The Economic Effects of Sharing Femtocells

Abstract

Femtocells are a promising technology for handling exponentially increasing wireless data traffic. Although extensive attention has been paid to resource control mechanisms, for example, power control and load balancing in femtocell networks, their success largely depends on whether operators and users accept this technology or not. In this paper, we study the economic aspects of femtocell services for the case of monopoly market, and aim to answer questions on operator's revenue, user surplus, and social welfare by considering practical service types and pricing strategies. We consider three user subscription services, that is, users can access only macro BSs (mobile-only), or deploy femto BSs in their house and open / exclusively use their femto BSs (open- / closed-femto). For pricing strategies, flat pricing and partial volume pricing are exploited. The main messages include the following: 1) open-femto service is beneficial to both users and providers; 2) in flat pricing, the impact on operator revenue of allowing or blocking the access of mobile-only users to open femto BSs is minor; and 3) compared with partial volume pricing, flat pricing is advantageous to the operator when users are sensitive to price.