Femtocells to cure 3G headaches?

The mobile phone is coming home. A device originally designed for people on the move has become a favourite toy indoors too - and not just for texting or catching up on the latest gossip from friends but for richer data and video services too.

While this might sound like music to the ears of mobile operators there is a snag - and an expensive one at that.

Operators are having to face up to the challenge of providing high quality indoor coverage to cater for habitual handset users, which - in one scenario - means more base stations to provide the necessary network density.

But there is another way, according to a new report from analyst Analysys, entitled: Femtocells in the Consumer Market: business case and marketing plan.

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Market demand for ubiquitous access to mobile services is making the case for femtocells - aka small indoor cellular base stations which utilise broadband connections for backhaul.

Mark Heath, co-author of the report and director of research at Sound Partners Research, told silicon.com: "The idea of femtocells is a really clever way to avoid needing to make these big 3G networks more dense to provide the necessary quality of service."

Some operators would have to double or triple the number of base stations they have to provide the very high quality of service required for indoor coverage, according to Heath.

He added: "By eliminating transition costs by utilising DSL connections already in people's homes and getting the unit price down to a very low level, it could be a more cost effective way to deliver services."

Femtocells could also cut the cost of building expensive broadcast networks - such as DVB-H - to cater for mobile TV, as a less dense network would be needed and therefore fewer base stations.

Heath said people's expectations are always ahead of what the network can deliver - citing the example of Japanese operator NTT DoCoMo's ongoing investment in its 3G network. "Almost each year they are upping their rollout plans," he said, adding femtocells offer "another option" to operators who haven't invested significantly in 3G, with sparse macrocell 3G networks providing outdoor coverage and femtocells covering the indoors.

The technology could offer additional benefits for consumers, said Heath, such as location-based services. A femtocell has the ability to know you are home so could provide a specific service tailored to location. For instance, a parent could be alerted by SMS that their child has arrived home.

However, while there is a clear business case for homes that don't currently have indoor mobile coverage - and are therefore more likely to be willing to pay for the coverage offered by a femtocell - the report warns operators should avoid the danger of overestimating revenue expectations from non-voice services.

And there are significant risks for business too, said the analyst. Mobile users are already often paying a premium to use their handsets indoors for voice calls - a revenue stream that might be jeopardised by raised expectations of lower call costs when at home and connecting via a femtocell.

The report also warns operators should be wary of the power of negative press around the idea of people having base stations inside their homes - even if the reality is the devices are not in any way harmful to health.

Heath added: "Everybody's excited about these things and they do have big potential but it really is a case of being very careful what the proposition is that you go to market with and who you are targeting because if you get that wrong then it could be an expensive mistake."