MicroCell uses AT&T network, so it can’t be free
Many pundits like Chris Foresman are angry at AT&T for counting femtocell usage (what AT&T calls “MicroCell”) against a customer’s usage cap. They’re angry because they assume that the service only uses the broadband connection and not AT&T’s network. But AT&T MicroCell service does in fact use AT&T’s back-end infrastructure in addition to the user’s broadband connection.
A 3G femtocell acts as a miniature base station inside a customer’s home. It simulates a GSM or CDMA based voice and data 3G network, and it uses the customer’s broadband connection as a back-haul to the 3G provider’s network. Both the voice and data service are routed through the wireless provider’s back-end infrastructure. When a customer uses their AT&T Microcell service for data, they are in essence using AT&T as a secured Virtual Private Network (VPN) Internet transit provider.
It matters not that a MicroCell customer already paid for a broadband connection which may or may not have a Wi-Fi enabled router/gateway. The Microcell can even provide 3G voice and data service to customers who don’t have a Wi-Fi router, but that uses AT&T’s back-end infrastructure which is going to cost something. Consumers could opt for the free and faster solution by supplying their own Wi-Fi router and enabling good Wi-Fi security. This protects consumers against snooping, offers them lower data latency because their traffic doesn’t have to tunnel through AT&T, and it avoids using up those precious mobile bytes.
Foresman also complained about how poor AT&T’s 3G coverage is, and the fact that tethering and text messaging aren’t free. The coverage criticism is a bit unfair because AT&T will spend around $36 billion in 2009 and 2010 upgrading their wireless network, and it needs to be pointed out that those map comparisons aren’t apples to apples since not all “3G” speeds are the same. Those map comparisons would look vastly different if they were actually comparing comparably fast services.
It’s also a fact that consumers who tether use more bytes than consumers who don’t and the fact that it’s the same 2GB cap is irrelevant. It’s simply unrealistic to claim that any unused byte or minute that expires is money wasted because it’s like saying that someone who only goes to their gym 5 days a month should only have to pay $5/month instead of $30/month. The economics of such a pricing scheme simply doesn’t work and I’m pretty sure that most non-tethering users think it’s fair that they pay less than tethering users.
To respond to Foresman’s rants against text messaging, I’m just going to point to my previous post “Being rational about text message pricing“.
I still think Apple and AT&T should have figured out some type of branding solution they could both agree on and packaged these somehow with the iPhone 4. I would have caved for one.
can you point to CAPEX cite? I thought it was around 7 Billion on wireless each year, a number that was REDUCED from previous projections?
can you provide cite for ATT capex, thought it was about 8 B per annum which was reduced from previous estimates?
@DMM
AT&T *wishes* it “only” had a wireless CAPEX of $7B. Look at the CNET article I linked to. This information came from the Q4-2009 call in January of this year.
Here are more numbers on capex.
http://www.digitalsociety.org/2010/02/what-if-isps-could-be-good-like-google/
Hi
I am one of the analysts that first started writing about this a couple of weeks ago. I cover wireless carriers, and have also been tracking the development of femtocells since around 2006.
http://disruptivewireless.blogspot.com/2010/06/at-tiering-femtocells-and-holistic.html
Yes, you are right that femtocell traffic uses AT&T’s core network. But it is also true to say that the core network costs *much* less than the radio network (and its “backhaul” connections from the cell sites). The ratio of costs is hard to calculate cleanly, but it’s probably of the order of perhaps 5:1
My guess is that AT&T has been doing a big project to revamp its billing system for tiered pricing at the same time as the Microcell being rolled out – and either didn’t have time, resource or motivation to *simultaneneously* make the new billing system truly femtocell-aware.
Dean Bubley
Disruptive Analysis
@disruptivedean
Dean,
It’s probably true that the Microcells use a lot less of AT&T’s infrastructure. My point was that it wasn’t and can’t be free which is what a lot of people are clamoring for. My other point is that people shouldn’t even be worrying about this because they should be using Wi-Fi in their home which is free from caps and free from added latency.
Even if we went by your estimate that it only uses 1/5th the physical network infrastructure (that ignores other things like administration and support costs), and therefore should cost a lot less, it’s a moot point if you do the logical thing which is to use Wi-Fi.
This sounds like another manufactured crisis to me.
Dear George,
You’re right, it shouldn’t be free. It should be included in the monthly fee for having a phone. The fee that everyone pays to pay for the “backend infrastructure”. The minutes and texts that AT&T charges for? You pay for those too, in addition to the base fee for the infrastructure.
Curious to know how much AT&T paid to have this blog post written.
[...] George Ou thinks it’s reasonable for AT&T to charge for femto data… [...]
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“Both the voice and data service are routed through the wireless provider’s back-end infrastructure. When a customer uses their AT&T Microcell service for data, they are in essence using AT&T as a secured Virtual Private Network (VPN) Internet transit provider.”
Okay, that just tells me WHAT they did, but not WHY they did it. I can totally understand AT&T’s justification for allowing circuit-switched voice traffic to use their wireless core. There’s no way around that until they move to LTE where everything’s just IP packets. However, why the hell are they not simply routing 3G data packets to the customer’s existing network infrastructure? Surely, that would both take a lot of load off AT&T’s wireless core as well as preserve the customer’s precious data quota for use while actually roaming outside the femtocell’s coverage. No, it is glaringly apparent that AT&T is simply being greedy about mobile data and they think they can get away with their theft under a thinly veiled guise.
@PacoBell,
I believe your question is why isn’t AT&T split tunneling the 3G data traffic directly onto the consumer’s broadband connection rather than tunnel all the 3G traffic through AT&T’s network.
The arguments I’ve heard is that this offers more security especially if the user isn’t using adequate Wi-Fi security. So you can think of the MicroCell 3G service as a secure VPN alternative.
Furthermore, if you really wanted to use your broadband connection directly, just use the Wi-Fi feature which is included in ever smartphone AT&T sells. This really makes the MicroCell data charges moot because you have a choice of paying (in your data allowance) for a secure Microcell VPN or you can pay nothing using the Wi-Fi.
If AT&T split MicroCell traffic to the unsecure broadband network, you lose one of your options.
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