Are Femtocells Cost-Efficient?

November 11, 2008 at 5:03 am | Posted in Uncategorized | 2 Comments
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Femtocells are already successful in remote locations and could be hugely successful in a broader measure.

We can evaluate the success of femtocells in two, distinct applications (each of which has its own measure of success):
 (1) Near-term, in-building use
 (2) Long-term, overlay

Near-term: In-building useipaccess-femtocell-on-wall

Femtocells are already cost-effective in focused applications. Anything that can deliver coverage in an indoor venue at a lower cost than the incumbent solution (i.e., a dedicated microcell, base station) … is successful. Since base stations are expensive—even microcells—then the use of a much less expensive, Femtocell solution, is far more advantageous. Better to use a dedicated, inexpensive femtocell to provide heaps of capacity in a home than to dedicate a fraction of a very expensive macrocell. (Note: I was surprised to learn that as much as 40% of mobile data usage takes place in the home, according to a Nokia smartphone study, December 2007). Femtocell solutions already succeed for specialized solutions  (e.g., delivering high-capacity to areas of high usage, such as the office or home, where standard cellular coverage would be more costly). Femtocell in the home, for example, is a benefit to the Consumer (better in-building coverage and increased capacity) and to the Operator (decreased cost of delivering capacity).

Long-term: Overlay

ericsson-tower-tube-in-field

Femtocells are not yet cost-effective in broad application: as a general replacement of the existing method of providing radio coverage and capacity. Could a femtocell replace the macrocell? The measure of success here is: Can a Femtocell deliver capacity more efficiently on a square-meter, life cycle basis (than an existing, GSM base station)? This assessment includes several cost elements:

Initial cost: Femtocells competitive
Measured on cost of capacity and coverage, Femtocells are on the right track, since they already are close to matching the cost:capacity of existing, GSM base stations (i.e., one could theoretically use femtocells just as efficiently as a macrocell to light up a coverage area with a given capacity). So femtocells offer an attractively low, initial cost. However, let’s not count out the incumbent, as they can also adapt and compete (in this case: reduce their cost using some of the same techniques as the Femtocell providers). 

Backhaul Expense: Femtocells cost less
Femtocell deployments have a lower cost of backhaul—zero—versus the cost of backhauling the traffic from the GSM cell to the Mobile Switch. Even if the cost is not completely zero (Home femtocell traffic riding on the subscriber’s DSL), it’s vurtually zero: the Operator simply has to pay for a DSL instead of multiple T1/E1 connections. Huge advantage here for femtocells. But in this advantage lies a major problem: how can one deliver backhaul to a large number of small-radius femtocells? Unfortunately, what works well in a home or enterprise does not work well in large coverage areas. I imagine that the lack of power and backhaul will prevent femtocells from being used out in the open; a large network of lower-powered cells is not going to replace a single, large-radius cell. 

Operating Expense: Femtocells cost more
Although this is conjecture until there are results from a major trial, I suspect that the cost of operating & maintaining hundreds of femtocells is greater than that for one macrocell. Further, macrocells have to interoperate seamlessly with the existing macrocellular system, which already have established network management systems & procedures. The need to interoperate with the existing macrocellular network is a major hurdle that I discussed in a previous post, “Hurdles to Femtocell Success.”

SUMMARY: Femtocells are cost-efficient today, and will be increasingly used in low-power, small-radius applications to complement the macrocellular network. While not replacing the existing cellular network, they may take over the responsibility of delivering a substantial amount of capacity to subscribers in a wider variety of locales.

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2 Comments »

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  1. […] Are femtocells cost efficient? […]

  2. yes they will be success ful


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