Earlier this month, there was a bit of confusion over AT&T's 2011 wireless data growth. CEO John Stankey asserted that wireless data consumption was growing at 40% a year, down from estimates and far less than the 92% growth posited by Cisco and the 120% growth forecasted by the FCC.
But wait! CTO John Donovan chimed in a few days later to report that, no, data consumption had actually jumped by 100% in 2011. However, that's not what really stood out to me in his blog post, which you can read here (http://www.attinnovationspace.com/innovation/story/a7781181). The real kicker is AT&T's cumulative wireless data traffic growth over the last five years, which sits at 20,000%.
Now that's a number. If, for example, the small town of Waycross, Georgia (population 14,725) were to start growing at that same rate tomorrow, by 2017 it would be larger than Chicago.
Other wireless companies around the globe are seeing these same levels of staggering growth, and while they are scrambling to build wireless networks that can support more and more traffic, cost concerns and spectrum limitations dictate that an aggressive backhaul transformation is not only prudent, but essential. Keeping pace with current demand often means leasing that extra bandwidth rather than building it out on your own.
As a result, the wholesale IP backhaul market is booming. According to 2011 research from Yankee Group, the market for wholesale backhaul services in North America will grow from $2.45 billion in 2010 to $3.9 billion in 2015. As Ethernet and IP offer significant savings over comparable TDM-based capacity (Infonetics calls reports that the former costs one sixth of the latter), most of that spend will be on these cost-effective technologies.
This is all good, right? Cheaper bandwidth means more capacity, which is a key part of meeting the needs of mobile operators and end-users alike. However, this lower barrier to entry also means more and more entrants into the wholesale market, leading to widespread competition based on the one thing Ethernet service providers are least excited to compete on: price.
But there's more to the story: a commoditized wholesale backhaul environment means that, while service providers are getting a third party to carry their customers' bits and bytes for a bargain price, they will have very limited visibility into that network, beyond the static monthly SLA reports they receive from the wholesaler. These reports are sporadic in nature and often far less specific in content than mobile operators need to ensure high levels of QoS for their subscribers. (In fact, some service providers are offered little more than an Excel Spreadsheet, which hardly provides the depth of detail that would help wireless operators ensure high levels of service quality.). In essence, they've gotten a great deal on the ride, but have to take it almost blindfolded.
But it's not all bad news. These challenges, while significant, present a major opportunity for wholesale backhaul providers to differentiate their offerings while simultaneously creating new revenue streams. Backhaul providers that provide MNOs with actionable and on-demand visibility into their leased services can stand apart as a clear choice for MNOs concerned with total end-user QoE. What's more, most smart mobile operators will gladly pay a premium for these analytics, considering the higher levels of customer satisfaction and reduced churn rates they can help ensure with better performance indicators.
This level of network visibility is particularly essential in suburban and rural markets where bandwidth is less available and more expensive, with the lack of density increasing the cost of build out, but also increasing the going rate for service.
This higher cost raises the stakes for both mobile providers (who are paying more for their leased bandwidth), and backhaul providers (who have a multi-billion dollar opportunity on their hands if they can provide adequate resources for lessees).
It is in these markets that wholesale providers, particularly tier 2 and 3 providers that may not be targeting the more competitive urban areas, can stand out by adding premium reporting options on top of their leased backhaul offerings to help mobile operators keep an eye on the quality of the transport layer — a key component in determining the end-users' QoE.
Premium reports on packet loss, frame delay, throughput, latency, virtual circuit availability, and other KPIs provide mobile service operators the sort of visibility that is necessary to provide the level of service their end-users have come to expect. What's more, if the MNO is offering multiple classes of service (CoS), the demand for network visibility is that much greater.
There's a great deal of opportunity here. To ensure high QoS for their subscribers, MNOs need backhaul solutions that don't skimp on visibility. Backhaul providers can differentiate themselves and create new revenue streams by offering that very visibility. If all goes well, end-users get their bandwidth, and keep their customer experience.
Tim Young is the editor-in-chief at Pipeline, where we focuses on OSS and telecommunications issues. Tim has been with Pipeline since the beginning of 2005, and has served as editor-in-chief since February of 2006.
This post is a part of our Maximizing the Ethernet Mobile Backhaul Opportunity Expert Blog Series. We invite you to read other recent installments in this ongoing series:
View part 1: The Pipeline Ethernet article: Harnessing the Potential of Ethernet Backhaul by Juan Prieto, Product Marketing Manager — Mobile Solutions, InfoVista
View part 2: Harnessing the Potential of Ethernet Backhaul by Juan Prieto, Product Marketing Manager — Mobile Solutions, InfoVista