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 What
is the estimated market size for cellular backhaul and why is it
important to Cable?
There are approximately 200,000 cell sites in the U.S.
generating an estimated $2B - $3B per year in backhaul revenues. As
wireless carriers continue to roll out high bandwidth services, we see
this market growing since the demands for backhaul bandwidth
correspondingly increase.
With 95% of the market currently served by copper-based T-1 lines today,
wireless carriers are facing some key challenges. Under this
infrastructure, increasing backhaul bandwidth can be troublesome –
doubling the bandwidth can mean doubling the cost, a cost increase that
is not supported by proportional increases in wireless subscriber
revenue. In many cases, the infrastructure may not support the new
bandwidth and interface demands at all.
This is where Cable comes in - there is a significant opportunity for
Cable to gain meaningful share in this growing market by virtue of the
industry’s bandwidth rich, fiber-based infrastructure. Cable can help
wireless carriers solve their backhaul bottleneck, while capitalizing on
a new source of revenue beyond residential services.
Where is the traffic being hauled – from where to
where?
The backhaul service provides a means for the wireless
carriers to get their cellular traffic from the cellular towers to
“Mobile Telephone Switching Offices,” or “MTSOs” – the wireless
carrier’s Headend, if you will. Physically, this means the Cable
operator will locate their equipment at the cellular tower to connect
traffic to the Cable Headend or Hub. From there, Cable can hopefully
leverage their existing Metro network to move the traffic to the MTSO.
They may connect to the MTSO simply via a fiber connection (GE or OC-x),
co-locate their equipment in the MTSO, or place their equipment at a
mutually agreed upon co-location where the service hand-off takes place.
What techniques or technologies are currently used to
provide cellular backhaul services?
The majority of services are provided over copper-based T-1
lines today. The T-1 infrastructure has traditionally been an excellent
medium to provide this backhaul – the infrastructure is ubiquitous in
the US and it is natively TDM. Wireless carriers could confidently
design their wireless network around their voice capacity needs, while
counting on T-1s being close by to connect their cellular towers.
But cellular traffic has changed considerably in its voice/data traffic
mix over the last several years. Have you ever seen the person next to
you surfing the web with a cellular wireless card on their laptop? If
you’ve ever used one yourself, you know the freedom and convenience that
this mobile data technology offers. Wireless carriers see this, the
revenue benefits, and the competitive pressures to provide these
services and are rapidly evolving their networks to 3rd and 4th
generation technologies – 3G and 4G – to support them. As these
technologies roll out, T1 is no longer the ideal fit. The infrastructure
doesn’t scale easily and doesn’t natively support Ethernet – a challenge
especially with 4G.
How is a cable-delivered offering different or better?
Cable really shines with a fiber-based offering. The
industry’s substantial investments in HFC have pushed fiber deep into
populated areas following a similar geographic distribution as cell
towers - in some cases we’ve estimated that cable nodes have a 2:1
coverage ratio over cell towers.
The good news for wireless carriers is that all MSOs already deploy
fiber-based commercial services. Many can provide a reliable, scalable
service that offers T1 and Ethernet interfaces today. That means they
can really help the wireless carriers by enabling the advanced
applications and services that the mobility portfolio is driving to get
toward.
What are the challenges associated with getting into
cellular backhaul?
One is that cell backhaul services are not just best-effort.
While the base stations are going IP, TDM will be around for a while.
From a network and infrastructure perspective, the cable operator needs
to assure they can provide these services with strict SLAs. Adhering to
strict SLAs means high QoS, to support jitter and latency sensitive,
“nailed up” services. Often times there are resiliency requirements as
well.
What are the benefits of backhaul, for cable
operators?
From an economic perspective, there’s no doubt – cellular
backhaul is a big market. What makes it particularly appealing is that
the majority of the potential revenue comes from 3 or 4 major carriers,
who sign up to large, long-term million-dollar per month contracts for
several years, guaranteed. It is solid, low-churn revenue. And, once a
cable operator proves credible in providing reliable services in one
cellular market for a specific wireless carrier, that relationship can
be extended into other markets.
From a strategic perspective, wireless backhaul gives MSOs the
opportunity to be share-takers in a lucrative source of incremental
revenue and fiscal growth, beyond the core residential services. Plus,
the infrastructure built out to serve that initial cellular backhaul
customer can be leveraged for high margin revenues in the future –from
additional cell sites at the same location, and from small-medium
enterprises within the same serving area.
Operationally, there is no doubt it is achievable. We’ve worked with
many systems that are experiencing tremendous successes with cellular
backhaul. It’s partly their HFC assets, and partly their local presence.
Because cable operators can put engineering, support and fiscal control
at the local level, they’re in a good position to be flexible. This
matters when negotiating with the mobile carriers, to truly maximize the
value enjoyed by both parties.
What are the benefits off cable-delivered backhaul to
cellular companies?
From the wireless carrier’s perspective, cable operators truly offer the
means to ease the threat or burden of backhaul OPEX growth as new
wireless services are rolled out – they can get the carriers off the
cost curve and scale limitations of T-1s. MSOs can come in at a matched
or even lower cost with a more favorable cost curve, while offering a
more reliable, scalable, future-proof infrastructure, today.
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