The industry is buzzing today with the rumor that ip.Access has ‘won’ a contract with AT&T to supply femtocells. The reportedly $500,000,000 contract for 7,000,000 units gives you an ASP of $71.43/unit. Ouch. What exactly did they win? The right to sell femtocells below cost to AT&T?
Frankly I think it's AT&T that is hoping Cisco buys ip.Access. At least Cisco can afford to lose money on every unit and ‘make it up in volume.’
The article notes that the contract calls for ip.Access to ‘eventually price the units at less than $100 apiece’. If half of the units are sold at $100 each, the other 50% need to be sold at $42.86 to get to an ASP of $71.43. Hummm… that’s probably why the article dryly notes the contract ‘could exceed $500m.’
My advice to Cisco: wait… buy ip.Access out of bankruptcy.
The best way to get costs down in the market: Open standards.
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