Vodafone Picks Femto Vendors

Vodafone Group plc (NYSE: VOD) has chosen Alcatel-Lucent (NYSE: ALU) and ip.access Ltd. to supply femtocells integrated into a home gateway after issuing a request for proposal (RFP) earlier this year, according to an industry source.

Vodafone, Alcatel-Lucent, and ip.access declined to comment. While the femtocell buzz has gone quiet, Vodafone's vendor selection is indicative of the increased level of activity among operators worldwide.

There are about 20 femtocell trials worldwide, according to sources, which is an increase from the activity that was going on just a few months ago. For the refresher course, femtocells are tiny base stations that go into homes or offices to improve voice and data coverage. (See Vodafone RFP Fuels Femtocells, FT Preps Femtocell RFP, Softbank Trials Femtocell, Is AT&T Putting Out Femto Feelers?, AT&T's Foggy FMC Plans, and Sprint Goes Femto.)

Vodafone's RFP called for a femtocell to be integrated into a home gateway. Both Alcatel-Lucent and ip.access have partnerships with home gateway vendors to develop integrated femtocell products, which would fit the bill for Vodafone's requirements. AlcaLu has a stake in 2Wire Inc. and a partnership with Sagem Télécommunications SA , while ip.access has a partnership with Thomson S.A. (NYSE: TMS; Euronext Paris: 18453). (See AlcaLu Goes Femto, Is AlcaLu Eyeing Thomson?, 2Wire Inc., Alcatel Buys Into 2Wire, and Thomson, IP.access Team.)

Vodafone's RFP is considered to be among the largest in the industry and has acted as a catalyst for the new 3G femtocell market. Vodafone's RFP requires 400,000 units, and the operator wants an integrated gateway that includes DSL, WiFi, Ethernet, and a femtocell. (See Femto Players Gun for Gateways.)

While Vodafone's femtocell strategy and vendor selection is driven from the group level, some of its European markets are trying out other vendor products. For example, SFR -- of which Vodafone owns 43.9 percent -- is understood to be trialing equipment from Ubiquisys Ltd. The Google (Nasdaq: GOOG)-backed femtocell vendor recently partnered with Netgear Inc. (Nasdaq: NTGR) to develop an integrated gateway. (See Netgear, Ubiquisys Team, Ubiquisys Ramps Up Production, Femtocell Startup Pockets $25M, Google Invests in 3G Startup, UbiquiSys Ltd., and SFR, NSN Team on 3G.)

Telefónica O2 Europe plc has two preferred femtocell suppliers now, one of which is Huawei Technologies Co. Ltd.

Sprint Nextel Corp. (NYSE: S) also had a large RFP out for 700,000 units of CDMA2000 and WiMax femtocells earlier this year. But an industry source says this RFP turned out to be more like a request for information (RFI) and the operator has not chosen its vendors yet.

All of the operator activity means femtocell vendors are very busy these days.

"Everyone is scrambling to put together a commercial working system…. Operators are saying, 'Give us a product now,' " says Andy Tiller, vice president of marketing at ip.access. When asked whether ip.access was supplying Vodafone, Tiller said he could not comment.

Stuart Carlaw, research director at ABI Research , agrees that the femtocell activity has increased and has gone "behind the scenes," where operators are working on the practicalities of deploying the home base stations. "There has been a shift from robust marketing to a focus on engineering," he says.

"If you're a wireless operator and there's saturation in your market and convergence going on, sooner or later you're competing against Sky TV," says Carlaw. "You need to get into the home quickly and expand that footprint."

Commercial femtocell deployments will start in late 2008, according to Carlaw. The exception is Sprint Nextel's Airave CDMA femtocell from Samsung Corp. , which the operator launched last month in Denver and Indianapolis.

Carlaw says he is not very positive about Sprint's femtocell proposition because it is over-priced at $50. "Femtocells need to be near to zero as possible… We're looking at subsidization," says Carlaw. "And service pricing needs to be below $20 [per month] for all-you-can-eat bundles."

— Michelle Donegan, European Editor, Unstrung