Picochip demonstrated its Chinese femtocell reference design for the first time in China today and announced that femto startup Digimoc Telecom Technology (Shanghai) Co. Ltd. will use its chips and software designs to make femtocells based on the country's homegrown 3G standard, TD-SCDMA (Time Division Synchronous Code Division Multiple Access).

The news is a clear indication that China Mobile Communications Corp. is interested in the low-power home base stations, because it is the only Chinese operator that will deploy TD-SCDMA in the country. And as the world's largest operator with 415 million subscribers, China Mobile's attention to femtocells could make the country a mega-sized market for the fledgling devices as the operator ramps up to roll out its new 3G network. (See China Mobile to Unleash 3G Next Year and China Mobile Wants More 3G Phones.)

The picoChip TD-SCDMA femtocell reference design was unveiled in January this year and is now generally available. Digimoc -- which has been described as "just like Ubiquisys Ltd. were in 2006" -- is the first publicly announced customer for the product. Digimoc's femtocell access points may be available sometime next year. (See PicoChip Unveils Chinese Femtocell.)

When the femto reference design for the Chinese market was unveiled, femtocells received a resounding endorsement from the TD-SCDMA Industry Alliance . “Femtocells are an important part of the TD-SCDMA ecosystem, and an essential part of operator strategy, particularly as we evolve to TD-SCDMA LTE," said Yang Hua, secretary general of the TD-SCDMA Industry Alliance, in a statement at the time. "PicoChip's achievement significantly pushes the TD-SCDMA industry forward.”

The argument for 3G femtocells is that the devices could offer an operator like China Mobile a more efficient way to design and deploy its new 3G network. With the low-power, small base stations deployed indoors and even outdoors, operators can design their networks with more capacity and coverage at a lower cost than having to deploy additional macro base stations, so the thinking goes.

"If you do a femto [deployment] at the beginning of your network, you can change the economics of your network," says Rupert Baines, picoChip's VP of marketing. "You can put coverage and capacity where you need it very efficiently and make your network an awful lot nicer and more efficient."

The strategy would be compelling for operators that are building greenfield 3G or 4G networks, like China Mobile's TD-SCDMA network. The concept is similar to Vodafone Group plc (NYSE: VOD)'s vision for a "metrozone" of femtocells for future 4G networks, like LTE (Long-Term Evolution). (See Vodafone Dreams of Metro Femto.)

"Any operator who's launching a network now, whether it's 3G or 4G, is going to be doing this kind of thing," says Baines.

But for the Chinese 3G femtocells, all of the teething pains that the UMTS 3G femtocells are going through -- from interference problems to standardization efforts -- will be much the same, and these products are only at the beginning of that process.

— Michelle Donegan, European Editor, Unstrung