Femtocells

Om Malik wrote an interesting piece on Femtocells and the failures in Fixed Mobile Convergence (FMC).  Quoting from the article:

According to The Wall Street Journal, femtocells aren’t doing terribly well — sales are slow and demand is weak. It’s a classic chicken-and-egg situation. Carriers are waiting for demand to go up, while folks (like me) are waiting for prices — which currently range from $100 to $250 for the device alone, plus a monthly service fee — to come down.

The rest of the article goes into some details as to what the issues are but what jumps out is the phrase “plus a monthly service fee.”  This encapsulates precisely what I believe is wrong in the telecom world -more focus on small incremental revenues instead of looking at what service and value can be provided to make the customers happy.  The mobile industry is one of the industries where 15%-25% of their entire customer base churns out every year. What would it look like if the churn was an order of magnitude less?  Let’s see what the benefits of a femtocell are:

  • Remove load from the spectrum allocation and tower backhaul (scarce resources)
  • Improve the customer experience
  • Possibly reduce tower density (and associated cost with rental, power, backhaul)

For all this, you expect the customer to pay you to put a femtocell in their house? How about offering customers a discount for calls made via femtocell?

Now comes the delicate balancing act of figuring out who pays for the femtocell?  One option is to have customers buy them outright. Another one is to sell a discounted version, but extend the contract.  Asking for a monthly payment when the customer who is buying the device is unhappy with the coverage is just adding insult to injury.

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5 Responses to Femtocells

  1. director of front says:

    It is completely comical if service providers expect customers to pay for a device whose primary goal is to reduce utilization on the service providers network (rf, tower backhaul).

    Are there performance benefits to the customer? Sure, customers broadband connections probably are a better medium to reach the rest of the world than the legacy cellular backhaul networks (which are a myriad of ATM, Frame networks stitched together with pseudowires).

    Carriers for years have been covering the cost of customer CPE for years when it came to broadband CPE. In fact, mobile subscriber bills now rival or are greater than standard broadband Internet bills (low end DSL service can be acquired for cheaper than crack).

    Perhaps providers can further bundle services together such as offering a free femtocell unit to users who are or will acquire broadband access as well (AT&T and Verizon could play this card with their U-Verse & FiOS offerings).

    Either way, voice calls are nice to offload. But the real key is going to be offloading the data portion. Femtocell is nifty, but being able to have customers offload their data to the nearest WiFi AP or a femtocell and use a broadband connection should be the priority.

  2. tsoul says:

    People pay for improving their experience all the time. You can offer the customers a discount, but it’s not really all that cheaper in the short term for the carrier to terminate the user’s calls (or data, more specifically) over the net as opposed to over the air. Of course this seems contrarian, but if we did some rigorous analysis of the carrier’s deployment strategies w/r/t FMC we would see the truth of it. More importantly the experience is not really markedly improved for the end user and certainly not cheaper for the carrier in the short term, the costs are just being shifted around.

    I agree with your assertion that the carrier’s model for femtocells are flawed. (Mobile) carriers need to be thinking about how do I insert myself in the value chain, a prospect they seem to have a hard time doing because it involves partnerships, which carriers seem to have difficulty with. My ideal home carrier would provide me not only the triple-play services I should expect, but think about innovative ways to provide value in the home other than being dumb pipes for voice, video, and data. Of course this means people have to stop thinking of their carriers as evil. At the consumer level I never hear from anyone who thinks of their carrier in a positive light, whether its mobile, triple play, whatever. Its either the hatred for the way the carrier does business (consumer’s perception of a right to network neutrality or privacy), or customer service issues. Why do I want to buy any additional devices from a carrier I hate doing business with already?

    When you have sufficiently advanced devices, femtocells are less important. And since the carrier tends to want you to use a sufficiently advanced handset to even use femtocell service the problem just goes away. It’s all a little bit of a boondoggle.

  3. Femtocells shouldn’t even be something that you should have to pay extra for, they should be an essential element of every CPE. Just like wifi and other wireless technologies. Brough Turner once correctly remarked that wireless is about bits/herz/m^2. Introducing low power femtocells for any kind of wireless technology would allow for more bits to be send over the first 10-100 meters, giving users better service and allowing telco’s to squeeze more bits/month from their licenses.

  4. […] focused on the issue of who should pay for a femtocell.  Views are typically polarised, as seen here: one commenter believes it’s “completely comical if service providers expect customers to pay […]

  5. Jim Forster says:

    Well, the other consideration is, why bother with Femtocells? Mobile carriers don’t have too much of a voice bandwidth problem, but they have an enormous data bandwidth problem. Hybrid devices (e.g. iPhone) that can easily switch to WiFi when it’s available are an easy way to offload the some of the data from the operators wireless spectrum to the fixed broadband network. Not perfect, but pretty easy.

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