Femtocell Thoughts - Part 2

In part one of this miniseries on femtocells I've been looking at the benefits for mobile operators. This part deals with why users would put a femtocell into their home.

From the user's point of view the advantages of femtocells are less clear to me. While the user shares all of the operator advantages discussed in a previous blog entry, increasing customer retention and thus churn is not necessarily in the interest of users since it could reduce competition. Also, it is unlikely that all family members use the same mobile operator and thus could benefit from a single femto cell.

In addition, mobile multimedia users are usually still early adopters which tend to use sophisticated phones, of which many include Wifi. With such phones a femto cell for multimedia content is not required since Wifi offers a similar or better experience for Internet content. Multimedia services offered by mobile network operators, however, are usually not available over Wifi which, from the end user perspective, is not a huge loss since early adopters tend to use Internet services rather than multimedia services of operators that are usually more expensive or come with limitations not acceptable to such users.

An advantage not mentioned before is that better 3G in-house penetration would increase call establishment success rate for 3G video calls since mobiles reselecting to the 2G network because reception quality is better can not be used for incoming or outgoing video calls. Thus, femtocells could become an important element in the future to make video calls more popular as the service still fights with the famous hen/egg problem of 3G network availability and number of users with compatible handsets.

Monetary incentives could persuade users to install femto cells. Operators could for example offer cheaper prices for voice calls that are handled via the femto cell. Also, the operator could propose to share revenue with femto ‘owners’ if other subscribers use the cell for voice and data communication instead of a macro cell.

Often the argument is brought forward that femtocells allow to market single phone solutions in which the user no longer has a fixed line phone and uses his mobile phone both at home and on the go. However, such solutions which use the macro layer instead of femtocells have already been available for several years in countries such as Germany (O2’s famous home zone for example) and are already very popular. Also, it is unlikely that mobile network operators would have competitive prices for all types of calls so many users would still use a SIP phone or software client on a PC for such calls at home. Calling a mobile number is still more expensive in most parts of the world excluding the U.S.A. than calling fixed line phones so single phone offers have to include a fixed line number for the mobile phone in order. Again, this is already done in practice for example by O2 in Germany for a number of years but femtocells might enable the mobile network operator to deliver such services cheaper than how it is currently done over the macro layer.

It should alsobe mentioned that using a femtocell would have a configuration and usability advantage over SIP Wifi phones. However, it is likely that the configuration process for SIP and Wifi on handsets will improve over the next few years thus decreasing this advantage.

To be continued

So much for now on the user's point of view on femtocells. In the third part, to come soon, I will take a look at the technical background and hurdles.

As always, comments are welcome!

Comments

[Stefan Constantinescu]

What about on the opposite end of the spectrum, the operators. How will they handle this sudden increase of termination points? If everyone has a femtocell how will walking down a street insure I use the cellphone tower outside and not the one inside some old ladies house? I recently met with a financial analyst friend of mine who said femtocell's were overhyped and I wish I remembered more of our conversation so I could bring us his arguments here.

[Jason Pollock]

Let's brainstorm a bit. :)

1) Regulatory rules surrounding the provision of local phone service. All of a sudden, the carrier has a fixed address to deliver the call to - it's not a mobile service anymore. There are probably several markets that allow preferential rates for fixed lines.

2) Roaming. The business user takes their femtocell with them and plugs it in at the hotel. All of a sudden, they aren't roaming anymore. Imagine a company like IBM signing a deal with T-Mobile and setting up femtocells in all of their offices overseas. People already do this with VoIP endpoints - they'll do the same with a femtocell.

3) Better coverage. How many people complain about the signal coverage that their phone gets? Now it won't matter what carrier has a better coverage area - you'll be able to buy a femtocell and provide coverage where you want it.

4) Endpoint ownership. If I own the femtocell, I might expect to be able to run a service on it. Integrate it with my PBX. Deliver calls on it, tell when people are in the office, etc. Lots of cool stuff in there.

[Dean Bubley]

I think most femtos will be 'geo-locked' to a given location, either by integral GPS, IP address or other mechanisms. You won't be able to plug them in anywhere.

On the cost/roaming issue, an outstanding problem in Europe is determining whether 'mobile services' equate to 'mobile numbers', 'mobile devices' or 'actual mobility'. Just because a user is on an 07xxx number does not mean he or she is 'mobile' any more because of WiFi, Femtos, SIP etc. This will cause regulatory problems such interconnect rates and so on.

A huge issue will be how a typical user or household deals with multiple femtos. The idea that a whole family has a single mobile operator for several years is completely unrealistic in all but a handful of 'utopian' examples.

[hip2b2]

Can an operator actually sell femtocells that are not geolocked? What if T-Mobile offers that services to IBM (as mentioned above)?

This will allow a lot of people to save on terminate rates. This makes it attractive to a lot of multinational firms with branches around the world?

Are there regulatory issues if the operator allowed this?

What if the IBM restricted the signal to its office premesis only?

[Zed]

Martin: I don't think video call revenues are ever going to justify a femtocell buildout.

Dean: I don't know of any feasible geo-locking technique for femtocells. IP numbers are non-geographic and tunneling will break any geo-IP database. Indoor GPS? Forgetaboutit. And it's not like you are going to be able to use existing coverage to authorize the femtocell. So, Dean, please elaborate on these "other mechanisms".

- Zed