Forum makes business case for femtocells

Signals Research Group has completed a paper on the business case for femtocells as part of its business modelling initiative with the Femto Forum*.

The study found the business case for femtocells is strong - often doubling the customer lifetime value - and does not depend on any one critical factor or assumption to generate a favourable outcome. This was found to be the case across various scenarios in different regions of the world.

Signals Research Group found that changing the perceived key assumptions associated with femtocells does not threaten the viability of the business case. For example, increasing the wholesale cost of the femtocell by 50% (from $200 to $300) reduces the basic value proposition for femtocells by 16.3%.

The study found that the business case is not contingent upon a reduction in churn even, although it is a likely outcome of a femtocell deployment and has already been proven in other FMC product deployments.  

The research concluded there are considerable savings associated with offloading traffic via the femtocell - in particular for heavy data users. The study found that the cost savings associated with offloading as low as 1.4Gb of HSPA data or 1.3Gb of EV-DO Rev A data per month via the femtocell from a coverage-constrained macro cellular network would justify an operator offering a subscriber a free femtocell. 

For a small but rapidly growing segment of heavy wireless data users an operator can halve the cost of delivering wireless data at home or in the office by offloading traffic from the macro cellular network onto a femtocell.

These latest findings follow those presented by Signals Research Group at Mobile World Congress where it was announced that even with conservative assumptions, the customer lifetime value of a femtocell user increases by as much as 125%, and even more in certain user scenarios.

Additionally it was found that a European operator wanting to provide a reliable 2.5Mbps in-building service for the most coverage challenged households, could do so for €320 per household if it used a femtocell strategy, whereas providing similar in-home service with the means of the macro cellular network alone would cost €900.

"What shines through when you undertake a serious assessment of the femtocell business case is that there is no single factor required for healthy financial returns. Cost savings, incremental revenue, and retention benefits enable femtocells to be deployed successfully with a wide variety of assumptions," said J. Randolph Luening, Vice President of Wireless Economics at SRG.  "Instead, the business case is highly dependent on the attributes of the targeted customer segment and the specific customer proposition put forth by the operator.\'

"We\'ve seen femtocell deployments mostly focus on providing improved indoor coverage. However, the rapid take-up in mobile broadband services means we\'re going to see this start to change rapidly. If the mobile industry is serious about decisively moving beyond simple voice and text to providing a mobile broadband service to all its subscribers then femtocells must be a key consideration for managing the associated costs," said Simon Saunders, Chairman of the Femto Forum.

"Signals Research Group\'s findings illustrate the flexibility of the femtocell business case. The picture that emerges is one of a low risk investment, requiring a modest financial outlay to get started and costs which can be easily paid back based on conservative assumptions about the services offered," he added.

 

Although the research found there are certain regional and country-specific influences on the femtocell business case, they are outweighed by other assumptions (for example, ARPU, usage, etc), which transcend all regions of the world.

However, operators in different regions of the world are likely to vary their go-to-market strategies based on local conditions. Operators in large geographic regions, such as North America, may leverage femtocells to provide improved coverage. Conversely, operators in regions such as Western Europe where calling plans are more expensive may place a greater emphasis on free calls.

The research indicated there is nothing that precludes any of the strategies from being successful in any of the regions although some will prove to be more popular than others.

The whitepaper builds upon preliminary results detailed at this year\'s Mobile World Congress by presenting results for fourteen different scenarios across three 3 regions of the world - Western Europe, the US, and Developed Asia.

The scenarios studied took into consideration regional specific attributes, such as the radio access technology (UMTS/HSPA or 1X/EV-DO Rev A), typical key performance indicators such as voice + data usage and average revenue per user, and realistic femtocell strategies that would be appropriate for the region being analysed. 

*The paper is available from www.femtoforum.org

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