Technology | Media | Telecommunications

Friday, April 11, 2008

Fear of the Unknown Slows FMC Progress

What's really holding back fixed-mobile convergence (FMC) service deployment? Some analysts believe that it's technology and CPE cost issues, but I'm not convinced. I believe that it's service provider fear of current revenue stream cannibalization causing these delays.

U.S. mobile network operators are just now starting to investigate the use of femtocell technology as a way to keep a lid on both backhaul costs and customer churn rates, but first-generation equipment prices are still too high for wide-scale deployment, according to the latest market assessment from Unstrung Insider.

"If there's one safe bet regarding femtocells, it's that success or bust, they're guaranteed to go down in telecom history as one of the most-watched and most-hyped wireless technologies ever," notes Tim Kridel, research analyst with Unstrung Insider and author of their report.

"Most U.S. service providers and equipment vendors are still trying to figure out where femtocells fit in to their network architectures and service plans."

Although femtocells are generally viewed as the domain of wireless carriers, they will also have a direct impact on wireline operators, such as telcos and cable MSOs, Kridel says. "Femtocells rely on a cable or DSL connection for network backhaul," he notes.

"Telcos and MSOs could serve as important partners for wireless carriers that lack wired broadband and video services, such as Sprint Nextel and T-Mobile USA."

Other key findings of Unstrung Insider's study include:

- Wide deployment of femtocells at customer sites could give mobile operators the means to significantly reduce the cost of backhauling traffic from cell towers.

- Carriers and vendors agree that at $200-plus, first-generation femtocells are too expensive for widespread adoption.

- Network operators could justify deeply subsidizing femtocells to reduce churn among high-value customers.