Mobile operators can no longer justify the costs associated with leased backhaul to provide for the growing number of subscribers and faster technologies.
This is according to MTN senior manager for data, roaming and reseller solutions Brian Seligmann, speaking at the 2008 MyBroadband Conference, yesterday.
“We need so much more capacity that we have no choice but to start self-providing, that is why we are all digging up the roads at the moment,” he noted.
Seligmann said, as the number of towers increase and the subscriber footprint grows, it becomes harder to justify the operational costs of leased backhaul and the associated hardware requirements.
He explained there are two primary factors to consider when deploying a network: the first being capacity and the second being coverage. When more users are added to the network, more capacity and coverage is required.
Opex woes
Because users share the bandwidth, the more users, the less reliable the Internet service becomes. However, with the “bursty” packet-like nature of users' habits, access is usually stable and reliable. “This inherent nature is discarded when you include peer-to-peer download packages, where one user will then take all the available bandwidth.”
To cater for the growing demand in this kind of Internet usage, the operators can add more carriers and increase the total pool of bandwidth at any given site; however, there comes a point when adding carriers becomes economically impossible, he pointed out.
“It creates a domino effect. The expense is operational and not capital. One can always justify capital expenses. But operational expenses must be 100% recovered. This is why the fibre rings are so critical to our business,” explained Seligmann.
He noted that for MTN it has become a question of being able to serve each customer the best online experience.
No choice
Richard Hurst, IDC Africa programme manager of communications, says it makes sense for the operators to build their own backhaul networks. “However, for the immediate future they will have to rely on Telkom for the infrastructure.”
He adds, as demonstrated by Neotel's infrastructure deployment, building that kind of network does not happen overnight. “It takes planning, thought, time and money to get backhaul right.”
Hurst believes self-provisioning is also a double-edged sword for the operators, because they will now be held accountable for any trouble on any part of the network.
Denis Smit, MD of research firm BMI-TechKnowledge, agrees, saying the operators have really been left with no choice but to build their own networks. “This is not a new condition, it has been around for quite some time,” he adds.
While he says the operators will be held accountable for the new networks, the benefit for the consumer will not be from that accountability, but rather from the new networks themselves. “Telkom's network is overwhelmed by traffic. If operators migrate users onto their own networks, there could be a service improvement.”
SOS
Companies like MTN are eyeing speed upgrades, from the current highest rate of 7.2Mbps to a possible 14.4Mbps. However, Smit says until the companies are free from leased lines through Telkom, they will not be able to justify the expense and will not be able to implement it.
The MTN Group has dedicated R7.1 billion - the equivalent of 70% of the group's EBITDA - to the upgrade of its network infrastructure.
The company has begun the construction of a national fibre-backbone, which it expects to be completed by 2010. According to the company's figures, fibre will free MTN from Telkom's networks at a cost of between R1.2 billion and R1.5 billion.
It adds that it expects to save over R9 billion over 10 years by implementing its self-provisioning strategy.
Vodacom has also started rolling out its own backhaul, having completed four of 11 fibre metro rings. “From a Vodacom Business perspective, we have influenced route planning so that we can provide access to particular buildings for key customers during the first roll-out phase,” said Vodacom Business executive director Wally Beelders at yesterday's conference.
He added that the metro rings will be extended to regional and then national fibre backbones and are expected to be completed over the next three years.
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