Indoor base stations could dramatically alter the mobile landscape in coming years. The analysis below is extracted from a recent Analysys report, Picocells and femtocells: will indoor base stations transform the telecoms industry?
Small, low-cost indoor base stations, often referred to as picocells and femtocells, could present the opportunity for mobile operators to make a radical departure from their traditional cellular network architecture. The prospect of substantial cost savings and new service opportunities from this change is generating intense interest from operators, and an increasing number of companies are developing products. Many wireless technologies have been hyped in recent years, but indoor base stations could be the one that has far-reaching consequences.
Indoor base stations can be applied to a variety of wireless technologies, such as GSM, W-CDMA (including HSPA), CDMA2000 (including EV-DO), 3G LTE, WiMAX and WiBro, but not all of these applications will be commercially justified. By far the greatest opportunity will be the use of 3G femtocells in households, where they provide high-quality coverage as well as improved tariffs and services for customers.
Quantifying the opportunity
For mobile operators, there is a compelling case for the widespread deployment of 3G femtocells. Operators need to improve in-building coverage significantly, and 3G femtocells offer a practical, and potentially much less expensive, alternative to further investment in 3G macrocell networks. Analysys Research’s modelling shows that mobile operators could benefit significantly – particularly if they have a small number of customers. A typical small operator could save an average of about USD45 per customer per year by deploying 3G femtocells in 60% of customer households by 2012 (see Figure 1). However, mobile operators that fail to adopt a large-scale approach may find themselves expending great effort on integrating a large number of 3G femtocells without avoiding significant macrocell investment, if most of their customers do not take up femtocells. 3G femtocell deployment to 20% of households by 2012 would only save about USD20 per customer per year, because significant numbers of macrocells would still be needed.
Figure 1: Annual cost saving per customer for a small operator (with 5 million customers) deploying 3G femtocells (Source: Analysys Research, 2007)
3G femtocells also provide mobile operators with revenue opportunities – for example, from fixed–mobile substitution. 3G femtocells could allow mobile operators to offer relatively inexpensive, high-quality voice calls for mobile users when they are at home (to drive fixed–mobile substitution), while maintaining a significant premium for mobile calls when users are elsewhere. Operators could also offer various group subscriptions and tariffs linked to femtocells – for example, to attract all the members of a household to their networks. In addition, femtocells will enable mobile operators to compete against emerging converged cellular/WLAN services (such as the BT Fusion UMA-based service in the UK) by offering very similar tariffs without the need for special handsets.
3G femtocells could have far-reaching consequences for the telecoms industry. Mobile operators have invested heavily in macrocell network construction, but will increasingly divert investment towards indoor base stations, which will have profound implications for cellular network infrastructure vendors. Indoor base stations will drive the migration of voice traffic from fixed to mobile networks until 3G carries the majority of voice telephony. However, indoor base stations will also reverse fixed–line substitution in developed countries and will help to drive DSL penetration to very high levels, because fixed broadband capabilities are needed to connect femtocells back to core mobile networks.
