Femtocells: Implementing a Better Business Model To Increase SP Profitability

Femtocell offerings have been based on what the Cisco Internet Business Solutions Group (IBSG) calls the “Consumer Pull” model. This is where SPs ask consumers to invest in the femtocell device and / or pay a recurring monthly fee. Unfortunately, the recent recession has changed consumer behavior to the point where customers are not willing to spend more money to receive additional services. Cisco IBSG has observed that there is an implied limit to the amount SPs can charge for monthly mobile services. In an attempt to remain competitive, this has forced SPs to offer more minutes and data without increasing the price.

Given this scenario, consumers with poor mobile coverage in their homes will be more inclined to switch SPs rather than purchase an additional service from their existing provider. From the consumer’s point of view, it is the SP’s role to provide good coverage—whether in the home or on the road. Cisco IBSG believes the lack of a compelling value proposition for consumers is the main reason for slow femtocell adoption to date.

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