Parks Associates Blog

Monday, February 15, 2010

Pricing Still an Issue for 3G Femtocells

In a recent interview with Light Reading Ericsson's Vice President of Radio products said that femtocells were beaten by WiFi as the technology of choice for data services within the home. Pricing seems to be the key factor inhibiting wide spread adoption of 3G femtocells.

In 2008, the goal of major chip set providers and femtocell systems providers was to break the $100 barrier. Chip sets were still considered to be quite expensive to make femtocell attractive as a mass market product. In addition to pricing, another key factor that drives the cost of deploying a femtocell is the fact that they operate in a regulated and licensed frequency. As a result, femtocells come with some legal caveats in some markets. Operators are still faced with potential truck rolls to assist customers with setting up their femtocells. Wireless operations at most of the major operators are not set up to handle such onsite support with the same efficiency as their wireline counterparts (even though they are part of the same company).

Net effect is that femtos have to be combined with routers or gateways to really get some penetration. Operators will have to consider ‘HomeZone’ type of services offering heavily subsidized data services as long as consumers are feeding off a femtocell. In our recent study titled 'Broadband, Communications and Entertainment Bundles' we found that consumers are more interested in femtocells for their potential to offer unlimited data services than in their potential to enhance indoor coverage.

WiFi is a good interim solution, but it drains the battery rather rapidly. 3G radio by itself is quite demanding in terms of power requirements and WiFi exacerbates that situation. Femtocells certainly have a future. Femto adoption depends highly on what the price point is going to be and more importantly what sort 'subsidies' wireless operators will be able to offer on services riding femtocells and ensuing broadband connections.

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