Intel wants desktop PCs to double up as network hubs and video recorders, a move that could make life tough for the companies that produce those standalone products.
The Santa Clara, Calif.-based chipmaker will begin midyear by adding wireless networking technology Wi-Fi to an upcoming pair of desktop chipsets. When manufacturers choose a specific version of one of the two new chipsets, they will be able to add the foundation for a built-in Wi-Fi access point nearly for free.
"Consumers want all their devices to connect and communicate wirelessly," said Louis Burns, an Intel vice president. "Content delivery must be a high-quality audio and video experience."
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Intel is looking to transform the role of the desktop PC, adding Wi-Fi to an upcoming pair of desktop chipsets and developing the Entertainment PC.
Intel sees the addition of those features to its PCs as a vital push to make playback of multimedia content and home networking essential elements in consumer desktops. But the strategy, which is a boon to consumers, could leave some companies out in the cold.
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At the same time, the company is developing the Entertainment PC (EPC), a desktop design based on Microsoft's Windows XP Media Center Edition operating system, which manufacturers can use to create more entertainment-oriented PCs that come with features such as digital video recorders.
Intel sees the addition of those features to its PCs as a vital push to make playback of multimedia content and home networking essential elements in consumer desktops. It predicts that a number of future products, including televisions and stereo equipment will be able to access wireless networks. But the strategy, which lowers the price of gadgets and is a boon to consumers, could leave some companies out in the cold.
Similar strategies traditionally have driven some competitors out of markets. The chipmaker's decision to add graphics to its PC chipsets in 1999, for example, preceded a major consolidation among graphics chipmakers. The number of companies working on graphics chips shrank from around 40 in 1998 to today's handful. The motherboard market and other industries have experienced similar threats.
Likewise, as PC makers such as Intel begin adding Wi-Fi access points to desktops, consolidation is expected to occur among Wi-Fi gear makers. Currently, PC users who want to set up a Wi-Fi network typically purchase an access point that is installed between the DSL (digital subscriber line) or cable modem and the computer. The wireless access point allows laptops and other desktop computers to share the Net connection. Under Intel's plan, the access point would be incorporated with Intel's chipset, eliminating the need for a separate device.
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Intel's EPC initiative also could put the squeeze on digital video recorder (DVR) makers like TiVo, analysts said.
"When Intel enters a market, competitors either scramble for the exits or entrench for the storm," said Richard Doherty, an analyst with research firm The Envisioneering Group.
Competitors agree, but assert that it's not a knockout punch.
"This is low-hanging fruit for Intel, and it makes a lot of sense...as they look to sell more chips for desktops," said Kevin Allan, a director of product management at NetGear. "Will it dramatically impact our business? I don't think so. We welcome their entry, because it will help to grow the market the same way Centrino did."
Intel has even joined industry groups, such as the Digital Home Working Group (DHWG), to connect consumer products to networks. The goal of the DHWG is to allow consumers to use a network to access and share resources on home devices in the same way they share a printer or broadband connection at work.
The DHWG is meeting later this week to work on creating guidelines to network devices and determine if a new name for the group is needed. But old habits die hard, and Intel's proactive behavior has rankled some in the group, according to sources. The chipmaker developed its own home networking guidelines and is proposing them for adoption by the DHWG.
The road ahead
Intel will add Wi-Fi to desktops through a version of the Grantsdale or Alderwood chipsets that come with a special input/output controller chip, called the ICH6W. That chip, along with an add-in card that includes radio gear such as an antenna, turns a desktop into 802.11b or 802.11g Wi-Fi access points, Intel said.
Technically, Wi-Fi access won't be free because it will cost PC makers to add it to new computers. But it will likely be less than an independent access point. Additionally, PC makers have shown they can often absorb the price of new features.
The chipmaker said these desktops will provide a relatively easy-to-use access point that allows notebooks and other wireless devices to share a broadband Internet connection and files. Thus, a consumer or a small business that purchases a PC with the built-in Wi-Fi access point will not need any other gear to create a basic Wi-Fi network.
While the concept is attractive, it will take time for these features to migrate to mainstream PCs. The features will mostly be used in higher-end systems in the $1,000-plus range. Lately, the average selling price for a desktop purchased at retail has hovered around $700, according to market researcher NPD Techworld.
PC-based access points have some potential limits as well, including location. While it's generally best to locate an access point centrally, that might not be convenient for PC owners, analysts said.
Secondly, a PC would have to be turned on all the time so that client devices could connect to the network. That uses a lot more power than a stand-alone access point.
Indeed, while some PC manufacturers have expressed interest in building Wi-Fi access points and EPC-style machines for consumers, it's not a universal desire at the moment. Some manufacturers will also offer the access points on small business PCs. But at least one PC executive said he isn't yet convinced. The Intel gear will have to be easy to configure--or else consumers won't be able to use it, he said.
In the meantime, gear makers are focusing on products that connect to a wireless network established by an access point. Manufacturers have already begun offering routers that have storage-sharing features as well as devices that allow consumer electronics devices, such as stereos, to connect to wireless networks.
Meanwhile, EPCs will be fitted with Pentium 4 chips, will provide a vault for storing music and video, and won't require additional monthly service fees, executives from Intel and Microsoft have said.
But DVR pioneer TiVo, for one, says it's ready for a fight. It is moving to make its DVRs cheaper and easier to use with new models, price cuts and rebates. The company believes that the device that's the easiest to use will prevail.
"The PC folks are trying to make a PC not look like a PC," said Ted Malone, director of product marketing at TiVo. "There is still a consumer perception problem that (an EPC) is still a PC and can you get it to work (as easily as a) TV."