Three years ago, the hype began concerning the benefits of femtocells in improving mobile-phone coverage and improving network capacity in the enterprise. Today the market is, by many accounts, ramping up, with the expectation that several mobile operators will begin pushing these mini-base stations into businesses this year.

While the consumer market remains a significant focus for operators, the value proposition for enterprises and operators can't be ignored, analysts say. Enterprises benefit from these wireless signal extenders by saving costs and improving efficiency, while operators have a tool to push their services further into these high-paying customers' premises.

"The acceleration and interest in enterprise femtocells have been big themes for us," said Simon Saunders, chair of the Femto Forum. "In the coming months we are going to see operators coming forward with an enterprise proposition that can be supported by today's home products."

New research from Informa Telecoms & Media indicates that femtocell technology is experiencing the initial signs of maturity, with several top-tier operators deploying the technology via a variety of business models. Mobile operators around the world have commenced nine commercial launches of femtocell technology, along with several ongoing trials.

Alcatel-Lucent, which last month introduced an enterprise femtocell that includes both 3G and High Speed Packet Access (HSPA) radios, is now involved in 20 trials worldwide, said Jean-Pierre Lartigue, vice president of AlcaLu's wireless networks marketing and strategy division.

"The market is becoming more and more active," he said.

Sprint was the first U.S. operator to commercially roll out a voice-only, CDMA-based femtocell product in 2008, while Verizon Wireless introduced the Verizon Wireless Extender in early 2009. AT&T currently is testing a 3G femtocell product, but has yet to roll out the offering nationwide.

Little is known about the take rate of these offerings, but one major sticking point in the home femtocell market has been the fact that operators always have touted their network coverage while trying, at the same time, to charge customers significant money for a femtocell that extends coverage, analysts say. Verizon Wireless, for instance, charges $250 for the device, but doesn't require a monthly fee. Sprint charges $100 on top of a $5 monthly fee.

The enterprise segment, however, is seen as one that is significantly less price-sensitive, Lartigue said. Moreover, wireless overage is notoriously poor deep inside buildings and femtocells offer a viable alternative to distributed antenna systems, which easily can cost an enterprise $100,000. Wireless operators generally are unwilling to subsidize such exorbitant costs to extend their signals, while many building owners have balked at the price.

Much of the cost associated with DAS, and even picocells — which are smaller base stations but are nevertheless complicated and more expensive to install — has to do with the inherent complexity of the system, which requires expensive equipment, engineering and testing.

Will Franks, chief technology officer and founder of femtocell software vendor Ubiquisys, said that his company already has scored a major contract with an unnamed global operator for an enterprise femtocell. "The principal we based it on is that we have to make it as easy as possible for an enterprise or operator to install them, and therefore take away the cost associated with a DAS or a picocell system, which are just uneconomical for an operator," he said.

Several vendors are incorporating self-optimization software that allows the femtocell to recognize automatically other femtocells, as well as the macro network, once the hardware is connected.

"The enterprise doesn't need IT people and sophisticated RF people," Franks said. "Once the femtocells are installed, they immediately go live and talk to each other over the LAN, sharing that information. Calls are then handed off between the femtocells and the building. It's really, really simple. It's an almost idiot-proof way of providing mobile coverage."

The benefits of a femtocell are particularly acute when an operator looks to bid on a contract for an enterprise that may have a regional headquarters, field offices spread across other areas and telecommuters, Franks said. "The challenge for the operator is how it is going to provide the coverage and services required across all of that diversity. It's not just about a large building."

Jacob Sharony, founder and principal consultant with Mobius Consulting, said the challenge of femtocells concerns the interference problems they pose to both the macro cellular system and with other femtocells. "Take a multi-dwelling apartment building — if there are many femtocells that aren't coordinated, this will create lots of interference," he said. "The enterprise would have lots of problems, too. There needs to be in place good algorithms to manage all of these radio resources, scan the air and adjust the channel or power. That problem can be solved."

It already has, according to Ubiquisys, Alcatel-Lucent and other vendors, which are incorporating software solutions in femtocell hardware that not only enable self-configuration but the ability to adjust power levels on the fly. Such a concept is expected to be used widely in next-generation LTE networks as a way to reduce operational expenditures and assist in the rapid rollout of networks.

Still, the self-organizing capability isn't part of a standard, so enterprise customers are unable to mix and match femtocells from various vendors. In fact, there are many elements that aren't standardized yet. Peter Jarich, vice president with Current Analysis, said that while there is no shortage of femtocell solutions built for the enterprise, there also is no agreement on the appropriate architecture for enterprise femtocell networks. Standardized ways of using a centralized controller, for instance, have not been established.

"To ensure scalability and consistent support, operators need to drive the Femto Forum to develop standards, or at least recommendations around the topic," Jarich said.

Saunders said that the Femto Forum is working with mobile network standards bodies to create more standardized functions within the enterprise. But he added that there is no reason femtocells cannot be deployed in the enterprise today, as the basic architecture exists.

"The enterprise is being supported by the same interface as the home architecture gateway into the network. You've got the same overall management protocols that we have been using already," Saunders said.

But Alcatel-Lucent's Lartigue said that vendors can't simply sell home femtocells to the enterprise market, as they require more capacity and tougher security configurations.

"The femto in the enterprise requires some closed and open features," he said. "It has to be quite controlled — we are very careful about that."

One standardization feature the Femto Forum is working on concerns how to integrate a femtocell with an enterprise's private branch exchange (PBX) to enable converged telephony services. These could include presence and location services that enable colleagues to find one another within a large campus, push messaging and three-digit calling.

While the enterprise femtocell business case centers on extending voice services, femtocells increasingly are being touted as a way to offload data traffic for mobile operators, since traffic is backhauled over the fixed broadband connection within a home or enterprise. While Wi-Fi is prevalent in the enterprise, the availability of 3G femtocells would allow the enterprise to also access mobile data. Business models will likely vary, but operators are expected to offer enterprise customers special data rates.

Paget Alves, president of Sprint Nextel's Business Markets Group, envisions a WiMAX femtocell as a replacement for fixed-line voice and data services in small- to medium-sized businesses. The operator resells WiMAX service from Clearwire — it is the majority owner of the provider — and aims to cover 120 million points of presence by the end of 2010. Clearwire's mobile WiMAX network, which currently is running in 27 markets, can deliver typical download speeds of 3-6 Mb/s. Thus, Alves said, WiMAX is robust enough to replace fixed-line technologies

"There is a business case because you are saving the enterprise costs, not just improving quality," he said. "We believe the enterprise is the place for 4G. The change in bandwidth for capacity and speed introduces a technology leap that enterprises can leverage across all industry sectors. This is the biggest catalyst for business we've seen over the last couple of years."

While not giving a time frame for an enterprise-grade WiMAX femtocell, Alves said one is in the works and will build upon its existing home offering.

Femtocell Enterprise Products on the Market

Airvana: The HubBub is a high-capacity WCDMA femtocell that can scale to 24 users.

AirWalk Communications: The EdgePoint PRO combines both wireless voice and data functionality via a dual-mode platform that combines both CDMA 1xRTT voice and 1xEV-DO Rev. A data.

Alcatel-Lucent: The small cell enterprise solution is a WCDMA/HSPA femtocell that offers enhanced voice and data service.

Ubiquisys: The Femto-Engine is a software femtocell that separates femtocell functionality from the underlying hardware foundation. The software is designed to deliver self-organizing intelligence.

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