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For all the speed mobile operators are building into their networks, a lot of it doesn't reach subscribers trying to make calls or surf the Web indoors. While some carriers look to Wi-Fi and dual-mode phones to bridge the gap, another technology is coming along that could work with the handsets customers have today.

Femtocells, named after a small order of size in physics, are cellular base stations for homes and offices. The concept is not new, but the constant smaller-and-cheaper trend in processors has finally made it feasible. Several carriers are considering the technology, according to vendors and analysts, and the first large commercial deployments may hit the ground next year.

Seeking Indoor Access

Mobile operators have invested billions of dollars in licenses and infrastructure for fast 3G (third-generation) mobile data networks. Yet subscribers often can't get the throughput they've paid for when they're indoors -- exactly where people are most likely to use network-intensive multimedia services, said ABI Research analyst Stuart Carlaw. Picocells, often used in office buildings and campuses, are too big for home use.

To get the bandwidth where it's needed, mobile providers are looking to the DSL and cable modems most subscribers have in their homes. This also saves them money on backhaul, the links that tie the cellular to the wired network, which carriers typically have to lease. At the moment, giving better in-home coverage means using Wi-Fi. T-Mobile USA Inc., BT Group PLC and France Telecom SA all have services that let subscribers use the cellular network outside and automatically switch to Wi-Fi indoors.

Wi-Fi router options are plentiful and inexpensive. But when it comes to phones, subscribers who want to go this route have only a handful of models to choose from. Because femtocells are just like regular cellular base stations, any phone for the carrier's network can be used with them. From the carrier's perspective, a femtocell system is also preferable because it has the same security between the phone and the cell, according to Wen Tong, a research fellow at Nortel Networks Corp.

Short on Bandwidth

The 3G bandwidth crunch is real. For example, EV-DO (Evolution-Data Optimized) 3G technology is supposed to deliver between 400K bps (bits per second) and 600K bps of throughput on average. But if just 20 subscribers try to access data services at the same time, a typical EV-DO base station can only provide 100K bps to each, Tong said. Supporting more users over the base station's range, which typically is several kilometers, requires expensive upgrades.

Cost has been the major barrier to femtocell adoption. Nokia Corp. and Telefonaktiebolaget LM Ericsson tried out the concept more than 10 years ago, but the equipment for homes and offices was too big and too expensive, ABI's Carlaw said. Moore's Law, which predicts that microprocessors will continually get faster and smaller, soon will make that customer equipment small and cheap enough to deploy commercially. Carlaw believes that in 2009, when most observers expect femtocells to hit the market in force, a cell with an integrated broadband modem will cost the carrier about US$120.

Paying for an entirely new device will be a tricky issue in the price-sensitive cellular business, according to In-Stat analyst Allen Nogee. U.S. carriers already subsidize handsets and will be reluctant to take on the additional cost, he said. And European and Asian operators aren't used to offering subsidies at all. It may be hard to persuade subscribers to pay for something that essentially saves the carrier from having to build a better network and deliver the performance it promised in the first place, Nogee said.

There are also technical challenges to solve. One is interference: Because femtocells use the same frequency as the macro cells that make up the ordinary cell network, they basically are competing networks, possibly numbering in the hundreds, surrounding one cell tower. That could hurt reception for callers both indoors and outdoors. And like other radio problems, it's still theoretical, Carlaw said.

"No one's ever going to know what it's like" until the femtocells are in place, he said.

Femtocells also need to have clocks precisely synchronized with the main cell towers, particularly for CDMA (Code-Division Multiple Access) networks, Nortel's Tong said. There is more work to be done on that problem, he said.

In Search of Standards

Standards could simplify matters and help femtocells proliferate, but they appear to be far off. The industry hasn't even settled on the basic method of making the femtocell talk to the operator's core network, InStat's Nogee said.

Nokia Siemens Networks Ltd. last month announced it would make a network gateway to aggregate traffic from many femtocells but would leave the home-based devices to other vendors. Ultimately, the company wants to make its gateway work with almost any femtocell and take the technology to a standards body, said Timo Hyppola, head of indoor radio solutions at the network infrastructure maker. But for now, each vendor has to sit down with Nokia Siemens to make its own device work with the gateway, he said. Thomson SA has agreed to work with Nokia Siemens.

As long as carriers are the ones supplying femtocells to their subscribers, standardization will be tough, InStat's Nogee believes. A carrier by itself has no incentive to make its femtocells work with any other mobile operator's system. But if equipment makers can get the technology integrated into broadband modems, which are sold at retail or provided by wireline carriers, that could change. With high volume and low cost, femtocells will proliferate until most households can afford one, he said. In-Stat expects 40.6 million femtocells to be in use worldwide by 2011, with 101.5 million individual users, a majority of them in Europe and Asia. Among U.S. operators, Verizon Wireless Inc. and Sprint Nextel Corp. are exploring femtocells, he said. Neither carrier responded to requests for comment on the subject.

ABI's Carlaw also sees rapid growth, though not just around the corner. In 2012, vendors will ship 36 million femtocells and there will be an installed base of nearly 70 million of the devices, serving more than 150 million users, he predicted.