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Industry leaders clockwise round the table from the
left: Roberto Vannini and Holly Kramer, Telstra; Cynthia Gordon
and Garrett Johnston, MTS; Xu Ming, Eric Sun, and Donglin Shen,
ZTE; Lars Stork, Celtel Nigeria; Alan Burkitt-Gray, GTB; Mike
Short, Telefónica O2; Andrew Parkin-White, Analysys.
Mike Grant of Analysys arrived after the picture was
Industry leaders take part in GTB's femto
Those taking part in the roundtable were:
Mike Grant, head of media practice;
Andrew Parkin-White, principal
Lars Stork, chief operating officer
Cynthia Gordon, chief marketing officer;
Garrett Johnston, group director for strategic
Mike Short, VP of R&D
Holly Kramer, group managing director of
product management; and
Roberto Vannini, executive director
of wireless and mobility products
Donglin Shen, VP of wireless strategy,
Eric Sun, head of technical and
commercial, western Europe; and
Xu Ming, vice president, wireless
products management division
The roundtable was chaired by Alan
Burkitt-Gray, editor of Global Telecoms
Global Telecoms Business held a roundtable on innovation at
Mobile World Congress in Barcelona in February. At the event,
sponsored by ZTE, senior executives from the industry discussed
innovation and the relationship between operators and vendors,
and what operators are looking for. This is an edited
transcript of the debate.
To give the discussions a particular focus they gave some
attention to femtocells, as a particular instance of innovation
that vendors are offering and some operators are trying out in
different applications. Femtocells were one of the hot topics
at the Mobile World Congress.
Andrew Parkin-White: We've published some
15,000-word-plus reports on femtocells, one looking at the
consumer market and one looking at the enterprise market. In
the consumer market there are a number of strategies starting
to emerge. If you look at the US, indoor coverage can be a big
One of the immediate things the vendor side is pushing is a
cheap voice product that can compete with fixed-network
tariffs. But a lot of the time people are already using
cellular services in the home and this risks destroying a
premium revenue stream.
Where we did see femtocells really coming into their own in
value-added services - mobile broadband, mobile TV, and so
The enterprise market is completely different. One of the major
issues is coverage in the workplace. By offering a
femtocell-based fixed-mobile convergence solution we ran into a
whole set of issues to do with integration of telephony into
the company communications system - the PBX or a hosted VPN.
The practical difficulties there are the cost of transmission,
which can make or break the business case.
Cynthia Gordon: My perception of a lot of
vendors is that they don't understand enough about the market
we operate in.
Typically the senior executives don't live in those markets.
They fly in for two or three days and then think they
understand Russia or wherever. They couldn't possibly
We're launching 3G in three of our countries during 2008. We're
launching it in Uzbekistan where we only have 16% mobile
penetration - that's because we think we can take people
straight into 3G. Fixed internet usage is below 10%, so that's
a great opportunity.
Femtocells: yes, we're very interested. In the territories we
operate in, people need entertainment because they're spending
a lot of time indoors. Because of the characteristics of the
housing, getting penetration indoors is even more
Garrett Johnston: Innovation, vendors and
technology are only loosely associated. If I was to look at the
sources of innovation in MTS, vendors wouldn't come in the top
If I walk into a leading operator store in Dublin or London,
they will ask me if I want to pay as you go or pay monthly.
Would you really want to mould your customer round the billing
system? Or would you prefer to mould your billing system round
If you come to MTS, our value propositions are all about
children, they're all about women, about single entrepreneurs,
about immigrants, emigrants, families, and so on.
The reason for the interest in femtocells is very simply not so
much the indoor coverage, though that is interesting, but the
opportunity to personalise the service down to someone's
bedroom and use that as the fingerprint - the imprint of a
person's personality and their usage profile - and carry the
profile across the network for the 30% of usage that remains
outside the bedroom.
Alan Burkitt-Gray: You know when they're
doing something at home.
Garrett Johnston: Because 70-80% of usage
in Russia is at home, because of climatic conditions and lack
of disposable income to go to pubs and restaurants: people do
their entertaining at home.
The kid wants to look at The Simpsons and doesn't want his mum
to see he's been on The Simpsons website, so he goes to his
bedroom and does it on his own. Two or three of the teenagers
in the same apartment do the same thing. Then when they're out
and about we know they like The Simpsons because the bedroom
usage gives us the fingerprint of how they think and we can
pile on other experiences that are relevant.
For us innovation is all about customers, all about segments.
The femtocells is a very interesting instrument to help us
execute against those insights.
Lars Stork: Nigeria has a population of
around 143 million people and the current penetration is around
30% - around 40 million. It's expected that that will grow to
90 million by 2011.
We've gone through a major segmentation process over the last
six months, focussing on two major segments: one is the youth -
around 50% of the population - and the second is the rural
poor. Around 70% of the population lives in rural
We've done some interesting things with the rural community -
we're not only running a telecoms business in Nigeria, we are
also running a power company. We have around 3,000 base
stations and we expect to end up with 4,000-5,000 this year.
Every base station has two generators, so the consumption of
diesel every year is more than 70 million litres. People turn
off the generators and steal the generator - that's a daily
We have come up with a model that's quite innovative: we try
and share the ownership of the base station in those local
communities where the local entrepreneur - the son of the soil
- becomes our strategic partner and gets a share of the revenue
from these rural community sites. That's worked very well. We
are rolling that out big time across Nigeria this year. Every
time we put in more capacity it is immediately consumed.
Alan Burkitt-Gray: Mike, you have a diverse
mix of companies in Telefónica O2 - highly developed
Germany and the UK and the not-quite-emerging markets of the
Czech Republic and Slovakia. What are your views on
Mike Short: In western Europe we are in
many countries where there are more phones than people. We see
growing voice, substitution for fixed in favour of mobile.
There's a lot of growing data and those data requirements
predominate in a lot of our thinking. A lot of our femtocell
thinking is much more about ways of handling that.
In Latin America the issues are more how we can keep the costs
under control. It's a cost reduction challenge in low GDP
markets - it's quite a big challenge in high GDP markets.
We need to think about cost before we add any more investment.
We'd rather reduce the number of suppliers we use first before
adding any more infrastructure. We have too many suppliers. Our
cost base is under pressure.
We can only cope with the data wave when we think about cost
very clearly, but our primary driver is demand.
Holly Kramer: Typically this is a
technology-driven business and always has solutions in search
of needs, so that technology is often conceived before the need
is fully identified.
We're doing deep, intensive customer segmentation work. We have
a dream that one day all our products will be driven by the
customer insight - we're not really quite there yet.
We're interested in femtocells: everyone's talking about them -
there must be something to it.
In Australia we don't have so much of an in-building coverage
issue as a driver. Our 3G network, which is now ubiquitous,
covering 99% of the population, is on the 850 spectrum so it
has better penetration in-building coverage. So it's not a
What's appealing about femtocells is if you do that on wifi the
whole family has to go out and buy the same device from the
same manufacturer and that's unrealistic. With femtocells it
makes sense but we still don't know enough about them to see if
Fixed-mobile convergence for us has always had the objection of
potentially network efficiency. If we can take traffic off the
wireless network and leverage the fixed infrastructure that's
probably from an economic perspective the most appealing
Alan Burkitt-Gray: Eric, can you respond
and talk about how you understand what the operators need.
Donglin Shen: I have to disagree with those
opinions that femto technology is a technology looking for a
market. There is a market need.
US operators have been searching for solutions to resolve the
coverage issue for people living in suburban areas. In some
areas there are only a few families and to build a base station
to cover them is sometimes economically not a viable solution.
It's too expensive.
In the US, broadband - with fibre, cables or DSL - is
everywhere, in dense urban or suburban areas.
Femtocells are a way to offer mobile coverage in isolated
areas: you provide a phone and you have service at home with
the same device. There is a market need.
US operators have been searching to find the solution. Before I
joined ZTE I was working for AT&T Wireless and we spent a
lot of time searching for all kinds of technologies to find a
high sensitivity receiver to provide service in the home.
There's Bluetooth, but the problem is you need a special
terminal to support that and that's not economical for the
operator. That's why UMA comes into the picture - but for wifi
you need extra modules in the handset and that increases the
cost for the handset. Turn on the wifi and the power
consumption is huge, and the battery doesn't last as
This is where the femtocell comes into the picture. In the US
and Canada where broadband internet is common the femtocell can
resolve the coverage problem - this looks a nice
The problem is handover. From a femtocell you can hand over to
the main network but the main network handing over to a
femtocell is a problem because the cell is very limited in
size. It's hard to support a lot of femtocells. If you have
only a few femtocells in the area, I think that would be
Alan Burkitt-Gray: Is it a specific problem
in North America, the way they built mobile networks - they saw
them as in-car networks?
Donglin Shen: About three years ago the US
cellular operators were looking hard for the solution. T-Mobile
has deployed a UMA network to offer residential coverage.
In the US with femtocells you have to meet FCC regulations. You
cannot transmit on frequencies that do not belong to the
operator. You have to get that problem resolved first.
People think femtocells can be used to offload the network
traffic, especially in high density urban areas but that is
really debatable. GSM is a narrowband system and you can always
choose an idle channel to do that, but for WCDMA there's an
interference issue, a technical issue that needs to be
resolved. That's a challenge for the industry, how to work on
If you look forward to the next generation technology, there's
quite an issue there. If you're close to the base station you
can have a higher data rate. The radio link is good, you can
get a higher data rate and you can serve your customers.
But when you come close to the cell edge it's a problem.
If you look at 3G coverage, in the centre of the site around
the base station you have 384 kilobits a second, then further
away it is 128, then 64 kilobits. How can you offer the higher
data rate evenly across your network? The femtocell comes into
the picture here: it becomes a viable service.
There are technical questions to be sorted out: you have to be
connected to the broadband internet. If the operator is a
full-service provider it has broadband internet and wireless
and it's easy to resolve. If it's only a cellular operator,
then the broadband internet operator may not easily allow it.
That's a very touchy issue.
For emerging markets, if they have no broadband internet it is
hard to introduce this solution. But if they have broadband
internet in place, it's a way to introduce 3G technology to
their customers, with a very low initial capex. They don't have
to spend a lot of money to build up a whole infrastructure to
support the service. They can have femtocells to open service
at the start and slowly build up in the future.
Alan Burkitt-Gray: Who will pay for
femtocells? What are the different models that people have
looked at? Is it the customer, who is going to be asked to pay
$200 for a femtocell in their home, or would it be subsidised
by the operator?
Donglin Shen: I think it's up to the
operator's business model. People are looking at fully
subsidised by the operator or partly subsidised by the
operator. You have to look at the particular situation.
In some cases I don't think operators will encourage femtocells
because they could damage the network service quality. If
that's the case they don't have to subsidise them.
But in the US if you don't have service in your residential
areas and you'd have to spend several thousand dollars on your
base stations to offer service, then you'd subsidise femtocells
and customers could start using their phones.
Alan Burkitt-Gray: Do you see femtocell
service quality problems in Telefónica O2, Mike?
Mike Short: We've already tried them out
and we've had some worries about spectrum, network management
Femtocells will take some of the issues about spectrum
management and quality away from the operator and that's our
job. We need to see how femtocells work from a spectrum point
From a network management point of view also we need to see how
they work - if they're working back over ADSL we need to
understand the network management characteristics, indoor and
outdoor, for end to end service point of view.
And we want to make sure there are no special devices
requirements arising. It would be crazy if we deploy femtocells
and suddenly new device issues appear.
Holly Kramer: Are you trying 3G
Mike Short: We only want to trial 3G
because we don't see much point in trying 2G. Because of the
data story and we're not sure 2G femtocells give us enough
benefit for the long term.
Garrett Johnston: We don't have our own
fixed broadband network. We don't have DSL deployed, and we
probably don't want to deploy it. Are you doing any trials
where you don't require fixed broadband capability?
Mike Short: We are using ADSL, but it's not
always owned by us.
Garrett Johnston: So it is theoretically
Mike Short: We know it is.
Alan Burkitt-Gray: Is it local loop
Mike Short: It depends on the regulation of
ADSL as to whether you can do that or not. We don't want to dig
up roads. In some countries we do have the ADSL ourselves.
Donglin Shen: At lot of the US customers
have DSL or cable modems. They pay a monthly subscription and
they can use whatever they want. They have unlimited bandwidth
and it is OK to put the femtocell at home. But, when the
broadband internet owner finds out, that the mobiles are using
their network to offer commercial service, what's their
Alan Burkitt-Gray: As when people who use
Skype: they don't like it.
Eric Sun: If people have wifi-based
terminals there may be a broader range of services on the
internet instead of via your operator-provided services, that
could be a concern. With the iPhone you can connect to the
internet at home with wifi, so you can surf.
Mike Short: Shall I describe what the
iPhone is doing in practice? There is very little wifi usage at
the moment on the iPhones being sold in the UK. We made it very
easy in terms of accessing over 10,000 wifi hotspots. There is
very little wifi usage today on those iPhones. But it affects
the volume of femtocells being bought - in other words if wifi
does prove to be more successful, in time you buy less
femtocells, and we offer wifi services today.
Mike Grant: If you're interested in
delivering a broadband wireless experience into the home what
is the most cost-effective way of delivering that experience?
Is it by a wifi to the consumer or it is by a femtocell. As a
wifi user and an HSDPA user, I find it's a lot easier to start
to use a cellular network that continues to track me and my
terminal, my device, from environment to environment and give
me the best level of service than it is to have a wifi
connected device that disconnects and I have to reconnect when
I get on board the Heathrow Express or get into the
From a pure experience perspective, the femtocell seems to be a
very elegant solution. The question is, I guess, whether you
can deliver that from the cost perspective.
Cynthia Gordon: We always think we're a
very rational industry with our business cases and investment
committees, but we're actually a very fashion-oriented
For me, wifi is a classic example. I remember three to five
years ago people were sceptical about 3G because wifi was going
to replace it and no one would want 3G, and that was the
In some cases femtocells are great and in others they're
completely inappropriate. It's the operators job to manage that
Roberto Vannini: We are seeing a fantastic
uptake on wireless broadband. Our cooperation with vendors in
the 850 frequency band helps us address some of the
More important, we keep going in terms of innovation - we are
at 14.4 megabits a second and we are delivering a 7.2 megabit
commercial rate. For us the specific needs of an additional
piece technology should be seen on the roadmap where we see
that some fundamental piece of technology is developed and
delivered at the correct time.
This industry in the last seven years has said several times
that we are at the tipping point of turning round the business.
Now we are at that phase with wireless broadband.
Andrew Parkin-White: Only 7% of global
users are on 3G networks. We really are just starting. On the
tipping point issue, I know organisations like my own have been
guilty in saying in 2002 we'll see data taking off, then 2003.
Where we are now is where we predicted we'd be five years
We do tend to forget the perspective of the customer. At the
end of the day the customer has needs they want to satisfy.
Mike Grant: The iPhone has given people
experience of mobile content. Previous generations of mobile
internet were not what people were looking for. They want to
get on a browser and go to whatever website and do whatever
The Apple iPhone is the first device where you can actually do
that on a mobile phone. It's not perfect, but it is a portent
for a broader range of other devices and network
infrastructure, and I think you will see much greater internet
Lars Stork: In Nigeria mobile broadband has
huge potential. The problem is the infrastructure - we're
building our own fibre network, about 4,000 kilometres of fibre
in the ground to get the bandwidth we require so we can do
There's no doubt there's huge potential. In that part of the
world there is no fixed line. The only internet access is on
the mobile phone. People are desperate for internet access.
Xu Ming: We can use femtocells for rural
village coverage, using IP via satellite. In one village we can
use only one femtocell and everyone living in the village can
Our R&D teams are still discussing which requirements to
meet - because there are so many requirements for femtocells.
We think the femtocell is an answer to indoor coverage, which
is why we have developed not only GSM femtocells but WCDMA and
other wireless products.
Mike Short: The other roadmap we've not
mentioned is the China roadmap - China is the largest mobile
market in the world by customer numbers. We need to know what
the China roadmap is. Where is 3G in China? Who's going to get
the licences? How soon? What's going to happen to mobile TV?
What's going to happen to 4G? What's the China roadmap.
Xu Ming: We are waiting for the Chinese
government to give the licences to our Chinese operators. I
hope they will be able to provide 3G service before the Olympic