Network sharing and femtos: can they co-exist?

OvumAs operators adapt to increasing data demand, the number of network planning options available to them increases. However, multiple approaches can create new issues, with one approach potentially undermining another. For example, improvements to macro networks could cause femtocells to become redundant for indoor coverage.
It is uncommon to see discussions comparing femtocells and network sharing, but essentially their purpose is the same – to boost coverage and capacity, albeit with one focused specifically on indoor coverage and one oriented towards the macro layer. Nonetheless, this overlap calls for a deeper comparative analysis of all the network planning options that help operators improve their coverage and capacity. Without this, operators risk duplication and wasted investment in their networks, and the femtocell business case will come under increased pressure.
A lot of effort, both technical and PR, has been invested in making femtocells a commercial reality. For mobile operators, femtocells expand coverage inside the home and offer an opportunity to offload traffic onto the fixed network, helping the mobile operator to save on backhaul/transportation costs as well as theoretically save macro network capacity. However, the usefulness of femtocells ends if macro network coverage improves.
While improvements in macro network coverage can be a result of an operator investing in more network equipment, it can also be improved through network sharing. Given the inherent challenges of negotiating a network sharing deal, operators that share their networks generally expect improvement in their network coverage, although this doesn’t always include in-building coverage.
Will the femtocell business case be threatened if network sharing becomes common?
The network sharing agenda can evolve along several different paths, one of which is the “neutral host” concept. As operators work out how to pay for the deployment of next-generation mobile networks, the idea of a wholesaler (whether owned by operators or a third party) building the network and then renting capacity to operators – similar to what Arqiva has suggested in the UK or LightSquared is hoping for in the US – is no longer far-fetched.
While most of the operators that have launched a femtocell product are not actively involved in network sharing, could an increase in network sharing damage the business case for femtocells? In one scenario, a femtocell is no longer required to boost coverage or capacity. In this case, an operator-specific, stand-alone femtocell that is paid for by the customer (as in today’s business model) could only be promoted by focusing on value-added services. However, this approach hardly stands up to scrutiny.
Alternatively, femtocells could carve out an entirely new market for the future. If network sharing leads to the “neutral host” scenario, then operators could use femtocells to gain competitive advantage by cost-effectively boosting coverage and capacity beyond what the neutral host is providing. In addition, the more challenging propagation characteristics of high frequency LTE/post-LTE networks could even make femtocells necessary for the neutral host to boost its coverage and capacity.
Although developments in network sharing may alter the long-term prognosis for femtocells, some things are already clear. Femtocell functionality should become an integral part of a free home gateway, just as Wi-Fi is today. Under this scenario, integrated telcos will benefit most as mobile-only operators will struggle to get stand-alone femtocells into homes, especially if they expect customers to pay for them. In addition, there are specific issues related to in-building coverage where femtocells could still represent a more cost-effective way of providing network coverage and capacity.
Balancing femtocells, network sharing, and all the other options available for boosting coverage will make network planning far more complex in the future, especially as self-optimizing network (SON) technologies will not be the panacea that some have claimed.
The solutions that operators decide to invest in or ignore will have a huge impact on their ability to deliver coverage and capacity, even before technical implementation begins. In addition, operators cannot afford to invest in duplicity in the current economic environment.
However, this begs the question that if femtocells are less compelling, is it worth the investment in deploying them? Ovum will continue to closely monitor this situation and will publish further findings later in the year.