There are plenty of solid rationales for femtocells, which in essence are tiny base stations that hang off cable modems or DSL lines in homes and offices: They help distribute signals to the hard-to-reach places and relieve backhaul congestion, which is a signal's path from the end-user device to the interior of the network.
Experts say that these both are important tasks, as frequencies rise (and thus get harder to propagate, or distribute) -- and increased data traffic makes backhaul congestion a looming challenge.
So things seemed set up for femtocells. But, instead of facing growth, it appears times are getting harder for femtocells. The latest bit of bad news came this week as ABI said it is downgrading its projections for the device shipments by 55 percent.
That's a significant number. In April, the firm said that 790,000 femtocells would be shipped this year. Lopping off 55 percent cuts the number to 350,000. ABI also sliced its estimates for 2010 by 40 percent and for 2014 by 10 percent. The commentary in the press release notes that the major carriers indeed are deploying femtocells, just in lesser numbers than anticipated. The analyst says the overall slowdown may be due to the the economy in general and the $150 price tag in particular, the need for more time to prepare on the technical and sales sides, and concerns over interference.
Not all the femtocell news is bad. FierceWireless reports that Comcast is testing femtocells as an adjunct to WiMax service. That's potentially big news: Comcast is a reseller of, and major investor in, Clearwire, which is in the middle of a massive rollout of its Clear service. The history of the cable industry suggests that a technology successfully adopted by one operator will be used pretty much across the board. FierceWireless points out that Clearwire says the femtocell and its cousin, the picocell, will be part of the company's standard deployment strategy.
GigaOm's Stacey Higginbotham takes the view that the problems that femtocells are experiencing may be more fundamental than a slow start. She says at least one of the challenges femtos are designed to address-improving coverage-can be solved simply by using the Wi-Fi functionality that increasingly is embedded in feature phones and smartphones. Thus, the wireless functionality used to fill in where cellular is weak would be paid for through the subscribers' existing DSL or cable relationship instead of counting against the cellular data plan, the approach carriers would use under a plan that relies on femtocells.
The femtocell isn't dead. However, a major analyst firm cutting its projection by more than half -- something they understandably are loathe to do -- certainly is bad news. Vendors can still save the day, most likely, but they must react aggressively.