Last week Vodafone UK announced a new, five-year, mobile backhaul contract with BT Wholesale. Through this agreement, BT Wholesale will provide and manage high speed connectivity between Vodafone's UK base stations and its mobile switching offices.
BT will be providing mobile backhaul services for both voice and data services, with speeds up to 60Mbps, through its 21st Century Network (21CN) enabled Ethernet service. BT Wholesale signed a five-year mobile backhaul agreement with T-Mobile in July 2007. BT Wholesale mentioned that it would be using leased lines in order to provide the service and would also use Ethernet services when available.
There are a lot of technical concerns now about the reliability of T1/E1 leased line use for mobile backhaul as mobile data traffic increases, especially in peak times, through the growth in usage of high-bandwidth mobile applications.
Last year Ovum RHK estimated that 90% of backhaul traffic is carried by the mobile operators themselves or by a business related to their parent company (see our report, Forecast: Wireless backhaul opportunities, global). However, we expect this figure to change as it will become very expensive for mobile operators without a fixed-incumbent parent to invest in new technologies to cope with the demands of mobile backhaul services. There is also a possibility of using a hybrid infrastructure: using T1/EI leased lines for voice and Ethernet based solutions for data.
Consequently we believe that most other mobile operators will follow Vodafone and T-Mobile's example and providers that can offer flexible and scalable bandwidth to meet increased data application for mobile backhaul. This is a good market opportunity for BT, which has made a considerable investment in its 21CN to generate such revenue streams.
Fernanda Mello Veiga, Senior Analyst