Free article: Femtocells set to have major impact on the mobile industry

3G indoor base stations – commonly referred to as femtocells – are an exciting new technology that could have far-reaching consequences for the wireless industry, if mobile operators deploy them widely.

Femtocells could not have arrived at a better time for the mobile industry. The trend towards fixed–mobile substitution is gathering pace in many countries, and people are increasingly using mobile phones in their homes and workplaces. However, 3G in-building coverage is significantly worse than that of 2G for most mobile operators. Without femtocells, mobile operators would be forced to make substantial investment to increase the number of outdoor base stations in their networks dramatically – by a factor of two or more, in some cases – to improve in-building coverage.

Widespread 3G femtocell deployment could negate the need for at least part of this investment, by providing a targeted means of enhancing in-building coverage for customers that need or want it. For example, an operator with 5 million customers could save an average of about USD45 per customer per year by 2012 by deploying 3G femtocells in 60% of customer households, as shown in Figure 1.

Figure 1: Cost savings for a small operator (with 5 million customers) deploying 3G femtocells

Mobile operators that decide to implement indoor base stations must be prepared to undertake a large-scale deployment. If a large proportion of customers do not take up femtocells, their mobile operators will still need to invest heavily in macrocells. For example, an operator with 5 million customers would save only about USD20 per customer per year by 2012 if it deployed 3G femtocells in just 20% of households.

Cost benefits are just one part of the exciting business case for femtocells. Other potential benefits for mobile operators include opportunities to increase voice revenue from fixed–mobile substitution, group subscriptions and tariffs based on home femtocells, enhanced mobile data services and opportunities to offer fixed broadband services. Femtocells could also provide a superior alternative to converged cellular/WLAN services, such as those based on UMA. Femtocells would allow mobile operators to offer tariffs that are very similar to those of UMA-based services, with low-priced calls in the home and premium-priced calls elsewhere. However, femtocells will work with standard cellular devices, whereas UMA-based services require dedicated handsets. The variety of UMA handsets available will never be as wide as that of standard handsets, and UMA devices may be more expensive and less attractive.

Several critical implementation issues must be resolved if femtocells are to fulfil their potential. These issues include interference, range, quality of service, network integration and management, handover, billing and security. However, if these can be resolved quickly, widespread commercial deployment of femtocells could happen as early as 2008.

The new report Picocells and Femtocells: will indoor base stations transform the telecoms industry? describes how indoor base stations could be used across different wireless technologies, including 2G, 3G and WiMAX. It considers the business case for their application and identifies the issues that need to be resolved to enable widespread deployment. It quantifies likely revenue and cost benefits, including the savings that operators can make by avoiding the expansion of macrocell networks. It also assesses the strategic impact of home base stations on the telecoms industry, including fundamental changes to network evolution. The report draws on interviews from a range of indoor base station experts and vendors in Europe and the USA.