AT&T's small-cell-backhaul quest heralds next frontier for cable, wireline telcos

Sean Buckley, FierceTelecom

AT&T's (NYSE: T) recent revelation that it is going to work with cable operators to test their HFC-based DOCSIS products for small-cell-backhaul deployments shows that wireless operators want an arsenal of approaches in their toolkit.

"You have to look at all options--cable, VDSL, wireless--you have to look at the lowest cost that meets your engineering requirements," Gordon Mansfield, assistant vice president of small-cell solutions for AT&T, was quoted as saying in a Light Reading article. "By doing that, you have multiple options depending on the geographic area you then have available."

Mansfield's views reflect the reality that small cells will be deployed in a variety of situations and geographies. Although fiber is the optimal choice for backhaul, it isn't available in every market.

Given the diversity of approaches--picocells, metrocells and microcells--a wireless operator will use various methods, including lit and dark fiber, microwave and cable's hybrid fiber coax (HFC).

Cable operators are in a prime spot to capitalize on the small-cell trend. For example, Cox Communications has complemented its fiber-based product set with an HFC-based DOCSIS offering that leverages the electrical power of its existing network.

"We see continued growth in the wireless backhaul market with the transition to small cell," said Jeremy Bye, vice president of carrier and wholesale at Cox Business, in an interview with FierceTelecom. "Hopefully, as the equipment vendors move to more mature solutions in small cell that are more in line of where the mobile network operators want them to be from a cost perspective and probably smaller form and easier to fit on a strand mount, Cox is positioned to do well because we have powered plant."

Traditional wireline telcos, such as Cincinnati Bell, FairPoint and Windstream, are just as eager to participate in the small-cell-backhaul game.

Having experience delivering copper-based T-1 backhaul services to wireless operators, wireline telcos have been building out fiber to wireless towers in their network footprints. But as they start to reach the end of their deployment cycles, they see new opportunities in selling more bandwidth to existing tenants and assessing the small-cell opportunities.

Smaller telcos, such as Cincinnati Bell, which is selling its own wireless business to Verizon Wireless (NYSE: VZ), will gain some new wireless-backhaul business. It also completed a separate RFP for small cells in Cincinnati.

"We're probably too early in the process to understand the whole dynamics of small cell, but it's going to be a lot of business in Cincinnati," said Ted Torbeck, CEO of Cincinnati Bell, during the recent Stephens Spring Investment Conference. "You have all of the major carriers putting small cells in, and we see that as a big opportunity for growth in our carrier business."

But the small-cell backhaul game is also playing out in rural markets. FairPoint has reached another milestone in its ongoing wireless-backhaul drive by securing a small-cell contract with emerging wireless-infrastructure provider CoverageCo. For this deployment, FairPoint is using its existing copper-based network infrastructure.

However, traditional telcos see their legacy revenue decline as they ramp up next-gen fiber and Ethernet-based backhaul deployments. Windstream saw its overall wholesale revenue affected by its customers' shutting down their TDM-based circuits. In addition, Windstream is assessing the small-cell opportunity but provided no specifics about its strategy.

"What you saw show up in our quarterly results are a lot of headwinds, because when these carriers turn up their fiber transport to the towers they also turn down their TDM circuits," said Jeff Gardner, CEO of Windstream, during the recent J.P. Morgan Global Technology, Media and Telecom Conference. "We saw some very aggressive grooming in the first quarter."

Just how big is the small-cell-backhaul market? According to a recent MarketsandMarkets report, the market will be worth $2.08 billion by 2019. That figure includes a mixture of technologies: copper, fiber, millimeter wave wireless, microwave, sub-6 GHz wireless, and satellite.

Today, wireline operators are still figuring out how to attack the small-cell-backhaul opportunity. But it's clear that as they wind down their fiber-to-the-tower deployments, small cells could be the next chapter in their wholesale wireless-backhaul book.--Sean