Femtocells mean you pay for mobile network expansion

Thought mobile phone companies offering fixed line broadband was just a cheap way to boost ARPU or retention? Well, in the short term it probably does offer those benefits but, just as I imagine Sky do, mobile companies may have plans to use fixed line broadband to boost their core offering.

O2 has announced a large scale trial of femtocells.

Femtocells – the prefix “femto” meaning one quadrillionth, so perhaps we shouldn’t take the name too literally – provide mobile phone coverage in small areas, such as homes, offices and shops. Although your mobile phone sees them as just another part of the mobile network, they work much like wifi access points: they hook up to a broadband connection and act as a bridge between mobile devices and the mobile network proper.

The idea is that if, for example, you live in an area with poor network coverage, you install a femtocell and your house has its own low-powered mobile phone cell. In theory, you’ll always have perfect coverage in that location because your calls will bypass any local mobile towers and go straight over your broadband connection.

Interestingly, though, the O2 press release includes this quote from Vivek Dev, Chief Operating Officer of Telefónica O2 Europe:

“Our Apple iPhone is already driving unheard-of levels of mobile internet usage, and the introduction of flat rate data tariffs is expected to increase this further. Both of these place huge capacity demands on our networks, and because so much of that usage is at home, femtocells coupled with DSL could provide an alternative capacity resource.”

This is a fascinating idea: O2 seem to be suggesting that they plan to charge you a flat rate for mobile data but actually want to punt a large chunk of that over the broadband connection you also pay for. If that is what they’re planning to do, then you’ll be paying twice for data traffic on your mobile whenever you’re at home. In effect, their customers will be providing the mobile operator with free backhaul.

Now, as O2 is one of only two UK mobile networks with an LLU broadband operation, it would seem likely they’ll offer femtocells primarily to their own broadband customers. Then at least you can argue they’re using their own network and, who knows, perhaps the flat rate data packages they mention will be hybrid fixed line/mobile packages. However, if data is the primary motivation behind femotcells it prompts two questions:

  • Is 3G data really that limited?
  • Why not just sell more wifi capable devices?

The answer to the first question, based on my limited reading, is: probably. The answer to the second question, though, is more interesting: wifi is the enemy. Following the ridiculous sums spent on UK 3G licences, the mobile operators are keen to see 3G use increase; apparently 3G traffic is also cheaper than 2G traffic. If it’s true that most mobile data use is in the home (or another fixed location), then encouraging wifi use effectively remove the mobile operators from the picture. It would also make 3G less of a must-have phone feature, thereby keeping more traffic on the more expensive 2G network; the Apple iPhone is perhaps a good example of a device that has wifi but not yet 3G. So, the mobile networks would rather we have 3G femtocells in our homes because then we’re committed to 3G; something video calling could never achieve.

The fact that it’s just another – and possibly expensive – way of using your own broadband connection surely won’t be lost on people.

The good thing about femtocells, rather than wifi, is that the transition between real mobile network and femtocell will be seamless and they’ll work with any 3G mobile phone. If it cost me nothing, I’d certainly get a femtocell. Despite clear line of site to the mobile tower, the walls of our 1920s house whittle puny 3G signals down to a squeak. And I do mean it’d have to cost me nothing: I’m already paying my mobile network (O2 at the moment) for network coverage.

If it weren’t for Virgin Media’s lack of focus and difficulty in maintaining the quality of its current product set, I’d suggest they’d be in the best place to benefit from femtocells. They have an extensive broadband network and an MVNO in the form of Virgin Mobile. With femtocells, they could avoid paying transit fees to their mobile network provider (T-Mobile) and without the expense of building a full mobile network.