ARPU Growth Not Keeping Up With Traffic Growth

ARTICLE

ARPU Growth Not Keeping Up With Traffic Growth

By Basharat H. Ashai, Market Analyst - Asia Pac & Middle East
Contact the author at Basharat@maravedis-bwa.com

Last week I attended the "Mobile Backhaul Conference 2009" in Hong Kong, organized by BEACON Events. I served as chair on day one of the conference and moderated three panel discussions. Although all these panels were very informative, I will here focus on some of the major overarching issues that came up during the conference: the rise in traffic growth outpacing ARPU growth, and the need for higher capacity backhaul solutions.

Mobile traffic is on the rise, leading to many challenges for mobile operators in terms of capacity utilization, rising OPEX and CAPEX. ARPU growth is not keeping up with this traffic growth. Until now operators have been mainly deploying E1 or T1 circuits for their mobile backhaul networks, relying on TDM and ATM technologies to deliver data, mobile voice and video broadband applications. E1s and T1s provide limited bandwidth at 1Meg per copper pair, and existing TDM networks are becoming overburdened with current demand. Also, the growing adoption of 3G services, and the expected wide scale rollout of WiMAX and LTE networks means that the need for significant amounts of network capacity at the back end will only accelerate.

There is a need for high capacity backhaul to support network technology evolution. Operators need to meet current and future demands yet maintain bottom lines though cost-effective backhaul solutions. The impression I got from the Mobile Backhaul Conference is that IP/MPLS (Internet Protocol/Multiprotocol Label Switching) is at the centre of many solutions. It is now a mature and proven backhaul deployment solution with the backing of the IP/MPLS Forum. The Forum is an international, industry-wide, non-profit association of service providers, equipment vendors, testing centers and enterprise users. Its main focus for 2009 will be the Certification Program centered on mobile backhaul. Cisco Systems is the first vendor to have completed the first phase of its MPLS in mobile backhaul certification program. This first phase is ongoing, and the Forum will be announcing other vendors who have passed in Q2 2009. In October 2008, the IP/MPLS Forum announced the approval of the first technical specification under its MPLS in Mobile Backhaul Initiative (MMBI), which defines how MPLS can be used to backhaul traffic for mobile operators. The Forum will be conducting additional phases of testing in 2009 against the MMBI specification to certify both ATM and IP solutions over MPLS. This will ensure a wide range of application support for operators across various Radio Access Network (RAN) architectures including HSPA, WiMAX and LTE.

IP/MPLS offers many benefits and has been deployed globally in mobile core. It adds capabilities like scalability, resiliency, manageability, traffic engineering, QoS, and multiservice – support for 2G, 3G ATM and IP RAN (e.g. LTE, WiMAX). Many major players like Telecom New Zealand, AT&T, Mobily and others have deployed IP/MPLS; Telecom New Zealand has deployed Alcatel-Lucent’s IP/MPLS portfolio. Over 250 service providers in more than 100 countries have selected the Alcatel-Lucent IP/MPLS portfolio as key elements of their IP transformation. Huawei Technologies has provided an IP/MPLS solution to Mobily. Before implementing routers from Huawei, Mobily’s voice and data services ran through two separate bearer networks, resulting in an increased OPEX and CAPEX. Deployment of the IP/MPLS core network will be very significant for Mobily to develop Fixed-Mobile Convergence (FMC) services in the future.

The other subject most touched upon by speakers at the conference included the use of satellite backhaul technology. In most rural backhaul situations distances are large, terrains are difficult, and bandwidth is small. In such cases satellite becomes the most straightforward solution. For example, backhaul over satellite is important for archipelagos (chains or clusters of islands) like Indonesia. VSAT IP will provide a better solution for cellular/wireless backhaul, allowing the assignment of satellite bandwidth on-demand, and improved quality of service. By implementing VSAT IP the network operator can also utilize backhaul over satellite to provide 3G and 3.5G network access.

Mobile operators might invest significantly to upgrade their mobile backhaul in the near-to-medium term. However, the same backhaul infrastructure must be designed to transfer GSM, HSPA and LTE in a “single-pipe” fashion. It is crucial to consider HSPA evolution and LTE requirements in the near term to secure backhaul investment and potentially avoid additional expensive upgrades in the medium-to-long term, and also to delay huge near-term investment thanks to “tactical” solutions waiting for very high throughput transmission solutions.

Operators are upgrading or have plans to upgrade their backhaul networks, but the fact is that there is still a big market for TDM connection into cell sites. The evolution from 2G to 3G to 4G will take several more years; operators should maximize existing network backhaul investments with a migration path using diversified, cost-effective wireless backhaul solutions.

For more information you can contact the author. Basharat@maravedis-bwa.com