Home Is Where the Femtocell Is

Companies such as Motorola and Google are investing in femtocells, which promise to improve cell-phone coverage inside houses

by Olga Kharif and Bruce Meyerson

How femtocells work
Airvana

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Ask the folks at T-Mobile USA why most people switch mobile-phone providers and they'll tell you it's not because of poor customer service or high-priced call plans. Consumers' main reason for seeking a new carrier? They can't get good network coverage inside their homes, where anywhere from 27% to 41% of all wireless minutes are spent.

There's a host of new technologies, from Wi-Fi to Voice over Internet Protocol, that customers can use in place of unreliable in-home cell coverage. But the most effective may be one few people have even heard of. It's known as a femtocell, and it acts as an in-home wireless access point. The femtocell looks like a typical modem or router and uses a high-speed Internet connection, rather than the wireless network, to convey a call from a handset to the carrier's switching station, where it's directed to its destination. Derived from the word "femto," denoting something one-quadrillionth the size of a given unit, femtocells sidestep nearby towers and the spotty coverage they sometimes provide.

The technology holds enough potential that a phalanx of tech companies, including mobile-phone maker Motorola (MOT) and Web search leader Google (GOOG), are dedicating serious resources to femtocell development. Ray Smets, vice-president of marketing in the broadband solutions group at Motorola, says femtocells are "getting an equal amount of energy in terms of importance" as other, more established technologies including Wi-Fi and WiMAX, which deliver high-speed Internet access. "We see it just as significant as other wireless technologies we are developing," Smets says. In February, Motorola bought startup Netopia to propel its femtocell efforts.

Giving Google a Leg Up

On July 20, Google joined a group of investors that parked $20 million in Britain-based femtocell startup Ubiquisys. Earlier in July, Thomson (TMS), the world's largest maker of DSL modems, struck a deal with infrastructure maker Nokia Siemens Networks to develop femtocell gear. On July 2, networking giant Netgear (NTGR), which makes Wi-Fi routers, co-founded the Femto Forum, designed to promote femtocell standards and use. Other forum members include Airvana, ip.access, picoChip, RadioFrame Networks, Tatara Systems, and Ubiquisys.

Why the seemingly sudden flurry of interest? By 2012, there will be more than 150 million users of femtocell products on 70 million access points worldwide, according to consultancy ABI Research. That's a quick ramp-up for a technology that's only in trials now. If and as it takes hold, analysts expect femtocell technology to give newcomers such as Google a big leg up in the wireless market, while adding to pressure on existing telecom providers such as AT&T (T) and Vonage (VG).