Femtocells in the Consumer Market: Business Case and Marketing Plan

• What are the major elements of the business case for femtocells, in terms of revenue, cost savings and investment requirements?
• Which market segments may be interested in femtocells (or the services they enable), and which of these are the most attractive for mobile network operators?
• Is there a business case for voice-telephony services alone and, if so, in what circumstances? What approaches should mobile network operators take with voice services?
• What is the financial payback for a range of customer segments and service mixes? How can you achieve payback in less than six months?
• To what extent can non-voice services improve the business case for femtocells? Which non-voice services will really make the biggest difference?
• What is the most compelling service offering for consumers?
• How could femtocells allow mobile network operators to make dramatic reductions in investment in conventional 3G macrocellular networks and dedicated broadcasting networks (such as DVB-H)? How much could mobile network operators save, and what difference will this make to the business case for femtocells?
• How does the business case for femtocells compare with those for other options, such as home-zone tariffs, bundled services, dual-mode handset services and network sharing?

0 Summary

1 Interest in femtocells is growing, and business cases and service propositions must be prepared

1.1 MNOs are investigating commercial deployment of femtocells

1.2 Key questions remain over the success of femtocells

2 Operators and equipment vendors must keep a clear commercial focus on femtocells

2.1 MNOs are preparing to launch consumer femtocell propositions in 2008

2.2 Operators and vendors must build the case for commercial roll-out using realistic costs

2.3 A business case framework helps MNOs to formulate and execute an effective femtocell strategy

2.4 MNOs should develop compelling service propositions for key market segments

2.5 MNOs should examine alternatives to femtocells

3 For voice services alone, the business case for femtocells is uncertain

3.1 MNOs and femtocell vendors have focused first on voice telephony

3.2 Increasing affordability of traditional mobile will reduce the appeal of femtocells

3.3 Consumer inertia, mixed marketing messages and possible health concerns may dampen demand

3.4 Voice is not network intensive, limiting 3G network cost savings

4 Mobile TV, video and audio make the business case for femtocells

4.1 Femtocells could be highly effective for mass-market mobile TV, video and audio services indoors

4.2 Much mobile TV and video usage will be indoors, where femtocells perform well

4.3 Femtocells bring similar benefits for the delivery of radio and audio in the home

4.4 Femtocells are essential to the profitable delivery of affordable video and audio services in the home

4.5 Femtocells could enable big savings on 3G macrocell network costs

4.6 Femtocells could allow operators to deploy less dense broadcasting networks

4.7 Mobile video and audio improve the business case for femtocells

5 Broadband access and location-aware services add to the case for femtocells

5.1 Femtocells could enable MNOs to offer compelling and profitable mobile broadband services

5.2 Femtocells could enable new location-aware services

6 Femtocells are preferable to the alternatives, and MNOs should start developing propositions

6.1 Alternatives to femtocells are less attractive when a broad service mix is required

6.2 MNOs should start to develop compelling propositions based on femtocells

6.3 MNOs should include a video and audio portfolio prior to femtocell launch

Actions

Companies discussed in this report:

Vodafone, BT, France Telecom, ip.access, Tatara Systems, Sprint, O2.

List of Figures and Tables

Figure 0.1 Major revenue and cost elements of an MNO’s business case for femtocells

Figure 2.1 Major revenue and cost elements of an MNO’s business case for femtocells

Figure 3.1 Increase in the proportion of mobile-originated voice traffic in Western Europe as the mobile price premium has decreased, 1Q 2004 to 4Q 2006

Figure 3.2 Increase in the proportion of mobile-originated voice traffic in Finland with lower average spend per mobile minute, 1Q 2004 to 4Q 2006

Figure 3.3 Mobile-originated voice traffic compared to mobile price premium in various Western European countries, 4Q 2006

Table 3.1 Comparison of network capacity consumption by a range of services

Table 3.2 Summary of the business case for deployment of femtocells to support voice services in a variety of scenarios

Figure 3.4 MNO’s costs associated with femtocell deployment for four voice telephony scenarios

Figure 3.5: MNO’s revenue gains associated with femtocell deployment for four voice telephony scenarios

Table 4.1: Estimated indoor usage of mobile TV services based on DVB-H trials

Table 4.2: Estimated indoor usage of mobile radio services based on UK DAB-IP trials

Table 4.3: Estimated revenue per megabyte from indoor service use, taking into account variable network cost

Table 4.4: Amount of data diverted from a 3G macrocell network by femtocell use: an example usage profile

Table 4.5: Summary of the business case for deployment of femtocells to support voice, video and audio services in a variety of scenarios

Figure 4.1: MNO’s costs associated with femtocell deployment for four voice and non-voice scenarios

Figure 4.2: MNO’s revenue gains and cost savings associated with femtocell deployment for four voice and non-voice scenarios

Table 5.1: Examples