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Mobile World Congress O2 is pushing ahead with expanded femtocell trials over the next year with the stated intention of rolling out a commercial product during 2009, reducing their network costs and increasing customer connection speeds all at the same time.

Femtocells are tiny base stations which plug into customers' broadband connection and route calls using VoIP, which can lead to better call quality and faster data connections, although it's really about reducing the cost of network backhaul. They use the standard 3G frequencies and protocols, so work with any handset and can only be deployed by licence-owning network operators.

But they also need to be very clever, to avoid interfering with existing infrastructure and to ensure they're only used within the geographical area for which the network operator has a licence.

The most obvious way to do the latter is by embedding some sort of GPS capability into the femtocell; that's what Samsung has done in the USA for their UbiCell CDMA femtocell (though, to be fair, the GPS is also used for timing purposes). In the UK Ofcom today announced that in-car radar systems will have to do something similar, when approaching any of the UK's five radio telescopes - in-ship GSM systems work on the same basis when approaching shore.

Ubiquisys, the Google-backed company providing the femtocells for O2, along with 12 other trials around the world, provide a technology that listens in to the existing GSM and 3G network signals to establish if the licensee is allowed to transmit here. This provides the additional advantage of allowing network operators to lock the femtocell to one physical location (or more, for a small fee), preventing customers taking their 'cell on holiday with them.

The original idea of femtocells was to provide cheap calls, but with the cost of calling so low there has been a clear shift to data, with O2's chief operating office Vivek Dev citing the iPhone as a clear driver: "Our Apple iPhone is already driving unheard-of levels of mobile internet usage, and the introduction of flat rate data tariffs is expected to increase this further."

Ironically, the iPhone won't actually work with the femtocells O2 is deploying as they are 3G-only devices, but perhaps Vivek is looking ahead to the next generation handset from Apple.

O2 will certainly use femtocells to drive uptake of their broadband offering. Few network operators will risk deploying the technology on ADSL connections they don't own as the quality of connection will be out of their hands – though some might decide it's worth the risk. O2's own DVB-H trials show that nearly half mobile-TV viewing is done in the home, so a large-scale femtocell deployment provides them with the opportunity to become a major provider of video to the home, without all that mucking about with new frequencies and infrastructure. ®

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