Informa Telecoms & Media recently reported that 2.3 million femtocells are in use worldwide — a laughably small figure compared to forecasts from just a few years ago, like the 102 million users that ABI Research predicted in 2006. And as Informa’s data illustrates, the segment continues to merely tread water, even as our consumption of mobile data surges. But while the time for femtocells at the residential consumer level has essentially passed, there nonetheless remains some opportunity for them to survive.
Three huge factors have kept the femtocell market in shackles:
- Price: AT&T charges $150 for its MicroCell, and using the femtocell — which off-loads traffic to an existing Internet connection in the home or business — still counts against monthly plans. Verizon Wireless doesn’t charge for usage of its Network Extender, but the device itself will set you back $250. Carriers incur back-end costs in deploying femtocells, of course, but it’s understandable that customers have balked at the thought of paying what amounts to a double dip.
- Wi-Fi: Home-based femtocell technology “is going head-to-head with Wi-Fi,” Ericsson’s Håkan Eriksson said last week, since nearly every data-friendly smartphone on the market supports the latter. Femtocells have advantages over Wi-Fi: They don’t suck power or require switching as Wi-Fi can. Still, consumers have been unwilling to pay $150 or more for the introduction of a new technology.
- Advancing cellular technologies: Femtocell development has consistently lagged behind the advancement of cellular build-outs: Verizon Wireless, for instance, began offering a 3G femtocell only last October, nearly a decade after its initial 3G deployment. Demand for femtocells will suffer as we enter the era of next-generation networks. Verizon continues to expand the LTE network it first turned on last year, AT&T will follow suit this summer and T-Mobile has deployed HSP+ in dozens of markets. Those rollouts don’t just mean faster network speeds; they also mean that carriers can support more traffic on the network, which has been a key selling point for femtocells.
There’s little reason to expect consumer-targeted, in-home femtocells will gain anymore traction, but that doesn’t mean opportunity is entirely lost. Even as residential sales spiral downward, manufacturers like Picochip and Ubiquisys have begun unveiling public access products, as the Register noted earlier this week. In this case, femtocells are morphing into “metrocells” that fill the network gaps where blanket coverage with traditional cell towers is difficult, such as in high-density urban areas. Indeed, Informa reported in a recent survey that “60 percent of operators believe small cells will be more important than macrocells for an effective LTE deployment strategy.” That’s partially due to the fact that carriers are boosting capacity by reusing spectrum — a trend that requires smaller cell sites. While the strategy is more efficient than traditional towers, it also leaves the carriers with more network holes to fill.
Meanwhile, the market research firm Maravedis has predicted public-access femtocells will fall from $100 to $70 or so this year, and continue to slide into the $50 range next year as more offerings come to market. Those colliding trends lay the foundation for long-awaited growth in the femtocell market.
Further opportunity lies in the enterprise, where tablets and smartphones are increasingly joining laptops and other devices as everyday tools. Femtocells can be used to deliver better coverage and support multiple connections, which could encourage businesses to cut more fixed-line connections. They can also support international calling at rates far less expensive than traditional mobile plans, which could finally spur carriers to offer discounts to businesses that embrace femtocell technology. Certainly, femtocells have plenty of competition here, from established Wi-Fi networks to carriers. But if the latter integrates femtocells in a way that makes it easier and cheaper for businesses, the technology could see substantial adoption in the enterprise.
The bottom line is that the window for femtocells to thrive in the residential consumer segment has essentially closed, and the key to their survival now lies in finding where the technology best fits. The future of femtocells will see them working alongside other technologies — not in place of them.