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David Williams
Global Director of Sales, Research
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Femtocells: U.S. Market Prospects
If there's one safe bet regarding femtocells, it's that success or bust, they're guaranteed to go down in telecom history as one of the most-watched and most-hyped technologies ever. Beyond that it's a crapshoot, because most service providers and equipment vendors are still trying to figure out where femtocells fit in to their network architectures and service plans.

That fit is both literal and figurative: Literally, for example, most vendors are still knee-deep in critical integration issues such as avoiding interference between femtocells and the macrocellular network, and integration with an operator's operations/billing support system (OSS/BSS). On the figurative side, wireless carriers are hashing out whether femtocells should be used to encourage more wireline displacement, including cable VOIP, to tame rising cell-site backhaul costs, and whether they can be used to reduce churn among high-value customers.

None of these issues are trivial, which is the main reason why 2008 will be a year of limited trials in the North American market, with major deployments unlikely until 2009 or 2010. Another barrier to near-term deployments is cost: There's a broad consensus among equipment vendors and wireless carriers that to be a mass-market play, femtocells must retail for significantly less than $100. Whether that price point is achieved by vendors wringing out costs, through deep operator subsidies, or both, is yet another issue that the industry will spend 2008 trying to figure out.

Unstrung Insider believes that for many vendors and wireless carriers, the business case for femtocells centers as much around saving money as it does around making it. Potential savings include reining in macro-network backhaul costs and customer-acquisition costs both sorely overlooked and underappreciated factors in most discussions of femtocells thus far.

Although femtocells are generally viewed as the domain of wireless carriers, it's a mistake to dismiss telcos and cable multiple system operators (MSOs) as players in this space. Their roles directly affect a wireless carrier's ability to successfully offer femtocells. Telcos and MSOs could also serve as important partners for wireless carriers that lack wired broadband and video services, such as Sprint Nextel and T-Mobile USA.

The likelihood of those partnerships is one of the reasons why femtocells are likely to evolve from standalone devices to modules integrated into other products, such as gateways, cable modems, and set-top boxes. This integration should help lower price as a barrier to femtocell adoption by hiding that cost in another device and by sharing components such as power supplies. Device integration will also lead to more partnerships between wireless carriers and broadband providers.

Widespread femtocell adoption could also have a negative impact on telcos and MSOs betting on significant additional revenue from leasing backhaul, such as T1 lines, to wireless carriers as they ramp up bandwidth-intensive technologies such as EV-DO Revision A and the 7.2-Mbit/s version of HSDPA. For example, if femtocells offload a significant amount of data traffic, wireless carriers would be under less pressure to add T1s and radios to each cell site.

This report identifies and analyzes these and other key issues that will affect the deployment of femtocells in the North American market through early 2009. It looks at how femtocells will affect the competitive landscape, not just among wireless carriers, but also among telcos and MSOs. This report also profiles 16 leading femtocell equipment vendors, offering insight into which companies are best positioned to emerge as key players in this market.

Sample research data from the report is shown in the excerpts below:
Table of Contents (uni0308_toc.pdf)
Macrocells, microcells, and picocells typically include only BTS functionality, while femtocells typically integrate functions of both a BTS and a base station controller (BSC). So while its larger siblings have the BSC as an intermediary between them and the core cellular network, the femtocell communicates with the mobile switching center (MSC) or softswitch, as well as with data infrastructure such as GGSNs, with a packet data gateway in between. This distinction is just one example of how femtocells are more complex than the analogy of a shrunken BTS might imply. Excerpt 1 illustrates where femtocells (shown in red) typically reside in a cellular network.
[click on the image above for the full excerpt]
Companies profiled in this report include: Airvana Inc. (Nasdaq: AIRV); AirWalk Communications Inc.; Alcatel-Lucent (NYSE: ALU); Continuous Computing Corp.; Huawei Technologies Co. Ltd.; ip.access Ltd.; Kineto Wireless Inc.; Motorola Inc. (NYSE: MOT); NEC Corp. (Nasdaq: NIPNY); NextPoint Networks Inc.; Nokia Siemens Networks B.V., a joint venture of Nokia Corp. (NYSE: NOK) and Siemens AG (NYSE: SI; Frankfurt: SIE); RadioFrame Networks Inc.; Samsung Telecommunications America LLP, a subsidiary of Samsung Electronics Co. Ltd. (Korea: SEC); Sonus Networks Inc. (Nasdaq: SONS); Tatara Systems Inc.; and Ubiquisys Ltd.
Total pages: 23
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