Femtocells are tiny, low power 3G radio systems that plug into a residential broadband connection to provide a mobile signal directly in the home.
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Plugging coverage holes
With about 30% of mobile calls made at home, operators with coverage holes in residential areas have the potential to boost their revenues significantly by deploying femtocells.
An ARPU gain of €10 per month (spread across all users in the household) would easily cover the fully subsidised cost of a femtocell (and more). Combined with a femtozone tariff, femtocells can be used to encourage substitution of voice minutes from the fixed line phone. Unlike homezone tariffs (based on macro cell ID), femtocells actually reduce the cost of delivering calls, and provide discounts that don’t leak outside the home.
Driving the adoption of data services
Femtocells also encourage the adoption of mobile data services by providing faster data speeds and better user experiences inside the home where new services are often tried first.
Equally importantly, femtocells allow operators to deliver data services at a very low cost, because the traffic is backhauled to the core network over the household’s existing broadband link.
These cost savings can be passed on to customers (e.g. via femtozone tariffs), making broadband-bundled mobile price plans competitive not only with the fixed line telephone, but also with the TV and PC for entertainment and information services in the home. This is strategically important to mobile operators as they adopt new business models based on revenue share with web and media partners instead of per-megabyte data pricing.
Reducing the cost of 3G service provision
If mobile TV and other bandwidth-hungry mobile data services are to be commercially successful, operators need a way to deliver this data cost-effectively via the 3G network.
Femtocells help in two ways:
- Firstly, removing indoor data sessions from the macro network reduces the number of users each macro cell needs to support.
- Secondly, because of the way WCDMA works, if indoor users are served via femtocells instead of from the macro cell, the capacity of the macro network increases out of all proportion to the number of users who have been removed from the cell.
Even ignoring the revenue earning opportunity, the cost savings from off-loading the macro network alone provide a strong business case for operators to deploy femtocells.
If usage of high-speed mobile data services increases to a level equivalent to each subscriber streaming one 3-minute 384 kbps video per day, an operator with 10 million subscribers could save €500 million over 4 years by deploying femtocells to 20% of its subscribers’ homes instead of upgrading its macro network – even with a full subsidy on the femtocell.
