Femto Forum Disputes Claim That Operators Aren’t Making Enough Use of Femtocells
The femtocell market will languish unless mobile operators start using the technology to win customers and not just close coverage gaps, said ABI Research Mobile Networks Practice Manager Aditya Kaul in a report published just before the holidays. Although the number of operator contracts is rising sharply, the number of femtocells being shipped is hardly keeping pace, he said. But Femto Forum Chair Simon Saunders told us this week that ABI’s findings amount to “damning with faint praise,” because the jump in contracts shows many providers are edging up into greater femtocell use.
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The number of femtocell commercial contracts reached 88 in 2011, with 37 operators launching services, ABI reported. Alcatel-Lucent, Huawei and Ubiquisys are tied closely for the top share of contracts, it said. But the market share of unit shipments “looks very different compared to the contract market share,” it said. Cisco/ip.access and Airvana/Ericsson, closely tied for the highest market share, together represent 55 percent of the market’s shipment volume, it said. Cisco supplies AT&T and Airvana/Ericsson sells to Sprint, it said.
The operator and consumer markets are being driven by the ease of installing femtocells; the lower cost to deploy them compared to traditional cell towers; growing customer dissatisfaction with network coverage; and the increased use of cellphones indoors, Kaul told us. With only two of the 37 femtocell operators making up 55 percent of the shipments, “the risk is that the market will lose its momentum if the status quo doesn’t change,” he said. Most operators still use femtocells as “Band-Aid solutions” for closing coverage holes rather than as a “customer acquisition tool,” he said. Operators are also concerned about femtocells causing radio interference in their networks, and they want the devices to be cheaper, he said. While some operators, such as SFR in France, are trying to move beyond that stance and use femtocells to attract more customers, “the market needs many more SFRs to carry the momentum forward and achieve true mass-market status,” he said.
SFR offers femtocells for free to all of its 3G subscribers, using them as a competitive differentiator and not just to reduce churn, Kaul told us. Femtocells can be used to boost coverage in the home but also to improve the 3G experience by providing better Internet speeds, he said.
But Saunders said 2011 was a great year for the femtocell sector, as the number of operators who went commercial doubled. Many providers take tentative first steps toward commercial rollout and then move ahead with more deployments in other environments and countries, he said. There are many markets with multiple femtocell players, and in the majority of those cases, operators are offering free devices to customers, either universally or to targeted groups, he said. Even at the scale at which femtocells are today -- 2.5 million units in 2011 -- they've already transformed the mobile networks landscape, he said.
As for operator unwillingness to follow SFR’s example, Saunders said different markets have differing value equations. Some operators believe it’s important to create something of value to customers and that charging for femtocells does that, he said. SFR provides the devices for a charge of €49 ($63.39 at Wednesday’s exchange rate) that is reversed once the femtocells are actually activated, he said. Telecom Italia is trialing specific applications and services to be offered via femtocells to provide more value, he said. The trend is away from Band-Aid solutions because many customers want wider coverage in their homes even if they already have good wireless signals, he said.
Another sign that operators are interested in more than coverage gaps is the growing number that have committed to LTE small cell deployments, expected to be a key market trend this year, Informa Telecoms & Media analyst Dimitris Mavrakis said in a Dec. 14 report for the Femto Forum. There are more 3G femtocells than conventional base stations globally, and Mavrakis predicted that growth to continue with 48 million access points in use worldwide by 2014. An earlier Informa survey said 60 percent of operators believe small cells will be more important than macrocells in LTE networks, he said.
Saunders dismissed the idea that radio interference worries operators, saying it’s “old news and largely dead.” The industry has the issue under control, he said. The challenges will come from the wide range of applications made possible by femtocells, he said. The technology can be scaled up into picocells, macrocells and other devices as operators recognize its value for places such as offices, metro areas and rural locations, he said.