Mobile Backhaul's Great Present and Fabulous Future

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Btr Ftr Art Backhaul 7 31 12The cable industry's infatuation with providing mobile backhaul services to wireless carriers rolling out 4G is continuing. Indeed, it is picking up speed. And, for MSOs, the good news is that there is a long way to go.

"We are definitely seeing the cable operators going after the mobile backhaul opportunity," said Frank Weiner, the vice president of marketing for Cyan, a company in the software-defined network (SDN) sector. "It's a natural extension for them."

Industry insiders describe a long-term scenario in which revenues are flowing in now and, at the same time, a tremendous amount of work - and potential revenue - awaits in the future. This promising future is fraught with complexity and competition from a couple of sectors.

Andy Fuentes, a senior analyst at Visant Strategies, said the scenario is to start upgrading in the densest urban centers and methodically move to the suburbs and finally to the rural areas. Verizon, Sprint and AT&T have gone through a round of requests for proposals, and the process likely will repeat itself in an essentially never-ending cycle as technology evolves, he said. "The cable providers were part of most of those," he said of the first round RFPs. "They did the best with the Sprint RFPs."

At a high level, it can be said that a first wave of mobile backhaul upgrades is more or less complete. Expert observers suggest that these upgrades, like many first iterations of new technology, were essentially driven by immediate need and lack the features that wireless companies want to see in the longer term. In essence, the first wave of requests for proposals focused on adding needed bandwidth as the transition from 2G to high capacity 3G and 4G LTE networks took hold.

The next step, insiders say, will be a round of upgrades featuring more sophisticated electronics. More specifically, carriers want to see hardware and software that enables them to see what is going on in the network in real time. This is a key element of determining whether carriers are satisfying the service level agreements (SLAs) that are part of the agreement between the carriers and those transporting their data.

In addition, mobile carriers want flexibility. The massive increase in video has led to network utilization that is not as consistent and predictable as it was when all or most of the traffic was voice calls. In more instances, experts say, one cell site can be overloaded while one in relatively close proximity is running below capacity. The next generation of mobile backhaul gear will have features enabling backhaul capacity to be divvied up in a way that makes use of the aggregate available bandwidth.

The best news of all for cable operators is that the transition to 3G and 4G cell sites is nowhere near complete. Lots of work remains - at least for the industries that prove capable. Barry Zipp, the industry marketing director for Ciena (NASDAQ:CIEN), said only a bit more than half of the existing cell towers have transitioned from 2G to 3G or 4G. The cable industry, he estimates, now serves 7% to 8% of all cell towers. The remainder of the towers will be upgraded beyond 2G by 2015, he estimates. The cable industry, he said, will double its percentage to about 15%.

The cable industry is battling players in two other food groups for supremacy in the mobile backhaul segment. One, of course, is the wireline carrier community. The second group now is known as the alternate access carriers; many may remember them by their earlier moniker, competitive local access carriers (CLECs).

The experts say the actual technology the three sectors offer is roughly the same. The business case each puts on the table, however, is different. For example, wireline carriers in many cases are associated with wireless firms. This could make a particular wireless carrier more or less likely to use a specific wired company depending upon whether they are on the same or competing corporate teams. Ciena's Zipp said the alternate access carriers and MSOs tend to be more aggressive than the incumbent wireline operators on pricing and in willingness to invest in technology.

For the most part, the technology challenges don't change for each of the players, despite the fact that they have different legacy technologies. "The obstacles are the same for all players ... everyone has to deal with the complexities of constructing fiber plant in metropolitan areas, routing, permitting," said Tom Bludau, the marketing development manager for 3M's (NYSE:MMM) Communication Markets Division. "Because ILECS have been serving business customers, they might have existing plant in the area. But it all depends on the situation."

The bottom line is that the commercial services segment overall and the mobile backhaul element of it continue to represent a shining possibility for the cable industry. Perhaps the best news is that it is a relatively young segment, and opportunities - which, of course, are no guarantee of success - will exist for years to come.

"I think it's a pretty exciting thing that will continue for three, four or five years and who knows how much further beyond that," said John Dahlquist, the vice president of marketing at Aurora Networks. "The whole cell tower backhaul world is growing so rapidly, and the cable operators are perfectly positioned with fiber. Wherever the cell towers are, operators typically are not too far away with their fiber."

Carl Weinschenk is the Senior Editor for Broadband Technology Report. He can be reached at carl@broadbandtechreport.com.
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