3G & WiMax Femtocells: The Operator View

The emerging market for femtocells – a.k.a. home base stations – is getting all the hype these days. And news that Google (Nasdaq: GOOG) is in the game can only add to the buzz around this innovative approach to cellular network build-out. (See Google Invests in 3G Startup.)

To judge from coverage here on Unstrung, mobile operators certainly like the concept, with AT&T Inc. (NYSE: T), Softbank Mobile Corp. , Sprint Nextel Corp. (NYSE: S), Telefónica Móviles SA , Telefónica O2 Europe plc , T-Mobile International AG , Vodafone Group plc (NYSE: VOD), the Orange Group, and more, all evaluating the technology.

Here's a summary of recent articles identifying operator interest in the home base station market:

• Vodafone CEO Seeks Cheap Femtos
• Is AT&T Putting Out Femto Feelers?
• Vodafone RFP Fuels Femtocells
• FT Preps Femtocell RFP
• Softbank Trials Femtocell
• Sprint Goes Femto With WiMax

For those who missed the memo, femtocells are tiny, low-power cellular base stations, similar to WiFi access points. They can be either standalone devices, or integrated into home gateways, and can be made to support several wireless standards. Unlike WiFi, however, they operate in licensed frequencies.

From an end-user perspective, deploying a femto at home provides benefits such as better coverage, lower battery consumption, and, possibly, higher-speed, lower-latency data connections. Longer-term, there's even sci-fi talk of using your mobile phone as a kind of remote control for home entertainment systems, with femtos acting as a hub that enables users to transfer music and image files among computers, TVs, and other devices.

As with any emerging technology, there are, of course, some unresolved technical and commercial issues – not least of which are: What exactly are femtocells for? And what is the business case?

At the high level, things are clear enough. By using low-cost technology to provide coverage and capacity where and when it's most needed, operators can deliver better services at lower cost. Unlike macro network build outs, operator investment in femtos is linked directly to subscriber demand, contract lock-ins, and revenue. By using licensed spectrum, quality can be assured, while barriers to entry are kept high. Importantly for some, it also keeps the WiFi genie in the bottle a while longer.

Dig into the details, however, and it's another story. In the following sections, this report will look at mobile operator attitudes to some of the key issues affecting femtocell adoption. The majority of comments included were gathered at the Home Access Point and Femtocell Conference hosted earlier this summer in London.

The report addresses selected high-level femtocell issues, as viewed by mobile operators and articulated in their public comments. It does not draw on off-record information, and does not dive deeply into the technical details or vendor strategies. For that, see our Unstrung Insider research report, "3G Home Base Stations: Femto Cells & FMC for the Masses." For a summary see: 3G Base Stations Hit Home.

Here's the hyperlinked summary:

• Voice vs Data
• ISP Backhaul
• Spectrum & Regulation
• Core Integration & Standards
• Pricing & Subsidies
• Market Timing

— Gabriel Brown, Chief Analyst, Unstrung Insider