The best session of the Lightreading Ethernet Conference covered Wireless Base Station Backhaul. Patrick Donegan of Heavyreading and the panelists presented cohesive data and their take on which way the market would head. I gained a new perspective on the opportunity wireless backhaul presents.
The fundamental problem wireless carriers face is the underlying shift from voice dominated to data dominated traffic. Voice is growing linearly, while data is likely to grow exponentially. If leased copper T1′s are used for backhaul, their backhaul costs will scale linearly as capacity is added.
Understanding the demographics of the problem are crucial to uncovering the opportunities. HeavyReading presented the following:
Mashing up additional data from the panelists along with my own opinions yields the following:
Carriers don’t like copper T1s because of the high cost per bit but they will trust them with their lives. Given traffic growth is ‘best-effort’ data, carriers are looking at running parallel networks where voice backhaul is on reliable T1′s, and data is moved over to Ethernet. This caps their high cost T1 copper expenditures and moves the growth to a lower cost backhaul method.
Europe does not appear poised to change in the near term, other than a move from TDM (E1) based microwave to Ethernet based microwave. One company I plan to look at is Ceragon Networks (CRNT). They would appear to benefit from this trend though the company if far from ‘undiscovered’. They OEM their products through Nokia. Other suggestions are welcome.
North America is much more interesting. The current reliance on expensive copper T1′s as a backhaul technology will simply have to end, the only question is how it changes.
Symmetric DSL backhaul is one solution, but recent forbearance rulings by the FCC force me to question whether ILECs will offer this service at a competitive price. Hatteras, Actelis and others who are pure-play SDSL vendors count wireless backhaul as a key business driver. I think the FCC just drove a stake through their heart. Comments welcome.
I have heard that a major US wireless carrier (Verizon, I believe) is moving to microwave based backhaul in the unlicensed 5GHz spectrum. I don’t know who is providing the equipment, perhaps Harris-Stratex (HSTX) ? Fibertower (FTWR) provides T1 equivalent backhaul using 30GHz microwave but looks like a classic infrastructure cash sinkhole. Perhaps it will be saved by a combination of monopolized DSL and an urgent need for cheap data backhaul.
Will the big tower providers, Crown Castle (CCI) and American Tower (AMT), evolve to provide Ethernet ISP services in addition to hard infrastructure? It would make sense to me that either of these companies could be in the backhaul business.
From a silicon perspective, the opportunity size is simply not that big. There seems to be a legitimate hesitancy on the part of carriers to move voice T1′s to circuit emulation because the risks outweigh the potential rewards. This puts a dark cloud over circuit emulation as a big chip market. Ethernet over PDH could have more legs, particularly if the ILECs price T1′s to margin to fend off competing technologies. Unfortunately there are only 400k copper sites in North America; assuming a few chips per site and $50 a chip yields <$100m total market over many years. Silicon vendors who are banking on wireless backhaul as their big market are likely to be disappointed.
Europe and Asia appear to be poised for evolutionary change with high bandwidth Ethernet based microwave and straight fiber, while North America will see a revolutionary change away from TDM copper to microwave and potentially symmetric DSL. The opportunity appears to be on the services side, and perhaps a focused equipment provider. The silicon opportunity here is relatively small.