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In the U.S., cable operators are now positioned to expand their position in the market for mobile backhaul services from low single digits to perhaps a third of U.S. backhaul revenue by the end of 2015, according to a new BNA forecast.
Beginning in 2008, cable industry executives began including cell backhaul in their overall commercial service planning, as traffic trends among mobile operators indicated that demand for fiber connections to cell towers was climbing rapidly and was likely to explode as the next generation of mobile data services came to market.
The timing has been excellent for the multi-systems operators. The companies have made huge investments to extend fiber deeper into their urban, suburban and exurban territories and to build out high-capacity national and regional rings capable of transporting huge amounts of traffic. Their push into the residential voice and data markets, the extension of those services to small businesses, and aggressive development of Ethernet service capabilities focused on moving up market in the enterprise space have all required steady improvements in the capabilities and capacities of their networks.
Cable operators has been driving fiber very deep into their hybrid fiber-coax networks and adding MPLS and Ethernet infrastructure to move their own massive data flows. Those investments have placed fiber and carrier-grade networking technology into urban and suburban areas. And even in less populated areas, MSOs' fiber backbones and distribution plant are close enough to many towers to make them a viable option for backhaul. Indeed, except in the relatively limited areas where incumbent telephone companies have deployed their own fiber-deep infrastructure, cable now has fiber access points that are typically closer to more cell towers than any other group of network operators.
Equally important, cable operators have been active participants in the Metro Ethernet Forum as part of their broader commercial services strategies and are rolling out Ethernet services aimed at mid-sized enterprises across much of their footprints.
An important implication of MSOs' move to add commercial services has been the absolute requirement to build into their networks carrier-grade reliability, resiliency, and performance, beyond the high standards they have had to meet internally to operate their existing residential video, voice, and data networks. The experience they have gained over the last decade as they have built, operated and expanded their regional and national backbones has paid significant dividends in that regard.
Now, the industry is poised to capture a growing portion of the overall market for cell backhaul services. Time Warner Cable has begun reporting the number of towers in service and discussing in general terms the state of their sales pipeline, Company executives from Cox Communications and Time Warner Cable have reported that backhaul revenue tripled and doubled, respectively from 2009 to 2010. Given current trends, we expect both companies to triple revenue this year.
Cablevision Systems also has offered backhaul in its New York City-area footprint for a number of years, but the company has not emphasized the segment. With its acquisition of Bresnan Communications, however, we expect the company to dedicate more resources to winning and serving mobile network operators' needs in its new western territory.
Comcast and Charter Communications are both increasing their activity in the backhaul market. Comcast is currently rolling out its Ethernet offerings, focused on small and medium-sized businesses, into its markets, and will leverage that investment to expand its backhaul business. Once it has Ethernet available across its entire footprint, Comcast will see rapid revenue growth. Given its size and increased focus, we expect that Comcast will lead all MSOs in terms of revenue by the end of 2012.
Those dynamics are also helping to boost backhaul opportunities for much of the remainder of the market. While the pace of revenue growth will vary widely among the smaller operators, all are positioned to reap the benefit of their extensive fiber networks, proximity to cell towers, and the increasing sophistication and reliability of their infrastructure.
BNA’s Broadband Advisory Services unit expects that by 2015 cable operators will be capturing the majority of new tower builds and will win new and expanded contracts to run fiber and deliver Ethernet backhaul services to existing towers.
By Tim McElgunn
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