European Femtocells Markets - Will the Hype Lead to Mass-Market Adoption?

Published on: 1st Jan 1970: 1:33am

Apart from a few mobile operators, most European operators will continue to trial femtocells in 2009 with commercial deployments of standard-based femtocells projected to occur in 2010. Commitment to wide-scale deployment of femtocells are subject to trials but also dependent on equipment certification based on industry-accepted standards.

New analysis from Frost & Sullivan finds that by 2014, there will be 11.8 million femtocell subscribers with femtocell vendors generating revenues of just over EUR 400 million.

As 3G is deployed further down the frequency band, by the laws of physics, the wavelength of the signal reduces, providing smaller coverage. Hence, carriers need to deploy more base stations to meet coverage and capacity requirements, resulting in higher capital expenditure (CAPEX) and operational expenditure (OPEX). "Carriers are therefore evaluating femtocells as a solution to reduce the cost factor and enhance indoor quality of service (QoS) for 3G, considering the fact that more than 90 per cent of mobile data services are accessed inside buildings, and the cost of 3G handsets are on the decline," explains Frost & Sullivan Programme Manager Luke Thomas. "Stronger 3G signals inside buildings imply faster data rates."

Furthermore, as femtocells are connected to the user's broadband network, the user, instead of the carrier, would have to pay for backhaul traffic to the latter's core network. This results in enhanced cost benefits for mobile carriers.

The underlying factor for the success of femtocells lies in its costs. A fair majority of vendors claim that the current stand-alone 3G femtocells average around euro 150. However, others opine that these would not include 'added features', such as interference management and seamless mobility mechanisms for handover-in and handover-out between the macro cell and femtocells, the incorporation of which could eventually cost around euro 250 to euro 275.

"With an integrated home gateway with femtocell technology, the cost could easily reach euro 300 to euro 400 in the initial phases till high volumes drive the cost down," remarks Thomas. "Therefore, initial deployments will either witness stand-alone 2G femtocells that can upgrade to 3G or standalone 3G LTE femtocells."

It is crucial that chipset vendors reduce chipset costs, which are currently approximately euro 50. In order to reach the euro 100 mark for femtocells, many opine that chipset costs alone need to be about euro 8-10.

Pricing models must be made transparent to the end user without creating any confusion. This is essential because, eventually, end users would rent out femtocells from the carrier and, if they do not gain any monetary benefits, the business case will be lost.

"Operators must acknowledge that femtocells differ from the market segmentation done for mobile devices," concludes Thomas. "Therefore, they should segment the femtocells market by price performance sensitivity factors, such as users wanting to pay less for unlimited voice and data traffic or users who are willing to pay a premium to get better coverage inside buildings."

 

Tags: [femtocell]  [picocell]  [base]  [chipset]  [broadband]  [indoor]  [seamless]  [2g]