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The Case for Femtocells Andy Tiller, VP Marketing at ip.access
Introduction Femtocells are tiny, low power 3G radio systems that plug into a residential broadband connection to provide a mobile signal directly in the home. The most obvious business case for femtocells is providing coverage for mobile voice services in areas where the macro network is not available. It is widely reported that about 30% of mobile calls are made at home, which suggests that operators with coverage holes in residential areas have the potential to significantly increase revenues by deploying femtocells. For example, a subscriber with no mobile coverage at home whose monthly bill is €45, 80% of which is from voice services, could be expected to spend around €11 more each month. This would more than cover the fully subsidised cost of a femtocell. A case can also be made for using femtocells with a “femtozone tariff” as an alternative to homezone tariffs for encouraging substitution of voice minutes from the fixed line phone. Homezone tariffs, which provide mobile calls at fixed-line rates in the home, suffer from three problems, all of which will become increasingly significant for 3G data services:
Femtocells, combined with "femtozone" tariffs, can solve all these problems, giving a good user experience in the home at an affordable cost to the operator, with price discounts that don’t leak outside the home.
Femtocells & mobile data services Apart from being able to extend voice coverage where none previously existed, femtocells also have the potential to play a significant role in the advancement of mobile data services. Delivering high-speed mobile data inside buildings is a tough challenge for the macro network. Femtocells give a faster data speed and better user experience, encouraging greater use of data services inside the home, where new services are often tried first. As subscribers become familiar with using data services inside the home, so they will use the same services more outside the home as well. Equally importantly, femtocells allow the operator 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 the mobile phone 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-MB data pricing. But do consumers really want to use mobile data services at home, even if the femtocell provides a good experience and attractive prices? After all, the PC and TV are readily available, free, and in many ways more natural choices for video entertainment, Internet browsing, social networking, instant messaging and other applications. Interestingly, it seems that the mobile phone does indeed retain its appeal, even when pitted against the PC and TV. For instance, a recent McKinsey report highlighted that 35% of mobile TV is watched in the home[1]. The mobile phone also offers privacy for IM sessions and Internet browsing, as well as the convenience of being immediately to hand for quick tasks like Internet search. Much of the user-generated content shared on the Internet is captured on mobile phones, and RSS feeds and podcasts are often consumed on portable devices. It makes sense to upload videos and photos directly from the mobile phone to websites like YouTube and Flickr, and also to download podcasts and music directly to the phone from the web. This is much more convenient than transferring files via the PC.
Strain on the network Most 3G networks are running well below capacity today, but even a moderate level of adoption of mobile TV, video-streaming and other mobile broadband services can quickly strain the network to breaking point. Broadcast technologies such as DVB-H will only solve part of the problem, because they only increase efficiency if lots of people want to watch the same thing at the same time. We have learned from the Internet’s “Long Tail” effect, and the phenomenal success of video-sharing sites like YouTube, that most video content will need to be streamed on demand. If mobile TV and other bandwidth-hungry 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 W-CDMA works, power is shared amongst all users in a 3G cell. If some users are indoors, the radio signal must be forced through walls to reach them, and their phones therefore consume a large share of the available power. The net result is that the capacity of the macro cell is reduced, and quality of service suffers for all users in the cell. If the indoor users are served via femtocells instead of from the macro cell, the capacity of the macro network improves out of all proportion to the number of users who have been removed from the cell. Even ignoring all the strategic benefits of femtocells, the cost savings from off-loading the macro network provide a strong business case for operators to deploy femtocells. Figure 1 illustrates the business case for a hypothetical network that is used only for video streaming (e.g. watching YouTube on the mobile phone). The model compares the cost of serving a city of 500,000 inhabitants from the macro network alone with the cost of serving the city from a macro network supplemented with a femtocell layer for serving indoor users. Assuming that some users have access to a femtocell for indoor use, and that 30% of these users’ video streaming sessions take place indoors, the overall business case is calculated by taking the saving from deploying fewer macro cell sites and subtracting the cost of deploying the femtocell layer.
Figure 1: Annual femtocell saving per customer for 128 kbps video streaming
Femtocells can bring very significant cost savings to the operator, even at moderate usage levels. For example, if subscribers average just one 3-minute video streaming session per day at 128 kbps, a 20% user penetration of fully subsidised €200 femtocells (each serving a household of 2.4 users) will save the operator around €14 per customer per year (i.e. €14 for each subscriber in the city, not only those who have femtocells). In practice, a real network is used for a range of services, but the simple model provides a reference point for a world in which mobile data services are becoming adopted more widely.
Consumer propositions Ultimately the success of femtocells depends on operators finding the right combination of discounts and new services to attract end users, and to overcome potential objections to more clutter in the home or irrational fears about mobile phone emissions. This will involve careful customer segmentation and creative marketing. But the potential benefits for operators are significant, and should more than justify the cost of these initiatives, including femtocell subsidies and service discounts. In addition to offering a better user experience and better value for mobile voice and data services in the home, operators can also offer value added services via the femtocell, such as automatic podcast reloads, home presence services and personalised mobile TV. These femtocell services and tariffs may be included within a broadband package, with the femtocell itself being integrated into the home gateway. These themes are explored further in the white paper.
About ip.access ip.access is a technology innovator and a pioneer in cellular over IP. Their Oyster 3G™ femtocell was launched in February 2007 at the 3GSM World Congress in Barcelona, where it won the GSM Association award for best Radio Access Product. [1] “The Revolution of the Third Screen”, October 2006. |
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