The wireless operator community's move to deploy more cell sites to support upcoming deployments of LTE and their overall migration to IP is creating a healthy market opportunity for transport and router vendors, says Dell'Oro Group.
In its recently released market report, the mobile backhaul market, including transport and routers & switches, is forecast to reach $9 billion by 2016.
The traditional wireline transport segment of wireless backhaul will grow at a 2 percent compounded annual growth rate to $6 billion by 2016. Likewise, routers and switches, which is expected to represent 30 percent of the mobile backhaul market by 2016, should grow at a 9 percent compounded annual growth rate to nearly $3 billion.
"Since mobile radios are carrying more packet data than voice circuits and an even greater amount in the future, we anticipate operators will continue to evolve their backhaul networks to increase throughput and efficiency with routers & switches at cell sites and network edge," said Jimmy Yu, vice president of Mobile Backhaul Market Research at Dell'Oro.
Microwave will also play a role in the equation, providing service to "over half of the sites" in areas where it's cost prohibitive to deploy fiber, or as a complement to another wireline solution.
After wireless operators complete their roll out of macro cell sites, they will begin deploying both micro and pico small cells. Small cell deployments will use a mix of both fiber solutions supplied by wholesale providers like Zayo, which recently created a team dedicated to small cell deployment sales and emerging non-line-of-sight wireless-based solutions offered by vendors like Bridgewave.
This forecast bodes well for both vendors and the incumbent and competitive wholesale providers that supply wireless backhaul services.
Besides Zayo, a number of incumbent telcos and competitive players, including CenturyLink (NYSE: CTL) and XO Communications, are ramping up their respective networks to deal with the impending demand for wireless backhaul.
CenturyLink reported in its Q2 2012 earnings report that it completed almost 1,350 fiber builds to cell towers and over 2,000 year-to-date, ending the quarter with about 12,150 fiber-connected towers. Meanwhile, XO completed the upgrade of its nationwide backbone network to 100G in response what the CLEC's CTO Randy Nicklas says are "other carriers including mobile operators and others [asking] us about 100G transit service."
While the wireless backhaul market will continue to see growth over the next four years, a separate report by Insight Research projects a "compounded annual revenue growth rate of 17 percent, with growth slowing by 2016 to be more in the range of 12 to 15 percent."
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