More from 4G World: WiFi bets and femtocell confessions

At 4G World here in Chicago, the debate is raging on about the potential value of femtocells.  One audience member asked yesterday, “If I already have a 20 Mbps broadband connection and a WiFi access point, then why do I need a femtocell?”  I think he was on to something, but it is interesting to go back in time a little and see how the relative business cases for WiFi and femtocells have changed as the market evolved.

This feels like a confession:  Three years ago, I was a proponent of femtocells as a solution for indoor coverage, particularly when compared to WiFi UMA.  Too few devices had WiFi, and it seemed unrealistic to expect many users to adopt a solution that required such a constrained selection.  Different family members or different personnel within an organization may have very different device preferences or be at different points within the replacement cycle.

By contrast, femtocells allow installation of customer premise equipment where it is needed, and the problem is solved.  Individual users don’t need to change their behavior, and if the costs were right, then it could be an attractive solution for many households and businesses.  But the costs were too high (I priced one at $300 at the time) and commercial availability was and still is limited.

Fast-forward three years and the market has changed dramatically:

1. Lead by the iPhone and RIM’s Blackberry, smartphones are rapidly gaining share – in developed markets, the majority of users will have one within two device replacement cycles


2. The challenge is no longer only about indoor coverage, but now also includes an immediate need for additional data capacity to support high bandwidth applications


3. Leading smartphones will nearly all be WiFi-enabled

The result is that homeowners and businesses no longer need to pay to install a femto cell, and users no longer need to be constrained to specialized, suboptimal devices.  For most people, WiFi coverage already exists in their home and office, and these same people are likely to carry a WiFi-enabled smartphone now or within two upgrade cycles.

These smartphones are also responsible for driving a massive increase in data traffic and clogging up 3G networks.  WiFi provides a mechanism for operators to offload 30% or more of this traffic without massive upgrades -- and in advance of LTE networks coming over the next 3 years.

Device makers are scrambling to offer smartphones that match Apple’s iPhone as the key competitive benchmark (including WiFi).  Mobile operators are responding to increasing smartphone usage with investments in WiFi assets and improvement of seamless switching between WiFi and wide-area cellular to offload some of the associated explosion of data traffic.  The way the iPhone restricts high-bandwidth applications so they can only be used over WiFi is a good example of a first step in this direction.

Meanwhile, the level of investment in femtocells is small by comparison, involves a tough value proposition to customers, and is focused on solving a problem that is largely taking care of itself.

My money is on WiFi.

Femtocells have the whiff of 'if' not 'when'

There's a discussion on Mobile Innovation about 'When will Femtocells go Mass Market?'

We think it's now 'if', not when:

1. the market in the developed world is moving to smartphones


2. substantially all smartphones will have WiFi


3. WiFi is already pervasive in the enterprise


4. WiFi is widespread in the home

So, who needs the extra cost and expense of a femtocell, when the WiFi infrastructure is already there? Vodafone is asking £160 (= US$265, €183) for its femtocell, the Vodafone Access Gateway:

Vodafone Access Gateway

A Belkin N150 Enhanced Wireless Router for BT is just £70 ( = US$117, €80) - less than half as much:

Belkin N150 Enhanced Wireless Router

Part of the discussion was triggered by a new report from Juniper Research, which puts the numbers at just 15 million worldwide by 2012. That's hardly mass market: it's much less than 1% of subscribers in the developed world. It's not enough to put any sort of dent in the smartphone surge shortfall.

So for femtocells, it's becoming if, not when...

Nokia's not-a-netbook

Nokia’s netbook, the Booklet 3G, has been being lambasted for its high price, particularly given its slow processor and smallish hard drive:

Nokia's Booklet 3G

It seems that many of the people critiquing it are focused on its high price, without recognizing the impact of the features which differentiate it:

1. wide area broadband, not just WiFi


2. built-in location services with GPS


3. a rugged case, of Aluminum, not plastic


4. very long battery life, twice that of many netbooks.

These features change the function of the device, the job that potential users might hire it to do.

The function of a netbook is to connect quickly and cheaply to the web via WiFi in the home; this is the job that users hire netbooks to do.

What about customers who want a netbook-like device, that they can use while either mobile, or where WiFi is not available:

• in much of the world, there is little if any fixed broadband and less WiFi, let alone the hotspots that US road warriors can rely on being able to find as they refuel with caffeine; these potential customers are looking for a robust device that connects quickly and cheaply to the web via 3G cellular


• for US road warriors, a lightweight rugged long lasting device with good connectivity and location smarts might be a great candidate for their job: enabling me to connect quickly and easily while traveling.

A very long battery life may even eliminate the need for a top-up charge during the day, and hence for carrying a wall wart and scavenging for power.

The right way to look at an innovation is from the perspective of the function of the innovation. For Nokia that means how does its Booklet 3G stack up against the other candidates for this job:

• Nokia’s own high end smartphones such as the N97 or Apple’s iPhone


• rugged or lightweight laptops, plus 3G connectivity, such as Verizon’s MiFi device


• or even a conventional netbook, to which a 3G modem and large capacity battery have been added

The trade-off amongst these candidates is then very different:

• a lot bigger which is good for usability but bad for portability, a little more expensive than a smartphone


• cheaper and simpler and smaller than something like a MacBook Air or Dell Adamo


• even competitive with something like Dell’s own netbook for which adding a 3G modem and a large capacity battery boosts the price by $275.

Seen through this lens, moving into these adjacent markets makes a lot more sense for Nokia; its Booklet 3G netbook is the not-a-netbook. The interesting question for Nokia then becomes: are there enough customers in the developing world where it is so strong, leveraging 3G rather than fixed broadband, or enough road warriors who prefer their candidate for the job of portable companion?

WiFi makes a ruckus

One of the big impacts of smartphones has been a resurgence in WiFi as noted by, amongst others GigaOM and ABI; we believe that pretty much every smartphone worthy of the name will incorporate WiFi, to enable a whole bunch of convergence use cases, such as connectivity within the home and office for convergence. This may well extend to public spaces as well; we think that there's a compelling case to be made for 'drive by downloads' to unload the cellular networks laboring under the impact of the smartphone surge.

Our Cambridge (MA) office is at Cambridge Innovation Center, at One Broadway, which is a great space, and the importance of WiFi is driven home by a recent post on the blog:

people are beginning to rely much more on Wi-Fi than they had in the past, with some companies dropping wired connections entirely.  Some cell phones, such as the T-Mobile Blackberries our staff use, can now make and receive all their calls over Wi-Fi

There's a great discussion of the challenges involved, and the outcome, for which are extremely grateful, of much improved reception and performance, thanks to Ruckus' BeamFlex (reviewed here)

After all the testing and analysis, one system stood head and shoulders above the others: the ZoneFlex system from Ruckus Wireless.  I remember in particular one of the graphs comparing the performance of the various systems under heavy load.  The other systems showed a jumble of jagged lines representing drop-outs, while Ruckus sailed smoothly through with none.

Another funny story from this effort was that after we were done, we had come to know some other support people very well, but didn’t have a read on the quality of Ruckus support.  Why?  Because we didn’t have to call them!

There's a wider theme there that harks back to some of our early work with Virgin Mobile; the best customer service is the one you never need...