BT Eyes Femtocells

BT Group plc (NYSE: BT; London: BTA) is evaluating how femtocells -- small home mobile base stations -- might extend its converged service offerings, the British carrier revealed today.

But the operator warns that the cost of deploying femtocells is still too high. (See 3G & WiMax Femtocells: The Operator View.)

"We're doing technical evaluations of femtocells, like everyone else, but the big issue is cost," said Warren Buckley, BT's director of mobility and convergence, speaking at the Informa Femotcell Solution conference in London.

Buckley stressed that the operator has not yet made a decision whether to deploy femtocells, but the home base stations could offer a way to expand the current range of converged handsets and services that the operator offers through its BT Fusion fixed/mobile convergence (FMC) service. (See Gateway Key to BT's Fusion Flop.)

However, he points out that the current cost of a femtocell is far higher than the cost of BT's Home Hub home gateway, of which BT has shipped more than 2 million. (See Thomson Ships BT Home Hub and BT Gets a Gateway.)

"The cost of the BT Home Hub is significantly less than 50 percent of what we're being quoted for a femtocell," says Buckley. "The cost model now does not justify me putting a femtocell in the Home Hub." (See Femto Players Gun for Gateways.)

BT is also checking out how any deployment of femtocells in the U.K. might affect traffic on the carrier's access network, since the home base stations use broadband connections for backhaul to the mobile core network. Buckley, though, says the carrier is "not worried about the bandwidth impact of femtocells over our broadband."

The BT man said the carrier's experiences with Fusion and the BT Home Hub broadband residential gateway will inform its decision on femtocells.

Fusion has not been successful in terms of subscriber growth. There are fewer than 50,000 Fusion customers after two years of offering the service. BT attributes the poor growth to lack of attractive dualmode handsets and channels to market. (See BT Launches Fixed/Mobile Phone, BT Goes Blue, BT's Flat Fusion , and FT vs BT on FMC.)

But one analyst says Fusion's problem is rooted in unclear, and even confusing, marketing.

"Users don't know what [Fusion] is for," says David Tansley, a partner at Deloitte Touche Tohmatsu . "They can't figure out whether it's about cheaper calls or new services. That lack of clarity is very damaging."

While BT's eye wanders to check out femtocells, the operator says it remains committed to WiFi as a key component of its mobility offering and to Fusion, despite the lackluster customer takeup.

The operator plans a marketing push for Fusion early in 2008, including the offer of a wider range of handsets. [Ed note: Haven't we heard this before?] (See BT Adds WiFi Devices, BT Touts Fusion WiFi, BT FONs in WiFi Hotspots, and BT, FON Team Up.)

Just four weeks ago, BT quietly launched a prepay option for Fusion and its GSM services. Buckley says this will open the services to a new portion of the addressable mobile market in the U.K., since 65 percent of the U.K. market is prepaid.

"We plan to drive Fusion growth through pre-pay and new handsets, new [service] plans, and a new approach to marketing," says Buckley. "We have to make customers more aware of the services."

Indeed, with more improvements, Fusion might even be able to shed its Top Turkey status here at Light Reading and Unstrung. (See Unstrung's Top Five Wireless Turkeys.)

— Michelle Donegan, European Editor, Light Reading