Feature Article

February 13, 2013

Are Mobile Operators Neglecting Backhaul?

Strategy Analytics says mobile operators globally are not investing enough in backhaul capacity, (specifically in technologies that make the backhaul networks “smarter”), potentially leading to a “capacity” crunch could hit the global mobile industry by 2017.

Looked at in that way, mobile operators will face a global “investment gap” of $9.2 billion and a global capacity shortfall of 16 petabytes by 2017. In part, that forecast seems to be driven by estimates of how much capacity needs to be brought into service to accommodate peak demand, rather than average demand.

Global mobile data traffic has increased 13 times in the last five years, and Strategy Analytics forecasts it will grow by five to six times more by 2017.

The Tellabs-commissioned study suggests the investment shortfalls will be biggest in the Asia Pacific region.

  • Asia Pacific – $5.3 billion; 9.4 Petabytes
  • Middle East Africa – $1 billion; 1.8 Petabytes
  • Western Europe – $1 billion; 1.8 Petabytes
  • North America – $650 million; 1.2 Petabytes
  • Caribbean/Latin America – $600 million; 1.1 Petabytes
  • Central & Eastern Europe – $580 million; 1 Petabyte

Current operator forecasts allocate an average of 17.5 percent of total cost of operations to backhaul investment, but investment at that level simply cannot meet user demand, Strategy Analytics researchers argue.

“At today’s backhaul investment levels, operators could create a significant backhaul capacity shortage,” said Sue Rudd, Strategy Analytics director. “Operators need to rethink their backhaul investments as they deploy small cells and LTE capacity.”

The report finds that the cost of poor backhaul performance is greater than the investment to provide adequate backhaul.

In part, that is because estimated revenue lost to customer churn is forecast to be four times higher than the backhaul investment required to meet customer demand.

Strategy Analytics estimates backhaul investment could reduce the churn rate by between 4 and 7 percent. Globally, for every $1 spent on backhaul above 17.5 percent of total cost of operations, operators could protect $4 in revenue.

Operators in different regions risk missing out on between 2.8 percent and 5.1 percent of revenue that would be retained by addressing issues that result in poor network performance.

Operators could save 1.7 percent of revenue by 2017 by minimizing new customer acquisition costs, as well. Operating margins could improve by up to 5 percent if backhaul investment increases to meet traffic growth, Strategy Analytics said.

By 2017, required backhaul investment would grow to just over $35 billion worldwide, while the forecast of backhaul held at a constant share of network operations costs would lead to just under $26 billion in investment.




Edited by Braden Becker


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