In a bid to demonstrate the feasability of home-based computer networks, the two networking equipment giants are each working with builders to develop entire communities of homes with high-speed Internet access built-in.
Both companies recently announced initiatives to target planned communities. Nortel announced last Thursday that it will design, install and support a high-speed voice, broadcast video and data network in a Madera County, Calif., development. Cisco Systems announced last Friday an initiative called "Connected Communities" that aims to educate builders and developers on the benefits and opportunities of building Internet technologies into the infrastructure of a home.
Nortel's project will focus on providing communities with fast access to the Internet, while Cisco's initiative aims to encourage builders to construct homes that link various home appliances and gadgets with each other and to the Internet.
The deals are part of recent efforts by tech companies to push toward the residential market and could represent a trend as more home buyers request Net access and more people require a home office to work.
"A $200,000 home here in the Central Valley would be $1 million in Silicon Valley," said Dennes Coombes, owner of the Property Development Group, the developer working with Nortel. "So telecommuting offers a huge advantage to companies in attracting employees to the area."
A December study by Cahners In-Stat Group estimates that the market to serve multi-tenant unit buildings, like office or apartment units, with high-speed Net access will grow to $4.8 billion in the United States by 2004.
"There's a (demand) push effect on the part of service providers and equipment vendors," said Amy Helland, an industry analyst at Cahners, who says tech companies are pushing products and services onto the market to spark consumer interest.
A recent real estate boom also helps tech companies. U.S. Commerce Department data indicates that about 898,000 new homes were sold last year. That compares with the 667,000 sold in 1995.
Nortel signed a $5.6 million contract to wire 500 units in the first phase of the Madera County development, which will eventually total about 30,000 units. Nortel also worked with community and government agencies like California State University, Fresno; Chawanakee School District; Edison Utility Services; Sierra Foothills Public Utilities District; and Cal-Trans, as well as with the real estate developer of the site, Property Development Group.
Nortel is betting that telecommuting will take off over the next few years and drive demand for faster networks as workers realize they have options other than long commutes.
"More and more residential communities are going to require high-speed networks to be a part of community developments," said Greg Merritt, a vice president of marketing at Nortel.
Cisco is also starting to flirt with the home networking market. Last July, the company closed a deal with Southern California land developer Playa Vista and local service provider PaeTec to network 13,000 homes and 6 million square feet of office space in west Los Angeles.
The company has made other agreements with developers in Texas, Arizona and New Jersey.
Cisco makes appliances called "residential gateways," which allow home electronic devices like PCs, stereos, kitchen appliances and security systems to communicate and share an Internet connection.
This home network lets homeowners adjust the heat or air-conditioning in a room from a PC, watch a security-camera feed of their home over a Web browser, or distribute audio or video throughout the home.
Nor are Cisco and Nortel alone. Other competitors are targeting the same niche. For Example, Extreme Networks announced a deal Monday to provide residential networks in Sweden.
"The more bandwidth you add to the infrastructure, the more applications will be created," said Sam Halabi, a vice president of IP carrier marketing and business development at Extreme. Extreme is a maker of network equipment for telecom companies.
Yet despite the large drive to wire the consumer, all the companies must still deliver, whether they are bringing the Internet to your house or plugging it into a coffee maker.
"It's a very strong market, but both service providers and hardware vendors are going to have to devise systems that are valuable to customers and building owners," Cahners' Helland said.