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Home networking: Here but yet so far

First-generation products will roll out this year, but widespread adoption may be years away, according to analysts and technology companies.

PALO ALTO, California--Consumers who own multiple PCs, surf the Web, and telecommute will help spur the growth of home networking this year, but widespread adoption may be years away, according to analysts and technology companies.

A blend of analysts and company executives predicted that consumers will one day want to connect all of their consumer electronic devices--from PCs, stereos, and DVD players to the microwave oven--but said some issues, such as standards that allow devices to communicate, still need to be resolved.

With Intel, 3Com and other companies rolling out their first-generation products this year, only the technology enthusiasts will want to network their homes, according to Boyd Peterson, an analyst with industry researcher the Yankee Group. The firm sponsored a two-day symposium here focused on the future of the market for home networking technology.

Companies need to work out the kinks of home networking, making it simple and cheap for consumers to wire their homes, according to executives.

Sanjeev Verma, Motorola's director of marketing and business development, said the market is still too immature for mass adoption: Fast Internet access through cable and DSL won't be widely available until late 1999.

"We're taking the first meaningful steps this year. It will explode next year," said Verma, who believes only 100,000 families will network their homes by the end of 1999.

Peterson agrees, saying it's too soon to tout 1999 as the year of home networking, as some in the industry have done. For most consumers, this year will be the first time they hear about home networking, including the ability to turn off the coffee pot in your kitchen from your Web browser at work.

"It's more like a debutante ball in 1999," he said. "You're seeing the manifestation of two years of work from the technology companies. They're coming out with their first commercial products."

Peterson said demand will be driven by faster Internet access and cheap prices for PCs, allowing families to buy more than one computer. A recent Yankee Group study found 30 percent of all homes with multiple PCs want them to be networked.

In the longer term, the industry must create must-have applications that consumers can't live without. The first products are emulating office applications, such as sharing peripherals and Internet access, he said. Future applications will focus on communications and entertainment.

Jeff Thermond, chief executive of Epigram, believes the market will be huge when consumers begin to use digital technology: MPEG2 for video distribution, MP3 for audio, and digital photography.

"It's a Field of Dreams" scenario," he said. "We have built the infrastructure. They will come with applications."

New applications not yet created will help propel the home networking market, Thermond predicted. "This will create new platforms. New multibillion industries will emerge that we don't know about yet."

In the meantime, home networking standards are moving forward, speakers at the seminar said. The Home Phoneline Networking Alliance set of specifications, which can network PCs in the home using installed phone wire, was completed in 1998's third quarter and products with speeds of up to 1 mbps began shipping in the fourth quarter, said Cyrus Namazi, president and chair of HomePNA. The target is 10 mbps later this year.

The HomeRF Working Group, which governs specifications for networking wireless devices to PCs in the home, is backed by some 70 companies, including Intel, IBM, Hewlett-Packard, Microsoft, and Motorola, said Ben Manny, chairman of the HomeRF Working Group and engineering manager of Residential Communications at Intel.

A provisional specification was adopted in late 1998 and products will roll out in the second half of 1999, he said.

Wall Street analysts attending the conference said they are optimistic about the market's potential, especially since the Internet is one of the main drivers of home networking.

"All the pieces are coming together. 1999 could be the year when the networked home hits Wall Street's screens," said Peter Rogers, managing director of Volpe Brown Whelan & Company.

However, home networking still needs to mature before investors sink money into the emerging market. "We're seeing products that can work, but I'm not sure if we have the applications that will engage this market," he said.

Rogers added that start-ups such as Sharewave and Echelon are more compelling to investors than the bigger companies, such as Intel or Cisco, which have a home networking arm to their business.

John Todd, vice president of research at Wedbush Morgan Securities, said consumers will adopt the technology as long as home networking is affordable, easy to use, and the technology is standardized.

Todd said market leaders will begin to emerge among the large companies (such as Microsoft, Compaq Computer, IBM, and HP), the networking companies (3Com, Intel, and Proxim), and startups (such as Tut Systems and Epigram).

While Yankee Group analysts believe consumers will choose a mix between cable, DSL, and wireless connections, Eric Zimits, senior analyst and managing director at Hambrecht & Quist, predicts consumers will prefer wireless.

"Mobility is a huge factor," he said.

Zimits added that innovations in the home networking market will eventually drive products to the business market.