Who Needs Femtocells If We Have Wi-Fi?

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 β€” the Chinese carrier that’s now infamous for offering the iPhone (s aapl) sans Wi-Fi β€” 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 β€˜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.