Home Networks Not Connecting with Consumers

Home networks have found an audience among early technology adopters, but vendors, service providers and retailers have yet to convince the mass market of the technology’s upside.

According to a report by the Yankee Group, only 6 percent of PC-owning U.S. households have a home network. This early adopter segment, which does not require heavy marketing, has been convinced, but in-home connectivity will require substantial investment in consumer education to explain the benefits to the mass market.

Similar to broadband Internet access, the Yankee Group found that the key to convincing consumers to adopt home networks is to communicate their utility and applications, rather than emphasizing speed and technological specifications. Of the 40 percent of PC-owning U.S. households not interested in connectivity, a striking 78 percent cited “no need” as the primary reason for lack of interest.

Only 20 percent of PC-owning households not interested in connectivity indicated price as the primary inhibitor to purchase, but the Yankee Group expects price to play a role in home network adoption among a wider intended audience. Interest in networking will be derived not from reduced price, however, but rather breadth of services, content and enhanced applications.

“While the size of the interested consumer base is promising, vendors and service providers must effectively target high-value consumer segments with the greatest near-term likelihood to purchase,” said Dominic Ainscough, an analyst with the Consumer Market Convergence Planning Service at the Yankee Group. “Today’s consumer requires a compelling reason to expand or reapportion their household communications budget beyond traditional products including voice, cable and Internet. As connectivity allows consumers to drive greater utility from existing products and services, OEMs and providers should emphasize its value in expanding the efficiency of adjacent products, including Internet and devices.”

Entertainment applications might be the feature of home networks most appealing to consumers because enhancements to their entertainment options are nothing new. Many consumers have gone from broadcast television, to cable TV, VCRs and DVDs in their lifetime, and home networks could be seen as enabling the next step — specifically, technologies that enable the storage and distribution of digital content.

A study of 711 U.S. online households from Parks Associates found a significant interest in “digital download” services, which would include movies and music files. Consumers also expressed parallel interest in complementary connectivity solutions that could share these files among PCs and consumer electronics products.

“We believe that digital content in the form of video and high-quality audio files will drive certain home networking applications, especially if that content can be aggregated on a platform and sent to multiple devices within the home,” said Kurt Scherf, Parks Associates’ vice president of research. “This year, we expect to see robust home networking solutions emerge in end-user products that will have commercial success in the market.”

Parks Associates estimates that by the end of 2005, U.S. households will have more than 80 million connection points for entertainment-specific applications.