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Scott Kirsner | Innovation Economy

The power of a cellular tower -- now in a home version

Femtocells would increase reception and data speed by sending calls over your Internet connection

If you drop calls in the den, fade out in the family room, and have trouble beaming BlackBerry messages from the bedroom, a femtocell may be just the thing you need. It may also be just the thing your mobile carrier needs to keep you in eternal thrall.

Femtocells are tiny cellular base stations that consumers will soon be able to install in homes, scaled-down versions of the refrigerator-size racks of equipment that nestle beneath cell towers and carry your conversations as you speed down the highway. Early prototypes are not much bigger than a TV dinner.

Plugged into your high-speed Internet connection, they'll communicate with your existing cellphone whenever you're at home, and send your calls over the Internet. The benefits are better coverage, faster data speeds, and longer battery life for your handset - since it no longer has to communicate with a cell tower that may be a mile away.

For mobile carriers, femtocells "could save them from having to build more towers and infrastructure to handle subscriber growth," explains Randy Battat, chief executive of Airvana Inc., a Chelmsford telecom equipment maker that is angling for a piece of the fledgling femtocell business.

Battat says femtocells could also foster loyalty, since bad coverage in the home is one reason consumers defect from one mobile carrier to another, and for that reason, carriers may give them to consumers for free, or at a discounted price. In May, two months before Airvana went public, the company paid $10.9 million to acquire a British maker of femtocell technology called 3Way Networks.

For Airvana, femtocells are a key part of the growth story the company is spinning for Wall Street, and two recent analyst reports from Morgan Stanley and Lehman Brothers suggest that selling femtocells to mobile carriers over the coming years "could be a key catalyst for shares," in the words of Morgan Stanley's analyst.

Battat says his company will start trials with mobile carriers later this year, and he expects customers will be able to get a femtocell by next year; Airvana currently sells its high speed wireless technology to carriers like Sprint and Verizon to support their high-speed mobile data networks.

But Airvana isn't the only local company interested in femtos, as the true techies call them. (Technically, femto is a measurement of size, much smaller than micro or nano.) Analog Devices Inc. of Norwood may make a chip that'll go inside the femtocell, and Tatara Systems, an Acton company, announced a femtocell partnership with Japan's NEC Corp., in which it'll provide software for the femtocell and the servers that support it on the carrier's network.

Several local venture firms are also making bets on femtos; Highland Capital Partners of Lexington led a financing round in June that put $27 million into picoChip Designs Ltd., a company in Bath, England, that will compete with Analog Devices to make chips for femtocells.

Also in June, Highland and North Bridge Venture Partners of Waltham led an $8 million financing round for Tatara. Even Google has gotten in the game, participating in a recent $25 million funding round for Ubiquisys Ltd., a British femtocell maker.

"We're at a crossroads in the industry," says Highland partner Jon Auerbach. "Cellular operators have spent billions of dollars building their networks, and oftentimes it's impossible to get a phone to work in your home or your office, and that's a pretty important problem."

By various estimates, about one-third of all cellphone activity now happens in the home. Dean Bubley, founder of the research firm Disruptive Analysis, adds that high-speed 3G data services "operate at higher frequencies that don't go through walls as well."

Zippier data at home could make the cellphone a much more useful device. Battat suggests that cellphones might become video transmission devices, sending live video of the new puppy to your sister in Texas. Auerbach says it'd become easier to buy songs over a PC at home and send them to your phone for later listening.

Motorola vice president Ray Smets paints a scenario in which all the data you collect on your cellphone throughout the day are synched up with your home computers the moment you walk through your door and your phone starts communicating with the femtocell. Smets calls it a "liquid mobility experience."

It sounds great. And motivating it all is the fact that equipment makers like Motorola and Airvana would love to shoehorn another piece of electronics gear into your home. For mobile carriers, an important motivation is that with a femtocell, you'll be paying for the data connection your phone will be using when you're at home, through your monthly DSL or cable modem bill.

That may mean that the carrier will offer you a flat-fee plan for calls initiated while you're using your femtocell at home. But it could also mean that the suppliers of home broadband connections start upping their rates as they see large numbers of users gobbling more bandwidth.

Battat expects femtocells to cost anywhere from $100 to $300, but consumers who sign up for a long-term contract with a carrier, or who bring more of their family members into the carrier's network, will likely get them at a discount, or even for free.

One important point: An individual femtocell will only support phones from a specific carrier, so if Sprint supplies your femto, your spouse who has a Verizon plan won't benefit from it. "Once the femtocell is in, the carrier owns the customer," says Ted Fagenson, executive vice president of marketing at 2Wire, Inc., a Silicon Valley company. "It gives them a leg up on competitors."

The market research firm ABI Research expects that as many as 150 million people could be using 70 million femtocells by 2012. 2Wire plans to combine femtocells with its "residential gateway" devices, which also handle DSL Internet access and WiFi. "Customers say, 'Don't give me another box,"' Fagenson says.

Battat, the Airvana CEO, is open to the idea of a combined device, or a standalone femtocell. The company is working with Continuum, a product design consultancy in West Newton, on prototype designs that would make it attractive enough to display on a bookshelf rather than hiding it behind a filing cabinet.

But Battat would like you to forget that you ever heard the term femtocell. He's a former senior executive at Apple Inc., the company that made WiFi wireless technology less intimidating to consumers by avoiding techie terms like WiFi or 802.11b, and making sure they looked cool.

"We don't call it a femtocell," he says. "We call it a 'personal base station,' and it'll give you five bars of coverage when you're at home."

Isn't it ironic that the wireless industry, a business that evolved to keep us connected in our cars and in distant hotel rooms, is only just now figuring out how to achieve the fidelity at home that we've come to expect from the old-fashioned, wired telephone?

Innovation Economy is a weekly column that focuses on entrepreneurship, technology, and venture capital in New England. Scott Kirsner can be reached at kirsner@pobox.com.

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