Wireless carriers should be expected to speak highly of their networks-it’s arguably their greatest asset alongside spectrum holdings-but the No. 3 and No. 4 carriers are now enabling customers to build their own micro networks of sorts. Are they giving up some of the control they’ve battled so hard for or is there an upside for the carriers that outweighs any fear of cannibalizing their own services?
Sprint Nextel Corp. last week announced it had begun selling a compact, consumer-targeted femtocell base station that will work with any Sprint phone and a broadband Internet connection to expand in-home wireless coverage.
The move comes almost three months after T-Mobile USA Inc. launched its HotSpot @Home service, which enables its customers to seamlessly hand off between cellular networks and Wi-Fi hot spots.
Strong in-home coverage
Because Sprint is merely expanding its own network into subscribers’ homes with the addition of a femtocell base station, it doesn’t require customers to purchase a new device. Femtocells-small, stand-alone units that can be deployed in buildings and homes, have gained the interest of carriers as a means to increase network coverage. And Sprint is the first tier-one carrier to make a femtocell solution commercially available to its subscribers. One limitation: subscribers will only be able to use the new service in markets where Sprint maintains a network.
T-Mobile, on the other hand, requires subscribers to purchase a Wi-Fi-capable device to use its HotSpot @Home service. Wi-Fi, which operates on unlicensed mobile access spectrum, could present additional opportunities for T-Mobile subscribers since it would give them access to voice applications on private, small-scale networks rather than resting on the backbone of T-Mobile’s network.
For either service to become widely adopted, analysts said the carriers will have to present concise advertising that keys in on benefits that will matter most to consumers: improved in-home coverage and unlimited off-network voice call that won’t be docked from their regular buckets of minutes.
“We’ve got to remember that for the carrier the most inhospitable situation for them is inside the home,” said Stuart Carlaw, wireless research director at ABI Research. “One thing that can’t be underestimated in the United States is good in-home cellular coverage. People are willing to pay up to $100 for that.”
The Sprint AIRAVE, which is manufactured by Samsung Electronics Co. Ltd., is now available for purchase in select areas of Denver and Indianapolis. The device, which will allow Sprint customers to use their mobile device to make voice calls using their broadband Internet connection, is being sold for $50 with a monthly price tag of $15 per individual or $30 for a family plan.
Sprint touts the new service as a seamless solution that will quickly transfer subscribers on and off the femtocell access point when they enter and leave its short range.
“Even though they don’t say it, it offloads it off the macro network,” said Bill Ho, senior analyst at Current Analysis.
“What they should be touting is the simplicity of it all,” he added. “It’s that whole simplicity that would help spin the consumer, plus the coverage obviously.”
The hype cycle
Carlaw said the sweet spot for these type of services will be $20 and below. “I think there’s kind of a conundrum of cost and convenience,” he said.
“With the AIRAVE, Sprint is delivering an enhanced in-home coverage solution that’s simple to access, low in cost and compatible with any Sprint phone,” said Ajit Bhatia, director of product management for the carrier. “In addition, with unlimited in-home wireless calling, the AIRAVE makes it even more convenient for customers to rely on their Sprint phones at home.”
While femtocells offer a plug-and-play, in-building coverage solution that would self-register and self-optimize on the carrier network, there are still some issues to be ironed out. “There are a lot of barriers that have yet to be addressed,” Carlaw said. “It’s in a little bit of a hype cycle.”
“Femtocells definitely have the edge at the moment. In general there is a lot of momentum behind the femtocell solution,” Carlaw said.
“With the femtocell your handset portfolio is the same no matter what handset you’re using,” he added. “The biggest bottleneck with voice over Wi-Fi . is handset availability.”
Analysts and industry watchers aren’t convinced subscribers will purchase such a device in droves, particularly since they already pay monthly service fees for service that’s supposed to follow with them wherever they go. In addition, operators could run into problems if thousands of femtocells are operating in a concentrated area; potentially interfering with other cell sites.
Stealth mode
Nonetheless, such moves appear to be gaining steam at carriers.
“A lot of the carriers are working in stealth mode,” Carlaw said, adding that AT&T Mobility and Verizon Wireless are looking into similar services.
If they’re hesitant to launch anything like this commercially, it won’t be for lack of reasoning. Unlike their counterparts that have already launched these services, AT&T and Verizon have their wireline businesses to think about.
“Will it kill and accelerate the local-access line loss?” Ho asks. “So it becomes a strategic decision on their part. It’s a balance strategically between how much do I save of the wireline side.”
But if AT&T and Verizon sit on the sideline too long, they could miss the boat entirely. “Better to keep it in the house rather than lose it to the likes of Vonage and Skype,” Ho said. “The guys who have wireline asset parents; they may or may not have made that decision already.”
Sprint said it plans to make the AIRAVE service and device available nationwide in 2008.
