Ovum: Hold back femtocell deployment

Recent industry announcements indicate femtocell market is heating up, but the cellular technology is hindered by lack of standards, says analyst.
Written by Sol E. Solomon, Contributor

Despite two major announcements this week involving femtocell deployments, the cellular technology's impact will be "minimal" until after 2009, according to Ovum.

Japan's Softbank unveiled Monday it has placed orders for 3G femtocell equipment and intends to launch the cellular technology commercially in January 2009. At the same time, NEC said it was investing in fixed-mobile convergence specialist Kineto Wireless, which has run femtocell-related trials.

Also known as base station access points, femtocells are touted to improve indoor phone coverage by transmitting cellular traffic over the user's broadband connection.

Steven Hartley, senior analyst at Ovum, said in a report Thursday that the lack of standardization is the main technical stumbling block causing the limited short-term impact of femtocells. The research firm advised operators to hold back on implementing femtocells until standards-based equipment are available, "unless the need to be particularly disruptive in the market is their overarching market strategy".

Hartley explained: "Although far from insurmountable, the time needed to iron out required standards is already causing operators to hold back on their plans until the situation is clarified." Ovum does not expect this to happen before December 2008.

Most operators will refuse to move on to femtocells until they have cheap equipment that is easily integrated into their existing network, Hartley said.

"This depends on the standards being ratified and equipment based on those standards coming to market in sufficient volumes to be cost effective. This will take time, and will not occur until the end of 2009," he said.

In the meantime, operators currently trialing the technology will provide "unparalleled feedback" and help further the technical maturity of femtocells, according to Ovum.

Among them, Singapore telco StarHub, in May kicked off a six-month femtocell trial for a pre-selected group of consumer customers.

According to Hartley, quality-of-service (QoS) guarantees over broadband as well as the regulatory situation for the technology are also unclear. "[Issues around] QoS guarantees are most important to mobile operators without their own fixed broadband offering, and will only be solved with commercial agreements," the analyst said. The regulatory situation will be sorted out as more deployments occur after 2010, he added.

NEC's investment in Kineto signals increased movement by major players in the femtocell space, Hartley said, but noted that the absence of the largest wireless network vendor, Ericsson, "suggests it at least is not convinced that the market is yet ready to take off".

Furthermore, he said, specialist vendors are taking a "disproportionately large role", suggesting a vacuum has yet to be filled by the large players. "This points to technical immaturity and time needed to progress the situation," he added.

"Until technical maturity and a critical mass of major vendor support are achieved, the vendor ecosystem will continue to evolve as it is currently--with partnerships and investments eking out interoperability and attempting to carve out the market opportunity," Hartley said.

In a ZDNet Asia report early this year, an IDC Asia-Pacific analyst said femtocell deployment will be limited to developed countries, where competition will drive operators to adopt the technology due to its potential to replace fixed line home phones.

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