Femtocells: A Key Cost Reduction, via Offload

February 26, 2009 at 3:57 am | Posted in Uncategorized | 1 Comment
Tags: Femtocell, Mobile Internet profitability, UMA

Femtocells, in particular, represent an excellent method for MNOs to offload this expanding data use onto End Users’ networks-completely relieving the MNO of major CAPEX and OPEX costs! When an End User installs a femtocell in their home, the MNO obtains:

• free or reduced cost radio access network (RAN),
  a major CAPEX and OPEX cost

• free backhaul (from RAN to network) and site rental,
  the major OPEX cost

This solution may revolutionize the way that MNOs deploy their radio networks: instead of purchasing and installing very expensive “macro” cell sites to cover large areas, the MNO partners with the End User to deploy many, cheap, femtocells to deliver capacity where the End User needs it. Certainly, femtocells can efficiently divert/offload traffic (from the MNOs) by delivering excellent coverage and high capacity access where people consume it (perhaps 75% of use in their Home and Campus/Office environments).

Operators need major cost reduction in the delivery of radio access, as the current method is extremely costly, so they will drive Femtocell technology to a successful outcome and deploy them wherever mobile internet is available for free backhaul. Without femtocells, MNOs are forced to deploy more radios, leading to costly RAN enhancements. And MNOs are increasing their spending on radio networks, reflecting their reliance on adding macrocellular capacity. [“Mobile Networks Forecasts: Future Mobile Traffic, Base Stations & Revenues,” Informa, http://www.informatm.com/networks, 7/2008]

In a very short time, femtocells may become the dominant method of delivering coverage and capacity to subscribers. Operators are just starting to deliver service with femtocells costing $200, but the Cost Of Goods (COGS) will undoubtedly drop quickly as Femto deployments expand from thousands to millions.

Although Femtocells are an excellent way for MNOs to reduce or eliminate some of their largest cost components, femtocells are but one of many ways that MNOs will cut costs in delivering data services (enumerated in a previous analysis, “Solutions for Expanding Data Usage“).