Cisco's home-networking push

Company sees big opportunities in the connected home as it prepares to launch its first media-centric products at the Consumer Electronics Show.

Cisco Systems, which builds the gear that powers the Internet, is making a big push this year at the Consumer Electronics Show in Las Vegas with new products that will help consumers move digital media around their homes.

Ned Hooper, senior vice president of corporate development for Cisco's Consumer Business Group Cisco Systems

The company plans to hold a press conference in Las Vegas on Wednesday to reveal the new products and its refined strategy for providing consumers with "communication and entertainment experiences that are more visual, more social and more personal," the company said in a press release.

To get a sneak peek at Cisco's strategy, I talked by phone with Ned Hooper, senior vice president of corporate development for Cisco's Consumer Business Group. While details of the soon-to-be-announced products are still under wraps, Hooper shed some light on why Cisco thinks there is a big opportunity in helping consumers get their homes connected and where the company plans to go with its strategy from next.

Q: Cisco isn't the first company to build products for the digital home. Dell, Gateway, and Hewlett-Packard have all tried to develop products to help consumers play their music and video throughout the home. So far, none of these companies have been very successful. Even Apple's Apple TV is a considered a niche product. Why do you think Cisco will have more success?
Hooper: I think it's important to look at how media and entertainment is being delivered to the home. The presence of the Internet and digital media is transforming all these industries and how people access entertainment and how they communicate with each other.

Over 100 million households have set top boxes with their cable or digital satellite service. So the digital set top box market is doing well. Services such as video on demand and DVRs are in high demand. But building expensive devices for a single function hasn't proven to be a viable market.

Cisco has been positioned very well in terms of being able to offer infrastructure for these network services. And we're already in the consumer electronics business with Linksys and Scientific Atlanta. It might surprise you to know that Cisco has shipped over 160 million consumer devices. This includes set-top boxes and home routers.

But what can Cisco do that's different from these other companies that have tried to address this market?
Hooper: What you can do today in terms of sharing media and moving it around the house if you have a high-degree of technical aptitude or a lot of money is really impressive. But we see opportunity in making it more feasible to do in the mass market. It's all about usability.

We're still in the very early days of this market. There are only about 39 million households in the U.S. that are networked or "connected" out of a total of about 120 million households nationwide. So, total penetration is still low. But the market is in transition. The first phase of the connected home was all about connecting two PCs to the same broadband connection. Or maybe you connected them to a printer over a wireless network. Now it's about the media-enabled home and connecting all the devices in the home so you can move and share your media around the house. In this phase, the ability to connect devices in the home to each other is just as important as connecting them to the Internet.

But the big question is how do we make it easier. That is the first thing that needs to be addressed. And at Cisco we see the network as becoming a platform that can help make connecting these devices easier. We don't see the solution as simply being a box. You shouldn't have to boot up your PC to share a picture or a song in the home network.

One of the biggest complaints I've heard from people setting up home entertainment systems is that there are too many wires connecting everything together. Do you think it's possible to shuttle all this bandwidth intensive media around the home wirelessly?
Hooper: We launched a high-end home router in July that we refer to as the Linksys WRT610N router. It's the first dual-band home router that operates in both the 2.4 Gigahertz and 5 GHz spectrum bands. It enables consumers to separate media content from basic Internet traffic in the home. I actually have been testing out the new products we are announcing at CES at home, and I used this router to put all the multimedia traffic in my home on the 5GHz band while I put my basic Internet traffic on the 2.4 GHz band. And it works great. It ensures that there isn't any congestion on the network. We also have some quality of service mechanisms that help ensure high quality audio and video.

You've talked about Cisco's role in connecting devices in the home. But with the economy worsening, I've found more people turning to the Internet for video . Do you think video that is freely available on the Internet through sites like Joost.com or Hulu.com or even some of the TV networks will eventually replace cable or other paid TV services?
Hooper: I don't think that people want to shut off their cable or satellite service. I think what they want is more services. Even in a troubled economy, we typically see people increase their spending on home entertainment ,because it's cheaper than leaving home. Also, subscription based services have historically shown to be successful. So I think whether it's Netflix or Time Warner Cable or Verizon Fios, there is going to be growth.

But there are clearly different ways to make money. And maybe we will see more ad supported models. The interesting thing for Cisco is because of our relationships with service providers, media companies and consumers, we can help deliver content across all routes to the market.

Once Cisco unveils its products to make accessing media throughout the home easier, what's next?
Hooper: We also see an opportunity to bring immersive telepresence video technology into the home. We expect we can have something available in about 18 months or so.

But this service costs large companies tens of thousands of dollars to offer. How can Cisco make high-quality video conferencing affordable enough for people to use at home?
Hooper: There are natural cost reduction cycles. For example, the cost of processing gets cheaper along with other components, which help us move toward affordable price points. Also we are seeing massive capital investment across cable and phone companies to increase broadband speeds. So the broadband capacity will be there to deliver the high-quality video. Consumers themselves are also investing in digital and high-definition TVs as the transition from analog to digital TV takes place. So all these things are coming together, which will help alleviate the cost of offering telepresence.

But how cheap will the price have to be to get people to want to use the service?
Hooper: It's too early to talk about price points. But what we have seen in the enterprise is that once people experience true high-quality video in this way, they communicate in a different way. There will be huge demand for it. Look at the success of Skype with its Web-based video, which is not the same quality we're talking about with telepresence. You see how excited consumers are about this service. Once you add an immersive video experience to the communication, you increase the quality of the interaction.

Would you sell telepresence as a separate service through a carrier, or would consumers simply be able to buy the equipment and start making these calls at home?
Hooper: The service will ride on an existing broadband connection. But the service provider still benefits because it gives these companies still investing in broadband infrastructure a more compelling service that will require consumers upgrade to faster speed services.

Some people have argued that digital rights technologies that restrict how content is shared have hurt innovation. Would you agree?
I don't think it has hurt innovation. If you look across the industry there have been many advancements. But I think there is a big opportunity for media companies to enhance the experience. We are working closely with media companies to do this, especially when it comes to video.

So far people have been able to deal with managing their music collections. But as these collections get larger, it's a burden when you have to transition from one computer to a new one. When you start talking about moving video collections, it becomes even more difficult.

We have been talking to content providers about this. And production companies are interested in a model where consumers own rights to the content instead of the physical media. So they are starting to experiment with different business models. And we are focused on being a partner to help them pull it all together.

 

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