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Signals Research Group has completed a detailed whitepaper on the business case for femtocells as part of its ongoing femtocell business modeling initiative with the Femto Forum, the independent industry and operator association that supports femtocell deployment worldwide. The study found, across a wide variety of scenarios considering different regions of the world, the business case for femtocells is strong—often doubling the customer lifetime value—and does not depend on any one critical factor or assumption to generate a favorable outcome. Further to this, the research demonstrated that femtocells can dramatically reduce the growing financial costs made by heavy mobile broadband data users on the mobile network.

The study found that changing the perceived key assumptions associated with femtocells does not threaten the viability of the business case. For example, increasing the wholesale cost of the femtocell by 50% (from $200 to $300) only reduces the basic value proposition for femtocells by a modest 16.3%. The study also found that the business case does not depend upon a reduction in churn, even though it is a likely outcome of a femtocell deployment and has already been proven in other similar fixed mobile convergence (FMC) product deployments.

At a time when there is a great deal of interest surrounding managing the costs associated with the growing uptake of “unlimited” mobile broadband data packages, the research found there to be considerable savings associated with offloading traffic via the femtocell, in particular for heavy data users. The study found that the cost savings associated with offloading as low as 1.4 Gbytes of HSPA data or 1.3 Gbytes of EV-DO Rev A data per month via the femtocell from a coverage-constrained macro-cellular network would justify an operator offering a subscriber a free femtocell. For a small but rapidly growing segment of heavy wireless data users, an operator can easily halve the cost of delivering wireless data at home or in the office by offloading traffic from the macro cellular network onto a femtocell.

These latest findings follow those presented by Signals Research Group at Mobile World Congress, when the researchers announced that even with conservative assumptions, the customer lifetime value of a femtocell user increases by as much as 125%, and even more in certain user scenarios. Additionally, the study found that a European operator wanting to provide a reliable 2.5 Mbits/s in-building service for the most coverage-challenged households could do so for €320 per household if it used a femtocell strategy, whereas providing similar in-home service with the means of the macro cellular network alone would cost €900.

“What shines through when you undertake a serious assessment of the femtocell business case is that there is no single factor required for healthy financial returns. Cost savings, incremental revenue, and retention benefits enable femtocells to be deployed successfully with a wide variety of assumptions,” said J. Randolph Luening, vice president of Wireless Economics at Signals Research Group. “Instead, the business case is highly dependent on the attributes of the targeted customer segment and the specific customer proposition put forth by the operator.”

“To date, we’ve seen femtocell deployments mostly focus on providing improved indoor coverage. However, the rapid take-up in mobile broadband services means we’re going to see this start to change rapidly. If the mobile industry is serious about decisively moving beyond simple voice and text to providing a mobile broadband service to all its subscribers, then femtocells must be a key consideration for managing the associated costs,” said Simon Saunders, chairman of the Femto Forum. “Signals Research Group’s findings illustrate the flexibility of the femtocell business case. The picture that emerges is one of a low-risk investment, requiring a modest financial outlay to get started and costs which can be easily paid back based on conservative assumptions about the services offered.”

Although the research found there are certain regional and country-specific influences on the femtocell business case, they are outweighed by other assumptions (e.g., ARPU, usage, etc.), which transcend all regions of the world. However, operators in different regions are likely to vary their go-to-market strategies based on local conditions. Operators in large geographic regions, such as North America, may leverage femtocells to provide improved coverage. Conversely, operators in regions such as Western Europe where calling plans are more expensive may place a greater emphasis on free calls. The research indicated there is nothing that precludes any of the strategies from being successful in any of the regions, though some will prove to be more popular than others.

The whitepaper builds upon preliminary results detailed at this year’s Mobile World Congress by presenting results for 14 different scenarios across three three regions of the world—Western Europe, the United States, and Developed Asia. The scenarios studied considered regional specific attributes, such as the radio access technology (UMTS/HSPA or 1X/EV-DO Rev A), typical key performance indicators such as voice + data usage and average revenue per user, and realistic femtocell strategies that would be appropriate for the region being analyzed.

The whitepaper is available on the Femto Forum Web site, and the full business case modeling tool is available to full members of Femto Forum. In other news, the Femto Forum welcomes seven new members who are already active in the working groups: Cable&Wireless, Intelibs, Octasic, Qualcomm, Sony Corp., Toshiba, and True Move.