Femtocells – sounds like a science fiction term for robotic feminine cells – but it’s just another buzzword for a new technology and product that promises so much in the future, yet has delivered mostly in practical terms thus far.
For the moment, the technology that extends cellular networks to the home or business on very small scale is only just beginning to come to the surface.
Most of the momentum around femtocells has been in the U.S. market. At least so far as commercial deployments go. Sprint Nextel Corp. began selling a femtocell base station last fall in select markets and at the time said it would be deploying the product and service nationwide in 2008, yet no updates have been provided.
Three months prior, T-Mobile USA Inc. launched a Wi-Fi-based hub and dual-mode handsets that enable customers to seamlessly hand off between its cellular network and Wi-Fi hot spots. T-Mobile USA’s service is not femtocell-based, but it delivers a similar end result by allowing customers to build their own micro networks of sorts.
iPhone-like adoption
While T-Mobile USA’s service requires customers to purchase a new, Wi-Fi-capable device, femtocell offerings such as Sprint Nextel’s don’t require anything more than a femtocell base station.
The small, stand-alone units have gained the interest of carriers as a means to increase network coverage, particularly in-building. Sprint Nextel was the first tier-one carrier to make a femtocell solution commercially available, yet others are quickly following the No. 3’s lead.
Customers seem to be more won over by T-Mobile USA’s approach right now, as the carrier recently announced almost half of its customers that bought cellphones capable of running on the service have come to the carrier from elsewhere.
Financial analyst firm ThinkPanmure L.L.C. recently wrote a report on femtocells that compared the success rate of Wi-Fi and Unlicensed Mobile Access-equipped cellphones to Apple Inc.’s iPhone and concluded that GSM operators should quickly adopt the solution while they await more development in the femtocell space. AT&T Mobility, which has exclusive rights to the iPhone in the United States, has said 40% of its iPhone subscribers are new customers. Orange France, which has also launched Wi-Fi/UMA technology, reported that those customers churn at a rate three times less than its other subscribers.
“We believe that these are impressive statistics that ought to induce all other GSM operators to quickly adopt Wi-Fi/UMA as a centerpiece of their near-term strategy, while they await the eventual availability of femtocells,” the firm wrote in the report. “The iPhone may be getting one hundred times the press coverage of the Wi-Fi/UMA rollout by T-Mobile USA and Orange France, but the Wi-Fi/UMA success rate is in many ways about equal to the iPhone.”
Competition from Wi-Fi
Momentum is building around femtocells, yet many have seen the delays and expect more to come because of the complexity of the technology and the havoc it could potentially wreak on cellular networks. Because of this the firm expects UMA/Wi-Fi to reach 10 million subscribers before femtocells see their first broad-based rollout.
“In early trials Wi-Fi demonstrated better performance than femtocells using the same Internet connection,” wrote Peter Thornycraft for a white paper on femtocells for Aruba Networks, a company that develops a series of mobility solutions for enterprise.
“Since Wi-Fi is indisputably the technology of choice for an in-home wireless network, the eventual solution may be a combination of Wi-Fi and femtocell technologies in conjunction with a DSL termination.”
AT&T Mobility’s big plans
AT&T Mobility, which has released a series of Wi-Fi-capable phones of the past couple years, just might be moving down that path as it brings together all its services and properties over the coming year. Indeed, last month ThinkPanmure reported that AT&T Mobility plans to sell up to 7 million femtocells from ip.access Ltd., a picocell and femtocell infrastructure vendor.
The firm said AT&T Mobility has inked a contract with the firm for up to $500 million in femtocells over a five-year stretch and plans to sell the devices for as little as $100 each. While the carrier said it plans to conduct a trial on femtocells later this year, it’s refused to comment on the report.
Last week, Qualcomm Inc. bought a stake in ip.access for an unspecified dollar amount and relative share, but ip.access said the stake was not a controlling one. Intel Corp., Cisco Systems Inc. and Motorola Inc. have all invested in the vendor as well.
Because femtocells operate on a carrier’s licensed spectrum, much of the initial push is expected to come from carriers themselves since they’ll want to maintain control of their networks. Few, if any, analysts foresee a point where the products might be sold in electronics stores by third parties.
Still, femtocells could solve the indoor coverage dilemma for wireless carriers by eliminating the need for a carrier to cover that same space and offloading the equipment costs onto the user.
Many believe customers will only come to buy femtocells in droves if carriers can present concise advertising that keys in on benefits that will matter most to consumers: improved in-home coverage and unlimited off-network voice calls that won’t be docked from their regular bucket of minutes.
Strong growth by 2010
The most recent report from ABI Research concludes that 2008 will remain “fairly low-key” for femtocell vendors, as only about 100,000 units are expected to ship by year’s end. Next year, the industry will see results from more than 20 trials currently underway, but the firm doesn’t expect units to ship in the tens of millions until 2010.
“By 2010, femtocell silicon solutions will have been optimized to the degree that $100 price points for femtocell access points will be within reach and OEMs’ order books will have the volume to sustain critical wholesale price reductions,” wrote Stuart Carlaw, VP and research director at the firm.
“The turning point for this market will be late 2009. There is little doubt that all the technical hurdles regarding femtocell deployments can be overcome. The really critical issue will be whether initial carrier deployments are supported by robust business models and service plans that extend beyond pure fixed-mobile substitution goals.”
Many believe femtocells will really take off in the United States when companies began offering converged devices like set-top boxes and routers that are equipped with a suite of services and applications.
“I don’t necessarily think that in the long term they will deploy standalone femto boxes,” said Manish Singh, VP at Continuous Computing.
“Adding the femtocell function inside the residential gateway would be a very good approach that AT&T is likely to take,” he said. “It clearly gives them the advantage to provide the quad-play offering to the consumer.”
Moreover, Singh doesn’t believe carriers have made a definitive choice between Wi-Fi and femtocell. “From a carrier perspective, I don’t think it has been decided that it’s only going to be Wi-Fi or femtocell. I think the carriers are trying out both options,” he said.
Singh pointed out that femtocells will be a high-volume, low-margin play at the end of the day.
Currently there are at least 12 or 13 architectures being contemplated and developed for femtocells, said Sudhir Tangri, VP at Aricent Inc., a company that develops communications software.
Femto Forum Ltd., a U.K.-based organization formed last year, is charged with narrowing that field down to three or four, Tangri said. Meanwhile chipset vendors are trying to bring down costs by about 50% from the $15 to $20 cost they’re seeing with femtocells now, he said.
Mostly, femtocell evangelists believe the technology will drive other services like fixed-mobile convergence, IP multimedia systems and long term evolution cellular technology. “Femtocells, we strongly believe, are going to ride all of these waves.”
