Femtocells are evolving, but operators aren't

Lynnette LunaThere was a lot of noise coming from the femtocell camp this week during the Femto Forum's World Summit, and the news appeared encouraging. Could the year of the femtocell finally be coming?

According to Informa, global femtocell deployments more than doubled in the last nine months, but that doubling means just 16 operator commitments--including 13 commercial launches. But Informa expects the femtocell market to hit the 49-million unit mark by 2014.

But while the vendor ecosystem appears to be ramping up in terms of interoperability, standardization and driving down pricing points, how operators are marketing these mini base stations still appears to be as convoluted as it was in the beginning.

The basic marketing message coming from operators is enhancing coverage--coverage many argue operators should be providing in the first place, not charging extra for. Moreover, few American cell phone subscribers even understand what they are.

This week, Parks Associates revealed the results of a survey that found more than half of U.S. broadband households with mobile phones would be willing to pay for the devices and associated new services. "The findings also indicate femtocells can significantly improve subscriber satisfaction and lead many households to consolidate with a single provider."

Basically, once survey respondents were educated about what femtocells were (only 10 percent knew before the survey), 56 percent of them found femtocells appealing. And 72 percent said they would be interested in at least one advanced femtocell service, such as virtual home number that rings to every cell phone in the home, and would pay about $10 a month for a bundle of three advanced services.

Parks Associates also found that respondents are sensitive to the price level of the device. Demand was highest when upfront costs were in the $20 to $50 range. This demand halves when in the $50-$100 range and halves again when the cost exceeds $100.

AT&T has now rolled out its femtocell service nationwide, selling the 3G Microcell for $150. If customers take out a dedicated $20 monthly plan, they get unlimited femtocell voice minutes in return for a $100 rebate. Existing AT&T broadband customers can additionally receive an extra $49.99 rebate, which makes the femtocell free.

The mobile data proposition of femtocells, which the Femto Forum has been hyping as a good solution for offloading mobile broadband traffic that is beginning to crush mobile networks, is non-existent at this point. And it may already be leaving a bad taste in the mouths of consumers who would like to use AT&T's Microcell for data. The operator is including data usage via a femtocell in its data caps imposed for its macro network and emphasizing that customers should use WiFi for unlimited data usage.

AT&T's reasoning is that traffic still travels over its macro network because it has to comply with legal intercept regulations. (see related this story). If in fact the intercept regulations apply to femtocells, that could become another sticking point for a femtocell market that still isn't mature.

As Peter Jarich, vice president with Current Analysis, pointed out in a recent research note: "As we move into the fifth year of product availability the lack of solid operator momentum is a problem. It suggests that the market may, perennially, be in its infancy--potentially failing to ever grow much beyond that stage. More specifically, it suggests that 2010 may be critical for the space, that if the market doesn't turn a corner soon, it never will."--Lynnette

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