There are something like 3.7 Million cell towers (or basestations) worldwide. How long will it take before domestic femtocells reach that number. I’ve estimated that this could happen during 2010, only 18 months from now, by which time the RF landscape of network operators could be radically different. Read more about my assumptions and implications.
How many cell towers are there?
A good ratio of cellphones to cell towers is something like 1000:1. That’s not to say that each tower can handle 1000 simultaneous calls, or that towers are used efficiently. Traffic patterns vary depending on time of day (workplaces being busy during working hours, suburbs being busy in the evenings). Factors involved also include the frequency range used (higher frequencies don’t travel so far or penetrate into buildings so well), the topology of the country being covered, even the materials used in building construction. I’ve heard of actual ratios vary from perhaps 500:1 through to over 2000:1 in different networks. It’s also depends whether you count 2G and 3G combined cellsites as separate or not – I’ve assumed these are a single shared resource.
With over 3.7 Billion mobile phone subscriptions today, this translates to some 3.7 million cellsites worldwide. This is likely to grow to some 4 million sites during 2009.
Consumer wireless products ship in very large quantities
The numbers involved are staggering. This 1 trillion dollar industry includes sales of 1.2 Billion mobile phones in 2008 , an increase of 5%. Exciting new products can fly off the shelves in no time - Apple sold 1 Million 3G iPhones in the first weekend they went on sale last summer.
Engadget reports the time taken for various products to achieve global sales of 1 million units in the US alone:
Addressable Market Size and potential takeup
The target market for femtocells is mostly restricted to developed countries with high wireline broadband penetration – North America, Western Europe, Middle East, China, Japan etc.
Something like a 1 Billion target addressable market size might be reasonable estimate.
Unlike the commercial restrictions of Apple iPhones, all networks can offer femtocells to their customers. The issue is more about where and when networks will bring femtocells to market.
With the US market already open to several femtocell products, let’s assume that by the end of 2009 half of this addressable market would be able to buy one in their own country - some 500 million potential customers.
In order to reach a sales total of 4 million units and outnumber outdoor cellsites, we’d be looking at 0.8% buying the product.
It’s fair to point out that femtocells are often shared between multiple subscribers in a house, which could inflate this percentage to something more like 1.5%.
Compare this with the estimated minimum of 10% of subscribers that are dissatisfied with their indoor coverage at home.
Many analyst estimates and reports are available to predict longer term takeup of femtocells, with ABI research suggesting some 40 million units sold by 2013. If this were realised, femtocells would outnumber outdoor cellsites by some 10:1. Other analysts are more cautious. Whether you believe these estimates or not, breaking through the 4 million barrier seems quite realistic.
How long to reach the goal
I believe that “early adopters” in the terminology of the product lifecycle could be enough to reach this target. Given the interest from the most enthusiastic supporters (what I’ve termed “arm biters” in my categorisation of femtocell commenters ), I believe we could see stronger adoption than witnesses for dual-mode WiFi/UMA services, providing there is healthy marketing promotional activity.
With new networks likely to launch these products during 2009, it’s not unreasonable in my view that femtocells could average sales of 200,000 units over the next 18 months and thus achieve the goal by mid 2010.
It may be that I’m too cautious, but without knowing the actual launch dates of femtocells in each operator (and their marketing budget or price package), I think this is a reasonable. By that time, monthly shipment volumes would be higher and growing.
Changing the network landscape
With more cellsites in homes than celltowers, a lot of traffic capacity will be offloaded. This will have a beneficial affect on those who continue to use cell towers, both when out and about as well as in their own homes. Reduced traffic loads mean less interference – signals can travel further, signal to noise ratios are improved. Coverage and capacity should improve to provide better end user experience.
Part of the business case for femtocells is that operators can offset their cost from savings made on their cell tower costs. This doesn’t really kick in until femtocells reach something like 20% penetration – much higher than the figures I’ve estimated above – but there will be some benefit. There should also be lower churn previously due to poor coverage in the home.