Carriers Seek to Enhance In-Building Cellular Connections

Cellular carriers have spent more than a decade and billions of dollars building out their networks so customers can use their services wherever they may roam. Coverage has improved along and on many city streets, but in-building reception has remained spotty in many cases.

Companies such as Andrew Corp., MobileAccess Networks, InnerWireless, InterDigital Communications, and Spotwave Wireless have designed products to address this problem. While interest in these devices has been growing, the vendors must clear a few hurdles in order to remain viable long-term.

Losing Tolerance

Consumers and businesses have been turning to cellular services because of the convenience they offer. As users' reliance on these services grows, they become less tolerant of dropped calls. "Users won't become too upset if a voice call is dropped," noted Phil Redman, a vice president at market research firm Gartner (NYSE: IT) Group. "Many are now using their phones for data services and not being able to access their e-mail with cause frustration."

Data applications are less forgiving of the problems that wireless services can encounter in penetrating structures that are quite dense. Signals also find it difficult to reach the upper floors in multi-story buildings and any underground spaces.

In-building wireless systems are designed to address these problems. These products position high-powered receiving stations in different locations and use various proprietary signaling techniques to increase the range of wireless networks. "The most promising in building solutions rely on smart antennas that guide and capture signals in narrow beams, and cognitive radios that automatically avoid interference," stated Ira Brodsky, president of market research firm Datacomm Research Co.

Such systems have been stationed in apartment complexes, municipal buildings, malls, airports and hospitals.

Serving Multiple Masters

The products serve three constituencies. The first is value-added network service providers. In some cases, telecommunications service providers or building landlords install in building wireless system to improve the network coverage for their commercial or consumer customers. The system can be deployed in a couple of ways. A landlord can support one cellular service provider's signal or improve reception for any carrier that tenants may have. The latter approach is popular in widely frequented buildings and New York's Rockefeller Center is one place where it is used.

Enterprises are the second group of users. In some cases, corporations have older buildings that cannot easily support network wiring. Wireless systems enable companies to deliver network service without incurring huge upfront expenses. In addition, corporations may have certain locations where thick walls or unusual building configurations make it difficult to serve. In building wireless systems are found in many high rise buildings, for instance the Sears Tower in Chicago relies on them.

Carriers are the last group of customers. They use these systems to improve the range and performance of their networks. Because usage patterns change, providing quality reception is an ongoing challenge for carriers. After a carrier identifies a coverage problem, these devices enable it to fill the hole.

Marketing Message is Heard

Once the enhanced service is deployed, the carriers' businesses benefits in two ways. One obvious advantage is increased use of their networks. If customers are able to communicate as they walk in and around a building, their monthly bill will rise.

The enhanced network performance should also increase customer satisfaction. "Churn is a major problem for carriers," said Jason Maracheck, an industry analyst with market research firm Current Analysis Inc. "Users will switch from one carrier to another."

The constituencies seem to understand the benefits in building systems offer. "In building wireless system sales have been doubling during the past few years and we expect 40 compound annual growth through 2008," Gartner Group's Redman told TechNewsWorld.

The growth is welcome news to in building wireless equipment vendors, who struggled for a few years. During the dot-com boom, a handful of high-profile telecommunications service providers emerged with business model was based on using in-building systems to wedge their way into the telecommunications market. Most of their business models were flawed, many encountered financial problems, and some went out of business.

The market seems to have stabilized from that phase, but in building wireless equipment suppliers still face a few challenges. When service providers or landlords sign deals with some of the landlords or companies focused on delivering in building service, the issue of customer control arises.

Cellular carriers want to maintain as much control over their networks as possible, so they can guarantee Quality of Service to customers and they could potentially lose that by working with third parties. Also, how much revenue from each call goes to the carrier and how much goes to the third party can be a contentious issue. Last, it can be unclear whether the third party of the carrier becomes the primary customer contact.

Watch Out for the Big Boys

Another hurdle stems from established cellular network equipment vendors, such as Ericsson (Nasdaq: ERICY), Lucent Technologies (NYSE: LU), Nortel Networks (NYSE: NT) and Siemens (NYSE: SI). They have developed versions of their cellular base stations for the in building market. "The established equipment vendors have scaled down their base stations into the small devices called picocells that they have been positioning to improve their in building coverage," said Current Analysis' Maracheck told TechNewsWorld.

The convergence of wireless LAN (WLAN) and cellular services also presents a threat. Carriers are moving to develop new services so wireless connections are handed from cellular to WLAN. "The advantage with the WLAN offers is reduced cost: these products cost much less than in building wireless systems," noted Datacomm Research's Brodsky.

While in building wireless systems have moved out of the early adopter market phase, it is not a given that it maintain its recent impressive growth.

"The need for improved in building wireless communication is certainly clear but what is not as certain is that need will be met by the in building systems, existing cellular base station suppliers, or WLANs," concluded Current Analysis' Maracheck.