Femtocells to grow from 0.2 million units in 2009 to 12 million units in 2014

From Qualcomm's QMag:

Femtocell shipments will grow from 0.2 million units in 2009 at a compound annual growth rate (CAGR) of 127 percent to 12 million units worldwide in 2014, according to analyst firm Berg Insight.

In the U.S., 14.8 billion video clips are viewed online every month with an average user viewing time of 356 minutes and a consumption of 680Mbps (ComScore); in the UK, the average monthly consumption per user is 1.3Gbps(ComScore). This online trend is now migrating onto mobile. According to AT&T, data represented 27 percent of revenues in 1Q09 compared to 21 percent in the same period the previous year, with streaming audio and video accounting for 31 percent of network traffic.

In developed markets(Coda Research Consultancy), much of this mobile data explosion is generated by smartphone users, where the average year-on-year growth of mobile data per user is between three and five times.

“We need to drive down the cost per bit in operator networks while also meeting the rocketing demand for mobile broadband services, which is putting too much pressure on HSPA and HSPA+ networks,” said Simon Saunders, chairman of the Femto Forum. “We need a change and that is where femtocells have a major role to play.”

It is a change driven by the operators’ need to meet growing user consumption. Saunders told QMag that 90 percent of mobile data usage is indoors. “Because the data user experience is directly correlated to the quality of that signal, it makes sense to place femtos indoors where signals are weakest and therefore the user experience is poorest,” he said.

Questions are now being raised by mobile operators about whether macro networks will scale to meet the rapid upsurge in mobile data demand. In addition, coverage holes caused by building shadows and building penetration losses are limiting the performance of wireless networks indoors.

“Femtocells bring the network supply closer to the demand for services, and in the process, provide excellent signal conditions and high data throughput,” said Nick Karter, senior director of business development at Qualcomm.

Karter said operators confronted with capacity concerns will require substantial capital expenditures to improve macro network performance to support its heaviest users. However, operators can target their CAPEX in both the enterprise and residential environments by providing their heaviest users with femtocells. This will ease network congestion on the macro network and reduce backhaul capacity needs. In the process, femtocells can deliver indoor throughputs and peak rates well in excess of 1Mbps.

Similarly, Saunders is confident that the return on investment from femtocells will be considerably higher than a macro network upgrade path.

“Operators are starting to realize that the investment required to provide free femtocells to heavy data users is far lower than trying to achieve the same outcome with macro network upgrades,” he said. “Femtos deliver better voice quality and a vastly improved data experience at a cost no other technology can match.”

He claimed that 20 percent of homes in the UK have inadequate coverage for voice and data. In July, Vodafone UK became the latest operator to deal with the existing issue of mobile coverage at home using femtocells when it launched its Vodafone Access Gateway – targeting homes and small office locations. The UK operator positioned the service as delivering “more reliable 3G coverage indoors” and providing improved voice calls and faster data downloads.

Vodafone UK was the first European operator to launch a femto service, following similar announcements from Sprint and Verizon Wireless in the U.S., NTT DoCoMo and Softbank in Japan, and StarHub in Singapore. “These operators are the pioneers, and we will see more femto launches before the end of the year from other big operators,” said Saunders.

The Vodafone Gateway is available on a monthly tariff of £5 or a one-off cost of £160, while Verizon charges US$250 Femtocell shipments will grow from 0.2 million units in 2009 at a compound annual growth rate (CAGR) of 127 percent to 12 million units worldwide in 2014, according to analyst firm Berg Insight. (£157) for its Wireless Network Extender device. But as both Karter and Saunders explained, the costs are expected to be incorporated by operators as femto becomes a central component in the fight against churn. “Femtocells are creating a very sticky service for the consumer by providing operators with the ability to create differentiated offerings,” Saunders said.

Not only does femto have the additional attraction of being able to work with all 4 billion mobile devices operating around the world, it can deliver location-, context-, presence-, and user-based information.

Femto could deliver premium, bigger apps to the device when the user returns home and the device switches from the macro network to the femtocell. “When users are out and about they can use basic multimedia services,” Saunders explained. “However, when they arrive home they can use the femto to access far higher bandwidth services and synchronize their handset quickly and at zero cost with all of the media stored on their home network.”

As Saunders notes, femto is still in its evolutionary phase and requires key players such as Qualcomm to build on the standardized products in large volumes by delivering the silicon to femto-friendly vendors.

“We all need to draw on a common base of components,” Saunders said. “So we’ve been looking at femtocell devices and network gateways and started to harmonize design based on standards. This will allow consumers and operators to choose from a wider range of products as well as bring costs down through economies of scale. If it’s cheaper overall to deliver and it provides a better service, then everyone wins.”