Femtocells tipped to save operators over $5bn

Mobile operators could make "significant savings" on network infrastructure costs by deploying femtocells.

Analyst Informa Telecoms & Media has calculated that savings of up to $5.3bn (£2.8bn) or more could be made on network infrastructure costs if femtocells "are properly deployed using meticulous geographic network planning".

Informa said it expects more than 40 million of the broadband-piggybacking indoor base-station devices will be deployed by the end of 2013. The analyst firm believes this installed base could help operators offload up to eight percent of total mobile traffic to fixed broadband networks.

The $5.3bn savings are based on the assumption that, without femtocells, operators would have to spend some $9bn on beefing up network coverage to take extra traffic — a figure which presupposes a third of this traffic will be handled by utilising capacity from existing network infrastructure.

If existing network infrastructure is unable to handle this third, investment expenditure would need to be even higher, at $13.8bn.

The capital expenditure on femtocells is likely to be $3.7bn — the majority (85 percent) of which will go on femtocell access points. Operator savings could be higher depending on whether this hardware is fully subsidised or not.

However, savings could be eroded by the cost of marketing and promoting femtocells and related services to end users, in order to drive the kind of mass adoption needed to generate savings in the first place. Getting users to pay for improved network coverage themselves could be something of a hard sell.

Malik Saadi, principal analyst at Informa, said in a statement: "Deploying femtocells requires a good understanding of market segmentation of both mobile consumer and household markets, meticulous planning and targeted marketing campaigns, which mean operators will have to invest a substantial amount of money if they want femtocell services to gain popularity."

Operators also face a potential headache if femtocells are sold in a "sporadic" fashion, said Saadi, as a scattered deployment would undermine savings by making the access points hard to manage.

Femtocells also need to be deployed in clusters to ensure they can effectively substitute the capacity of macrocell networks — or else they could simply end up being a burden to operators, said Informa.

Saadi added: "If femtocells are sold to customers in sporadic fashion via traditional mobile operators' channels, then this may induce a huge scattering of femtocell deployment over large areas. Not only will this make it hard to manage FAPs [femtocell access points] and related networks but, most importantly, this would mean the operator will not be able to make any capex [capital expenditure] or opex [operational expenditure] savings."

Savings from femtocells will, therefore, depend considerably on the individual operator, the mobile access technology supported, and on the region and type of area targeted, said Informa. Operators will need to find ways of increasing both revenues and Arpu (average revenue per user) from femtocell services in order to make them profitable, it added.