Cellular Backhaul Capital Expenditure to Reach $23 Billion in 2012

Cellular backhaul, which today accounts for a CAPEX just in excess of $14 billion, is expected to reach $23 billion by 2012, according to a study just released by ABI Research. By then, Eastern Europe will have replaced Western Europe as the leading backhaul spender, followed by the Asia-Pacific region.

"The persistently high cost of backhaul ? in both capital investment and operating expenditure ? is a top-of-mind issue for mobile operators," says senior analyst Nadine Manjaro. "Today, most networks across the globe are still using T1 for backhaul, but in the next five years there will be a significant migration to Ethernet-based solutions and microwave. Microwave will be the dominant backhaul technology in four of the five regions studied. However, North America will migrate to Ethernet-based solutions and Latin America will continue to depend on T1. In North America, the high cost of real estate to mount antennas and the high cost per megabit will impact microwave deployments. Service providers should start shaping their strategies based on that assumption."

One trend that will help reduce microwave cost significantly is a move away from point-to-point architectures towards point-to-multipoint designs. "Customers are going to be looking for point-to-multipoint solutions," says Manjaro. "Equipment vendors should take note, and focus their efforts accordingly."

Vendors that have been alert to this trend include Cambridge Broadband, Alvarion, and (although more focused on WiMAX), Redline Communications.

Certain predictions about the direction of this market seem unlikely to be fulfilled in the short term. Some people have predicted that cable would play a major backhaul role, but it has not turned out to be very significant. Others have been touting IP-based solutions, but ABI Research's analysis has not revealed much movement in that direction as yet.

Instead, says Manjaro, "Applying some of the techniques that are common in wireless infrastructure to backhaul solutions will help to drive down costs: that's where the innovation is coming from. Software-defined radio (SDR) and Discrete Multitone (DMT) are just two of the emerging technologies being used to improve network performance while reducing cost."

Posted to the site on 30th August 2007