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Wireless Femtocell Train is Easily Derailed

The worldwide wireless market in the developed world is approaching saturation, with mobile phone service providers offering little compelling differentiation except for price points and market coverage, according to In-Stat's latest assessment.

Mobile triple-play services (voice, video, and Internet) revenue opportunities are a potential solution to this situation, but only when cell operators first solve signal coverage and capacity issues in the indoor home environment, the high-tech market research firm says.

"Femtocells -- small cellular base stations designed for use in residential and small business environments that provide enhanced coverage at the edge of the wireless network -- are a practical, near-term cure for these problems, with no practical limitations," says Allen Nogee, In-Stat analyst. "Femtocell technology is unlikely to be superseded by another technology in the foreseeable future."

If only it were that simple -- where wireless market saturation could be solved with the introduction of a new technology. This was essentially the same myopic mindset that was responsible for the current 3G network deployment anticlimax. Build it, and they will come -- that's been the approach used thus far.

But, as I've stated before, marketing strategy should never be centered upon a foundation of a blind leap-of-faith. Carriers must acknowledge the historical facts -- what you don't know about the market can, and will, harm you.

The femtocell gravy train could easily be derailed, in my opinion, because to date the value proposition has been weak -- relative to the required investment. More work needs to be performed on the detailed application scenarios, in an effort to uncover all the potential value-added benefits.

The upside could very well be significant for service providers -- based upon meaningful and compelling user applications, not the underlying technology.

The founding of the Femto Forum, which counts several small femto-technology vendors among its founding members, marks the launch of the emerging femtocell industry.

In-Stat's market study found the following:

- Worldwide femtocell subscriptions (installed devices) are expected to grow to 40.6 million by 2011.

- Femtocell end-users will reach 101.5 million over the next five years.

- Femtocell device and service pricing will be a major short-term challenge, likely requiring operator subsidization. Again, primarily because of the weak and untested value proposition.

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