Femtocells, indoor 3G base stations installed by consumers, will boost cellular network capacity more than ten-fold without causing interference, according to research carried out by the Femto Forum.

Femtocells are designed to give indoor coverage for 3G (third-generation) phones, routing traffic over broadband networks and freeing up the existing cellular networks. However, as they will often operate on the same frequencies as outdoor networks, operators have expressed fears that they will cause interference. Because of these and other concerns, femtocell services have been slow to appear.

"The capacity jump will be equivalent to the jump experienced when mobile phones moved from analogue to digital," said Professor Simon Saunders, chairman of the Forum. "We analyzed scenarios where total capacity could increase by a hundred times."

The study analyzed simulations based on real data from the Forum's operator members, he explained. It found that femtocells will normally deliver an order-of-magnitude more capacity than the macro network alone, even when they are deployed very densely. Interference can be limited by various power-management technologies available in current femtocell products, the study found.

"I was expecting more commercial activity in femtocells by the end of 2008," said analyst Richard Webb of Infonetics Research. "Really there are only two services [Softbank in Japan and Starhub in Singapore]. There are technical challenges which need to be addressed before we will see mass market adoptions. I think we are moving towards solutions, but I don't think these have been hard-baked yet."

Commercial femtocells reduce the interference problems by adapting their power levels downward in response to the strength of the nearby macrocells, says the Forum's report. They also use attenuation and other technologies to deal with the fact that 3G handsets are not "tuned" to femtocells, and so they may signal at high power, as if to a distant cell-tower, even when the femtocell is in the same room.

"We are making sure these technologies are supported in the femtocell standards," said Saunders, "and making sure regulators understand that femtocells can make better use of existing spectrum without creating harmful interference." Today's interference-limiting technologies are proprietary, however, and have to be standardized, he acknowledged. "We are not promoting one technology or another. We want to highlight that these techniques exist," said Saunders.

Analysts believe femtocells face bigger challenges than interference: "I think there's still a remaining question mark about the business model," said Webb. "How will femtocells be sold and who to? What is the price point and what is the bundle?"