NETWORKING: Home, Sweet Home

Home networking–whatever that means to various interest groups–has been

identified as a major opportunity area by numerous studies. According to a study

released by Cahners In-stat Group, a market research firm known for its focused

research, the ‘connected home’ market will grow into a $9.2-billion

opportunity by 2006. This comprises sale of home networking equipment and

software, residential gateways, and home control and automation products.

This is echoed by the results of a study conducted in March 2001 by Internet

Home Alliance, a body of technology companies interested in furthering the cause

of home networking. The study found that 42 percent of the single family

homeowners–that is 26 million households–in the US are inclined to adopt a

connected home, primarily to enhance the quality of life.

The forecasts, however, are anything but new. The concept of connected homes

has been propuned by technology companies–most notably the consumer

electronics companies like Sony–for at least three years now. But the actual

deployment has not really happened to the expected level.

Deliver More than You Promise



Iain Stevenson, principal consultant, Ovum, in a release issued by the

analyst and consulting company, explains, "When home networks first

started, people got carried away with ‘houses of the future’ concepts, such

as home automation and intelligent fridges. But other less glamorous

developments are where the real market opportunities lie.

"The lesson", he says, "is to keep products simple, and above

all, useful for non-technical, mainstream people wanting networked information

and entertainment in their homes." Some of the potentially successful

offerings, as outlined by Ovum, are home network kits (adapter cards and

gateways), and improved Internet gateway devices (i.e. offering filtering for

viruses, spam and porn).

Whose Turf Is It?



For any potentially hot opportunity, there are at least two-three camps

fighting out to gain control over it. Home networking is no different.

The first battle on this turf started between the consumer elecronics camp

(led to a great extent by Sony) and the IT industry camp. The reason why this

battle has become less relevant now is the gradual evolution of Internet as the

uniting factor and the acknowledgement of the majors in all camps that it is

futile to go against the idea on which the Internet is based–that everything

must connect to everything and the right to choose lies with and only with the

user. So we see even Microsoft accepting the fact that PC is not the end of the

world and trying to port Windows to mobile phones and the like. Similarly,

consumer electronics companies have now to connect to the IT world through IP.

But though the battle between the clearly defined industry segments is not so

relevant, the battle between companies will continue, each company trying to get

a slice of everything.

The more interesting battle is being fought now among competing technologies

for connecting homes. All these technologies can be broadly divided into four

categories–wired, wireless, powerline and phoneline. At least six major

potential standards have been projected as the ultimate for the connected home

within these categories.

Wired: This is the good old Ethernet. And a very important development

has rekindled new hopes among Ethernet backers. And that is fast adoption of

Gigabit Ethernet by service providers as an access solution. According to

Gartner Group, even in countries like India, by 2004, Ethernet will become the

second most popular broadband access technology after DSL. The Ethernet home

networking backers feel, once the service providers adopt these, it will be

bundled along with services, such as rich multimedia content like gaming and

video by broadband service providers. And then they will, for their business

needs, deploy and maintain the intra-home networks as well.

Wireless: There are three technologies within this space–the

much-hyped Bluetooth, 802.11b-based WLAN (also called Wi-Fi), and HomeRF,

proposed by a group of about 80 companies called HomeRF working group. And the

newest i.e. Wi-Fi seems to be leading the race. The much-hyped Bluetooth, it

seems, has missed the bus, with the home user becoming more and more demanding

about his needs for speed, which Bluetooth cannot provide. Even in the proposed

version 2, the maximum it offers is 2 Mbps, much below the 10 Mbps promised by

HomeRF and the 11 Mbps promised by Wi-Fi.

What works in favor of Wi-Fi (802.11b) is that the core technology, Ethernet,

is proven and mature. Also, it can integrate smoothly with the wired Gigabit

Ethernet of service providers, without much of a problem. Last but not the

least, with enterprises deploying it, prices of networking components will fall

more sharply than the stand-alone standards like Bluetooth and HomeRF.

Powerline: Utilities are becoming more active in the communication

game. Their advantage–with no additional wiring, the whole proposition looks

simpler and cost-effective. What, however, is not so good with powerline is the

slow data speed, which is around 350 kbps and is promised to go to 1.5 Mbps.

Although a 10 Mbps version is being talked about, no one is sure about whether

and when it will come. Other drawbacks include noisy lines and security threat

as the power networks do not have any logical separation between different

homes.

The cause is being pursued by an alliance called HomePlug in

the US, a group of about a dozen companies, most of whom are also members of

other standard groups. Japan has its own group called Echonet, and many

observers feel is more focused and practical than HomePlug.

Phoneline: Phonelines offer the same advantage that

powerlines carry, the only difference being that it is not spread across all

rooms. The Home Phoneline Network Alliance (HPNA), a phoneline backing interest

group, says it will not be a deterrent as most people have phone lines in their

rooms that have PCs. However, when it comes to connecting other appliances, this

logic fails. The plus points, however, are that it scores in speed and cost over

powerline and implementation is also not so complex. Noise is also not an issue.

One interesting point, however needs to be mentioned while

writing about alternative standards. Most of these standards are being backed by

the fence-sitters. The same Intel, 3Com, and Compaq, are backing almost all the

standards. So the muscle power of the industry group will not be a factor in

deciding who the winner is. That is good news for the user as the best

technology will win.

Where Are Service Providers?



Curiously enough, hardly any research reports, articles, studies and

technologies on home networking mentioned anything the involvement of service

providers. The reason is simple: service providers are not involved.

How long can they afford to remain so is the question? How

long can the technology companies allow them to remain so, is a bigger question.

As some of the recent developments in the service provider

market–especially, the broadband and mobile Internet–show, good content and

content-based applications are becoming central to a service provider’s

business strategy, occupying a very crucial place in the service delivery

value-chain.

That being the trend, the service provider, at least in the

medium run, will charge the user not for how long he uses his network, but how

and for what he uses it. And suddenly, his interest in getting homes connected

inside, becomes a little more obvious. As per Metcalfe’s law, the value of a

network grows by the square of the processing power of all terminals attached to

it. The service provider will see better and more innovative usage of its

network, if more (and different types of) devices are connected to it.

Put simply, the network service provider will increasingly be

more profitable with more homes getting networked.

And that is where marketing should begin. The two types of

enterprises familiar to end-users are the device/appliance makers and local

service providers in different countries. By actively involving service

providers in the home networking value-chain, the equipment companies will have

three clear advantages:

• Network equipment companies will save on marketing cost.
  
  The awareness on building a part can be better and more cost-effectively
  
  handled by the service providers

• Equipment companies can also use service providers as
  
  channels for products, saving on logistics cost and time. This, however,
  
  cannot be a sustainable strategy because with falling margins, it will not
  
  be attractive for service providers. But this can be used to make inroads to
  
  homes initially

It makes tremendous sense for service providers to actively

push the concept of networked homes. With Ethernet and DSL coming in, a lot of

brodaband specific content will be available to the homes. Its further

distribution will be possible through home networking.

Also, remote connectivity gives a sense of always remaining

connected with one’s home. This is also a great value for the customer. What

it needs is simple monitoring (through webcam and simple data transfer) and

basic control from devices like PCs, notebooks, PDAs, and mobile phones, and not

the refrigerator-will-dial-the-local-milkman-when-milk-is-finished kind of fancy

applications. This makes the role of service provider even more crucial.

Shyamanuja Das