Convergence – AT&T’s and Cisco’s Strategy

The below device is called a femtocell / microcell. Femtocells are really the first real-life incarnation of what’s known as “fixed / mobile convergence”, so they deserve some attention in that context.

AT&T’s microcell is designed by Cisco. This is another consumer end market Cisco is pushing into, and indicative of why they need you to care about their revamped “human network” strategy and branding.

Basically a femtocell gives you 5 bars in your home/office. Think about how many dropped calls you get while at home. These would disappear (assuming your phone did the dropping).

Real quick background: femtocells connect to a broadband router. The cellular signal only travels from your cell phone to the femtocell. That’s it. No talking to an outside basestation (calls/data are immediately converted to IP packets over the internet backbone).Truly a converged device.

Here is why mobile convergence is a strategic part of AT&T’s vision:

• AT&T is now an IPTV provider, wireless operator, and wireline/DSL provider. Same with Verizon. Femtocells will be integrated into the home router and distributed… at almost no additional charge above today’s ‘gateway’ devices.
• 70% of cell phone calls are in the home / office. Therefore femtocells would solve 70% of AT&Tssucky serviceissues!
• Femtocells are a lot cheaper than network upgrades, and guess what—the consumer may even be willing to foot the bill (AT&T’s charging $150 initially). For a ‘Gen 1’ technology $150 is very attractive (think of how much DVR’s/TiVo, or wireless routers cost when first introduced—usually $200-$500).
• Reduced churn (the enemy of all operators): Important since 3G does not offer the same depth of coverage as 2G -> increases customer lifetime value and loyalty.

Here is whymobile convergence isa strategic part of Cisco’s vision:

• Wireless is the future and really is the ultimate killer app. This is Cisco’s 3rd “box” in the home – they own Linksys (networking) and Scientific Atlanta (STB). Now they have a consumer wireless play too. Cisco’s rumored “super STB” will almost certainly contain femtocell functionality (if cable providers allow it).
• Why is mobility important? Because it will break down walls between carriers, content owners and creators. Content will be enriched to fit our lifestyle, location, and “presence”
• Era of multiple screens blends fixed / mobile: Think of multiple screens, all capable of understanding your ideal usage environment. Within 5 years we will all demand the same “experience” regardless of where we are at that moment.
• Digital Signage is now referred to as the “fifth screen”. Cisco is talking a lot about this. Contextual targeting on billboards could be sort of creepy, but it’s also a huge $$ opportunity. These screens will sense / communicate with your phone

Back to femtocells / microcells: Initially, perhaps only households with poor signal will be attracted. But Gen 2 boxes will integrate the femtocell technology into home gateway boxes whether you use it or not (it will be activated as a feature if you need it).

Of course the femtocell is just one auxiliary device in the convergence that’s happening, but it’s strategically important fort both companies, and it could be a real winner when AT&T starts nationwide mass deployments (likely Q2 this year).

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