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LTE presents major opportunity for femtocell adoption

Long Term Evolution (LTE) could invigorate the femtocell market, but the conditions have to work in the technology's favor for LTE to take root.

As Long Term Evolution (LTE), the speedy 4G wireless technology touted by Verizon and AT&T, approaches widespread deployment in 2010-2011, femtocell adoption could gather steam if the groundwork is laid right.

Currently, nearly all carriers are trying out femtocells, which create small hot spot-like pockets of cellular access on a provider's own spectrum and then route it over the Internet to improve indoor coverage and reduce costs.

But as carriers debate whether customers should bear some or all of the burden of buying and maintaining femtocell hardware, they have been slow to adopt femtocells broadly. Each femtocell can cost several hundred dollars, and consumers aren't necessarily sold on the idea of buying one more gadget to manage.

LTE, however, might provide several openings in the femtocell market and give carriers a golden opportunity to familiarize consumers with these devices.

For one, femtocells enable end users to take their LTE network wherever they want, even if a carrier's own buildout remains small at first.

"Some vendors are looking to deploy LTE in hot spot-like deployments, where the demand is highest first," said Nadine Manjaro, a senior analyst at ABI Research. "So it makes sense that they would cover a building with a picocell and femtocells for the smaller buildings or personal usage."

Similar to a femtocell, a picocell is a device that's higher powered and is intended for larger, in-building deployments.

In a new ABI research report, Manjaro predicted that emerging femtocell standards will likely be an integrated part of the LTE standard, with several manufacturers even supporting new interfaces. That support suggests that some early LTE deployments will be entirely femtocell based.

She said many of these principles apply to WiMax. But the shorter deployment timeline for WiMax means it won't receive the benefits of the more fully finished femtocell standards.

Part of the interest in femtocells stems from timing: For the most part, femtocell standardization has been a slow process, though in the past few months major progress has been made. Manjaro said many of those standards will be ratified shortly before LTE comes online, giving the technology a fresh shot at wider adoption.

The deployment picture will also vary greatly from country to country, depending on which wireless spectrum has been allocated to LTE. In the U.S., the relatively robust, low-band 700 MHz spectrum --which penetrates walls and buildings well -- will probably be the first to support an LTE network. In China and much of Europe, however, far higher bands are likely, and higher spectrums have a tougher time penetrating walls and providing in-building coverage, which strengthens the femtocell argument.

Possible risk to the femto future?

While LTE could signal a golden age or at least a greater opportunity for femtocells, there is also concern that the technology's gaining favor could be short-lived if it's not handled properly.

"If femtocells are not proliferated in large-scale deployments over the next two to three years, the whole business case might be in jeopardy," said Sudhir Tangri, the marketing director for telecommunications outsourcing and consulting firm Aricent. Otherwise, Tangri said, users will not be familiar with femtocell use cases and, when the time comes, will likely pass for simpler alternatives.

Tangri also said it's critical for service providers to sort out the logistical questions about how deployments will work, even as the tricky technology problems get solved.

"There are certain issues that need to be sorted out -- whether it's 3G or 4G -- like distribution, like ownership," he said. "Who owns the box? The service provider? The consumer? These are fundamental questions before even getting into the technology, and we believe they need to be sorted out."

Tangri said that if these issues were not resolved by the 2011, femtocells would likely miss their opportunity to become accepted and integrated into cellular infrastructure and uptake would be minimal.

That being said, Tangri was upbeat about the technology's prospects, citing the ongoing testing by major carriers globally and their eagerness to move forward.

"I would say that currently we as an organization are involved with operators on advanced stages of user trials," he said. "We'll get into deployments the second half of next year. … But there are still questions that need to be answered."

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