In-door coverage has been an issue ever since 3G networks were introduced. Femtocells promise a solution as well as answering other issues such as covering the cost of infrastructure to support an increasingly dazzling array of mobile services. Priscilla Awde reports on how things are going now that they are being put to the test of real users, for the first time.

 It is a fact: people like using mobile phones indoors, in offices, houses or public buildings, and they are doing so in greater numbers for voice and increasingly data services.

Yet although the number of houses without fixed lines is growing, few people can access 3G data services reliably indoors. Mobile operators therefore stand to lose not only potential revenue streams but also customers moving to carriers with better coverage or service quality.

Demand is there for broadband mobile data services. Around 60 per cent of users in recent mobile TV trials watched on their phones at home. Orange’s, network revenue from mobile data services increased nearly 22 per cent in the last nine months and Vodafone Group’s, data revenue rose over 45 per cent.

Much of the demand is fuelled by network roll out, new 3G devices, services and technologies but it is notoriously difficult to get reliable indoor cover. Adding capacity to the macro network is expensive. All problems femtocells and their larger picocell cousins are designed to redress.

Femtocells target the SME (Small/Medium Enterprise) and residential market, whilst picocells are suited for large offices or campus environments. Operating within licenced spectrum, both appear as devices to base stations and as base stations to core networks. They plug into existing broadband xDSL or fibre connections diverting wireless traffic off the macro network and into the fixed system thereby freeing up expensive spectrum and reducing costs. Operators can recover investments in femtocell deployment by reducing macro network capex.

As a cellular response to FMC, femtocells will help prevent churn by extending coverage and capacity and operators can cost effectively exploit new revenue opportunities. “Mobile data is taking off now and operators need to worry about 3G network capacity. There is a strong case to serve indoor users in a different network layer to offload the macro network and thereby avoid infrastructure spend,” says Andy Tiller, VP marketing at ip.access. “However, femtocells need broadband networks making remote, rural access difficult.”

Importantly people can use existing 3G phones thereby vastly increasing the addressable market.

Adding femtocells to HSPA and HSPA+ platforms may extend the life of 3G networks and thereby obviate the need for early investment in 4G technologies. “As part of the 3G and LTE (Long Term Evolution), infrastructure, femtocells will be needed more and more for high data rates and new coverage,” explains Manish Singh, VP field engineering at Continuous Computing. “The vast xDSL/cable broadband infrastructure enables wireless backhaul from houses to the mobile core.”

Standards have now been established for the air interface between handset and femtocell and between the backend gateway and core network but work is needed for the IP interface between the femtocell access point and the access controller or gateway connecting to the core network. “Lots of work needs to be done in standards and network architecture harmonisation which the Femto Forum, is addressing,” continues Singh. “Operators are concerned about R F interference with existing macro networks so we need more trials to ensure volume deployments don’t affect macro cells working in the same spectrum.”

It seems femtocells are an innovation made in heaven as the several strings to operators’ business case appear favourable. Telcos can tie all members of a household into their network: up to six people can be connected to one femtocell. By creating home zone bundles and family tariff plans operators can increase customer loyalty, reduce churn and raise ARPU from innovative broadband services. “Mobile operators must ensure handsets are used as the key device for all communications including social networking, messaging, emails and browsing,” believes Steve Shaw, associate VP marketing for Kineto Wireless.

Femtocells add fixed broadband speeds to in-building wireless networks and allow operators to target heavy data users, cover hot spots and extend network reach potentially giving users an xDSL-type experience. “There are cost savings in increasing cover and capacity since deploying femtocells is cheaper than capex in macro cells,” explains Rupert Baines, VP marketing at Picochip, who puts the annual value of the mobile data market at $115billion and growing at approximately 50-60 per cent a year.

“Backhaul expenses are the number one opex for carriers and will increase with the growth of data. Electricity powering macro cells is very expensive but drops with femtocells. They also allow mobile operators to keep control of customers and give them a competitive weapon against Wi Fi and WiMax.”

In competitive markets mobile operators face the risk of fixed operators or other players getting spectrum and rolling out femtocells without building a macro network.

Initially femtocells will be stand alone units but eventually quad play services will delivered via one converged CPE device. Phase three will be a triple screen play with video content moved between TVs, PCs and mobile handsets.

With large scale residential femtocell deployments operators face several challenges including whether to subsidise units and how to manage what may be thousands of millions of new boxes in their networks. Although not due for deployment until 2009, Vincent Poulbere, principal analyst at Ovum, estimates that in Western Europe there will be an installed base of 15 million femtocells in 2011 but he warns Wi Fi could affect the business case.

“People with high end devices with embedded Wi Fi use them at home to access data services: they are familiar and already in use therefore a risk to femtocells especially if free home Wi Fi usage becomes mainstream. It is important for the femtocell business case to discover the potential for residential data usage and know what subscribers are doing at home.

“Huge traffic increases driven by HSPA and new data friendly devices will eventually drive the need for extra capacity and traffic trends are exponential.”

In a recent report Analysys, says the potential for large incremental revenues is jeopardised if operators base their business case only on voice: femtocells will yield greater financial benefits delivering multimedia residential services.

“The battle ground now for all operators is the home which cannot be served by pure wireless, so they must expand their business into fixed services. Extending the macro network will never give QOS and cannot rival xDSL not just in performance and latency but also cost,” explains co-author Mark Heath. “Piggy backing on xDSL, femtocells allow telcos to provide very high quality data links at home.

“This is a new game for mobile operators giving them opportunities to offer interesting service innovations to differentiate themselves from competitors in the home.”

Among the inhibitors is the cost of guaranteeing end-to-end service quality and security. Pure mobile operators can create their own access via local loop unbundling (LLU), or form wholesale agreements with fixed broadband suppliers - however that may involve revenue share. Several mobile operators are buying ISPs or going down the LLU route. O2, has DSL networks in Europe and VP for R&D Mike Short sees femtocells as a good adjunct to 3G indoor cover. “We need to manage QOS but if traffic goes via DSL backhaul it may not go via the mobile management centre.

“There is more room for femtocells in the 3G world as WCDMA networks are very energy intensive and more difficult to cover indoors.”

As differences between fixed and mobile operators blur there is likely to be more consolidation but mobile operators can connect femtocells without having fixed access networks. Simon Saunders, chairman of the Femto Forum says: “ Femtocells plug into existing broadband modems so operators don’t need agreements with DSL providers unless they want to guarantee end-to-end service.

“Femtocells encourage growth and take the capacity brakes off 3G,” he adds. “HSPA rates over femtocells are very good and exploit the capabilities of phones. ‘All you can eat’ packages change behaviour and new services generate more revenue as users adopt mobile devices for more types of communications.”

At present femtocells cost around $150 which most consider too high especially if operators subsidise units: prices will fall with economies of scale. Eventually femtocells will be embedded into home communication hubs which will reduce prices.

Whatever the model, femtocells must be ‘plug and play’ units. Mark Keenan, general manager at RadioFrame Network, believes provisioning and security must be totally automated and zero touch for consumers: “We are not far from this now. Integration into basic networks is automated via the internet and tunnels. Picking a frequency is easy and can be automated to allow pico and femtocells to select a channel. Handing out to the macro network is easy but handing calls in to femtocells is difficult because there are hundreds underneath macro cells - mobiles must find and connect to their own home network. Standards are built to ensure mobiles are linked to the right femtocell.”

Cautious, and insisting on the need for standards, Kenny Graham, head, new technology/innovation at Vodafone concludes: “Operators are looking for innovative ways to deliver to customers with cost advantages. The challenge is getting it right - we need to ensure cost points and form factors are right. We will see a mix of subsidy and customer purchase of femtocells. There are lots of promises from vendors but the industry needs trials.”