Business case for femtocell technology

Abstract

a. Importance of this project: Femto cell technology has captured the imagination of the telecom wireless network industry. This industry has witnessed enormous growth and innovation, at the same time the success of any technology depends on the value created for the consumer. The technology choice needs to be the best and most cost effective solutions for both service providers and the cellular consumers. The business plan is an attempt to analyze and forecast the business opportunities for the cellular service provider by adopting femto cell indoor base stations. b. Objectives :The objective has been clearly to figure out the actual value creator service that is going to be achieved by deploying femto cell indoor base stations and hence the business viability of such an offering. c. Methodology: Study of the telecom wireless domain was conducted to assess the opportunity for service providers. Due to the fact that US markets are trendsetters in the fields of wireless telecommunications, study was carried out for the profitability of deploying femtocell from the perspective of a US cellular service provider. The need for the consumer was assessed based on the recent trends shown in US markets. Suitable assumptions were made (and mentioned so wherever made) while deriving the financial analysis for a fictitious business unit of Verizon dealing with the deployment of femtocells. d. Learning: Voice and data are the two forms of information that get transacted over a wireless media. Historically till the advent of high-speed wireless access technology age, voice contributed almost an average of 95% of the revenues for any cellular service provider globally. Slowly but surely, data contributions to revenue have demonstrated a healthy growth. By June 2007, in developed countries such as USA, estimated data contributions to revenue have been to the extent of about 15%. Consumer has surely given her thumps-up to the mobile broadband age. 3G Americas research wing, in September 2007, have forecasted the data revenue contributions to assume a healthy 26 % by 2012.Femtocell technology on its own is not a disruptive technology. But when used as a lever to usher in the mobile broadband revolution, femtocell along with high speed wireless access technologies such as HSPA or EV-DO becomes a disruptive offering/technology. The reason behind this is the concept known as personalization of mobile due to easy and quality access for home users thanks to femtocell. This builds of consumer confidence and she will be hooked on for all the data access requirements (entertainment or enterprise).Challenge is one of integration of wireline and wireless core networks. Question of why will the wireline service provider support wireless provider. Wireline and wireless service providers are pitted against each other. Who will be a beneficiary out of femtocell technology? To address this, a game formulation was made. Game theory payoff analysis states that any service provider who wants to leverage the opportunity provided by femtocell has to be both a cellular service provider as well as a wireline service provider. Any standalone provider whorealizes the value being generated by femtocell will be better off to either acquire the complimentary service provider or get acquired. Such a player who has both wireless and wireline business under one umbrella will reap the most from this.e. Outcome: There is a huge opportunity waiting, thanks due to mobile broadband that has enabled high-speed data access over wireless media. To popularize and build confidence to consumers, femtocell technology shall play the role perfectly in making home access very reliable and cost effective (calls made on mobile when in femtocell area shall cost as low as a fixed wireline call no hidden costs at all).This will draw the consumer nearer to fetching data on her mobile device to an extent such that mobile device will become a serious alternative to a PC or a laptop. To substantiate the business viability and the opportunity, we have built the financial model for a fictitious Verizon femtocell business unit. By 2012, we forecast that there would be 15-million femtocell access point owned homes in USA. This will lead to a revenue generation of about $15 Billion in a span of five years with a capital investment of about $1.5 Billion.