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Summary:

It doesn’t matter how brilliant your mouse trap is if it doesn’t catch any mice. Same goes for technologies. Witness femtocells, those small, in-premise devices that help with spotty cell phone coverage by piggybacking on wired broadband connections. According to The Wall Street Journal, femtocells aren’t […]

It doesn’t matter how brilliant your mouse trap is if it doesn’t catch any mice. Same goes for technologies. Witness femtocells, those small, in-premise devices that help with spotty cell phone coverage by piggybacking on wired broadband connections.

According to The Wall Street Journal, femtocells aren’t doing terribly well — sales are slow and demand is weak. It’s a classic chicken-and-egg situation. Carriers are waiting for demand to go up, while folks (like me) are waiting for prices — which currently range from $100 to $250 for the device alone, plus a monthly service fee — to come down.

And that doesn’t seem to be happening. According to ABI Research, less than 20 million of these devices will be sold in 2012 vs. a few hundred thousand in 2009 — globally! That’s nothing compared to the amount of venture dollars that have been poured into this sector (see the table below for some examples.)

Our Previous Femtocell Coverage
4G: Forget Cell Towers, Bring on the Femtocells.
Femtocells or Wi-Fi, That Is the Question.
Here Come the Femtocells
Verizon’s Femtocell Is Pretty Lame.
Embarq Files for Universal Femtocell Patent.
Is Verizon Wireless Network Extender a Rip-off?
T-Mobile Backs Femtocell Startup.
Kineto Gets $15.5M for Femtocell Push
Qualcomm Backs Femtocell Maker, ip.access

“By the end of the year, most of the big operators will be out and about,” Chris Gilbert, CEO of UK femtocell manufacturer Ubiquisys, was quoted by the WSJ as saying. I don’t expect him to be anything but publicly optimistic, but unless the carriers start to give these devices away, he is whistling in the dark.

Femtocells are a good way for carriers to offload the pressure on their cellular networks to wired ones without spending a lot on back-end infrastructure. But the problem such an approach proposes to solve — poor cell phone reception in areas where coverage is weak — becomes less of a problem as carriers spend money on improving their network coverage.

From the looks of it, femtocells are going to be yet another example of a fixed-mobile convergence technology that has landed on the road to nowhere. Fixed mobile convergence (FMC) is supposed to be a simple and transparent way to hand off active voice calls between cellular and Wi-Fi networks on dual-mode phones. Technologies such as UMA have been created to address this need, and I, for one, can’t understand why more carriers and handset makers aren’t supporting UMA technology, especially given how beautifully it works on T-Mobile’s BlackBerry devices.

Since UMA leverages the Wi-Fi infrastructure, and since in 2009 nearly 100 million phones are forecast to ship with Wi-Fi capability built in, more carriers should be embracing it as a way to provide better coverage to their customers.

While cell phone companies want you to buy routers from them, you actually don’t need one — your own Wi-Fi network is good enough for the job. If you’ve read some of my recent posts, you know that Wi-Fi can only help the phone companies offload traffic from their stressed-out networks.

AT&T in particular should be making this a key feature of all its devices, especially considering that it has more network challenges than any other carrier. UMA would even make the iPhone more reliable. (OK, here I go daydreaming again!)

“A wide sweep of industry announcements trumpeting FMC capabilities have been made in 2009, however, our analysis shows only moderate increases in actual use, or planned use, of most applications,” says David Lemelin, In-Stat analyst. “IT managers, service providers and integrators may have a good understanding of FMC’s benefits, but until workers actually use its capabilities, the benefits will go unrealized.” (In-Stat press release.)

The problem is that despite all their potential, these fixed-mobile convergence technologies — including femtocells — in addition to being relatively expensive, have failed to focus on the consumer experience.

This article also appeared on BusinessWeek.com.

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  1. I believe business case was never too strong for femtocell. Operator wants user to

    1) pay additional $100-$250
    2) make purchased bandwidth available for mobile operator (think in terms of capped usage)
    3) Not benifit from its own bandwidth usage to get substantial subsidy in voice plans

    And that all for better coverage. Thanks but No Thanks, I am happy with my coverage.

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  2. As Om points out, there is in fact a tremendous market for the Femtocell…it’s just that’s known by it’s other name – the 11n access point.

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    1. oh that is so tweet-able. I am so stealing that for my tweet stream. :-)

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    2. Except femtocell, as used here to describe a very low power 2/3G radio with IP backhaul, has nothing to do with WiFi . . .

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  3. Om, you’re so dead on. The fundamental problem (as Vipin points out, too) is that femtocell cost was supposed to be very low by now–maybe $50 to carriers. Instead, based on the fees being charged, it sounds like volume production still puts the price at $200 to $300 per unit wholesale. Which is insane relative to the benefit.

    Note, too, that Sprint and Verizon are selling *2G* femtocells. which means that you get slow data service over your smartphone when connecting at home unless you have a dual-mode Wi-Fi device that preferentially uses Wi-Fi when available.

    AT&T is the only firm that’s going to (someday) have a 3G femtocell out there, but that means that devices in the home will burn battery power because 3G radios require a lot of power relative to Wi-Fi radios.

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    1. When you state that “3G radios require a lot of power relative to Wi-Fi radios”, you are talking apples-to-oranges.

      Sure, the power a cell phone uses in the home to connect to the macro network (whose tower is outside and God knows how far away, so the signal has to blast through the walls of the house and reach the tower)is going to be a lot more than it needs to connect to the Wi-Fi access point which is, at most, upstairs or downstairs.

      When a femtocell is introduced to a house, the power requirement for the 3G modem will be significantly reduced. One could argue that a Wi-Fi enabled 3G phone using WiFi will burn power faster than a 3G phone using a femtocell as the Wi-Fi enabled phone has to have two radios active – the Wi-Fi radio and the 3G radio (so the phone can receive calls from the macro network) while the 3G phone using a femtocell only requires one radio to be active.

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  4. As far as AT&T is concerned, the congestion is going to get worse as it is making it mandatory to subscribe to data plans when customers buy smartphones after Sept 6th :-(

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  5. I think eFMC is for enterprise is never going to take off as carries are offering 100$ plans.

    I worked for a FMC company and they are struggling left and right to make even smaller numbers in 100-200K range. Some of their own execution problem but more to do with market adoption.

    Many companies even stopped their FMC charter – Aruba.

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  6. Om,

    I agree 100% but I’m thinking that in addition, the internet providers don’t want to get flooded with phone calls. For example I have AT&T mobile service , why would Charter Communication my internet provider want to add to it’s load by handling my mobile phone calls.

    Maybe if I had AT&T high speed internet it would make sense. I just don’t see Charter wanting to help AT&T lighten it’s load.

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    1. how is it relevant what the internet provider wants? the difference in amount of data a call makes compared to one stupid youtube video is so huge… plus we pay for our internet service to do with as we please. these phones connect to wifi where you have access to. not every single wifi spot.

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  7. [...] post: Like Fixed-Mobile Convergence, Femtocells Are on a Road to Nowhere Share and [...]

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  8. i would consider a femtocell only if two conditions were met.

    1. there was no monthly fee. actually i should really get a discount for not using tower bandwidth; but i would be happy with just free.

    2. they must work internationally. this is really in my opinion the ‘killer app’ for femtocells. residents of multiple countries could add their home network to their foreign residence.

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    1. 1.) At&t’s femtocell has no monthly fees. It’s only a monthly fee if you want unlimited calls

      2.) You ARE FING DREAMING!!!. The At&t femtocell has a GPS locator built in and will only work within the geographical confines of the service plan you currently have. The microcell will only work after it establishes it’s GPS location.

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  9. The fundamental problem the operators are trying to solve is indoor coverage and macro offload.

    Today, consumer Femto cells is a cheap alternative to Picocells and repeaters and make use of DSL and Cable to offload traffic and improve internal coverage in a home or small office (“better user experience). However, there are still interference issues and handoff issues which must be addressed and solved. In addition, as some people point out, the consumer pricing needs work.

    To compare and contrast .n with Femto completely disregards many mobile-only applications and the fact that NO changes to the handset and user behavior is needed. I’m reminded by the tale of 2002 when “WiFi will be mobile” and WiFi will create a new set of mobile players (we all know how that movie ended). WiFi and Femto will coexist. It’s that simple.

    FMC is great but the reason why FMC (VoWIFI + PBX integration) never took off is due to the complexity, voice reliability and cost to the enterprise to install and manage mobility apps (servers, routers, etc). How many people within enterprise IT teams (or at home) really has WiFi RF planning know-how? The answer is simple…

    Femto is in its infancy still. Just like WiFi, problems will be sorted out and ultimately issues will be addressed and more scalable solutions will make inroads in the enterprise environment.

    Coverage and offload of macro capacity will drive the operators’ business case (Capex and Opex alternatives are Picocells and DAS). For the consumers, price and low (or no) monthly fees will drive adoption. As for the enterprise, it must be scalable and easy to integrate with the existing voice/data systems WITHOUT requiring IT staff to understand RF planning.

    WiFi is great for FREE data. As for me, I’m always mobile (even at home) – I need more.

    Twitter/mobileinsider

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