Femtocells form part of the mobile operator's network, whether located at home or in a business. This section explains the system architecture, operation and technical issues arising.

Most of the functionality of a complete 3G cellsite has been miniaturised onto a chipset, which is integrated into a package that looks and operates like a WiFi access point, and is connected via broadband internet back to the mobile operators network. A femtocell is installed at home and connected to mains power and a standard broadband IP connection (typically DSL or Cable modem) through to the mobile operator's core network. Voice calls, text messages and data services are provided by the same systems that are used when outdoors.

Femtocells operate at very low radiation power levels (50 milliwatts peak output during a call, much lower when idle), and typically have a range of 10 to 200 metres. The signals do not travel through walls particularly well, but this is a benefit because it allows the frequency to be reused for other calls in nearby buildings. Where users walk outside or out of range, calls are automatically handed over to the external mobile network. Any standard 3G phone can be used on the femtocell if permitted by the mobile operator. Unlike WiFi access points, 3G Femtocells operate using licenced spectrum and thus must be supplied and operated in conjunction with the mobile operator.

Standardisation is well underway, the agreed interfaces for 3G UMTS and 3G CDMA which connect into the operators existing core network. Standard interfaces have also been ratified between the femto gateway and the femtocells so that operators can use femtocells from different vendors, ensuring competition, wide range of choice and lower prices.

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