Mobile Backhaul Evolution: Jennifer M. Pigg April 27, 2010

Mobile Backhaul Evolution
Jennifer M. Pigg
April 27, 2010
© Copyright 2010. Yankee Group Research, Inc. All rights reserved. Mobile Backhaul Evolution April 2010 Page 1
Agenda
Drivers: Over the Edge

Cell Site Bingo
Ethernet Everywhere
Media Money
Conclusions
Mobile Devices 2010
Which of the following devices do you personally own or use? (n=1,267)
Laptop 47% 12% 7%
Mobile phone 48% 9% 6%
Smartphone 27% 5% 5%
USB modem 24% 6% 6%
Wireless data card modem 12% 3% 2%
Netbook 9% 2% 1%
Mobile hotspot router 7% 1%

0%
0% 10% 20% 30% 40% 50% 60% 70%

Percent of respondents
1 2 3+
Future Smartphone Purchase: Likelihood Q1 2009
How likely is it that your next personal mobile phone will be a multimedia handset
with a data plan (such as the iPhone, BlackBerry Storm, G1, Nokia N97, etc.)?
100%
10% 9% 7% 5% 6%
11%
90% 10% 17%
11% 12% 26%
13% 15%
80% 14% 37%
17%
70% 24% 26%
26%
33% 21%
60% 31% 28%
Percent
of 50% 29% 27%
25% 24% 26%
respondents
40% 30%
20% 17% 23%
30%
19% 21%
20%
32% 34% 33% 12%
25% 27% 24% 8%
10% 18%
11% 8%
0%
13-15 16-17 18-19 20-24 25-34 35-44 45-54 55-64 65+
(n=221) (n=164) (n=133) (n=331) (n=671) (n=745) (n=664) (n=505) (n=426)
Very likely Likely Unsure Not likely Very unlikely

Base: People who own a mobile phone
Future Smartphone Purchase: Likelihood Jan. 2010
How likely is it that your next personal mobile phone will be a

a smartphone with a data plan?
100% 5% 1%
8% 7% 5% 6%
9% 12%
7% 18%
90% 10% 9%
13% 27%
15% 16%
80% 16%
30% 21% 23% 17%
70% 24%
26%
60% 28%
Percent 33% 34%
21%
of 50% 27% 25%
25%
respondents 28%
40%
29% 18% 20% 20%
30%
20% 41% 37% 37% 3%

34%
28% 25% 25%
10% 22%
16%
0%
13-15 16-17 18-19 20-24 25-34 35-44 45-54 55-64 65+ (n=74)
(n=73) (n=46) (n=44) (n=104) (n=209) (n=239) (n=190) (n=117)
Very likely Likely Unsure Not likely Very unlikely
Base: People who own a mobile phone
More Emphasis on Mobility for Internet Connectivity
n 2007 = 2,500
n 2008 = 2,535
n 2009= 13,002 (6,338 for MP3 Player) Source: Yankee Group Anywhere Consumer: 2008 EU Web/Data Survey
Time Spent Watching Video Q1 2009
How much time do you spend watching video on …?
100%
90% 14%
6%
7%
80% 5%
8%
14%
70% 14% 23%
60% 13%
29%
Percent
of 50%
respondents 14%
15% 13%
40% 35% 25%
9%
10%
63% 11%
30%
8%
43% 19%
20% 17% 4%
16%
28% 7%
24%
10%
13% 13% 11%
9%
0%
TV (live TV) TV (VOD) TV (programs Online (on a Video game Handheld game Digital audio Mobile phone
(n=1,132) (n=368) recorded on computer) console (n=689) console (n=408) player or MP3 (n=1,079)
DVR) (n=511) (n=1,204) (n=581)
At least once a day At least once a week At least once a month Less than once a month
Base: People with each device
Time Spent Watching Video Q1 2010
How much time do you spend watching video on …?
100%
4%
90% 5% 15%
7%
80% 13% 8%
14%
70% 26%
60% 13%
34% 17%
Percent
12%
of 50% 14%
respondents
24% 13%
40% 37% 16% 8%
74%
10%
30%
20% 18% 4%
41% 18% 6%
20% 9%
31% 5%
10% 20% 8%
16% 12% 16% 14%
5%
0%
TV (live TV) TV (VoD) TV (programs PC/laptop Video game Handheld Digital audio Mobile phone Retail set-top
(n=1,231) (n=371) recorded on (n=1,244) console game console player or MP3 (n=994) box (n=764)
DVR) (n=606) (n=800) (n=473) (n=593)
At least once a day At least once a week At least once a month Less than once a month
Base: People with each device
Agenda

Cell Site Bingo
Ethernet Everywhere
Media Money
Conclusions
Operational Cost Structure for Mobile Must Change
Where Are the Costs?
• 80% of network operational costs for

the MNO are attributable to the RAN
•But… the RAN is continually changing:

TDM Packet
SONET/SDH Ethernet
TDMA/CDMA UMTS/GSM/LTE
MNO A MNO A+B+C
• A single MSO can be running three

base stations from a cell site:
• GSM – Voice, low-speed data
• EDGE – Higher-speed data
• UMTS – Very high-speed data
Projected Cell Site Growth Worldwide
Number of Cell Sites in 2009 Five-Year CAGR
United States 245,100 7.5%
South America 119,880 8%
Europe 601,020 6%
Middle East and Asia 1,219,000 6%
Africa 59,400 8%
Australia/New Zealand 33,075 5%
A Brief History of Cell Site Penetration in the
U.S. and What Has To Change
• The voice offload model was the safe
solution in 2008, but service providers, 300
particularly wireline, cannot support
parallel backhaul models and the 264.7
resulting opex for another five years. 250

2009 value = 245
• Service providers are demanding strict 200 183.7
SLAs, which are essential for IP voice
and converged voice/data/video mobile
networks. 150
• One-way jitter or 1-3 ms
• 104.3
One-way latency 3-5 ms
• 99.999% availability 100
• Multiple SLAs and flows per user site
50 U.S. Cell Sites
• The MNOs are looking to low-cost, 22.7 (in 000's)
5.6
simple, ubiquitous Ethernet for next- 0.913
generation backhaul via dark fiber, 0
MPLS, or SONET today, and MPLS-TP 1985 1990 1995 2000 2005 2010
or PBB-TE in 2010 and beyond.
Source: CTIA and Yankee Group, 2009
How Much Backhaul Do You Need To Support LTE?
50 Mbps Backhaul in two years
10 Mbps backhaul 2009
The Backhaul Challenge
• Yankee Group research shows that
mobile network operators in the U.S.
spent $6.7 billion on backhaul in
2009. This was for 245,000 cell sites
supporting, on average, just under 10
Mbps of backhaul capacity.
• Globally, over $25 billion was spent

in backhaul services in 2009.
• In 2012, there will be more than

300,000 cell sites in the U.S., each
supporting, on average, 100 Mbps. If
we were to just keep throwing T1s at
the problem, this would result in a
backhaul bill of $82 billion. The
monthly average cost per site, per
mile, would be about $23,000,
compared to today’s average of
$2,100.
Agenda

Cell Site Bingo
Ethernet Everywhere
Media Money
Conclusions
Ethernet: Compelling Economics
• Ethernet service average

• $40 per month per Mb
• T1/E1 (1.54/2.048 Mbps) average cost

• $200-$800 per month
• U.S. average slightly over $300 per
month
• 3G cell sites have smaller coverage

footprint than 2G
• More cell sites with higher backhaul
speeds mean greater impact on opex
• Ethernet bandwidth can be allocated

remotely
• Increments as small as 1 Mb
• No lag time, no on-site visit
Example: 500-Node Network
10 Mbps or Backhaul Cost Backhaul Cost Backhaul Cost

equivalent to Per Month: Per Month: Per Year: 500
500 sites One Site 500 Sites Sites
7 T1s @ $300
per month per $2,100 $1,050,000 $12,600,000
T1
Ethernet @
$75 per month $750 $375,000 $4,500,000
per Mb
Ethernet @
$40 per month $400 $200,000 $2,400,000
per Mb
For a 500-node network, Ethernet saves the MNO

between 65% and 80% in bandwidth costs per year
Ethernet Mobile Backhaul Services
• Requirements:
• Synchronization
— ITU SyncE
— IEEE 1588
• Ethernet OAM
— EEE 802.1ag Connectivity Fault Management (CFM)
— ITU Y.1731 performance monitoring
• Emulation support: pseudo-wires

• Support for not only TDM circuits, but frame/cell services
• Ethernet mobile backhaul architecture alternatives

• Virtual private LAN service (VPLS)
• Multiprotocol label switching (MPLS)
• Ethernet transport
• All connect to the MPLS core network
Poll
How far into the Mobile Network will

we push MPLS?
Agenda

Cell Site Bingo
Ethernet Everywhere
Media Money
Conclusions
Backhaul Media Breakdown: 2009
100%
90%
80%
70%
60% Microw ave
50% Fiber
40% Copper
30%
20%
10%
0%
North America Europe Worldw ide
Regional Considerations as Drivers
• Availability of spectrum
• License costs
• Regulatory environment
• Labor costs
• General accounting practices
• Availability of fiber and copper

infrastructure
• Ability to hold onto the copper

infrastructure
Lease vs. Own Strategies
• Incumbents: Leverage existing resources where possible, deploy new

where necessary
• Challengers: Capital constrained and limited footprint; build out

microwave or lease copper and fiber facilities
• Rural (both incumbent and challenger): Greater reliance on microwave

backhauling to fiber rings where available
A Rural Challenge
• What we expect to see in

innovative implementation while
waiting for the impact of the
Broadband Regulatory Act
• Daisy-chain and Tree microwave

implementations giving way to
more stable, recoverable ring
implementations
• High-speed copper DSL

implementations supporting
increased femto and Wi-Fi
implementations
MNO Dominant Backhaul Strategies
• Leased Lines
• Vodafone UK • T-Mobile
•3 • SFR (France)
• Microwave
• Orange • Paltel (Africa)
• Clearwire Telecom (Middle East) • Hi Link Telecom (Middle East)
• Sprint (Canada) • WIND Mobile (Canada)
• Maxis (Malaysia) • Digicell
• Fiber
• Verizon • PTC
• DoCoMo • China Mobile
MNOs have a dominant, but not exclusive, strategy
Copper
• T1s widely available
• DSL targeted at mobile backhaul from many including: ALU, Actelis,

Hatteras, Positron
• As speed increases on the copper, four things have been common in the
past:
• Move to asymmetrical send/receive speeds to give more bandwidth to
downstream data
• Increase the number of copper pairs
• Increase the likelihood of electromagnetic fields (EMF) interference impacting
other pairs in the cable
• Pairs had to be conditioned pairs
• Despite the news of its demise, copper technology has improved to the
point where it is a viable, robust, available and inexpensive solution for
mobile backhaul
Copper (cont.)
• Actelis just introduced a solution offering 20 Mb over 2 pair
• Reduced pairs means reduced hardware costs, footprint, increased

density per rack unit
• Will benefit from femto growth
• Does not sacrifice EFM performance, i.e., maintains ANSI T1.417

compliance
• In a lab test of “DSL Phantom Mode” this month, Bell Labs achieved
downstream transmission speeds of 300 Mbps over distances up to 400
meters (or 100 Mbps at 1 km) on a single pair. Will not emerge as a
product until 2012
Poll
How long will it be before we have no

more than 5 percent of base stations
connected via copper backhaul?
Trenching Fiber
• Costs include: right-of-way, construction, site reconstruction, fiber

cable, connectors
Cost Per foot Per mile

Rural $12 $63,360
Metro $30 $158,400
Urban $42 $221,760
Microwave Costs
$4k to $50k depending on capacity

Microwave backhaul systems
and degree of redundancy
$4k to $10k per link based on
Antennas, cable and power antenna size, radio configuration
and tower height
Installation $3k to $8k including cabling, etc.
Not trivial – 5-10% of equipment

Maintenance
costs per year
Varies widely – can be below $200

Licenses per month in U.S. or over $2,000 per
month in western Europe
Site lease for antenna space Up to $700 per month
Microwave Start-Up Costs
Source: Ceragon
Agenda

Cell Site Bingo
Ethernet Everywhere
Media Money
Conclusions
Adding It Up: Lower-Cost Mobile Backhaul
• Linear or near-linear growth in backhaul expense is not an option.

Within the next five years, service providers will have to:
• Transition from TDM to packet-based backhaul
• Transition to fiber backhaul and microwave
• Simplify backhaul connectivity with Ethernet
• Unify voice and data, particularly for wireline mobile backhaul
• A focus on capex will not result in the least-cost network. Focus

instead on:
• Operational costs (management, provisioning, spectrum licensing)
• Network design and architecture. Keep the low RAN flexible and the high
RAN aggregation nodes scalable and robust.
• Business decisions. Share. Leverage someone else’s fiber, flexibility and
economies of scale; use managed and outsourced RAN services.
Thank You
Read analyst blogs at
blogs.yankeegroup.com
Watch analyst videos at

youtube.com/yankeegroup
Follow us on Twitter:
@YankeeGroup
Jennifer Pigg, Research VP

Fan Yankee Group [email protected]
at facebook.com
Upcoming Yankee Group webinar:

Evolving Service Provider Business Models
Tuesday, May 25, 2010 | 11 a.m. ET
www.yankeegroup.com
© Copyright 2010. Yankee Group Research, Inc. All rights reserved.
Register at www.yankeegroup.com
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Mobile Backhaul Evolution

Drivers: Over the Edge

Laptop 47% 12% 7%

Mobile phone 48% 9% 6%

USB modem 24% 6% 6%

Wireless data card modem 12% 3% 2%

Mobile hotspot router 7% 1%

0% 10% 20% 30% 40% 50% 60% 70%

Very likely Likely Unsure Not likely Very unlikely

How likely is it that your next personal mobile phone will be a

20% 41% 37% 37% 3%

Very likely Likely Unsure Not likely Very unlikely

Base: People who own a mobile phone

Drivers: Over the Edge

• 80% of network operational costs for

•But… the RAN is continually changing:

• A single MSO can be running three

Number of Cell Sites in 2009 Five-Year CAGR

United States 245,100 7.5%

South America 119,880 8%

Middle East and Asia 1,219,000 6%

Australia/New Zealand 33,075 5%

resulting opex for another five years. 250

50 Mbps Backhaul in two years

10 Mbps backhaul 2009

• Globally, over $25 billion was spent

• In 2012, there will be more than

Drivers: Over the Edge

• Ethernet service average

• T1/E1 (1.54/2.048 Mbps) average cost

• 3G cell sites have smaller coverage

• Ethernet bandwidth can be allocated

10 Mbps or Backhaul Cost Backhaul Cost Backhaul Cost

For a 500-node network, Ethernet saves the MNO

• Emulation support: pseudo-wires

• Ethernet mobile backhaul architecture alternatives

How far into the Mobile Network will

Drivers: Over the Edge

• General accounting practices

• Availability of fiber and copper

• Ability to hold onto the copper

• Incumbents: Leverage existing resources where possible, deploy new

• Challengers: Capital constrained and limited footprint; build out

• Rural (both incumbent and challenger): Greater reliance on microwave

• What we expect to see in

• Daisy-chain and Tree microwave

• High-speed copper DSL

MNOs have a dominant, but not exclusive, strategy

• T1s widely available

• DSL targeted at mobile backhaul from many including: ALU, Actelis,

• Actelis just introduced a solution offering 20 Mb over 2 pair

• Reduced pairs means reduced hardware costs, footprint, increased

• Will benefit from femto growth

• Does not sacrifice EFM performance, i.e., maintains ANSI T1.417

How long will it be before we have no

• Costs include: right-of-way, construction, site reconstruction, fiber

Cost Per foot Per mile

Metro $30 $158,400

Urban $42 $221,760