Femtocells: A New Weapon in the Battle for the Broadband Home

Femto Hub Blog (Dec 17 2008) Network Equipment Vendors

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  1. Femtocells: A New Weapon in the Battle for the Broadband Home By Vedat Eyuboglu

    Analog telephony is on its way out.  Phone companies are losing telephony subscribers at an annual rate of roughly 10%, as subscribers are replacing their primary and/or secondary analog phone lines with lower-cost flat-rate VoIP services or “cutting the cord” with their mobile phones.  With the weak economy this trend is likely to get worse. 

    In North America, especially threatening to phone companies are the cable companies.  With their bundled voice, video and Internet services delivered over a managed broadband IP network, cable companies have been making significant inroads into traditional voice services. To counter this threat, phone companies have been investing heavily in new broadband access network infrastructure based on Fiber-To-The-Home (Verizon FiOS) and Fiber-To-The-Curb (AT&T U-Verse) technologies and are showing some early success in attracting video subscribers away from cable companies.

    While this fierce competition is raging on in the fixed-line world, wireless is rapidly becoming the most indispensable communication service for consumers.  The nature of wireless service is also changing from voice/text to mobile broadband, as evidenced by the phenomenal growth of smartphones such as the iPhone and Blackberry, which are driving significant data usage.  It is expected that in just a few years the vast majority of wireless subscribers will own a smartphone.  This will increase average monthly data usage significantly over current levels and put capacity pressure on traditional macro cellular networks.

    To gain an advantage in the battle for the broadband home, all operators have been exploring ways to integrate wireless into their fixed-line services.  Emerging in-building wireless solutions based on femtocells or Wi-Fi-enabled cell phones now offer operators the ability to implement such an integration in a very synergistic way. By taking advantage of the broadband Internet connection available in most homes today these in-building systems allow operators to deliver mobile broadband services to cell phones, when they are inside homes, with the same quality that subscribers have come to expect from a fixed-line broadband service.  Femtocells go even further 1) by supporting existing handsets that consumers already own and 2) by enabling a tighter alignment with the macrocell network through the use of the same licensed spectrum and the same 3G air interface protocol.  The end result for consumers is great coverage and consistent mobile broadband data speeds in homes and for the operators it is lower churn and ability to inexpensively deliver unprecedented levels of data capacity that currently is not available for cell phones.  Add on top of this the ability to offer new and innovative femtozone services, and you have a game changer.

    For phone companies who are also wireless operators—so-called “integrated” operators—the, femtocell is the vehicle to leverage wireless and fixed-line assets and deliver an integrated experience using a single home gateway with a built-in femtocell that delivers video, voice and mobile services over a single broadband Internet connection.  For these operators, femtocells represent a way of holding on to those telephony subscribers who may be considering switching to the competition, by offering a bundled quad-play service that improves consumer’s communication experience while at the same time lowering their costs. 

    For wireless companies who are not fixed-line operators, femtocells offer a way to attract residential voice subscribers through low-cost flat-rate voice services that can be added to subscriber’s mobile phone bill.  Such integrated mobile VoIP services will be much superior to VoIP services offered by operators such as Vonage, because the VoIP service will also support mobile devices and will be tightly integrated with the subscriber’s cell phone service.  The day when we will think of our “personal” mobile phones and our “shared” family phones in our homes as being part of the same voice service seems to be around the corner.

    For cable operators who are looking to offer wireless services as an MVNO, femtocells offer an additional benefit by keeping their wireless subscribers on their cable networks when they are at home.  When a subscriber with a mobile phone enters the home and attaches to the femtocell, the smartphone will disconnect completely from the macro cellular network and will be served entirely by cable operator’s own network.  This will lower the cost of mobile service delivery for the cable operator.

    As 2009 rolls in and femtocells move from early trials to commercial deployment, it will be interesting to watch how operators around the globe will leverage the femtocell in the battle for the broadband home.

    Editor’s Note: Vedat Eyuboglu is Airvana’s CTO.  He and Sanjeev Verma co-founded the company in 2000.

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