Healthy Pipes: Mobility, Ethernet Bode Well for Wholesale in 2013

Despite the continuing consolidation within their customer ranks, as well as the emergence of service provider “insourcing” strategies, wholesale telecom services providers remain bullish about the future of their business, according to Yankee Group’s most recent “Smart Wholesale Survey.” Faced with profound transformations brought on by users’ demand for more bandwidth, more content, more devices and more types of services, wholesale operators are embracing these trends and demands as encouraging signs for most of the wholesale industry, show the findings.

For the entire report from Editor in Chief Martin Vilaboy, please check out ChannelVision’s full issue, available online by clicking here.

“After several years of being pushed to the background in discussions around areas of investment, growth and strategy, network operators are finally loud and proud about their wholesale business,” writes Sandra Palumbo, Yankee Group researcher.

According to the survey of 216 wholesale telecom companies from across the globe, more than eight of 10 respondents expected wholesale revenue to increase during the next few years, while 44 percent expect those revenues to grow by more than 10 percent. Just as in the previous year’s survey, respondents are optimistic about the continued growth in international bandwidth demand, but most of the enthusiasm centers around a very robust mobility market and the continued growth of cloud computing and content-heavy services, suggest the survey results.

Indeed, in the 2011 survey, mobile operators, international operators and content providers once again are the top three customers segments deemed to have the greatest growth potential, says Yankee Group. Topping the short list, a full 89 percent of wholesale respondents agree or strongly agree that mobile-related services will be “the largest driver of wholesale growth for at least the next three years.” And just as 4G is billed as the future of mobility (Parks Associates expects more than 560 million 4G/LTE global subscribership by 2016), it also is a key component to the future of the wholesale market, dubbed by Palumbo as the expected “darling to wholesale operators around the globe.” According to the survey, 77 percent of wholesale respondents agree that 4G offers a “game-changing” opportunity for the wholesale market.

“Mobility and mobile-related services – 4G, wireless backhaul and mobile data – are huge contributors to the bullish joy around wholesale,” Palumbo points out. “Our survey respondents’ attitudes around mobility services are loudly positive.”

Most of the enthusiasm, of course, centers on the increasing demand for backhaul. Consider, for instance, that the average macrocell backhaul requirements were 10 Mbps in 2008, or the equivalent of about seven T1s, says Yankee Group. In less than three years, that more than tripled to 35 Mbps, and Yankee Group expects it to hit 100 Mbps by 2015. Likewise, in 2010, there were about 2.4 million macro cell site backhaul connections worldwide.

By 2015, Yankee predicts there will nearly one million more. Overall, the market for wholesale backhaul services in North America is expected to grow from $2.45 billion in 2010 to $3.9 billion in 2015. The majority of this growth, say Yankee analysts, will be attributed to Ethernet.

Currently, the majority of wholesale backhaul in North America is TDM over copper. In 2012, wholesale backhaul revenues from TDM will be about four times the revenues for Ethernet, but wholesale providers increasingly are offering Ethernet services as a backhaul option. Moving forward, it’s likely the mobile network operators will continue to rely on legacy platforms for 2G and 3G voice services, if for no other reason than inertia, say Yankee analysts, and will move to Ethernet primarily to support newer 4G and data services.

“For backhaul connectivity over 10 Mbps, it is, on average, half the cost of the equivalent TDM bandwidth,” says Jennifer Pigg, Yankee analyst. “The higher the bandwidth demand, the more difficult it becomes to ignore Ethernet’s cost advantage.”

For the entire report from Editor in Chief Martin Vilaboy, please check out ChannelVision’s full issue, available online by clicking here.

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