Microwave backhaul still dominated by Tier 1 vendors

According to Sky Light Research, the $6 billion microwave point-to-point radio market continues to be dominated by Tier 1 telecommunication vendors players like Ericsson, NEC, Alcatel-Lucent and Nokia Siemens Networks. There also are a handful of pure-play microwave radio vendors like Ceragon, Dragonwave and Harris Stratex Networks. Traditionally, NEC and Ericsson have been market leaders, which still holds true today. However, Chinese vendor Huawei is making strides into the market with aggressive vendor financing from Chinese banks. While most players have held share relatively steady, Huawei has increased its share roughly 10 percentage points over the past year.

The market continues to be driven by mobile backhaul, which accounts for approximately three-fourths of the market. As much as operators would like to conserve cash, at this point and time, competition and network quality is not allowing indiscretion on backhaul. Backhaul is a critical piece of the network and can essentially make or break the operator's business. Thus, competition for mobile backhaul deals is fierce and vendors rely on technology attributes to win major deals. Recent improvements in the radio have given operators more to compete on than just vendor financing or price. Innovative, next-generation radios offer scalable capacities for IP/Ethernet and/or TDM traffic. Yet, despite the improvements in the radio, operators are also demanding ultra low prices, especially in volume deals.

Analyzing the pricing trend over several quarters, price pressure does not seem especially steep; however, when the price trend is compared to product mix, a different picture emerges. Eighteen months ago, prices hovered around $5,200 in the first quarter of 2008, and in the second quarter of 2009, prices were in the neighborhood of $4,800--about an 8 percent decrease. During the same time, high-capacity radios generated under half of the market's revenue in the first quarter of 2008 and by the second quarter of 2009, they generated just over half--about a 10 percent increase.

This trend will persist as mobile data traffic continues to dilute voice traffic. As mobile data traffic grows, high capacity radios will shift from TDM/SDH to Hybrid TDM/Packet to pure packet based. The move toward radios with higher functionality is masking price decreases, which actually come in at a decrease of around 20 percent for the respective time period.

Sky Light Research, located in Scottsdale, Ariz., has been tracking and forecasting the microwave equipment market on a quarterly basis for over eight years. Market share reports are published every 90 days and include market sizing and/or share by global, regional, and applications for the microwave equipment market. For more information, please contact Emmy Johnson at [email protected] or 480-563-2251.