Small cell base stations are set to play an important role

A growth in markets with multiple femtocell offerings is driving operators to offer the products for free, according to a new study from Informa Telecoms & Media. Femtocell services are currently available in 23 countries around the world, and 43 per cent of these countries have multiple operators offering the technology, the firm said. For the majority of these countries, at least one operator offers the devices free of charge.

Informa identified that the growth is being driven by the falling costs of femtocell technology as economies of scale and competition increase. Over the past quarter, important progress has been made in the evolution of femto chipsets with new launches from Cavium, Freescale, Qualcomm and Texas Instruments. These join existing chipset vendors – Broadcom, DesignArt, Picochip and Mindspeed.

“We are seeing evidence that once one operator deploys femtocells in a market there is strong pressure on its competitors to offer a rival service. This competition is in turn starting to drive free femtocell offers as operators look to differentiate their services. These free offers have become commercially viable as the costs associated with femtocells start to fall due to vendor competition and economies of scale,” said Dimitris Mavrakis, principal analyst at Informa.

New femtocell deployments in the past quarter include Vodafone Netherlands, Vodafone Czech Republic, Vimpelcom in Russia and Cosmote in Greece. There are currently 36 femtocell deployments globally, 14 further commitments, and, as of June 2011, in excess of 2.3 million femtocells active both privately in homes and offices, as well as publically in metropolitan and rural environments.

There are more 3G femtocells than conventional 3G base stations globally and Informa forecasts growth to continue with 48 million access points in use globally by 2014. Eight of the top ten mobile operator groups by revenue offer femtocell services, including AT&T, France Telecom, NTT DoCoMo, Sprint, Telefónica, Deutsche Telecom, Verizon Wireless and Vodafone.

The expansion of the femtocell industry is also reflected in the growing membership of the Femto Forum, the femtocell industry association. Its newest members include Asahikasei Microdevices Eircom, Femtocell Communications Zimbabwe, Free Mobile, Idirect, Nomor, Polska Telefonia Cyfrowa S.A. and TOT PCL. The Forum’s membership includes 70 vendors and 66 mobile operators representing over 1.94 billion mobile subscribers worldwide, across multiple wireless technologies and accounts for 34 per cent of total mobile subscribers worldwide.

All of the major infrastructure vendors have announced some degree of support for small cells in their product portfolios, be it picocell, femtocell, small-cell RAN, wifi or a combination of these. But far from being purely vendor driven, the need to rethink the macro model is getting equally strong support from mobile operators, many of whom have already embraced small cells through their growing use of alternative technologies such as wireless LANs and femtocells as a means of offloading data traffic from the cellular network or extending coverage.

Judging by the deliberations at Informa Telecoms & Media’s Small Cells World Congress in Berlin (October 11-12) a consensus already exists that adherence to the macro-cell network model cannot in itself provide sufficient capacity to meet future traffic demand. But that doesn’t make small cells a done deal, and it was clear that there are more questions than answers when it comes to implementing a small cell strategy.

Key areas of concern for the delegates in Berlin included how to make the best choice of small cell technology, tackling interference issues, hotspot identification (in order to better target small cell deployments), backhaul provision, managing small cells in a multi-vendor environment, handover between the macro network and small cell sites, self-organizing capabilities (SONs), and the challenges of distributed architectures and cloud-RAN.

Wifi/femtocell convergence

Wifi remains very much on the agenda for many mobile operators, but there was a clear desire to integrate the technology more closely with cellular both in terms of ease of use (network discovery, authentication and log-on) and at the core network level. Femtocells were generally agreed to have fewer integration challenges in terms of authentication and security than wifi, but interference problems between what some regarded as “unplanned” consumer femtocell deployments and the macro network remained a concern for some operators, notably Deutsche Telekom and Orange.

Vodafone, on the other hand, reported a largely positive experience with its consumer femtocell offering, which it has now launched in twelve markets including most recently the Czech Republic and the Netherlands. Despite having been deployed initially to improve voice coverage, the operator said that femtos were also having the effect of driving up data usage and reducing churn. Vodafone is already extending femtocells into the enterprise and evolving the technology for outdoor networks, and says that femtocells will feature as part of a future LTE rollout.

Most speakers, Vodafone included, subscribed to the now widely shared view that femtocells and wifi can be complementary. With the majority of today’s femtocell deployments addressing voice coverage, some operators remain unconvinced that the technology can provide a viable platform for data. However, there was broad agreement that achieving a greater degree of harmonization between femtocells and wifi could exploit the strengths of both technologies while minimizing concerns about their perceived shortcomings.

The news that industry bodies including the Femto Forum, the Wi-Fi Alliance and the Wireless Broadband Association are co-operating shows that old rivalries have clearly been buried. For its part, the Femto Forum envisages a new balance between Wi-Fi and femtocell usage in a smart combination to provide “fine-grained offload” and a better customer experience.

One practical application of femtocell/wifi convergence was recently demonstrated by combining the femtocell’s SIM-based authentication and billing capabilities with wifi as a delivery mechanism for high-volume data such as video content.  The introduction of integrated femtocell/wifi access points such as Contela’s product for Korea’s SKT (co-developed with Picochip) is further evidence that the technologies are converging, and in Berlin Huawei confirmed that it now has a commercial, integrated femtocell/wifi product for providing improved coverage and latency for in-building systems.

Outstanding issues

The “to do” list for small cells to be successful is extensive, however, particularly with regard to integration with the macro level. Initially this means improved radio planning, simplified field installation and set-up, and smarter handover and cell-load management. Also under discussion were the implementation of  QoS and policy management in small cell networks , and support for multi-vendor heterogeneous-network.

Some of these areas will be addressed through the use of self-organizing networks (SONs), for example, by providing the capability for newly-installed cells to self-configure and self-optimize in relation to neighbouring cells and the prevailing radio environment. In the heterogeneous network, SON support within a multi-vendor small cell environment will be crucial.

Network Norway, which is already using SONs as part of its enterprise femtocell offering, says these capabilities can also be applied in public (outdoor) small-cell networks. Deutsche Telekom wants to extend SON functionality to provide the option of powering down small cell sites during periods of low usage such as overnight.

Alcatel-Lucent called for greater flexibility in the management of handover between the macro and small cells within its coverage area, pointing out that incoming handover to the hotspot would not be necessary in cases where the user was passing through the small cell area and could be retained on the macro network. This would require fewer limitations on the definition of target cells as contained in the current standards, the vendor argued.

Several speakers also agreed that the accurate pinpointing of hotspots – down to 50 metres – was an important requirement that the industry needs to address.

Hetnets & Cloud RAN

The goal of the truly heterogeneous network where multiple small cell technologies provide seamless layers of coverage within the macro environment may be some way off, but vendors speaking in Berlin were keen to outline the advantages of a coordinated approach in maximising the potential capacity and performance gains.

Huawei pointed to improvements in cell throughput in excess of four times that of the macro, that could be achieved with effective interference coordination in hetnets, while Alcatel-Lucent presented examples of performance gains achievable with the densification of small cells, and talked of the importance of load balancing between cells, and precision small-cell deployment. Modelling by Bellabs showed a potential TCO saving of up to 55 per cent over 5-years for a small cell deployment versus the macrocell alternative

From the operator side, Deutsche Telekom stressed the need for policy management capabilities to be implemented on a local basis, and said that the tools were coming for operators to implement policy in hetnets.

Speakers and delegates alike were cautious on the subject of Cloud RAN architectures that separate the remote radio head and antenna from the cell’s baseband processing functionality. One major concern related to backhaul, or more specifically the challenge of supporting so-called “fronthauling” between the baseband pool and the remote radio unit.

Deutsche Telekom said that while current trials of a Cloud RAN solution in China would benefit from the availability of fibre, its own situation was different, and it lacked the ability to provide “endless capacity”. Hence the operator is looking for a “middle way” somewhere between a cloud RAN and a BTS-on-a-mast approach.

Shahram Niri, director of global LTE strategy, NEC

It’s a truth universally acknowledged that the current data boom is only the beginning of a far greater explosion. But while the industry is looking to LTE to address this issue, Japanese vendor NEC argues that the new technology, too, is just the first step to coping with the looming capacity crisis.

For Dr Shahram G Niri, director of global LTE/SAE strategy & solution at NEC Europe and visiting professor at the University of Surrey, one key element of the solution will be small cells—compact, low power base stations that can be deployed more easily, more quickly and more cost efficiently in data hotspots than their large-scale counterparts. “At NEC we believe that small cells are a whole new way of building future mobile broadband networks,” Niri says. “They add massive capacity, in a very fast time, with a TCO which is absolutely a key to sustainability of mobile broadband business.” In fact, he believes that they will prove to be nothing less than essential as operators bid to stay ahead of growth.

“The challenge is that we have more users, more smartphones, more connected devices and more data hungry and video-centric applications. There’s no doubt that traffic is increasing and it is increasing exponentially. It is going to be a continuous challenge to stay ahead of traffic increases.” The most straightforward solution would be additional spectrum, but acquiring and deploying that spectrum is a major challenge for operators. Niri believes, though, that even if this were not the case, spectrum alone would not be sufficient to deal with the capacity issue.

“Spectrum is a resource that’s finite, and very expensive, and very hard to harmonise across regions,” he says. “Let’s say, for the sake of argument, that you double the amount of spectrum available for mobile broadband between now and five or 10 years’ time. You double the capacity, [but] you are looking at scenarios where traffic increases somewhere between a minimum of a hundred to a few hundred times. How are we going to cope with that? The spectrum shortage is a real problem and industry needs to look more seriously into this.”

Technology advances such as higher order modulation; coding, clever scheduling and MIMO won’t be enough to deal with this capacity crunch, Niri says and the barrier is the laws of physics. “We are reaching the upper limits of spectral efficiency in terms of the amount of bits we could really squeeze from every MHz of spectrum.”

Adding more macro cells is not the answer either, he says. “The current macro networks are complex, costly to operate and still will not deliver the desired performance. New network topologies and deployment methods will offer more gains than new technologies and hardware. Frequency reuse is the key to keeping up with the exponential increase of traffic in the future.”

The answer to the problem, he says, is small cells, and the efficient way they use the networks. NEC says its tests have shown that small cells can deliver around three times the throughput of a typical network of macro cells. Small cells with low power radios are designed to support a limited number of subscribers – usually in the tens and hundreds rather than thousands of macro base stations, but conversely they are also faster, simpler, more efficient and more cost-effective.

“Small cells are moving right to the heart of the network,” Niri says. “And they are a good solution because they help to drive the cost down. At the same time they improve the user experience, add value and help to increase revenue.”

Naturally, other vendors have also seen the potential of small cells, so what is it that NEC believes gives it an advantage in the market?

A combination of innovative and solid products and real world calls deployment experience, says Niri. “At NEC we are pioneers in small cell solutions. We’ve been at the forefront of this paradigm shift.”

Niri cites the firm’s operator engagements, particularly in its home market of Japan. “I think this goes back to our experience in mobile broadband. We’ve were behind the first 3G network in the world in Japan in 2001 – the leading broadband market. We were behind the first 3G network in Europe in 2003. We’ve also had a lot of success in pioneering 3G femtos [combined] with a deep understanding of mobile broadband.”

Then there’s NEC’s small cell technology itself, he says. “What we’ve done in small cell technology is to make a really compact and really high performance and intelligent product. And we’ve done it earlier than anybody else – I believe that we are a good year if not more ahead of the others.”

The challenge, Niri believes, is simply getting the small cell message across to the market and explaining that what worked for 3G won’t necessarily work in a data-centric 4G world; for LTE, operators will need to take a different tack.

“The tradition is to use macro for deployment— this has been the operators‘ bread and butter. In 3G, this made sense, as coverage was the driver—but then capacity became an issue when mobile broadband picked up. Yes, even today small cell technology is used in 3G, but what we’ve said to our customers is that the network dynamics are totally different. Coverage is not an issue—capacity, cost and performance are issues ,and they cannot be addressed with macro cells.

“Small cells are not a coverage solution—they are primarily a good way of providing a lot of capacity and superior performance at a lower TCO. [So] what we’re saying to customers is that it is the other way round to 3G. Build the capacity layer using small cells and then use macro to do out-fill to improve the coverage. This is a change in mind set.”

So do operators generally need educating over the benefits that small cells can bring? Niri believes they do.“We had to do a lot of hard work, all the way from theoretical simulations to business cases and TCO analysis to try and convince that this was a true solution. But through these joint analyses we have formed a very good understanding [with operators].”

Finally, Niri says that the received wisdom that the flat IP architecture of LTE simplifies the network maintenance is false.

“I simply challenge those who say that future networks will be simpler because you have a flat IP infrastructure. In fact, we are going to have more complex networks [offering] extreme mobility, ubiquity and personalisation. [They will be] video dominated and [deliver] surprising applications as yet unimagined. How could this network be simpler?”

The challenge Niri says is to design a network that masks the complexity as much as possible, yet offers intelligence, availability, resilience and speed—and all at a lower cost. It’s a tall order but one that Niri believes is necessary—and small cells will play a crucial role.

“We will surely see one touch and zero touch [plug and play] zero footprint small cells equipped with very intelligent SON in a variety of micro, pico and femto forms play a very big, if not the main, role in the evolution of mobile broadband,”he says.

The world’s first Small Cells event takes place in Berlin, Germany on 11-12th  October 2011

Small cell base stations are set to play an important role

With mobile data traffic expected to double annually, small cell base stations are set to play an important role in expanding the capacity of wireless networks. Mobile operators are realizing that to meet the demands for data, video and application access caused by smart phones and other devices, there is a real beauty to going small.

Small cells provide flexibility and increased QoS capabilities at an attractive cost. Implementing a small cell infrastructure is also more environmentally friendly as it will reduce the number of cell towers (maybe even eventually eliminate them) and it provides a cleaner signal with less power.

But going small is the answer to just one part of the equation. The ability to interact with today’s macro networks as well as effectively backhaul small cells is another.

Compact base stations (C-BTS) have been referred to by several nomenclatures such as micro and pico base stations. They are small size, fully integrated base stations that include baseband processing and radio module in one physical unit. They are relatively light in weight (e.g. a few kilograms) and are easy to deploy and maintain. They come with varying output power ranging from a half-watt to a few watts.

They are provisioned to support a limited number of subscribers that range in the tens of subscribers. These features separate them from larger ‘macro’ base stations that typically have a split or all-indoor architecture in addition to larger capabilities in terms of output power and number of supported subscribers. Thus, it is common to deploy compact base stations at relatively low height (e.g. 10-15 meters) to cover a limited area (e.g. 100 meter) to provide capacity to a hot spot or coverage in a dead zone. Macro base stations on the other hand are mounted higher at 30-45 meters, for example, and used to provide wider coverage (e.g. 500 meters or more).

Despite the differences in architecture and form-factor, the data rate that a large or small base station can support is the same. This is the link-level data rate that is measured in a lab environment, in the absence of interference. The link-level rate is determined by the capability of the wireless access technology such as WCDMA or LTE.

However, what matters to wireless network operators and subscribers alike is the actual performance of a wireless network. Hence, network-level performance is the real measure with link-level performance being an upper-bound that’s only reached in ideal scenarios seldom present in a real deployment.

Small cell base stations provide higher capacity than macro cells because of the deployment scenario. Because these base stations are mounted low above ground, they are less susceptible to interference. This translates directly into higher capacity.

Higher signal quality leads to better throughput because it allows the system to use a more spectrally efficient transmission scheme where more bits can be transmitted at the same time.  Therefore, the areas where users can transmit and receive at higher data rate are larger in a small cell than a macro cell. This is significant because it leads directly to a large increase in overall capacity: the capacity of small cell base station is about 89 per cent higher than that of a macro cell.

Additional benefits include:

1-    Lower delay: users will experience lower latency for data services and will enjoy faster download and upload time.

2-    In-building coverage: small cells provide better outdoor-to-indoor coverage. Considering that 40 per cent of mobile traffic originates from home and 25 per cent from work, this can represent a significant source of revenue for network operators.

3-    Better cell-edge coverage: Macro base stations provide poor service at the cell edge which includes a large percentage of the cell area. Small cells provide better cell-edge performance, particularly for the uplink than large cells.

The fact that small cells provide almost double the capacity of a macro cell is why they are set to become an important part in addressing the capacity crunch in wireless networks.

However, small cell base stations have met with challenges from a business case perspective even though they can be made at a fraction of the cost of larger base stations. The issue is how to backhaul such base stations and the cost of the backhaul. As these base stations are mounted low above ground, typical microwave systems are not technically effective because they require a clear line-of-sight between the two nodes of the microwave link – which is difficult to provide in urban areas where small cells are deployed below building rooflines. Alternatively, fiber is expensive to lay as it may not be available at the spot where the small cell is required in addition to large monthly fees that make it unattractive from an economical perspective.

Frank Rayal is VP of Product Management at backhaul supplier BLiNQ Networks

What do you think about small cells? Add your comments below.

There are now 31 commercial femtocell services worldwide which represents over 60 per cent growth in deployments in the past quarter alone. This market growth is reflected in the fact that eight of the top 10 mobile operator groups (by revenue) now offer femtocell services, which includes AT&T Group, France Telecom Group, NTT DOCOMO Group, Sprint, Telefonica Group, Deutsche Telecom Group, Verizon Wireless and Vodafone Group. Furthermore, in the vast majority of these markets, the devices now outnumber all generations of cell sites.

Informa forecasts this growth to continue with 48 million access points in use globally by 2014. Where last quarter Informa noted the recent growth in enterprise femtocell usage, this quarter has been notable due to the growth in femtocells for public access, especially as a means for speeding up mobile broadband in busy areas as exemplified by SK Telecom’s pure data offload strategy. The technology is also expected to grow in 4G networks with 60 per cent of operators believing that small cells will be more important than macrocells for an effective LTE deployment strategy according to a recent Informa survey.

“Femtocells haven’t just passed a major milestone – it is now apparent that they are rapidly becoming less of a differentiator for service providers and more like an essential offering. Consumers are increasingly going to expect something that for a long time seemed impossible – near ubiquitous coverage for voice and high speed data. Femtocells make this a very real possibility,” said Dimitris Mavrakis, Senior Analyst at Informa Telecoms & Media.

Furthermore, the past quarter has also seen important progress in femtocell technology. The first industry-wide agreed set of API specifications for advanced mobile applications based on femtocell technology have been published. The API provides awareness information so developers can incorporate enhanced presence, context and location-sensitive features into new and existing apps, and can also take advantage of the lower cost and faster data connections enabled by femtocells.

The expansion of the femtocell industry is also reflected in the growing membership of the Femto Forum, the femtocell industry association, which now includes 74 vendors and 63 mobile operators representing over 1.71 billion mobile subscribers worldwide, across multiple wireless technologies (WiMAX, UMTS and CDMA) and accounts for 33 per cent of total mobile subscribers worldwide.

The report is updated on a quarterly basis and is published free of charge on the Femto Forum’s website here.

Ubiquisys said its new Intel powered small cells will offer new levels of compute power for local caching

Ubiquisys, the femtocell vendor, has announced a partnership with chip manufacturer Intel to develop a new range of intelligent small cell base stations. The devices will feature Ubiquisys application software and will be powered by Intel architecture.

The small cells will be available in a variety of configurations and will be powered either by Intel Atom, Core, or Xeon processors depending on operator requirements. They will run WCDMA, LTE and wifi in the same box and according to Ubiquisys will bring new levels of compute power to the femtocell sector.

“What we’re talking about today is a completely new type of small cell”, Keith Day, VP Marketing of Ubiquisys told Telecoms.com. “The Intel powered cells have powerful computing capacity and abundant storage so they have the ability to do things that small cells simply haven’t been able to before.”

The cells are designed to cache local data enabling faster performance for end users. It will also help to significantly reduce the strain on operator networks, thus lowering their backhaul costs.

As an example Day described a scenario where a football stadium offered video highlights to all match attendees with the content stored locally on the small cells, rather than being pulled from the internet.

“If you imagine a deployment scenario of these hotspots under a single macro cell, what you have is a cloud of computing resources, which are bringing data and applications much closer to the point of use for mobile data users,” said Day.

“On this computing platform you could for example cache local data, such as a football stadium with an internet video feed, and rather than being taken from the web it would be cached locally. If you’re doing Twitter upload the cell can take care of all of that as well.

“Any localised data that otherwise would come from the internet onto the handset is transformed when you put a small cell in,” Day added. “It caches things locally so that’s it’s much closer to the user, and the distance from the small cell to the user’s handsets is also very, very small and the actual data rates are much, much higher – so the actual performance, per user, is much higher.”

Will Franks, CTO of Ubiquisys added, “What we’ve done here is to put significant compute power at the [network] edge – it’s not been done before.”

Ubiquisys said the Intel powered small cells would appear on the market in 2012.

According to a recent Informa Telecoms & Media survey, 61 per cent of responders said that they believed that small cells would be more important than macro cells for effective deployment of LTE networks.

The fourth annual LTE North America Conference takes place in Texas, US, November 8-9

The merged company will focus on 4G, femtos and traffic management

IP networking firm RadiSys has acquired traffic management specialist Continuous Computing, to better target opportunities in the rapidly growing 3G and 4G, femtocell and Deep Packet Inspection (DPI) sectors.

The price of the acquisition is $73m in cash and stock with the potential of a further $15m payout based on the performance of Continuous over the next 18 months.

According to RadiSys, the acquisition of Continuous Computing allows further expansion into the LTE, femto / small cell wireless and DPI markets, giving both companies’ customers a broader set of solutions.

Indeed, many operators are investigating models that allow them to better manage the data deluge, and many eyes have fallen upon next generation technologies. But with so much legacy infrastructure still in use, congestion will remain a key issue for some time.

Report overview:

Operators have been forced to reassess their views on the role of Wi-Fi within their business. It’s not so long ago that Wi-Fi was being actively disabled in devices sold by certain operators – it was seen as a competitive threat to their emerging mobile data businesses. But that attitude has now come full circle and today operators see Wi-Fi as a crucial part of their overall network and customer experience strategy. Similarly, femtocells got off to a slow start as operators questioned the viability of different business models, but today a growing number of operators have either already begun offering or are planning to offer femtocells to their residential and business customers.

Now that we’re seeing viable business models for Wi-Fi and femtocells emerge, it’s an important time to assess the results experienced by pioneering operators. Have operators been able to generate new revenue streams? Can Wi-Fi and femtocells be successfully deployed to mitigate the impact of mobile data traffic growth on operators’ networks? Is there any evidence that femtocells can be used by operators to reduce churn? What is the role of Wi-Fi in managing the customer experience of smartphones?

Informa’s research program is dedicated to examining the go-to-market strategies of the early adopters of Wi-Fi and femtocells and identifying operator best practice from around the globe in terms of sales, marketing, branding, distribution, network strategy and much more.

This research will help you:

• Understand how operators are including Wi-Fi and femtocells as a key element of a holistic network-management strategy.
• What are the main business models underpinning investments into Wi-Fi and femtocells?
• Identify how Wi-Fi and femtocells can co-exist and learn from operators that have successfully developed strategies adapted to different customer traffic profiles and varying coverage challenges.
• Understand how Wi-Fi and femtocells have been successfully used by operators to increase customer loyalty.
• Assess competitor positioning and direction through detailed case studies that highlight best practice.
• Gain an insight into the successful the go-to-market strategies employed by early adopters in every major global region, including branding, pricing and distribution.
• Understand how Wi-Fi and femtocells are being used to generate new revenue streams for operators.

Pricing information: £2,495

To buy this report click here

To view a free extract of this report click here

Small cells are getting bigger

Femtocells are getting bigger. This is true both in the sense that the market as a whole is gathering momentum and in the more literal sense that the sector is moving away from the central tenet of miniaturisation on which it first made its stand.

The femtocell was brought to market with a very simple message. Here was a base station small enough to fit in the home of the consumer, which could be plugged into their fixed line connection, immediately giving them outstanding indoor cellular coverage, backhauled through their own resource. It certainly spoke to a need in many markets, where coverage in the home is unreliable at best.

The toughest question raised by the femtocell sales pitch was how operators might encourage users to buy their own access point, while simultaneously running advertising campaigns trumpeting the quality and coverage of their macro network.

The toughest question raised by the technology, meanwhile, was how it could be guaranteed that these little home networks, which operate in licensed, carrier spectrum, could be kept from interfering with the wider network beyond the walls.

This potential “show stopper”, as Andy Tiller, VP of product marketing at femto pioneer IP Access describes it, has, he says, been dealt with. Femtocells have been proven workable by the deployments seen so far. And on the marketing side, he says, a mix of strategies have nudged the devices into users’ homes. Some operators give them away free to users in patchy coverage areas, others charge customers $150/unit, for example.

Whichever way the products have been shifted, it is the original femto proposition that has generated the bulk of sales recorded to date. Informa estimates that there were 1.7 million femtocell access points deployed globally by the end of Q4 2010. Tier-one operators are on board; Sprint, AT&T and Verizon in the US, Softbank, KDDI and NTT DoCoMo in Japan and Vodafone and Telefónica in Europe have all lent credence to the femtocell story. There were 18 commercial femtocell deployments worldwide by the end of 2010, with a further 30 deployment commitments.

The femtocell sector remains small, like its products, but the companies that operate within it are eyeing bigger things…

Evidence of the perceived opportunity in the femto space is also to be found among the vendor community. It’s a popular observation in the sector that, thanks to the volume of its femtocell shipments, Cisco now has more base stations deployed in the US than any other vendor. Broadcom, one of the biggest vendors in the silicon space, bought femto player Percello in 2010, while Alcatel Lucent and Huawei are the two biggest names from the macro network supply side looking to make their mark in this area.

The femtocell sector remains small, like its products, but the companies that operate within it are eyeing bigger things. Specifically they are bidding to establish femtocells as a solution for enterprise, rural and metro deployments, looking to take a slice out of the traditional infrastructure market. And so the term ‘femtocell’ is being quietly phased out. Instead, a more general classification has come into parlance: ‘small cells’.

The deployment of an abundance of small cells is the only way to relieve the coverage and capacity pressures congesting the macro network, say players in this space. And only by scaling up comparatively low cost technology like femtocells can these small cells be manufactured in sufficient volumes while remaining economically viable. The self organising nature of femtocells is also pitched as a big win for these small cell deployments, taking the burden of managing a vast number of new cells away.

A confrontation may be in the offing, though. If the femto sector scales up to metro levels, it is going to bump up against the traditional infrastructure supply side which, the companies mentioned above aside, are holding back from the small cell space.

Andy Tiller, SVP product management at IP access, says: “You’ve got this sort of battleground emerging at enterprise and public access metro level environments where operators like the idea of scaling up the femtocell because it uses cheap IP backhaul, the cost of the kit is low and it offloads the RNCs. On the other hand you’ve got the macro vendors pushing down into that space, arguing that with their traditional architectures you get the benefits of soft handover, and other things that femtos can’t do. The two sides are converging on the metro network level.”

There is a conciliatory tone to much of what the femto specialists say, however, with the familiar ‘complementary not competitive’ industry mantra being applied by some spokespeople. Alcatel Lucent, which has a legacy in the macro network and an enthusiasm for the newer, small cell approach, has a foot in each camp, and so a vested interest in both levels of network technology continuing to flourish.

“We’re now thinking about whether this technology could be absorbed into a city for areas like outdoor coverage hotspots,” says Yannick Dupuch, director of the small cell business unit at Alcatel Lucent. “We’re trying to balance these technologies, which are low cost, with a more expensive solution coming from the macro environment which is more costly, but with a higher level of performance.

And we believe there is room on the market for these two types of approach, depending on the applications and the budget of our customer.” The femto sector sees small cells as a great way of beefing out existing 3G coverage, for example. “What I think we’ll see is large, preplanned manual cells, with huge numbers of intelligent cells of various sizes underneath,” says Keith Day, vice president of marketing at sector specialist Ubiquisys, which supplies femtocells to Softbank in Japan. “Softbank are looking at putting 40 small cells outside for every large base station in the network,” he says.

Femtocell solutions for the enterprise are a logical extension of the initial, domestic coverage model with which products were first introduced. This is an area into which IP Access, Ubiquisys and Alcatel Lucent are all pushing, with end-to-end miniature, selfconfiguring networks for indoor office use that are kept distinct from the network beyond the office walls.

But bringing the technology to metro hotspots or rural areas will not be without significant challenges. As Andy Tiller says, residential grade femtocells would fail in a public access environment because they could not be properly managed. “The industry is being a little naïve in suggesting that route,” he says.

Tiller’s opposite number at Ubiquisys concedes that integrating scaled-up femto technology into the macro network is probably the greatest challenge that the sector faces. “We have to work out the boundaries. Where do the cells fit in with the topology of a planned network? We don’t know the answer to that, yet,” Day says.

The other problem he identifies is processing power. The intelligence built into the products as they’re being scaled up requires a huge amount of processing power. Historically mobile has been about processing at the centre, Day says but increasingly it will be focused on processing at the edge, which will create new demands on processing power.

Alcatel Lucent’s Dupuch argues that the silicon vendors in the femto space are more than equal to the task ahead of them. “Up until recently we were only able to do four users per femtocell and you were limited to 7Mbps,” he says. “This year we’ll do 32 users and 21Mbps. In the next two years you’ll see more drastic improvements of the processing power and then you can add much more complexity.”

Dupuch attributes these advances in part to the increasing enthusiasm of silicon vendors for the femto sector. Broadcom’s arrival through the Percello purchase meant it joined arch rival Qualcomm in the space; Qualcomm is an investor in IP Access. Sector specialist Picochip is the incumbent silicon provider for femtocells and a key partner for IP Access, Ubiquisys and Alcatel Lucent but Dupuch says that his firm is running RFQs with other vendors “to make sure that we have the right partner and make sure that we are still going to be very competitive.”

Picochip, for its own part, is among the most bullish players in the space. Rupert Baines, the firm’s vice president of marketing, is predicting a sea-change in the industry, brought about by explosive growth in the small cell space. Like his fellow femto players, Baines stresses the requirement that these myriad small cells be made extremely cheaply, something which traditional infrastructure vendors will not be able to manage, he says.

Most base stations from traditional vendors, Baines says, are designed to be made in small quantities, using custom components and custom silicon and are necessarily expensive. He draws a parallel with the computer industry of the late 1970s, when computers were high cost, low volume products, made with bespoke software and components. When Intel microprocessors came along, allowing for the mass production of units designed for the home, the previous stable of vendors like Data General, Unisys and IBM found themselves in “a world of hurt,” he said.

The same will happen with the base station manufacturing business, Baines predicts. “Because of people like us, and Qualcomm and Broadcom copying us, you can now make base stations cheaply using standard components and standard software,” he says. “I’m expecting the same kind of fallout in this industry as there was in the computer industry.” Baines doesn’t name names, but suggests that some leading vendors are going to endure dramatic downturns in fortunes, and are currently burying their heads in the sand.

“Look at how aggressively Huawei and Alcatel Lucent are getting into this,” he says. “Look at what John Chambers [of Cisco] says about why they are doing femtocells. Denial is not just a river in Egypt.”

Clearly the firm with the most to lose if these kind of predictions have any substance to them is Ericsson. “I don’t think Ericsson felt threatened by residential femtocells,” says IP Access’ Andy Tiller. “After all, that’s not its business. But when the femto industry begins to move into metro and public access in particular—railways and hotels, for example, where a microcell might previously have done the job, that starts to become quite interesting and disruptive.”

How the incumbent infrastructure vendors respond remains to be seen. But Ericsson, and to a lesser extent Nokia Siemens, which has a femto gateway but no access point offering, are taking a more observational role for the time being. With pioneering companies like Ubiquisys and IP Access still relatively small, an acquisition cannot be ruled out, and the next two years could prove to be defining ones for the small cell network model.