Of femtocells, TeleChoice’s Danny Briere writes:
“Now that I’ve seen some of the initial telco offerings taking shape and deployments looming, I’m disappointed with the word on the street about femtocell pricing. Carriers are thinking like telcos, not consumer electronics manufacturers. They’re taking something quite simple and making it complex – just like the rest of their cell phone plans.
“Well, business modeling for carriers is something at which we excel. We have created picocell and FMC financial models for vendors to show the carriers, and have analyzed a fair share of femtocell ones, but rather than bore you with a long set of calculations about tower radios, erlangs, backhaul and soft handoff impacts on tower capacities, let’s boil this down to some definite ‘truths’:
“Carriers can save money by offloading traffic from towers to femtocells. Femtocells can save a carrier money by offloading the 30-plus% of calls made in homes to their customer’s lower-cost broadband connections (broadband connections that may or may not be on their network even). The advent of ‘unlimited’ plans will likely mean more of these minutes will originate or terminate in the home.
“Savings on voice calls alone isn’t going to make a business case for femtocells. Voice just doesn’t eat up all that much bandwidth – but data applications (and especially mobile video) do, and can greatly improve a ‘cost savings only’ business case for femtocells. But today’s femtocell unit costs and growing-but-still-relatively-low data use mean that carriers can’t afford to just ‘give away’ femtocells and make the business case on cost savings alone.
“Don’t expect near term capex/opex savings to save the day. In the beginning, femtocells don’t really help with network capital, and may not help much with opex. In theory, you can avoid building or growing cellsites because of femtocells. Unfortunately, that’s only true if you have enough femtocell density in an area to make additional tower capacity unnecessary, or to significantly limit the traffic (and backhaul requirements) on that site. That density is not likely to happen anytime soon, even with massive adoption of femtocells.”
You can read the rest of Briere’s commentary here, and leave your comments at the bottom of this page.
If carriers want to sell femto cells as a service (i.e. unlimited minutes from home) then they have to compete with Skype pricing model: $30/year flat rate for US and Canada. In other words they have to convince the customer to pay $180 (=$15×12months) annually instead of $30, for exactly the same service. And I think this will be a hard sell…
I completely agree with your assessment of this emerging technology and I’ll even go a step further…
I’m eagerly anticipating the hinted-to femtocell deployment from AT&T early next year (and trying to get in their beta trials presumably later this year) because where I work (and live: Upsate NY, a little south of Albany), there is NO cell phone reception (even though they just placed a brand spanking new tower right over the hill, pointed at I90: oh well, them’s the breaks!).
For us, femtocell means salvation for cell phones for work (and home). And I’ll gladly pay up to $300 (I’m desperate) for such a box.
BUT, if AT&T charges an additional monthly fee for the “privilege” of using their network (and my “subsidizing them” through said usage over my non-AT&T broadband network), then I’m bolting to TMobile (to use their wifi-based service: not as elegant but it’ll work).
The only reason we haven’t left yet is (wait for it… wait for it…) the iPhone!
Yep, can’t help myself. I love that device and have been waiting for it (v2.0) since last year (when the first one came out). Now, I’m actually willing to pay the higher fees to use it, but for those fees, I actually want to use it, hence the need for a femtocell.
Let’s see if AT&T is penny-wise and pound-foolish and is willing to lose customers like us over a misguided business model.
Freddy.