Femto Nation

The battle for the indoor customer has begun in earnest, with LECs, cablecos and mobile operators squaring off to capture the hearts and wallets of the residential consumer. One of the sticking points for the cellcos, however, has been a lack of indoor coverage — many people find their mobile calls are dropped when they enter their homes. Femtocells are setting out to change all that, and are presenting a challenge to both landline and dual-mode Wi-Fi-cellular services in the process.

Airvana’s commercial femtocell

To date, only Sprint Nextel has launched a commercial femtocell deployment, in certain areas of Denver and Indianapolis, dubbed “AIRAVE.” It plans to take the service nationwide this year. There are no other public trials, although the Femto Forum notes there are “innumerable” non-public trials under way at most major operators. Boosters say that femtocells are set to sweep the nation if not the globe; In-Stat predicts that worldwide femtocell subscriptions will grow to 40.6 million by 2011, while femtocell end users will reach 101.5 million over the next five years (see chart below).

So what’s behind it? Femtocells are essentially small cellular base stations that plug into a residential DSL or cable modem. They use licensed spectrum and attach to cell phones in the same manner as cell phones attach to macro base stations — meaning that customers can use their existing cell phones with the femtocells. But the femto plugs into a residential broadband connection for backhaul — voice services are converted to VoIP and carried back to the wireless operator’s core network seamlessly for the customer. The result for the end user is guaranteed coverage within the home, at a much higher quality than typically experienced on the WAN.

Sprint’s AIRAVE femtocell

“The air interface is the weakest link in terms of bandwidth and QoS, and the further you are from a cell tower the lower it will be,” explains Vivek Pachaury, director of business development at communications software developer Aricent Inc. “If you have one of these sitting in your house, then connected to a thick pipe for backhaul, it dramatically improves the quality profile.”

Meanwhile, the operator gains a much more cost-efficient way to extend its network. Rather than spend millions on new cell towers and paying out expensive leases to the LEC for special access backhaul, an operator can simply sell femtocells to end users, which make use of what is usually someone else’s broadband, for which the end user also is paying. In turn, the femto architecture frees up cell tower capacity, so carriers get more from their existing spectrum.

Another point is that femtocells potentially solve the source of one of the biggest issues for wireless operators: churn. Studies show that poor indoor quality is the No. 1 reason people switch providers. “Many people go into a store and buy a handset, only to find out it doesn’t have good service at home — so they take it back,” explains Allen Nogee, an analyst at In-Stat. “Consider that there are four main operators, and generally they all have this issue. By the time the end user gets through them all it’s been eight years and they say, ‘This one has to be better by now, let’s try that again.’ And on it goes.”

Femto Forum’s Simon Saunders

Femto deployments also provide a “long-tail” opportunity for operators. The increased speed and bandwidth within a femtocell coverage area means that users are more likely to adopt 3G and HSPA applications and use the mobile Internet. And, “a femto play gives the carrier the opportunity to respond to growth in mobile data,” says Simon Saunders, chairman of the Femto Forum. “The overall number of bits on the network is growing, and more are from non-SMS data services than voice. Operators need to respond to that [in terms of capacity]. They can hold back to their detriment, but spending more on big towers is not going to provide a scalable approach.” Femtocells allow operators to target pockets of early adopters for high-bandwidth data services as they are taken up, rather than lighting up an expensive outdoor footprint and only then launching service, he explains.

The femtocell story doesn’t end with simply making things easier for the mobile operator, however. The technology is poised to change the competitive landscape radically, too. Steven Shaw, associate vice president at UMA pioneer Kineto Wireless, says that femtocells dramatically impact the battle for the building. “The battle for the home is heating up — one of the most competitive places is the home zone,” he says. “You have broadband providers, VoIP providers, and on and on. So mobile operators are creating home-zone strategies to combat this. Femtocells and dual-mode for that matter give them the opportunity to own the home.”

If femtocells take off as expected, voice over Wi-Fi and dual-mode Wi-Fi-cellular services like T-Mobile USA Inc.’s Hotspot@home could get a fierce competitor. Alan Lefkof, corporate vice president and general manager at Motorola Inc., says the requirement to have a dual-mode phone is one impediment for VoWiFi — something femtocells do not require. “Clearly, the bigger market numbers for handsets are those that are single-mode phones,” he notes. “So femtocells could be 10 to 15 times larger of a market. If T-Mobile gives me a dual-mode phone for free, I’ll take it. But if the battery life isn’t what we want because the Wi-Fi is chewing it up, maybe you tell your friends and next time not opt for that dual-mode phone. It’s easier to visualize dual-mode in the gateway or CPE.”

Motorola’s Alan Lefkof

Another issue with dual-mode is the unlicensed nature of Wi-Fi, a fact that makes for interference between neighbors’ access points, difficulties in configuring the wireless router and a lack of operator control for QoS and security.

On the other side of the coin, Wi-Fi is a known quantity. “I think people are familiar with Wi-Fi, and are comfortable with the idea of using it,” says Nogee. “People probably feel more comfortable using it because their other devices already connect to a Wi-Fi router. I don’t think femtocells are going to be such an easy sell. Even if you give it to them for free, to get the person to put it in their house and hook it up as a new concept is another thing altogether.”

Which approach makes more sense for the operator is somewhat of a function of that operator’s specific assets. “If you take a look at T-Mobile, they have a large hotspot asset, and have the methodology and experience turning up hotspot users,” explains Mark Pugerude, vice president of corporate and business development at Reef Point Systems Inc., maker of gateways for the access edge. “So it’s not a long walk to a dual-mode deployment. Technology won’t always be the driver for operator choices.”

Airvana’s Michael McFarland

While femtocells represent a potential threat for VoWiFi, they also present a threat to the LEC. Mobile-only operators can leverage femtocells to gain residential voice customers they couldn’t otherwise reach, tearing them away from the wireline provider with near-toll-quality service. “It’s a great way to compete with the LEC, which is good,” says Nogee. “However, if they don’t offer broadband, how does the broadband provider feel about this? It becomes a network neutrality issue, because the LEC or cableco potentially could block the packets.”

Kineto Wireless’ Steven Shaw

Meanwhile, operators with both wireline and wireless assets can put together a sticky bundle of broadband access and cell coverage. “You can offer three services that are all interplaying together,” says Nogee. “There is some tie-in to putting these into a gateway, and roll the costs into that. And the consumer has it even if not enabled. The one caveat is that if the operator has a wireline arm, this could be scouring some business away from wireline LD.”

Then there is the competition between cellular providers themselves. “It’s a big competitive advantage if you have a good femtocell offering,” says Michael McFarland, director of product management at femtocell maker Airvana Inc. “You could typically offer a discounted rate for when the user is at home. And everyone’s looking for more minutes for less money. The other thing is, someone is now putting a device that is specific to their wireless operator in their home. Putting a device into that home is one more way to retain those customers. To switch means they have to go get another femtocell and would need to change over everyone in the home. From a stickiness standpoint, it’s one more touchpoint to keep the customer on your network.”

Helping all of these scenarios along is development in the handset market. “The vision that I paint for operators is that you have the typical consumer sub and maybe he’s watching a football game on a 50-inch plasma TV in HD,” says Shaw. “He has his BlackBerry or iPhone and uses that device for everything else. So the competitor in this space is the laptop, and how does the operator make it so he doesn’t have to use a laptop ever again? We’re on the verge of these iconic devices that do so much more than voice.”

Femto Challenges

For all their benefits, femtocells still face a number of challenges, from consumer acceptance to cost to technology issues.

The Femto Forum has made it its mission to tackle most of them. The organization was started in June 2007 in response to concerns that some of the early femto trials brought about. Standardization across air interfaces, including 3GPP, 3GPP2 and WiMAX is one big objective, which is key to getting equipment and software down to a price point that supports mass deployment. At the moment, femtocells cost operators $100 to $200 each. In Sprint’s case, it is subsidizing the CPE for the consumer, but that strategy makes it hard to close the business case at scale, says Simon Saunders, chairman of the Femto Forum. “We saw an early opportunity but also a fragmented one if commonality issues are not addressed, and quickly at that,” he says. “Ensuring speed and volume — this goes to the core of what we think is possible.”

A second requirement is bringing an ecosystem together. “We need to involve a whole bunch of players and work on common specifications for a range of use cases, making sure that fits together in a sensible way,” says Saunders. “So operators have a choice, but also that end customer has a choice of form factors and features.”

Initially, femtocells will be a market on its own or “together with a home router/Wi-Fi, but in a couple of years it could start to intersect with the set-top box or home gateway market,” says David Readman, director of global business development for ZTE USA Inc., a femtocell manufacturer.

Related to this is the sales model — should femtocells be available through wireless dealers, big box retailers, direct from the provider only or a mix? “These are pretty early days for most femtocell opportunities,” says Steven Shaw, associate vice president at Kineto Wireless. “Sprint got into the market before many people thought they would, and there are still some productization issues. ‘What’s the business case, the value proposition, what exactly is it I am selling?’ are all questions. And one of the biggest considerations is the cost of the femtocell itself.”

Allen Nogee, an analyst at In-Stat, adds that carriers will have to square the message of the reliable network with the new sales pitch of gaining better indoor coverage with a femtocell. “Making it seem that the discounted calling is the value prop is one way around that,” he notes.

And finally, spreading awareness and solving customer uptake issues is another mission. “We’re working on zero-touch provisioning for femtocells, which we think is critical for adoption, but most of our competitors aren’t there now,” says Alan Lefkof, corporate vice president and general manager at Motorola Inc. “If you’ve ever dealt with home-networking issues, you know why. Today, routers have a high customer care/customer call incidence. A lot of people have weird stuff on the network. When it all doesn’t work together, the carrier that sold the gateway gets the call, and the consumer’s going to think twice about his decision.”

Another issue for femtocells is the complexity of the architecture. “Wi-Fi doesn’t have the same challenge, it just connects in range,” says Lefkof. “Femtos want to do the fancy hand-in, hand-off, so the system has to make a decision about when it will disconnect from macro to femto. And, will there be clarity, clicks, dropouts? A lot of the trials are focusing on that.”

Back-office and frequency planning also are issues on the table. “The frequencies in femto-specific deployments are bound by underlying operators,” says Mark Pugerude, vice president of corporate and business development at Reef Point Systems Inc. “How do you track, populate those, plan frequencies … the industry is working to automate that.”

Natasha Tamaskar, director of product management at Reef Point, says operators are concerned with having all those new devices in the network, too. The network goes from a certain number of towers to potentially millions of new base stations. That drives a need for security, management and traffic monitoring. “We are trying to provide a mechanism so operators can segment certain kinds of traffic,” she says. “Geographically, certain types of policies might be applicable to different areas, so you have to be able to look at all the traffic, and create policy zones. If a pocket of users are doing a lot of video downloads, you’ll need more bandwidth.”

The answer to these questions and more should come sooner rather than later. “In the summer of 2008 we’ll start to see real deployments that will answer many of these questions,” says Aricent Inc. spokesman Trevor Strudley. “That will be the proving ground.”

Management Consideration

For operators to take advantage of the market opportunity femtocells present, they must consider specific challenges and address unique requirements for femtocell-core network integration. Provided below are a couple of key issues operators should keep in mind:

Integration – Operators should look at how to effectively integrate/manage hundreds of thousands of additional access points that can be moved/added by users at any time.

Management – Operators should consider using network intelligence and tools that can manage capacity between individual femtocells and the outdoor cell network.

Control – As the integration and management of femtocells becomes more widespread, competitive and complex, operators will want to reduce costs and maintain control of their networks. But how to do so is something that is not yet completely understood. Also, operators must consider issues relative to authentication, network performance, security, etc.

Source: WiChorus Inc.

Share this article: Email, Slashdot, Digg, Del.icio.us, Yahoo!MyWeb, Windows Live Favorites, Furl
Add this article feed to: RSS, My Yahoo, Newsgator, Bloglines