Analyst: Is carrier femtocell pricing doomed?

Of femtocells, TeleChoice’s Danny Briere writes:

“Now that I’ve seen some of the initial telco offerings taking shape and deployments looming,I’m disappointed with the word on the street about femtocell pricing. Carriers are thinking like telcos, not consumer electronics manufacturers. They’re taking something quite simple and making it complex just like the rest of their cell phone plans.

“Well, business modeling for carriers is something at which we excel. We have created picocell and FMC financial models for vendors to show the carriers, and have analyzed a fair share of femtocell ones, but rather than bore you with a long set of calculations about tower radios, erlangs, backhaul and soft handoff impacts on tower capacities, let’s boil this down to some definite ‘truths’:

“Carriers can save money by offloading traffic from towers to femtocells. Femtocells can save a carrier money by offloading the 30-plus% of calls made in homes to their customer’s lower-cost broadband connections (broadband connections that may or may not be on their network even). The advent of ‘unlimited’ plans will likely mean more of these minutes will originate or terminate in the home.

“Savings on voice calls alone isn’t going to make a business case for femtocells. Voice just doesn’t eat up all that much bandwidth but data applications (and especially mobile video) do, and can greatly improve a ‘cost savings only’ business case for femtocells. But today’s femtocell unit costs and growing-but-still-relatively-low data use mean that carriers can’t afford to just ‘give away’ femtocells and make the business case on cost savings alone.

“Don’t expect near term capex/opex savings to save the day. In the beginning, femtocells don’t really help with network capital, and may not help much with opex. In theory, you can avoid building or growing cellsites because of femtocells. Unfortunately, that’s only true if you have enough femtocell density in an area to make additional tower capacity unnecessary, or to significantly limit the traffic (and backhaul requirements) on that site. That density is not likely to happen anytime soon, even with massive adoption of femtocells.”

You can read the rest of Briere’s commentary here, and leave your comments at the bottom of this page.

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