New Survey Points To Strong Adoption Of Femtocells In Europe
Survey concludes market proposition key to user uptake.
The concept of a femtocell was largely unknown last year to the mobile operator community, but in 2008 operators no longer need a definition. In fact, a host of operators are embarking on femtocell trials with hopes of introducing service by the end of the year or in early 2009.
Billed as an alternative to WiFi/cellular solutions, femtocells can be described as router-sized mobile home base stations that provide 3G coverage in the home while using the home broadband connection as backhaul. They are expected to become the next big thing in fixed-mobile convergence, promising to solve coverage challenges while using standard handsets; the need for new dual-mode handsets has held back acceptance of traditional FMC services. Femtocells will enable operators to offer consumers high-speed data and high quality voice services in the home with reduced infrastructure costs and cheaper prices for the consumer. Operators know that the proliferation of flat-rate voice and data plans will continue to increase the amount of traffic on their 3G networks. Hence, they need a data and voice offload feature that can help bear much of the traffic.
Recent industry analyst reports suggest femtocells could improve mobile coverage and cut operators’ infrastructure costs by billions. Informa Telecoms & Media says the number of femtocells deployed by the end of 2013 is expected to exceed 40 million, with 22 million units coming online in 2013 alone. This trend could assist operators in offloading up to eight percent of their total mobile traffic to fixed networks via the end user subscriber line, resulting in significant savings. Informa estimates the mobile operator industry could save $5.3 billion or more in network infrastructure costs if femtocell infrastructure is properly deployed.
Research firm IDC predicts that spending on femtocell-enabled services will grow to $900 million by 2011 while Infonetics Research forecasts that in the four-year period between 2008 and 2011, total revenue sales of femtocell units worldwide will reach $2.5 billion and 40.6 million units.
Moreover, mobile operators can realize significant cost savings by keeping their customers loyal, said Malcolm Latham, senior solutions manager within Motorola’s Home & Networks Mobility business, which is involved in femtocell trials across Europe. Similar types of offerings already in the market, using Unlicensed Mobile Access (UMA) that routes traffic onto WiFi networks, have proven to significantly reduce churn.
While mobile operators widely understand the benefits of femtocells to their businesses, the next step is to understand how to market the femtocell-enabled services to end users.
New research from Motorola and ABI Research is shedding light on the attitude that European consumers, in particular, have toward femtocell-enabled in-home services. The findings give significant insight into how operators can market femtocells to end users in order to realize the tremendous capital expenditure savings they desire.
“While a positive outlook for femtocells exists, the marketing proposition, pricing and marketing needs must be specific to the home market, with clear messaging that conveys the benefits of femtocells,” concluded Latham.
ABI Research quizzed around 1,800 mobile users from six European countries (France, Germany, Italy, Poland, Spain and the U.K.), and found that more than three quarters of respondents were not familiar with femtocells, which isn’t surprising given the fact that the industry itself didn’t really know what femtocells were a year ago. Yet, this unfamiliarity is part of the marketing challenge, said Stuart Carlaw, vice president and research director with ABI Research.
“The first real aspect here is that any marketing message centered on technology will find the ground very hard going,” Carlaw said. “This raises an awkward question: Do you invest heavily at the point of sale in marketing campaigns to educate the customer, which will make the financial burden of a service extremely high or do you forget the femto aspect completely? I would argue that the best process here is to find a robust services solution package and then market around that service and view the femtocell as a completely transparent enabling factor.”
Indeed, when the key benefits of femtocells, such as increased mobile coverage in the home, improved call quality and lower cost “in-home” voice call charges were explained to survey respondents, more than 40 percent indicated they would definitely or probably buy a femtocell within the next 12 months.
Motorola found that Poland has the highest potential rate of early femtocell adopters with 67 percent saying they would purchase a femtocell box, followed by Spain with 62 percent, Italy with 61 percent, France and the UK both with 34 percent, and Germany with 33 percent.
Femtocell technology continues to evolve in capability, laying the groundwork for greater awareness and potential adoption. For instance, Motorola and ABI Research found that femtocells positioned as an extension to the family media environment garnered high attention, with 51 percent of respondents saying they were interested in a family plan that allows various members of a household to connect to the femtocell.
Flexibility is key, however. Carlaw stressed the need for operators to tailor their offerings to different segments of the consumer base with different billing conditions. Dad might have a contract and share his minutes with mom, but the kids might be on prepaid plans with their own accounts. Add a femtocell in the mix, and the family members might be charged at half their standard rate or for free.
“The message that came out of the survey loud and clear was fixed billing,” Carlaw said. “Put a femtocell in someone’s home and fix the bill. It will be a very attractive proposition, especially for families and groups of users sharing the femtocell resource.”
Moreover, femtocells as part of a bundle of services—such as fixed-line, IPTV and broadband—were attractive to respondents. Between 27 percent and 47 percent of respondents, depending on the country, indicated they would add a femtocell-based solution to a bundle, while between 24 percent and 42 percent said they would take a bundle to receive access to a femtocell-based solution.
“It’s clear that femtocells are becoming part of the home services market play,” said Latham. “We see a vision of the femtocell integrated within the home gateway, and the mobile device becomes the mobile operator’s brand in the home.”
Perhaps the most surprising was the fact that the majority of respondents saw their current broadband supplier rather than their mobile operator as the favored supplier of femtocells.
“This raises an interesting opportunity for mobile carriers to change their perceived position in the market from a pure wireless player to a more converged carrier,” said Carlaw. “Femtocells are a product that pushes two, sometimes very different, markets together. As such, they provide huge opportunities to cross sell services.”
Indeed, this plays into the strategies of many European operators, which are looking to become total telecommunications providers, offering bundles such as wireless, fixed broadband and IPTV. For those with pure wireless plays, Latham said femtocells could spur these operators to partner with broadband players.
“One of the questions mobile operators have regarding femtocells is about Quality of Service (QoS),” Latham said. “Operators naturally want to control service levels end-to-end; from the femtocell through the broadband service to their core network.”
Clearly, femtocells offer both a new revenue opportunity as well as significant capex savings, but only if mobile operators play their cards right. As Carlaw says: “The message needs to be about a value proposition to the user that is based on a robust and attractive service domain that offers a lifestyle extension at cheaper prices. To be trapped in the old pitfall of marketing technology will be met with failure.”