If the advent of Apple's (Nasdaq: AAPL) iPhone is any indication, the proliferation of easy-to-use smart phones and tablet computers is driving a host of new bandwidth-hungry data and multimedia services. The rise in bandwidth-hungry traffic that users are accessing from their phones means that wireless operators require a higher speed wireless backhaul network.
In our new feature, AT&T, Verizon, others hone their wireless backhaul skills, we discuss how the demand for higher speed bandwidth backhaul is creating a new opportunities for Tier 1 wireline service providers to help their wireless customers migrate from legacy copper-based T1 facilities to fiber and Ethernet.
So just how big is the wireless backhaul opportunity? According to a study by iGR, the demand for U.S. wireless backhaul will grow at "a CAGR of nearly 58 percent between 2011 and 2016" while fiber-based backhaul will reach a compound annual growth rate of nearly 85 percent during this period.
For traditional ILECs--all of which have seen their traditional copper-based voice revenues plummet as consumers move to IP-based solutions or ditch their wireline phone for wireless--fiber-based backhaul has become a big wholesale revenue opportunity. To stay competitive in the wireless backhaul race, all four of the largest telcos--AT&T (NYSE: T), Verizon (NYSE: VZ), CenturyLink (NYSE: CTL), and Windstream (Nasdaq: WIN)--continue to build fiber to cell towers within their wireline footprints.
At these fiber-based cell sites, service providers offer a set of Ethernet-based services that can more effectively scale to support higher speed data rates, particularly video, that users are accessing from their phones and tablets. However, some providers like Windstream also offer hybrid TDM/Ethernet and even TDM backup for traditional voice services.
The ILECs' fiber-based wireless backhaul opportunity comes with various challenges. For one, the replacement of legacy T1 circuits with fiber and Ethernet cuts into their quarterly revenues. The incumbents also face a growing threat from a number of competitive providers such as Level 3 (NYSE: LVLT), DukeNet and Zayo, which started from clean, all-fiber slates.
Regardless of the challenges they face, the reality is that the telcos had to build a FTTT business to not only support their own existing backhaul customer base while maintaining their competitive footing in the ever-evolving wholesale services space.--Sean
Take a look at our new report, AT&T, Verizon, others hone their wireless backhaul skills