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Third-generation (3G) network operators in the U.K. could begin testing a technology to improve indoor network coverage before the end of the year.

It's not known which operators will be the first to undertake trials, said Nick Johnson, chief technology officer of IP Access, one of several companies that makes femtocells, the small 3G base stations that enable the improvement.

Mobile phone company Vodafone Group PLC has issued a request-for-proposal to femtocell vendors, said Stuart Carlaw, research director for ABI Research. "When you get to an RFP, it's pretty serious stuff," he said.

Sprint Nextel Corp. and Softbank Corp. in Japan are also out in front, with Softbank demonstrating femtocells earlier this week in Tokyo.

By placing 3G radio base stations in the home, and using domestic broadband connections to link calls to their network backbone, operators hope to extend 3G coverage into homes where reception is otherwise poor. A group that will promote open standards around the technology, the Femto Forum, launched earlier this week.

IP Access demonstrated its Oyster 3G home access femtocell deep in a London wine cellar on Friday, transmitting a video conference call between two mobile phones.

The technology will compete with other carriers' Wi-Fi coverage, which enables UMA (Unlicensed Mobile Access), a way to make call over a Wi-Fi hotspot that's plugged into a home DSL (Digital Subscriber Line) connection and have them billed to a mobile phone account. UMA is used in offerings such as BT Group PLC's Fusion service.

Femtocells hold an advantage in that they can be used by 3G mobiles, while only a few models support UMA and Wi-Fi, Carlaw said.

Carriers will likely end up subsidizing the cost of a femtocell, which is probably now around US$120 to $130, or bundling it as part of a service package, Carlaw said. "A consumer is not going to pay," the analyst added.

ABI predicts around 52,000 femtocell units will ship this year, with around 1 million in 2008 when deployments become more widespread. However, femtocells are not likely to replace Wi-Fi, as some carriers already have huge investments in that technology.

"I think they'll coexist," Carlaw said.