Femtocell - a Revolutionary Residential Gateway for Fixed-Mobile Substitution
Published on: 12th February 2009
Much has been said about femtocells in recent times. Frost & Sullivan senior industry analyst M. Kumaresan believes that femtocells have the potential to revolutionize 3G services by enhancing user experience within an indoor environment, while serving as a major revenue proposition for mobile operators.
"Femtocells can enhance fixed-mobile substitution (FMS), enabling carriers to provide cheaper voice and data tariffs - either at flat-rates or aligned to VoIP (voice over Internet protocol) or landline tariffs - thereby encouraging users to make more calls from their mobile phones rather than their fixed-line devices at home," says Kumaresan.
Femtocells, in simple terms, are personal base stations that reside at customers' premises. Plugged into fixed-line broadband connections, these low-power radio systems provide improved cellular signal strengths within the enclosed quarters enabling faster data downloads, and allow mobile users to use their existing mobile devices to access both data and voice services.
"This is one of the key differentiators of femtocells," Kumaresan notes, "Allowing mobile users to access FMC (fixed-mobile converged) services via a single device - their existing handsets."
Mobile carriers are under immense pressure to increase ARPU (average revenue per user) by driving higher 3G data usage after having invested billions in spectrum acquisitions and network rollouts. He says, "Femtocells are a means to reduce churn and increase ARPU by increasing subscriber uptake of various and differentiated 3G data applications given that more than 90 percent of mobile data services are accessed from inside buildings.
"With fixed broadband adoption on the rise, femtocells also solve the issue of obtaining high-speed 3G signals at reduced costs by backhauling onto users' IP infrastructure, thus enabling users to enjoy next generation, high-bandwidth, data-consuming applications, such as video streaming, with a good user experience," he continues, adding that operators can also retain subscribers by locking-in contracts, bundling services with subsidised femtocell units.
While he believes that femtocells are an engineering achievement, he also says that the technology needs to juggle some operational challenges before it can realise its true potential.
Kumaresan highlights that one of the major drawbacks with femtocell is the need for a fixed DSL (digital subscriber line) connection, "As most mobile operators do not own a fixed-line network, leasing network access from or partnerships with ISPs (Internet service providers) now becomes necessary... It is a fine balance between this (leasing bandwidth) and investing in one's own fixed network.
"The leasing option and cost of bandwidth, of course, now determines the business model and pricing or subsidy for femtocell units that operators are able to offer end users," he adds.
Given this, Kumaresan believes that the popularity and uptake of femtocells are likely to be more prevalent in the more mature mobile markets which also have strong fixed broadband networks, such as Hong Kong, Taiwan and Singapore. In these mature markets, however, introducing an additional node to the already complex networks will need careful planning as it has the propensity to compromise service quality if radio networks are not optimal.
The advantage of femtocell however, Kumaresan says, "...is its potential to evolve into an integrated home gateway that supports WiFi, ADSL and Ethernet, apart from cellular technology," which means a variety of applications can be supported, enabling carriers to provide bundled triple- or quadruple-play services at lower costs.
"Some vendors are already working with carriers to provide 3G femtocells integrated with residential gateways," adds Kumaresan. "We believe that integrated 3G femtocells can be expected to be commercially available as early as 2010."
But for now, initial deployments are likely to be in the form of standalone 2G or 3G femtocell units. The first few deployments are likely to be seen in the more developed markets, by integrated service providers which have both wireless and fixed networks. In emerging markets, rollouts are expected to be feasible only in the commercial or business districts where data traffic is higher.