Femtocell prospects surrounded by uncertainties

01 Apr 2008

Femtocells may have created huge interests among operators worldwide, with some planning commercial deployment this year. However, the lack of a business case and regulatory issues are likely to dim the market outlook of 3G femtocells in Asia.

CW Cheung, consulting director for Asia with Ovum, said the price of a femtocell base station is $150-$200, which is still too expensive for deployments. Only when the price drops to $100 will there be a business case for service providers, he noted.

While femtocells can create significant cost savings by offloading macro radio network facilities and enable cellcos to provide indoor wireless service at a low cost, Cheung said such cost benefits can only be realized when there is high penetration and demand for mobile data services at home, which is still not yet the case in many developed 3G markets like Hong Kong, Singapore and even Japan.

Charles Henshaw, CEO of China Mobile Peoples Telephone, the smallest GSM operator in Hong Kong, also argued ROI will be slow if operators need to subsidize the service.

'I believe femtocells will eventually take off, because it's hard to stop technology - it always finds a way. But will it take off in Hong Kong‾ I don't know,' he said.

There are also concerns about the radiation from the base stations, Henshaw added.

Regulatory issue

Economical challenges aside, regulatory 'complications' may also pay a role in femtocell rollouts in Asia, according to ABI Research. In Japan, for instance, Softbank Mobile still needs regulatory approval before it can roll out femtocell service commercially.

Softbank CTO Junichi Miyakawa said the company is still negotiating with the regulator to change regulations to allow end-users to install femtocells by themselves, and is confident such issues will be resolved by October, the target date for commercial femtocell service.

The South Korea government, meanwhile, is also yet to finish its fixed-mobile convergence policy, and ABI believes that commercial femtocell services will not be introduced in the country until 2009.

Femtocell prospects in India and China are heavily dependent on 3G license development, the research firm suggested.

Despite this, ABI Research predicts that femtocells will generate revenue of nearly $5 million in 2008 from device shipments in the Asia-Pacific region. The research firm said while the figure is a modest sum in global terms, it represents quite satisfactory early growth, given that it is generated from a market that barely exists.

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