Operators Spent Nearly US$20 Billion in Mobile Backhaul Charges in 2006

Migration from TDM circuit to IP packet switching among mobile carriers has been anticipated since the debut of 2.5G data services in the mid-1990s, but exploding high speed data traffic has finally forced the migration to begin.

And good timing, too, says Infonetics Research in its latest report, because mobile operators are feeling the pain of expensive mobile backhaul costs, having shelled out US$19.5 billion to wireline service providers in 2006 alone.

"To handle all the voice, video, and data traffic created by the 2.5 billion mobile subscribers worldwide, operators are spending like crazy for more bandwidth," said Michael Howard, principal analyst of Infonetics Research.

"On the bright side, they'll get a lot more for their money in the future with next-gen equipment like microwave and IP/Ethernet, which can handle 2G/3G voice simultaneously with 2.5G/3G/3.5G data and video traffic streams, and at a fraction of the cost of traditional wireline backhaul using PDH leased lines (and ATM over PDH)," Howard added. "These improvements will allow mobile operators to slowly increase their capital investment while rapidly adding more subscribers and higher capacity services."

As noted at Infonetics' New Options for Mobile Backhaul conference at the CTIA Wireless 2007 show last week in Orlando, some operators are already testing and trialing Ethernet backhaul, and major Ethernet deployments are expected to begin by late 2007 and will be in full swing by 2008.

Report Highlights

• Worldwide mobile cell site backhaul equipment grew 13% to $3.9 billion between 2005 and 2006 and is forecast to grow to $6.0 billion by 2010
• Worldwide mobile backhaul installed cell site connections grew 24% 2.3 million in 2006, and will grow strongly through 2010 - Microwave radio makes up 80% of total mobile backhaul equipment sales and 54% of total connections in 2006
• The cost per mobile backhaul connection for leased lines PDH and ATM over PDH is about two and a half times that of new wireline connections (Ethernet, DSL, cable, PON), now and in 2010
• Ethernet makes up just 1% of total mobile backhaul equipment revenue in 2006, but is forecast to soar to $2.5 billion by 2010, at which time it will represent 41% of the market
• EMEA--with Europe, Middle East, and Africa all contributing--accounts for 43% of worldwide mobile cell site backhaul equipment revenue in 2006; Asia Pacific accounts for 30%, CALA 21%, and North America 6%

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Posted to the site on 4th April 2007