17 Nov 2010

Femtocells - The State of the Market

Simon Saunders, Chairman of the Femto-Forum looks at the state of the femtocell market their deployment, business case and new femtocell developments.

Much has been made of the disruptive potential of femtocells over the past few years, but we are now seeing the technology radically reshape live mobile networks. According to Informa Telecoms & Media, femtocells now outnumber macrocells in the USA - it won't be long before they do the same in the UK and Japan. Such is the nature of the small cell revolution that single countries will soon have more cells than currently exist on the whole planet. Here we'll look at what's driving the rapid ascent of the femtocell market and what we can expect in the coming months.

Femtocells have started to move into the mainstream following deployments by major operators in Europe, Asia and North America. The latest heavyweight to rollout services was Telefonica with its offering for businesses and consumers in Spain. This follows hot on the heels of Vodafone's trailblazing femtocell launches in Europe - in fact the operator now offers services in the UK, Spain, and Greece. Progress has been even quicker elsewhere with the three largest operators in the US and Japan all offering femtocells as well. In total there are now 17 operators that have deployed femtocells - double the number there were this time last year.

This influx of major operators has created a corresponding rise in major telecom vendors entering the space. While large infrastructure manufacturers such as Alcatel Lucent, Nokia Siemens Networks, Huawei and NEC have been offering femtocell products for some time, we're now seeing the major semiconductor players also entering the space. Qualcomm recently launched its femtocell chipset while Broadcom has made the first major acquisition in the femtocell space in the shape of Israeli chip start-up Percello.

Femtocell packages

Over the past few months we've also seen an important evolution in the consumer proposition. Several mobile operators around the world have started offering femtocells for free, or at highly discounted rates, either as a customer retention tool or as a means of rapidly increasing market share. For example, SoftBank Mobile in Japan is giving away free femtocells and ADSL connections to its customers while several others are offering packages where the femtocell and associated service are provided for free to loyal customers.

A recent consumer research project by analysts Parks Associates found that 56% of US consumers (with mobile phones and broadband) consider femtocells appealing with two thirds of these finding the technology either 'very' or 'extremely' appealing. This number rose to 89% when asking those already familiar with femtocells, suggesting that as awareness of the technology grows, so will interest.

The primary driver for consumer interest was improved in-home coverage followed by improved battery life, advanced femtocell services and home-zone tariffs. In fact, femtocell services, which use the presence of the mobile device in the home to trigger different events, could drive a new revenue stream for operators. Of those interested in femtocells 72% were very interested in at least one femtocell service; half of these respondents would be willing to pay $4.99/month for their single favourite service or $9.99/month for a bundle of their favourite three illustrating a potential new revenue opportunity for operators. Examples of such services include a virtual home number, which calls all mobiles in the home, or receiving personalised reminders when entering or leaving the home.

Femtocell studies

The study also revealed that femtocells can be used to improve consumer satisfaction and loyalty. Among consumers who consider themselves likely to change operator in the next 12 months, 44% said that they would be very likely to reconsider if their current operator offered a femtocell. Similarly, 35% of consumers in multi-operator households said they would likely consolidate their services around a single provider who offered femtocells.,/p>

Although over 90% of those who found the technology appealing expressed willingness to pay upfront for the device, respondents demonstrated sensitivity to the actual price level. This means that operators are likely to be more successful if they build their business model around market share gains and new service revenues rather than simply by charging for the device.

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