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Summary:

Femtocells, micro-base stations placed inside the home to improve cellular coverage, are supposed to be the answer to operators’ bandwidth constraints. They’re also a new source of revenue for carriers and the startups and large equipment-makers who are building the devices. But so far, the market […]

400374CDMA_Ubicell

Samsung's CDMA Femtocell

Femtocells, micro-base stations placed inside the home to improve cellular coverage, are supposed to be the answer to operators’ bandwidth constraints. They’re also a new source of revenue for carriers and the startups and large equipment-makers who are building the devices. But so far, the market has failed to materialize, not least because consumers don’t want to pay a monthly fee or buy equipment in order to help carriers improve their networks. But as Wi-Fi gets embedded on phones and hotspots proliferate, are femtocells even necessary?

The question struck me after reading about China Unicom — the Chinese carrier that’s now infamous for offering the iPhone sans Wi-Fi — announcing that it would offer a femtocell product for its subscribers. ABI Research analyst Aditya Kaul notes in a blog this morning that, since first-generation iPhones won’t have Wi-Fi, the China Unicom femtocell business may get a boost from customers who are eager to surf:

The interesting bit is that China Unicom recently announced their iPhone launch. Was this meant to be timed with their femtocell launch? The fact that the initial shipments of the iPhone will not carry WiFi or even the Chinese equivalent WAPI, bodes well for their ‘3G Inn’ service.

On the enterprise side, we’ve seen Wi-Fi take on femtocells and win, and my gut tells me that will happen in the home as well. Using your own wired backhaul to provide Internet access off the 3G network makes sense, rather than paying a carrier to use your wired backhaul to improve the 3G coverage that will count against your data plan.

Would carriers try to turn the clock back on hotspot coverage in hopes of pushing their femtocell offerings? That would mean fewer phones with Wi-Fi, no more carrier-supported hotspots and, for carriers, some serious network re-engineering. My guess is that such an approach may fly in China, but not in most other countries. Wi-Fi use for mobile data access is now widespread, and so far most femtocells in the U.S. are voice focused rather than data focused. It seems to me that the femtocell market is still a solution in search of a problem (GigaOM Pro subscription required). That’s bad news for Qualcomm, Samsung, Airvana, Ubiquisys, PicoChip and others betting on the market.

  1. I’ve always wondered why T-mobile’s Wifi/UMA combination wasn’t much more popular. It’s not prominently on their website, and they only have a couple UMA capable phones.

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    1. Stacey Higginbotham Monday, November 2, 2009

      I wonder if it was perhaps ahead of its time. Only now is the mass market paying attention to issues such as getting good data quality on handsets and avoiding roaming charges using VoIP, where UMA shines.

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    2. Stacey Higginbotham Monday, November 2, 2009

      I wonder if it was perhaps ahead of its time. Only now is the mass market paying attention to issues such as getting good data quality on handsets and avoiding roaming charges using VoIP, where UMA shines.

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    3. I use a BlackBerry 8900 with UMA. It’s such an excellent feature. I love that it helps me stay accessible while I’m out of the country.

      A good friend of mine uses it because it’s his best option. His house isn’t covered well by any of the “big four”. UMA takes care of that issue for him.

      My dream phone is an Android 2.0 model with a great keyboard, a strong processor, and UMA. C’mon T-Mobile! Make it happen!!!

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  2. T-mobile never used the femtocells, but instead equips many of their phones with wifi to enable them to make calls using uma. This is completely transparent once the connection with the WiFi router is set up. No subscription necessary, and no equipment to buy, since it works through any existing wireless router.

    Added bonus: works through any wifi connection, anywhere in the world. On my last trip to Europe I made calls to the US at US rates, without the need for a VOIP app like Skype on my phone. Simply tell the phone to give priority to WiFi uma connections.

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    1. Actually, it *does* require a subscription. The $9.99/mo HotSpot@Home package. (This is different than the ‘at home phone’ they advertise)

      Problem is, this service seems to have disappeared from their new rate plans. Seems that you can still use UMA but it comes out of your minutes. Others are reporting that if you don’t have the $9.99 unlimited @home plan that it’s not working at all.

      I have the unlimited hotspot calling feature at home, and you’re right, it’s awesome. But if I had to pay for a femtocell with unlimited airtime when using it, I wouldn’t mind that either. If I have to pay for the femtocell to compensate for crappy coverage, AND it uses my minutes up, that’s a problem. AT&T’s rumored pricing is $19.99/mo per *account* (not line level – account level) and the airtime/data is unlimited. I would be happy with that.

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      1. You’re incorrect. A subscription is not required. If you don’t opt for the $9.99 plan then your UMA minutes are just deducted from your monthly bucket.

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      2. PaloAltoWorldView Monday, November 2, 2009

        No, T-Mobile USA does NOT require any form of subscription for use of UMA. There is a $9.99/month plan available IF you’re not otherwise on an unlimited plan or don’t want the UMA-minutes to be subtracted from your “regular” cell plan. So if you have an unlimited cell calling plan, for example — it wouldn’t make any sense for you to add the $9.99/month thing.

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  3. @TimB – I think carriers do not like to openly promote such devices because they are usually used for customers who do not have acceptable voice reception. And the carriers don’t want that message to be too prominent, IMO.

    Stacey – IMO, femtocells are more reliable (I don’t have one, but know folks who do) for voice than wifi – and that is the primary reason for the device in the US – to give customers with poor reception in their homes better voice coverage. As you stated, data is an after thought. I have not had good enough success with Skype on the iPhone for me to use it regularly, so I would certainly consider a femtocell for home office coverage where I make 99% of my calls.

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  4. Stacey

    It is often fun to have “religious wars” of different technologies, and maybe WiFi vs femto is a battle about to happen, but I think it is a bit more interesting than that.

    Sure, there are a lot of cases where WiFi and femtocells are alternatives, and can deliver similar benefits to users, but I’d suggest that each has its own advantages. As such, the situation is a bit more interesting than you suggest, and the opportunities for femtocells are rather rosier.

    Femtocells are still new, so saying “the market has failed to materialize” seems an oddly harsh judgement. It is certainly clear that carriers are now starting to launch service: Vodafone this summer, AT&T starting their soft-launch last month and others such as Unicomm now. These are 3G: both Sprint & Verizon started with 1X products but have said they’ll soon launch 3G.

    You quote ABI: they and other analysts seem to agree there will be a solid market.

    Femtocells can deliver a host of benefits to both customers and carriers: better coverage, increased data capacity and new services. Some of these could also be delivered by WiFi, but others can’t.

    Most of all, femtocells deliver those benefits to absolutely any cellphone: Bob Metcalfe famously said “Always bet on the installed base” and 3+billion cellphones is a pretty good start….

    Of course, there are applications that are better suited to WiFi: I prefer steaming video to my laptop than on a phone screen, for example. Conversely, for voice, or quick email, I prefer to have my handset to putting a laptop in my pocket, and waiting for Windows to wake up…

    I think most people see the two as complementary: different ways of delivering different services to primarily different devices.

    But that said, you might pose other questions: Why have so few carriers have suceeded with voice-over-WiFi offerings to date; why have so many people have bought 3G dongles and data cards in the last few years; or, if WiFi on its own were good enough, why do we get excited about the iPhone rather than the iPod Touch ?

    The FemtoForum is hosting a conference in San Diego in two weeks: I would love to invite you. Perhaps we could arrange to meet & discuss things there?

    You might be interested in some of the demonstrations of services and update on the many carriers deploying or about to launch.

    Rupert Baines
    Chairman: WG1 – FemtoForum
    Vice-President Marketing, picoChip

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    1. PS

      For those who are interested, the Femtocells America Conference is Nov 16, 17th
      http://www.avrenevents.com/FemtocellsAmericas2009/

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    2. RE: “Conversely, for voice, or quick email, I prefer to have my handset to putting a laptop in my pocket, and waiting for Windows to wake up…”

      There are plenty of people who use cell/UMA over Wifi for voice over Wifi….and plenty use (your example) of a iPod touch and Wifi or Novatel’s pocket device.

      I don’t think anyone questions the *technical* merits of Femtocells – the insulting part is the carriers charging for the device as well as additional monthly charges to provide backhaul for them through their own connection. There’s a specific use-case for people with poor coverage in their own homes (as you can see in these comments) — but how big is that market?

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      1. TimB

        Sure, and I’m not saying femto is the only solution.

        But I am saying that WiFi is only fitted on a portion of handsets so for the other portion a different technology is needed. Given that is 90+% of the market, it seems worthy of note….

        It is not just voice coverage: as people use more data, femtos are a good way to deliver that: 60% of cellular data is used indoors – which presumably indicates WiFi is not solving people’s problems just yet.

        I think the charging model is something we will see different approaches to, which is what you’d expect in competitive markets. Certainly several carriers have femto pricing quite similar to the UMA ones discussed above: free if you use your minutes, or a flat fee for unlimited minutes. There are carriers with more aggressive offers too.

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  5. I’d love a femto. When can I have one?

    Of the carriers, T-Mobile is the only one with UMA and it is hardly a good advert: I’m not surprised they don’t promote it: I wouldn’t boast about it either if I were them…. I’m guessing the others looked at it and saw how poor it was which is why they don’t offer (it is a competive market after all).

    Indeed, as the post below says, do any other carriers in the world offer it?

    You can only use it on a *tiny* range of handsets: great if you have a Blackberry which supports it, but I don’t, nor do my kids. The choice is limitted.

    It isn’t even all phones which have WiFi – and most of them don’t.

    Great if you want to leave WiFi on – but I don’t as it kills the battery. So that’s useless service.

    Quality was poor and it cut in and out.

    Where I live, coverage is poor. If I could get decent coverage to my existing phone, so people calling me actually reached me instead of voicemail – I would pay for that. If I got email to my phone in the evening, without going to the PC, so much the better.

    Sure, in an ideal world “the carrier should pay”. But that’s like saying “the government should pay” – the only way my carrier pays for anything is through fees – and I bet putting in a femto to serve my house is cheaper than them upgrading the whole sate and my hoping I get some of the benefit.

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    1. < >

      The others don’t offer it, not because it’s a poor solution, but because it is compatible with existing hardware and is free. No money to be made there.
      Even T-mobile offers an unlimited bucket and ‘forgets’ to make clear that you can use it without that $9.99 plan as well, which convinces many (see poster above commenting on my earlier comment) that a $9.99 plan add-on is required.

      I prefer the WiFi solution, because it will work anywhere, not just at home where your femtocell is. For international travelers it really is an amazing deal to call and use data using regular minutes.

      BTW, I have never had any problems with WiFi calls; as long as the WiFi connection is of sufficient speed there is no discernible difference between GSM or uma calls.

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  6. If you are saying femtocells are silly because carriers can just route calls over WiFi, I agree. This is what AT&T *SHOULD* do instead of their ridiculously slow roll-out of the microcell. But unfortunately, they aren’t so I’ll have to buy the microcell. Looking forward to the day I can make a call from my house on my iPhone.

    AT&T why do you suck so badly?

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  7. Nosame Otherin Monday, November 2, 2009

    Why even use UMA – when there is Skype or even better – Google Voice? Or even better, a wifi phone

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  8. i could see femtocells take off eventually but the audience that would go for them would be people who have eliminated there Cable/DSL in favor of an all mobile 3G/4G internet environment. the carrier would have to provide the back haul. this could be done with a rooftop device that connects back to the call carriers via a microwave link.

    but the idea that people would move carrier traffic they are paying for over to another cable or DSL link they are paying for is ridiculous.

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  9. to all you skeptics poo pooing UMA…..

    go scratch.

    i have had both t-mobile varieties, hotspot@home and plain old t-mo@home for well over a year now (this post is going through my linksys/t-mo router) they rock!

    wait ’til magenta wakes up and offers an ANDROID UMA device.

    hang on, my g-1 does everything but, call right now over wifi.

    just gimme a UMA app for my g-1 or a new ANDROID with it baked in.

    ps; i’ve shopped the other companies for their femtocell offerings and they’re clueless and overpriced.

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  10. Debbie Greenstreet, Texas Instruments Tuesday, November 3, 2009

    Certainly there are some viable voice solutions available today over WiFi largely due to the fact that 802.11 in the premises is so prevalent. However, without protocols like UMA that require capability both in the handset and the network, you won’t achieve the seamless handover that you would expect with a macro to femto relationship. Despite today’s WLAN market presence, I wouldn’t give up on femto cells. Due to all of the hype, it may seem like the femto market is not taking off, but it really in its early deployment stage. Unlike WLAN, it dove into the residential market before being fleshed out and widely accepted in the enterprise/campus sector – and I believe the enterprise femtocell and picocell market represent significant opportunities over the next several years. As far as the operators’ relationship with femtocells; well yes, they do need femtocells for multiple reasons and they want to control revenue, but they also know they have to find ways to entice and satisfy the subscribers. Not all operators charge for the box. This summer the Vodaphone device was announced and is provided gratis to those currently subscribing at a given monthly rate. We expect to see new applications and conveniences (imagine the ‘home femtozone’ where your phone knows “home” and can now interface to other devices and applications) being offered as the industry evolves. Early femto applications in Europe already include the ability for users to track their children entering and leaving school. I suspect that someday, the services offered by femtocell solutions will be so prevalent we may take them for granted; just like we have come to assume with WLAN presence.

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    1. Debbie agree with the sentiment of your post – it is too early to write off femto. However the signs are not looking good to me.

      The idea that femto is justified because of some “home” service seems a bit lame to me. Most “homes” already have WiFi and most other electronics (media server etc.) in the home are WiFi enabled.

      Basically femto was designed to complement coverage and imho will find a place an easy to install and maintain pico (i.e. to fill gaps in coverage). Do not see how it can replace WiFi in homes (esp. if the primary benefit is to provide fast data speeds).

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      1. But it is not that most homes have WiFi. Sure they do.
        But most *phones* don’t.

        Perhaps 10% of the phones sold this year have WiFi.

        Most of those don’t have software to make it easy to use; many of those (as the person above said) have WiFi turned off to save power.

        So a box that makes 100% of the phones work better (not a small fraction of a small fraction) is a good thing.

        Voice is still the killer app for cellphones, and there are a lot of people using Facebook etc on smartphones who don’t care if it is WiFi or 3G just so long as it works.

        Few technologies “replace” another (WiFi didn’t replace Ethernet; WiFi and Bluettoth both sell a lot of chips every year)

        Perhaps WiFi is the perfect solution to iPhone users (perhaps…!) — but for everyone else WiFi is not ideal – wheras a femto might be

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