Dark Fiber

Contributing Editor

“AT&T Mobility has found that one iPhone user typically generates as much data traffic as 30 basic feature phone users,” says ABI Research (News - Alert) analyst Nadine Manjaro.

That's one reason why third-generation (3G) networks sometimes struggle to keep up with demand, and why fourth-generation networks are on the way. A 30-fold increase in end user demand is tough to keep up with.

Mobile networks face constraints other than bandwidth, however. Mobile networks use radios. Radios have ports. And ports are used by applications that ping back and forth, even when not much actual bearer traffic is being consumed. Virtual private network connections and email, Facebook or other "update" operations don't require lots of bandwidth, but do occupy radio port capacity.

Still, radios are "tail circuits" that collect or deliver traffic that has to flow over the global backbone networks. That explains why ABI analysts predict worldwide revenues from leased backhaul circuits will double over the next 30 months. The growth will accelerates after 2012, resulting in a fivefold revenue increase between 2009 and 2014, for providers of backhaul bandwidth.

Network upgrades to support both WiMAX (News - Alert) and Long Term Evolution are part of the reason. “Operators might not deploy LTE immediately, but they know that before they do, they’ll have to upgrade their backhaul capacity,” Manjaro says.

ABI also predicts microwave backhaul, traditionally more popular in European markets than in North America, will exceed $8.5 billion in 2009.

The market opportunities generated by this growth in backhaul are spread around the backhaul equipment vendors and fixed line operators. Some backhaul infrastructure vendors like Ericsson, Alcatel-Lucent, and Nokia Siemens (News - Alert) Network will benefit from operators’ strong interest in carrier Ethernet solutions, says Manjaro.

Major microwave equipment vendors like Dragon Wave and Harris Stratex will also benefit from increased microwave adoption. And fixed-line operators such as BT, Embarq (News - Alert), AT&T, and Verizon Communications will develop new revenue streams by providing leased backhaul services, she says.

Even the business models for backhaul are in flux. “We have observed a movement towards backhaul as a managed service,” says Manjaro. “This enables mobile operators to focus on their core business, while guaranteeing a backhaul capacity matched to their changing traffic demands. BT provides that service to four of the top five European operators. In the United States, Embarq is moving in the same direction, and I think more cable companies will follow suit.”

Such moves parallel an increasing shift to sharing radio infrastructure. Though wired access providers generally consider control of those assets to be a valuable source of business advantage, mobile operators increasingly do not see ownership of radio ports, towers or perhaps even backhaul as providing differentiation or business advantage, at least when they do not already own wireline networks.