Home Networking Skyrockets, but Media Lags

By Ron Miller

Home networking is a hot trend driving network device sales, but would that media and entertainment networking could get in on the trend, according to a report released Monday by IDC.

The research firm said 12.5 million homes had strung up home networks in 2003, a number expected to surge to more than 16 million by the end of 2004. But most consumers are using the technology to share files and a broadband connection and apparently steering clear of media and entertainment features.

Jonathan Gaw, research manager at IDC and author of the report, said there are many reasons for the mixed results. But mostly, he said it’s due to the complexity of setting up the network. “The interfaces haven’t evolved enough to the point where the [home computers and televisions] can talk to each other.”

Manufacturers haven’t hidden complexity enough and the process is not as reliable as we would like it to be,” Gaw said.

In addition, Gaw said many consumers have a difficult time even conceiving of consumer devices and their computers working
together — or when they do, they are not happy with the current quality.

“Connecting consumer devices to a network is just a concept that people need to get used to,” he said. But frankly, he added, a streaming video over the Internet is just not as good a consumer experience as just turning on the TV.

Yet hardware vendors see big numbers in the ongoing merger of networking and consumer electronics. In the last year, vendors such as Dell , Gateway and Microsoft have turned their attention to the consumer
electronics space. Dell and Gateway sell media PCs powered by
Microsoft’s Media Center operating system; both computer companies have also begun selling consumer electronic devices such as
television sets.

Gaw said the one standard pushing networking forward is the 802.11 family of wireless networking protocols. With each new flavor of Wi-Fi, such as 802.11b, followed by 802.11g, prices come down on networking gear associated with the older standard.

It all adds up to consumer confusion, even though the growth numbers for home networking are impressive, he said.

“You have to go to Best Buy and figure out what’s the
difference between a router, gateway and access point. For a lot of
people, that’s an intimidating experience,” Gaw said.

Because of this, when most people look at purchasing home networking equipment through retail channels, the primary consideration is price. Gaw said home networking players Linksys, DLink and Netgear do enjoy some brand recognition in the buying process, but for the most part, the buying decisions come down to price.

In this context, he said channel sellers such as broadband ISPs could help manufacturers increase sales, partly to shield consumers from the complexity of trying to figure out what they need. The ISP could take advantage of the broadband sale to sell the networking equipment at the same time.

“When you call your ISP and say you want to switch to broadband, you’re going to have an open mind to purchase home networking equipment. Why are they getting it to begin with? They are using dial up and their kid is using dial up. They are tired of having busy signals all the time. Since you have two computers, we might as well set up you up. That channel will be important,” Gaw said.

At the same time, Gaw said cable TV and satellite players will be using a similar upsell approach. When people sign up for cable or satellite, the sales person might try and sell them a Tivo-type box and help the consumer set it up to play on all the TVs in the house.

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