Femtocell prices have dropped below $100, says vendor

The wholesale cost of a femtocell has dropped below US$100 and that will help give the sector a boost, femtocell vendor Ubiquisys said on Tuesday.

Femtocells are small base stations that can improve indoor mobile broadband coverage and increase capacity. When a user is making calls and surfing the Web with a phone or laptop equipped with wireless broadband, signals are sent via the femtocell and a fixed broadband connection. For carriers they also provide a chance to offload users from the regular mobile network, and save money on backhaul capacity.

Femtocell vendors are currently working to turn it into a mass-market technology. Currently, nine operators have started selling services, and a handful more are about to launch, according to the Femto Forum. That compares to 315 commercially launched mobile broadband networks based on HSPA (High-Speed Packet Access), according to recent data from the Global Mobile Suppliers Association (GSA).

Cheaper femtocells are one of the key things that will kick off this market big time, according to Will Franks, co-founder and CTO at Ubiquisys. Operators made it clear that if millions of femtocells were to be shipped, the price needed to drop below the $100 mark, because then mobile operators can give them away, Franks said.

Getting there has been a combination of pushing down the cost of components and leaving the manufacturing of femtocells to Chinese and Taiwanese companies, which are really good at making products at high volumes and low costs, according to Franks.

The biggest difference on the component side has been the cost of the baseband chip, which runs the modem and also comes with a CPU that runs the software, Franks said.

The first of the sub-$100 femtocells is the G3-mini, which is 8 centimeters tall, can handle eight simultaneous calls and download speeds of up to 14.4M bps (bits per second). The device is manufactured by SerComm and is based on Ubiquisys' Femto-Engine, which includes software and the hardware blueprints that are necessary to make a femtocell. Before the Femto-Engine became available companies like SerComm weren't able to manufacture femtocells, according to Ubiquisys.

Ubiquisys has received the first 100,000 unit order of the product, according to Franks. But he doesn't want to reveal who made the order, Franks said.

Not everyone is convinced that Ubiquisys can really charge as little as $100 for its femtocells and still make money.

Prices on femtocells are coming down, but if you add together the costs for the bill-of-materials, intellectual property, manufacturing and a margin for the vendor its difficult to get down to $100, according to Andy Tiller, vice president of marketing at competing vendor ip.access. If Ubiquisys sells tens of millions femtocells it might make sense, but operators aren't ordering those kinds of volumes today, he said.

A more realistic price would today be about $200, according to Tiller.

Those sentiments are echoed by Malik Saadi, principal analyst at Informa Telecoms & Media. With the volumes currently shipped $100 sounds reasonable if it was just the bill-of-materials, and not the whole femtocell, he said.

But Ubiquisys is not budging.

"I am not surprised that this comes as a bit of a shock to many in the industry, but we have received the first order at the sub-$100 price point," said Keith Day, vice president of marketing at Ubiquisys.

Also, the products aren't sold at a loss. Ubiquisys is too small to try to buy market share, according to Day.