Last weekend, I met with a friend for coffee to discuss the state of the network. He observed that I was consistently writing more and more about the mobile industry. I corrected him — I am writing more and more about the mobile Internet, not the mobile industry. And I’m doing so because it’s one of the most dynamic parts of today’s technology ecosystem — there’s no getting away from it.
If you’re an iPhone user, then you are all too familiar with the trials and tribulations that come with AT&T’s 3G service. It can be slow, it can be temperamental and it can be missing in action. Ma Bell, of course, has been trying its best to boost the bandwidth to your handset by using its 850 MHz spectrum band for 3G services.
But that isn’t enough. It doesn’t matter how much speed the air interfaces can handle; what matters is how much bandwidth is available to cell towers. As we have written in the past, most of the mobile companies are using older-generation technologies — a handful of T-1 connections that pump 6-10 megabits per second of bandwidth capacity into cell towers that turn around and share it with tens of thousands of users. But the popularity of new 3G devices such as the iPhone and BlackBerry 3G has increased the use of data, putting the backend networks under strain. And from that perspective, today’s 3G networks are like glittering skyscrapers built on a foundation of matchsticks.
The current buildout of wireless networks is mirroring that of the wired Internet in the late 1990s and early part of this decade. Back in the day, every time you pulled down a track from Napster, you put an enormous strain on the network, which, in turn, led to the rise of bandwidth providers such as Qwest and Level 3, along with a series of hardware makers. Today that problem is magnified manifold, mostly because the number of mobile users is so much higher than PC users accessing the Internet.
So every time you look up Facebook on your handset, you’re contributing to the strain on those wireless networks. And according to analyst firm Telegeography, by the end of 2013 the addressable market for 3G and 4G cellular services will have grown to more than 4.5 billion — or about 71 percent of all wireless subscribers.
This is clearly a big opportunity not only for new startups, but also for more established equipment makers. ADC Telecommunications (s ADC), which makes gear for broadband networks, is a perfect example. The company has been a beneficiary of Verizon’s expansion of its fiber networks to consumer homes, and now that fiber-to-the-home technology is finding a new use in the wireless backhaul networks. ADC’s fiber will compete with the microwave technologies being used for backhaul as well. This connectivity technology is known as “fiber to the cell site,” which means that carriers are connecting cell towers and mobile base stations with ultra-high-capacity fiber links to the Internet. And because these fiber networks can be easily upgraded to handle any amount of bandwidth when demand arises, the switch to 4G from 3G technologies won’t result in a bottleneck.
In a conference call with analysts to discuss the company’s most recent quarterly results, ADC CEO Robert Switz said that there “are approximately 200,000 cell sites in the U.S., with less than 10 percent of them fed by fiber today.” Carriers are looking to supplement these large macrocells with smaller, microcellular networks, which allow more bandwidth to be made available to consumers.
“While we have seen customer spending delays throughout this year, we believe that mobile carriers’ capacity issues continue to build and that our solutions provide an easy way to implement and economic solution to these problems,” Switz said on the ADC call. Loosely translated: These wireless backhaul networks are stretched to the max and are in desperate need of an upgrade. And guess who ADC’s two major customers are? AT&T (s T) and Verizon (s VZ), both of which are betting the farm on their respective wireless networks (and which together own more than half of the cell sites in the U.S.).
Verizon recently said that it plans to extend its fiber network for use as backhaul for its future Long Term Evolution (LTE) network, which may help it cut costs. According to a report released last month by telecommunications services provider Acision, backhaul typically accounts for 30 percent of operating costs.
And as Switz noted, the demand for wireless bandwidth capacity isn’t going to come down anytime soon. “You’ve got huge growth. And the apps are growing every day for the smartphones. So the capacity, the wireless carriers can’t keep up with capacity demand,” he said. “I just recently was in two meetings, names to be left blank, one provides silicon into the market and the other provides services and their forward strategic plans, they’re forecasting essentially handheld mobile devices with 100 MEG capacity, the ability to do telepresence conferencing and all the other good stuff that we laughed at years ago when AT&T used to put out their commercials on video, which we now all have.”
This sort of matches with Cisco’s forecast from earlier this year, that mobile traffic worldwide would reach more than one exabyte per month by 2012 — though some of our readers expressed doubts about Cisco’s claims.
Regardless, it’s clear that the future of the mobile Internet is bright, exciting and intriguing. I will be discussing that future onstage with T-Mobile USA’s chief technology officer, Cole Brodman, at our Mobilize 09 conference on Sept. 10 here in San Francisco. Hope to see you there.
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