Femtocells Direct Response Marketing Industry

The femtocell industry could be on the cusp of becoming one of the largest online direct response marketing areas if the carriers could simply get their act together.  The product category is expected to grow from 200,000 units in 2009 to over 70 million by 2014.  Carriers are still in denial about their problems and it remains to be seen if the carriers themselves will do the majority of the marketing or if they will leave it up to third parties to figure it out.  Carriers have spent billions of dollars defending their networks and trying to brainwash consumers that they have the best coverage maps and refuse to acknowledge their in-building coverage limitations to the media. AT&T & Verizon own 160 million customers and have two thirds of the market in the U.S. and are not really that motivated to roll these products out and admit their flaws.  We are most curious to see what the other one-third of the market or 80 million customers do with femtocells: T-Mobile, Sprint, TracFone, MetroPCS, Cricket, Boost, Cox, Comcast and Time Warner.

One disruptive new market entrant Magic Jack recently announced the development of a Femto Jack USB femtocell for $20 per year.  This announcement seemed to light a fire under the large carriers to get more trials underway and get the product in the market. Other technology alternatives and quasi competitors include Skype and Google Voice who are using Wi-Fi to get cell phone reception on smartphones.  The cable companies are also heavily vested in landlines into the home and want to protect these assets.  I can't imagine Cox & Comcast will want to have AT&T and Verizon voice/data traffic congesting their lines?  I expect these players to invest huge amounts of capital into the wireless business which will provide a quad-play.

At a price point of $5-10 per month or around $100-200, there will be plenty of margin for carriers and new cable entrants to pay marketing professionals for customer acquisition.  The key will be targeting customers who truly have a home coverage problem for voice and data.  We happen to think that approximately 120M mobile users in the U.S. alone are candidates for femtocells.  Our data on deadcellzones.com suggests that 50% of homes and businesses do not have seamless wireless coverage throughout the home.  Rural customers will be targeted areas for femtocell products because of the large distances between cell phone towers.  Customers who live in the city will be targeted for data congestion issues on the network.

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