Blog Post

Opportunities still exist for femtocells

Informa Telecoms & Media recently reported that a mere 2.3 million femtocells are in use worldwide, which is a laughably small figure compared to the sky-high forecasts from just a few years ago. Our consumption of mobile data is surging, but at the consumer level, femtocells are merely treading water. Nevertheless, there are opportunities in other areas for femtocells.

Femtocells have not been successful with consumers for three major reasons:

1. Price: AT&T (s t) charges $150 for its MicroCell, and Verizon Wireless’s (s vz) Network Extender will run you $250. Network operators incur back-end costs in deploying femtocells, of course, but it’s no mystery why customers have balked at the thought of paying what amounts to a double dip.

2. Wi-Fi: Home-based femtocell technology is squaring off against Wi-Fi, which is supported by nearly every data-friendly smartphone on the market.

3. Advancing cellular technologies: Femtocell development has lagged behind the advancement of cellular build-outs; for example, Verizon didn’t offer a 3G femtocell until last October. And new technologies like LTE and even HSPA+ provide more capacity as well as faster network speeds. Capacity has been an important selling point for femtocells.

While the window for consumer-targeted, in-home femtocells is closing quickly, there are still segments in which they could thrive. As the Register noted earlier this week, manufacturers such as Picochip and Ubiquisys have begun unveiling public access products dubbed “metrocells” that fill network gaps where blanket coverage with traditional cell towers is difficult. Meanwhile, the market research firm Maravedis has predicted that public-access femtocells will fall from $100 to $70 or so this year and will continue to slide into the $50 range next year. Those colliding trends lay the foundation for long-awaited growth in the femtocell market.

Further opportunity also lies in the enterprise, where femtocells can be used to deliver better indoor coverage and multiple connections to smartphones, tablets and other connected devices. They can be a low-cost alternative to picocells or DAS (distributed antenna systems), for instance, and can route calls through an enterprise PBS to deliver them to four-digit office extensions or mobile phones. If carriers can integrate femtocells in a way that makes it easier and cheaper for businesses, the technology will see substantial adoption in the enterprise.

For more thoughts on why opportunities still exists for femtocells outside the residential market, please see my weekly column at GigaOM Pro.

Image courtesy Flickr user jtjdt

5 Responses to “Opportunities still exist for femtocells”

  1. ABI Research

    I don’t argue with you on the forecasts bit. But I am sorry the article is inaccurate for the reasons stated in my comments below.

  2. Would like to clarify ABI Research’s forecasts and provide some feedback on the article. The PR you quote from ABI is from 2006 and back them yes femtocells were definitely seen as massive opportunity. We made a call on the opportunity based on the value proposition and some assumptions. We made calls on WiMAX as well but those haven’t born fruit because the market reacts differently from what you expect.

    On the whole your article lacks any depth, is inaccurate in places and is highly misleading. I would suggest speaking to some of the operators that have rolled femtocells out to broaden your vision

    1. Surveys have shown that the most interest in femtocells is from heavy Wi-Fi users
    2. Metro femtocells will cost between $5K and $10K – not $50
    3. 3G femtocells for WCDMA were available back in 2009 and LTE prototypes are already available. In fact many LTE networks will be built using femtocells
    4. In fact most operators in the US incl Sprint, AT&T are giving away free femtocells and so not everyone is paying for it

    Yes there is an issue around femtocell shipment volumes and them not scaling fast enough. 50+ operators have committed/deployed femtocells so far. However most are only going for customer retention strategy. For femtocells to go to mass-market operators have to look beyond customer retention. Unless this happens they will remain a niche. More importantly femtocells are not base stations but are base stations in the skin of an access point. Most people fail to understand that, which I believe is the cause of some of the issues we are seeing.

    • Good to hear from my former employer :)

      Colin’s piece made a link to ABI’s early forecasts to state early predictions – in general – haven’t been met for femtocells. That’s simply a fact. Any talk about market confusion, carrier strategies, etc, does nothing to change that (nor does dismissing the article as a whole as “lacking depth” or being innacurate). Those arguments are red herrings, and do nothing to change that what he said relative to that link was true.

    • Colin Gibbs

      A couple quick responses:

      1) Heavy Wi-Fi users may be most interested in femtos, but there’s no question that they’re competing technologies — especially when it comes to the residential market.

      2) The first 3G femtos for WCDMA came to market several years after dozens of those networks came online — which underscores my point that femto development has lagged. We’ll see how long it takes to bring LTE femtos to market.

      3) Of course it’s true that “not everyone is paying” for femtos. But those programs have been extremely limited, thanks in part to a lack of publicity/marketing.

      Again, my point is that the femtocell market is just a fraction of what had been predicted, but opportunities still exist.

    • I guess you both omitted the obvious:
      1. 4G will deployed by utilizing Pico/ Micro cells not femto.
      2. The reason for #1 is that you get better resource utilization (mainly spectrum) with bigger cell cites (pico/ micro).
      3. Femtos negatively impact macro cell sites if deployed at a site where coverage is good (not a dead zone). This was stated by AT&T CEO recently to question why they are not slow in femto cells.