Mobile Operators Must Develop a Robust Business Case for Femtocells

Mobile operators are considering widespread deployment of indoor base stations - called femtocells - as early as 2008. A large-scale roll-out of femtocells carries considerable risk and many early business cases are not commercially viable, according to a new report published by Analysys.

"Femtocells are progressing rapidly from being an interesting emerging technology to being ready for mobile operators to deploy", says report co-author, Dr Alastair Brydon. "Engineering departments within mobile operators have generally led the evaluation of femtocells but the next critical step is to define a profitable business case, based on clearly targeted and compelling customer propositions."

Key findings include:

• A number of service and customer scenarios in which operators propose to use femtocells do not make sound commercial sense and may cannibalise existing ARPU.
• Widespread use of femtocells solely to provide low-priced voice telephony in the home, although stimulating fixed-mobile substitution, could lead to disaster, as the revenue benefits are highly uncertain. Mobile operators that focus on voice telephony must target key market segments and resist very low pricing. For example, in a multi-person household with poor existing cellular coverage, operators can recoup the cost of femtocells within four months, provided a significant price premium is maintained over fixed calls.
• A strategy underpinned by a range of multimedia service propositions will result in a much stronger business case for femtocells, bringing the potential to increase revenue and save substantial costs, and offering operators the chance to recoup their investment within one to eight months, depending upon the scenario modelled. Applications such as mobile TV, video and audio services will significantly broaden the consumer appeal of femtocells.

"Mobile TV could be a critical component of a successful femtocell business case, providing substantial cost savings as well as revenue enhancement," says co-author Dr Mark Heath. "Trials have shown heavy usage of mobile TV at home, and mobile operators could save USD10 per household per year by avoiding the need to build dense DVB-H networks in order to provide mobile TV services indoors."

Posted to the site on 22nd November 2007