December 27, 1999 12:20 PM PST
Home networking comes of age
Hardware companies in 1999 began to ship a new generation of home networking products that allow users to link PCs and other peripherals within a home either by wireless connections, or by plugging hardware into an existing phone jack.
As access to high-speed Net connections becomes more widespread and more homes own more than one PC, firms believe that many will want to tap technology that will allow them to share Internet connections, printers and files, as well as play video games with other PC terminals in a house. Companies like 3Com and S3's Diamond Multimedia are just some of the players in this new networking space.
To push home networking technology, tech firms say they have made the technology easy to use as well as inexpensive. Looking to grab an early lead in this growing space, leaders like Intel have spent millions of dollars on advertising to push its own technology for home networking.
Many manufacturers say they have also taken a cue from the past. Early technology based on a standard called Ethernet didn't break into the home market at large as it was too difficult to manage for most home users, analysts added.
Yet arguments over which technology standard to use for home networking have to be solved. Analysts fear that a number of products based on incompatible technologies would only confuse consumers, and slow industry growth.
With the flood of new packages for home networking finally hitting the shelves, industry observers say the year 2000 will be crucial in determining whether consumers really will take to the technology.
"[The year] 2000 will be a watershed year," Cahners In-Stat Group analyst Michael Wolf said. "You'll see how much interest there really is and if people will actually buy this stuff."
The niche has had a good start so far. Home networking kit sales are seen reaching $137 million by the end of 1999 and jump to $281 million by 2000, according to a recent Cahners study. By 2003, however, the market is expected to boom to $1.4 billion in sales.
In the meantime, PC and modem makers are looking for ways to incorporate home networking technology into their core products. Computer manufacturers like Compaq Computer and Dell Computer have bundled home networking equipment into their PCs.
On the network end, cable operators and phone companies are working to drag high-speed lines closer to homes as modem makers like Motorola build home networking technology into its cable and digital subscriber line (DSL) modems.
"You will see more embedding of networking capabilities into PC products, and as the broadband access market accelerates, that will increase the momentum," Yankee Group analyst Boyd Peterson said.
Analysts say that 1999 will be known as the year home networking moved from concept to product. Consumer electronics, communications and hardware companies have released a slew of standards for home networking, as well as a number of new products based on different technologies, Peterson said.
This summer an industry consortium called the Home Phoneline Networking Alliance agreed on a new high-speed standard that lets people network PCs by plugging them into a standard phone jack. The technology features data transfer speeds at 10 megabits per second (mbps), a rate 10 times faster than the previous phoneline standard.
The extra bandwidth allows users to connect more than five PCs, transfer large files or graphics and distribute video or audio files across a home network.
Chip giant Intel and Diamond Multimedia were first to market earlier this year with kits using the slower phoneline standard. But with the faster standard in place, other companies such as 3Com and Nortel Networks' NetGear pushed their own products to market in time for this year's holiday season.
On the wireless front, Apple Computer made the biggest splash in July by announcing that its iBook portable computer would include wireless networking technology.
Yet the market for wireless networking could run into some problems, analysts say. Technology firms are currently sparring over two wireless standards that are incompatible.
On one side is 3Com, Lucent Technologies, Apple, Finland's Nokia and others that support a standard called 802.11B. The technology is fast at 11 mbps, but expensive. On the other side is IBM, Intel, Motorola and Proxim that back a standard called HomeRF. This standard, analysts say, is less expensive but much slower at 2 mbps.
The year 2000 should determine which standard will win as more firms release wireless technology, analysts say. So far only a handful of companies are shipping products: Proxim has chosen HomeRF technology, while Apple and Dell are shipping products that use the 802.11B standard.
A new technology entrant in the home networking arena may also make its mark in 2000. Powerline technology allows users to network computers by plugging hardware into an electrical outlet. Companies such as Intellon and Enikia are working to quiet skeptics who believe transferring data over an electrical line is impossible.
Critics of new technology believe powerline products would face too much interference as electric signals from appliances use the same frequencies as would data, voice and video sent over a home network structure.
"If they can solve the puzzle, it will be interesting," Wolf said.
The next step for home networking, analysts say, is to connect all appliances in a home. Cable providers, telecommunications carriers and high-tech firms are all working on new home appliances, called "residential gateways," that will link home appliances, PCs, and the phone to a high-speed Internet connection.
Such technology aims to make the homes of science fiction and fantasy a reality in the modern day. Users could adjust the heat or the air conditioning in a room from a PC, or even watch a security camera feed of their home over a Web browser.
The first-generation "gateways" will ship in 2000 as part of DSL and cable modems, which also support phoneline and wireless networking technology.
Yet analysts say that the technology for a completely wired home may still be years away. "I don't think 2000 will be the Year of the Internet Toaster," Wolf said.