Mark Keenan looks at the potential impact of femtocells and picocells technology on the small-to-medium enterprise.
Network operators have long tried to address that potentially very lucrative but hard-to-reach customer segment: the SME (small medium enterprise). Over the years, operators have experienced differing degrees of success, but this is a market sector that has long been viewed as one of the biggest challenges the industry faces.
However, an area of mobile communications that many analysts predict will soon be popular among consumers are increasingly being viewed as a key for unlocking the SME revenue stream for all kinds of operators.
The technology in question centres around indoor base stations, also referred to as femtocells and picocells, predicted by ABI Research to account for 102 million users worldwide by 2011.
In essence, these are small indoor access points - think of a slim paperback novel - that are designed to provide dedicated mobile network coverage within a limited area, such as a house or office. Unlike larger macro cells, these units are relatively low-power devices and manufacturers are designing them to be as 'plug and play' as broadband modems have become.
Another key difference between traditional base stations and these scaled-down versions is that they link back to the service provider via a broadband line (usually xDSL) to provide network backhaul, rather than using a leased line or microwave link.
Picocells and femtocell have much in common and employ the same base technology but they differ in that picocells are higher capacity and provide extra features for the business market, such as the ability to support larger numbers of simultaneous users, or to chain together picocells to create a network, and to integrate with existing IT environments. Femtocells, on the other hand, are lower capacity and have less inbuilt 'intelligence' but are cheaper and designed for the mass-market consumer market.
Indoor base stations address a very real market issue, namely: the problem of achieving high quality indoor coverage. Many mobile networks - particularly in busy city and town centres - are already overloaded, with too many subscribers placing demands on the network at any one time. Furthermore, the nature of radio based systems means that there will inevitably be weak spots in network coverage caused by a variety of obstructions, ranging trees and hills through to buildings and walls. Even thick modern double glazing can create a problem.
Coverage still an issue
A recent research-based report from analyst firm Quocirca revealed that approximately one third of SMEs had experienced problems with indoor coverage at work, with the figure raising to 45 per cent when those same users were at home (as is often the case with SME executives). Yet despite the fact that buildings are not ideal for mobile communications, more than half of all mobile calls are believed to be made within buildings and our reliance on mobile devices as a business tool continues to increase. Think of the number of people who live on their PDAs, whether at work, in a meeting or working from home.
Does it matter? Well, as the fight to attract and retain subscribers becomes harder and harder, then we all know that the emphasis on service quality increases. Indeed, a US study carried out by Telephia indicated that over a fifth of customer churn was as a result of poor network coverage. Research firm InStat has stated that the biggest challenge facing mobile subscribers is the lack of indoor coverage of 3G signals and warns operators that their success with 3G services will be limited unless they address this issue.
This is the operators' dilemma. While they are banking on return-on-investment on their 3G networks, the very nature of 3G means that it finds it even harder to penetrate buildings than 2G. At the same time, the kind of services that 3G lends itself to so well - mobile data and TV - place greater demands on the network than ever before. Yet building whole new landscapes of macro cells is not an option, both in terms of cost and environmental restrictions. This is why so many players in the industry - not just analysts, but vendors and operators - believe that indoor base stations are the solution for overcoming the network traffic logjam. Furthermore, they could help to enable new operators to enter the mobile market.
It would be wrong to think of indoor base stations in terms of 3G alone. For some time now, a couple of vendors (including RadioFrame) have been deploying 2G units to network operators in Europe. In RadioFrame's case, this includes providing business customers of Orange with picocells that enables the operator to improve service quality where needed.
Quocirca's research underlined the fact that while growth of mobile data is happening, voice services are still business users' primary focus and where they have concerns about service quality and cost. And let's not forget that most of these business users are still on 2G. They are also receptive to fixed mobile convergence, if presented attractively and cost-effectively.
While femtocells may not hit the mass market for a couple of years yet, indoor base stations could well prove the solution to maintain customer satisfaction among the SME community. Looking ahead, these 'mini cells' can also be used to achieve fixed mobile substitution, by enabling users to reduce expensive mobile call costs by using mobile broadband IP connections.
Ultimately, picocells could be used to enhance PBX services. Mobiles could be integrated with the PBX to support call transfer, hunt groups and virtual fixed lines, for instance. Potentially, picocells could replace the fixed PBX completely with a wireless PBX solution, or even supplant traditional WANs and LANs, although as these are so well-embedded in IT culture, that is certainly not going to happen overnight. It's interesting to note, however, that the technology is pretty much there to achieve this.
Where are we now? Apart from deployment of picocells to business users, femtocells - both on 2G and 3G - are being developed and trialled around the world, with a number of product and services from a variety of vendors and operators expected to be launched at the end of 2008 or early 2009. Some markets are more developed than others and while Europe is expected to be one of the fastest growing pico/femto markets, Sprint in the US announced its own femtocell solution in August 2008.
The pitfalls
No new market sector is without some potential pitfalls. Mass-market roll-out has been cited as a barrier and this certainly is something that needs addressing very soon. Most mobile and fixed operators are used to supporting deployment of voice-centric mobile phones, but as some of them have found, as soon as you move into mobile data support, then far more technical support tends to be needed. Furthermore, there is a big difference between distributing mobile phones and PDAs - whether via shops or courier delivery - and rolling out thousands - ultimately millions - of indoor base stations.
This is why it is crucial that pico and femtocells need to be 'plug or play' and involve 'zero touch' deployment. In other words: devices that can be installed by the customer; remotely activated by the operator; and (in the case of RadioFrame's own product line) even remotely updated, all without a truck roll.
In 2007, the Femto Forum was created by a number of vendors and operators to jointly agree a way forward regarding industry standards. A new technology that does not experience some dissent between players is rare, but the development of universally-accepted standards is happening at a relatively steady pace. Certainly, standards should not be viewed as a total barrier to indoor base station deployment - after all, picocells are already in commercial operation - though of course, interoperability is very desirable for the market's future.
Another danger is the tendency to 'over-hype' picos and femtos. Realistically, do we really think that every business and consumer will have one within the next 12months? I would say not. So let's not raise expectations to a ridiculous point, or develop business plans that are based on hope rather than common-sense.
That said, the benefits of picos and femtos - to operators and users alike - are very clear. While predictions on timescales, volumes and market expectations may vary, the general consensus would seem to be that indoor base stations are central to the future of the mobile industry, from 2G to 3G and beyond, not just for consumers but to support business users too.
Mark Keenan is General Manager for Europe, Middle East and Africa, RadioFrame Networks Inc, Redmond, Washington, USA. www.radioframenetworks.com. RadioFrame has pioneered the development of pico and femtocell products that are network-friendly and easily deployed plug-and-play solutions at the lowest cost available.