Vodafone, O2 Test Femtocells

BARCELONA -- Mobile World Congress -- Vodafone Group plc (NYSE: VOD) and Telefónica O2 Europe plc officially announced today that they have begun trials of femtocells in Spain and the U.K., respectively. (See O2 Trials Femtocells and V'fone Trials Femtocells.)

The news from the Mobile World Congress in Barcelona today follows reports that T-Mobile is also testing the tiny home base stations. (See T-Mobile Trials Femtos, Femtocells Brace for Big 2008, and 3G & WiMax Femtocells: The Operator View.)

In the U.K, Telefonica O2 this month started testing equipment from NEC Corp. (Tokyo: 6701) and the ZoneGate femtocell from Ubiquisys Ltd. Unstrung understands that Telefonica O2 will also test a femtocell solution from ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) (See NEC, Ubiquisys Team, Femtocell Startup Pockets $25M, and UbiquiSys Gets Google Boost.)

For the U.K. trials, Telefonica O2 is concentrating on what services can be delivered and how they will be provisioned.

"We're checking out the feature set and seeing if the 'zero touch' is really all that," says Chris Fenton, director of convergence policy at Telefonica O2. "We're really focused on whether we can make the customer experience."

NEC is integrating the Ubiquisys femtocell into its solution, which includes the femtocell gateway and "all the access point management and provisioning system, which makes it all 'zero touch,'" explains Anil Kohli, director for global femtocell competence at NEC Europe.

Telefonica O2 says it plans to expand the U.K. trial in the summer and aims for commercial services in early 2009, if all goes to plan.

If the "zero touch" promise cannot be fulfilled, then that greatly affects an operator's business case. If customers struggle with plugging in, setting up, and getting services on the home base stations, then increased calls to customer support centers will jack up an operator's costs.

Vivek Dev, chief operating officer of Telefónica O2 Europe, said in a statement, “Our Apple iPhone is already driving unheard-of levels of mobile internet usage, and the introduction of flat rate data tariffs is expected to increase this further. Both of these place huge capacity demands on our networks, and because so much of that usage is at home, femtocells coupled with DSL could provide an alternative capacity resource.”

Telefonica O2's trials are limited to the U.K. But Fenton says the trial complements what parent company Telefónica SA (NYSE: TEF) is doing in Spain. There, the Spanish operator is testing femtocell kits from Huawei Technologies Co. Ltd. and Alcatel-Lucent (NYSE: ALU).

These vendors will be busy with femtocells in Spain because Vodafone is also testing femtocell equipment from Alcatel-Lucent and Huawei in the country. (See Vodafone CEO Seeks Cheap Femtos, Vodafone Picks Femto Vendors, and Vodafone RFP Fuels Femtocells.)

Andy MacLeod, global networks director of Vodafone, said in a statement, “Femtocells have the potential to enhance customers’ 3G broadband experience, and the trials are critical to investigate whether the technology can deliver on its promise.”

— Michelle Donegan, European Editor, Unstrung