Following on from my earlier posts looking at the business case for small cells at home, I’d like to move to the most intriguing aspect to the femto small cells business model. Beyond providing better network coverage and capacity, reduced prices, and increased convenience, the small cell lets operators develop completely new services for their residential customers. For instance, you could have a tracking service for children or the elderly. Alternatively you could offer virtual “post it notes” rather than just sending an SMS, so that when the recipient arrives at home, they get a message to do the washing up or fee the cat. Location-based services at home, and in public locations, would benefit from the small cells approach.
So as we can see, the small cells business model should be based on all four pillars, possibly phased in time with macro offload first up to the new services era, because no single approach may be compelling enough for rapid uptake. In each market, operators will have a different approach to small cells business modelling. Some may subsidize the hardware costs by 100% but charge a small monthly rental fee, others may ask the subscriber to pay 50% of the hardware costs and be locked into an 18 month contract. We believe that the hardware cost to customers should be no more than 10% of monthly ARPU –in West Europe ARPUs average €35 per month, so small cells subscription would need to be €3 per month.
Patrick Lagrange is senior business modelling consultant within Bell Labs