There’s a lot of talk about femtocells now,
but everyone is expecting the talking to turn to walking in a year.

Femtocells, those small cellular base stations designed for home use, are getting ready for prime time. As many as two dozen carriers globally have started to test them, and 2008 will see those trials spreading. One carrier, Sprint Nextel, has started selling femtocells to customers in a limited commercial launch.

Most analysts and industry insiders don’t think femtocells will see much in the way of commercialized launches in 2008, with that wave starting in 2009. But there is enough interest from carriers in femtocells to heat up the market, even creating a hype cycle around the technology.

Callahan: Carriers need to “sell” advantages to customers.

“There’s a huge amount of hype at the moment,” says Paul Callahan, vice president of business development at vendor Airvana. “That said, there is going to be a year of trials in 2008, and this will be like a sea change for the industry.”

Callahan says there has been a “big a-ha” from carriers that have realized what femtocells might mean for their networks. Given their advantages for carriers, though, the operators will have to convince their subscribers of the advantages.

Standalone femtocells are about the size of a Wi-Fi access point, or could even be built into Wi-Fi access points, DSL routers or cable set-top boxes, as Motorola envisions. They act like mini-cellular base stations in the home, providing about 100 feet of coverage for subscribers. Ideally, there is a soft or seamless handoff between the carrier’s macro base station and the femtocell. Inside the home, the femtocell sends voice calls and data over a broadband network like DSL or cable TV.

Sprint offers its Airave femtocell equipment for $50 and then charges $15 a month for service.

CARRIER BENEFITS
There are a number of advantages that femtocells provide. Among them is improved coverage inside buildings, where as much as 70% of cellular calls are made. This is especially true for higher spectrum bands like those used for 3G in Europe and for WiMAX globally. The same benefit applies to data usage, which is expected to climb in importance. The carrier benefits because it doesn’t have to spend money on macro base stations to improve coverage, while the subscriber benefits with improved quality at home.

The next benefit is in improved network capacity since traffic indoors is off-loaded to a wired network and because power levels at the macro base station can be optimized to provide the best coverage for all subscribers in that site. Analyst Mike Thelander of Signals Research argues femtocells will extend the life of 3G networks because of the capacity gains.

Other advantages for femtocells, Thelander says, are the ability for a carrier to offer new billing services with fixed mobile substitution (FMS), create new levels of competition by giving wireless carriers more tools vs. wireline operators, eliminate the need for dual-mode devices to provide FMS, and deliver differentiated services.

SUBSCRIBER BENEFITS
The advantages for subscribers aren’t as clear-cut, other than improved in-home coverage. Sprint customers pay $50 for the femtocell equipment, which Sprint calls Airave, and then $15 a month (or $30 for a family) to use the service. Airave customers do get unlimited in-home calling, though.

Sprint knows its subscribers are using their cell phones at home more often, says spokesperson Emmy Anderson, so subscribers will appreciate reliable, unlimited calling at home. She says some subscribers could cut their monthly communications costs with Airave, apparently because they could disconnect their landlines.

“Sprint strives to provide customers with the best coverage possible,” Anderson says. For example, Sprint invested more than $7 billion in its networks and built approximately 4,000 new cell sites in 2007. “However, wireless coverage in homes can vary due to factors beyond Sprint’s control, such as home building materials, terrain features such as trees and mountains, and even weather conditions. Airave allows Sprint to offer customers 5-bar coverage in their homes regardless of these conditions,” she says.

Anderson also says customer reaction to Airave in the initial launch markets of Denver and Indianapolis was positive enough that the carrier expanded the service to Nashville and plans to offer it nationwide in 2008. She was unable to provide specific subscriber numbers.

Lefkof: Trials still need to prove handoff capability.

DIFFERENT PRODUCTS, STRATEGIES
AT&T and Verizon Wireless also are looking at femtocells, according to spokespeople for the two operators. AT&T plans to test femtocells in 2008, while Verizon Wireless is studying a number of technologies to provide improved in-home coverage and hasn’t decided on trials.

There are many flavors of femtocells, although there are efforts to standardize the products and technology through such bodies as 3GPP, the Femto Forum and IEEE. In addition to the femtocells themselves, which can take a variety of approaches, analyst Thelander notes there are at least five different approaches to integrate the femtocell network with the macro cellular network. Some use existing radio network controllers (RNC), some a proprietary RNC approach, others a “flat” architecture integrating the various elements, some using Unlicensed Mobile Access (UMA), and some pointing to IP Multimedia Subsystem (IMS) architecture.

Motorola thinks femtocells fits nicely into its seamless mobility and connected home strategies, says Alan Lefkof, vice president of the Broadband Solutions Group. Motorola is in two trials with European operators and plans a couple more in the United States this year. It has femtocells built into its existing Ethernet Wi-Fi gateways, as a standalone and in its DSL and cable gateways.

Lefkof thinks it will be 2009 before femtocells will become a mass-market item because the trials are needed to make sure the technology works the way it is supposed to, especially for handoffs.

Motorola also is focused on getting standards set to provide interoperability between the femtocells and the backend network architecture, he says. That interoperability is needed for a mass-market industry, Lefkof says.

Femtocells act as mini-base stations in the home, providing about 100 feet of coverage.

Airvana’s Callahan thinks femtocells will play an important role in any WiMAX network deployment because the air interface initially targets higher frequencies that don’t penetrate walls as well as existing cellular frequencies. He also sees femtocells as attractive for European operators who are overlaying a UMTS network on a GSM network, because the UMTS radios are at a higher frequency.

Callahan also thinks “it’s going to take a year to get it right,” referring to femtocell trials. “There’s going to be a bunch of speed bumps that will separate the wheat from the chaff. There are 16 competitors in the UMTS femtocell market; that won’t last.”

Once that trial phase is completed, analysts see a clear road ahead for femtocells. In-Stat is forecasting 40.6 million femtocells installed globally by 2011, with 101.5 million subscribers. And ABI Research is expecting 70 million femtocells in place by 2012 with 140 million subscribers.