Mobile Carriers See Gold in Femtocells

Continued from page 1

Broadband subscribers already have fast Internet surfing at home, by definition. Carriers may well offer cheaper cell-phone calls for femto customers using their home connection--but broadband subscribers can already do this using Skype, Vonage, or other voice over Internet protocol (VoIP) services. Strong cell signals at home are certainly a plus, but it's not clear how much consumers will pay for this, analysts say.

Without an obvious consumer must-have attraction, demand will likely be tied closely to price, Nissen says. If a femtocell is cheap enough, consumers will latch on to the idea, assuming (and this can be a big assumption) that carriers are able to explain and market it clearly. But this price may be a sticking point for some time.

Today, the equipment cost for femtocells runs in the range of $250 to $300. Sprint, one of the first companies to start commercial trials of the products, is offering them to consumers in Denver and Indianapolis for $50 apiece, along with an offer of lower-priced calling plans--altogether a substantial subsidy.

O2's Carvalho says that he expects equipment costs to come down to between 50 and 80 British pounds (about $100 to $160) once standards are set and mass-manufacturing begins. That's an acceptable price range for consumers used to buying products such as Wi-Fi modems, he says.

The standards process may take several years, however. Different equipment vendors use different techniques for aspects such as security, or for letting the femtocells talk to the carrier's core network. Femtocells have been developed for both rival 3G mobile phone standards--W-CDMA and CDMA2000--but different standards-setting bodies are separately at work on rules for each.

In the long term, analysts expect femtocells to be a fast-growing, successful market. In-Stat forecasts that 40.6 million femtocells will be distributed around the world by 2011. ABI Research is even more optimistic, projecting 70 million in use by 2012.

By that time or shortly afterward, analysts say, femtocell technology may be built into other devices, such as Internet routers for consumers.

Vodafone, T-Mobile, and O2 all announced trials early this year. Equipment vendors say that many other carriers are in undisclosed trials as well. Commercial deployment, in which the products will be distributed to consumers by the phone companies or their retail partners beyond the limited scale of Sprint's two-city experiment, is expected by early next year.

That's all assuming that consumers react positively when they actually get a chance to see how the technology works.

"If it winds up being more expensive, but it provides better data rates, it's probably worth the investment for us," says O2's Carvalho. "If it's more expensive but slower, and it annoys customers, we probably wouldn't take that on."