New optimism with Femto SIG

John C. Tanner
17 Jul 2009

After a couple of years of promise - and not a little hype - femtocells are edging closer and closer to prime time. The finalization of a 3GPP femto standard in April was helpful, and last month's Femto World Summit in London provided some welcome optimism over the femto future.

For a start, Vodafone became the third cellco (after Sprint Nextel and Verizon in the US) to move from trials to a live femto service. Vodafone this month began offering the Vodafone Access Gateway, a router-sized box that creates a 3G home zone that supports up to four 3G devices and uses the customer's fixed-broadband line for the backhaul. Customers can buy a gateway for roughly $265, or rent one for $8.25 a month, or get it for free if they sign up for certain data plans.

What customers get for their money, at least at the start, is better indoor coverage, but Vodafone intends to launch more advanced services later. Which brings us to the other big news at the femto summit: the Femto Forum's creation of a special interest group to develop femto apps.

The SIG aims to develop a common app platform that works across multiple vendors and operators, as well as create open APIs for apps developers to allow their software to run on various devices.

That's good news for the femto sector, because without apps, femtocell benefits mean more to cellcos than they do to end-users. Macrocell offload, cost-efficient capacity increases, subsidized backhaul and better indoor coverage are all useful benefits, but the last one is the only one that's of any use to the end-user - and that alone is not what's going to convince most users to stick one in their home.

The weakest link

Which is why the femto pitch has always included apps. Intrinsyc Software and Ubiquisys made the point in May with UX-Zone, a femto app for the Android platform that automatically changes the UI of your Android handset as you enter the femto zone to reflect available services that you wouldn't use in the macro network, like automatically uploading photos to your digital picture frame.

The Femto Forum showcased similar possibilities at the summit, such as "virtual fridge notes", an app from ip.access that delivers messages to family members when they get home and can include ones posted via Facebook. Surely there's a business model in there somewhere. (And as Caroline Gabriel of Rethink Research has already quipped, it'll probably come in the form of an app store.)

Little wonder analysts like Juniper Research are bullish enough on the femto story to project $9 billion in new revenues for cellcos by 2014.

But while the femto app SIG is a good idea, I can't help thinking back to around this time last year when I sat in on a femto panel at the Broadband World Forum. There was a lot of skepticism expressed about femtos that day, and they all centered on business model issues that arguably still haven't been fully addressed.

For example, how do you create home-zone tariffs that are low enough to make it attractive to users without bringing your ARPUs down? If you make the service data-centric, will the users' DSL line be able to handle the backhaul, and will they blame you if it doesn't? Do you even know who your target audience is, what they'll use femtos for and what they'll connect to it? Can you make the entire experience plug-and-play - to include technical issues like RF interference and security? And if something goes wrong, who takes the service call - the operator, the hardware manufacturer or the POS outlet that sold it?

To be fair, the only way to find out is to get out there and do it, not least because the answers will vary from market to market anyway. But operators need to be aware at all times that femto success won't come easy, and that it's ultimately their strategy that remains the weakest link in the value chain.

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