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Femtocells: Market Outlook & Reality Check
Since early 2008, the industry has made significant progress toward resolving technological issues, including minimizing femtocell interference with the macrocellular network and creating standards for multivendor interoperability. There is still much to do on those fronts, but even if everything were resolved tomorrow, the lack of revenue-generating business models would still stand in the way of aggressive, widespread deployments.

Today, femtocells drive a small amount of additional revenue, usually by encouraging wireline displacement and incentivizing members of a family or business to consolidate all of their phones on a single carrier. Tomorrow, femtocells' value proposition must change to drive more revenue. It is tough to convince customers to pay $50 or more for the femtocell, plus $10 to $20 for the accompanying service plan, just to have decent coverage. It could be an even tougher sell for carriers that have spent the past few years creating the perception that excellent coverage is already included in their monthly fees.

Femtocells rely on broadband for backhaul. Thus, the addressable market for femtocells is limited to consumers and enterprises that subscribe to broadband or at least have the ability to sign up. This year, many countries have created stimulus programs to expand broadband infrastructure, particularly in rural areas. Those initiatives will take until at least 2012 to be completed, but each rollout along the way steadily increases the addressable market for femtocells and the services that run over them. Though these stimulus packages are a lot of money, they will go only so far.

Femtocells' value proposition to end users and to service providers and their business partners is slowly evolving. Investors should pay close attention to this evolution because it directly affects femtocells' market and revenue potential.

Further down the road probably 2011 and later femtocells' value proposition will evolve again into a way to sell services that are impractical or impossible to deliver over other networks and devices. In the process, femtocells will begin providing more value to end users, instead of simply better coverage. This evolutionary shift is critical, because the more value end users perceive in femtocells, the more willing they will be to pay for them. That, in turn, reduces the need for large operator subsidies and improves the profitability of femtocells.

Femtocells: Market Outlook & Reality Check identifies and analyzes key issues that will affect the deployment of femtocells in consumer and enterprise markets through early 2011. It looks at how femtocells will affect the competitive landscape among wireless carriers, telcos, and MSOs. The report also profiles 14 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 (uni0909_toc.pdf)
As their "femto" prefix implies, femtocells are miniature cellular base transceiver stations (BTSs), including what the GSM community refers to as a Node B. They also can be integrated into other devices, including residential gateways, cable and DSL modems, and set-top boxes. Femtocells typically cover about 5,000 square feet, which varies based on factors such as building materials, and are the smallest and newest members of the BTS family. The following excerpt illustrates where femtocells (shown in red) typically reside in a cellular network, in this case a GSM system.
[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); Cisco Systems Inc. (Nasdaq: CSCO); Continuous Computing Corp.; Huawei Technologies Co. Ltd.; ip.access Ltd.; Kineto Wireless Inc.; Motorola Inc. (NYSE: MOT); NEC Corp. (Pink Sheets: NIPNF); Nokia Siemens Networks B.V., a joint venture of Nokia Corp. (NYSE: NOK) and Siemens AG (NYSE: SI; Frankfurt: SIE); Samsung Telecommunications America LLP, a subsidiary of Samsung Electronics Co. Ltd.; Tatara Systems Inc.; and Ubiquisys Ltd.
Total pages: 22
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