detecon opinion paper femtocells: are in-home cellphone solutions ready for mass-market deployment?

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Femtocells Are in-home cellphone solutions

ready for mass-market deployment?

2008 / 05

Femtocells – Are in-home cellphone solutions ready mass-market deployment?

Opinion Paper 2 Detecon International GmbH

Table of Contents

1 Executive Summary ............................................................................................ 3 2 Femtocells Basics ............................................................................................... 4

2.1 The challenges for indoor coverage ............................................................ 4 2.2 A cellular access point at home................................................................... 5 2.3 Network Integration ..................................................................................... 6

3 The Value Proposition......................................................................................... 7 3.1 For customers ............................................................................................. 7 3.2 For operators............................................................................................... 7 3.3 The femtocell hype ...................................................................................... 9

4 Challenges ........................................................................................................ 12 4.1 Technical ................................................................................................... 12 4.2 Economical................................................................................................ 14 4.3 Subscribers acceptance............................................................................ 14 4.4 Competing technologies............................................................................ 15 4.5 Regulation and standardization................................................................. 17

5 Conclusion & Recommendations ...................................................................... 18 6 Reading on........................................................................................................ 19 7 Abbreviations .................................................................................................... 20 8 The Authors....................................................................................................... 21 9 The Company.................................................................................................... 22



1 Executive Summary

Femtocells are small, low-cost cellular base stations designed for residential use to connect standard mobile devices to a mobile operator’s network through a broadband Internet connection. They are proposed as a solution to increase the indoor coverage reliability, and thus to provide better quality voice calls and higher speed data transfers. Femtocells are also an attempt to bypass the high investment costs derived from dense deployments with conventional base stations.

In this opinion paper, we explain the technical fundamentals of femtocells and present their value proposition paying special attention to the hypes behind the technology. Additionally, we stress some of the technical and commercial challenges for mass-market introduction such as RF interference, network management, high prices, public acceptance, and competing solutions for mobile communication services at home.

Our perception is that femtocells are still in an early evolutionary stage with multiple open issues to be solved before a mass-market deployment can bring the expected benefits. Mobile operators evaluating the introduction of femtocells in their networks should keep track of the evolution of the technology and standardization process. In order to gain experience with the technology, a possible approach is starting with trial developments. Particularly, mobile operators should start identifying those deployments where the introduction of femtocells could bring them benefits once the technology is mature.

This opinion paper opens the door for future in-depth analyses around the topic femtocells that will be released in future publications.



2 Femtocells Basics

Mobile operators are facing increasing pressure when trying to balance the advance of technology and new services with increasing costs, compensating the reduction in revenues from voice services and facing a growing competition from multiple players. The fixed-to-mobile substitution market, once considered as a secure expansion field is now being threaded by alternative technologies such as Wi-Fi and UMA phones. Mobile operators need to move quickly if they want to take a win of what has been called the battle for the building. Through this opinion paper we discuss whether femtocells can be considered as a viable option in this context.

2.1 The challenges for indoor coverage

Expenses on radio access network are of the biggest costs for operators when planning their networks. These expenses grow up when operators attempt to guarantee the same coverage levels for outdoor and indoor locations. With in-building coverage being one of the most demanding environments in terms of required time, effort and inversion, mobile operators concentrate invariably on achieving the highest coverage reliability on open spaces while accepting a lower one for indoors.

As voice used to be the single source of traffic in mobile phone networks, operators managed to overcome indoor coverage issues by deploying large macrocell base stations configured with sufficient transmit power to compensate losses through walls. Although this approach worked to some extent for GSM and low-data rate services like voice and messaging, in the case of high-data rate services and interference limited systems, which is exactly the case of 3G, increasing the transmit power does not fulfill the required coverage targets inside buildings, and on the contrary may reduce the overall network performance.

As next alternative for improving the network coverage, operators can increase the granularity of their deployments, essentially by reducing the cell size or range. Smaller cells allow covering target locations and increasing the available traffic capacity. In general, the smaller the cells are, the better the signal quality that can be achieved, but also the additional needed infrastructure and the more complex the design and managing efforts that result for the operator.

In the context of this paper the femtocell term refers exclusively to small cellular base stations used inside residential environments. A femtocell represents so far the

Cell Range Definition

Mobile operators can choose between different cell sizes when deploying a mobile network. The size of the cell, also known as range, specifies the maximum distance a mobile may be served with a certain probability. Due to propagation effects, the bigger the cell range is, the lower the data transmission that can be reached. Therefore, a tradeoff between range and bandwidth needs to be found. The values provided in the table are given as example, exact cell ranges depend from factors such as technology, frequency and environment.

Macro Micro Pico Femto

Range (m) 30 000 3 000 300 30

Bandwidth (kbps) 144 384 2 000 8 000

Concurrent users 100 100 10 4

Source: ip-access, In-Building Femtocell Workshop



finest existent granularity level for network coverage in mobile communication networks. The femtocell technology introduces two novelties. First, the radio transmitter and base station functionalities (RNC and GSN in the case of 3G) are shifted inside the customers’ location. Second, a symbiotic relationship within fixed and mobile access is established when the femtocell relies on an existing broadband Internet connection to reach the mobile operators’ network.

The introduction of femtocells establishes a new paradigm: achieving an increased indoor coverage supported by a broadband Internet connection, reaching a specific coverage extension where it is punctually needed.

2.2 A cellular access point at home

Femtocells aim at alleviating the lack of reliable coverage for indoor deployments based on a simple idea: manufacturing a small-box-sized base station with a low enough price to be deployed in high volume for residential use, connected to the core network of the operator via a fixed access network (wireline or wireless) using the standard customer’s broadband Internet access.

As illustrated in Figure 1, a femtocell provides cellular access to a limited number of devices, typically up to five, within a subscriber’s location. The way to the operator’s network is established through an existing broadband Internet connection.

Generic Femto Network Architecture

Source: Femtoforum Figure 1: Simplified architecture of the femtocell technology



2.3 Network Integration

Today there are several different approaches to integrate femtocells into mobile operator’s network. As illustrated in Figure 2, we classify the different solutions in four categories: Modified RNC based solution, RAN Concentrator, UMA based solution and SIP/IMS based solution.

Femtocell Integration Approaches

Core NetworkTunneled

Iu_b

Tunneled

Iu

UMA

SIP

Modified RNC

UMA Network Controller

Security Gateway

RAN Concentrator

Wm

Wi

Iu-CS

Iu-PS

3G Core

SIP/IMS Core

Figure 2: Simplified architecture of the femtocell technology

Modified RNC

This architecture is based on existing 3G networks, whereas the femtocells connect to the modified RNCs via the Iu-b over an IP interface. This approach makes an upgrade of the RNC necessary, but this solution allows operators to leverage on the same RNC to support femtocells in addition to macro network Node-Bs.

RAN Concentrator

The RAN concentrator approach is comparable to the modified RNC architecture, but it typically requires a new RNC. In this approach, the multiple femtocells connect directly to a new device called RAN Concentrator, using a proprietary interface. The RAN concentrator is connected to the mobile core network over the standard Iu-CS and Iu-PS interfaces.

UMA

The UMA approach uses a technology based on the 3GPP standard for GAN/UMA in order to integrate the femtocell into a mobile core network similar to UMA. This method requires the implementation of a UMA Network Controller (UNC) that talks with a UMA client in the femtocell. The UNC is connected to the mobile core network over the standard Iu-CS and Iu-PS interfaces.

SIP/IMS

In this approach, the femtocell is integrated through a SIP/IP Multimedia Subsystem based network and the femtocells convert cellular signals from the mobile to appropriate SIP based messages and uses Voice over IP over SIP. In the mobile core network, a SIP enabled Mobile Switching Center (MSC) is required to operate the translation from SIP into existing network interfaces. The RNC function is fully integrated into the femtocell.



3 The Value Proposition

Femtocells are proposed as a solution to increase the indoor coverage bypassing the high investment costs associated with traditional base stations. In this sense, operators are seeking in femtocells a way to achieve savings in infrastructure and to generate new revenue sources for services offered at home.

In this section, we review the femtocells’ value proposition, balancing the capabilities and limitations of the technology, the actual market status and its tendencies and relying on the experience gained when introducing new technologies.

3.1 For customers

Besides having better indoor coverage, we think the following benefits for customers are worth to mention:

Single communication device. Femtocells offer enhanced radio access using the same mobile devices the subscribers are used to and already own.

Possibility of attractive voice and data flat rates at home, given that the backhaul traffic is transported via an Internet connection.

However, beyond the discourse of better indoor coverage, single communication device and possible flat rate tariffs, we see a weak value proposition on the subscriber’s side.

3.2 For operators

Operators are those who may grab the most benefits from femtocells. From a long list of claimed benefits, we consider that freeing of macro network capacity, reduction of capital and operational expenditures and addition of new revenue opportunities may form part of the femtocells’ value proposition. In the following lines we explain our rationale behind these statements.

Freeing macro network capacity

Femtocells use the existing customer’s broadband connection for backhauling, which implies that less traffic goes through the macro network. Thus, more radio and backhaul resources are available. Therefore, thanks to the use of Internet as backhaul, the capacity of the radio network is increased. Additionally, since mobiles being served by a femtocell transmit at lower power levels, they create less interference in the macro network, which at the end increases the service quality of the whole network.

CAPEX and OPEX reduction

One of the most attracting benefits for mobile operators are the expected CAPEX and OPEX reductions. These reductions are mainly a result of the macro network offload and the use of the residential broadband access as backhaul, as mentioned before.

The savings from the macro network offload may be derived as follows: since users being served by femtocells are not generating traffic in the macro network, additional radio resources are available. These resources can be used, for example, to provide services to



outdoor subscribers. This means, that an increment in the network capacity may be achieved without investing in additional base stations.

Additional savings may be achieved since part of the backhaul traffic is relayed over the broadband IP network of the customer. The possible savings would depend on the location of the termination point for the femtocells traffic. The traffic could be directed, for example, to different aggregation points of the mobile network or directly to the core network.

Placing a base station, which is an element of the operator’s network infrastructure, on the customer side represents also savings in electricity, site rental and related services. As reference, the power consumption and site rental represent around 20% and 70% of the OPEX in typical UMTS/HSxPA sites, respectively1. With fewer macro sites operating it is evident that less operative expenses are required.

New revenue opportunities

Femtocells could create new revenue opportunities derived from the offer of bundled fixed (home) and mobile (underway) tariff plans. Additionally, since with femtocells the radio traffic remains at households, operators may offer more easily flat voice and data tariffs at home without running out of business. Finally, with the presence of a femtocell in a household, operators could be better positioned to offer family plans and therefore capturing new customers.

Synergies among business units

Femtocells are offered as a solution for mobile operators. Moreover, we foresee the major advantages for operators having both mobile and fixed-line business units, due to the symbiotic relationship that arises between mobile and fixed technologies, as described in Section 2.1. In this sense, the introduction of femtocells may allow the creation of group synergies, establishing an advantageous path towards the fixed-to-mobile substitution. At the same time, by pushing the mobile operator inside the homes, the group protects the revenues of the fixed-line arm, letting less free space for the arrival of threatening technologies like VoIP and VoIP over Wi-Fi.

For mobile only operators, the case may however be harder. Without a fixed-line unit to rely on for the broadband Internet access, the mobile operator will need to reach agreements with fixed operators and Internet Service Providers to guarantee quality of service for its traffic. These agreements may generate new OPEX that would cause a reduction in the expected savings from network offload and backhaul. Nevertheless, there is a solution to the problem: as for such operators an efficient (fixed) backhaul solution is mandatory, it can be extended to provide enhanced functionalities and performance for next generation mobile networks and at the same time serve as broadband fixed access to femtocell architectures. Modern technology concepts (NGN microwave PTP and/or PMP solutions) are available, corresponding business cases need to be evaluated carefully.

1 H. Holma & A. Toskala. HSDPA/HSUPA for UMTS. Wiley 2006, p144-153.



3.3 The femtocell hype

As many entrant technologies, femtocells have raised big expectations. Over publicity, exaggerated statements, questionable assumptions and biased analyses have contributed to create what we think is a hype around the benefits of the technology. We consider that three main hypes have been created around femtocells:

Addressable market for traffic generated indoors

CAPEX and OPEX reduction

Plug and play solution

There is indeed a certain degree of accuracy on the proposed benefits. Nevertheless, operators should be aware of performing a critical evaluation and understanding the preconditions behind these claims. We would like to present some guide for the analysis.

Huge amounts of mobile traffic are being generated indoors

Femtocells bring the idea that better indoor coverage is required. Although this is true in general terms, the next fundamental question is to which extent revenues from indoor services can be expected.

With prices for voice services falling and data services being positioned as the main source of income and also the main source for traffic in the network, revenues from data should be the target for femtocells. Furthermore, with most of the DSL providers also offering flat rate voice tarifs, we believe most users will be reluctant to pay additional fees for using voice at home with their mobile phones.

Consequently, some of the questions that arise are:

How high is the mobile indoor traffic generated for data?

Are high-volume demanding data home users willing to use their phones for watching videos, downloading music and sharing files instead of using a laptop for example?

Does the market for mobile high-speed data transfers at home exist?

Unfortunately, up to now reliable studies for mobile indoor generated traffic are only available for voice services.

Figure 3 shows results on the percentage of mobile calls originated at different locations, as reported by the Yankee Group2. An estimation of the indoor generated traffic depends directly on the type of deployment and market. In residential areas the percentage is certainly high, while in urban areas, although the indoor traffic may also achive high values, this traffic may be generated inside offices and public buildings which are actually out of the application reach of femtocells. We consider that a conservative assumption is that around 30% of mobile calls are originated at home.

2 Yankee Group. Femtocells: Driving a New Network Design Philosophy, 2007



Mobile Calls Generated at Home

Source: Yankee Group

3640

44

62

272424

12

21222121

1210

76

At workOther LocationsAt HomeIn Car

2006200520032001

Approximately which percentage of your mobile phone usage occurs in each of the following locations?

Perc

enta

ge o

f Res

pond

ers

Figure 3: Location of mobile generated calls

During our studies, we found some sources recurrently providing higher percentages (up to 75%) for indoor generated calls. However, they make only distinction between outdoor and indoor traffic. As previously mentioned, femtocells are designed to serve tiny locations like homes and small offices. This means that not all the indoor generated traffic can be addressed by femtocells. Mobile operators should be aware that:

Data traffic should be the addressable market for femtocells in case the benefits of network offload are intended.

Up to now no reliable studies about data traffic generated at home are available.

Not all the indoor traffic is traffic generated at home

CAPEX reduction

Femtocells should have a very low price to reach mass-market deployments. Analysis3 reports that big scale deployments (a femtocell penetration of about 60%) are required in order to achieve significant CAPEX reductions. Deploying a network with femtocells will always imply an additional cost for operators, which may choose between subsidizing or passing the cost to their customers.

During the value proposition, we mentioned that the reduction in CAPEX, is a result of the network offload. Nevertheless, talking about an offload make sense, when the network is near to reach saturation and its growth is driven by capacity. Operators need to evaluate if their networks are prior to reach saturation, so that an offload with femtocells may bring substantial savings.

3 Analysis Research. Picocells and Femtocells: will indoor base stations transform the telecoms industry?, 2007



On the other hand, femtocells should not be seen as a base station substitution, but as a complement and improvement to the infrastrucutre. Thinking in a deployment heavily based in femtocells is also unrealistic. Outdoor coverage is still needed to carry more than 50% of the traffic (see Figure 3) and femtocells are limited to users at home.

Regarding backhaul, mobile operators should also be aware that they may indeed need to increase their backhaul capacity in case heavy traffic is forwarded to the operators network when flat-rate tariffs are offered for mobile users at home. Operators therefore need to be aware that:

Femtocells are themselves an expense

Network offload brings substantial benefits when the network is close to saturation

Base stations are still needed for outdoor users

New CAPEX in backhaul may arise in case femtocells increase the data usage

OPEX reduction

Although it is true, that shifting the radio access to the subscribers’ premises may mean reducing the operation costs for the base stations, new operational cost may arise. For example, as mentioned in Section 3.2 since the backhaul connection of the femtocell is done through the Internet, mobile operators will need to reach agreements with fixed operators and Internet Service Providers to guarantee quality of service for the mobile traffic going through the Internet or incorporate their own fixed network branch if they have. In both cases, OPEX will shift to some extent from a mobile network to a fixed network.

Increases in customer care expenses may also be expected. With thousands of femtocells shouting across the city, operators should be prepared to support their customers at least until the technology reaches maturity.

Plug and play boxes

Finally, it is unrealistic to think that a small radio will solve the network planning issues that operators have been dealing during years. Indoor coverage is per se a complex task. The deployments are so diverse that an all-fit solution will barely work optimally in all cases. Conventional users will likely place the femtocell where the nearest DSL connection is, and not where it can provide better coverage. With femtocells using very low transmission power, attenuation inside homes should also be expected.

At the end of the day, mobile operators should balance if savings from network offload and possible additional revenues compensate the associated costs of deploying a femtocells network and the rise of new costs such additional backhaul and customer care.



4 Challenges

In the last section, we mentioned some benefits of femtocells for operators and subscribers. Nevertheless, we consider that before these benefits may be achieved, a series of challenges should be solved. Across this section, we highlight some of the aspects that could challenge a mass-market development of femtocells.

We believe that the most attracting value propositions of femtocells, better coverage and CAPEX reduction could also become their most challenging points. From the technical perspective issues associated with interference, network management and integration have to be considered. From the commercial point of view, prices, market readiness, and public concerns can also be mentioned.

4.1 Technical

RF interference management

Femtocells should adapt automatically their RF parameters (channel frequency, transmit power and scrambling codes among others) to the environment to maximize the use of resources and minimize the interference levels. These adaptations are to be reached without subscriber intervention or technical support from the operator side.

High interference levels created among femtocells or with macrocells could defeat the expected benefits. Manufacturers have been following different approaches to deal with interference levels in a femtocell deployment, for example:

Using a separate carrier for femtocells and for the macro cell environment. This approach may however not be suitable for operators with scarce allocated spectrum, who may want to maximize the capacity by frequency reuse.

Transmission at very low output power levels. This helps to minimize the interference within neighboring femtocells and with the macrocell network, since low power radio emissions are more easily attenuated through the walls of indoor deployments. However, the transmit power needs to be high enough to go through walls within a single house and to support high-data rate transfers.

In case of 3G femtocells, using scrambling codes not in use in neighboring cells. This requires the femtocell to first listen to the environment to know the used scrambling codes in the neighboring cells and start working with one that is not currently in use.

Whichever the employed alternative, the RF managing process needs to be done automatically, relying on the smartness of the femtocell for adapting itself to the environments without perturbing neighboring cells. Nowadays, vendors claim to have reached the appropriate technology to overcome these issues.



Nevertheless, the performance only could have been tested under controlled conditions since mass-market deployments still do not exist. Sprint Nextel is the largest femtocell deployment so far with an estimate of 2,200 femtocells shipped at the end of 20074.

Handover

A seamless handover refers to an effective integration and synchronization of femtocells with macrocells. This does not only involve challenges at the radio access level, but also raises issues such as access rights, security, authentication, and billing. As an example, a household guest may want to take advantage of better indoor coverage even if he is billed at the usual tariff. This could happen for example in the SOHO environment.

Vendors and operators will thus have to work on devising a simple and transparent authentication, authorization and billing procedure that allows users smoothly switch between macrocell and femtocell coverage.

Network integration

There are a number of technical challenges in incorporating femtocells within a mobile operator’s network. To make femtocell solutions marketable, the challenges have to be addressed. The major challenge is the need for a scalable, secure, and operationally sustainable approach for integrating femtocells into a core network.

Scalability - The expectation is to connect millions of femtocells to an operator’s network, in opposition to thousand of macro cells deployed today. Therefore, femtocell solutions have to be scalable to support millions of end points.

Security – As femtocells will connect to an operator’s network via the public internet, it is imperative to have a femtocell network connectivity interface that secures the traffic.

Service Transparency – It still remains to be clarified if an operator should provide all existing and planned services to handsets when connected via the femtocell or only a subset of them.

Network management

In order to maintain a smooth operation and customer satisfaction, operators will need to be able to manage femtocells remotely. Software and firmware updates, monitoring of the status and performance and diagnostic tests should be possible from a console in the operator's network. Additionally, when femtocells are deployed massively, remote software upgradeability will be vital to address operators' architectural evolution in a cost-effective manner.

4 Infonetics. Femtocell Access Points: Biannual Worldwide Market Size and Forecasts. March 2008.



4.2 Economical

Femtocell prices

As costs are closely related to shipment volumes, operators would obtain the most benefits only if the technology reaches the mass consumer market with millions of shipments of femtocells per year.

At launch, a femtocell is expected to cost mobile operators $200-250 (for comparison: a DSL modem costs around $20). Once launched in volume, the manufacturing cost target may drop to around $100. Unless femtocells prices drop down below $100, it is unlikely that the consumer market will take off. The enterprise market may pay more but will not provide the volume operators require to meet targets.

For operators wishing to provide a new home gateway (either to new broadband customers or as part of a box renewal for existing customers) another potential cost reduction factor is to integrate the femtocell into a single box that includes the DSL/cable modem and an IP router, in a similar way as the Wi-Fi access points are integrated today with DSL modems. An integration is in fact, from the technical point of view, also desirable since an all-in-one box would eliminate possible issues within equipment interoperability.

Network Integration Infrastructure

Independent from the technical characteristics of the different integration variants, the initial deployment costs are major criteria to choice a specific femtocell architecture. This decision should be based on the existing network infrastructure. An operator with existing UMA architecture will prefer a UMA based femtocell solution and an operator who has already IMS implemented could prefer a SIP/IMS based femtocell solution. The lowest expenditure exists with the “Modified RAN” solution, since only an upgrade of the RNC is required.

4.3 Subscribers acceptance

We think operators could have a tough task when trying to persuade users of installing femtocells at home. An operator needs to consider the following aspects from the customer’s perspective:

Regarding the service quality: Would subscribers be willing to accept a new solution that provides higher quality for mobile voice and data at home?

Regarding the tariff aspect: Would subscribers pay a flat-rate at home if they already have a flat rate for data and probably for voice included in the broadband connection?

Regarding the services: Do data demanding services that subscribers want to use at home already exist?

Femtocells extend the mobile operator’s network passing site associated and backhaul costs to the subscribers. A valid question that a subscriber may ask is: what are the benefits for me if I am absorbing some costs of the network operation?

Beneath the argument of better indoor coverage, which for final subscribers is less important since they already have fixed-line services, operators should remark the convenience of a single common device for communication anywhere.



Operators having both fixed-line and mobile arms, may also offer bundled offers that include the convenience of having both fixed-line and mobile services in a single bill. At some point in time, operators will certainly have to share with their customers the possible savings derived from the femtocells’ introduction, which means offering more attractive tariffs.

Talking about innovative services and added value is an old discourse that will fail, as it was the case when introducing 3G, if those exciting services still do not exist.

An additional challenge that may arise is the growing public concern on harmful radio emission levels. If femtocells are associated as a base station extension, users may be reluctant to take them home given the concern that base stations have arisen in the past. We consider that these concerns are unfounded since:

Femtocells’ emission levels are among the lowest for home wireless devices. Their typical maximum transmit power of is in the range from 15 to 20 mW5. As comparison, maximum transmit power levels for a WLAN access point are around 100 mW.

A mobile attached to a femtocell emits also at lower levels that when attached to macrocell, due to the power control mechanisms implemented in most of the mobile communication standards.

Based on studies performed on WLAN access points that report maximum SAR levels of 0.27 W/kg6, we can conclude that the emission levels for femtocells are far below the limits for safe emission standards, which establish a SAR limit of 2 W/kg7.

4.4 Competing technologies

Fixed-line, cable, mobile, and VoIP providers are engaged in what has been called the battle for the building competing aggressively to provide a full range of personal communication services to consumers when at home.

Within a constellation of service offers, we identified four different approaches that could be considered as competitors to femtocells when providing mobile in-house communication services:

Through DECT phones, they are cordless phones commonly used for domestic or corporate purposes. These consist of a base station and one or more handsets. The phone service is in general provided over the PSTN network.

Though Wi-Fi networks, using handsets that connect to a conventional Wi-Fi access point providing VoIP services over SIP or proprietary protocols like Skype or Vonage.

5 Go2call software. Presentation: VoIP Enabled Femtocells for GSM 2G Networks. Alcatel Lucent Workshop. Presentation: Alcatel-Lucent Portfolio.

6 Federal Office of Public Health, Swiss Confederation. EMF Fact sheets WLAN. Jan. 2007.

7 EC (European Commission). Council Recommendation of 12 July 1999 on the Limitation of Exposure of the General Public to Electromagnetic Fields (0Hz to 300GHz).



Through UMA networks, using dual-mode phones that can seamlessly roam and handover between Wi-Fi and cellular radio networks.

By means of Cell ID solutions, which use conventional mobile phones and cellular radio networks, with the advantage of offering preferential phone rates when the customer makes calls within a predefined location or “Home Zone”.

With customers having a wide range of possibilities for wireless communication at home, femtocells arrive to an arena with high competition. Each available solution has advantages and drawbacks. Some of the most important are summarized in Table 1.

Table 1: Available solutions for wireless communication at home

Solution Advantages Drawbacks

DECT • Widely deployed in Europe

• Proved solution

• DECT phones needed

• Mainly voice services

Wi-Fi • Wi-Fi access points are widely deployed

• VoIP services and tariffs

• Wi-Fi phones needed.

• QoS is not guaranteed

• SIP or VoIP account required

UMA • Phones can be used in Wi-Fi and cellular networks

• Dual phones needed

• UMA enable network required

Cell ID (Home zone)

• Only conventional mobile phone is needed

• Independent of fixed line

• Low coverage reliability

• Costs are high for operators, since traffic is still on radio channel

Femtocells • Only conventional mobile phone is needed

• Excellent QoS

• Femtocell prices are high

• Single architecture standard still to be reached

• Immature technology

From the presented solutions, Cell ID has been so far the most deployed by mobile operators. Although it may increase the customer base and loyalty and help to snatch some revenues from the fixed-line operators, the costs for the mobile operator are high since in general more traffic is carried in the macro network. Additionally, it still represents an outdoor solution providing service indoors.

The bet for femtocells is to position themselves as the solution for in-house wireless services. Taking advantage of their duality for delivering voice and data services, leveraging on the economies of scale already achieved with conventional mobile devices.



4.5 Regulation and standardization

We consider that regulatory and standardization issues could slow the deployment of femtocells. Regulation is country specific and the issues may be different from country to country. The standardization is a global effort among operators, vendors and regulators.

Regulatory issues: it is still not clear how the spectrum regulation will work. Our experience shows that regulatory topics may become a complex issue. Regulation authorities may raise their hands since the femtocells operate in the licensed spectrum that operators have been granted. Femtocells are an extension of the mobile operator’s network. Thus, operators will be found responsible for the operation of femtocells and their associated issues.

Standardization: although the radio access protocols used in femtocells are already known standards for mobile communications (GSM, UMTS, CDMA, WiMAX), a standard specifying the interfaces between elements in the femtocell architecture has not been defined. The Femto Forum, a group of global equipment and software vendors and operators, is working steadily to reach consensus in a fragmented market. The Femto Forum announced that its members agreed to develop a framework architecture that will have a single standard interface (modified Iu interface) between femtocell and network gateway and use already defined standards to interface between gateway and core network8.

A common standard is required to harmonize the integration of femtocells into mobile networks and to reach economies of scale that would eventually allow dropping down the equipment prices.

8 Telephony Online. Femto Forum lays down femtocell law. May 21, 2008. http://telephonyonline.com/wimax/news/femotcell-forum-standard-0521/



5 Conclusion & Recommendations

Through this opinion paper we presented the basics of the femtocell technology. We mentioned that femtocells may bring benefits to both customer and operators. We also remarked the hypes of the technology and discussed some of the most challenging issues that should be solved before this technology can be considered as mature for mass-market deployment.

After the discussion presented in this opinion paper we can settle the following recommendations for operators:

An addressable market needs to be identified. If the market for indoor data services is worth enough or may be increased, then operators may consider femtocells as a technology that could allow them to generate new revenues with a light investment in their radio network.

Operators need to be aware of the ongoing definition of standards. Up to now, different network integration alternatives exist. Betting on a specific architecture now may constrain the mass market reach if a different architecture is later selected to be the standard.

Operators will need a carefully designed marketing strategy to gain femtocell customers. Better indoor coverage and single common device are weak arguments if new tariffs are used to compensate the femtocell costs. The profits derived from femtocell deployments should also be reflected in more attractive tariffs for the customers.

Spectrum regulation issues should be followed in a country base. Operators should be aware of the governing policies, since they may differ from country to country.

In order to gain experience with the technology operators may start pilot and friendly user deployments. We consider that starting now a massive deployment of femtocells represents a risky movement.

Femtocells are not the magic weapon in the battle for the building. They may however offer a certain degree of freedom for the mobile operators.



6 Reading on

Analysis Research; Picocells and Femtocells: will indoor base stations transform the telecoms industry?, 2007

Continuous Computing; Integrating Femtocells with Existing Wireless Infrastructure

IP-Access; In-Building Femtocell Workshop, 2007

Kineto Wireless; UMA, The 3GPP Standard for Femtocell-to-Core Network Connectivity, Whitepaper 2007

Ovum; 3G home gateways. Opportunities and challenges, 2007.

Yankee Group; Femtocells: Driving a New Network Design Philosophy, 2007



7 Abbreviations

3G 3rd Generation

DECT Digital Enhanced Cordless Telecommunications

DSL Digital Subscriber Line

GAN Generic Access Network

GSM Global System for Mobile communications

GSN GPRS Support Node

HSxPA High Speed Downlink/Uplink Packet Access

IMS Internet Protocol Multimedia Subsystem

MSC Mobile Switching Center

PSTN Public Switched Telephone Network

RAN Radio Access Network

RF Radio Frequency

RNC Radio Network Controller

SAR Specific Absorbed Radiation

SIP Session Initiation Protocol

SOHO Small office/home office

UMA Unlicensed Mobile Access

WiMAX Worldwide Interoperability for Microwave Access

WLAN Wireless Local Area Network



8 The Authors

Óscar Escalante-Mendieta joined Detecon in 2007 after finishing his studies of electro-engineering at the University of Karlsruhe in Germany. As Business Analyst in the Competence Practice Communication Technology his current work focuses on radio access networks and technology benchmarking, linking the technical aspects of new communication technologies with commercial and strategic carriers’ decisions.

He can be reached at: 49 228 700 2822 or

[email protected]

Daniel Hoppe is a Consultant at Detecon in the Communication Technology Competence Practice and has an overall telecommunication experience of over 5 years. In Detecon, he has been involved in various projects in the area of mobile architectures and services. Apart from broad telecom domain knowledge, Mr. Hoppe has specialized expertise in the field of data/subscriber management, IP technology and NGN strategies.

He can be reached at: +49 228 700 2855 or

[email protected]



9 The Company

Detecon International GmbH

Detecon International is a leading worldwide company for integrated management and technology consulting founded in 2002 from the merger of consulting firms DETECON and Diebold. Based on its comprehensive expertise in information and communication technology (ICT), Detecon provides consulting services to customers from all key industries. The company's focus is on the development of new business models, optimization of existing strategies and increase of corporate efficiency through strategy, organization and process improvements. This combined with Detecon's exceptional technological expertise enables us to provide consulting services along our customers' entire value-added chain.. The industry know-how of our consultants and the knowledge we have gained from successful management and ICT projects in over 100 countries forms the foundation of our services. Detecon is a subsidiary of T-Systems, the business customers brand of Deutsche Telekom.

Integrated Management and Technology Competence

We possess an excellent capability to translate our technological expertise and comprehensive industry and procedural knowledge into concrete strategies and solutions. From analysis to design and implementation, we use integrated, systematic and customer-oriented consulting approaches. These entail, among other things, the evaluation of core competencies, modular design of services, value-oriented client management and the development of efficient structures in order to be able to distinguish oneself on the market with innovative products. All of this makes companies in the global era more flexible and faster – at lower costs.

Detecon offers both horizontal services that are oriented towards all industries and can entail architecture, marketing or purchasing strategies, for example, as well as vertical consulting services that presuppose extensive industry knowledge. Detecon's particular strength in the ICT industry is documented by numerous domestic and international projects for telecommunications providers, mobile operators and regulatory authorities that focused on the development of networks and markets, evaluation of technologies and standards or support during the merger and acquisition process.

Detecon International GmbH Oberkasselerstr. 2

53227 Bonn Telefon: +49 228 700 0

E-Mail: [email protected] Internet: www.detecon.com

detecon opinion paper femtocells: are in-home cellphone solutions ready for mass-market deployment?

Documents

introduction of femtocells

topic femtocells

mobile operators network

executive summary femtocells

massmarket introduction

mobile communication

competing solutions

standard mobile devices