Indoor base stations, also known as femtocells, are being touted as a way of substantially improving indoor 3G coverage, sparing mobile operators the need for further investment in macrocellular networks.

According to a new report published by Analysys, operators may have to increase the number of outdoor base stations in their networks by a factor of two or more in some cases as demand for in-building 3G coverage increases.

The study, Picocells and Femtocells: will indoor base stations transform the telecoms industry?, noted that operators in Japan launched 3G services early, but are still making substantial further investments in coverage enhancement.

"3G network in-building coverage is significantly worse than that of 2G for most mobile operators worldwide," said report co-author Dr Alastair Brydon.

"As the number of mobile users who make calls within their homes increases, operators could be forced to make substantial further investment in their macrocell networks to improve 3G coverage.

"However, deployment of millions of femtocells could provide a much less expensive alternative."

Dr Brydon added that widespread 3G femtocell deployment could avoid the need for substantial numbers of additional macrocells by providing a targeted means of enhancing in-building coverage for customers that need or want it.

It is estimated that an operator with five million customers could save an average of about $45 per customer per year by 2012 by deploying 3G femtocells in 60 per cent of customer households.

"Cost savings represent only one part of a compelling business case for the widespread deployment of femtocells," added Dr Mark Heath, co-author of the report.

"3G femtocells improve the opportunities to generate additional voice revenue from fixed-mobile substitution, group tariffs, mobile data services and DSL."