Could Optus offer free femtocells (aka 3G Home Zones)?

Stuart Corner
Tuesday, 27 September 2011 09:47

Opinion and Analysis

A decision by French mobile operator SFR to offer femtocells free to all its customers suggests that that they offer benefits for operators as much, or more so, than they offer for users.

When Optus launched its femtocell offering at the end of July (aka the Optus 3G Home Zone) I made two points: that the benefits to Optus were likely to be as great, or greater, than those accruing the user, and that the pricing was not particularly attractive.

On the first point I feel I have been totally vindicated by French mobile operator SFR's decision last week to offer femtocells free, to all its mobile customers. There is a $49 upfront fee, but that is refunded once the device is activated. SFR is France's second largest mobile operator with some 21 million customers.

SFR's move has likely been prompted by reports of plans by new operator Iliad, due to launch in January 2012, to offer free femtocells. Iliad plans to build its own network but initially will be making use of France Telecom's network. Presumably it will be paying for airtime by the minute and/or megabyte so anything it can do to serve customers without using that network will have an immediate positive impact on its bottom line.

Commenting on SFR's move on its blog, the supplier of its femtocell, Ubiquisys, said: "This service is the first universal free offer in Europe and follows the world's first free model launched by SoftBank Mobile in Japan [in mid 2010]'¦ The benefits of femtocells are migrating from a 'coverage fix' for problem homes, to a universal offer of a premium indoor experience. This is important as consumers increasingly consider mobile network quality in their choice of operator."

Of course that second factor is how Optus has been pushing its femtocell - very aggressively, but as I pointed out at the time of launch the benefits of femtocells to the operator are twofold: they boost throughput without the need to invest in network upgrades to improve in-building penetration, and they free up capacity for genuinely mobile users.

In mid 2009 the Femto Forum released a research paper which found that the cost savings associated with offloading as little as 1.4GB of HSPA data per month via a femtocell from a coverage-constrained macro cellular network would justify an operator offering a subscriber a free femtocell.

And earlier this year Wim Sweldens, president of wireless activities for Optus' femtocell supplier, Alcatel-Lucent, said: "The main driver of small cells adoption today is the delivery of crystal-clear voice services to buildings or areas that used to be 'blind' to the macro network. However, both residential and business users are quickly discovering the benefits from the increased mobile data capacity as well'¦Studies by Alcatel-Lucent Bell Labs show that - versus classic Pico or DAS [distributed antenna system] solutions - small cells are not only cheaper by more than 60 percent, but also enable in-building mobile coverage much faster than any other solution."

When it launched the 3G Home Zone, Optus said the initial pricing would apply only until the end of August. (I've asked Optus for an update on pricing.) Almost certainly Optus' number crunchers will have weighed the cost savings available to Optus against estimates of potential revenue from sales and Optus will likely try and get customers to pay for the benefits it can gain from femtocell deployment. If customers prove overly reluctant to do so, expect prices to come down quickly.