Small cells can do more for wireless carriers than improve indoor voice coverage and offload data traffic. Picocells, femtocells and Wi-Fi hotspots pinpoint subscribers' locations more precisely than macrocells, enabling carriers to launch more sophisticated mobile location-based services that generate revenue through partnerships.
The industry has hyped mobile location-based services for years. Carriers typically sold directory and navigation services directly to subscribers, but subscribers no longer expect to pay money for such location-based services, thanks to Google and free smartphone apps.
Now, over-the-top (OTT) players ranging from Facebook to Foursquare are partnering with advertisers and retailers to profit from mobile location-based services that encourage users to "check in" at a restaurant or store via smartphone applications, SMS or websites by offering incentives like coupons or other promotions.
If left unchecked, OTT providers will steal another revenue opportunity from carriers, just as the Android Market and Apple's App Store did to service providers with mobile application stores. Location-based OTT providers will use these free services to rake in revenue off the backs of carriers.
"The willingness of the consumer to pay anything to get [mobile location-based services] is vanishingly small," said Mike Jude, program manager at Stratecast, a division of Frost & Sullivan. "You generate revenue on the vendor and small business side and say, 'We can drive business to your doorstep because we know where you are in relation to your consumers.'"
Wireless carriers will need precise knowledge of their subscribers' exact locations if they are going to build a revenue stream with mobile location-based services. But location precision has been difficult -- if not impossible -- for carriers to achieve with macrocells, which cover a few square kilometers, Jude said.
GPS is more accurate but performs poorly indoors, which becomes problematic for supporting mobile location-based services in a shopping mall, airport or convention center.
A mobile network that includes small cells, such as Wi-Fi hotspots or femtocells, can pinpoint a subscriber's location within a few feet. Instead of manually "checking in" via Foursquare, a subscriber who has opted into such services could automatically receive alerts from vendors who partner with -- and pay money to -- a carrier.
Gartner recently identified mobile location-based services as one of the top 10 consumer mobile applications to watch in 2012 and predicted the consumer market will reach 1.4 billion users. Consumer revenue in North America is expected to reach $2 billion in 2012, up from $1.3 billion in 2010, according to Sandy Shen, research director at the firm.
Mobile location-based services are expected to generate $12.7 billion in revenue worldwide by 2014, states a report by Juniper Research, a telecom analysis firm based in England.
"The virtue of the cell phone is you choose to carry the thing and you choose to allow the network to track you," Jude said. "With the right kind of service with indoor, location-based identification, you can imagine a lot of ways to utilize it. I would say there's at least significant potential there [for carriers]."
Questions remain about LBS market
Although no one disputes a small cell's ability to enable LBS, the ROI for carriers is still in question. Infrastructure vendors have hyped potential adoption rates and revenue projections for years, but adoption and revenue haven’t materialized yet. It is unclear how much the rise of social networking could affect adoption.
Only 4% of adult Internet users in the United States reported using location-based services, such as Foursquare or Gowalla, according to a survey released late last year by the Pew Internet & American Life Project, a project by Pew Research Center. The highest adoption rates were in the 18-29 age group (8%) and English- and Spanish-speaking Hispanic users (10%). The most common medium was via cellular broadband.
The study surveyed 3,001 Internet users ages 18 and older between August and September. Among the 62% of respondents who said they used social networking sites, 6% said they use a location-based service.
ChinaTel, a holding company that is building wireless networks to launch fixed wireless broadband services in China and Peru, has its eye on small cells as a way to improve coverage. But the company hasn't considered using them to launch LBS.
"That's something we're not looking into yet, but if it makes sense and it's good for us, our ears are open to it," said Ryan Alvarez, vice president of strategic planning at ChinaTel.
ChinaTel, which holds a majority or near-majority stake in most of its holdings, will design, build and operate its networks while other stakeholders handle sales and marketing, Alvarez said.
ChinaTel engineers met with femtocell vendors regarding its project in Peru with partner Perusat, a Tier 2 wireline carrier. But the two network operators are nowhere near committing to the technology, he said.
"The huge catch to using femtocells that a lot of carriers don't realize is you have to make sure that the femtocell doesn't mess with your macro equipment because it can cause interference," Alvarez said. "We're very picky with what we do and who use … [so] we're very cautious of that."
Jude, of Stratecast, was skeptical that the mobile location-based services market today is "sufficiently robust to warrant or justify an investment" in small cells for that purpose alone. Handsets are also a long way from seamlessly handing off subscribers from cellular to Wi-Fi, making femtocells and picocells a better option for now, he said.
But small cells are usually cheap to deploy, which means carriers aren't opening themselves up to a huge risk by piloting the services in one or two locations, Jude said.
Cisco Systems is demonstrating location-based retail applications at Mobile World Congress this week with Deutsche Telekom, using Cisco's latest generation of outdoor 802.11n wireless access points (APs) and new Mobile Concierge Service Establishment Protocol (MSAP), according to Chris Kozup, a marketing director at Cisco.
Carrier Wi-Fi has been too clunky for subscribers to fully embrace, despite usually offering a faster connection than 3G, Kozup said. That's because subscribers have to find the right Wi-Fi network, initiate the connection and potentially enter a credit card number and/or a password.
Cisco's new Aironet 1550 AP uses a wireless device's native SIM credentials by supporting 802.11u, a standard designed to improve network discovery and selection on wireless devices.
The APs also support 802.11i encryption. The handoff from 3G to Wi-Fi occurs in the background when the subscriber comes within range of a carrier's hotspot, and MSAP connects the subscriber to retail applications that push coupons or store information, Kozup said.
Cisco is working with handset manufacturers to provide support for these features, he said. Samsung announced at Mobile World Congress that its new Galaxy S II and Galaxy Tab devices will support Cisco's carrier Wi-Fi portfolio.
"You've gone from a three-step process for the user to a transparent activity the user no longer has to interface with," Kozup said.
Alcatel-Lucent also announced four new additions to its 3G small cells portfolio at Mobile World Congress last week, highlighting the devices' open application programming interface (API) for service providers to enable mobile presence- and location-based services.
Jessica Scarpati is a news writer at SearchTelecom.com
This article originally appeared on SearchTelecom