Like Fixed-Mobile Convergence, Femtocells Are on a Road to Nowhere

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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