AT&T’s femto play – The iPhone and Enterprise connection

The femto market is overjoyed this week. With two of the largest operators in the US coming clean on femtocells, it might be right to term 2009 as a 'transition year' for femtocells.

Close on the heels of Verizon's announcement on Monday, came news that AT&T is launching femto city trials in three cities later in 1Q 2009. There are unconfirmed reports that the trials will be followed by a commercial launch later in 2009.

However, AT&T seem to be following a data-centric approach as opposed to its rivals Verizon and Sprint which have been talking about improving or extending voice coverage indoors. Its somehow ironic, looking at today's results from Verizon which saw web-surfing and texting revenue grow at 41% in the fourth quarter of last year. And if data revenues continue providing an 'offset' then why do they have a femtocell that simply extends 2G voice data?

In any case, operator differentiation on the femto has been something that everyone has been waiting for and the North American market seems to be embracing femtos at the moment.

There might be a reason why AT&T has gone for improving data capacity and coverage indoors rather than simply focusing on voice. With iPhone data usage going through the roof, it's not surprising that AT&T would desperately like to ensure that its macro network does not face a backhaul bandwidth crunch. With femtos providing sufficient capacity indoors, the macro network can service the outdoors, reducing output power at the cell site, boosting capacity and offering a better data experience when users are on the move. As a result, AT&T can expect to manage network capacity better and to do it without investing in additional cell sites or backhaul. Be aware, the capacity issue is all about data, not voice.

Although AT&T hasn't mentioned anything about unlimited data bundles, the fact that it is restricting usage to 3G phones is proof enough that it is bullish on data. The 3G femto push is certainly encouraging and would allow for a seamless experience for iPhone users, many of whom typically switch to their Wi-Fi network when accessing data indoors. Although Wi-Fi is always going to remain the primary interface for our desktops and laptops inside homes, 3G can become the default data connection for mobile phones. With operator data suggesting that the majority of mobile Internet usage is over mobile phones rather than laptops, it is not surprising to see operators like AT&T being aggressive on 3G femtocells. It might just be that the iPhone has forced them to act quicker than their competitors when it comes to 3G femtocells.

The other part of the announcement that is really interesting for me is that they plan to market the femto to SMEs. On their website they mention 'small businesses' and the capability to support 10 users with four simultaneous users. I am encouraged to see both Verizon and AT&T go after small businesses with the femtocell, as this will drive femto adoption across multiple segments, not just residential. With Sprint having a strong Converged Network Solutions unit, I won't be surprised if it has an enterprise version of their Airave in the works.