But you’d expect them to say that anyway

You’d expect a report of this nature to be favourable towards femtocells (although I’m not questioning the ethics of the research company which conducted the work). Whilst some reporters have picked up on a few headlines (femtocells can pay for themselves in a month), the story is much more complex.

Broadly speaking, every operator needs to determine the appropriate factors that apply in their country, for their business and which suits the mentality of their customers. The business case model then allows them to play around with their assumptions and determine what’s appropriate for their market.

The report explains its methodology, details a variety of different scenarios, and then provides a sensitivity analysis on each of the key input metrics. In all cases, a healthy business case exists – even for femtocells at today’s prices.

This is the same femtocell business case report that we reported about in February - what's new is that the full report is now made publically available (although the spreadsheet model behind it remains restricted to Femto Forum members themselves).

It’s expected that in most developed markets, a compelling business case for femtocell can be made. It’s just that the case itself will vary for each operator.

It’s all about Customer Lifetime Value

The analysis looks at the lifecycle of a customer (in this case a single home or office) and looks at how the revenue and costs may be affected by deploying a femtocell.

There are of course costs, including

• The femtocell itself
• OPEX costs of managing, maintaining and servicing the femtocell (remotely)
• Any call revenues cannibalised by offering free unlimited calls/data through it

But there should be some extra revenues and benefits

• Reduced churn, so the customer lifetime is extended
• Savings on macro network equipment
• Additional family members switching networks because of the improved service
• Extra services used, attracting additional fees/charges
• A monthly fee for unlimited calling
• Additional terminating revenues (i.e. where incoming calls subsidise the mobile operator – found in Europe and other countries, but not in the US)

There are detailed scenarios provided for a wide range of customer profiles, and which cover North America, Europe and Japan/Korea.

It’s also about coverage

Almost as an appendix, the later section covers the other primary case for femtocells – providing coverage in difficult hotspot areas, such as basements or where there are relatively few customers. Such femtocells may be installed by the network operator directly (sometimes called Metro Femto) or sold/provided to the customer directly.

Figures used in this assessment:

• $2.39 per GB of data
• $1.15 per 1000 Voice Minutes of Use
• $419 to install

This compares with macrocell costs of $8 to $10 per GB of data (using 3G), or $3.68-$3.96 per 1000 voice minutes (using 3G) - this contrast is shown more clearly in the chart below

What it doesn’t include

Mobile operators are under threat from a variety of technology and regulatory changes which can affect their business. Just as VoIP has eaten into the margins of wireline operators (even if they still carry the voice traffic, it’s at much reduced rates), there is also heavy downward pressure on voice revenues for mobile operators – and data revenues are not yet nearly as profitable.

This model doesn’t include some of the wider tectonic shifts in the telecoms industry – these are difficult to predict and even harder to quantify.

The reduction in churn and ability to keep the customer using the mobile device, rather than bypassing services (as VoIP did), may be even more compelling for many operators.

Summary

Operators will know themselves what suits their markets, what their current customer profiles and revenues are. This business case model will allow them to tailor the calculations to their own market situation and determine when and where to adopt the technology.

The report is available for free download to everyone, not just forum members – access it here .

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