The global femtocell market is poised for explosive growth over the next five years, as forecasts predict that the number of units shipped will balloon from 1 million this year to as high as 62 million by 2014.
Analysts expect falling prices, rising demand from enterprises and more metro market deployments to provide the momentum. But operators say their equation is missing an important factor: new femtocell-based services.
"The real adoption of [femtocells] is going to occur not when you have this perfect coverage solution," said Mike McRoberts, director of product management and development at Sprint Nextel Corp., which commercially launched its femtocell, AIRAVE, in 2008. "It's when you go to the next step and [offer] some compelling new services are built to operate on top of it so the customer has both a coverage reason and, more importantly, a service capability they don't have today."
Applications based on presence and location that work in tandem with femtocells not only have the potential to boost demand and a service provider's stickiness, they also give operators the justification to monetize the devices, McRoberts said.
Operators aren't going to get rich off femtocells and will often have to eat the cost of deployment by giving them away to consumers and businesses, acknowledged Rob Riordan, executive vice president for Nsight, the parent company of Cellcom, a regional wireless carrier in Wisconsin. But services and applications will generate new revenue streams and improve customer retention, he said.
The ability to use location and presence information from a femtocell in the home or the office to automate some applications has generated a lot of interest at Cellcom -- specifically, applications built on the Android platform, Riordan said.
Beyond traditional location-aware status update applications, Cellcom is also working on a service via its IMS-based network that would allow customers to queue music downloads on their Android devices, he said. The downloads would commence only when the device detects that it is connecting to Cellcom's network via a femtocell, which provides faster throughput.
The carrier is also working on femtocell-based services for enterprise customers by tying the device into their IP public branch exchanges (PBX), Riordan said. Another service would use the femtocell to signal to the handset that the user has come home or arrived at the office and swap application shortcuts on the screen for what's most appropriate.
"While we as a network provider [say] we know where you are, we do and we don't. That's a misnomer. I have no idea where you are, but my switch knows where you are, and that's a big difference," Riordan said. "But it's very simple with a femtocell to say, '[The user is] in the house' and build applications off of that."
Early femtocell market experiments a mixed bag
Marketing femtocells has been tricky for carriers, as customers don't want to buy another device to boost the wireless service they're already paying monthly rates to receive. A number of major carriers worldwide experimented with offering free or discounted femtocells to select customers.
Japanese carrier SoftBank is credited with starting the free femtocell market model earlier this year to improve visibility and demand for the product.
In the United States, AT&T recently attempted to pitch its femtocell giveaway as a reward for its "most valuable customers. "After getting lackluster adoption in its U.K., Spain and Qatar launches, European carrier Vodafone earlier this summer offered its 3G femtocell, Vodafone Access Gateway, free of charge or at a discount for residential postpaid subscribers in Greece.
Femtocell market to hit stride with new services
The femtocell market has been slow to grow and is likely to reach 1 million units shipped by the end of 2010, but 2012 is expected to be the year the market explodes, with about 30 million units shipped, according to Loren Shalinsky, senior analyst at Dell'Oro Group, who recently authored a five-year femtocell market forecast.