March 7, 2003 3:18 PM PST

Powerline networking gets a charge

Network gear makers are surging at the potential of powerline technology, as a complement to wireless products and as a differentiating feature for products that are increasingly fighting for retail shelf space.

Siemens has had what amounts to a second generation of powerline products in the market since November, and other companies such as NetGear are preparing to enter the market by the summertime.

Powerline networking is based on the HomePlug Powerline Alliance's HomePlug 1.0.1 standard, which allows devices such as PCs and access points to connect to a network through existing electrical wiring and outlets in a home.

These new products address many of the chief obstacles that held back powerline technology. But with the explosive popularity of Wi-Fi products, second fiddle is the best position open for emerging networking technologies--which is just fine with manufacturers. Wi-Fi refers to wireless networking technology based on the 802.11b, the 802.11a and--by midyear--the 802.11g standards, which allows people to access a network and share resources on that network.

"Powerline is not truly a standalone platform," said David Schmertz, vice-president in the home networking products group at Siemens. "It's more intended to be a complementary technology, not a Wi-Fi replacement." Siemens' powerline product can act as a wireless access point while also connecting to a powerline network. The theoretical throughput is 14mbps (megabits per second) and the average is around 7mbps to 8mbps, according to Schmertz.

Shipments of Wi-Fi products tripled in 2002 compared with 2001, with average selling prices dropping significantly. However, weaknesses in range and reception issues have left an opportunity open for powerline products as well as a way for fast-moving manufacturers to differentiate themselves. Wi-Fi products have a range of about 150 feet indoors, but that range depends on the number of walls and the environment through which a signal has to travel. Wi-Fi products are also known to have interference glitches with cordless phones and microwaves.

Equity research analyst William Bao Bean of Deutsche Bank Securities sees powerline piggybacking on the popularity of Wi-Fi products more in the coming months.

"Intellon is the main chip provider for powerline technology and they are getting increasing interest for their products," said Bean. Intellon is a privately held Ocala, Fla.-based company supplying communications products for network gear makers.

The feature may play a significant role in the number of players in the Wi-Fi market, according to Bean.

"There are about six major vendors in the market now, and retailers really only have shelf space for about four," said Bean. In addition to being a differentiating feature, powerline will means better margins for manufacturers who may be feeling the pinch of average selling prices, which are quickly falling.

Previously, powerline products were too big, expensive and had interference issues, but the next generation of products have slimmed down and are in the sub-$100 range. Powerline products are slightly larger than AC adapters.

The aggressively low pricing was a necessary step for Siemens, which is trying to garner some attention to its powerline product. It's trying to assuage previous impressions of powerline technology while also competing with Wi-Fi products.

"It was the only chance that powerline had in the face of rapidly declining prices of Wi-Fi products," said Schmertz. "We had to give the technology a chance to survive."

 

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