This week was filled with more doom and gloom predictions in the networking industry. In the midst of the forest filled with bears, AT&T made the statement that Capex is not down but slightly up as compared to 2008. Also bucking the trend, we heard supporting (positive) statements from IBM, Cisco, Google and Juniper as well as Vodafone. These companies are investing in people, companies and the future. So, overall, there are good news among a flurry of negative earnings and the Madoff scandal.
Some (perceived) sad news for the Femto players when RadioFrame finally confirmed that they will not be a player in the Femto AP market (rumors started prior to MWC in Barcelona). They will focus on the ASIC side of the business. But, is this bad news or good news? Maybe RadioFrame decided that competing for business with basic access point BOM well above $200 and operator requirements for pricing at $200 going to $100 over the next 2 years -- was not a good idea. Can we fault that logic?
"We are trying to be prudent with our money in these tough economic times and we have pared back to a core set of businesses that will take advantage of our unique market position while maximizing our use of funds." - CEO Jeff Brown said in an email reply to Unstrung earlier this week.
I personally applaud them for making the tough choice. But, does that mean that the other players are running off a cliff? With enough funding and volume, a low-price, market penetration strategy can pay off (especially if your company name is Huawei and you have the entire China government supporting you). The dilemma facing Ubiquisys and ip.access (and now Airvana who is betting the future eon Femto) is that they are the first into a potentially enormous market that has enormous risks. Winning the future bid for $100 Access Points limits the intelligence and features you can place within -- before BOM hits $200+. By setting the price low, the perceived value is low. This year (2009) and 2010 will be challenging for the consumer Femto players. Their mission is to survive numerous trials and operators tinkering with the Femto business plan for consumers, while building strong relationships with major players who will ultimately be picked for the big roll-outs. Yes, that's how this market will roll.
Was it therefore a surprise when the same consumer players made a left turn and started to talk about Enterprise Femto? Of course not as these players need to find a profitable market segment where they can sell Femto APs at a higher price and therefore make up for the costly consumer business. However, the trap lies with the product strategy. The low-priced consumer APs cannot scale to the demands of the enterprise. You cannot simply name the consumer AP something else, paint it blue, and expect it to work within the enterprise. A new board design is needed and advanced management and interference features demand a better product with tight integration with the gateway/aggregation router on or off premises. "Just" being a Femto AP vendor limits the control you have with operators and the enterprise alike. And, it gives you few cards to play with major OEMs. What's needed for the enterprise is: scalability, security and management features, QoS, advanced routing functions, local switching support and tight integration with the supporting RNC. In essence, the consumer Femto players need to design a radio network inside rather than a Wi-Fi-like access point. The enterprise will demand that you include Wi-Fi.
This "left turn" requires a new approach and that requires more funding. The road to Femto success is very exciting but also riddled with "IAD"s (important access developments). It's great that the Femto market receives a lot of media attention. But, it takes more than hype to survive the economic situation of 2009-2010.
Today, ABI released its updated Femto vendor matrix (http://tinyurl.com/arsr2k). In light of RadioFrame's bold move to exit the AP business, the matrix could become an indicator of a race to the bottom.
Show me the money, then I will believe in the Femto consumer business case.