Femtocell take-up poised for the big time

The market for indoor base stations, or femtocells, will develop rapidly over the coming years, according to new research.

Analyst firm Idate predicted that 10 million UMTS femtocells will ship in 2010, rising to 18 million in 2011.

Idate warned that a lack of agreed standards and outstanding technical issues will inhibit major rollouts in 2008.

But network integration issues are likely to be resolved by 2009 which, coupled with cost reductions, should lead to a ramp up in volumes in 2009 and 2010.

The company noted that, despite growing interest in femtocell technology, there are still considerable hurdles to be overcome before units can be rolled out on a wide-scale basis.

Despite the uncertainty, Idate expects commercial femtocell contracts to be awarded in 2007 or early 2008, and major network trials in early 2008.

However, other analysts are not convinced. Analysys warned that mobile operators will need to develop a robust business case for femtocells if the technology is to succeed.

The firm said that that large scale roll outs of femtocells carry considerable risk, and warned that many early business cases are not commercially viable.

"Femtocells are progressing rapidly from being an interesting emerging technology to being ready for mobile operators to deploy," said Dr Alastair Brydon, co-author of the Analysys report.

"Engineering departments within mobile operators have generally led the evaluation of femtocells but the next critical step is to define a profitable business case based on clearly targeted and compelling customer propositions."

Widespread use of femtocells solely to provide low-priced voice telephony in the home, although stimulating fixed-mobile substitution, could lead to disaster as the revenue benefits are highly uncertain.

Analysys reckons that offering a range of multimedia services will present a much stronger business case for femtocells, giving operators the chance to recoup investment within one to eight months depending on the model they implement.

"If operators can work out the kinks in the technology and find the correct balance of services and pricing, users could see femtocells rolled out on a very large scale in a short space of time, but it seems that stakeholders are walking a very fine line," said Dr Brydon.