Ethernet Base Stations Are Go

There is a glaring irony in the mobile infrastructure market. Rapid innovation in the core radio technology used in base-station equipment and 3G access networks has ushered in the era of mobile broadband services; traffic growth is exploding and the promise of higher capacity next-generation WiMax and Long Term Evolution (LTE) systems is around the corner.

Yet, despite being home to some of the most advanced networking technology ever developed and deployed, mobile networks are poorly prepared for data and are hamstrung by reliance on voice-oriented time division multiplexing (TDM) transport over E1/T1 circuits.

For mobile operators with ambitions to compete in the Internet services market, this dependence on TDM transport is financially unsustainable. As elsewhere in telecom, the move to packet is inevitable, and there's now huge interest in carrier Ethernet for mobile backhaul.

Taking maximum advantage of IP/Ethernet economics requires not just an upgrade in the transport domain, but also base-station equipment that presents an Ethernet port to the network. Together with IP RAN capability, this is set to emerge as critical to mobile base station purchasing decisions in 2008, finds the latest Unstrung Insider report, Ethernet-Capable Mobile Base Stations.

The first Ethernet-capable base-station equipment with support for native "IP RAN" protocols appeared on the market in 2007, with a small number of forward-looking Asian operators deploying the technology in live, commercial networks during the second half of the year. These are still isolated examples, however, and not reflective of the industry mainstream.

This report provides a systematic overview of equipment suppliers' strategies for adding Ethernet capability to 2G and 3G base-station products. Here's a summary of the competitive positioning of the leading global vendors:

• Driven by EV-DO deployments, CDMA operators and vendors have been more aggressive on IP RAN transport than the UMTS community has, albeit primarily over T1. Alcatel-Lucent (NYSE: ALU) and Nortel Networks Ltd. now both offer Ethernet-capable CDMA equipment and anticipate increased demand for "single-pipe" transmission that combines 1X and EV-DO over IP/Ethernet.

• In Japan, Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY) has offered Ethernet-capable UMTS base stations since 2006. This early move to Ethernet is partly explained by the nature of Japanese base-station deployments, which often use fiber-fed remote radio heads and centralized, high-capacity baseband server units. There is also often fiber available at the baseband server location.

• Nokia Siemens Networks has some early customers taking advantage of the built-in Ethernet capability already available on its Flexi WCDMA base-station products to enable hybrid backhaul architectures and ATM pseudowires. Its schedule for native Iub over IP is a little behind key competitors, however.

• Huawei Technologies Co. Ltd. leads the market in terms of commercially available, native IP RAN and has full support for Ethernet across its base-station portfolio. The vendor has both UMTS – EMobile Ltd. , Japan – and GSM – China Mobile Ltd. (NYSE: CHL) – reference customers and is successfully marketing its all-IP mobile network vision around the world.

• The most consistent strategy comes from Ericsson AB (Nasdaq: ERIC). While it is not the first to market, its launch of Ethernet and native IP RAN capability across both its 2G and 3G portfolio in January 2008 will have the largest overall impact on the market – one that will be magnified by the size of Ericsson's installed base.

— Gabriel Brown, Chief Analyst, Unstrung Insider

The report, Ethernet-Capable Mobile Base Stations, is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.unstrung.com/insider.