Verizon launches femtocell, but is better coverage enough?

Verizon Wireless today launched its first femtocell device, followed shortly by a similar product appearing on AT&T’s Web site ahead of a formal launch. Verizon’s Network Extender and AT&T’s 3G MicroCell act as in-home cell towers for homes or small businesses with poor coverage, routing wireless calls over their broadband Internet connection. The Verizon service is being marketed as a tool for better coverage but lacks the promise of cheaper prices or unlimited calling – femtocells’ other compelling potential.

Verizon’s Network Extender will cost $250 for the device with no additional service plan required. The small Samsung-made box can deliver an enhanced cellular signal to a 5,000 square-foot area. It provides CDMA 1xRTT coverage for voice and messaging but does not support EVDO, MediaFLO or GPS services. Up to three phones can place and receive calls at once, with a fourth channel reserved for emergency calls. The launch builds on Friday’s announced Verizon Hub, a touch-screen device that integrates landline, wireless and VoIP service but lacked the femtocell component.

According to Peter Jarich, research director at Current Analysis, femtocell services are appealing for two reasons: better coverage or cheaper service. Sprint was the first to the femtocell market, with its launch of the Airave femtocell last summer at $100 for the device but with a monthly $5 service charge. Before Sprint, T-Mobile’s HotSpot @Home WiFi service came the closest. The carrier sells WiFi routers and phones, designed to place calls over WiFi in addition to regular wireless calls. Sprint’s $5 Airave plan struck a lot of consumers as a weird, albeit smart, business model because better coverage was the only promise, Jarich said.

“Being able to charge $5 is not that bad of an idea if you are trying to draw money from folks,” he said. “That said, coming in and selling this to people and not charging them at all, you are still ultimately gaining something even if you are not gaining $5 a month; you are gaining stickiness because people have better coverage. You are not getting $5 a month, but in terms of what it is costing you, it ends up being worth it. Verizon is getting a little more aggressive on this.”

According to AT&T’s Web site, the Cisco 3G MicroCell can support up 10 3G cell phones in a home or small office and supports up to four simultaneous voice or data users at once. When consumers go out of range or an 11^th cell phone makes a call, the handset will automatically and seamlessly switch to AT&T’s 3G network. No pricing has been announced yet, but AT&T’s site said unlimited family or individual unlimited minute plans will be available. An AT&T’s spokeswoman said an employee trial of femtocell technology is underway and AT&T plans to launch customer trials in three cities during the first quarter, with more details to be shared then.