With the passing of another year, it’s time to reflect back on the achievements of the last 12 months and consider what awaits us next year. As usual, we compare progress with our predictions from this time last year and make some bold assertions of what’s to come.

How did ThinkFemtocell do?

First let's mark our own report card for 2010 using the predictions we forecast a year ago:

 

Prediction at end 2009	Accurate	Comment
Commercial launches continue with 20 operators live by end 2010. At least 5 operators offer more than one type of femtocell.	Wrong – slightly too optimistic	Operator launches did double from 8 to 16 by our count, but only 2 or 3 have multiple types of femtocells (notably Sprint and Verizon both offering 3G CDMA femtocells while still keeping older 2G in operation). Vendors offer several models within their portfolio (eg residential and enterprise etc) such as ALU and Huawei.
SIP/IMS femtocell standards published for 3G CDMA and actively deployed in the US	Correct	Sprint launched 3G CDMA femtocell based on the new 3GPP2 standard, although Verizon chose to go down the proprietary route.
Prices reduce towards $100 by the end of the year, with integrated modem/router/WiFi/femtocell products for less than $150	Correct	Ubiquisys claim that femtocell prices have now reached the $100 target unit cost, although this depends on volume and there are other costs, however high unit price no longer seems the limiting factor for takeup
Operators more actively promote their femtocell offerings. A range of more attractive pricing options.	Correct, but only from a few operators	Strong marketing campaigns from Vodafone UK (who discounted thousands of units to £20/$30 as  a one-off special offer) and ATT Wireless, but some other operators still keep relatively quiet about their commercial offers.
"Unlimited" outdoor data tariff plans replaced by a wider range of pricing options, including premium prices and encouraging greater data offload	Correct	ATT and Verizon both withdrew their unlimited data tariff plans, introducing data caps – a strategy matched by most operators worldwide. However little has been done to encourage data offload to residential/commercial– many still charge for data used on femtocells at home at normal rates.
Business case is better understood including the competitive threat (to femtocells) from WiFi for data use on smartphones.	Some progress	Various reports and documents published, but there still seems to be a need for further clarity/education on the topic.
Some consolidation in the industry with at least one industry startup being taken over or dropping out	Correct	While there is growing diversity of femtocell access point (FAP) manufacturers (some 25 to date), Airvana dropped out of UMTS femtocells to concentrate on CDMA only and Percello was bought by Broadcom
LTE femtocells won’t become reality until at least 2011, operators will continue to prepare and roll out initially using traditional macrocellular basestations	Correct	Although NTT DoCoMo strongly asks for LTE femtocells for use in 2012 and several vendors are already demonstrating products, the larger market for LTE remains some years away.

 

Overall: Continuing good progress and consolidation.

The term “Year of the Femtocell” seems to have been applied to each of the last few years, setting a high expectation that the industry was poised for takeoff. Having completed standards work and conducted many technical and market trials, perhaps 2010 will be remembered as the year when trials and testing gave way to significant numbers of femtocell shipments.

We estimate that femtocell shipments reached some 1.8 million units by the end of the year in total, with at least one operator shipping some 100,000 units a month.  This closely matches analyst estimates: Informa estimate 1.7 million deployed femtocells by end 2010; iSuppli estimate 1.9 million shipments; Strategy Analytics estimate 2 Million shipments. The number of live commercial networks has doubled from 8 to 16, all of which now offer 3G femtocells. The momentum is building up for significant volumes to be shipped next year.

Several networks have also launched enterprise femtocells, which can handle higher numbers of concurrent calls at longer range.

Further research and development continued towards:

• larger capacity/lower cost femtocells
• LTE femtocells
• metro-femto (public outdoor)

Many other networks are actively preparing for launch, indicated by numerous contract awards and regulatory acceptance around the world.

Technical

Residential femtocell testing and market trials have given way to further commercial rollouts from large to small operators. Technical issues are generally understood and further clarification of the standards has been made. Chip vendors have striven to provide higher speeds (21 Mbit/s HSPA), higher capacity (from 4 to 64 concurrent calls, hundreds of inactive data users) and longer range – all at lower prices and lower power consumption (5 Watts with the latest designs).

Having conquered the technical challenges of residential and enterprise femtocells, more attention is being focussed at so-called metro-femto for public outdoor use. While Picochip announce their LABS compliant design, the industry has been considering carefully how to integrate and configure femtocells for open access as an integral part of the network.

Meanwhile, the new 4G LTE standard already embeds the femtocell concept and several vendors have already demonstrated working products.

Standards

While the major achievements for standards work in 2010 involved extending femtocells to new technologies. The formal approval of standards for 3G CDMA, WiMAX and LTE were all completed during the year. Progress and refinement continued in the earlier UMTS femtocell standard at both the 3GPP and Broadband Forum standards committees.

Meanwhile, the industry started to demonstrate that the standard has been implemented, with interworking between vendors products conducted at a "plugfest" in March 2010. A second event is planned for March 2011. Many vendors have made press announcements about their compliance.

Commercial product

The range of femtocell vendors grew substantially during the year, with some 25 femtocell access point vendors offering a range of around 50 different products. Most femtocells today are manufactured in the Far East by low cost ODMs (Original Device Manufacturers), who have the economies of scale to built large volumes at low cost.

Cost

It is said that hardware cost for femtocells no longer prevents market takeup. Software and integration costs are still significant, but these are directly related to volumes. The main factor in cost now is how quickly and how many units are shipped. Where the integration and software costs are spread across larger numbers, then cost per unit drops further.

The cost for metro-femto and enterprise femtocells which both have higher specifications is still in the 100’s of dollars price bracket, substantially lower than mainstream cellsites, and will be an attractive solution to solve data capacity and coverage issues in the near future.

Business Case

The growing number of network operators now publicly committed to launch femtocell services, together with the bullish announcements from end-to-end femtocell vendors such as Alcatel-Lucent, demonstrate that the industry now accepts the business case for femtocells. Some large investments are being made, both by operators and by vendors.

Further work on the business case for individual operators is needed. The situation in each country varies widely and needs careful analysis to determine how best to approach the market.

Marketing

Top marks to Vodafone UK for heavy marketing of their SureSignal proposition which included a limited offer of units at £20 and media campaign using many channels during the year. Despite concerns that highlighting poor mobile phone coverage may backfire and cause customer complaints or concerns, the operator has differentiated themselves as the only one that can guarantee coverage. ATT, SFR and others have also had some good marketing campaigns, but we’ve seen others launch the product with much more limited marketing budgets. Perhaps the natural cautious conservative behaviour of operators will give way to stronger media campaigns in the future once confidence of the products operation and benefits are recognised.

Competitive

Wi-Fi remains the major competitive threat for femtocells in the long term, particularly as the focus shifts to data offload rather than voice coverage. The Femto Forum published a paper on the topic in the summer to address this. Some operators continue to invest heavily in public Wi-Fi infrastructure to augment and offload their busy 3G networks – for example ATT are reported to be installing 5x more Wi-Fi public hotspots than new cellsites. Having seen concerns in the press about Wi-Fi security issues when used at public hotspots, we may see a consumer backlash that wants a more secure, easy to use and reliable mobile data service than currently offered.

Femtocell Report Card Summary

Predictions for 2011

• Commercial launches continue with over 30 operators live by end 2011.
• Metro-Femto public outdoor femtocells deployed in at least 3 countries
• Integrated modem/femtocell products launched by at least 3 networks
• First Iu-h compliant femtocell commercially deployed
• Data capacity/quality becomes a differentiator for mobile network operators as data traffic and signalling continue to swamp networks
• Security concerns about public Wi-Fi use cause widespread concern and are reported in press
• Operators introduce a range of more attractive pricing options.
• LTE femtocells not commercially deployed until 2013

 

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