How Free Mobile is using femtocells to build a mobile network with millions of nodes

France’s Free Mobile has started on the next phase of its plan to shake up it the French wireless market. On Thursday its parent company, broadband ISP Iliad, started offering up femtocells to all of its customers at no cost.

Residential femtocells are hardly an earth-shattering concept – French operators like Bouygues Telecom have been offering them to customers for years. Basically they function as private base stations, connecting to the carrier’s network through a home broadband link. They’re ideal for customers who live in areas where coverage is spotty.

But the way Free plans to use femtos is definitely more radical. Just as Free is using millions of Wi-Fi connections in Iliad customers’ home gateways as a vast public hotspot network, it plans to use to millions of femtocells to create a huge small cell overlay. The idea is customers will be able to move freely between Free’s tower-based macro network and the small cells whenever they are in range, greatly expanding Free’s indoor coverage and adding loads of voice and data capacity to the network.

xaviernielThis has all been part of Iliad’s plan since it launched last year. As Om Malik wrote in his original profile, Iliad founder Xavier Niel is using a new math in the economics and design of Free’s mobile network.

Rather than make the cell tower the key component of the network, Free’s basic building block is Iliad’s custom broadband residential gateway. Iliad has made its set-top box modular, so new components like the femto upgrade can easily be slotted into it. Free has built an HSPA+ macro network as well, but it’s counting on its residential gateways to handle the bulk of its data and voice traffic.

Iliad customers who already have a Freebox Revolution gateway can order the femto module (there’s a €10 (U.S. $13.20) shipping fee), but new Freeboxes will come with the module installed.

The second part of that strategy is to create a community of users that share resources thus driving down the costs for everyone. And Free Mobile is nothing if not cheap. Its sub-€20 (U.S. $26.39) have kicked off a massive price war in France, and in its first year of operations managed to lure 8 percent of the France’s mobile market to its network. Free Mobile storeIliad is addressing one of the big technical imbalances between the wired and mobile broadband worlds: data is cheap and plentiful at home and work, but it’s limited and expensive everywhere in between. By making a portion of their bandwidth available to the Free community, Iliad customers are making broadband cheap and plentiful in far more places.

This shared wireless broadband concept was pioneered by Fon in neighboring Spain, but it’s never been deployed on such a wide scale as it has by Iliad. Other communications providers are starting to pay attention. Earlier this month Comcast(s cmsca) announced it would open up its residential Wi-Fi network, creating a residential hotspot footprint of millions of nodes.