Small Cell Business Cases

Femtocells should have the same commercial arrangements as ATMs

network-sharingFemtocells today are tied to a single network operator. Although they can sometimes be used by foreigners visiting and using their international roaming, users from other national networks are blocked. This means that building owners may need to install several femtocells from different network operators in order to satisfy every visitors needs. Do recent co-operation agreements in the US and Russia for LTE suggest there is a way around this problem?

First - consider the bank ATM analogy

In the early days of ATMs (Automated Teller Machines), each bank installed their own network of “holes in the wall” and made them available for use exclusively by their own customers. After a while, it became apparent that it wasn’t viable for any individual bank to install enough machines to satisfy customers in all locations. So partnership agreements were setup and customers from banks with reciprocal agreements were able to use each other's networks of machines. Here in the UK, this now extends to all major banks and building societies, with customers not paying to withdraw cash from any mainstream bank machine. It's hidden from the customer whether transaction costs are charged between participating banks - where done so, it would help to encourage each bank to build out more capacity to satisfy their own customers' needs.

However even this large integrated network doesn’t reach into all the locations where customers may want to access their funds. A small number of separate organisations has arisen which provide cash machines for less frequented places, rural areas etc. which the large banks have discounted. These charge the customer a small fee for each transaction – effectively offering a more convenient service at a premium.

The networks are starting to share

It's taken a couple of decades, but we are seeing network operators find ways of sharing common infrastructure and costs to save money. Sharing cell towers and even whole radio transmission networks is becoming more common. National roaming, where users of one network can directly access services from another operator, still remains relatively unusual in most countries. 

Roaming can be used to achieve excellent coverage. Foreigners visiting a country typically get the best service. Their roaming agreements with all the national operators mean that they can connect to any available network, usually at the same (high) price. This gives them an advantage over locals, who are tied to an individual network.

Some users or applications highly value this extra coverage, and buy a foreign SIM card (such as one of the global roaming cards on offer to frequent travellers) in order to secure their chances of being connected. In other cases, some innovative MVNOs offer data connections across any network. However, both these options are usually at much higher rates.

LTE network sharing is becoming a trend

It may be a bit early in the rollout of LTE to say it will become the norm, but we're starting to see a few deals announced where a single LTE network is being built nationally and shared by many or all mobile operators. Examples are in the US, where LightSquared plan to build out an extensive $2Billion LTE network where access is wholesaled to any existing operator. The customer won't know whether they're on their own operator's network or LightSquared, but it will allow them to provide extensive capacity and coverage in areas that would otherwise be unviable.

Similar, the recent announcement that Yota, initially a Russian WiMAX startup network, will rollout LTE nationwide also at a cost of $2Billion and resell this wholesale to the major Russian networks is both quite a coup and makes a lot of commercial sense for all parties involved.

Perhaps its a bit early in the evolution of LTE to say this will become a global trend, but with many operators who have publicly committed to commercial launch appearing to be quite restrained with the level of investment, I wouldn't be surprised if we see more.

So could femtocell access sharing also become the norm?

One of the major disadvantages of femtocells compared with Wi-Fi is that they are locked to an individual network operator. While the operator may see this as an advantage, for example in the residential context, it does complicate matters for building owners who want to improve service for a range of visitors.

Technical challenges can be overcome. If network operators did choose to permit (or even encourage) roaming through femtocells, then they could do so. This could allow a single open access femtocell to deliver service simultaneously to users belonging to different home networks - much in the same way that roaming works today, but on a different commercial basis.

Obviously this can't work where networks use radically different 3G technologies, such as CDMA and UMTS. But it could where a common technology, such as LTE is used.

So there are several different possibilities here:

  • The rollout of wholesale LTE networks could be extended to include a femtocell underlay, which could be built and provided either by the larger wholesale LTE network provider (e.g. LightSquared or Yota in the examples above)
  • A separate independent business could be formed that only wholesales LTE femtocell access to the existing networks on a usage basis
  • Network operators could agree to allow roaming between femtocells deployed by themselves on a reciprocal basis - their users benefitting as much as their competitors customers do.

Another possibliity is that the national regulator may set aside specific spectrum for this purpose (i.e. it must be shared and accessible to all users).

Back to the bank ATM analogy

Allowing national roaming between operators is very similar to banks offering reciprocal access to ATMs. This is a commercial decision where the benefits to the customer are significant.

Enabling 3rd parties to provide wholesale mobile access, whether 3G or LTE, may be cost effective to operators. It could be argued that some forms of network sharing already achieve this. In some countries, 3rd parties do provide wholesale ATM access for the banks, extending the service to otherwise unviable locations.

A final step in the maturity of ATMs has been the independent providers who charge fees for access to machines in additional extremely convenient or remote locations. This might be the commercial model that some landlords might like to use for femtocells (I can think that airport owners would love this opportunity). Whether there is demand for this option (which could be achieved by charging higher/roaming rates to users) is perhaps debatable. Onboard aircraft, ship and train systems are perhaps an example where this can be commercially appropriate.

Benefit to the user

What this approach would mean is that anyone who is prepared to install and operate a femtocell, which could be connected to any one of the mobile networks or even a 3rd party aggregator, could enable excellent coverage and data speeds within their premises. Assuming the default setting is for open access, any user from any network (technology compatible) could make use of the femtocell as part of their standard cellphone service contract. 

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