Femtos to save $5bn, but only if ops do their homework

The number of femtocells deployed by the end of 2013 is estimated to exceed the 40 million mark, with 22 million units added in 2013 alone, according to analyst research released Tuesday.

Industry analyst and telecoms.com parent, Informa Telecoms & Media, said this installed base could help operators to offload up to 8 per cent of total mobile traffic to fixed networks via the end user subscriber line.

This would allow mobile operators to make significant savings. Informa estimates the capital expenditure to implement femtocells capable of supporting 22 million new net additions would run to about $3.7bn – of which 85 per cent would be invested in femtocell access points (FAPs).

By comparison, handling the same amount of traffic carried by 22 million femtocell deployments using macrocell capacity would require a $13.8bn investment. Although in practice, operators systematically create capacity redundancies, so assuming that 33 per cent of the required capacity is provided by the existing macrocell coverage, then infrastructure investment required to handle that amount of traffic is likely to be closer to $9bn, Informa said.

Still, this means the industry could save $5.3bn or more in network infrastructure costs if femtocell infrastructure is properly deployed.

Although principal analyst at Informa, Malik Saadi, is quick to point out that the recognition of these savings depends on a number of factors: the nature of the operator, the mobile access technology involved, the value proposition to the end user, the region targeted, and the level of investments the operator has already made in upgrading its mobile network.

These savings could also be undercut by the cost of marketing and promoting FAPs and femtocell services. ” 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 substantial amount of money if they want femtocell services to gain popularity” said Saadi.

“In addition, 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 and related networks but most importantly this would mean the operator will not be able to make any CAPEX or OPEX savings,” he added.

The analyst says that in order for femtocell networks to effectively substitute the capacity of macrocell networks, they should be deployed in clusters otherwise their implementation could add additional burdens in terms of both capital and operation investments.

Click here for more information on Informa’s latest report, ‘Mobile Broadband Access at Home: The business Case for Femtocells, UMA and IMS/VCC Dual Mode Solutions’