NPRG Insight: Is Fixed Wireless the Canary in the Coalmine for Wireless Backhaul?
How does the state of the fixed wireless sector reflect on the health of wireless backhaul?
As the cellular backhaul market grows ever more competitive, especially with the entry of non-traditional players such as cable MSOs, opportunities for fixed wireless providers in the space have been squeezed. Though fixed wireless revenue from backhaul continues to grow, the number of pure fixed wireless players has shrunk. Should this act as a warning to the horde of new wireline entrants?
The state of fixed wireless backhaul is explained in part by the limited number of cellular service providers that are potential customers: the "big five" national cellular carriers will be reduced to just four after Verizon closes its acquisition of Alltel, and small regional carriers are collocated at fewer towers and typically have smaller bandwidth demands.
This small pool of prime customers dictates that would-be backhaul partners achieve a certain level of scale. And because the stakes involved are so high, a successful track record with backhaul becomes a key selection criteria. Both are limiting factors for potential fixed wireless entrants.
There are only a handful of fixed wireless providers with the necessary heft and reputation to provide carrier-grade service. Cellular operators, while looking to diversify beyond their reliance on the RBOCs for backhaul, typically seek to minimize the number of companies contracted as backhaul partners. If the market retains its current configuration even into the medium term, barriers of entry are likely to grow ever higher.
Significant Shifts (and Stagnations) Among Fixed Wireless Stand-alone Providers Between 2006 and 2008
Source: New Paradigm Resources Group, Inc.
While it can be misleading to directly transpose the problems of fixed wireless onto new wireline entrants in cell backhaul, the comparison is still instructive. Wireless backhaul makes up the largest single market for fixed wireless service. So the health of fixed wireless providers will continue to be a useful proxy for how cell backhaul is doing, especially as fixed wireless remains both a clear alternative as well as a complementary technology to fiber as backhaul needs begin to scale.
This does not necessarily mean there's going to be the same thinning of wireline providers in backhaul. Given the sheer size of the US, regionality is always going to play a role: a provider's unique geographic footprint may well work to its advantage in winning backhaul contracts. Just as importantly, the economics of fixed wireless technology fits into a variety of deployment models, including carrier self-provisioning, that make for a more complex story. But for those alert to all the signs, the fixed wireless sector is sending signals that are worth listening to, and gaining insight from.
You can read more detailed analysis on the fixed wireless sector in NPRG's Fixed Wireless Sector Analysis Report. For more direct insight into the wireless backhaul space, NPRG also publishes a Wireless Backhaul Market Study.