Cisco Eyes Home of the Future

Cisco Systems Inc., the dominant player in the networking equipment market place, threw its considerable weight into the home networking market Wednesday.

Cisco has teamed with Southern California land developer Playa Vista and PaeTec — an ISP and member of the Cisco Powered Network — to build 13,000 “smart homes” in West Los Angeles. The companies will also develop six million square feet of commercial and retail space there. Cisco has already unveiled a 17,000 square foot showcase Internet Home with a broadband connection that enables an array of consumer devices and appliances.

“The Internet Home drives home the message that always on, high speed Internet connections are available in today’s home, whether it’s an older home or a brand-new development,” said Mike Moone, group vice president and general manager of Cisco’s Consumer Line of Business. “It also demonstrates how an always on, high-speed connection is as easy to use as turning on a light or a water faucet.”

The development is part of Cisco’s strategy to provide consumers with “anywhere, anytime” Internet access.

“I think it’s a very intriguing idea,” said William Hurley, an analyst with The Yankee Group who follows the broadband market.

“Cisco has made a point of evangelizing the Internet generation as part of their story,” he said. “It’s a very rich strategy for Cisco product placement.” He added, “More people using more bandwidth on the Internet helps them out in a lot of ways.”

The technology that makes Cisco’s strategy possible is the Cisco Internet Home Gateway, which will be available for sale next year. The Internet Home Gateway is a router with the simplicity of a modem. Cisco said the device will enable multiservices delivery to homes over broadband connections and will feature easy home networking and self-configuration technology.

Until now, home networking has been the province of companies like Lucent Technologies, Proxim, Sohoware, 3Com, Intel and Motorola, as well as a few smaller players. But the home networking market is becoming a more attractive space. A recent report by high-tech market research firm Cahners In-Stat Group found that the market for home networking gear grew to $58 million in the first quarter of 2000. It could soar to more than $5.7 billion by 2004, the report said.

Shipments of wireless equipment were the major motivator for the first quarter numbers while phone line-based equipment shipments slowed due to expected quarterly cyclicality and an overstocked channel, according to Cahners. This was good news for Lucent, Proxim and Sohoware, which already had wireless products on the table. Phone line-based vendors Intel and 3Com are now entering that niche. But the market is dynamic and a group called the HomePlug Powerline Alliance — which includes Cisco Systems, Intel, 3Com, Motorola, Advanced Micro Devices, Compaq, Conexant, Enikia, Intellon, Panasonic, Diamond Multimedia, Tandy Corp. and Texas Instruments — is pushing a technology that can connect appliances to the Internet through electrical lines.

Cisco’s Internet Home Gateway, which will cost about $500, is designed to fit all three niches. It will support Ethernet, wireless, phone line and power line connections. With an Internet Home Gateway and a DSL connection, Cisco envisions homes where refrigerators notify owners via wireless Web pads when their doors are left open, security system

s turn off irons that were accidentally left on, and movies can be ordered at the touch of a button.

But Mike Wolf, of Cahners In-Stat Group, said Cisco will not be alone in offering various “flavors” of connectivity.

“It’s just a matter of starting to incorporate these types of technology into a box,” he said. “All of the big guys in networking are going to be doing it.”

He added that most of the companies that have focused on cable modems are now moving into the area. However, Cisco is not without its advantages.

“The one advantage they have is Cisco is a great name,” Wolf said, noting that the name is not as strong with consumers who haven’t dealt much with the company. “They necessarily don’t have an advantage in the consumer branding area. I think they have certain advantages relative to the service provider market. The market is still up for grabs.”

Hurley said building community-based shared networks could be a very strong strategy for Cisco.

“I think they could definitely gain traction in early adopted communities,” he said.

Cisco said customers will have a range of options, from adding connectivity to an existing home without upgrading any new wires to custom luxury homes complete with automated home control system for between $15,000 and $100,000. Existing homes can be upgraded without adding any new wires by installing DSL service and paying $500 for an Internet Home Gateway. This allows Ethernet speeds over phone lines, telemetry control of appliances through power lines and wireless connectivity for PCs, Web tablets, etc.