- Buyers Guide
This week saw the second Femtocells Europe conference in London, with the supporters of the miniature base stations seeking to look beyond the issue of indoor coverage to focus on more far-reaching benefits for operators — advanced applications, new ways of building out mobile broadband networks like WiMAX and LTE, and the promise of the sub-$99 product. All these are vital if femtocells are to achieve their goal of first commercial deployments in 2009, as are standards — the Femto Forum, whose plenary meeting was co-located, has made impressive progress on creating standards for connecting femtos to the core network, and now aims to do the same thing by the end of this week for another issue close to carriers' hearts: interference management.
As so often in the mobile broadband sector, the hard-nosed, real world business plans of the established operators were eclipsed, at least in the headlines, by the more bluesky activities of the 'new Clearwire' — the cheerleader for Mobile WiMAX that should be formed around year end by the merger of Sprint Nextel's Xohm unit and the original Clearwire, with funding from Intel, Google and the major US cablecos. Since Clearwire is the first major operator to deploy WiMAX for genuine mobile broadband and multimedia services, rather than traditional access, it is also likely to be the first WiMAX carrier to take an interest in femtocells. Sprint has been an early adopter of femtos, with the Samsung Airave CDMA product — limited in functionality, but hugely popular with its users. And the merged Clearwire's major supplier, Motorola, has also shown strong interest in femto technology. But the 'new Clearwire' has to be cautious about making any firm strategy statements until it is officially an entity, and in London, its key cable partner, Comcast, appeared to have jumped the gun.
Dave Williams — the visionary former O2 head of strategy who recently boosted Comcast's wireless credentials overnight by joining the cableco as head of wireless and technology — was due to deliver a keynote speech at the conference, but was apparently gagged by Clearwire's legal team after press reports of comments he made about WiMAX femtocell plans. Light Reading reported Williams as saying that the proposed Clearwire deal would rule that 5 MHz of the company's huge holding of 2.5GHz spectrum should be set aside for WiMAX femtocells, across the US. This would be available for any of the Clearwire participants to use, and would be particularly attractive to the cablecos (Comcast, Time Warner and Bright House, which will together own 22% of the venture) because they could offset the costs of buying wholesale capacity on the main Clearwire network, by creating their own hotzones in key customer bases, using femtocells backhauled by cable.
Of course, none of this can be definite until the Clearwire deal is signed and sealed, which could be many months away, but the type of arrangement speculated by the press reports will certainly be a feature of the mobile broadband market, and therefore a major opportunity for femtocells. Retail operators are already talking extensively about building out LTE or WiMAX in limited 'hotzones' in high value user bases, with hand-off to 3G for wide area coverage, but the model will be even more relevant to wholesale providers — and 4G looks increasingly likely to be dominated by a few wholesalers, leasing capacity to numerous well differentiated service providers, in a shift towards the approach that underpins the fixed internet. If there are to be fewer macro networks, supporting large numbers of services providers, many of those providers will also look to target their most attractive customer bases with their own-controlled networks, based on small cells.
All of this will only be possible when standards are finalized, obstacles like interference between femtocells convincingly overcome, and pricing has fallen to the operators' targeted $99 or below. The Femtocell Conference showcased several key steps towards these goals — an HSPA system on chip (SoC) from picoChip, promising dramatic improvements in the cost model; new ways to integrate femtos and handsets into the home network from ip.access — and the Femto Forum meeting aims to cross further milestones in standards.
However the details of the Clearwire/cableco deal pan out however, the speculation points to some important issues for WiMAX in the cable sector, and for the shape of the Clearwire network build-out. If we had known about femtocells when cellular operators were building their first digital cellular networks, they would have invested far less in the rural communities. Cellular networks are famous for reaching perhaps 80% of the people with 20% of the cost and then spending 80% more on base stations slowly over the years, to reach the rural communities. If customers could self-install a femtocell just like a Wi-Fi access point, and backhaul it down a cable connection, what would be the point of spending that last 80% on the rural part of the network?
But the critical issue is that, in one fell swoop, Williams could have done more to develop the cable-based digital home than any previous CableLabs invention. A 5 MHz slice of spectrum that remained in the same home could be engineered by power levels not to invade next door. This means that all of the bandwidth would be available to one user, delivering around 8 Mbps. This could be used to replace Wi-Fi, but we suspect that this is more about Comcast customers having just one handset, a cellular design, for each person in the home, all acting as VoIP handsets when within range of the femtocell. That would create a great network for loading content to the handset, and that content might come from the set-top or DVR, from the internet or from the PC, but equally would be a cheap way to deliver content from a central server, across the cable network, out through WiMAX bandwidth and create a transaction on the device which would not rely on expensive access to Clearwire-owned base stations.
Companies like Cisco are already known to be working on femto devices for AT&T, and Cisco's Linksys will bring them to the retail arena. But there is something of a difference between AT&T undermining its own cellular network using femtocells and a company like Comcast, which has no cellular revenue to sacrifice, offering it. The outcome for AT&T is that it will undermine its cellular revenues because cellular calls from home will be at VoIP flat rate pricing, whereas now they are either expensive cellular voice or go over its fixed line network. It has to go ahead and do this, because otherwise VoIP and cable voice will eat further into fixed voice revenues.
But Comcast only has cheap flat rate VoIP revenues anyway, so if it creates an incredibly cheap cellular service with much of that traffic carried over its VoIP network, it eliminates the need for a fixed a home phone (everyone uses their mobile) and the lower cellular call charges are still all additional to its revenues. It might even produce a formula rich enough that it subsidizes or bundles femtocells, or has a hybrid Wi-Fi router/femtocell made as its cable modem outlet.