Cell coverage not so good at your place? We can all sympathize with that.

Even so, installing a 3G base station inside your home probably seems a little excessive, no?

Well maybe not. The emergence of a new category of ultra-low-cost home base station equipment that lets wireless users communicate across any IP access network using a standard mobile handset could redefine the cost structure of 3G service delivery and reshape thinking on fixed/mobile convergence (FMC).

The idea is to take residential broadband access and combine it with low-power cellular base stations – a.k.a. femto cells – installed in subscriber homes to deliver carrier-grade voice and data services at a fraction of the cost of the outdoor macro network, finds the latest Unstrung Insider report 3G Home Base Stations: Femto Cells & FMC for the Masses.

Such a concept puts 3G in head-to-head competition with dual-mode wireless local-area network (WLAN) plays in the burgeoning fixed/mobile convergence market. The major difference between them is that femto cells work with the millions of standard mobile handsets already in use around the world.

For mobile operators, there are a number of benefits from home base station technology. Most notably, it means that investment can be scaled in line with subscriber demand and that capacity can be deployed indoors, where it is most needed. This reduces the requirement to deploy additional outdoor macro carriers to support indoor users, which removes one of the most inefficient and costly elements of 3G network deployment. Because the IP backhaul is paid for by the customer, opex costs are also kept in check, which immediately increases potential profit margins.

So what's not to like?

With this type of cost base operators gain greater flexibility in the types and cost of services they can offer, which can enabling them to introduce disruptive pricing and accelerate capture of wireline voice minutes from public switched telephone network (PSTN) and low-cost voice over IP (VOIP) providers. There is also an opportunity to develop services that take advantage of low-latency, high-speed data-to-wireless devices that one day could even extend to using mobile handsets to access and control multimedia home networks.

It's not all gravy, however. After all, if it’s so easy, why hasn’t anyone done this before on GSM?

The femto cell challenges and proposed solutions discussed in the report include:

These challenges, combined with the potential for femtos to cannibalize macro network equipment revenues, help explain why the market is only now catching fire.

On the vendor side one of the most notable trends is how startups and other privately held companies have emerged as the key innovators in femto cell technology. Companies here include 3Way Networks , AirWalk Communications Inc. , Airvana Inc. , ip.access Ltd. , Picochip , RadioFrame Networks Inc. , and Ubiquisys Ltd. .

Of the major equipment vendors active in this market, Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), NEC Corp. (Tokyo: 6701), and Samsung Electronics Co. Ltd. (Korea: SEC) have the most advanced development programs.

Other potential players, such as Huawei Technologies Co. Ltd. , Motorola Inc. (NYSE: MOT), Nokia Corp. (NYSE: NOK), Siemens Communications Group , and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) seem likely to work with OEM partners, probably sourcing technology from the above-named startups.

— Gabriel Brown, Chief Analyst, Unstrung Insider

The report, 3G Home Base Stations: Femto Cells & FMC for the Masses, 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.