Femtocells are a scam you don’t need, and the very existence of the T-Mobile HotSpot@Home solution shouts that loud and clear

February 19, 2009

5 Min Read
Beware of Femtos

With the annual Barcelona bash underway this week, there has been an excess of press releases hitting the wires. And more than few proclaim the dawning of femtocells at various carriers, as well as the supporting equipment for such from original equipment manufacturers (OEMs).

Every wireless service provider worth its salt has been talking about femtocells, and those that haven’t introduced the service, have it on their product roadmaps for the near future. These devices are much like the WiFi routers many of us have in our homes today. However, the objective with femtocells is to extend the wireless service of virtually any type – GSM, CDMA, WCDMA, WiMax – within a facility. The alleged need is based upon the fact that some buildings may degrade wireless signals more than others, particularly at higher frequencies.

From where I’m sitting, femtocells rival some of the other great achievements of our service providers like ISDN lines; long-distance as a competitive advantage; the merger attempt with Tele-Communications Inc.; and claiming a plastic cup (Hush-a-Phone) over the mouthpiece of a telephone threatened the integrity of their networks.

I’m not even certain you could call femtos a solution looking for a problem to solve. It’s more like a gimmick hoping to generate some cash from a hapless consumer.

Ostensibly, the consumer will acquire a femtocell base station from his/her service provider for a fixed price, monthly fee, or some combination thereof. A quick check of the table below shows the fees associated with the current offerings from our domestic service providers.

Table 1: Femtocell Offerings

Base Station

Monthly Fees

Sprint Airwave



T-Mobile HotSpot@Home*



Verizon Network Extender



* Requires a special handset that may cost $30 after rebates.
Source: Company reports

T-Mobile International AG 's HotSpot@Home service differs from Airwave and Network Extender in one critical perspective. Unlike the others, it is not a cellular base station. It’s a WiFi router like the ones that you buy today for $50 at Best Buy or Amazon. However, unlike those two retailers, T-Mobile thinks it carries a suggested retail price of $150, but after its magnanimous rebate you can get it for only $40. And because it is a WiFi router, you have to have a phone that supports WiFi, and T-Mobile will gladly sell you one at prices ranging from free to $30 after rebates.

As I noted above, the Airwave and Network Extender are both mini-cellular base stations. For the privilege of making their networks more efficient and effective, both will charge an outrageous fee for the base station, with Airwave adding the insult of a monthly usage charge. For this privilege, they’ll also utilize the broadband connection (DSL, cable modem) that you’re probably already paying $40 to $50 per month for. Talk about insulting!

Femtocells are a scam that you don’t need – and the very existence of the T-Mobile HotSpot@Home solution shouts that loud and clear. Most of us already have a wireless router in our homes today from D-Link Systems Inc. , Linksys , or half-a-dozen other companies. There is nothing to suggest that a properly equipped handset could not be used to make voice calls in the same manner every voice-over-IP (VoIP) service does today, and we don’t need a mini-cellular base station in the closet to do that. (See T-Mobile Pilots WiFi/Cell Service, MWC 2009: T-Mobile Gets Real on LTE, and MWC 2009:T-Mobile Preps Femto Launch.)

Service providers have had in place an agenda that prevented handset OEMs from including WiFi support. WiFi meant a subscriber might use a network other than the service provider’s, and that would preclude the ability to “charge” for those services. This is the classic parochial thinking on the part of service providers, whereby all features are a threat to their networks until they can devise mechanisms to monetize them.

Apple Inc. (Nasdaq: AAPL)'s iPhone was like a two-by-four between the eyes for these dolts. It had never occurred to them that opening their networks to WiFi might actually increase data usage on their networks as well as on WiFi networks. It’s a simple fact that iPhone subscribers are using their handsets in ways that are markedly different than those of traditional cellular subscribers. More importantly, the proof of that has been born out by the data that has been available from the service providers.

As you can see below, the iPhone generates more data growth for AT&T Inc. (NYSE: T). Even with the new BlackBerry Storm in its fourth quarter, the data growth rate at Verizon Wireless continues to trail its primary competitor. You would have thought that, given the success of the iPhone, the new Storm would have been equipped with WiFi support, but that was not the case. Verizon Wireless’s strategic decisions remain defensive in nature, with the objective to protect and control the network.

Table 2: Wireless Data Growth at Carriers





















Source: Company reports

To suggest that you “need” a femtocell from one of these carriers that, in effect, benefits its network using your resources (i.e., your broadband connection) while charging you for the privilege is a bad joke in anyone’s book. This is a scam designed simply to get you to put an increasing amount of minutes of use on your wireless phone more frequently. Let’s face it: You’re not going to use the femtocell for data, because you already had the broadband connection for your personal computer. If the signal strength at your location is insufficient to make a phone call, maybe it’s time for a new service provider, but don’t let yourself get sucked in to one of these white elephants.

— Bob Faulkner, Special to Unstrung

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