Voice not enough for femtocell success

As the ranks of the Femto Forum swell and interest in the technology approaches fever pitch, an industry expert is warning operators to carefully consider the business case before embarking on mass deployment.

Last month, about 30 companies - including some big names, such as Alcatel-Lucent, Motorola, NEC, Nokia Siemens Networks and Telefonica O2 - joined the seven companies that set up the Femto Forum in July, and NEC recently became the latest vendor to introduce a femtocell product. But a recent report from Analysys suggests that operators should think carefully about how they intend to ensure a return on investment from what is likely to be an expensive, mass deployment.

Mark Heath, director of research at Sound Partners and co-author of the Analysys report Femtocells in the Consumer Market, says that much of the early work on 3G femtocells has focused on how they can provide high-quality voice calls in the home at rates similar to those of fixed networks and therefore stimulate fixed/mobile substitution.

He says, however, that if the business case for femtocells involves a voice-only strategy, the potential for large incremental revenues is questionable, while an approach that positions femtocells as a platform for delivering multimedia services to the home will yield greater financial benefits.

"One of the big advantages of deploying femtocells is the ability to offer good coverage and data speeds close to those of fixed-line access, in the very place where people are most likely to want them: in the home," Heath says. "Consequently, operators should be looking at services which fit these criteria, rather than simply offering cheap mobile voice minutes."

He added that in Finland, where mobile subscribers enjoy good indoor coverage, traffic from fixed to mobile networks shifted 10 per cent in 2006 - the most ever for the country in one year. That migration proves, he said, that once mobile usage is perceived as being affordable, even though it might still be more expensive than fixed, people will adopt it.

"Therefore, operators might not need to go as far as offering cheaper voice calls," Heath said. "Instead, they should look at carefully segmenting their customer base and target customers with little or no indoor coverage."

To do so, services will need to be highly personalized and, by definition, niche. Tal Givoly, chief scientist at Amdocs, is skeptical of the value of femtocell deployment for just that reason. He told Informa Telecoms & Media that operators often end up disappointed when they rely on such services as a source of revenue. "They are niche services in some respects and very unlikely to become killer applications," he said. "What is happening in the Web 2.0 world is a much greater fragmentation of services which are being consumed by very niche communities with niche interests. That's a market that's very difficult for large organizations to cater for, because the risk, cost and time involved in creating those compelling services for niches are unattractive for a large organization."

Givoly said the introduction of femtocells was not a big step forward in terms of technology or the ability to deliver new services. He said that many operators were actually aiming to deliver Telco 2.0 and become "purveyors of the digital lifestyle" but that femtocells were essentially a Telco 1.0 play and would not help operators achieve that objective. "First cases would have to be increased customer loyalty rather than substantially revised new services," he said.

He suggested that operators look at other ways of delivering new services before rolling out femtocells en masse. "Some of those new services would be possible even over an exploratory IMS back end, so it's not obvious that femtocells are the only enabler," he said. "Even Web 2.0-style technologies would be able to facilitate those [services] if the devices are a bit smarter."

Mobile TV is one service that operators are eager to roll out and for which femtocells could be seen as a disruptive technology that saves operators a great deal of capex and opex. Heath said that DVB-H requires operators to invest a considerable amount in new infrastructure, requiring as it does a lot of new transmitters. He added that the development of a range of killer applications, including mobile TV, video and audio services, would significantly broaden the consumer appeal of femtocell services.

As the market progresses toward triple- and quadruple-play offerings, consumers will most likely expect high-quality mobile TV, video and audio services, which will be difficult to deliver using 3G macrocell networks. Heath said that deploying femtocells could substantially reduce the investment necessary and achieve significant capacity and cost savings.

Heath also says that although many network operators are offering mobile broadband services at attractive prices, they can do so only while 3G networks are relatively underused. "Without femtocells, they could soon run into QoS problems as mass take-up occurs," he said.

Heath said that there are a number of service opportunities that could take advantage of users' location as they come into range of their home femtocells. For example, femtocells could make it easier for users to download content to a mobile handset. He said that although there are significant advantages to deploying femtocells, operators need to be more imaginative in the uses to which they are put.

3G Wireless Broadband is a sister publication of telecoms.com

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