Competitive Intelligence Highlight
Conference Round-Up: Femtocells and Home Access Points - Take One
Type: Advisory Report
Analyst: P. Jarich
Report Date: Jul 19, 2007
Module: Wireless Infrastructure
ID: CIR24971 |
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Issue
The telecom market is no stranger to hype. Year after year, new technologies are introduced, all promising to meet a broad array of operator and end-user requirements. Marketing and campaigns ensue. After a good deal of market "education" the new technology is seen as an inevitable success. Technology development and deployment delays ensue.along with an inevitable backlash. Somewhere in this process, the new technology gets its own conference or tradeshow.
Femtocells are clearly following this formula. With UMA and other dual-mode FMC solutions preceding it, the market education phase has been a short one - but it has also resulted in some undeniably inflated expectations along with the inaugural "International Conference on Home Access Points and Femtocells" held by Avren Events in London from July 3rd to July 5th.
Since the emergence of femtocells as a legitimate FMC technology last year, we've noted the technical and business complications facing their success in earlier reports (see "Femto Fray: The Obstacles Ahead," October 30, 2006). Many of these remain. Some new ones have risen in importance. While it is understandably risky to talk about obstacles to a large group of femto fans, the opportunity to speak on the topic at the Femtocell Conference was welcome.
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Regardless of the hype and obstacles, most anyone would admit that the femtocell market - as a subset of FMC - is still in the earliest of stages; trials are just now beginning. As a result, there's only so much we can claim to know about the space. And, over three days of conference presentations and panels, certain themes were repeated over and over. To people who work in the space, this repetition was doubtless annoying - hearing the things they already knew over and over. More broadly, however, repetition highlighted the points that everyone could agree on, the points that clearly need to be thought about more deeply and addressed if we want the market to develop.
Current Analysis Perspective
The basic value proposition of femtocells is simple to understand: all the benefits of WiFi-based FMC without relying on a limited supply of relatively expensive dual-mode devices. To this end, Avren's femtocell conference had no sessions specifically dedicated to selling the femtocell dream. Most speakers (myself included) made a reference to femtocell market drivers. The real focus, however, centered on market dynamics and market potential. What have operators learned from current FMC deployments? What obstacles need to be overcome before femtocells can deliver on their promise? What are the options for integrating femtocells into an operator's mobile core? What are the silicon options for building a femtocell? How big is the femtocell opportunity and when might it materialize?
As with any well-constructed event, each speaker had his own topic. And, as with any event, speakers were free to take their presentations in almost any direction they wanted. The result? Certain topics and themes were repeated multiple times over the course of several days. Combining these themes with the direction of the entire show provides a clear snapshot of where the market stands today, where it's going, and what it will take to get there.
. Business Issues - Femtocell Rationale. With the first femtocell trials still underway, the specifics of actually rolling out a femtocell-based service are still very much an unknown. Surprisingly, however, there was also limited insight into why an end-user would want a femtocell. Improved indoor coverage can be delivered by repeaters, dual-mode solutions or even additional macro-cell base stations. Improved capacity would follow. Femtocells remove the need for subscribers to purchase dual-mode devices, but this assumes they see the value in FMC services and are strong 3G users - 2G networks, after all, already provide strong coverage. The primary rationale, then, is operator-driven: transport offload, an enticement for subscribers to use 3G, improved macro-cell capacity, etc. In short, as illustrated on a panel treating the subject, the customer draw (today) is cheaper voice services while the operator draw is cheaper data delivery. But, with other solutions delivering cheap voice, the operator rational dominates.
. Business Issues - Ownership. Compact, low-capacity 3G base stations are not a new development. Femtocells, however, make them a residential reality by bringing costs down. But, this raises a critical question, who actually pays for the femtocell? If the end-user buys it, the service offer (and savings) will need to be very compelling. If the operator buys it, the costs of rolling out a femtocell solution quickly escalate. Most operators at the conference agreed that they would need to "own" the femtocell. Some might rent it out to customers. Others would include it as part of a service subscription. Regardless, it would be something they would need to own since it is an extension of their network - something they would want to manage and something that would be leveraging their spectrum assets. Sprint, with its vision of WiMAX devices (femtocells included) being completely unsubsidized, was the most vocal outlier.
. Business Issues - Marketing. While not a major topic of conversation, everyone agreed that femtocell service launches would require their own, dedicated marketing efforts. After all, beyond the basics of FMC marketing, femtocells come with their own unique value proposition and obstacles. At a minimum, broader acceptance will require one common, accepted terminology for the device: femtocell, home access point, home base station, 3G home gateway, home node, etc. Without one, the only expected result can be market confusion. Likewise, while fears of RF exposure are unfounded given a femtocell's low-power output, it will still be necessary to make sure end-users understand this point. Ultimately, however, if the femtocell value proposition is tied to mobile data usage (3G, WiMAX, etc.) the success of the femtocell market may depend most on basic 3G marketing, getting 3G devices and services into the hands of users.
. Network Integration - Love of Existing, Open Standards. Operators could launch femtocells that operate as little more than WiFi access points, interfacing directly into an open Internet and improving the data performance of 3G (or even 2G) devices. That isn't FMC, though. It doesn't provide any integration with an operator's mobile voice or data infrastructure. It doesn't provide seamless connectivity with an operator's OSS and BSS solutions. From an integration standpoint, then, there's no shortage of solutions for connecting femtocells into an operator's mobile core, the three front-runners being SIP/IMS, UMA and an "RNC concentrator" or gateway approach linking into the core via existing Iu interfaces. While too early to declare any one option a winner, operators made two things clear. First, the use of Iu interfaces into the core is particularly appealing. Yes, most operators are moving on SIP and IMS. Iu-based gateways, however, promise to integrate into existing kit in a well understood way. Secondly, an open interface from the femtocell into the gateway is expected. 3G networks have been built with base stations and RNCs coming from one vendor. Femtocells, however, may take different forms with different capabilities serving different market segments. No operator wants to be locked into a single brand of home base stations simply based on their network gateway vendor.
. Network Integration - Defining "Open". What is an "open" interface? Technically, it's any interface whose specifications have been made public.or, at least, released to interested parties. Unfortunately, this doesn't mean that the interface is generally accepted or even easily adopted. Take the example of NSN's new Femto Gateway. The vendor touts its reliance on standard and open interfaces. Yet, it also says that it will, "certify" the femtocells that interoperate with the gateway. Why is certification necessary? Because "open" does not mean "standard" and even where standards are employed, there are often various implementations of the standard. While it's understood that Iu-based solutions are attractive, it's also expected that a diverse set of open interface options from the femtocell to the gateway may fragment the market, opening up opportunities for UMA and SIP solutions.
. Femtocell Dynamics - The Importance of BOM. Noted earlier, the promise of low-cost home base stations - something end-users and/or operators could afford - has helped to make femtocells a viable FMC solution. The question of, "how cheap," is a rhetorical one. Costs on par with WiFi APs would be ideal - but difficult to obtain until scale significantly ramps up. Confounding scale, however, is the fact that there is no standard set of functions a femtocell is supposed to deliver. Femtocell vendors are pursuing their own interface strategies. Most have diverse solutions for interference mitigation as well as security. Some will want to include WiFi in the node. DSL is the current expectation for backhaul. Cable and even fiber options are likely to follow.likely integrated into various forms of set-tops and residential gateways. Conversations with silicon vendors reflected the situation. A single chip femtocell solution, it was argued, is feasible and would enable a sub-$50 bill-of-materials (BOM). Until vendors and operators agree on common forms and functionalities, few vendors would take the risk of developing such a solution and cost constraints will remain.
. Market Timing - Trials and RFPs Galore. Of course, one of the biggest questions surrounding the femtocell space is, "When will it take off?" There is little doubt that femtocells will get deployed. But, if this takes years, interest is bound to fade.while competing solutions gain ground. Luckily, vendors and operators alike leveraged the opportunity of the Femtocell conference to talk about their plans. Orange, already delivering UMA services, revealed its interest in a femtocell RFP (request for proposal). T-Mobile noted its commitment to femtos as an FMC solution, even as its U.S. arm launched a UMA offer. News of Vodafone's RFP hit the wires, O2 confirmed its investigations, and Sprint, once again, noted plans for WiMAX femtocells. Softbank even held a proof-of-concept demonstration in Japan with a slew of vendors including ip.access, Motorola, Sonus, and Ubiquisys.
. Market Timing - Look to the Trade Shows. Despite the upcoming femtocell trials and product investigations, the question remains, "When will the market actually take off, when will we have trial results and proof points?" Here, the scheduling of Avren's next two femtocell conferences seems like a happy coincidence. The next Avren femtocell conference is planned for early December, the one after than in June of next year. The hope is that #2 will provide a venue to talk about early trials with #3 detailing the results of early commercial rollouts. Amidst the hype surrounding femtocells, it's easy to overlook the fact that they're still an immature technology. The fact that mainstream, commercial services shouldn't be expected for 18 months is an important reality check.
. Femtocell Dynamics - The Importance of RF Planning. Obstacles to a successful femtocell launch were a favorite topic at the conference, particularly for operators hoping to convey their product requirements. And, judging by the number of times it came up, the biggest technical issue keeping would-be femtocell operators up at night is RF planning. For the sake of capacity, operators will want to launch femtocells on the same channel as their macro cell network. This raises the specter of indoor vs. outdoor interference, not to mention indoor vs. indoor interference (e.g., interference between neighboring femtos). Separately, for the purpose of hand-in from the macro cell network, the existence of hundreds of new neighboring cells (i.e., femtocells) could easily result in an overwhelming set of new cell global identifiers (CGIs) if a standard cell planning procedure is followed. Ultimately, the result could be downgraded network performance (indoor and outdoor), awkward handoffs and a burden on the core network in terms of cell management. Unlike obstacles which can be overcome by business practices or strategies, RF planning and interference worries will require specific, technical solutions from femtocell vendors.
. Femtocell Dynamics - The Importance of the Femto Forum. The day before the conference began, the Femto Forum launched. While the name suggests a tiny industry group, the stated goal of the group is straightforward: promote the uptake of femtocells through standards development, ecosystem development and market education. How important is this? Take a moment to review the points above (also, see "Avren Femtocell Conference: Femto Forum Formation," July 5, 2007). Where marketing is important, the Forum could represent one unified, compelling voice. Where a standard, open interface out of the femtocell is required, the Forum (with the help of operator members) could help in defining the interface. Where operators pursuing diverse functionalities could keep femtocell scale in check, the Forum could help to coordinate requirements. Yet, with Forum membership largely limited to a small group of femtocell specialists, it's still unclear how much power it can actually yield.
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