The 0.2% Solution

At the “Path to 4G” event hosted by Fierce Wireless, and held in conjunction with the CTIA 2011 show in Orlando, Sprint’s vp of network development Iyad Tarazi disclosed that the company has 0.1 million femtocells deployed.

I think the word ‘disclosed’ is key.

0.1 million (aka 100,000) femtocells is nothing to be proud of, but honestly, I don't know what Sprint's expectations were.

Let’s consider the history.  Sprint launched their ‘Airave’ to much fanfare in August 2008.  At the time, the devices were featured prominently in their retail shops.  And in August, 2010, Sprint actually offered to give them away for FREE.

So after three years and giving them away for FREE, Sprint’s been able to actually pawn off 0.1 million devices.   With 50 million subscribers, this works out to a paltry 0.2% of the subscriber base.

How many of these units are actually active?  Many people I speak with who got a femtocell (not necessarily from Sprint) say they tried it and discarded it.

Compare this with T-Mobile’s Wi-Fi Calling service, which has roughly 5 million subscribers.  Of course they aren’t active all the time, but it’s certainly a lot more than 0.1m.

Sprint Embraces Wi-Fi

Sprint in the US is not and has never been a UMA operator. Still, I’ve written about the company before. Now, Sprint is making things a little more interesting for the dual-mode handset market.

"Sprint is embracing WiFi in all its major devices going forward," Jeff Clemow, the carrier's director of business product marketing, was quoted in a recent article in Fierce Wireless.

"It is now a requirement for all our PDA equipment suppliers to include WiFi," Clemow said, pointing to the new Palm Pre, which sports Wi-Fi, as evidence of the carrier's new position. "Several quarters ago we made a conscious decision to require all of our PDA suppliers to support Wi-Fi."

We have to say it. Sprint is behind the eight-ball on this whole “Wi-Fi is the way thing.” RIM has been leading the device market with Wi-Fi (and UMA-enabled) BlackBerries for some time, and spoke about how it was inevitable back in May 2008. The whole European market’s been bullish on Wi-Fi for some time now. In a study published in summer 2008, the European Union reported that within the EU27, 46% of households with internet access have Wi-Fi.

Even with a femtocell service, Sprint is realizing the best way to provide offload is with Wi-Fi. Now let’s talk about UMA…

It's a "Wireless Network Extender"

Rumors abound about Verizon Wireless’ launch of a Wireless Network Extender, more commonly known as a femtocell. Engadget reports that Verizon could begin selling the unit as early as next week.

The deeper question is: will consumers pay for coverage? $250 for the unit seems a bit steep.

Or will Verizon resort to providing the unit for free as a customer retention tactic like Sprint? We’ll have to wait and see.

Verizon preps femtocell service

According to reports from Engadget and Gadget.com, Verizon Wireless plans a launch of its own femtocell service based on Samsung’s Ubicell. We all know this is the same product used in Sprint’s Airave service.

For those following the Home Zone/FMC market, this amounts to an ‘I told you so’ moment. T-Mobile kicked things off. Next was Sprint, now Verizon. It looks like the FMC market in the US is really heating up. We told you home zones were hot.

This all stems from T-Mobile’s “Unlimited HotSpot Calling” (formerly known as ‘HotSpot@Home’), the Wi-Fi based Home Zone service T-Mobile launched about a year ago.

At the time, the UHC service provided something totally different than any of the other mobile operators in the US could deliver: a location specific ‘service zone’. T-Mobile could identify that subscribers were in their homes, and offer an unlimited, flat rate calling plan only when on Wi-Fi.

T-Mobile also got the added benefit of improving coverage in the home or office by using the Wi-Fi that already exists in those locations.

In response, Sprint launched Airave in September, 2008. It has been pointed out in this blog that while GSM operators have a choice of Wi-Fi or femto technology, CDMA-based operators are unfortunately limited to femtocells.

Without the ability to segment subscribers into specific locations, ATT and Verizon, launched unlimited MOBILE calling for $100. While all the majors eventually followed suit, this move immediately devalued the outdoor macro network, setting a ceiling on services at $100. Why not create a home zone offer, and limit unlimited calling to specific locations?

Yet Sprint and T-Mobile still had the upper hand, with unlimited calling when attached to Wi-Fi or the femtocell for just $10/month.

So now today we see Verizon realizing that a home zone service is different. In the US, it appears that a home zone service is now a competitive requirement.

AT&T, as a GSM operator, has a choice. They can do a femtocell service, or do Wi-Fi/UMA, or, I suppose, do nothing. It will be interesting to see what happens next.

Psst... Want a free femtocell?

In my continuing fascination with the Sprint femtocell service Airave, I’ve been following articles and blogs about the service. From the comments on-line, it’s clear the product is a hit. By making it a ‘2G’ product, Sprint has assured compatibility with all the handsets in the field. While there are minor issues, for people with little or no coverage (a far to common occurrence in the US), this is the wireless equivalent of ‘pennies from heaven’.

The one complain seems to be the pricing. Not much of a surprise there. A one time fee of $99.00 and then $4.95 a month to get five bars of coverage in your home seems a bit steep for something one expects from their mobile provider.

But if you don’t want to pay for it, perhaps there’s another way:

In this article from the San Francisco Chronicle, Sprint representatives said that on a case-by-case basis, some customers in problem areas with bad reception might be eligible for a free or discounted Airave or waived monthly fees.

Several of the bloggers who are ‘raving about Airave’ indicate they received the unit at no charge after complaining to Sprint customer service.

I have blogged about this as a face-off between two ‘home zone’ service offers, the other being T-Mobile’s “Unlimited Mobile Calling” (aka HotSpot@Home). I viewed Sprint’s push as a competitive response to T-Mobile’s Wi-Fi-based offer.

But perhaps Sprint has a more pressing need for the femtocell. An analysis of Q2 08 operating performance for the ‘big four’ mobile operators in the US showed negative trends for Sprint in nearly every category. Especially troubling is the 4% decline in the total subscriber base.

One way to stop subscribers from leaving, especially those with coverage issues, is to give them a femtocell.

Will Consumers Pay for Coverage?

If there was ever a place in the world to explore consumer’s reaction to paying for coverage, it’s the US. While coverage undoubtedly improves year after year, the ads and tag lines from AT&T (more bars in more places) and Verizon (America’s most reliable network) tell the story that coverage is an important issue for American consumers.

So it is with great interest that we watch Sprint’s Airave femtocell service launch. Engadget reported today that consumers across the US can now order the Airave service.

The upfront price of the femtocell has increased to $99.99 from $49.99 in the initial service trial (Indianapolis and Denver). In addition, consumers must pay $4.99/month for the privilege of putting a CDMA (2G) base station in their homes to improve coverage. It costs $10/month for unlimited flat rate calling.

While some might question the logic of using a 2G/CDMA radio in the Airave (slower data service indoors, anyone?), it does ensure that the service will work with 100% of its deployed base of handsets, rather than the fraction of subscribers with 3G (EV-DO) phones.

Of course, T-Mobile’s HotSpot @Home service is the incumbent ‘home zone’ service offer in the US. There is no charge for using Wi-Fi to improve coverage. Subscribers can use existing Wi-Fi access points anywhere in the world to increase signal strength indoors. Consumers need a UMA-enabled phone, typically free or less than $100 with a two year service contract.

So it looks like the game is on for US consumers and mobile service providers. It will be interesting to see how this plays out.

US Market Heats Up

If the rumors are true, things in the home zone market are about to get very interesting in the US.

Yesterday, there was a flurry of rumors that Sprint will launch their femtocell-based Airave service nationwide July 15^th. The service has been in limited commercial trial for more than 6 months in the US.

Market watchers (like me) like to compare the service offers. According to the rumors Sprint will offer the Airave femtocell to subscribers for an upfront fee of $99 and $15/month (or $30/month for families). In return consumers get unlimited nationwide calling when attached to the femtocell, and improved coverage.

T-Mobile’s Wi-Fi based offer, HotSpot @Home, lets consumers use Wi-Fi access points already in the home or get new ‘optimized’ Wi-Fi routers from T-Mobile, which are free with a two year contract. Consumers can use Wi-Fi to improve coverage for their existing mobile plan. Or for an additional $10/month ($20/mos for families), subscribers can an add unlimited nationwide calling option when attached to Wi-Fi.

Interestingly, in a video interview from the Avren femtocell conference, Lauren Town, head of marketing at Orange for Wi-Fi-based home service Unik, noted that the value proposition articulated for femtocell home zones during the conference was nearly identical to their existing service.

It’s not clear if Sprint’s rate will come down to $10/month to match the T-Mobile offer. One clear advantage is that Sprint’s femtocell is 1xRTT (or ‘2G’ in CDMA parlance), which means that it will work with the entire installed base of Sprint handsets. T-Mobile's advantage? The service works on Wi-Fi anywhere in the world (enterprise, outside US,...) rather than just one femtocell.

Like many new offers, Sprint service has faced some growing pains during the initial trial phase. Presumably these issues have been worked out.

If anything, the pressure is increasing for AT&T and Verizon. Neither company has a ‘home zone’ offer, which means neither company has the ability to create a location specific service offer like ‘unlimited flat rate calling from home’.

PS – I just noticed this. The address used to be http://airave.sprint.com. But that address now redirects to http://www.sprintenterprise.com/airave/ Hummm…

Sorry Sprint

A very interesting opinion was posted to the GLG site the other day. Samual Greenholtz with Telecom Pragmatics opines that Sprint’s first choice for its home zone service was a dual-mode CDMA/Wi-Fi product. But lacking a DMH standard for CDMA networks, they were forced to settle for their second choice technology: femtocells.

With that, I say “Sorry Sprint”. It’s well known that there is no UMA/GAN for CDMA networks. With a 3GPP2 version of GAN, Sprint would have been free to choose dual-mode handsets, femtocells, terminal adaptors or even softmobile clients to run off their mobile network.

Is there an opportunity here?

A New Thought On Femtocell Pricing

This week, analyst Danny Briere with Telechoice wrote an interesting piece for Telephony Online. The article was titled a rather depressing “Carrier Femtocell Pricing Doomed?”

I don’t think so, and Mr. Briere offers some interesting thoughts on alternative methods of pricing femtocell services. He has two points which I’ll oversimplify here:

• Separate the ‘coverage’ aspect of a femtocell from the ‘service’

The issue Mr. Briere has with Sprint’s Airave offer is that the consumer is required to purchase both ‘coverage’ and ‘service’ with the femtocell. A consumer wanting improved coverage must spend $50 and pay a recurring fee of $15/month. The same applies to a subscriber just interested in the flat rate calling plan. There’s no ability for Sprint to segment the subscriber benefit.

He contrasts this with T-Mobile’s Wi-Fi-based service where consumers can get ‘coverage’ by simply getting a dual-mode phone, no additional fees apply. Then if a consumer wants the flat rate calling ‘service’, they can spend an extra $10/month.

• Don’t underestimate subscriber’s ability to pay for something they value (in this case, coverage).

I think the concept of offering the femtocell as a pure consumer product play is creative. If the consumer values coverage, they may be willing to pay to address this issue. The operator may choose to have the consumer pay full price for the femtocell, or elect to subsidize a portion of the femtocell for subscriber retention reasons. But for subscribers who are coverage challenged, this may work.

One could apply the handset subsidy approach. If you want to just by a handset, a consumer pays full price. But if you choose to sign up for a service plan and commitment, then the handset is deeply subsidized.

To be worked out is the secondary/after market usage of a femtocell. Will the consumer be able to use the femtocell with a new mobile provider? In the US, there is an immediate radio issue (GSM vs CDMA) which hampers the issue immediately.

The point is there are many ways to meet consumer need, and the femtocell market is just getting started.

Home (Zone 2.0) for the holidays

The home is the most competitive location for providing telecommunications services today. Fixed, cable, mobile and VoIP providers all work aggressively to provide a full range of personal communication services (voice, instant messaging, email, social networking) to consumers, with a primary goal of winning additional mind (and wallet)-share from consumers when at home. Many within the industry have termed this fierce competition as the “battle for the building.”

For mobile operators, one of the most successful weapons in the battle for the building is the deployment of Home Zone services. A Home Zone service is based on a mobile operator defining a service area around a subscriber’s home where the operator can aggressively price service.

For example, when a subscriber is within his or her Home Zone (i.e., the subscriber is being served by the cell tower nearest to home), mobile calls are charged at land-line rates. Introduced in a number of Western European countries, these first-generation Home Zone services have proved popular with consumers.

Unfortunately, as these services are based on using the macro radio access network (RAN), they also present a number of significant challenges for mobile operators.

Revenue Leakage: As a subscriber’s “Home Zone” is based on the cell tower(s) that services their home, in many situations a subscriber could be served by the same tower throughout their day, whether at home, work or in transit.

Shrinking Margins: As the Home Zone service uses the macro RAN, an operator’s cost of service delivery remains the same. As a result, operators are directly sacrificing service margins.

Poor Performance: Unfortunately, the home is often ill-served from the macro RAN, as it is plagued by poor indoor coverage, particularly with high-speed 3G technologies.

To address these cost and performance challenges, mobile operators are beginning to launch the next generation of Home Zone services, known as “Home Zone 2.0” (HZ2.0). HZ2.0 services are defined by two primary characteristics.

First, they use a low-power femtocell or Wi-Fi access point deployed within a subscriber’s home to address revenue leakage and poor performance. The low-power access points overcome wireless service coverage issues. Moreover, micro radios improve the performance of the handset in the home because the radio resource is closer to the device. The signal is stronger and as a result, data rates are typically higher. Finally, offloading voice and data traffic to the micro radio access point frees up valuable macro network spectrum for outdoor mobile service delivery.

With a relatively small coverage radius (typically within the home), low-power access points constrain the home ‘zone’ and address the revenue leakage issue of alternative approaches. This improved Home Zone resolution helps operators keep the benefits of the HZ2.0 service confined to the home, where competition is most intense.

Second, HZ2.0 services use a subscriber’s existing home broadband access connection for backhauling mobile services. Broadband penetration in developed markets ranges from 35-60% of households. For mobile operators, broadband represents an ultra-low cost transport network that improves the margins for voice and data service delivery.

Also, a wired broadband network provides fast, reliable IP transport for new revenue-generating mobile data services. When delivered through high-speed 3G femtocells or Wi-Fi connections, subscribers get a true broadband mobile data experience.

Home Zone 2.0 is not just a concept; operators have begun to deploy services today. ABI Research recently published a report projecting the number of HZ2.0 (femtocell and dual-mode handset (DMH)-based) subscribers to reach more than 250 million worldwide by 2012.

Orange’s multi-national Unik/Unique HZ2.0 service offer, based on DMH and Wi-Fi, is among the most successful worldwide. Deployed for more than a year in France Orange’s Unik service has delivered a 10% increase in ARPU, and 15% of subscribers who take the service are new to Orange mobile.

In more recent months, the US has seen the industry’s first femtocell-based HZ2.0 offer. Sprint’s Airave service is currently in limited production, available in just two cities, but offers a promising glimpse at a femtocell service offer. The femtocell is available for a one-time fee of $49.95. For an additional $15/month, subscribers receive unlimited calling when in their Home Zone. This offer compares very favorably with competitive unlimited calling packages. Vonage, for example, offers unlimited in-home calling for $25/month.

Mobile operators have begun to realize the strategic imperative of HZ2.0. The home is an extremely competitive telecom location and represents an enormous growth opportunity. However, the existing macro radio network does not meet the cost or performance requirements to win the ‘battle for the building’.

Micro radio networks (femtocells and Wi-Fi) offer advantages for mobile operators to address indoor mobile radio performance. By leveraging broadband and IP as a backhaul network technology, operators can dramatically lower the cost of delivering services.

HZ2.0 services relying on broadband access and low power access points (femtocells and Wi-Fi) are being deployed by operators today. UMA is the technology that powers HZ2.0.

Sprint likes femtocells - not really a surprise

As reported by Doug Mahoney with VON from a conference in Chicago, Sprint Director of Signaling and Control Technology Manish Mangal stated that the company favored femtocells over Voice over Wi-Fi solutions.

Well, that’s not a surprise at all. For a company like Sprint, the only viable option for voice over Wi-Fi is an approach similar to VCC. As readers of this blog know, I have nothing good to say about VCC.

It’s a train wreck: burdensome to the network, complex t to install, and still not a ratified standard.

VCC isn’t tightly integrated into the phone or network. It’s sort of a ‘loose coupling’ which results in a poor hand-over experience and a high impact on battery performance.

But most of all, VCC delivers a very poor, fragmented user experience. Because subscribers are served from a different core network depending on the RAN they are using, subscriber get different services. How do you explain to someone that their phone can’t download ringtones or send an MMS when on Wi-Fi, but they can when on the CDMA network?

Don't take my word for it, Manish says the same things below:

“We’ve been testing voice over Wi-Fi,” stated Mangal, “There’s lot of hurdles [in implementing it], and no benefits. “There are so many technical issues to make it work.” Problems including the failure of dual-mode devices to catch on in the U.S. “We’ve sold [dual-mode devices], customers aren’t buying them,” he said, deterred by higher price points. Most current wireless networks were deployed as data networks, and haven’t been optimized for voice, so upgrading is expensive. More management time and demands for longer battery life round out the set of problems VoWi-Fi users have listed.

If Sprint’s comments are any indication, our analysis of VCC continues to be dead on. It's funny, operators rolling UMA-based dual-mode services don't have these problems at all.