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Femtocell: will it be useful in India?

Femtocells are tiny, low power 3G radio systems that plug into a residential broadband connection to provide a mobile signal directly in the home or office.

In more developed markets such as the USA, Europe and Japan, where data traffic has exploded in the recent past thanks to devices such as the iPhone, operators were increasingly facing quality of service issues with consumers reporting call drops. Such is the impact of the increased data consumption that AT&T and many other operators in the USA have discontinued their unlimited data plans, being unable to provide the bandwidth. To counter this problem, most operators offer Femtocell devices at subsidised rates. Some operators such as Softbank in Japan have even started offering them free.

In India, however, data consumption is not high enough right now to warrant Femtocell deployment. Moreover, 3G services are yet to arrive. But since Indian operators have paid huge rates for 3G spectrum they would like to use the spectrum efficiently, and this is where Femtocell's preposition sounds convincing.

As Kuldip Singh, chief managing director of MTNL puts it, "Almost 60 per cent of our subscribers use their cell phones while at home or in the office. If we transfer these calls to our wireline network, we will be able to free up our wireless network to provide better services to mobile consumers (who are not near a land line), and also use the precious spectrum to provide services to more subscribers."

With the launch of 3G services, data usage is going to increase. Already 15 per cent of handsets sold in India are 3G enabled. Social networking is already a rage with 120 million Facebook users in India, of which a majority access the site via their mobile phones. Data consumption is also likely to increase with better connectivity and data speeds.

This increase, coupled with limited spectrum (5MHz) will mean that operators might run out of spectrum very soon.

In that event, Femtocell could provide a great opportunity for operators to continue adding subscribers. It could also give a fillip to operators’ broadband networks.

Operators such as BSNL, MTNL, Bharti, Reliance Communications and Tata Teleservices have already deployed wireline broadband services largely in the metros. Most of this network is not
being used to its capacity due to increasingly unpopular landline services. These operators can easily use Femtocell to increase the usage of their wired infrastructure, meanwhile off-loading their wireless network.

Low ARPU in India, however, might not help in justifying Femtocell expenditure by operators. Going by Indian consumer behavior, Femtocell as a paid model will not work in India in the near future. Here, Softbank's approach of providing free and open Femtocell looks more feasible. Instead of selling to individual subscribers, operators can consider providing Femtocell in small residential localities, which will reduce the subsidy load on the operator, as well as provide better quality of service to the consumer.

"Open Femtocell provides an opportunity to the operators to provide better connectivity to their subscribers in a residential colony, without spending a huge amount on deploying new towers. This, I think, will be the most viable model for the Indian situation," says Sanjeev Verma, vice president and co-founder, Airvana, a technology company that makes Femtocells.

Businesses are another area in which Femtocell can become popular, provided they adopt mobile VAS in a big way.

There are many applications being developed for Femtocells. Such as Femtozone services, web and voice services that are triggered when a phone comes within range of a Femtocell; and connected home services that enable a phone to access the home LAN via a Femtocell such that it can be used to share data with, and control a range of home networked devices. These services can create new revenue streams for the operator.

Even ignoring the revenue earning opportunity, the cost savings from off-loading the macro network alone provide a strong business case for operators to deploy Femtocells.

According to ip.access, a company that manufactures Femtocell devices, if usage of high speed mobile data services increases to a level equivalent to each subscriber streaming one three minute 384 Kbps video per day, an operator with 10 million subscribers could save €500 million (about Rs 3,000 crore) over four years by deploying Femtocells in 20 per cent of its subscribers’ homes, instead of upgrading its macro network – even if it supplies Femtocell free of cost.

A typical Femtocell device costs $100 to $200 (between Rs 4,500 and Rs 9,500 approximately), depending on the range and number of users allowed. Given the cost, it will initially make sense only in the posh localities of metros.

There is no denying the fact that 3G services will take time to reach a level where congestion will be a major issue for operators. So, prospects of Femtocell in India in the near future are not very bright, but given the pace with which the telecom industry changes, it might be only a two to three year time period before Femtocell can be useful in the country. Some operators have already shown interest. "Some of the operators have contacted us, but it is mostly for understanding. We do not see them using Femtocell any time soon, but the way traffic is increasing in India, we see a bright future for us there," concluded Verma of Airvana.

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