Report for Vodafone Mobile backhaul market 22 April 2014 James Allen
Mobile backhaul market 2 Summary This document summarises the results of a project carried out by Analysys Mason on behalf of Vodafone, looking at: the extent to which microwave point to point radio can support the provision of cell site backhaul over the lifetime of the recommendation on relevant markets the extent to which operators with highly capillary fibre networks use fibre instead the approaches taken to regulation of the terminating segments of leased lines in a selection of six EU countries (France, Germany, Italy, the Netherlands, Spain and the UK) the impact of this regulation on mobile base station backhaul, and implications for future regulation in this area.
Current situation 3 Mobile backhaul is important Each mobile operator needs to connect its base stations with its core network electronics; these links are often referred to as backhaul. These links are leased lines (SDH or Ethernet). Demand from mobile operators is a large fraction of the leased line market (e.g. in 2006, 46% of the Italian leased line market by value was from base stations) The leased line market is a significant part of the telecoms market on its own - 2Bn/annum in the UK Backhaul link Core node Aggregation node Base station
Current situation Microwave radio has been enabling selfsupply by mobile operators The mobile operator has a variety of options to provide these links: building its own links, often using microwave point to point radio leasing commercial inputs, where these are available buying regulated inputs from the SMP operators. Horizontally integrated incumbent operators tend to use fibre 4 MNO BTS % of BTS linked by wireless technologies TI Mobile 17 383 12% Vodafone 14 271 84% Wind 12 340 85% H3G 9657 76% Source: AGCOM, 2009
Capacity (Mbit/s) Capacity (Mbit/s) Future situation..but backhaul requirements will exceed the capabilities of microwave soon 1,600 1,400 1,200 1,000 800 600 400 200 0 Urban cells 2014 2015 2016 2017 2018 2019 2020 2000 1800 1600 1400 1200 1000 Rural 5 site "daisy chain" 800 600 400 200 0 2014 2015 2016 2017 2018 2019 2020 5 4G peak cell capacity 4G average capacity (3 sectors) Microwave capacity (14 Mhz) Microwave capacity (28Mhz) Microwave capacity(56mhz) Microwave capacity (250Mhz in E-Band) 4G theoretical peak throughput (5 site) 4G average throughput (5 sites) Microwave capacity (14 Mhz) Microwave capacity (28Mhz) Microwave capacity(56mhz) Source: Analysys Mason Phase 1 report
Current regulation The "wholesale terminating segments" market is not well harmonised.. Italy defines the mobile backhaul market as distinct and finds no SMP (although this may not be prospectively true at high bandwidths) Some countries do not allow mobile operators to use wholesale terminating segments to connect base stations Netherlands Regulated access with price control, varying by speed, interface, geography Lighter price controls at > 10Mbit/s (France) No SMP above 155Mbit/s (Germany) Cost orientation for traditional interface <= 155Mbit/s (SDH), retail minus for Ethernet <=1Gbit/s, reasonable prices above 1Gbit/s (Spain) Only regulated at <=1Gbit/s (<=155Mbit/s SDH) with lighter price control in London (UK) 6
Current regulation.. the remedies in the passive infrastructure access market also vary widely.. In the six countries we examined, there are a wide variation of approaches: Access to duct and dark fibre Italy Access to duct only France Spain (dark fibre if duct not available) Access to neither duct nor dark fibre for providing mobile backhaul UK Germany Netherlands 7
Current prices 8..and prices vary substantially across the EU Monthly prices of 100Mbit/s circuits in different European countries 1.600 Fast Ethernet 100 Mbit/s (eur/mes) 1.400 1.200 1.000 800 600 400 Francia Italia Reino Unido Media España Alemania Austria Portugal Suecia 200 0 2 7 12 17 Distancia (Km) Source: CMT, 2013
Conclusion The recommendation on relevant markets is an appropriate tool to improve the situation It would seem helpful for the market for wholesale terminating segments of leased lines to be retained in the Recommendation. Failing this, guidance could be provided by the Commission or BEREC to cover the way in which terminating segments or the mobile backhaul market needs to be considered It is vital that the specific role of leased lines in supporting other retail markets be taken into account If products suitable for mobile backhaul are not available, the likely consequence will in the near future be a reduction in the ability of non-integrated mobile operators to compete on a level playing field in relation to high speed LTE services, to the detriment of end-users 9
10 Contact details James Allen Partner james.allen@analysysmason.com Analysys Mason Limited St Giles Court, 24 Castle Street Cambridge CB3 0AJ UK