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Pushed along by cloud apps, video, small cell deployments and a skyrocketing number of devices with wireless connectivity, mobile backhaul requirements are reaching a critical point. To avoid a capacity bottleneck in the wired path between base stations and the long-haul network, operators are ready to increase their investments in this area. And that offers a big opportunity for wholesale operators and other service providers in the backhaul space.

A recent research report says it expects the global mobile and wireless backhaul market to grow from $13.11 billion in 2013 to $23.3 billion by 2018, at a CAGR of 12.2 percent. The North American region in the mobile and wireless backhaul market is expected to hold the largest market size, and, over the next five years, the Latin American region is expected to experience highest traction in terms of growth.

Dell’ (News - Alert)Oro Group has a similar prediction, expecting wireless operators to invest in their wireline networks significantly over the next five years. It noted that Facebook, Netflix, Spotify and other over-the-top (OTT) apps are one big driver of increasing traffic and therefore backhaul demand; but LTE (News - Alert)-A (Advanced) offers greater spectrum efficiency and more connectivity to more devices per cell site, even as the bandwidth consumed per subscriber increases.

“Since the introduction of the iPhone (News - Alert) back in 2007 and subsequent proliferation of smart phones generating mobile data as well as voice traffic, service providers have prioritized building out and improving both their wireless and wireline networks,” said Tam Dell’Oro, president and founder of Dell’Oro Group, speaking to TelecomLead.

“In the United States, demand for routers in the backhaul for LTE networks has been one of the primary motives for investment in recent years,” said Alam Tamboli, senior analyst at Dell’Oro Group. However [in] this quarter, service providers in the region also invested heavily into fixed networks. In much of the world, routers used for LTE mobile backhaul networks continued to drive investment in the edge.”

The other main driver is the deployment of small cells, which allow operators to extend greater bandwidth and connectivity either indoors or into neighborhoods. But the result is greater aggregated traffic on the backhaul link. Small cell deployments, which are driving CapEx spending in their own right, are requiring operators to embrace new backhaul technology players who can offer cost-effective and high-performance solutions, especially in the small cell space.

Said Richard Webb, directing analyst for mobile backhaul and small cells at Infonetics Research (News - Alert), “Our recent macrocell backhaul study reveals the extent to which operators are looking at software-defined networking (SDN) and network functions virtualization (NFV) solutions to provide backhaul flexibility and cost-savings.”