Commentary: Getting home networking into second gear

By Charles Golvin, Principal Analyst

Home networks among online households grew 61 percent in the past year. But nongeek households that have yet to embrace networks see few reasons to get one.

To reach these mainstream consumers, gear makers, broadband Internet service providers and retailers must do a better job of educating consumers about home networking, push a service-based pricing model and show consumers how networking will change the way they enjoy content.

Networked: One in five online households
Home networks--especially those using wireless--continue to expand rapidly into online households. Most people handle the installation without professional help but increasingly want companies to bear the support load.

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Bringing home the network

There's more to home networking than entertainment, but turning the potential into reality remains a major challenge.

• But those networks are far from mainstream. People with home networks are classic early adopters--high-income technology optimists. They are well-educated and have been online 27 percent longer than the average online household.

• Wireless is catching up to wired. As in 2003, wired Ethernet is predominant in the networked home. But wireless grew most rapidly in the past year--43 percent of networks are at least partially untethered.

• Broadband and new PCs drive adoption. Three-quarters of those with a home network were triggered by the addition of a new PC or broadband service. Desktop PCs are by far the strongest driver--twice as many users identified this trigger versus either a new laptop or broadband.

• Installation is still do-it-yourself, but more users want support. Home networking setup remains a do-it-yourself (DIY) project--78 percent of home networkers bought equipment directly, and nine in 10 either installed it themselves or got a friend to assist. However, only half expect these DIY options to be adequate for ongoing support, a 14 percent decrease from a year ago. Help calls are 89 percent more likely to go to networking vendors like Linksys this year, and are 22 percent less likely to go to ISPs.

Not networked: People wonder, 'Why bother?'
The chasm between those with a home network and those without is wide--the latter group simply doesn't see a reason to have one. However, service providers can find a silver lining in the willingness of these nonnetworkers to pay for service, as well the opportunity to extend the service relationship.

• Most don't see a reason to network. Unlike many other technologies, like high-definition television, price is not the primary inhibitor to home networking adoption--lack of motivation is. More than half of the nonnetworked see no reason to get one, and another 18 percent don't even know what a home network is. Those who express an interest in networking are more likely to cite price and complexity as impediments, by 23 percent and 25 percent respectively.

• Those interested fancy a service model. Surprisingly, those without a home network would rather pay a monthly fee than foot the bill for the hardware. Just 18 percent of nonnetworkers say they are "very interested" or "extremely interested" in getting a home network under any of the offered payment models.

• While the purchase channel is a jump ball, ISPs are preferred for service. When asked where they prefer to buy a home network, 40 percent of households without a network say they don't know, and the rest are evenly split between retailers and ISPs. When it comes to installation, it's bad news for Best Buy's Geek Squad--these households prefer their ISP, telephone company or satellite provider to a consumer electronics, computer or specialty retailer by more than 3-to-1.

• Cable and DSL subscribers have distinct service preferences. Among broadband households without networks, the cable-versus-DSL choice translates directly into their preferences for service. Those with cable prefer a TV provider over any other option by more than 2-to-1 and place their local telephone company at the bottom of the list. DSL subscribers rank their telephone company first among professional installers, followed by their ISP--but they have the most confidence in themselves, a friend or a relative.

© 2005, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.