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Policy

The Big Haul

5/16/2011 12:01 AM Eastern

Consumer behaviorists may look back on this era as the “Screen Age”:
For millions of people, staring into luminous smartphones or tablets is now a way of life.

This insatiable addiction to mobile gadgets is only going to rise. Thanks to a surge in on-the-go
video viewing, the amount of monthly mobile data consumption in North America will increase
20-fold by 2015, according to a recent Cisco Systems forecast. In 2010, the amount of bandwidth
consumed by wireless devices was already more than triple that of the entire Internet 10 years ago.

Cover_Story_Image_05/16For cable operators, the public’s growing appetite for mobile gadgets promises to be a boon to
their commercial-services businesses — because all of those phones and other Internet-connected
devices must link back to wired networks somehow. Plus, cable’s hybrid fiber-coaxial networks are
widely deployed, so they’re well-suited to “backhaul” that traffic or provide supplemental wireless coverage for mobile carriers.

“The MSOs are now very well-positioned with that core network asset, which can scale very effectively for high data rates,”
Afzaal Akhtar, a senior partner with IBB Consulting focusing on network architecture and operations, said.

The revenue at stake is growing, too, as carriers expand their deployments of 4G high-speed data networks, though not quite
as dramatically. In the U.S., the leased mobile-backhaul services market will be an estimated $1.4 billion in 2011, increasing to
more than $2.3 billion by 2015, according to ABI Research.

“The lion’s share of growth we’ve seen in the carrier business
is wireless backhaul,” Cox Business director of carrier sales operations
Jay Clark said. “When we’re looking at backhaul, the
big piece the wireless carriers are looking for is capacity.”

Cox has been providing celluar backhaul for more than a decade
and other big cable operators, including Comcast, Time
Warner Cable, Cablevision Systems and Bright House Networks,
are also aggressively pursuing the opportunity.

In Florida, Bright House Networks will have at least 1,000
towers connected to its metro Ethernet network by the end of
2011, according to senior vice president of network engineering
and operations Craig Cowden.

“I think we’re just scratching the surface,” Cowden said. “We
haven’t hit the tipping point yet of large smartphone penetration
and applications — and both of those, in aggregate, really
require exponentially more bandwidth than was needed
in the past.”

Comcast, for its part, increased the number of cell backhaul
towers by about 80% in 2010 and offers voice trunking across
90% of its footprint, Comcast Cable president Neil Smit said
on the operator’s first-quarter earnings call May 4. “Our cell
backhaul business is ramping nicely,” he said, without providing
additional details.

The fit between cable and wireless operators is geographically
a good one. In the U.S., there are about 250,000 wireless
towers, and about 80% of those fall into an MSO’s footprint, according
to Akhtar. Cable operators have connected only 20,000
so far, he estimated — so there is considerable potential for
MSOs to grab a bigger share.

DELAYED PAYBACK

The challenge for cable operators in addressing backhaul
is that they’re not inclined to invest a lot of capital
ahead of the return, Akhtar said. “So there’s an internal
tussle: There’s an extremely large potential revenue opportunity,
but there’s a delayed payback.”

MSOs said expanding backhaul capabilities can provide
synergies with the rest of their commercial-services
businesses. “Backhaul is a good standalone business but it
really has tremendous strategic advantage — it makes the
connection to other commercial customers that much easier
to justify for building the fiber,” Cowden said.

But another potentially hindering factor is that the ongoing
consolidation of wireless carriers may make it much harder for
cable operators to profit from mobile backhaul, Sanford Bernstein
senior analyst Craig Moffett said.

AT&T, he pointed out, launched a $39 billion bid for wireless
carrier T-Mobile: “Cable’s natural customers in the mobile
backhaul market were T-Mobile and Sprint. They just lost
one of their customers.”

In addition, each of the cable operators has different
strategies for delivering wireless broadband Internet to
their customers — competitive with 4G Long-Term Evolution
services from the likes of AT&T and Verizon Wireless.

Comcast, TWC and Bright House,
together with Sprint, are investors
in Clearwire, which is building out
a nationwide 4G WiMax network,
and Cox is actively rolling out wireless
services initially in a wholesale
agreement with Sprint.

Cablevision has been the leader
in rolling out a Wi-Fi network across
the New York metropolitan area that
gives its Optimum Online broadband
subscribers outside-the-home Internet
access for no additional charge.
That service is an incentive to keep
customers from switching to Verizon
Communications’ FiOS service.
Time Warner Cable and Comcast
have followed with similar Wi-Fi deployments,
and the three MSOs have
reciprocal agreements allowing each
other’s customers to access any of the
Wi-Fi access points in the New York
region.

But while cable operators may not
seem at first blush to be natural allies
to AT&T and Verizon Wireless, industry
executives said the mobile operators would rather give
business to the MSOs than rival telcos.

Moreover, HFC networks provide more capacity in some
cases than traditional telco T-1 lines. “What’s been a good
opportunity for cable is, the traditional [backhaul] delivery
methods have been over copper owned by incumbent
local-exchange carriers,” Cox’s Clark said. “As you look at
the need for higher-speed connectivity, that’s not enough.”

Cox, which provides mobile backhaul to every major
wireless operator in the U.S., is increasingly seeing backhaul
connections evolve from T-1 connectivity — the legacy
circuit-switched connections that provide 1.5 Megabits
per second each — to Ethernet connectivity, particularly as
towers start adding 4G.

“We’ve hit this tipping point where the backhaul networks
need to be upgraded to Ethernet to really support
the demand,” he said.

The rollout of 4G networks, with at least four times the capacity
of 3G, has led wireless operators to switch to Ethernet
connections with 20 to 50 Mbps. In the past, Clark said,
a tower may have been hooked up with four to six T-1 lines.
In Las Vegas, one of Cox’s backhaul customers increased to
50 Mbps per site and now is at 200 Mbps.

“That’s the advantage of Ethernet — it’s a lot easier to provision
that additional capacity,” Clark said.

Bright House, too, is seeing its backhaul business migrate
from emulated T-1 lines to metro Ethernet connections. “As
the amount of bandwidth per subscriber session is much
more, you need an Ethernet solution,” Cowden said.

Verizon Wireless procures mobile-backhaul services
from a variety of providers, including cable operators, power
utilities and incumbent phone companies, Craig Frost,
the carrier’s executive director for network, said.

Cost and reliability are the primary factors in selecting a
backhaul partner, and Verizon Wireless now places a priority
on connecting Ethernet and fiber to towers, he said. Verizon
Wireless’ average backhaul contract is five years, with
some seven-year deals.

“We look at who are the fiber providers in a given area,
who can build out the network and who has a strategic plan
to maintain the level of spend required to support us,” Frost
said.

Verizon Wireless also prefers a single provider to cover an
entire geographic area, rather than dealing with multiple
wholesalers. “If we’re bidding for 100 [cell sites], we’re looking
for somebody to cover all 100,” Frost said.

Carriers like Verizon Wireless place comparatively
stringent service-level agreements, or SLAs, on backhaul
providers. And it’s taken some MSOs time to get up
to speed to meet those requirements, which specify levels
of uptime, latency, packet loss and jitter that they must
meet, or they face financial penalties.

“It’s really a crawl-walk-run approach for the MSOs,”
Akhtar said.

On the other hand, cable companies have a core expertise
in delivering multimedia and video traffic — which
is increasingly a bigger part of the overall mobile-traffic
mix, according to Simon Aspinall, Cisco’s senior director
of service-provider marketing. “The challenges the mobile
operators are facing now are things the cable operators
met early on,” he said.

To date, throughput and reliability have been the primary
requirements in this segment. Increasingly, however, backhaul
providers must provide intelligence to manage traffic to handle the crushing demand, according to Aspinall.

“It is just physically not possible to build out enough capacity
to satisfy all the demand,” he said. “So you have to
decide which applications, which users, which devices get
priority.”

OFFLOAD VEHICLES

In addition to classic backhaul, cable operators are exploring
a related concept: offloading constrained 3G and
4G networks with Wi-Fi or other wireless technologies via
“strand-mounted” radios hooked up to the coax network.

In this model, tablets or smartphone devices would connect
to MSO-operated Wi-Fi or localized LTE access points
in high-density locations, alleviating congestion on the
nearest cell tower. Essentially, the base stations move closer
to the users.

This picocell concept is attracting interest because new
towers are deployed at a very slow rate, given regulations
and construction costs, IBB’s Akhtar said. “All of us complain
about having a big cell tower in our backyard.”

Chantilly, Va.-based BelAir Networks, for one, has designed
a series of “small cell” products that can accommodate
an integrated Wi-Fi, 3G or 4G radio, plus a DOCSIS
cable modem or fiber interface. The device, somewhat
smaller than a node housing, can be mounted on coax
strands, vaults or pedestals.

Cable operators are in a great position to exploit
picocells, because they already have power and backhaul
connectivity on the HFC plant, BelAir vice president of
product marketing Dave Park said.

“Traditional backhaul is and will continue to be a good
business. But pulling fiber doesn’t change the number of
cell sites,” Park said. “This opens us to hundreds of thousands
— or even millions — of access points. We’re addressing
the core need of that immense growth in data.”

Bright House’s Cowden said he is “bullish” on picocells
and is working with BelAir to develop a deployment plan.
The MSO over the next few years expects to aggressively
deploy public Wi-Fi, which would be free for the operator’s
broadband customers.

Those access points would then provide the infrastructure
to let Bright House provide enhanced 4G coverage to
supplement the networks of its wireless-carrier customers.
“We’re looking at different options for LTE and other
technologies,” Cowden said.

Motorola Mobility, zeroing in on this segment, earlier
this month announced exclusive rights to market and sell
BelAir’s Wi-Fi access and picocell solutions to cable operators
worldwide (although BelAir will retain its direct
relationships with its three biggest MSO customers: Comcast,
Time Warner Cable and Cablevision). Separately, Arris
Group recently struck a reseller deal with Wi-Fi systems
provider Ruckus Wireless to target cable operators.

The opportunity is ripe for cable operators to deploy
Wi-Fi access solutions, given the explosion in tablets and
smartphone devices, which are “immensely hungry for
data,” Joe Cozzolino, Motorola Mobility senior vice president
and general manager, network infrastructure, said.
“The pull we have seen is outstanding from pretty much
all over.”

September