Femtocell Opinion, comment and reviews

Over 50% of femtocell operators insist you use their broadband too

femtocell connected homeSome quick analysis of residential femtocell offers available today showed that over half (8 out of 14) require you to buy their wireline broadband service too. Is that percentage likely to remain the same as the market grows, and does this give either party an advantage?

It’s the mobile operator’s choice

Femtocells must be connected to your own mobile network operator. They form an extension of the live network and connect through to the same telephone switches, routers, voicemail and billing systems that are used when outdoors. Since you are required to buy them from your mobile operator, they can determine whether you must connect it using their wireline broadband service or not.

This can be enforced by restricting the range of IP addresses which are routed into the femtocell gateway.

Mobile operators sometimes resell wireline broadband from other suppliers

In cases where the mobile network operator doesn’t directly provide it’s own wireline broadband service, a white-label wholesale offer is sometimes available. For example, Vodafone UK resells DSL broadband from BT (the major DSL provider). This gives them the option to require customers to switch to their service if they wanted to mandate it, but they've chosen not to make this a requirement.

Some mobile and fixed network operators have chosen to allow any broadband connection too

AT&T offer a DSL broadband service in many parts of the US, as well as a high speed fibre broadband service in a growing number of localities. However, they recognise that the most popular broadband services are supplied by the Cable TV companies and have also chosen to allow connection through any available broadband service.

Their approach is to offer a discount/rebate for customers who use their broadband. This carrot, rather than stick, approach of offering an incentive to customers seems a much more amiable way of doing business.

What are the downsides of mandating the same wireline broadband service?

Although changing wireline broadband suppliers has become much easier in many countries in recent years, the process is not without hiccups and the potential for disruption. As with changing bank accounts, customers are often somewhat concerned of the risk of being disconnected and the potential for disruption requiring extra phone calls to their providers.

The extra “switching cost” may deter some otherwise willing customers who only wanted to trial the system first. Imagine trying the new femtocell and finding out it didn’t work, but you are stuck with a different DSL provider for a long contract period.

So why should network operators insist on customers using their wireline broadband?

Financially, if operators can sell more services then they make more money. The question is whether mandating additional products will actively reduce sales or attractiveness of the femtocell itself. With strong industry pressure to reduce the cost price of the femtocell, it seems strange to be increasing the price to the end consumer at the same time.

It can be argued that the combined fixed and mobile operator may be able to engineer their network from end-to-end and so ensure the best possible service. However, if there is some optimization or priorisation given to the femtocell traffic then surely this can be provided by third parties. It is common for femtocell network operators to have discussed their service and its requirements with the major broadband network providers during the trials and early launch phases.

My prediction

In the longer term, I believe the restriction that femtocells must be connected over the mobile operator’s wireline service will be less common. Stronger takeup of the femtocell product means that it has to be easy to install and require minimal change. This is most likely to be the case for standalone femtocells. One exception is where a dedicated broadband line is installed explicitly to support a femtocell, as can be the case for On Signal (Portugal) and SoftBank (Japan).

At the same time, the market for integrated femtocells will grow. I’m still surprised that no network operator commercially offers a combined femtocell/DSL modem/Wi-Fi router (products have existed for some time). These may be targeted or even restricted to customers who buy both wireline and wireless services from the same network provider. The main benefit will be ease of installation, ease of remote maintenance/diagnostics/management and integrated traffic prioritization (so that voice calls are never affected by high data traffic).

So my guess is that the %age of femtocell operators mandating their wireline broadband will drop from over 50% today to less than 20% by end 2012.

[Updated 9/9/2010: I now understand that Softbank don't require customers to use their DSL service, but will supply it free of charge where none exists. This makes it 7/14 or 50% overall]

This article is based on our current list of where to buy a residential femtocell which also lists those network operators who mandate their wireline service.

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Comments   

#1 Deadcellzones.com said: 
This is going to get very ugly and I predict massive disruption by Cox, Comcast, Time Warner and Cablevision.
0 Quote 2010-09-09 16:53
 
#2 ThinkFemtocell said: 
@Jeff: Not quite sure what disruption exactly you have in mind, but I agree that cable operators could well have an advantage as this plays out.
0 Quote 2010-09-09 19:34
 
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