No Easy Path to Success for Promising Femtocell Technology

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Even skeptics acknowledge that femtocells are an extremely promising technology. The question isn't whether these small base stations can help wireless coverage. They can. Rather, the issues that must be addressed revolve around the development and business obstacles that complicate sliding new technology into an existing, albeit imperfect, sector.


By bringing small base stations into homes and businesses and attaching them to the ends of cable modem or digital subscriber line (DSL) networks, service providers can vastly improve the spotty cellular coverage available today. Indeed, there is a great need for femtocells, since coverage will continue to deteriorate due to the gradually higher frequencies being used. Femtocells, because they can use unlicensed spectrum for backhaul, also can cut costs.


Wired does a good job of describing these potential advantages. The basic idea is quite simple: Cellular base stations (and, when they are deployed, WiMax base stations) have great range. Their ability to permeate inside structures is poor, however. Femtocells confront that issue. They have a range of about 100 feet and can serve three or four users. This is more than a band-aid approach: An expert quoted in the story says that femtocells can offer "perfect five-bar coverage throughout the home."


While some rollouts are under way, there simply is no guarantee that femtocells will become a major fixed mobile convergence (FMC) platform. For instance, Ericsson -- which this Unstrung story calls the leading wideband code division multiple access (WCDMA) provider in the world -- is going slow on femtocells due to its belief that the market is immature. The company says that the window for the technology will not open until 2009.


An analyst, however, suggests a rationale for Ericsson's lack of enthusiasm is the fact that femtocells could commoditize the entire base station market. This is a bigger problem, since it suggests that powerful companies may not want femtocells to succeed. The business landscape around the technology is a big concern for Ajay Gupta, the vice president of wireless and convergence for Aricent. He told IT Business Edge that femtocells won't be a practical alternative until they hit a price point of $100 to $150. The good news is that that cost can be reached, he says. However, several things must happen, including adoption by big chip makers and creation of end-to-end ecosystems. Says Gupta:

A lot of market-oriented partnerships have to be put in place. The key challenges are how the wireless and wireline companies cooperate and so forth. The potential will be reaped only if there is a very market-oriented ecosystem put in place.

Though he claims to be optimistic, Gupta says there is no way of knowing if wireless and wireline companies will work together to the extent necessary for the market to coalesce.


Not all is doom and gloom in the femtocell market. Last week, Infonetics released a report that says the market will grow ten-fold between this year and next, and reach $630 million in 2010. The femtocell concept can be used to increase penetration of Global System for Mobile communication (GSM), WCDMA (including High Speed Packet Access), CDMA2000 (including Evolution-Data Optimized), 4G Long Term Evolution, WiMax and WiBro. 3G femtocells are the most promising, the firm says.


Earlier this month, Analysys released a report that suggested that the enterprise market can be more profitable for mobile providers if a more efficient way is found to improve interior coverage. Currently, picocells are used to do this. The release says high costs limit the viability of picocells to perform this task. Teaming picocells and femtocells can create a new level of savings and make more non-video data services viable.