Investment into the backhaul equipment of mobile operators is falling by the wayside and could damage the performance of key technologies, such as Wi-Fi or 4G.
This was the claim made in research commissioned by Tellabs and conducted by Strategy Analytics, showing while network providers were investing into radio technologies to increase connectivity to their customers, the backhaul equipment needed to strengthen the network was being neglected.
Currently, mobile operators predict they will spend 17.5% of their total operation costs on backhaul investments, but the study claims this level will not live up to user demands as mobile traffic continues to grow and 4G technology – and beyond – promises peak performance.
“At today’s backhaul investment levels, operators could create a significant backhaul capacity shortage,” said Sue Rudd, director of service provider analysis at Strategy Analytics. “This shortfall could diminish quality of service and, in turn, increase customer churn with as many as 40% of mobile users citing poor network performance as a reason for leaving an operator.”
The research said there will be a $9.2bn gap in the funding needed to upgrade backhaul over the next five years when compared with the money invested into the equipment globally, alongside a 16PB shortage of capacity to deal with the growing mobile data.
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The majority of this deficit is set to come from the Asia Pacific region – a shortfall of $5.3bn in backhaul funding and 9.4PB in capacity – but Western Europe will be responsible for a significant chunk of the figure – lacking $1bn of necessary investment and 1.8PB of capacity.
For every $1 spent over the predicted 17.5% of operation costs, Strategy Analytics claims an operator could protect $4 in revenue by keeping performance strong and retaining happy customers.
“Addressing the new capacity crunch requires a highly strategic approach to backhaul,” concluded Dan Kelly, CEO of Tellabs. “Operators who treat backhaul planning as a long-term, strategic investment opportunity to enhance customers’ quality of experience will produce higher revenue and profits.”