Femtocells (News - Alert) can generate attractive returns for operators by significantly increasing the expected lifetime value of a subscriber across a range of user scenarios, according to a recent study conducted by Femto Forum, the industry association that supports worldwide femtocell deployment.

 

The research, which was commissioned from wireless telecommunications consultancy Signals Research Group (SRG), used inputs validated by a wide group of mobile operators and equipment vendors.

 

The research analyzed the potential lifetime value generated by each customer for a 3G operator using femtocells under a range of scenarios, including; regional-specific assumptions, macro network assumptions, usage profiles, and femtocell-specific assumptions such as the cost of the femtocell and associated network elements and support.

 

The research found that the business case for femtocells is driven more by customer longevity and revenue effects than by variances in the cost of the device itself. Even with conservative assumptions, the business case for femtocells is attractive with the customer lifetime value increasing by as much as 125 percent, and even higher in certain user scenarios.

 

SRG leveraged its proprietary macro network economics model for this analysis. With this approach, it was possible to model the relationship between the macro network and the femtocell network in order to quantify cost-savings, such as the impact of macro network capacity offload or of coverage enhancements.

 

The study also found that operators can use femtocells to provide deep in-building mobile broadband coverage in a very cost efficient manner. As an example, SRG describes a case in which a European operator wanting to provide a reliable 2.5 Mbps in-building service for most coverage challenged households, could do it for $410 per household if it used a highly subsidized femtocell strategy, whereas providing similar in-home service with the means of a macro cellular network would cost $1,154. 

 

Offloading voice and data traffic from the macro network will become an important factor in the business case as mobile data traffic continues to grow rapidly around the globe, the study said. For example, the cost savings associated with offloading data traffic generated by heavy users more than justifies a fully subsidized femtocell business model.

 

The study clearly highlights the many benefits of femtocells to the consumer: fewer dropped calls, better voice quality, higher data rates, and attractive tariffs or voice and data bundles. Additionally, value-added services will strengthen the business case, but are not necessary to provide a positive outcome.

 

“The question is not whether operators in mature mobile markets should deploy femtocells, but in which segments,” said J. Randolph Luening, vice president of Wireless Economics at SRG, in a statement. “The financial and network benefits are clear.”

 

The real issue for operators, according to Luening, is finding the recipe that delivers optimum financial and network benefits as well as finding a compelling subscriber proposition. “Our research not only demonstrates the financial benefits of femtocells but it also provides a model that operators can use to fine-tune their propositions,” he continued.

 

“There has been plenty of hype surrounding femtocells, and our operator membership has consistently called for reality checks,” said Simon Saunders, chairman, Femto Forum, in a statement. “We decided to commission in-depth business case research and asked our operator members to participate in the project to ensure it reflected the practical realities of their working environment.”