Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
Brazil’s recently passed Conditioned Access Service law, which was passed last September, or the new Brazilian pay-TV law seemed to diminish market rumors that femtocell adoption would be encouraged by Brazilian Regulation in 2011, due to a regulatory change on femtocell-related taxes.
Brazilian carriers have so far steered clear of femtocell deployments due to the high costs associated with the Inspection Taxes charged to the use of those devices and instead have focused their efforts on Wi-Fi deployments. Why are femtocell and hotspot regulations so different in the Brazilian market?
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Regulatory aspects
Initially, it’s important to note that the reason for the differences is that they fit into different regulations. The femtocell is classified like a radio base station (independent of the technology it supports) and the Wi-Fi equipment is characterized as a restricted radiation equipment (as defined by the Restricted Radiation Equipment Regulation, approved by Anatel’s Resolution 506 of 2008).
The corresponding regulation is clear: while femtocells have to pay Inspection Taxes, Wi-Fi does not have this obligation, resulting in a disadvantageous business model to femtocells.
The Telecommunications Inspection Taxes are defined by another act, the Telecommunications Inspection Fund of 1966. These collected taxes need to be paid to the federal government in order to grant the right of operation and providing telecommunication services, are collected in two amounts according to Brazilian regulation, once when the equipment is turned on and the other in an annual payment.
The amount of tax are described in an annex of the law, meaning a femtocell deployment costs about $750 when activated and $250 per year. In contrast, a mobile base station is taxed about $15 when turned on and $5 per year. This regulation resulted in increased costs for the femtocell business model, which has resulted today in the Wi-Fi model as the best solution to offload 3G traffic in Brazil.
Technical features
From a more technical point of view, considering a pure femtocell offloading solution versus a pure Wi-Fi hotspot offloading solution in support of a 3G network, it can be seen that Wi-Fi standards provide downlink data rates up to 600 megabits per second in a 40 megahertz spectrum band while HSPA+ 3GPP Release 11 provides up to 336 Mbps for the same bandwidth. Again, the Wi-Fi hotspots solution wins.
The main Wi-Fi disadvantage concerns network architectural aspects: it’s necessary to design, operate and maintain diverse systems and technologies.
When we think about 4G networks using LTE and LTE-Advanced femtocells, the competitive situation changes. LTE (as standardized in 3GPP Releases 8 and 9) provides up to 326 Mbps in a 20 megahertz carrier and LTE-Advanced (as standardized in 3GPP Releases 10 and 11) can reach up to 1 gigabit per second in a 100 megahertz channel. In terms of data rates, LTE, LTE-Advanced and Wi-Fi are similar solutions, but the LTE family architecture promises to save capital expenses and operating expenses for carriers. Note that LTE networks are designed to operate with femtocells, which also makes the network configuration somewhat simple.
Comparing the standards in terms of latency, Wi-Fi and LTE-Advanced typically provide about 10 milliseconds of latency. LTE is about 30 Ms and 3G about 300 Ms. For Web browsing the difference between 3G and Wi-Fi on an unloaded system is quite small, but with something like online gaming, the difference is noticeable.
Future steps
Taking into account the technical and regulatory issues, the most probable scenarios moving forward are hybrid networks with 3G and 4G macrocell coverage overlaying femtocells and Wi-Fi hotspot coverage.
In order to tackle the original idea of categorizing femtocells as mobile stations, as they were going to be sold to the users, was ended by the Brazilian Government, but the regulatory asymmetry between Wi-Fi hotspots and femtocells continues implying that regulatory costs will be the same for both solutions. In fact, the technical and economic factors are going to be decisive.
Maria Luiza Kunert is a Brazilian telecommunications executive with almost 20 years in the wireless market. Kunert, has a degree in electronics engineering and as worked for network infrastructure vendors such as Ericsson and NEC and for service providers such as Vivo. Since 2009, she has worked as regulation adviser for Anatel, the Brazilian telecommunications government agency.
