Femtocells: analysing the business case

Femtocells are small cellular base stations, which are installed in the home and backhauled via the home’s fixed broadband access line. We have identified three main approaches for the business model:

a model driven by coverage improvements – femtocells could help increase voice and data service usage in the home, and decrease churn. This is particularly relevant in countries with poor indoor coverage for cellular voice
a model driven by a decrease in infrastructure costs – based on offloading some of the cellular traffic from the macrocell network and reducing the need to invest in macrocells to cope with increases in traffic
a model driven by the development of new service offerings – to generate incremental revenues from specific features or tariffs available when at home.

This report primarily aims at helping vendors and operators understand the economics of femtocell deployments. Our main focus is to understand the cost impacts of rolling out femtocells and how various market parameters can influence the outcome of the business case.

Report Highlights

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Key messages

Introduction

Objective of this report
Different business models for femtocells
Components of the femtocell business case
References

Component 1: femtocell costs

Component 2: macrocell network off-load cost savings
Voice and data usage in the home
Cost modelling
Understanding the impact of service usage and 3G market conditions
Understanding the impacts of deploying femtocells in suburban areas
Understanding the impacts of targeting heavy users
Understanding the impacts of promoting family offerings

Component 3: femtocell consumer propositions

The starting point is voice
Data services
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Table 1 Summary of macrocell network assumptions
Table 2 Macro-network parameters (macrocell network cost savings model)
Table 3 Parameters for urban/suburban macrocell network cost savings model
Table 4 Parameters for usage level macrocell network cost savings model
Table 5 Femtocell family offering parameters
Figure 1 Overview of business model options for femtocells
Figure 2 Contrasting femtocell business case scenarios
Figure 3 Annual macrocell network cost savings: different scenarios for network usage and 3G market conditions (per customer)
Figure 4 Annual macrocell network cost savings for different scenarios of network usage and 3G market conditions (per femtocell)
Figure 5 Comparison of annual macrocell network cost savings for urban and suburban environments
Figure 6 Macro-network cost savings for different service usage levels (per femtocell)
Figure 7 Cost saving gains by targeting heavy users (% increase of macrocell network cost savings)
Figure 8 Macro-network cost savings by average users (per femtocell)
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