ABI Research, one of the leading analyst proponents of femtocells, issued a somewhat despondent end of year summary for 2011, noting that the growing number of live commercial femtocell operators wasn't translating into the large number of shipments they had forecast a year or more ago. Their latest market size estimates provide some insight into the size and shape of the femtocell industry today.
- 2.5 million femtocells shipped in 2011 (up from my estimate of 1.5-1.8 million in 2010)
- 88 femtocell commercial operator contracts
- 37 femtocell services commercially launched
- Alcatel-Lucent, Huawei, Ubiquisys (through NEC, NSN) jointly 1st place for share of contracts
- Cisco/ip.access and Airvana/Ericsson jointly 1st place for share of units shipped
- Top 2 operators (Sprint, AT&T) took up more than half (55%) of all units shipped
Aditya Kaul, their principal analyst/practice manager covering the subject, gives the main reason for this being the lack of market promotion by network operators. They've tended to limit residential femtocells for use as a "retention tool", giving them away to unhappy customers about to leave because of poor inhouse coverage. This leads him to comment that "Femtocells are still largely used as Band-Aid solutions by most operators to cover up coverage holes. While operators like SFR in France are attempting to move beyond the Band-Aid proposition and use it as a competitive acquisition tool, the market needs many more SFRs to carry the momentum forward and achieve true mass-market status."
Nonetheless, I'd comment that the stark difference between the 88 contracts and 37 commercially live networks indicates there is a growing momentum of deployments and we could expect to see a continuing increase in live femtocell networks in the year ahead.
So what does 2012 hold?
Aditya explores a view that a large (non-telco) player such as Apple might enter the scene, perhaps integrating femtocell technology into its existing wireless products such as the AirPort.
I don't share this view and don't see the commercial business case for this.
Wi-Fi in the home has proven to be cheap and ubiquitous for data devices, with so many smartphones, tablets and PCs incorporating it. Users (especially power users) actively choose to switch to Wi-Fi when possible for the high speed and better performance it provides. There is no lock-in to a particular cellular network operator. What would Apple be able to provide in terms of better user experience or service through their own femtocells that they can't offer today? The cost of acquiring spectrum, regulatory approval, network roaming arrangements etc. on a worldwide basis would be substantial.
Although not yet trivial, the comparative ease of setting up/configuring Wi-Fi in the home reduces the attraction of a remotely managed femtocell for data only, although I'd still place the femtocell as easiest option of the lot. Once outside the home, issues around ease of use, security, cost and highly variable quality all become more significant and are where mobile network operators have most value to bring.
Will the market focus move outside the home in 2012?
Access to data on the move is more critical than ever. The ability to check email, facebook and other messages – being in constant contact throughout the day – has been a growing trend of the last couple of years. You only need to walk down the street to see people viewing their smartphones as they bump into you where before they would have been distracted making voice calls.
The quality of mobile data service – in terms of speed, latency, capacity and quality – is highly variable and remains a critical challenge for mobile networks to address. Certainly the difference between network operators is extremely noticable where I live and work and should make a greater difference to how consumers select their network providers in the future.
With the high speed and capacity of small cells and femtocell technology already being shown to be extremely cost effective compared to traditional macrocell sites, mobile network operators are rightly exploring the option of HetNets which mix both large and small cells into a coherent and high performance system. Those network who have already invested in integrating a femtocell gateway into their networks will be in a strong position to capitalise quickly on that for complementary small cell applications.
Measuring success with different metrics
This means less emphasis on measuring just the simple numbers of femtocell shipments. Metrocells and enterprise femtocells, often engineered in more robust packaging and with higher capacity, attract a premium pricepoint above that of residential units at low margins. While still much more cost effective than expanding with macrocells alone, the dynamics of the industry and pricepoints for individual components are set to change. This will affect all levels of the femtocell and small cell "food chain" and we can expect to see vendors and operators repositioning themselves.
I expect 2012 will see femtocell technology make a turn on its path to ultimate success.