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Home > Market Research > Mobile Strategies > Femtocells in the Consumer Market: business case and marketing plan
Success with femtocells is not guaranteed, and a focus on low-cost voice telephony could prove disastrous. In our report, we study the business case for femtocells in order to pinpoint the circumstances in which femtocells are commercially viable. We define compelling consumer propositions and marketing plans for this exciting new technology.
It’s now time for mobile operators to define viable business cases for 3G indoor base stations, commonly referred to as femtocells, and to develop compelling service propositions and marketing plans that make those business cases a reality. There is increasing excitement in the mobile industry about the potential for femtocells. Equipment vendors and mobile network operators are busily developing and evaluating products and considering how to integrate large numbers (potentially millions) of femtocells into existing mobile networks. However, the success of femtocells is not guaranteed, and the cost of failure could be very high. Much early attention has been focused on the technical challenges of femtocells, but mobile operators should concentrate on making viable business cases and delivering successful consumer propositions.
This report shows operators how they can profitably derive revenue from femtocells by defining compelling consumer propositions with which to target key segments. It considers both voice telephony and a number of non-voice services that will be critical to a viable business case. The report quantifies the business case for operators deploying femtocells for a range of customer types and service mixes in order to pinpoint the most attractive opportunities. The report also compares the business case for femtocells with those for other options, including network sharing, UMA services, home-zone tariffs and traditional bundles, and defines exactly where, how and when femtocells should be deployed to achieve the best return.
Femtocells in the Consumer Market: business case and marketing plan answers your key questions:
- 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?
Who should read this report
- Mobile network operators: senior executives and technology and marketing managers, in order to understand the business case for femtocells and the market propositions that will be needed to drive their take-up
- Indoor base station vendors: senior executives and product and marketing managers, in order to strengthen the business case for mobile operators and to relieve price pressure on femtocell products
- Investors and analysts: in order to assess the market potential for femtocells and the actions required to make them succeed.
About the authors
Dr Alastair Brydon and Dr Mark Heath are founders of Sound Partners Ltd and authors of over 35 Analysys Research reports, including How to Succeed with Fixed– Mobile Convergence, The Acceleration of Fixed–Mobile Substitution in Western Europe: facts and figures, Seizing the Opportunities from Enterprise Mobility, The Future of the Global Wireless Industry: scenarios for 2007–12, The World’s Top Ten Non-voice Services for Mobile network operators, Picocells and Femtocells: will indoor base stations transform the telecoms industry?, Mobile Operator Strategies for Fixed Broadband, The Business Case for WiMAX, Forecasting the Commercial Impact of Wireless VoIP in the USA and Western Europe, Evaluating the Options for Mobile TV and Radio Broadcasting in Western Europe, and Prospects for the Evolution of 3G and 4G.
Alastair is CEO of Sound Partners Ltd. Prior to joining Sound Partners, Alastair reported to Nokia’s European management team and worked with many of Nokia’s customers to implement market firsts ranging from the introduction of prepaid mobile tariffs to new mass-market content services. Previously, Alastair worked in a number of roles for the BT Group, focusing on the evolution of wireless services, networks and technologies. He also contributed to international research and standardisation of GSM, DECT and 3G. Alastair holds BSc and PhD degrees from UMIST, where he was awarded the IEE Prize for top student.
Mark is Director of Research at Sound Partners Ltd. He previously held a number of marketing and business development roles in Nokia, ultimately becoming responsible for strategy and business development across Europe. Before that, Mark was responsible for business planning at BT Cellnet in the UK, after spending six years at BT in wireless systems research and development. Mark holds BSc and PhD degrees from the University of Leeds, winning the University prize for his research in telecommunications. Mark also holds an MBA, graduating as top student from Henley Management College.
Andrew Parkin-White (Principal Analyst) has gained a deep understanding of the strategic and operational issues facing the mobile industry during his 17-year career. Formerly at Ovum, where he had been Managing Director of Consulting, Executive Board Director and, prior to that, leader of mobile research and consulting activities, Andrew's extensive experience of working in senior operations roles for operators and vendors is combined with a first-class research and consultancy background. He has also held managerial roles in strategic planning and marketing with organisations including BT, Marconi and Orange.
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Table of Contents
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 of mobile broadband services currently offered by MNOs
Table 6.1: Examples of femtocell service propositions to appeal to different market segments.
For full details, please email keithw@cmsinfo.com
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