In The News

Will 2008 Really Be The Year Of The Femtocell?

From the December 13, 2007 edition of Wireless Business Forecast

Every vendor has a new femtocell home base station to hawk, but...

To hear some folks in the wireless broadband and cellular industry tell it, the coming year will see femtocells burst onto the scene. Will they be a panacea for the problem of "can you hear me now" indoors? A killer technology for the cellular industry to slaughter such technologies as mobile Wi-Fi meshes and the putative WiMAX because of their inability to penetrate brick walls? Are they the technology that could kill the Wi-Fi/GSM dual-mode phone that's been this year's buzzword in many circles.

Indeed, as we noted last month, our sister e-letter CT Report is calling it "femtomania" (Wireless Business Forecast, Nov. 29) and warning its readership that the cable industry had better get its act together and be sure to work with femtocells. And as if the floodgates had opened, we've suddenly been deluged with femtocell-related issues.

Thus, in the never-ending quest to be among the first with coverage of "the next big thing," we started scouting around to see if we could be convinced 2008 is going to be the year of the femtocell.

In Conclusion

We'll save you the suspense and start with our conclusion instead of ending with it: The year of the femtocell won't be 2008, although 2009 or 2010 just might be.

We reached that conclusion after a long conversation with Continuous Computing's Todd Mersch, product marketing manager in charge of femtocell technology. Continuous isn't selling femtocells per se. It's selling a version of its Trillium 3G/4G wireless protocol software that's been enhanced for femtocell applications. Because it's not selling the femtocells themselves, Continuous has a calmer view of the market than those that are starting to push hardware - as fast as they can get it out the door.

The issue isn't demand for femtocells, Mersch says, reporting a "lot of market activity," both in the United States and Europe. "Everyone I've talked to in the European market is talking about the interesting data services you can have" using femtocells, he says. At the same time, "a lot of the deployments are coming out of the United States."

Mersch cites both AT&T and Sprint as being forerunners. AT&T has a request for proposals out - believed for a trial some time next year (in Europe, both Vodafone and France Telecom have similar RFPs outstanding). Sprint is even farther along, with a relatively quiet trial that started a few months ago in Denver and Indianapolis.

In those cities, Sprint is selling femtocells for residential use. The femtocells are made by Samsung, and Sprint is charging just $50 for them plus $15 per month for a single user and $30 for a family. Calls made via Sprint CDMA cellphones over the femtocells, which users simply plug into their DSL or cable broadband, are unlimited. Essentially, a user is making the call over broadband - but broadband attached to a radio that, unlike Wi-Fi, is using licensed spectrum -- the same licensed spectrum as regular cellular service. When the user leaves the house, the call is simply handed off to an outdoor cellular network access point and, from that point on, the calls are billed on the user's wireless plan. The whole thing is a sort of "taste" of femtocell technology - it's missing the data part - but ominous for advocates of dual-mode phones; the end effect is identical to schemes based on Wi-Fi.

The Cost

This all sounds nice except for once little catch: Femtocells don't cost $50. "Cost is the Number One concern" in the proliferation of femtocells, Mersch says. Sprint's $50 most likely is far less than it's paying Samsung, Mersch estimates. While "its not clear what they're buying it for from Samsung," he says that, by all estimates, the devices still cost $300 or more to make.

Even if Sprint is paying less, "when you're subsidizing $150 in a $200 piece of equipment, making that up in minutes is a little hard to justify," he maintains. And that, in a nutshell, is why 2008 isn't going to be the year of the femtocell. The industry still needs more time to work out the cost.

That will happen, Mersch thinks. It's just going to take time.

As an indication of just how much interest there is - interest expected to translate into multiple competitive products - Mersche says Continuous is "engaging with 15-20 opportunities" to sell its femtocell software.

However, he says, the company isn't at the point where it can openly discuss its potential customers. "The main thing we have nailed down is working with one of the key silicon vendors in this domain," he continues. That would be for a customized version of Trillium that integrates with the silicon coming from the unidentified vendors.

The silicon and software, then, would go to manufacturers making femtocells - or perhaps even more. One line of development, he says, includes integrating the femtocell into the DSL modem, much as such modems are sold these days with Wi-Fi built in. Such a development, he adds, could significantly decrease the cost of deploying femtocell technology.

The Fat Pipes

That has more than trivial implications for the Wi-Fi community, though. It creates a vision of wireless broadband shuttled around the house using cellular technology, meaning a user would use the same wireless broadband at home and on the road.

"The pipes are fat enough at this point for mobile data rates over 3G technology," Mersch says, not even talking about 4G at this time.

And, of course, if the data is being piped that way, why use Wi-Fi for voice?

Wi-Fi versus femtocell -- "they're definitely competing technologies," Mersch says. He adds that, in pitching to the femtocell market, "there's definitely a lot of disparaging remarks" he's hearing regarding the dual-mode Wi-Fi/cellular solutions just starting to roll out, particularly in the enterprise market.

Now, if femtocells do fulfill their promise, those dual-mode solutions may just be transitory until femtocells are ready. "There's a couple of vendors...big equipment manufacturers...that feel the enterprise is really a strong play for femtocell," Mersch says.

Which leads to the inevitable question of "when?" "You've got a lot of trials in 2008," Mersch says, "but you're still talking about volumes in the hundreds of thousands (of femtocells), not the millions." And he reveals his prediction for what really will be "the year of the femtocell:" "In 2009, you'll see volume size in the millions."

Here's What We Think

Just for starters: Sprint selling femtocells? How interesting. That sure sounds like an admission Sprint understands WiMAX may not cut it indoors or, to be more precise, it may not be able to get through the walls into the indoors. One only has to look at the Wi-Fi mesh mess in Philadelphia, where it was belatedly discovered reception through brick walls doesn't work very well. What an astounding discovery, given all the engineering talent allegedly working on mesh technology...

So Sprint could well be looking at femtocells as its fallback data position. Now it gets interesting. If Sprint is using CDMA for voice services and slower data, and WiMAX for faster data (outside), it's walking into the dual-mode conundrum.

Meanwhile, there's Long Term Evolution/System Architecture Evolution (LTE/SAE) - the 4G mobile broadband technology expected to be used by both AT&T Wireless and Verizon Wireless, which just last month was successfully tested dishing up 100 Mb/s wireless broadband (TelecomWeb news break, Nov. 7). Femtocells will be able to facilitate LTE indoors. Trillium has LTE clearly on its femtocell development roadmap, for instance, as does most of the femtocell industry.

Indeed, this could open up a real can of worms involving 802.11n and 802.20 wireless broadband (oh, and 802.16, including WiMAX and who knows what other implementation of that IEEE standard will emerge, including South Korea's Wibro), again because dual-mode always means dual-cost. And if LTE femtocells are built into xDSL or cable modems, why bother with any other technology? Some industry gurus are predicting that, even though the dual-mode Wi-Fi/GSM phone has a head start on femtocell technology, it could be as soon as 2010 when femtocells catch up and replace the dual-mode solution.

Gazing even deeper into our crystal ball, we see VoIP technology in use in cellular handsets functioning over LTE broadband, just as this past year or so has seen VoIP over Wi-Fi being touted. And, of course, LTE bandwidth is more than enough for IPTV.

Put another way: Everything could be broadband, both in business and the home. But there is another caveat. Analyst house Frost & Sullivan, in a report on the outlook for femtocells in Europe, has raised a huge regulatory red flag. The problem, which at the same time is the strength of femtocells, is the use of licensed spectrum.

"Regulatory uncertainties and technological challenges will be major restraints to mass market adoption of femtocells in Europe," Frost & Sullivan is warning. "It is unclear, from a regulatory standpoint if the user can purchase femtocells through retail or if the operator would need to personally install it. Unlike Wi-Fi, femtocells operate in the licensed band and typically, spectrum licensees must approve the use of any equipment using the spectrum. However, some opine that the distribution can be conducted through retailing, directly to the end users, which is no different from today's handset- distribution model."

So far, nobody has raised similar issues in the United States but, obviously, the same thing could happen if the FCC discovers the existence of femtocells. Obviously, the FCC hasn't raised an issue yet - or Sprint wouldn't be already conducting a trial. But either the U.S. or European regulators could get snippy about things, given the use of licensed frequencies, which could significantly throw off the calculations of how fast femtocells penetrate the market, both here and abroad.