J'son & Partners Consulting presents brief results of the analytical report "Femtocells in Russia and the world", which analyzes and summarizes the experience of countries actively using this technology, and investigates the current situation and prospects of the emerging femtocell market in Russia.
Femtocell is a low-power (100 mW) and small cellular base station designed for use in a small territory (an office or a household). Femtocells, as well as pikocells, metrocells and microcells, refer to so-called "small cells», low-power wireless access points, that operate in a licensed frequency spectrum, are managed by the operator and have a certain intelligence.
The main advantage of this technology is the ability for the operator to reduce significantly capital and operating costs while increasing the coverage and capacity of network. From a consumer perspective, the main advantage of femtocells is the ability to receive a good indoor signal with significant savings on calls from fixed locations committed by preferential tariffs, furthermore, femtocells provide a number of additional services. However, femtocells have some disadvantages, for example, there may be some problems due to the effect of network interference.
At the initial stage of development femtocell market was dominated by small, specialized vendors like ip.access, Ubiquisys and Airvana. To date, the market includes almost all major manufacturers: Alcatel-Lucent, Cisco, Huawei, NEC, Nokia-Siemens Networks (NSN), Samsung, ZTE, etc.
Major operators have already installed millions of femtocells. As of June 2012, Sprint announces 600 thousand installed femtocells, in October 2012, this figure already exceeds 1 million. Softbank, SFR and Vodafone operators have established more than 100 thousand femtocells each. Despite the fact that AT & T doesn’t disclose the number of installed femtocell, according to the estimations this figure exceeds 500 thousand units.
Global femtocell market
The first femtocell network was launched in 2007 in the U.S. By the end of the 2nd quarter 2012 in the world, there were over 40 commercial femtocell projects, about 60 projects are in the deployment stage. In this case, the bulk of the projects is implemented in the private sector, although in recent years the number of projects is growing in the corporate sector, femtocells appear in public places and in rural areas (Table 1).
As compared to femtocells for individuals corporate femtocells provide enhanced coverage, a greater number of simultaneous active sessions, voice and data calls. Femtocells are a good alternative to other solutions to improve indoor coverage - repeaters, distributed antenna and other things, as it costs significantly less for corporate clients. Thus, according to the mobile operator Sprint, which targets both the large enterprise, and the segment of small and medium businesses, the cost of femtocell network deploying is half less expensive than non related to femtocell technologies. This is a very powerful tool to retain corporate clients and reduce churn.
Some operators, including Softbank, Vodafone, Cosmote and SFR offer free service equipment, in this case the SFR does not set the minimum requirements for ARPU; Mosaic Telecom SK Telecom and other operators are planning to follow that example. AT & T offers discounts for femtocell stations to customers who ordered the operator’s Internet access service, and if the users subscribe to unlimited cellular plan, the access point is free.
According to opinion polls, many users are willing to pay for the "extension" of the operator's network coverage, so the strategy of subsidizing operators subscriber equipment for femtocells is becoming quite common. This factor, as well as a significant decline in prices for femtocell stations are essential drivers for the development of the femtocell market.
But, despite the decline in the cost of femtocells equipment in recent years and devices subsidizing of individual operators, Informa Telecoms & Media survey showed, that the main barriers to wider use of "small cells" in the private sector remain insufficient services offer from the operators and the lack of subscribers understanding of the benefits of using this technology.
According to Small Cell Forum, by the end of 2011 there were more than 3 million active femtocells of different types (private and corporate segment, urban and rural networks), i.e. more than 3G base stations. More than 2.5 million femtocells were shipped in 2011, the increase of supply of up to 6 million units is expected by the end of 2012. According to Infonetics Research Forecast, by the end of the 4th quarter of 2012 femtocell quarterly sales exceed $ 400 million, the sales of 3G-femtocells will prevail (Fig. 1).
The main reason of the femtocell networks deployment is optimization of network indoor coverage. According to the results of the poll, conducted by Infonetics Research among 18 mobile operators, the main drivers are optimization of areas of large traffic consumption and the inability to expand makrocell networks (Fig. 2).
According to the results of the online survey of more than 300 representatives of vendors, operators of mobile and fixed communications, marketing analysts and other femtocell market participants, conducted by Informa Telecoms & Media, the main technological driver for the deployment of "small cells", including femtocells, will be LTE technology, more than half of respondents think so(Figure 3).
The introduction of "small cells" in LTE networks and public areas will be a key driver for the more active development of this segment of the market.
South Korea's SK Telecom was the first operator who managed to implement a commercial project to deploy femtocells on LTE network. Company Virgin UK and Telefonica have announced trials of "small cells" for LTE.
Femtocell market in Russia
The forming of femtocell market in Russia began in 2011, i.e. a few years later than in developed countries. MTS and "MegaFon" has launched femtocell projects almost simultaneously. In May 2011, "VimpelCom" started with a test operation in two regions - the North-West and Central - in August and November 2011, correspondingly.
Now size of the Russian femtocell market (less than two thousand registered femtocell stations) is not comparable with the leading femtocell U.S. market, where about 1.5-2 million femtocell stations were established, i.e. more than half of all installed femtocells in the world (Table 2).
More than half of the existing base stations for femtocells are deployed in the Central Federal District (Figure 4). At the same time Moscow constituted 76% of all district stations, and a total of Moscow and the Moscow region - 84%. The second largest number of femtocells is deployed in the North-West Federal District and constitutes 24%. 83% of all existing stations are concentrated in St. Petersburg, and together with the Leningrad region it amounts to 89%.
Central and North-Western Federal District became the first and fundamental regions to promote femtocell services in Russia. In these regions, femtocells were deployed by all the operators of "Big Three".
South, Far East and North Caucasus federal districts are the least developed by the number of femtocells - together they constitute 3% of operating femtocell stations. In the Ural Federal District there is no base stations of IMT-2000/UMTS standard to create a femtocell.
In February 2010, the State Commission for Radio Frequencies (SCRF) simplified the approval procedure for the installation of femtocells. Under the new rules of regulation, it is possible to use radio frequency bands 1935-1980 MHz and 2125-2170 MHz through radio-electronic means to create femtocells on mobile radio networks of IMT-2000/UMTS standard without issuing separate SCRF solutions for each entity or person.
Changes of the registration rules simplified the procedure and reduced the registration time of femtocells, which gave impetus to the development of femtocell market in Russia primarily in the segment of corporate users. However, according to the operators, additional refinement and simplification, in particular, the assignment of femtocells to user devices are required for the development of mass market. Therefore, the largest mobile operators in Russia are focused on providing services primarily to corporate users.
Femtocell market in Russia is at the stage of formation. Further development will depend largely on the improvement and simplification of legislation in this matter, as well as on the analysis of commercial efficiency of cellular operators femtocell projects.
In the coming years the structure of the market will change. According to Infonetics Research forecasts, in terms of quantity the market share of femtocells in houses will be 75% by 2016 (compared to 90% at present), market share of femtocells in public places will increase from 1% to 12% and the market share of corporate femtocells will grow from 8.5% to 13% (Fig. 5).
In general, the forecasts of analytical agencies, made in 2011-2012, indicate high expectations for the development of the femtocell market in the world in the medium term. According to opinion polls, the coming years will be the beginning of large-scale deployment of "small cells". According to the optimistic scenario, J'son & Partners Consulting expects up to 1 million femtocells operating in Russia by the end of 2016.
From the perspective of the end user in Russia, while femtocells have low consumer value as in most cases the operators actually offer to improve the coverage of cellular communication at the subscriber’s expense. Therefore it is necessary to increase the value of femtocells in the eyes of the consumer, including through the expansion of its functionality and the introduction of additional services (eg, SMS-notifications about the family member / employee in the range of a femtocell, etc.).
Contents of the full version of the report (82 pages)«Femtocells in Russia and the world»
1.1. Definition and spheres of application
1.2. Femtocell architecture
1.3. Femtocell advantages
2. Main equipment vendors and their solutions
3. Femtocell usage regulation
3.1. In the world
3.1.1 Femtocell and frequency band licensing
3.1.2 User access
3.1.3 Radiation level
3.1.4 Conformance to standards
3.1.5 Lawful interception
3.1.6 Subscriber equipment placement
3.1.7 Emergency calls
3.1.8 The position of regulatory authorities in different countries
3.2. In Russia
4. Femtocell market: current state, trends and forecasts
4.1. In the world
4.1.1. Main project
4.1.2. Typical business cases and spheres of application
188.8.131.52. Private segment
184.108.40.206. Corporate segment
220.127.116.11. Public places and social projects
18.104.22.168. Rural area
22.214.171.124. New business models
4.1.3. Statstics of sales and deployments
4.1.4. Drivers and barriers for the market development
4.1.5. Trends and forecasts
4.2. In Russia
4.2.1. Main projects
4.2.2. Femtocell distribution by the Russian regions
4.2.3. Market shares of operators by the number of installations
4.2.4. Trends and Forecasts
Conclusion and recommendations
Appendix 1. Success story: Sprint (USA)
Appendix 2. Profiles of major femtocell operators, B2C
Vodafone (United Kingdom)
NTT DoCoMo (Japan)
List of Figures
Fig. 1. Types of "small cells» and a typical range as compared to macrocell networks
Fig. 2. Typical areas of "small cells" application and the hierarchy of networks
Fig. 3. Which three main features define the concept of "small cell" best?
Fig. 4. Which places are most suitable to deploy "small cells"?
Fig. 5. General structure and scheme of femtocell work
Fig. 6. Femtocell advantages for operators and subscribers
Fig. 7. Main advantages of small cells for the end users
Fig. 8. The positioning of vendors in the femtocell market
Fig. 9. Classification of vendors in the femtocell market
Fig. 10. The number of vendors in the market of "small cells" in various segments
Fig. 11. Market shares of femtocells mabufacturers in the world in terms of sales revenue, 1Q2012
Fig. 12 . Major operators leading in the introduction of the femtocells in the world
Fig. 13. The world's first LTE femtocell with Wi-Fi support
Fig. 14. Statistics of the femtocells implementation projects and i plans of its launch in the world, 2009-2012
Fig. 15. Femtocells equipment market in the world, 2011
Fig. 16. The structure of femtocells market in the world, 3Q2011
Fig. 17. Main reasons for operators to offer corporate femtocells and FMC-Services
Fig. 18. Main drivers of femtocells deployment
Fig. 19. What are the three most important reasons for the deployment of "small cells"
Fig. 20. What technology will be a key driver for the market of "small cells" in the next 5 years (2012-2017)?
Fig. 21. Main barriers for the use of femtocells
Fig. 22. Main barriers for more active use of "small cells" in the private sector
Fig. 23. Main problems in the consumer small cells" segment "
Fig. 24. Main problems in the segment of "street» (outdoor) «small cells"
Fig. 25. Cost of femtocell acceess point, 2009-2014
Fig. 26. The number of femtocell users in the world, 2009-2014
Fig. 27. Wi-Fi effect on the development of "small cells" market
Fig. 28. Forecast of "small cells" deployment in the world, 2011-2016
Fig. 29. The globel market of femtocell 2G/3G/4G equipment, 2011-2015
Fig. 30. The global market of femtocell access points: the geographical structure of the market, 2015
Fig. 31. The global femtocells market: market structure by consumers, 2016
Fig. 32. Expected year of mass deployment of "small cells" in the world
Fig. 33. What technological factor is likely to affect the market of "small cells"?
Fig. 34. The distribution of the number of active BSs for a femtocell by Federal Districts of Russia, October 2012
Fig. 35. Market shares of Russian operators by the number of active femtocells, October 2012
Fig. 36. Original femto access point Airave 1.0 on the Sprint network
Fig. 37. Femto access point Airave 2.0 on the Sprint network
Fig. 38. Corporate femtocell Airave Pro Connect on the Sprint network
List of Tables
Table 1. Main sphere of femtocell application
Table 2. Main femtocell disadvantages and their possible solution
Table 3. First launches of “small cells” in the world
Table 4. Major projects of commercial femtocells in the world, 1H2011
Table 5. Key projects for the introduction of commercial femtocells in the world, 2Q 2012
Table 6. Femtocells projects segmentation by target groups of consumers, 2Q2012
Table 7. Main forecasts of the market of "small cells" and femtocells in the world by analytical agencies
Table 8. The number of femtocells, Russia vs. the USA, October 2012
Table 9. Main characteristics of femtocells implementation project, "VimpelCom"
Table 10. Main characteristics of femtocells implementation project, “MegaFon”
Table 11. Main characteristics of femtocells implementation project, MTS
Table 12. The distribution of the number of active base stations for femtocells by region, October 2012
Table 13. Providing Mobile operators femtocell services in the Russian regions, October 2012
Table 14. Femtocells projects indicators, October 2012
This Information Note is Prepared by J’son & Partners Consulting, We strive to provide factual and prognostic data that fully reflect the situation and are available to us before issuing the material. J’son & Partners Consulting reserves the right to revise the data after publication of new official information by the market players.
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