Femtocells go commercial

All of a sudden, the world seems to have gone femto-crazy ... or more accurately, operators have finally decided to bite the bullet and deploy services. Disapppointingly, this seems to mean that my big brave prediction for 2009 has been shot down only six months into the year. I still maintain that LTE will be the bigger opportunity for femtocells, but nevertheless the news that Vodafone and AT&T are launching commercial services this year goes to show that there is some immediate and real opportunity as well.

However, looking deeper into the news and you get a sense of some of the underlying themes which will now start to come to the fore.

1. Quality of Service: Suffice it to say, if I used a Voda femto in my flat in London, I would struggle to get more than three words out so bad is my Tiscali broadband. The simple fact is an operator can never guarantee QoS. In a conventional network, they can guarantee it throughout the core as far as the cell site, but as soon as it hits the RAN, there are so many environmental variables (pesky things like buildings that get in the way) that the operator can only then do a best effort. Now, in theory, femtocells solve this problem - it fixes the in-building RF problem. But, if operators such as Vodafone then use the subscribers' own DSL connection to backhaul the call, they have again surrendered control over QoS. In fact, they've taken a step back. While they can optimise the RAN, they have no control over the ISP.
2. The Form Factor: At the moment, AT&T and Vodafone are planning to go to market with standalone femtocells. The marketing wizards at AT&T have branded theirs a '3G microcell, clearly expecting the US consumer to be tech-savvy, while Vodafone have gone the route of calling it an 'Access Gateway' (access to what, you can already hear consumers asking). However, AT&T has also alluded to 'integrated femtocells' coming later, and this is perhaps where it becomes a real consumer market. I sat in a briefing by Continuous Computing* with Ovum this week and this point came up. Although a lot of the details are still under wraps, Continuous Computing said that not only are about half of their femtocell design wins are with set-top box manufacturers and the like, but that we should be seeing the first integrated femtocell products shipping around late 2009 / early 2010.
3. The Pricing: Well, this really is the big one, isn't it. The pricing from Voda has that the femtocell with be free on selected tariffs (so operator subsidised like handsets) and also bundled in some phone packages. If you buy the femtocell as a standalone, you're looking at £160 or £5 per month. I won't even try and digest the different phone packages since I've always maintained their are designed solely to confuse but it's clear that the subscriber is going to have to pay extra to solve a coverage problem which you can be pretty sure they weren't warned about when they first bought their shinny 3G handset.
   

But let's not be churlish. Femtocells are going commercial with two tier 1 operators and for an industry that has invested time, money and effort in creating the market, that can only be a good thing. Well, provided they work and deliver on the subscribers' expectations that is ...

* Continuous Computing is an AxiCom client

Is Skype finally challenging operators' voice revenues?

The news that there has been over 1 million downloads of Skype to iPhones in just two days is challenging mobile operators to face up to the fact that their voice revenues – which for better or for worse are still the bedrock of their financial health, despite all the talk of data services – may be truly coming under threat at last. While consumer advocacy groups (and VoIP providers) are arguing for operators to open up their network (so called ‘net neutrality’), mobile operators are looking to block Skype in the name of ‘network efficiency’ and ‘non-compliance’ of the application with their network.

The VON Coalition Europe (a group that includes Internet giants like Google, Microsoft, Skype and Intel) claims that operators are blocking or degrading of content, services or applications “for motives that extend beyond efficient traffic management.” With a typical Skype call normally only using 8 to 20kbps, which can be compared to the download of an average web page, Skype in many respects is considered a low bandwidth application. However, make a Skype video call rather than a basic voice call, and the impact on the network could be very different…

With so many claims and counter-claims flying around on the true impact of services such as VoIP on a mobile network, it can be hard to see what the true picture is. Are operators justified in blocking Skype because of the impact on their network? Or is this just a cover for their deep rooted fear that Skype is about to slay the sacred cow of voice revenues?

It perhaps takes companies like Actix* provide real insight into what the real impact of services such as Skype on a mobile operator’s network performance. Working with tier one operators in North America, Europe and Asia, Actix is at the heart of operators’ network status management systems, processing over 1 terrabyte of data every day on a typical tier network.

While there is a certain inevitability about VoIP as operators look towards LTE and an all-IP network, data loads are increasing over 3G (and more so with HSPA), pushing the cost-per-bit for ever higher. With the advent of LTE, mature operators will be left with at least three overlaying Radio Access Networks (RAN) to manage - 2G, 3G and 3.9/4G networks. With a large portion of the delivery cost of every bit being RAN-related, the challenging economics of mobile broadband will enforce the need for a much sharper focus on delivery cost per data bit if operators are to remain profitable.

So maybe both sides are telling the truth ... operators are fighting a rear-guard action because they fear the impact of opening up their network to yet more data which they cannot directly monetise, while VoIP advocates are right in pointing a figure at operators' basic revenue concerns as the real motivation for their opposition.

* Actix is an AxiCom client

2009 predictions (well, everyone else is at it!)

As the year winds down with yet more gloom (though whether Voda's decision to stop sponsoring the England cricket team is credit crunch driven, or a result of their woeful result against India this week, it's hard to be sure), looking forward to 2009 has to be a bit more cheerful ... doesn't it?

So, in no particular order, what will be some of the themes for 2009...

1. Femtocells will be revealed as the emperor with no clothes. It's all the rage, all very trendy, but anyone actually have any idea on how the price point will come down to where it can be a consumer product? Will they actually solve the technical issues that are starting to come out of the woodwork as operator trials come to a close? They've been great PR fodder this year, but 2009 will see femtocells starting to talk the LTE story. Surely recognition that they've missed this first boat and are having to refocus on a technology that is still another couple of years off. Which means theme two will be ...

2. Start-ups running out of cash. Talk about self-fulfilling prophecies, but Sequioa seems to have single-handedly frozen the whole VC market. If companies were expecting revenue this year but see this pushed out, we'll surely see some bright ideas staying as just bright ideas and never coming to market.

3. Self-optimising networks (SON) have been talked about for a while, but now operators are starting to join in. Cutting OPEX will be a key focus in 2009 and, with the RAN accounting for the single largest expense, operators will look to move SON from theory as they look cut costs out of their business, while still delivering a true mobile broadband experience for subscribers.

4. LTE-this, LTE-that ... the down in the weeds techies will have their moment in the sun in 2009 as the underlying protocols on which LTE is built get their airing. From DPI to GAN, we'll see three letter acronyms flooding the market to explain other three letter acronyms. What's not to love about telecoms!

5. Mini-notebooks ... already a growing phenonoma, this new form factor will become the mobile broadband device. Embedding HSPA into the devices and bundling them with operator contracts will become the norm.