femtocells

Operators look to more effective traffic analysis and management

O2 has been deploying DPI for traffic analysis (and possibly management) in its upgraded 7 Mbps upgrade to 3G, and some of the information the company has gained could have a significant impact on 3G/4G planning worldwide.

The company found, not surprisingly, that 5% of users consumed 80% of bandwidth. This skewing of the old 80-20 rule is one of the primary reasons why operators say that some form of traffic management is essential to insure that the broad population gets good service at a fair price. The data also shows that most usage is in the evening and at home, however, which means that femtocells would offload considerable traffic were they widely deployed.

Many operators tell us that while 3G femtocells are possible, the application of IMS and 4G would make it far easier, particularly if self-organizing principles were applied to cell setup. How valuable all this intelligence will be may depend on regulatory trends, though; many countries are seeing considerable public advocacy pressure against traffic management.

Femtocell deployment to test 4G pricing and ROI

Vodafone is planning to release the first European femtocell offering in about a week, using Alcatel-Lucent products. AT&T is also planning to expand its currently limited set of trials immediately, and to have a national offering in late 2009. The moves will be an important step in the evolution of femtocells, and may prove a trial balloon for the 4G deployment of femtocell technology that we’re hearing is an absolutely critical part of nearly everyone’s 4G plans.

With 4G deployment there is a need to manage total first-cost and at the same time give users a reasonable experience. Femtocells in each 4G home would give users an in-home experience with 4G as a baseline even if their own home area wasn’t yet covered by 4G cells, or was covered sparsely. If we see more with femtocells in 2009, we’ll also have a chance to see how carriers propose to price femtocell airtime: Will they discount it or make it free given that their network isn’t really being used? That will tell us a lot about whether femtocells will be a means of encouraging high-bit-rate applications at home where traffic won’t hurt the provider network, or whether providers will try to use femtocells only to get a better ROI by reducing the demand for true 4G cells.

4G LTE adoption may depend on smartphone model

The LTE transformation appears to be gaining momentum, even though it still looks like no significant investment will be made until 2010. We believe that a major factor in this is the decision by service providers to adopt a smartphone-pull model for data revenue, a model that relies on the Internet and handsets to drive data growth and shift revenue to data-centric plans.

Unlike some previous walled-garden service plans, the smartphone model needs a lot of users and capacity to create additional revenue, and thus may be best approached with LTE. Too much near-term push on data, one operator tells us, would confront operators with the choice of either staying with 3G and risking an explosion in the number of cells, or forcing the buyers of 3G smartphones to upgrade en masse to 4G.

Femtocell plans are likely a good barometer here; operators have been talking up 4G femtocells and Motorola has now announced it’s focusing its femtocell work there. Our model says that 2011 will be the big year for 4G, which means that it will be important for equipment vendors to both prepare for that and address how to keep infrastructure spending up in the meantime.

BT sends signal on future voice services

A securities analyst has reported that BT may be slow-rolling 21CN and may in particular be rethinking its notion of migrating from TDM/PSTN voice to VoIP, at least in the near term. The information came out as it related to the impact that a VoIP cutback might have on Sonus. Obviously it could be significant.

What could be more significant is why this might happen. On one hand, the TDM plant is more depreciated than ever, and so barriers to replacement are falling. Yet there’s nothing as cheap as something you own that has no residual value to write off against your top line. Balanced against this is that operating costs for aging equipment typically grow. So at some point, you must assume BT would have to change.

The most logical starting point here is that it makes no sense to do something that involves TDM-to-IP conversion; you are forced to invest in the gateways. But if you have any TDM circuits, you can’t avoid that. Thus, we think that the likely issue here is a migration to packet voice for wireline and wireless, eliminating circuit technology in one sweep.

That would imply, in our view, that BT might synchronize three things before moving forward: 4G/LTE, FMC/femtocells and wireline migration to VoIP in some form. The question is what form. There are indicators that a P2P voice model, or at any rate something other than a SIP model, might be cheaper to deploy. Given Skype would likely offer voice services on any OTT-ready smartphone and over all home broadband, it makes no sense to spend a lot on your own voice program; you will have to match the Skype price or lose.

Verizon “Hub” VoIP to be FMC flagship

Verizon will be launching a VoIP product, “the Hub”, that will also be the flagship of its FMC and likely femtocell position. The new product is designed to deal with the end-of-life issues facing TDM voice and to provide a lower-cost way of offering voice services without risking loss of customers to other providers or to free Internet systems.

Verizon will be using integration with Verizon Wireless services and management of all voice calling from a single device as the kickers. All of this proves that telecom providers are looking at the service layer for their solutions; nobody believes Verizon will build out IP infrastructure for this. It will simply ride on capacity that’s already there.

Metro and access drive ‘09 deployment focus

It is becoming increasingly clear that 2009 will see the most action in the metro and access space. Worldwide, operators are looking very hard at FMC and femtocells, and we believe that there will be some deployments even in the US by 2H09.

There are also a number of competitive initiatives from competitive access providers aimed at Ethernet services and enterprise customers, attempting to play off the corporate desire to gain headroom in access to leverage with later tactical purchases of services.

 Our research is showing that worldwide focus on infrastructure spending will be strongly in the access/metro direction in 2009 and even in 2010.