technologies like asynchronous transfer mode (ATM) and TDM have been in use for decades, the transition to an all-IP/ Ethernet backhaul is gaining traction with mobile network operators moving towards 4G technologies.

According to Infonetics Research, over 100 network operators are deploying IP/Ethernet-only backhaul to carry all traffic, including data and voice. Between 2009 and 2010, the share of network operators planning to use all-IP/Ethernet backhaul, as opposed to hybrid or TDM networks, had increased from 45 per cent to 65 per cent.

Research firm Ovum reports that by 2015, 88 per cent of backhaul connections will be carried over Ethernet.

A key reason for this transition is that the costs associated with carrying voice and data from cell sites need to be reduced. And it has been estimated that the cost per bit for carrying this traffic via Ethernet is significantly lower as compared to that on TDM. Infonetics estimates that Ethernet backhaul connections are six times cheaper than their TDM equivalents.

Sharing backhaul

The practice of operators sharing their backhaul facilities is gaining traction. Different parts of the network can be shared and several business models can be used for sharing. The most common network sharing practice is site and backhaul sharing as it is less business sensitive than radio or core sharing.

While capacity sharing on fibre is very common, sharing is less common for microwave. Several countries have a national fibre backbone, which is shared by multiple service providers. This model is gaining adoption, especially in countries with large geographies and low ARPUs.

Demand for backhaul T&M

The increasing use of mobile devices, emergence of technologies like long term evolution (LTE) and Wi-Max, and the trend of social networking have resulted in a substantial increase in mobile data usage. Operators are struggling to manage this network traffic growth, and are migrating to backhaul connections.

This scenario presents significant opportunities for the global mobile backhaul test and measurement equipment market. According to Infonetics, the global mobile backhaul test equipment market is expected to witness a CAGR of 12.1 per cent during 2011-14.

However, as the standardisation of telecom equipment is changing rapidly, interoperability could pose a challenge to the growth of this market.

Conclusion

Clearly, the selection of backhaul technologies is key to an operator’s success. While fibre could be the optimal backhaul technology from the performance perspective, several aspects need to be considered while preparing a backhaul strategy. These include existing technologies, cost (capex and opex), traffic growth and user profiles.