As I penned this edition of Stateside, analysts in my firm were closing out forecasts for Atlantic-ACM’s US Telecom Wired and Wireless Sizing and Share: 2011-16, the latest edition in our sizing and share series. I took an early look at broad trending data and found that, as we have been advising all year, wireless retail demand is the major driver of wireline wholesale development.
In the simplest of terms, demand continues to outstrip capacity. With consumer and business users demonstrating a seemingly insatiable demand for bandwidth, wireless providers are in a perpetual pursuit of capacity augmentation – for today’s needs as well as tomorrow’s. A major component of this augmentation lies in backhaul, which has become the wholesale industry’s hottest growth area.
Ethernet currently sits atop backhaul’s adoption curve with cable players moving in with their aggressive Ethernet pricing, fibre players mapping towers and analysing where to build, and major wireless players making investments.
This product’s growth is impressive. Time Warner Cable more than doubled its Ethernet-based backhaul revenues from Q1 2010 to Q1 2011 – from $13 million to $28 million. Similarly, Comcast reported an 80% rise in Ethernet backhaul revenue year-on-year in the second quarter.
Overall, wholesale local transport revenues, which include Ethernet and other backhaul, will grow from $14.7 billion last year to $17.3 billion by 2016, a compound annual growth rate (CAGR) of 2.7%.
It is worth noting that, despite new builds and ‘next-gen’ wholesale product demand, massive surges in demand from iPhone, Android, tablet and other devices has driven some providers towards traditional transport solutions such as multiple DS1s or DS3s, simply because of the need for immediate provisioning.
In our annual metro survey, wireless providers nationwide reported that, on average in 2010, 54% of their current local transport spend was on those low-speed lines, with only about 22% on Ethernet transport. (Our current metro carrier survey will tell us how this has changed in 2011.)
In other words, backhaul is hot, but there is room for strategic improvement. Better demand forecasting will allow providers to pursue network improvements with greater method than urgency, which translates to increasing Ethernet demand and better footprint management.
Judy Reed Smith is CEO of Atlantic-ACM. She can be contacted at: judyrsmith@atlantic-acm.com
