Analyst urges caution on femtocell roll-outs

Analyst urges caution on femtocell roll-outs

Carriers warned of need for solid business case

Mobile operators considering widespread deployments of indoor base stations, or femtocells, should review their business models carefully to avoid potentially "disastrous" risks.

Analysys warned that large-scale roll-outs of femtocells carry considerable risks as many early business cases are "not commercially viable".

"Femtocells are progressing rapidly from an interesting emerging technology to being ready for mobile operators to deploy," said report co-author Dr Alastair Brydon.

"Engineering departments within mobile operators have generally led the evaluation of femtocells, but the next critical step is to define a profitable business case based on clearly targeted and compelling customer propositions."

The study warned that widespread use of femtocells solely to provide low-priced voice telephony in the home will stimulate fixed-mobile substitution, but could "lead to disaster" as the revenue benefits are highly uncertain.

Mobile operators that focus on voice telephony should instead target key market segments and resist very low pricing, according to the research.

For example, in a multi-person household with poor existing cellular coverage operators could recoup the cost of femtocells within four months provided that a "significant price premium" is maintained over fixed calls.

A strategy underpinned by a range of multimedia service propositions will result in a much stronger business case for femtocells, bringing the potential to increase revenue and save substantial costs.

Applications such as mobile TV, video and audio services will also significantly broaden the consumer appeal of femtocells.

"Mobile TV could be a critical component of a successful femtocell business case, providing substantial cost savings as well as revenue enhancement," said co-author Dr Mark Heath.

"Trials have shown heavy use of mobile TV at home, and mobile operators could save $10 per household per year by avoiding the need to build dense DVB-H networks in order to provide mobile TV services indoors."