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Questions and Answers 

Please feel free to ask questions by emailing us at contact@soundpartners.com

Here are the answers to a number of questions that we have already received:

Q. What makes you feel that people will want to use their mobile device for video/audio at home?

A. Perhaps surprisingly, one of the environments in which trials of mobile TV services have demonstrated heavy usage is the home, where consumers essentially use their handsets as additional (personal) TVs. In a UK trial of DVB-H conducted during the first half of 2006 by O2 and Arqiva, the home was the most common location in which to use the service, according to 36% of participants.  

Q.  What proportion of households in the USA have poor indoor coverage?

A. We estimate that 25% of US households have patchy or poor indoor coverage.  

Q. If you say business case for voice only is doubtable, what's your view on 2G femtocells?

A. There is a much weaker business case for 2G femtocells compared with 3G femtocells, for a number of reasons. Firstly, indoor coverage with 2G is generally better than 3G. Secondly, the opportunities to generate additional revenue from non-voice services are much more limited with 2G compared with 3G. Thirdly, a key part of the business model for 3G femtocells is network infrastructure cost saving, by transporting usage-intensive services via residential broadband connections rather than via a macrocell network. The fact that 2G femtocells would predominantly carry voice (which is not particularly network intensive) means that network infrastructure cost savings would be small.  

Q. Do you think that customers will be willing to accept a femtocell in their home?

A. Absolutely. We expect that femtocell functionality will be integrated within a single box that also provides WLAN and a DSL modem. Hence, many households will simply be replacing a single box with another box.  There may be health concerns among some consumers, however, which may dampen demand. Health scares associated with mobile phones and masts have been widely publicised, although they have not had a marked effect on the take-up and usage of mobile services. It is inevitable that femtocells will rekindle the debate. Mobile operators need to be ready to address such concerns with marketing campaigns highlighting the fact that femtocells reduce exposure to mobile phone radiation: the introduction of femtocells makes it possible to significantly reduce the power of transmitter outputs from mobile handsets used in their vicinity, as there is no need to communicate with outdoor base stations over what could be many kilometres.  

Q. Would mobile TV be a long term phenomena as opposed to a short term, since it is a new thing that requires time to learn?

A. DVB-H trials have shown strong initial demand for mobile TV services. Within the timescales that we are predicting – that femtocells will see widespread deployment in 2009 – mobile TV services will be demanded by a broad range of consumers, and will significantly enhance a femtocell proposition.   

Q. Is it possible that femtocells can be used by a greenfield operator in a rather mature market (where a sizeable premium for mobility still exists) to tap into FMS, and also to mitigate site acquisition and other hurdles encountered in macrocell rollout?

A. We see significant potential for femtocells for new entrants or small operators that have not rolled out extensive 3G networks. No longer will they be disadvantaged by not providing near-ubiquitous wide-area coverage. At one extreme, an operator could avoid having any 3G macrocell network by rolling out 3G femtocells and having an MVNO agreement with another operator for calls made out of range of femtocells.  

Q. How do you see the viability of a femtocell when VoIP over WLAN becomes a reality (e.g. With IMS)

A. Femtocells allow mobile network operators to offer a completely seamless range of services, which can be accessed indoors or in the wide area services using mainstream handsets. The business cases quantified in the report show that, provided that mobile network operators deliver a compelling service proposition and target customer segments appropriately, financial payback occurs within a few months.  

Q. What is mobile price premium?

A. Mobile price premium is the extent to which mobile voice calls are more expensive for users than fixed voice calls, expressed as a percentage (calculated as difference in spend per minute between mobile voice calls and fixed voice calls divided by average spend per minute for fixed voice calls).  

Q. Please explain what you mean by DVB-H cost avoidance.

A. The results of DVB-H trials showing significant indoor usage of mobile TV and radio services have dealt a blow to some operators that were hoping to deploy a DVB-H network cheaply by installing equipment only at the small number of sites of transmitters used for conventional terrestrial TV and radio services. Traditional TV broadcasting networks, and the locations of their transmitters, have been optimised to provide adequate reception by rooftop aerials; in order to provide high-quality indoor coverage with DVB-H, coverage would have to be supplemented from a large number of extra transmitter sites. Using femtocells for indoor coverage would avoid the expense of extra transmitters. The report shows that allowing MNOs using L-band spectrum in a large Western European country could save EUR100–250 million (USD133–333 million) in capital investment.  

Q. How will MNO's reconcile indoor femtocells with the outdoor 3G experience, e.g. taking a gaming experience outside may be problematic right?

A. MNOs will have to manage customer expectations on a per-service basis. For many non usage-intensive services, MNOs will be able to provide a seamless service, whereas there may be more challenges with other services (e.g. mobile video). MNOs will need to ensure that they deploy the latest macrocell network enhancements (e.g. HSPA, HSPA+) to minimise the performance differences.  

Q. What would the TV signals run over indoor, would that be 3G?

A. Yes. All indoor voice and non-voice services (e.g. mobile TV) would be carried using 3G.

Q. Please could you clarify why larger voice bundles are a substitute/ alternative to femtocells, thanks

A. In many markets, the attraction of femtocells will be diminished by the widely available tariffs that offer generous bundles of voice minutes at affordable prices. For example, in the USA, Verizon Wireless offers 450 any-time, any-network minutes for USD39.99, and 900 minutes for USD59.99. These packages include unlimited on-net calling and unlimited night and weekend minutes. In the UK, 3 provides 500 any-time, any-network minutes for GBP18 (USD35) per month, in a bundle which also includes 300 minutes of on-net calls. Customers will see little advantage in adopting alternative charging schemes, such as cheap calls in femtocell areas, if they are already happy with such bundles. With the ability to make up to 800 minutes of inclusive calls per month, most subscribers to 3’s tariff will be able to use their mobile phones to make all the calls they need, without worrying about their usage levels or resorting to fixed phones when at home. Provided that users experience good indoor coverage, they may prefer these simple tariffs to femtocell packages, even if the average price of calls made in the home is somewhat higher than that of fixed calls. Furthermore, although bundles are perceived by mobile users as being good value for money, they can return relatively high revenues per minute for MNOs because many users do not use up their monthly allocations. Of course, in cases where indoor residential is poor, femtocells could still have a role even if bundled tariffs (or other attractive pricing schemes) are available.  

Q. What are the assumed costs for such a femtocell?

A. In our modelling, we have assumed a femtocell cost of USD150 per unit.  

Q. Does mobile TV at home makes sense? Will users prefer to watch TV on their mobiles instead of on big screen TVs?

A. As already discussed above, one of the environments in which trials of mobile TV services have demonstrated heavy usage is the home. The mobile acts as an extremely convenient second TV. Enhancements such as integration with IPTV services and/or a set-top box may enhance consumer appeal and convenience.  

Q. Do you think there is a femtocell potential for the enterprise market (compared to the current installed base of Wi-Fi enterprise networks)?

A. Absolutely. This is covered extensively in our new report The Business Case for Picocells and Femtocells in the Enterprise Market. The introduction of indoor base stations could allow MNOs to substantially improve cellular coverage indoors, for example to improve on the coverage achieved by WLAN services. Furthermore, the introduction of indoor base stations potentially allows MNOs to offer lower-cost tariffs for enterprises and a range of other features (e.g. PBX functionality) to gain the upper hand against emerging WLAN services. Unlike WLAN services, which require dedicated dual-mode handsets, enterprises will be able to use their existing (mainstream cellular) handsets.  

Q. You mention mostly 3G femtocells in developed markets -  what opportunity  do you see  for  2G femtocells in emerging markets(i.e. South East Asia)

A. Compared to developed countries, we see only limited opportunities for 3G femtocells in developing countries. This is principally due to the need for a broadband connection in the home, providing backhaul transmission to the mobile network. DSL penetration in developing countries is low.  

Q. With the increasing incidence of portable PCs with Wi-Fi (and in the future WiMAX), why would a person use their mobile with a 2" screen for multimedia vs. a UMPC with a 5" screen, particularly since a large number of HHs have Wi-Fi in the home and fixed BB.

A. Convenience.  Consumers will carry their mobile phone with them wherever they are. Some consumers may prefer to use larger devices – with better screens – but they could also operate to a 3G femtocell.  

Q. Do you think UMA will survive if and when Femtocells become mainstream?

A. Femtocell services will be a major challenge to UMA dual-mode handset services, because of the simplicity of cellular-only services delivered on mainstream mobile handsets. Some operators see UMA services as an interim solution before widespread adoption of 3G femtocells.  

Q. Why don't the MNO's offer Wi-Fi routers with their own broadband backhaul for indoor rather than going to 3G femtocells?

A. We expect mobile operators to offer Wi-Fi routers (with embedded femtocell functionality) with their own broadband backhaul. This allows operators to completely control the end-to-end delivery of services, and achieve enhanced ARPU from the provision of residential fixed broadband services. In our recent report Mobile Operator Strategies for Fixed Broadband we show that fixed broadband services represent a new source of significant revenue growth and a means of reducing churn. The key challenge is finding the most effective and profitable way of providing such services.  

Q. Should the femtocell replace the Wi-Fi networks for the enterprise or should both co-exist in the future?

A. We believe that femtocells and Wi-Fi networks will co-exist in many enterprises (at least in the short term), whereas in others, 3G services could displace Wi-Fi networks altogether. Some enterprises may be attracted by the concept of seamless delivery of services, independent of location.  

Q. Do you see a relationship between IMS deployment and femtocell adoption, for easy of service delivery by the operator?

A. IMS could be an important part of a compelling femtocell proposition, particularly if IMS intelligence is built in to the femtocell. Not only could IMS help in the delivery of multimedia services, it could have other important roles, such as intelligent routeing of calls. IMS has even greater application for enterprise picocells and femtocells.  

Q. According to your business case, when would you expect a serious uptake of a femtocell 3G product in the best case?

A. We see commercial introduction in the second half of 2008, with widespread deployment in 2009.  

Q. Do you have any insight on how Sprint's Femtocell offering (Airave) have been received in the US?

A. It’s very early days at present, but we will be tracking the progress of Airave and other femtocell initiatives.