AT&T, Verizon, others hone their wireless backhaul skills

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fiber to the towerThe top four wireline operators--AT&T (NYSE: T), Verizon (NYSE: VZ), CenturyLink (NYSE: CTL), and Windstream (Nasdaq: WIN)--have become the natural purveyors of fiber to the tower (FTTT) services for wireless operators that need to higher speed backhaul services to accommodate the growth of their existing 3G and 4G LTE networks.

Just how big is the FTTT opportunity? According to a study written by Strategy Analytics for Tellabs (Nasdaq: TLAB), North America's wireless operators face a $650 million backhaul funding gap.

While the actual speeds delivered vary by market, all of these wireline wholesalers and alternative players have been aggressively extending fiber into existing cell towers inside their footprint delivering a host of IP/Ethernet-based services.

Some obvious differences exist in this group.

AT&T and Verizon face a dual challenge in that they have to serve other wireless operators in their wireline footprints along with AT&T Mobility and Verizon Wireless. Those internal wireless divisions can be the toughest customers in that they will expect their wireline counterparts to provide a very high level of service and responsiveness--despite the fact that neither incumbent has wireline facilities within their nationwide wireless footprints.

For instance, when Verizon Wireless initially launched LTE, the carrier leveraged both Verizon Global Wholesale's assets and those of other competitors like CenturyLink and DukeNet for FTTT connectivity across 3,500 cell sites in 25 states.

CenturyLink and Windstream don't have wireless subsidiaries to serve, so it should be no surprise that they have made fiber-based wireless backhaul a big part of their wholesale strategy. Both of these providers bolstered their wireline network facilities via targeted acquisitions of other carriers.

Out of the two, CenturyLink took the most ambitious route, acquiring both Embarq and Qwest--two telcos that gave it greater fiber density in the markets it served to extend to towers. Meanwhile, Windstream enhanced its fiber capacity by purchasing Kentucky Data Link as part of its acquisition of Norlight Telecom.

Despite the differences between wholesale providers offering wireless backhaul, one of the challenges they all have is near-term revenue decline as customers migrate off of legacy copper-based T1 circuits to fiber.

In this report, the first of four in this new series, we'll examine how the top four ILECs are tackling the wireless backhaul opportunity.