The notion of providing customers with their own miniature base station should have been an easy sell for the developers of femtocells. Operators adopting the technology could improve a user's mobile phone reception and boost the customer experience--critical to attracting and retaining subscribers.
While femtos offer a simple proposition, persuading operators to deploy the devices has taken significantly longer than even the most conservative estimates.
Reflect back three years. Two well-known market research firms predicted the femtocell mark would boom. ABI Research said the CAGR for femtocells would be over 300 per cent from 2008 to 2013. Forward Concepts claimed that equipment sales would reach nearly $5 billion by 2012.
This hasn't happened, and the reasons why are worth examining.
Hurdles to overcome
First, according to industry analysts and participants, femtocells still cost too much and, in the meantime, operators have invested hugely in augmenting their macro networks. Also, vendors have proposed alternative solutions to femtocells.
The issue of cost is associated with volumes, and femtocells are caught in the vicious circle of low shipment numbers, which means equipment costs are still stubbornly high.
Operators have also become less concerned about improving in-building coverage and more focused on installing base stations to capture the colossal, and highly profitable, growth in mobile data traffic.
Although the wholesale price of a femtocell has fallen below the critical $100 level-though by how much remains vague-Steve Hartley, a principal analyst with Ovum, points to integration expense as a factor behind low operator acceptance.
"Deploying femtocells remains too expensive when the core network integration work is accounted for, which is why we've only seen the larger operators with more internal resources deploying them," he said.
"There's a huge amount of back office work needed to accommodate femtocells, and this hasn't been thought through enough," Hartley said. "There's setting up the femto gateway, then integrating the femtocells as elements into the network, and reshaping the billing to manage free or unlimited calls when subscribers use the femto. There are so many layers of complexity that need to be worked through."
Making the case for femtocells
Keith Day, vice president of marketing for the femtocell developer Ubiquisys, disagrees with this viewpoint. He said operators have been using initial femtocell launches to understand consumer reaction and decide how the proposition should be packaged.
"Femtos need to be introduced carefully, but we've seen a big ramp in shipments in 2010 and we're seeing higher volumes this year," he said.
This argument is backed up by the latest research from Informa Telecoms & Media, stating that 2.3 million 3G femtos have now been deployed globally compared to 1.6 million 3G macrocells. The report claims there are now 31 commercial deployments using femtocells-a 60 per cent growth over the past quarter, with eight of the top 10 mobile operator groups by revenue now offering femtocell services.
However, there are those who are less optimistic, including Ericsson CTO Håkan Eriksson, giving the viewpoint of the world's largest network infrastructure vendor.
"The femtocell solves no problem from my viewpoint," he said. "Even worse, the femtocell will, somehow at least, interfere with the macro network that is close by. What will happen is that the industry will realise that femtos are a bad idea-they'll need upgrading, cause interference, and disrupt consumer expectations."
Eriksson said the original concept of a 3G femto designed to provide better in-building voice coverage is now flawed, given the efforts by operators to boost their data networks.
"All the devices that are generating this data are Wi-Fi enabled," he said. "So installing a femto in the home to carry data traffic is going head-to-head with Wi-Fi."
Additionally, Eriksson believes that Wi-Fi has already won the battle for providing wireless data in the home. "Perhaps by 2020 there will only be LTE and Wi-Fi, with LTE providing the wide-area and ‘802.11 something' for the home," he said.
Day, of Ubiquisys, countered and suggested that viewpoint is out of step with the majority of operators around the world. "We know that the company has included femtocells as part of larger offers on a number of occasions," he said, referring to Ericsson.
However, Day conceded that the fetmocell model has moved on and confirmed it is working, in cooperation with Texas Instruments and Intel, on a tri-mode femtocell that will support 3G, LTE and Wi-Fi. "This new platform needs to be low cost and capable of being a direct replacement for Wi-Fi and cellular hotspots," he said.
The evolution of the femtocell concept
This idea of femtocells moving into the hotspot sector is also being promoted by Alcatel-Lucent. "While the residential femtocell is all about improving the subscribers' experience, using femtocell technology to boost urban or rural capacity is a new opportunity for operators," said David Swift, the company's small cell product marketing manager. "Where it really comes into play is when an existing site runs out of capacity, and the femtocell can be quickly installed as a ‘small cell' within the macro network. It's not build it and they will come, it's build it where they are."
Alcatel-Lucent's 9363 Urban Metro Cell at the Gare du Nord train station in Paris.
Swift said that Alcatel-Lucent is now more focused on heterogeneous rather than traditional self-organising networks. "Small cells, or metro cells, are key to operators wanting to bring services closer to the user. They can also be installed in partnership with retailers, for example, who can offer priority connections to selected users, and then open the rest to other consumers. This could lead to an operator rev-share model that rewards the partner if they sell unused capacity."
This foray into new areas with a fresh business model could be the spur that femtocells have been searching for.
Regardless, the femtocell or small cell concept does have strong merit and its technical credentials and business models are being commercially tested by operators in large-scale deployments.
However, perhaps femtocells' initial focus of boosting in-door coverage has been overtaken by events, and the technology still awaits its moment in the spotlight in a slightly different guise.