[Satellite News 03-29-11] The combination of rapid growth in network traffic and slow growth in revenue is squeezing mobile network operators’ profit margins, according to a research report from global telecoms, media and technology adviser Analysys Mason, released March 29.
    In the report, “The Cost of Capacity: Mobile Backhaul Worldwide,” Terry Norman, Principal Analyst at Analysys Mason urged operators to design their network roll-outs to reduce costs and increase network capacity. “Operators will be able to keep up with their customers’ demand for data in the short term, but thirty-fold growth in data volumes by 2015 will drive most operators to increase their backhaul capacity. Operators can achieve this in two ways – by leasing dedicated lines from incumbent and some alternative operators, or by building their own fiber or microwave backhaul.”
    Analysys Mason said that well-designed radio access systems, which include a backhaul network connecting base stations to the core of a mobile operator’s network, is becoming an important consideration in an operator’s radio access strategy.
    “Growth in the take-up of devices and technologies that offer an improved user experience, such as smartphones and tablets, will increase the amount of data that customers consume,” said Norman.
    O3b Networks CEO Steve Collar told Satellite News that the company is well aware of the importance of backhaul markets as its business model focuses on the “middle mile” and not on selling direct access to the customer. “There is a big difference between broadband and connectivity between Europe and North America and the developing world. One of the biggest problems is the backhaul. Yes, fiber and wireless are there. I think we need to think differently about the way we serve the developing world,” he said. “The demands for bandwidth are high. O3b has an implicitly mobile system. We can respond to fiber cuts, emergency situations. We will be using those attributes for a number of different applications. We are selling into countries that are fibered if not more fibered in Africa. We don’t compete with fiber. The deployment of networks in Africa will spur the needs for applications.”
    Analysys Mason’s research shows that backhaul costs are forecast to increase by a factor of ten by 2015, which could significantly reduce operators’ profit margins. The firm also warns that capacity constraints in backhaul networks are threatening to constrict the flow of data to and from the customer. These trends are driving operators to review their backhaul strategies and equipment suppliers to develop transmission network technologies that address these issues, according to Norman.
   “There is no universally applicable backhaul solution. Operators must review their backhaul improvement strategies on a region-by-region and country-by-country basis to identify the optimal solution for each market,” he said. “The initial cost is not the only overriding factor. Variables such as security, return on investment timescale, traffic growth rate and the availability of local infrastructure must contribute to the overall backhaul strategy. Operators must calculate a fair and accurate ‘total cost of ownership’ model for backhaul costs.”