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Femtocells challenge Wi-Fi dominance in the home

Posted: 26 Jul 2007 ?? ?Print Version ?Bookmark and Share

Keywords:Wi-Fi dominance? home challenge? femtocells?

Frenetic activity has been seen these past weeks in the still largely untested business of femtocells!also known as home base stations or 3G access points.

A group of about 25 companies!including chip suppliers, mobile network operators and the developers of these mini base stations!have joined together to form the Femto Forum. Only seven have publicly acknowledged their participation in the Femto Forum, but several operators have revealed they have put out requests for proposals to equipment vendors, however, and hardly a day goes by without some of the key players announcing they are partnering to bring femtocells to market.

Earlier this month, one of the first international congresses focusing on the technology was held in London, United Kingdom and attracted more than 250 attendees.

Existing hurdles
Still, it is clear there are technical, regulatory and commercial hurdles to be cleared before the widespread deployment of femtocells, which can provide enhanced voice and data coverage in the home for up to six users on their existing 3G handsets.

Femtocells represent the first real threat to the increasing dominance of Wi-Fi routers in the home and offer the prospect of an all-IP approach to increasing coverage, while backhauling cellular traffic over a broadband connection. As such, they could pave the way for cellular operators to offset any loss of revenue from voice over Wi-Fi, where calls are handed off to a Wi-Fi network and then carried back to the mobile network over a cable broadband or DSL connection.

It would seem that cellular network operators should be beating a path to the femtocell vendors. But apparently they are not yet convinced of the cost efficiencies femtocells offer and are confused by the many options for integration into the core network!with the three key versions being Iub over IP, Unlicensed Mobile Access (UMA), or based on IP Multimedia Subsystem (IMS) and Session Internet Protocol (SIP) standards. Nor are they in agreement as to whether the business case is predicated on expectations for much higher data usage or better voice coverage.

Coming mid-2008
Industry analysts and vendors, not surprisingly, are convinced femtocells will make their mark by the middle of 2008, then soar to large volumes quickly.

Vincent Poulbere, principal analyst at Ovum, projects a slow buildup in 2008 in Western Europe and about 7 million units shipped in 2009, rising to 17 million in 2011.

Meanwhile, Stuart Carlaw, research director at ABI Research, said: "It's a high-risk, high-reward environment for now, but we see 102 million users by 2011 on 36 million femtocells. But that depends on operators' converting the trials they tell us they are conducting to major deployments.

"If things do not go as smoothly as anticipated... things could turn out badly, particularly for the many innovative, startup companies that are currently driving the technology," he said.

Carlaw added that the introduction of open standards will be key to success, and thus welcomed the Femto Forum's target of focusing on that in the first instance. "The industry needs to focus on economies of scale and not get fragmented," he said.

From a semiconductor perspective, he said, the risks are high right now. "We are seeing a lot of price pressures even before there is any meaningful volume out there. But despite this, companies such as picoChip, ST Microelectronics, ADI and Xilinx are pretty active in the market. Most are focusing on total solutions, while others such as picoChip are partnering for the radio side. Still others, such as Texas Instruments, Broadcom and Freescale Semiconductor, are looking on and waiting for volumes, and will either acquire the expertise or dive in and commoditize the market," Carlaw said.

The analyst's "conservative" estimate is that the semiconductor opportunity for femtocells will be $50 million by 2008, rising to a "robust" $935 million by 2012.

Peter Claydon, COO and one of the co-founders of picoChip, which claims to be the only company shipping baseband chips specifically for femtocells, said, "A typical chip for a femtocell costs about $10 million to design, including software." With the projected numbers for first-generation femtocell baseband chips, the company would need a $2 margin per unit to recover costs, he estimated.

Claydon noted that picoChip is already designing a second-generation femtocell chip.

'Big investment'
ABI's Carlaw, however, suggested a more realistic design cost for a femtocell chip is in the region of $25 million to $30 million. "That is a big investment for the startups that are active now for a market that has yet to prove itself," he said.

TI thinks any significant volume for both its DSPs and analog parts in femtocells will not materialize until 2009, "and that is if all goes well with significant outstanding issues such as standardization and field trials," said Josef Alt, business development manager for communications infrastructure products at TI Europe.

"Cost is bound to be a big issue, and some of the figures I am hearing for femtocells, say $70, are just not realistic, not even when we get to big volumes in, say, 2012," Alt said. More realistic numbers, he said, are between $150 and $200.

Alt added that TI is working with customers on femtocell designs, "but we are looking very carefully at the business case, as are our big OEM customers, who we think will have the advantage in the long run!the likes of Ericsson, Nokia Siemens Networks and Alcatel Lucent."

That sounds like an ominous warning to the early pioneers developing and supplying femtocells to network operators. Those pioneers include companies such as Ubiquisys Ltd, ip.access, 2Wire, Airvana Inc. (recently acquired 3-Way Networks), RadioFrame Networks Inc. and Tatara Systems, which already have the likes of NEC, Samsung, Motorola ZTE Corp. and Huawei to contend with, in addition to the ones mentioned by Alt, as well as likely contenders from the consumer space such as Netgear Inc.

Success uncertain
Ubiquisys, for one, is not sitting on its laurels. The Swindon, England-based group has been one of those setting the agenda, but Will Franks, CTO, admits "it is not a foregone conclusion this market will succeed."

"Wi-Fi dual mode continues to evolve and grow and we!that is, the femtocell ecosystem!probably have a two-year window to make our mark, ensure we come up with standard interfaces, and, above all, avoid fragmentation," said Franks.

For now, the ball is very much in the court of the carriers, and they are at last beginning to make positive noises about the technology. Most observers believe the first to commit to a commercial network will be Japanese group Softbank, which has been conducting proof-of-concept tests and trials with equipment from Motorola, ip.access, Ubiquisys and others.

"It is the perfect storm for them. They have the spectrum, the 3G coverage and the traditional Japanese strategy of early adopters," said ABI's Carlaw.

- John Walko
EE Times Europe

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