Femtocell can be thought of as the "son of FMC," rather than using a Bluetooth or WiFi air interface and a specialized phone; it re-uses the GSM or CDMA air interface and potentially your existing mobile phone.  But given FMC's (Fixed Mobile Convergence) poor market acceptance; why should femtocell be any different?  Reviewing femtocell against the FMC service models discussed in this previous weblog article on FMC, it can be thought of as a hybrid of the dual mode and substitution models.  In that, a short-range wireless system is used in the office/home, however, that interface is the same as the wide area network (GSM/CDMA).  It enables all communications to be managed by one converged operator and hence does not require the enterprise to maintain existing PBX equipment.

Examining some of the FMC failures we've seen in the market.  Both Deutsche Telekom (DT) and Korea Telecom withdrew their FMC services, blaming poor service take-up.  A critical issue was the price paid for the service was not significantly lower than the savings incurred by the customer.  This was then compounded by the usability issues around calls being made at home or in the office and not being charged at the cheaper FMC rates; as well as the teething battery life issues.  There was a period in 2006 when it appeared every DT employee was looking for a power socket to recharge their T-One phone.

When T-One was launched a T-One customer paid about €70 per month to get the full range of services, after having paid connection charges of €185. The absolute minimum spent, forgoing the DSL connection, came to about €55. But even this was expensive compared to E-Plus' flat rate charge of €25 per month with unlimited calls to national fixed and E-Plus numbers (calls to other operators cost 25 cents) - and hence Fixed Mobile Conversion won out!

BT Fusion Plus's old pricing was 12.50GBP per month plus call charges, so for calls to a UK landline, standard pricing was 80p for one hour, with BT Fusion Plus that dropped to 10p for one hour.  Definitely cheaper, but to recoup the 12.50 per month fixed fee, required about 18 hours of calls (over 1000 minutes).  It didn't take customers long to work out that wasn't entirely a good deal.  Today BT bundles the Fusion cost into the minutes plans.

However, a notable exception to these failures is Orange Unik.  France Telecom benefited from a large retail base of broadband customers, and was able to exploit the success of its home gateway, Livebox, which supported Unik (avoiding multiple boxes).  When launched the Unik service offered unlimited, flat-rate calling to all national PSTN numbers for €10 per month, or unlimited calling to all national PSTN numbers and Orange mobile numbers for €22 per month.  Which is a significant value given the penetration of Orange customers for fixed, mobile and broadband is significant in France.  It was also a fraction of the cost of Deutsche Telekom's T-One service.  This enabled Unik to achieve a penetration of 500k customers in Feb '08, see this weblog article from SofNet.  Though this remains a small percentage of FT's total 25.3M customer base; and even in this success-case, the business case is slight as it relies heavily upon the inclusion of savings in retention and acquisition costs.

The critical lessons are: keep the service as transparent as possible with respect to user experience; keep the saving as simple to understand and as significant as possible for the customer.  

So now let's examine some of the hurdles femtocell is climbing:

• Interference between with macrocell and with neighbouring femtocells (especially in flats/condos/apartments) in real-world deployments.
• Quality and range. If a femtocell operates at the same frequency as the macrocell, the range could be as low as 10-20m.  If on clear spectrum, the range can be as great as 150m.  But many operators are not in a position to offer clear spectrum.
• Network management.  A similar problem to DSL modems or VoIP terminal adapters, which has recently been addressed by the adoption of the TR-069 family of specifications.
• Handover.  Macro-to-femto handover is tough (Sprint's AIRAVE femtocell trial does not do such handover).  Femto-to-macro handover is easy, perhaps too easy; if there is a charging difference the FMC billing problems previously described may recur.
• Tolerance to broadband backhaul limitations.  Latency, synchronization, and limited uplink, especially in rural locations where customers may be inclined to adopt femto to improve their in-home mobile performance.  It likely requires the femtocell provider to also provide broadband to ensure end-to-end quality of service.
• Billing.  Critical issue for previous FMC services, as it resulted in many complaints and high churn
• Security.  Opportunities for fraud increase as the operator extends their mobile network into the public domain.
• Network integration and evolution.  Operators will likely use the Iub interface, other approaches are also possible but costs/performance/evolution complicates the decision (e.g. just voice support, or voice and data).

So femtocell will need to be integrated into the broadband modem provided by the converged operator, and its cost will likely need to be borne by the operator not the customer, else the customer will choose a cheaper service.  The proposition needs to be very simple, e.g. unlimited calling at home for all your phones and 80% off international calls for only 10 GBP per month.  The user experience must also be simple; when the customer is at home they just call like anywhere else, the calls are just cheaper; no checking for signal levels or listening for multiple tones when dialing.

Femtocell enables mobile broadband traffic to be off-loaded in the home and office, this is an important benefit for the operator not the customer.  Operational and commercial issues need to be resolved, as described above.  But once solved, and its operation is transparent to the customer, we will likely see femtocell bundled in all converged operator broadband modems.  The main challenge facing femocell technology is the timing of when the operational and commercial issues can be solved to meet the conditions necessary for market success not technology trial success.

UC (Unified Communications) brings together the communication and data networks of an enterprise.  The Innovative Communications Alliance (ICA), led by Nortel and Microsoft, is creating the hype surrounding UC.  The purpose of this article is not to discuss UC within the enterprise, rather look at the emerging mobilization of UC and the impact it could have on mobile operators. 

North American Mobile Office revenues are predicted to reach $6-7B in 2011, their current CAGR (Compound Annual Growth Rate) is about 40%.  In Europe, Vodafone's Mobile Office service has done well with roughly 2M customers.  As 'human latency,' that is the time it takes for decisions to be made, becomes increasingly important to the performance of businesses.  Enabling employees to be easily contactable and have access to the enterprise applications and data regardless of location is becoming mission critical.

Looking at the benefits of UC mobilization for the three main actors:

• For customers, mobilizing UC helps in removing some of the communications complexity, e.g. multiple voicemail boxes, multiple messaging platforms, multiple identifies and phone numbers.  Doing a quick tally, I currently have 5 mobile numbers (a US postpaid mobile and prepaid SIMs for the UK, Singapore, UAE and France), an office number, 6 IM/VoIP accounts, and 6 email addresses that I know of.  There are simply too many choices and not enough success with today's disparate communication tools.
• For enterprises, UC helps reduce human latency, enabling employees and partners to get in contact as soon as possible to speed up decision making, improving the company's competitiveness and efficiency.
• For mobile operators: mobilizing UC is strategically important as voice becomes just another application on enterprise IP networks, so they must deliver the UC solution else risk significant voice and VAS (Value Added Service) revenue erosion.

Some of the trends impacting this emerging landscape are:

• Enterprise vendors are using the ubiquity of IP to make communications just another "application," e.g. Avaya, Cisco, IBM, Microsoft, Nortel and Oracle.   Microsoft Communicator Mobile will present a significant threat as the corporate directory, messaging, presence and potentially VoIP could be driven 'over-the-top' of the operators network.
• Ultra-mobile PCs and increasing broadband wireless speeds will make the mobile channel 'more' transparent to IP based communications.  Blurring the difference in experience between a 'phone on the go' and the 'PC in the office.'
• Existing mobile email vendors are moving into the UC and enterprise application space, e.g. RIM.  Enabling the Blackberry junkies to use the device beyond email.
• Hosted enterprise software, e.g. Salesforce.com, has achieved broad market acceptance, creating opportunities for all players to mash-up integrated enterprise solutions.

In this emerging environment what is an operator to do?  Recent enterprise market studies show they still prefer to look to the operator for mobilization solutions.  But given the size of the market and the number of innovative players all trying to leverage their incumbency in the customer's experience, the current preference may not be around for long.

• Partnering with the UC vendors is essential, even through there is a potential long-term risk of from UC vendor's handset clients, UC is going to happen within the enterprise first, and be mobilized second.  There is no option but to work with the incumbent UC vendors. 
• For converged operators with an established enterprise solution business, offering a hosted UC solution with mobilization will be attractive to a number of enterprise segments.  Though an emerging issue will be the integration of this with enterprise applications and data, that is being able to mash-up the hosted solution into the enterprises' data and processes.
• For mobile-only operators the key is to focus on having a best in class mobile solution that can work across a number of UC platforms.  For example, having the UC client and other mobilization application driven from a common user interface.
• Regardless of operator, the over-riding need is to deliver a tight integrated customer experience.  Offering and charging for separate services, e.g. presence, collaboration, messaging, email, directory, security, and enterprise integration will ensure an enterprise goes elsewhere.
  

FMC is a tired term.  Some operators and quite a few enterprises are fed-up of listening to ill-formed, technology-centric FMC pitches.  Taking a simplistic view, when a consumer has a mobile phone, why do they need FMC?  With virtually unlimited 'night and weekend' rates they already have cheap calling at home.  For an enterprise, when their employees have a mobile phone, they now have potentially uncontrolled costs, especially for roaming charges.  So I'm going to look at FMC from an enterprise perspective, because they have a pain point that FMC could potentially solve.  The lack of success of BT Fusion in the consumer market is a data point to back-up this assertion.

Looking at the market there appears to be three broad approaches to FMC:

• The handset centric dual-mode approach where the enterprise replaces the mobile network with short-range radio (WiFi, DECT or Bluetooth) in the office.   They retain the mobile network for off-premises mobility and replace the desktop phone with a dual-mode device. The enterprise retains in their PBX and some voice-over-IP (VoIP) capability.  Here the device vendors, fixed operators and PBX vendors position their solutions.
• The second option is where the enterprise uses signalling and/or VPN (Virtual Private Network) functionality to give it more control over call routing and costs.   It retains its PBX (or hosted PBX), its desktop phones and its mobile devices.  Here the fixed operators, system integrators and also the PBX vendors position their solutions.
• The third, and the mobile operators favourite, is the substitution approach.  Where the enterprise replaces desktop phones with mobile phones and replaces the PBX with a mobile centrex/hosted PBX service.  Here the mobile infrastructure and device vendors position their solutions.

An example of the 'dual mode' approach is BT Fusion Plus.  The Plus is for WiFi rather than Bluetooth.  The BT Business Hub provides the wireless link between BT Fusion handsets and the BT Broadband connection and supports up to 10 Fusion handsets with up to 5 making calls simultaneously.   The Hub is able to connect up to ten PCs, laptops, and peripherals to BT Business Broadband.  They claim savings of about 80% compared to other mobile providers when making calls through the Hub.  For a small business the motivation is simple, communication savings when they're in the office or connected via a BT WiFi hotspot.  FMC is just an element of the solution BT provides, and customers would use it to save money, I'll come back to this point later.

For the 'integration' approach, at the simple end of the scale, the enterprise can simply purchase a bundle of fixed and mobile services from a service provider who is willing and able to provide both, for example, France Telecom's VPN Unifie bundle.  Or Avaya has 'Extension to Cellular,' which is positioned as a feature within Communications Manager, their IP PBX software.  Where software on the mobile phone, Avaya's  one-X Mobile Edition that runs on Nokia Series 60 / 80, Windows Mobile and Blackberry. The client can work out how best to optimize call routing.

And finally the simplest and most successful form of FMC, substitution, otherwise know as Fixed Mobile Conversion.  The enterprise replaces the desktop phones with cellular devices, and replaces the PBX with a mobile Centrex/hosted PBX service. This enables the enterprise to have both fixed and mobile numbers (regulation permitting).  A good example is Vodafone's Wireless Office with roughly 2M customers.

I find it easier to think in pictures, so here is a diagram that gives a fuller view of the landscape I described above.

So given this landscape what are the emerging trends? 

Most enterprises view the 'integration' and 'dual mode' approaches as unproven technologies.  The adoption of multiple new technologies simultaneously is challenging.  Some FMC installations require voice-grade Wi-Fi upgrades; most deployments require all users have a smart phone, and nearly all deployments use VoIP.  Currently there is proprietary and non-interoperable hardware.  High upfront capex costs for devices and hardware as well as a lack of standards and interoperability dilute the cost savings of least-cost call routing.  When IT decision makers think convergence, it isn't about FMC; their convergence perspective is around voice and data (IP telephony).

Bottom line: FMC remains a specialized application in the cold-light of an enterprise's priorities.  A recommendation is to move away from trying to sell just FMC, rather focus upon using FMC as a stepping stone to managed services contracts, e.g. Cisco's SmartBusiness Communications System is a good example of this approach; and focus upon a broader enterprise unified communication and collaboration proposition.  The phasing of this bundled approach must to be driven by customer need, not technology availability.