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Joe Madden |
Remember the old Monty Python movie, where the poor Israelites sit around griping about the oppression of the Romans? They ask, "What have the Romans ever done for us? ... Oh yes, apart from the aqueducts and sanitation and roads and irrigation and education...."
Many times we don't appreciate what we have until we take a moment to gain perspective.
The market for consumer femtocells has not taken off as many people hoped. Shipments of consumer femtocell units will reach 2.1 million this year, barely exceeding numbers in 2012 and 2011. The growth has reached a plateau of about 2 million units per year, which is essentially the same level of sales seen by consumer repeaters for the past 10 years.
A market for 2.1 million units per year at $100 apiece results in $210 million in revenue, which is simply not enough to repay the billion-dollar R&D investment into Picochip/Mindspeed, Percello/Broadcom, and all of the consumer femtocell start-ups. Recently, I have used the word "flop" to describe consumer femtocell products, because the investors have not seen the promised payback in the consumer market.
However, the word "flop" is too harsh. All that R&D investment will result in a big payoff over time. We should recognize that R&D for the consumer coverage application has given us amazing tools for the development of a high-capacity HetNet. Here are a few:
- Low-cost Systems on a Chip (SoCs);
- Femto Gateways allow integration of large numbers of small cells;
- Local Breakout has improved network efficiency in prioritizing and routing traffic;
- Self-provisioning femtocells allow for much easier deployment of capacity-grade small cells;
- Self-optimizing femtocells have led to better automation in the network overall;
- Mobile operators now have experience with network overlay issues; and
- Low cost, indoor competition for the large OEMs is forcing the entrenched supply chain to change.
We now have eight vendors of sophisticated multi-core Systems on a Chip (SoCs), which in fact can be accurately described as "a Base Station on a Chip." The latest SoCs have as many as 48 processor cores, and handle all of the base station and network coordination for both 3G and LTE simultaneously. The existence of so many SoC vendors (led by giants like Freescale, TI, Qualcomm, Broadcom and spoilers like Mindspeed and Cavium) guarantees that innovation will lead to low cost in the hardware and basic software stack.
In addition, the femtocell gateways intended to scale up to networks of millions of femtocells will be extremely useful, as instead we scale up each network to hundreds of thousands of small cells. Deployment of small cells does not need to become a Broadway production, with coordination between radio deployment and upgrades to the core network and RNCs. Instead, the gateway enables a technician to add capacity to the network with a small cell, without worrying about the impact in the core.
Local Breakout is an important step in scaling up the network. Before the consumer femtocell proved out the concept of Local Breakout, all traffic was routed through the core network elements. Consumer femtocells relied on the idea that a great deal of Internet traffic would be connected directly to the Internet, saving the core network from an overwhelming load of Youtube videos and other basic Internet traffic which the mobile operator did not need to handle. The next step involves even more sophistication, in routing key traffic to the mobile core network, and breaking out traffic (like that cute kitten video on Facebook) that the mobile operator cannot monetize.
The idea of having the end user configure a base station was a big challenge six years ago. Imagine your grandmother opening the box on a 2007 femtocell. Nowadays, Granny can do it. A consumer femtocell unit can determine its location, establish a backhaul connection, register and provision itself on the mobile network, and set its radio parameters autonomously. This experience, both in the OEM community and in the carrier's field operations staff, will be crucial to deployment of capacity-grade small cells without spending hours at each site, fiddling with the settings.
Similarly, after the small cell is configured, it must continuously optimize itself as the radio environment changes. The nearby macro base stations will change, either in antenna tilt or by adding new LTE bands and services. The capacity overlay of small cells must be able to adapt to a shifting radio environment, to maintain high capacity. Also, the past four years of field experience has taught the operators how to adjust their macro networks to coexist with a small-cell overlay. Macro network SON is adapting to respond to small cell deployment.
Finally, and perhaps most importantly, the threat of competition from start-up femtocell vendors has forced the mobile supply chain to change. Despite thirty years of debate in standards meetings, companies like Ericsson and Alcatel-Lucent still have proprietary interfaces to their base station equipment, and advanced operations such as soft handover, CoMP, and eICIC simply don't work in a multi-vendor environment. Without pressure from outside the established industry, the top OEMs would not change quickly. The consumer femtocell has opened up the idea that indoor coverage can be supported by a multi-vendor network, where the advanced mobility features are less important. The outdoor network will require soft handovers at 150 km per hour. But the indoor user can be served very effectively through indoor small cells, supported by existing backhaul, at a much lower cost per bit.
The total impact of all these changes: Through small cells, we will achieve a 70 percent reduction in cost per bit delivered to many indoor locations. The industry needs another step in cost reduction like this, to establish a profitable business in the next 20 years. Imagine a 2020 Monty Python skit, where John Cleese asks, "What have femtocells ever done for us?...... Apart from the SoCs, gateways, SON, and overall cost reduction of 70 percent."
Joe Madden is Principal Analyst at Mobile Experts LLC. Mobile Experts is a network of market and technology experts that provide market analysis on the mobile infrastructure and mobile handset markets. He provides market forecasts for handset, DAS, small cell, and base station markets, with in-depth research down to the nitty gritty details of frequency bands and power levels. Mr. Madden graduated, cum laude, from UCLA in 1989 and is a Silicon Valley veteran. He has survived IPOs, LBOs, divestitures, acquistions, and mergers during his 24 years in mobile communications.