LAS VEGAS — All of the exciting new devices and discussion about high-bandwidth 4G (Fourth Generation) data services (up to 100Mbps) here at CTIA have the comm equipment guys salivating: It’s likely to mean a boom in new business for building backhaul networks, the plumbing that carriers need to haul all of the data to and from the mobile towers.
There are deals to be had, as Alcatel-Lucent announced a new deal with Verizon for backhaul networks paving the way for 4G. In addition, equipment vendors were announcing new gear that can accommodate service providers that need to overhaul their networks for mobile upgrades. For example, Huntsville, Alabama-based Adtran yesterday announced a flexible new Ethernet mobile backhaul product, the NetVanta(R) 8044M, that can easily swap between copper and fiber.
The issue is that mobile networks may not yet be ready for the deluge of data that will hit their networks when 4G comes to pass. As demonstrated clearly with the iPhone when it swamped some of AT&T’s networks, when mobile providers give consumer the power to use large amounts of data and surf the Internet on their phones, they become ravenous bandwidth hogs.
A little-known fact of the carrier networks is that a small amount of the backhaul links have been upgraded to fiber. In fact, some estimate that less than 10% of the backhaul connections which connect mobile data towers to the carrier’s core network are fiber. The rest are in many cases old copper lines that have connection speeds as small as 1.54 Mbps (T-1 lines).
“Mobile applications are driving bandwidth like crazy,” says Jason Morgan, a product manage with Adtran. “LTE speeds will be higher than many of the backhaul links today. There are many limitations, and the mobile operators are actively investing to fix that. They want 100 Mbps to the cell site.”
Operators I spoke with confirmed this. Steve Elfman, president of network operations and wholesale for Sprint, said that after the bandwidth boom and bust of of the telecom bubble in 1999-2001, operators held back on further bandwidth investment, choosing to wait for the applications. They’re here now.
“People held back until the applications came out and now they are here so the demand is shifting,” said Elfman.
Asked where he will get the bandwidth, Elfman said it would be a variety of sources. Sprint works with many regional carriers to buy mobile backhaul services where it can’t build them itself. These may include microwave, regional fiber, or in some cases, cable networks. “We prefer not to buy our bandwidth from AT&T or Verizon if we can help it,” said Elfman.
The bottom line is that backhaul investment could provide a much-needed boost to the telecom equipment sector. Some of the companies positioned to benefit from this include Alcatel-Lucent (ALU), Adtran (ADTN), Ciena (CIEN), and newly minted IPO Calix (CALX).