Femtocells Are Coming

Base stations have been shrinking for some time, and it's becoming obvious that carriers are now starting to consider much more seriously the use of tiny radios in subscribers' homes to improve coverage.

A home base station – or femtocell – is a low-cost, low-power radio system that can be used to boost bandwidth and coverage and enable new applications such as fixed/mobile convergence (FMC) in a subscriber's dwelling. Vendors have been pushing the idea for a while, but it appears that mobile operators are now starting to take them seriously.

For instance, Sprint Corp. (NYSE: S) is examining many options to ensure that indoor coverage on its new WiMax network is up to scratch. Unstrung Insider analyst Gabriel Brown expects that at least one major carrier will announce a femtocell rollout this year. (See Sprint Goes Femto With WiMax.) ABI Research is predicting that there will be 102 million users on 32 million femtocells worldwide by 2011. I'd say that it's hard to call those kinds of numbers at the moment, as the market is barely born yet. I do agree with ABI, however, that the bulk of femtocells will support two or more radio types.

Multimode is definitely the way to go with femtocells, since people frequently use more than one type of wireless device in the home. Sprint is already said to be looking at products using WiMax and a couple of flavors of CDMA.

What will get really interesting is when carriers start to look at putting WiFi into these boxes. It will open up an opportunity for the major service providers to get into the SOHO market and offer users an all-in-one box to replace their old WiFi access points with a more managed and layered service.

In fact, femtocells represent the first real threat to the dominance of WiFi in the home. Initially, carriers will be able to offer services like Internet connectivity and voice-over-WiFi calls in the home that can move to the cellular network when the user goes out of range. BT Group plc (NYSE: BT; London: BTA) and T-Mobile US Inc. have already started on this path with dedicated FMC services. I suspect that T-Mobile USA will continue to be a pioneer in this space and be among the first North American operators to deploy femtocells. This will allow it to extend both its cellular and WiFi hotspot services further into people's homes.

Even though users thanks to WiFi access points, are much more used to the idea of wireless connectivity in the home, there is no sure-fire guarantee that subscribers will buy into the femtocell idea. I suspect that pricing, security, management, and – yes – health questions will all come to the fore when these appliances are more common on the market. (See HBS: Issues of Management and Wireless Illin'.)

And oh yeah – the marketing folks are going to have to come up with a snappier name than the somewhat hygienic-sounding "femtocell," which seems to be the favored industry term right now. I think most people would expect to hide a femtocell at the back of their bathroom cabinet rather than sticking it in their kitchen window.

— Dan Jones, Site Editor, Unstrung

lrmobile_atiller 12/5/2012 | 3:09:38 PM
re: Femtocells Are Coming Hi Dan

I think you've put your finger on the main challenge for femtocells. The business case and strategic benefits for wireless carriers are pretty clear, and the carriers have bought into the idea. However, the carriers will need to come up with compelling consumer propositions to persuade people to take a femtocell home and plug it in.

Beyond giving femtocells a better name, I'd expect to see discounts on voice and data services similar to the homezone tariffs that have been used as a FMS tactic by the mobile operators in Germany and elsewhere. "Femtozone" tariffs should be more effective for the operator on two counts. Firstly, they can be restricted to the home, so that the operator does not need to sacrifice the premium for mobility across a wide area. Secondly, femtocells reduce the cost of delivering the service, so that any discount does not come straight off the operatorGÇÖs bottom line.

Also, where homezone tariffs almost exclusively offer discounts on voice calls, femtozone tariffs are likely to offer similar discounts for data services as well. If operators want the cell phone to become a viable alternative to the PC and TV in the home for entertainment and information services, they'll need to offer competitive pricing. For example, I wonder if we'll see music downloads priced at iTunes rates in the femtozone?

Andy Tiller
VP Marketing at ip.access (developer of the Oyster 3G femtocell)
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