Home Networks Next for Wired Consumers

The market for “connected home” equipment — home networking equipment and software, residential gateways and home control and automation products — will grow from $1.4 billion in 2001 to $9.2 billion worldwide by 2006, according to a report by Cahners In-Stat Group.

The report, “The Digital Domicile: The Exploding Market for Home Networking Technology and Services“, found that the connected home market has been spurred over the past year by a surge in the popularity of wireless networking technology and basic home routers to enable broadband sharing.

“We’ve finally seen the hockey stick,” said Michael Wolf, a director with In-Stat. “After years of asking questions and learning about connectivity, the consumer has begun to see the value of networking a home, despite a tough economic environment. Home networking has proven to be one of the few bright spots in today’s otherwise challenging technology market.”

Wireless networking has increased the popularity of home networking over the past 12 months, but other factors that will continue to drive the momentum include the recognition among consumers of the need for network security, as they turn to home routers and residential gateways for “firewall” protection with an always-on connection, and the release of Windows XP, which is a “home-network friendly” operating system. The emergence of the home server in coming years as a distributor of content to the different end points over the home network and the gradual increase in interest in home networks among broadband providers as an important distribution platform will also move consumers toward acquiring home networks.

“One of the positives in the home networking market — wider integration of home connectivity at lower prices for consumers — is one of the continued challenges for the vendor community. Vendors will need to work hard to make all these connections work at the higher levels as well as be able to make money from their investments in this technology,” Wolf said.

Interest in home networks may also be helped by a consumer population that is becoming increasingly tech-savvy, and has worked the Internet into its daily routine. According to the Yankee Group’s annual Technologically Advanced Family Survey, 93 percent of households in the United States that own PCs now have Internet access.

The top three uses for home PCs are online services/Internet access (76 percent), games/entertainment (58 percent) and personal/household finances (30 percent). The online population is also becoming more experienced. Of PC owners who have Internet access, 83 percent have been online for more than one year; 40 percent of those users have been online for between one and three years, and 43 percent have been online for over three years.

“These results indicate that a vast majority of consumers are incorporating the online channel into their daily activities, ranging from providing entertainment content to tracking household finances,” said Lisa Melsted, an analyst for the Yankee Group’s Internet Market Strategies research and consulting practice. “As online consumers become more experienced, the opportunity for service providers to develop value-added services, content and applications to address consumer’s needs will continue to expand. It is important for companies to track online consumer usage patterns and trends to determine which new services will successfully meet the needs of these online consumers.”

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