Without Canadian consumer pull, femtocells wait on push from US carriers

As analysts downgrade their roll-out projections for femtocells and Canadian wireless providers remain mum on their plans, the localized cellphone base station technology will remain in the wings – that is, until a massive order from a US carrier brings the unit price down. “Last year we were forecasting that there would be 31 million femtocells deployed globally by 2012; now we are forecasting 16 million in 2013,” Alan Nogee, a principal analyst at In-Stat, tells Report on Wireless. Why the climb down? Femtocells – essentially small cellular base stations suited for indoor environments that receive poor tower coverage – can be a complicated proposition. They use licensed spectrum, are more complex and expensive than Wi-Fi routers, and rely on either cable or DSL to backhaul over a broadband network. “It’s up to the operator to prove you are in the coverage area,” says Nogee. “You can’t move the femtocell, and if there is noise or interference the operator is responsible.” However, ABI Research senior analyst Aditya Kaul says the recent publication of the Home Node B standard, which is the formal specification for 3G UMTS femtocells, is “a shot in the arm for the femtocell market.” In an interview with Report on Wireless Kaul makes it clear that the road to mass deployment of femtocells in Canada, while visible, is by no means without its bumps. “Sprint and Verizon have done initial rollouts in the US, but when I spoke to them it was clear to me that their strategy was about churn reduction,” says Kaul, suggesting that, barring a significant price drop in femtocells, a Canadian operator would follow the same strategy. In effect, when a customer calls in to say that coverage is poor, a carrier could have a femtocell offer up its sleeve: it can ship a box, and all a customer needs to do is plug it into an existing cable or DSL connection for enhanced coverage. But the idea is to do it selectively, because femtocells now cost about $250. “What has happened up to now is that the advantages of femtocells have been focussed on the operator side – it’s been more of an operator push than a consumer pull,” says Kaul, noting that consumer viability emerges around the $100 price-point. The Sprint and Verizon femtocells are only deployed for voice, though the Home Node B standard means that they can be engineered for data on 3G networks. This could be when demand picks up, and also where conflicts arise: because femtocells backhaul on cable or DSL, the wireless carriers effectively get a free ride on the customer’s broadband connection. According to a recent report by research-firm Frost & Sullivan, some mobile operators are considering subsidizing 3G LTE-enabled femtocells, thereby making their mobile subscribers pay for the backhaul. “Later this year we might see AT&T launch a full rollout of these solutions,” says Kaul. “We will see femtocells used for dedicated data coverage in homes apart from voice. Data is an important component of revenues for carriers, and has been growing quite fast – at AT&T growth is almost 50% year-over-year.” But if you attach your femtocell box to another broadband provider, you could find yourself paying twice for data, once to the cellphone provider and again as part of the bit cap with your ISP. “A provider would prefer to bundle cellular with a femtocell box on broadband Internet and cable TV,” says Kaul. “That would definitely be the first choice for any mobile operator that is also an ISP.” Industry estimates are that from 5% to 10% of users face problems with coverage, and 30% to 40% of mobile phone use is indoors. Meanwhile, as stresses increase on networks femtocells may be an important part of the solution. “More people are using their phones to check email and Facebook,” says Kaul. “Internet use is moving to mobile devices. But for femtocells to really take off they have to shift from a niche technology to a market technology.” That may yet happen: femtocells will soon integrate with DSL or cable modems, which means that a lot of users could feasibly have a seamless 3G switch-over and not realize that they have a femtocell in their house. “There are people with little or no cellphone coverage who could use femtocells,” says Nogee. “But this is a chicken and egg proposition when it comes to pricing, and that is in the hands of the operators.”

Without Canadian consumer pull, femtocells wait on push from US carriers

News | April 24, 2009

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