May 28, 2004 4:00 AM PDT

Networked homes move closer to reality

SEOUL, South Korea--At the Samsung Tower Palace, even the refrigerators are logged onto the Net.

The luxury apartment complex here is a showcase for Samsung Electronics' burgeoning digital home business--an idea that once was dismissed as a pie-in-the-sky but now is starting to gain traction. Besides refrigerators, Samsung Tower's $1 million-plus apartments are outfitted with Internet-enabled ovens, security cameras and wall-mounted flat-panel displays.

Samsung has sold more than 6,000 networked homes in South Korea, and now it's eager to export its success. The company has tests under way in Canada, Australia and Europe, and it recently struck deals with two U.S.-based home builders to conduct digital home trials in the United States. According to Samsung, wiring homes in the United States with the necessary networking gear will cost from $2,000 to $10,000--making adoption relatively affordable.

News.context

What's new:
Wider use of broadband Internet access, a greater affinity for digital media, and more "smart" products and types of networks are bringing the digital home closer to reality.

Bottom line:
Many consumers call into question the practicality of products such as Internet-enabled refrigerators and other digital devices, not to mention their complexity. Nonetheless, the dawn of the digital home is here.

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"We are focusing on the (new-home) market," said Yong Duk Yoon, vice president for Samsung's Advanced Institute of Technology.

Technology and consumer electronics companies have tried to peddle the home of the future for years. But wider use of broadband Internet access in the United States, a greater affinity for digital media, and more "smart" products and types of networks are bringing the digital home closer to reality.

"The value proposition for customers is pretty attractive," said Van Baker, an analyst with research firm Gartner. "Price is not an obstacle. It is just ease of use and ease of configuration."

Last year, a group of companies driven by Intel and Sony formed the Digital Home Working Group--a consortium dedicated to drafting guidelines that will make it easier for consumer electronics and computing devices to work together. After missing some self-imposed deadlines, the group is holding an event on June 22 where it will reveal a new name for the group, final guidelines for products and an outline of how it will proceed.

In another sign of momentum, Intel opened a research lab here in March and hired S.K. Lee, a former Samsung researcher, to examine what kind of products would be useful in the digital home. Lee said the lab will differ from others at Intel, in that it will work with other companies, such as LG and Samsung, rather than with universities.

Despite the recent traction, the digital home faces major obstacles. Many consumers call into question the usefulness of products such as Internet-enabled refrigerators and other digital devices, not to mention their complexity.

Retail chain Best Buy is seeing returns of 15 percent to 20 percent on home-networking products, Baker said. That's high compared with the low single-digit rates for most other products.

For example, owners of TiVo digital video recorders (DVR) have said they find them essential but that the installation is time consuming and, in some cases, confusing. Still, TiVo recently surprised Wall Street with higher-than-expected subscription rates to its service. The company said it added 264,000 subscribers in its first quarter, bringing its total to nearly 1.6 million.

Meanwhile, TiVo Series2 DVRs have an option, called the Home Media Option, that enables the devices to be connected to home networks.

In South Korea, Samsung's digital homes still have some problems to be worked out, Yoon said. Samsung uses powerline networking in its model home demonstration, which still has some interoperability problems and effectively limits the market to new homes, where the necessary wiring can be installed during construction.

Broadband adoption
Still, a growing number of homeowners are going digital, making the market irresistible. Digital subscriber line (DSL) providers saw a spike in subscriptions last quarter, adding more new residential customers than ever, according to a study released earlier this month.

An estimated 26.9 million Americans now have broadband Internet access. Federal agencies are working on policies to meet a goal set by President Bush to make high-speed Internet access available to all Americans by 2007. And the Federal Communications Commission is looking to establish wireless as a third broadband option in the United States.

Many experts expect the use of broadband access to propel the adoption of the digital home because it will allow consumers to access digital media and commerce from more devices, as well as encourage companies to make their music and videos available online.

At the same time, consumer electronics companies are creating more and more digital products. For years, Sony has tried to make its music and video available on computing devices. For example, the company envisions a day when a customer downloads its "Spider-Man" movie to watch on his or her computer. But a slower-than-expected rate of broadband adoption and concerns about the digital rights management of movies and music has stalled the plan.

Still, Sony and others have been creating digital products, betting that this content will be widely available on devices soon. The company has been selling a flat-panel television with wireless networking capabilities in Japan.

In addition, Samsung has been working on a TV set that receives high-definition television (HDTV) feeds wirelessly using an 802.11a connection. Samsung also has an experiment for sending multiple HDTV streams over an ultrawideband connection. And in the United States, Best Buy has been selling a Samsung refrigerator with Internet access.

Although sales of these products have been slow, Samsung expects to see demand grow as home builders and home owners invest in the increasingly sophisticated networks required to run them effectively.

"The product is still considered leading edge and futuristic, and it's fairly expensive, so it's an investment," said Brian Lucas, a Best Buy spokesman. "Only those that want the latest and greatest are going to buy one, but it shows what the future holds."

 

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