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Can femtocells live up to the hype?

Pricing, standardization and interference are all key issues for “mini-cell towers”

By Brad Reed, Network World
January 08, 2008 12:00 AM ET

Network World - While having your own personal cell tower may seem like a tantalizing prospect, you might have to wait a while longer before it becomes a reality.

Although femtocells have generated quite a bit of hype for their potential to save money and boost call quality, analysts and manufacturers say that there is still much work to be done if femtocells are to have a major impact in the wireless market. In addition to lowering the cost of producing femtocells, manufacturers need to figure out how to prioritize voice traffic over IP, to standardize femtocell architecture to avoid industry fragmentation and to mitigate interference issues with cell towers and other femtocells. These may seem like daunting challenges to meet over a short period of time, says Paul Callahan, vice president of business development Airvana, but they're ones that femtocell manufacturers will have to face in order to successfully bring their products to market.

“It's very hard to do right, especially when you're trying to do it right out of the chute,” says Callahan, whose company specializes in broadband wireless infrastructure and has been developing technology for femtocells. “If it's anything like the way that security operated initially for Wi-Fi, then we're all going down.”

The concept behind femtocells is easy to understand. Essentially, they're designed as small cellular access points that route nearby wireless voice traffic through preexisting broadband connections. In this way, femtocells can provide VoIP for wireless handsets that can both improve call quality and save money by letting users make calls without using up their cell minutes. (compare VoIP management products).

Femtocell pricing

But one problem that could keep femtocells out of homes and offices is their price. Gartner analyst Akshay Sharma says that even though femtocells are still in their trial stages, many of the vendors he's spoken to say they're likely going to charge about $200 per femtocell unit. This is roughly two times the price that Vodafone CEO Arun Sarin says would be needed to make femtocells a widespread success.

Gartner analyst Deborah Kish thinks that $200 might be too much for a consumer to pay for a femtocell, but notes that it might entice enterprises that want to save money on their monthly telecom bills. As more and more enterprises try to save money by encouraging employees to use wireless handsets instead of landlines for business calls, they would be the ones to most benefit from having femtocells route call traffic through the broadband connection. Additionally, femtocells could boost the quality of mobile phones in the office to the point where employees could feel less inclined to rely upon their landlines for consistent service.

Of course, carriers could solve their pricing problems in the consumer market by subsidizing losses in their femtocell divisions in order to keep prices low and entice early adopters. Currently, Sprint is offering trials of its Airave femtocell units for about $50, while charging customers a flat monthly rate of $15 for individual plans and $30 for family plans. And while vendors might be looking at charging high prices for femtocells now, notes Callahan, it's still far too early to tell what vendors will charge once the devices hit the competitive market.

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