Femtocells will deliver over US$5bn in savings, but only if operators do their homework

The number of femtocells deployed by the end of 2013 will exceed the 40 million mark, with 22 million net additions in 2013 alone, according to Informa Telecoms & Media. This installed base could help operators to offload up to 8% of total mobile traffic to fixed networks via the end user subscriber line, the company stated.

This could allow mobile operators to make significant savings by reducing the need to create additional macro-cell capacity to cope with this traffic. However, whether these savings materialise depends on a number of factors: the nature of the operator, the mobile access technology involved, the value proposition to the end user, the region targeted, and the level of investments the operator has already made in upgrading its mobile network, Informa said.

Informa explained that o handle the same amount of traffic carried by the 22 million femtocell deployments in 2013 would in theory require a US$13.8 billion investment in macrocell capacity. This is the potential sum if one takes into account capital expenditure related radio access infrastructure, operational costs and the mobile backhaul cost required for adding new macrocells to handle a traffic capacity equivalent to this carried over the new femtocell installed base.

However, Informa added that this theoretical figure assumes operators have no spare capacity in their existing networks and they have to build this capacity from scratch. In practice, when operators invest in widening the coverage of their networks they systematically create capacity redundancies, probably enough to handle a big part of this traffic anyway. Assuming that 33% of the required capacity is provided by the existing macrocell coverage, then macrocell infrastructure expenditure investment required to handle that amount of traffic is likely to be closer to US$ 9billion.

By comparison Informa Telecoms & Media estimates the capital expenditure related to implementing femtocell networks to support 22 million new net additions would cost the industry about US$3.7billion, 85% of which goes to femtocell access points (FAPs). Thus, the industry could save US$5.3 billion or more in network infrastructure costs if femtocell solutions are properly deployed using meticulous geographic network planning.

Savings could be higher depending on whether these devices are fully subsidised or not. Also while there are potentials of savings in network expenditure when deploying 3.5G, WiMAX or LTE, this saving is less obvious for GSM/GPRS networks and WCDMA to a certain extent.

However this saving of US$5.3 billion or more could be undercut by the cost of marketing and promoting FAPs and femtocell services, said Malik Saadi, principal analyst at Informa. “Deploying femtocells requires a good understanding of market segmentation of both mobile consumer and household markets, meticulous planning and targeted marketing campaigns, which mean operators will have to invest substantial amounta of money if they want femtocell services to gain popularity.”

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