The recent rumour that BT, a fixed network operator in the UK and also an MVNO, is to offer femtocells may or may not prove correct. While we don’t tend to work on rumours alone, it does open up a potential new business model that is worth exploring. Here are a few thoughts on the topic.
BT’s competitive environment
BT is the incumbent landline provider in the UK, with some 20 million landline voice connections. BT Openreach provides these on a wholesale basis, and is required to sell these on the same basis to any other retailer. Many ISPs use this white-label service to offer broadband internet, adding their own email, hosting and customer support services in what has become quite a competitive market. Voice calls can also be directed through 3rd parties on a wholesale basis, again making the market very competitive.
In response, BT Retail has kept up with a range of services so that it isn’t competing on price alone. They offer IP television through their BT Vision product, which combines free to air TV channels with premium subscription channels such as sports and downloaded content.
As with many ISPs, they bundle the DSL modem/router/WiFi box with their service package. This allows them better control and simpler customer support instead of supporting a wide range of different boxes. They are strong supporters of Wi-Fi and have adopted the Fonera business model where their customers can allow others to use their Wi-Fi (through a separate, secure channel) in return for free access to others when out and about.
Other differentiators include bundled Wi-Fi minutes when away from home, introductory pricing with low headline rates, anti-virus security for PCs, online data storage and more.
BT as an MVNO
BT also retails a branded mobile phone service, delivered through Vodafone’s mobile network. This allows their customers to deal with a single communications provider, with a minimal investment from BT to provide it.
Why would BT offer femtocells?
The rumour is that BT Retail will resell the existing Vodafone SureSignal femtocell provided by Alcatel-Lucent/SAGEM. It’s unknown if this will be targeted at residential and/or business customers.
Since BT already provide DSL modems and broadband service, this should be relatively easy for them to add to their range. They will need to adapt their customer care and back office provisioning systems, linking these into Vodafone to activate and manage the device (or have arrangements with Vodafone to do so).
I would expect them to promote this in a different way from Vodafone, in order to justify a reason for customers to choose them instead. This suggests it’s more likely to be bundled as an option with their broadband and landline packages.
Wouldn’t it make more sense for an integrated box?
Today’s femtocells are all provided as standalone units, connecting into existing DSL or cable modems. Sometimes this has led to technical issues because of compatibility with particular modem/routers or conflicts with other devices.
Several vendors have already demonstrated combined products which integrate both the femtocell and modem, reducing the possibility of configuration errors, problems with voice traffic being swamped by PC downloads/uploads and software upgrades.
Without any prior knowledge of BT’s plans, I would suggest it makes great sense if they could offer an integrated modem/router/Wi-Fi/femtocell box to their customers. This could be part of a premium package, either charged at higher rate or linked to taking out a mobile phone subscription through BT.
Is this business model of interest to other fixed network providers?
I’ve heard it said several times that those network providers with both fixed and mobile assets have the upper hand. They can deliver a femtocell service with end-to-end management because they control both the mobile network and the wireline broadband.
In some ways, wireline providers are more suited to providing residential equipment (so called Customer Premises Equipment – CPE). They have been doing so for many decades and have experience of customer support, configuration management etc. This is also true of cable operators who provide set top boxes.
Where the wireline provider already offers a range of service, adding a femtocell option seems to be a useful differentiator. It remains to be seen if this encourages everyone in the home to switch to the single provider for all their fixed and mobile communication services.
For those fixed operators in the same situation as BT, this business model is worth investigating and if it is launched I am sure many will be looking closely at its success.