It's been widely noted that mobile backhaul requirements will grow at a staggering rate as subscriber numbers and adoption of 3G services and applications grows, with the average backhaul bandwidth necessary per site increasing from around 5 Mb/s now to about 9 Mb/s in the next few years. However, that rapid increase in capacity needs also will come with a rapid decrease in the amount of money being spent on the equipment and technology essential to backhaul, according to a new study from Infonetics Research.

That's because less costly, more efficient and bandwidth-rich IP network equipment will be taking over for the TDM-based systems currently installed in the networks of telcos to provide backhaul transport for most mobile networks. In 2005, only 1% of backhaul equipment sales involved IP-based gear, but by 2009, IP's share of the take is expected to increase to about 45% of mobile backhaul equipment sales — a dollar figure of around $1.1 billion.

As a result, even as volume increases, the backhaul equipment market's total value will decline on the back of IP-related economic efficiencies. According to Infonetics' report, “Mobile Backhaul Equipment, Installed Base, & Services Market Outlook,” the mobile backhaul equipment market was worth $3.4 billion in 2005 but will have a total value of just $2.4 billion by 2009.

Spending on mobile backhaul services is expected to be a different story, according to the consultancy. With 3G adoption and bandwidth-hogging applications such as mobile video on the rise, mobile operators by 2009 will spend twice the $16 billion they spent on backhaul link services in 2005.

Backhaul costs can account for up to 30% of a mobile carrier's operational expenses, and while the market for link services will continue to grow, mobile carriers will get more for their money. “The average annual charge per connection goes up only 18% between 2005 and 2009 — from $8004 to $9455 — while the capacities grow from one to two T-1s/E-1s per connection to tens of megabits per second to even 100 Mb/s,” said Michael Howard, principal analyst of Infonetics Research.

Meanwhile, the backhaul market continues to draw interest from new potential backhaul providers, such as cable TV companies. Analysts have noted that cable TV companies' abundance of fiber positions them well to compete with telcos to provide backhaul capacity to the mobile carriers. Network planning firm Stratsoft and access vendor Narad Networks last week presented findings at the Society of Cable TV Engineers Business Services Symposium in Chicago that suggested cable TV providers also have a geographic edge.

Michael Tattersall, CEO of Stratsoft, said, “[Cable TV firms] have deployed their fiber very deeply across residential geographies, with fiber access points serving an average of 500 homes throughout the country.”