Analysis: Femtocell Technology and Business Opportunities

The domestic telecommunications market is undergoing a transformation. Restructuring and full-service operations have become the focus of industry attention. Traditional fixed-line operators have finally been able to operate mobile services. However, today's "mobile" is no longer the "mobile" of yesterday. How to "show your strength" in the reorganized mobile market may be a matter of great concern for the "fixed" and "mobile" operators.

The emergence of Femtocell may provide some inspiration. Femtocell (femtocell base station), also known as desktop base station, is a home base station technology, mainly used to solve the problem of indoor coverage in the home. However, due to its innovative features such as running on IP protocol, accessing the operator's mobile core network through the user's IP broadband network, ultra-miniaturization, and plug-and-play, it presents a "blue ocean" to operators.

Femtocell is not so much an innovative technology as it is a source of new business opportunities.

Understanding Femtocell

Femtocell is an ultra-small mobile base station launched in recent years in response to the development of 3G and the trend of mobile broadband. Femtoforum is an organization that actively promotes its productization. Its current members include telecom operators and equipment manufacturers such as Alcatel-Lucent, AT&T, British Telecom, Cisco, Ericsson, Huawei, ZTE, Motorola, NEC, Samsung, and Vodafone.

Femtocell uses IP protocol and is connected through the user's existing ADSL, LAN and other broadband circuits. The remote end uses a dedicated gateway to achieve connectivity from the IP network to the mobile network. It is similar in size to an ADSL modem and has the characteristics of easy installation, automatic configuration, automatic network planning, and plug-and-play. Femtocell has products suitable for various standards such as CDMA, GSM, UMTS, and supports 2G, 2.5G, and 3G. It has the same standard and frequency band as other mobile base stations of operators, so mobile terminals such as mobile phones can be used universally. It has 1 carrier, a transmission power of 10~100 milliwatts (similar to WiFi AP), a coverage radius of 50~200 meters, supports 4~6 active users, and the maximum user movement speed allowed is 10 kilometers per hour.

The price of a Femtocell is currently around $200 per unit, and it is expected to drop to $100 per unit or even lower if the shipment volume is large. It is a user-end product and is accessed through a public IP network, so security is an important issue to ensure operation. A Femtocell has a SIM card similar to a mobile phone, which stores device information, identity information, and configuration information. After power-on, the SIM card is used to automatically authenticate and authorize the network, and a connection is established after registration is completed.

The dedicated security gateway is the gateway between the Femtocell and the mobile core network. It is configured between the IP broadband network and the mobile core network. Each Femtocell uses IPsec technology to establish an encrypted channel with the gateway. The gateway needs to handle a large number of encrypted channels and manage the switching of users in and out of the Femtocell.

The birth environment of Femtocell

Globally, due to the replacement of fixed voice by mobile, the booming mobile business is in sharp contrast to the declining fixed voice business. A survey in the United States shows that 69% of young people under the age of 24 use mobile phones for local calls and 83% for long-distance calls. The trend of the younger generation using mobile phones as the only communication tool is obvious.

As the Internet becomes part of people's lives, the demand for broadband applications is growing. People want to be able to access multimedia services such as music and videos anytime and anywhere through their mobile phones, as can be seen from the public's almost blind pursuit of 3G.

In recent years, my country's broadband business has continued to develop rapidly. By the end of 2007, the number of home Internet-connected computers reached 78 million.

The quality of broadband access circuits has improved rapidly. The “optical fiber in, copper out” policy has prompted the user access technology to quickly upgrade from “local telephone branch-copper cable-ADSL” to optical fiber + DSL, optical fiber + LAN, and even FTTH.

The restructuring of my country's telecommunications industry is becoming increasingly clear, and market competition under full-service operation requires comprehensive advantages. China Telecom and China Netcom have a large number of broadband access network resources and Internet application resources. How to realize FMC, how to "add wings to the tiger", and how to combine the "wing" and "tiger" of mobile to form a comprehensive competitive advantage are the issues facing the leaders of fixed-line operators.

In addition, according to a survey, 70% of mobile data services occur indoors, 20% to 40% in Europe, 40% to 50% in the United States, and 60% in China. These data show that although they are mobile services, most of them occur in fixed places.

Moreover, in existing mobile services, indoor signal coverage is poor due to losses caused by walls; the base station coverage radius and user capacity and available bandwidth per user in mobile networks have always been a contradiction; the construction of new base stations faces many difficulties such as site selection, machine room, power supply, and environmental protection.

For all these reasons, Femtocell came into being.

What does Femtocell bring?

Due to the characteristics of Femtocell itself, it will bring many benefits to operators and users.

For operators, the use of Femtocells can bring the following advantages: Improve service quality. Since indoor signal coverage is improved, the quality of broadband and voice services for users can be significantly improved; Increase network capacity. Each Femtocell is equivalent to adding a base station, which of course also increases the capacity of the entire network; Rapid network expansion. Since users participate, once users approve, the power of "people's war" will be revealed; Reduce CAPEX. Femtocells are purchased by users and use the users' broadband access circuits, which reduces the expansion of network equipment and the investment in corresponding base station links; Reduce OPEX. Since Femtocells are placed in users' homes, operating costs such as computer rooms, power supplies, air conditioning and circuit maintenance are saved; Increase user stickiness. Since Femtocells have good indoor coverage characteristics and bandwidth, operators can provide corresponding home domain service packages to give users a good service experience, thereby increasing user stickiness and attracting users from other networks to switch networks; Increase ARPU. Since indoor coverage is good and bandwidth is high, users will increase their use of multimedia services, thereby increasing ARPU.

For users, using Femtocell has the following benefits: full signal everywhere indoors, Femtocell can provide high-quality signal coverage throughout the home; better quality and richer services, due to the characteristics of Femtocell, users can obtain voice and Internet services with more powerful functions and richer content than ordinary base stations; more economical services, because Femtocell is placed in the user's home, the operator may give users subsidies, discounts and more economical home domain packages; improved broadband experience, because the number of users covered is small, Femtocell can provide each user with higher-speed broadband services and give users a better broadband experience; high-quality voice quality, because each Femtocell only connects to a few users, Femtocell uses a new generation of voice coding technology to make voice quality better; terminal universality, Femtocell is universal with existing mobile terminals on the Internet, users can use mobile phones as the main communication tool whether they are outside or at home, and realize the convenience of one mobile phone, one number, one address book, and one bill; save battery, Femtocell has a small coverage radius, and the connected mobile phone will reduce its transmission power, thereby saving battery and reducing radiation to the human body.

Business opportunities that femtocells may bring

Proper use of Femtocells is likely to generate many business opportunities and new business models.

In terms of signal coverage, it can be used to improve indoor coverage within the original coverage area, and can also be used to add coverage points outside the original coverage area (of course, these points will have traffic). Users can also carry Femtocells with them and "plug and play" wherever there is broadband IP access.

In terms of service provision, operators can design services specifically for Femtocell users, including broadband mobility services, Internet application services, home gateway integration services, Femtocell-specific package services, home-domain-specific package services, VoIP services, etc. In terms of business models, operators can adopt user purchase subsidies, operation subsidies, user participation operations (allowing nearby users to access), cooperative operations (partners are responsible for purchasing and placing Femtocells), etc. In terms of competitive advantages, Femtocell can form indoor signal coverage advantages, data service bandwidth advantages (extension of wired broadband advantages), collective access of family members, rapid expansion of networks and users, and wired and wireless integrated service advantages.

Femtocell is a powerful tool for creating business opportunities. By making good use of Femtocell, fixed network operators will be able to give full play to their advantages in wired broadband access network after obtaining mobile business operation licenses, and expand mobile networks and users at low cost and high speed. The ultra-small and family-friendly features of Femtocell will bring broad imagination space for corresponding product development and operation models. The user participation and disposability of Femtocell are in line with the popular trends of WEB2.0 and DIY, and will be favored and sought after by many users.