MNO backhaul challenges

There’s been a lot of discussion about the impact data-centric devices (smartphones, Apple iPads, netbooks etc.) are having on mobile phone networks. High volumes of data traffic are stressing mobile networks and MNOs have responded by introducing additional capacity in the form of picocells, femtocells and Wi-Fi hotspots to ease some of the data load. MNOs have also taken steps to dampen down demand through the introduction of tiered data pricing models (you pay for what you use) and data usage caps.

Despite these measures, backhaul networks have come under strain and while in the past additional backhaul costs were offset by incremental voice revenues this relationship has broken down as the revenue per bit derived from data services is significantly lower than that derived from voice. So as they look to boost backhaul capacity to handle the explosion of data traffic, MNOs are having to find new cost-effective solutions.

The chart below shows the key MNO requirements from a backhaul network and the compatibility of available technologies. The key driver is the need to handle high levels of data traffic with scalability to meet future growth. And as the typical downlink/uplink ratio for data traffic backhaul is 70/30, MNOs require the flexibility to tailor asymmetric data rates to meet network flows. Fortunately MNOs can now trust IP/Ethernet to cope with the timing and synchronisation issues associated with mobile networks as they will need IP/Ethernet to handle the high air interface data rates associated with 4G/LTE.

Finally MNOs are looking for lower CAPEX and lower OPEX in their backhaul networks as they offer competitive services to satisfy the cravings of their data-hungry customers.

 

Wi-Fi: Why Now? (Answer: A £2Bn saving for UK MNOs)

 

The mobile data capacity crunch is now a reality. A year ago we predicted that in major metropolitan areas mobile data demand would outstrip supply during 2010. The arrival of tablet computing in the form of the Apple iPad (and others) as well as the continuing adoption of smartphones has accelerated the demand for mobile data. With HSPA networks struggling to cope with this surge in demand and UK MNOs waiting on the availability of more spectrum  (and appropriate 4G technology to be able to use the spectrum), we think that the time for Wi-Fi hotzones is here. Wi-Fi hotzones could delay the requirement for UK MNOs to invest £2Bn in network CAPEX in the period 2011-2014.

In Dec 2009, we carried out a mobile data supply and demand study looking in detail at London. We concluded that London would suffer a network capacity issue during 2010 (you can download this research from our website). Since our study, demand has accelerated with the continuing adoption of mobile data enabled devices such as the Apple iPad and smartphones in general (which not only have 3G but also Wi-Fi embedded).

Our assertion is that Wi-Fi based WLANs and in particular next generation 802.11n products from vendors such as Ruckus Wireless, Cisco and Aruba Networks will make wider hotpots i.e. hotzones a commercial reality. With MNO networks struggling to cope with demand for mobile data and the timing for UK spectrum auctions for 4G still not clear (most likely in early 2012 for 2.6GHz), it is time for MNOs to capitalise on tighter integration with larger scale outdoor and indoor Wi-Fi based hotzone networks.

Our further modelling reveals that MNOs could delay a circa £2Bn CAPEX investment in network upgrades in 2011-2014 by leveraging lower cost Wi-Fi based hotzones. We believe that MNOs will nevertheless be compelled to acquire further spectrum in upcoming Ofcom auctions and invest in the region of £3Bn in spectrum acquisition (based on benchmarks from recent similar auctions in Germany and India).

Moreover, we are bullish on white space and cognitive radio. If the regulators get their act together, there is every chance that Wi-Fi based on white space could become the next big thing. We will write more about this topic in the future.