Home Networking Set for Major Growth

Approximately 650,000 US homes have some form of networking installed according to the Yankee Group, and that number is expected to grow at a compound annual growth rate of 95 percent over the next four years, when it will reach 10 million by 2003.

“The networked home is the point of digital convergence; the place where consumers are realizing the benefits of appealing new applications and content,” said Boyd Peterson, vice president of the Yankee Group. “Today, this means consumers can access the Internet from anywhere in their homes; but soon familiar products like telephones, stereos, and televisions will take on a whole new life.”

According to the Yankee Group’s 1999 Networked Home Survey, 17 million US households are already interested in home networking. The survey found that high-speed broadband Internet access will serve as the catalyst for the growth of home networking. Broadband Internet brings with it the need to share access among multiple PCs and to deliver Internet and multimedia content to many different devices and locations within the home. The proliferation of new Web appliances such as MP3 recorders, and the promise of digital television and IP telephony services delivered over the same networks will further increase the demand for home networking solutions.

“1999 has been a watershed year for the home networking industry,” said Karuna Uppal, a senior analyst at Yankee Group. “Advancements in home networking standards and product availability have moved home networking technology from the laboratory to the living room.”

Of the nearly 10 million homes expected to have networking solutions by 2003, the Yankee Group predicts that the majority of these will be employing PC-based networking. More than 4 million PC-based homes will install phone line-based networking over existing wiring; nearly 1.5 million homes will use wireless networking technology, and about 300,000 homes will use power line networking that works over existing electrical wiring.

By the end of 2003, Yankee Group also predicts the home networking market will be fueled by an estimated 5 million broadband homes that will have residential gateways installed — devices that route IP traffic and provide data management and security.

“Simple home networking solutions and new protocols that link devices within the home will be at the heart of a technology evolution for consumers,” said Craig Mundie, senior VP of Microsoft. “Home networks that run on existing wiring and new wireless links will connect many types of digital devices in the home, providing them with a wide range of multimedia content and services from the Internet.”

According to research by Frost & Sullivan, the US home networking market generated $37.9 million in the first two quarters of 1999, a dramatic increase over the 1998 total of $34.5 million.

According to Frost & Sullivan’s report “U.S. Home Networking Markets,” rapid growth in the home networking space will continue to be fueled by faster and easier products and new end-user groups that include less technically savvy consumers who desire plug-and-play products.

As more PC OEMs begin including home networking capabilities in their products, partnering with these PC OEMs provides strong opportunities for vendors.

“Any vendor could easily slingshot as a leader in the market with the right strategic partnerships,” said Frost & Sullivan analyst Brian Palmer. “Some vendors are rushing to offer home kits that deliver data, voice, and video traffic over the existing wiring infrastructure in the home, while others are devising systems requiring no physical connection between networked nodes. The exciting new applications of home networking will be the ‘No New Wires’ alternatives, such as power, phone, and wireless.”

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