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Mobile’s Need for Fibre

It was interesting to see that in New Zealand Vodafone had second thoughts and decided to come up with its own proposal of forming a consortium of network operators, rather than simply supporting the government’s announcement of its FttH plans.

Our analysis of this change of mind is that mobile operators increasingly need fibre networks to sustain the enormous growth in mobile broadband.

Most mobile stations around the world are not connected to a fibre network.

Driven by developments such as iPhone and Android, and in particular the applications that are possible with these devices, the operators are pushed to upgrade their network so as to be able to cater for all the extra capacity needed for these new services. You only have to look at those awesome Android applications that let you point your mobile phone camera (with an inbuilt radar device) at the buildings in a street to see which are for sale, in which of them business jobs are available, and where restaurants, shops, etc. are all linked to Google maps, street view and other applications.

After a decade of failing to develop this market themselves it has become clear that the mobile operators are no longer in charge—they are being pushed in this new direction by the applications and mobile device providers. Backhaul demand created by mobile broadband applications will lead to a rather rapid upgrade to LTE networks. Capacity demand on such networks could be anything from 300Mb/s to 1Gb/s per cell site.

The scramble for iPhones, and soon no doubt the Androids also, is turning the operators from mobile leaders to mobile followers. This has been predicted by us for more than a decade (since the arrival of WAP in 1997).

The problem for mobile operators in saturated markets is that the service revenue predictions for the next five years are looking rather flat, while at the same time they are being forced to continue to invest more and more into their network; more mobile stations and, more importantly, a fibre-based backbone. Rolling out fibre takes time and wireless broadband is growing fast, so before long the mobile operators will also be faced with a timing problem. For them, national fibre optic networks, especially open networks based on wholesale, can’t come quickly enough.

The mobile-only operators have great difficulty getting attractive access prices for their fibre optic backbone needs. They need to be able to use these networks on a utilities basis, rather than one that is based on the premium rates charged by the vertically-integrated fixed operators.

And so it doesn’t come as a surprise that when the opportunity arises the mobile operators will begin to become involved in any large-scale fibre optic infrastructure developments.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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