* The component manufacturer announces plans to buy Percello Ltd., a privately held company that develops system-on-a-chip solutions for femtocells
We seldom feature a component manufacturer in our newsletter, but this edition is the exception as one recent transaction caught our attention. Broadcom, a successful supplier to multiple manufacturers that build everything from cable modems to VoIP systems to network switches, has announced it plans to buy Percello Ltd., a privately held company that develops system-on-a-chip (SoC) solutions for femtocells. Broadcom expects to pay about $86 million initially, plus up to $12 million more if Percello achieves certain performance goals.
Femtocells extend cellular coverage indoors where signals are weak, communicating with a service provider’s network through a wireline broadband connection. Wireless carriers benefit by offloading residential and enterprise voice and data traffic away from valuable radio spectrum and onto a wired connection, and users benefit by having better coverage on buildings that otherwise might have poor cellular coverage.
Will femtocells ever get their moment?
We found two interesting points in Broadcom’s plan. First, it allows Broadcom to better combine some of its existing portfolio (like broadband devices) with the incoming femtocell technology. Second, the femtocell market may be poised to explode. In the company’s statement, Aditya Kaul, Practice Director, Mobile Networks, ABI Research was quoted saying, “The femtocell market has turned the corner in 2010 with more than 1 million femtocells global shipments expected by conservative estimates this year. By 2015 we see more than 50 million femtocells being shipped annually with WCDMA femtocells making up the bulk of the market.”
We think much of the femtocell market growth will be driven by the increasing demand for mobile broadband content and applications, including mobile video and enterprise mobility. We’ve already seen some service provider pricing models that charge based on data usage transmitted to and from a cell tower, but don’t charge for data consumer by the smartphone when using a Wi-Fi access point that is connected by the Internet by a wired broadband link. With emerging 4G wireless download speeds 5M to 12Mbps promoting data usage but the usage caps imposed by wireless data plans discouraging too much consumption, it is little wonder that consumers and service providers alike are looking for a solution.
But the ultimate success of a femtocell may be decided by pricing plans. If wireless carriers don’t charge for data usage from a femtocell, then femtocells will thrive. But if carriers charge the same for data consumed regardless of the access technology, then the femtocell advantage of merely providing better in-building coverage may not be enough to spur much growth.
