Femtocell Technology Gains Mass Appeal for Mobile Broadband

LONDON, July 6, 2010 - Fewer than 10 percent of U.S. consumers are familiar with the term "femtocell," but when told about the technology's benefits, 56 percent like what they hear and are prepared to pay their cell phone provider a premium for it.

A survey conducted by researcher Parks Associates on behalf of the Femto Forum, which represents mobile operators and vendors of wireless systems, also found that femtocell services could reduce churn and improve customer satisfaction. Although the study was commissioned by a group with a vested interest in the success of femtocells, similar sentiments are emerging from Europe. Vodafone, which launched one of the world's first major commercial femtocell services in the United Kingdom in July 2009, has reported a significant drop in churn and is now deploying the technology in other European countries.

Femtocells are small cell base stations delivering wireless signals over a reduced area, such as a home or business premise, operating within licensed radio spectrum as part of the larger mobile service. Subscribers use their phone within the femtocell in the usual way, but with a number of benefits for operators as well as customers.

The smaller cell size reduces power consumption, increasing battery life, while operators can provide voice service benefits such as special home zone tariffs and a virtual home number, turning every cell phone in the house into an extension that rings when a call comes in. On the data side, customers can be given greater mobile bandwidth, improving performance, but the most appealing benefit for Vodafone customers in the United Kingdom has been better radio coverage within the home, with the service being rebranded as "Sure Signal."

The Femtocell Forum survey found that 36 percent of all consumers would be willing to pay about a $5 premium for an additional feature such as a virtual home number, and about $10 extra for a bundle of their three favorite services.

Femtocells also have huge potential cost savings for operators by offloading data from their costly radio access networks to the fixed broadband data network. However, this raises new issues like how to share costs between the mobile and fixed broadband network, especially when different service providers operate them. The emerging model in many cases involves an informal partnership between the mobile operator and the customer, with agreement that broadband service costs may have to increase to cover the extra transmission capacity consumed by traffic offloaded onto the fixed broadband network.

But femtocells are not the only show in town for data offload, with the big rival being wi-fi. Under that model, operators would carry voice as usual over the mobile network with data switched again to the broadband network but this time over the local wi-fi network rather than a femtocell. This has the advantage that wi-fi is widely installed in homes and also hotspots, creating scope for extended coverage outside the home as well. But it requires wi-fi enabled handsets, which have been slow to arrive widely on the market.

A femtocell may be more attractive because it integrates all traffic within a single service platform, with perhaps greater opportunities for novel services that consumers are willing to pay extra for. For the immediate future, it looks like both routes will be pursued, with femtocells having greatest traction in areas where signal coverage within the home is a major issue.