Crucial economics for mobile data

Executive summary Backhaul is a crucial enabler for mobile operators deploying new high-capacity technologies like Long Term Evolution (LTE), as they look for a solution that meets their performance requirements and minimizes costs – in particular opex, the largest contributor to backhaul costs. Backhaul prominence will rise further with the deployment of small cells, and with the associated increase in the number of cell sites, mostly in challenging urban locations and requiring a wireless backhaul link. How can operators choose from a wide range of backhaul choices, ranging from fibre to microwave and E-band point-to-point (PTP), and to microwave point-to-multipoint (PMP)? This paper presents a financial analysis based on a total cost of ownership (TCO) model that compares capex and opex of fibre, microwave and E-band PTP, and microwave PMP backhaul within Long Term Evolution (LTE), third-generation (3G), and small-cell networks over a period of five years. For operators that do not own a fibre network or lack affordable access to leased circuits, wireless solutions provide the capacity, performance, flexibility, and cost-effectiveness that they need to backhaul 3G and 4G traffic. Among wireless solutions, PMP is the most cost-effective because it requires fewer radios to meet the backhaul requirements than either microwave or E-band PTP does, and this translates into lower equipment and installation costs (fewer radios to install), as well as lower opex (fewer links to operate). Furthermore, the smaller equipment footprint and the ability to use spectrum licences that cover areas instead of individual links make PMP easier and faster to deploy in challenging urban environments. The cost savings afforded by PMP are further driven by the ability to leverage aggregation gains which arise from the lack of correlation of data traffic patterns from different radio access network (RAN) site sectors. Unlike voice, data traffic is extremely bursty, but traffic peaks across base stations are not correlated. By combining traffic from multiple RAN sites, wireless backhaul throughput requirements are kept in check, even as RAN traffic levels grow, especially when using the PMP architecture, and spectrum resources can be more effectively used. Our TCO analysis shows that microwave PMP is particularly cost-effective compared to microwave PTP in high-density environments for two main reasons: (1) it efficiently leverages gains from traffic aggregation; and (2) it allows operators to buy, install, and operate less equipment as the hub equipment is shared across multiple RAN locations. PMP gives operators a 49% …