Feature Article

August 22, 2013

Wired Networks Now for Mobile Backhaul

What is the strategic value of a terrestrial communications network using cables? According to the Organization for Economic Cooperation and Development (OECD), wired networks largely have become valuable as providers of backhaul for mobile and wireless devices.

Some studies suggest that 80 percent of data used on mobile devices is consumed using Wi-Fi connections to fixed networks, OECD says. The subplot is that Internet access is now the driver of revenue for both wired and mobile networks, as growth from voice and text messaging declines.

Revenues corresponding to data services are growing at double digit rates in most OECD countries, and transport of data is now the major source of growth for network operators, as few observers expect growth in voice or text messaging revenues for operators within the OECD membership.

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While there are significant opportunities in new services such as mobile payments, essentially these involve the transport of data in association with partners such as credit companies, OECD says. One might suggest something similar for most machine to machine sensor applications, with the current exception of home security services.

Some executives will recoil from the notion that mobile backhaul now is the strategic value driver for wired access networks. Still, it is hard to argue with the characterization.

In 2011, the total number of OECD communication access paths was 2.066 million, or 166 subscriptions per 100 inhabitants, an OECD report suggests.

Mobile subscriptions represented 65.4 percent of paths, versus 64 percent in 2009, and traditional fixed telephony subscriptions continue to decline, representing no more than 34.6 percent of paths, not counting the share of satellite or fixed wireless paths.

In contrast to pricing trends for some other products, the average subscription rate of mobile Internet access in OECD countries as a whole rose to 56.6 percent in June 2012, up from just 23.1 percent in 2009.

To be sure, usage or consumption is not "revenue." Wired networks sell multiple products, generating revenue from all of them directly, and virtually no revenue directly from Wi-Fi access.

Still, the strategic, irreplaceable role for a wired network now is becoming "Internet access at high speeds and at low cost."

Combined with end user or supplier provided Wi-Fi distribution inside the building, the unique value of a wired network is in its ability to deliver lots of bandwidth, affordably.

Edited by Alisen Downey

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