Europe : Among the many technologies that are hyped as the ‘next big thing’ in the cellular industry, indoor base stations (often referred to as femtocells) are set to cause fundamental changes and will drive fixed–mobile substitution, according to a new report, Picocells and Femtocells: will indoor base stations transform the telecoms industry?, published by Analysys, the global advisers on telecoms, IT and media.

“The indoor base station concept has emerged rapidly and has created extensive speculation about its potentially wide-reaching consequences”, says co-author Dr Alastair Brydon. “A number of technologies have been over-hyped in recent years, but femtocells have the potential to transform the telecoms industry. The trend towards fixed–mobile substitution is increasing in many countries, and 3G networks are at a relatively early stage in their development. In this context, 3G femtocells could not have arrived at a better time for the mobile industry.”

“The potential of femtocells is substantial for mobile operators, but critical implementation and performance issues need to be resolved before they can be deployed widely”, according to Dr Mark Heath ( inset ), co-author of the report. “These include interference, range, performance, network integration and management, handover, billing and security.”

The report draws on interviews from a range of indoor base station experts and vendors in Europe and the USA and describes how indoor base stations may be used across different wireless technologies, assesses the business case for their application and identifies the issues that need to be resolved to enable widespread deployment.

Key findings include:

- Indoor base stations can be applied to a number of wireless technologies, including 2G, 3G, 3G LTE, WiMAX and WiBro, but 3G femtocells present the greatest opportunity.

- There is a compelling business case for mobile operators to deploy femtocells, based on ARPU growth, cost savings and churn reduction. Indoor base stations can provide a less‧ expensive alternative to traditional outdoor cellular infrastructure for providing in ‧building coverage.

- Femtocells will accelerate the migration of voice traffic from fixed to mobile networks, until 3G networks carry the majority of voice traffic. Femtocells will undermine the case for converged cellular-WLAN services (for example, based on UMA) by enabling very similar tariffs without the need for dedicated handsets.

“The potential of femtocells is substantial for mobile operators, but critical implementation and performance issues need to be resolved before they can be deployed widely”, according to Dr Mark Heath, co-author of the report. “These include interference, range, performance, network integration and management, handover, billing and security.”