As third-generation wireless technologies proliferate, bringing ever-faster data rates to an increasing number of customers, carriers face an undeniable obstacle: Their patchy and incomplete coverage. Unfortunately for carriers, increasing coverage is ridiculously expensive.
That's why many carriers are eyeing femtocell technology, which promises to ease their financial burden while at the same time offering cellphone customers something they've always wanted: pristine reception in their homes and offices.
Femtocells are essentially miniature cellphone access points that customers would deploy inside their homes and offices. (Femto is the metric prefix for 10 to the minus-15th power, or one-quadrillionth. It's six orders of magnitude smaller than nano.) With a range of about 100 feet and the ability to support three or four users, they're about the size of a typical Wi-Fi router. Starting in the second half of 2008, carriers will begin renting or selling these femtocells to their customers, which would, in the words of Sanjeev Verma, co-founder of femtocell developer Airvana, provide "perfect five-bar coverage throughout the home."
If they catch on, femtocells have the potential to save carriers hundreds of millions of dollars in cell-tower costs. In effect, carriers would be shifting the burden of providing complete coverage to their customers -- a nifty trick if they can pull it off.
"When an operator tries to give you coverage and service, the first thing they have to do is build out these cellular towers," explains Verma. "Those towers blast wireless coverage two to three miles. But it's ubiquitous coverage and everyone using a phone in that radius has to share it. Then there's the cost of leasing the land to build the tower. Basically, there's a lot of cost associated with this model. With the femtocell, all of that goes away," he continues.
When (and if) WiMax finally debuts next year, femtocells will be an attractive add-on for that wireless technology, too. While WiMax boasts a longer range than Wi-Fi, it is not good at penetrating buildings, analysts say.
Virtually every major carrier now has a strategy for deploying the in-home technology, Verma says. Trials have been taking place in Europe of more than a year, and stateside, Sprint has already started offering femtocells to its customers in the Dallas and Indianapolis areas. According to Verma, a full-fledged commercial debut here in the United States is slated for the second half of 2008, with AT&T and Sprint likely to be the first carriers offering the service on a large scale.
The technology could even give prospective newcomers to the wireless market, such as Google, a considerable cost advantage when it comes to rolling out coverage. That's because it would be cheaper for a startup to offer femtocells to interested customers wherever they may be, rather than try to blanket the nation with coverage. Google is interested enough in the technology that it joined a group of investors in plugging $20 million into a British femtocell startup called Ubiquisys earlier this year.
But not everyone is as enthusiastic about femtocells. While he admits that the technology will likely increase coverage, improve capacity and decrease backhaul costs for service providers, In-Stat analyst Allen Nogee says there are still a lot of unknowns when it comes to the technology.
"We're talking about very small transmitters," Nogee says. "At this point, no one really knows how they will interfere with other people's cellular reception who maybe don't have a unit in their house or apartment."
There's also the fact that the femtocells are still fairly expensive, Nogee says, typically costing between $200 to $300. Although Sprint is offering Dallas customers $50 femtocells, Nogee says those units -- built by Samsung -- cost $250 apiece to make. If those units don't drive data usage, Sprint stands to lose a fair amount of money.
In the end, In-Stat sees the nascent technology less as an avenue for carriers to cheaply extend coverage, and more as way for them to whet consumers' appetites for 3-G services.
"A lot subscribers are still not using those (3-G) services," Nogee says. "The thinking is that the more people get use to the benefits of 3-G at home, the more they'll also want to use those services on the road."
