Will The Wired Home Play In Peoria?
Barry Bonds is as serious about technology as he is about baseball. The three-time San Francisco Giants MVP is building a $2.5 million home near Silicon Valley where he plans to have 10 personal computers that will let him easily tap the Internet from every major room, check the weather, or see who's at his front gate. To do this, Bonds is spending $20,000 on a fancy wiring scheme that also will send data from one PC to another or spit out documents from a printer on the other side of the house. And his whole family will be able to share a fast Net link. "I'm prewiring my house for the 21st century," Bonds says.
Until recently, only tech afficionados like the 34-year-old slugger built home networks. After buying gear from 3Com Corp., NetGear, and other suppliers, die-hard geeks installed network cards in PCs, strung wires through the attic or basement, and sweated the details of getting finicky networking software to run. There aren't many people willing to deal with those headaches. All told, only about 300,000 homes in the U.S.--or three out of every 1,000 families--have networks today, according to Forrester Research Inc.
Now, makers of networking gear are pushing to bring the Bonds-style networks popular in Silicon Valley to Middle America. The key, they believe, is a wave of new technologies that will allow average computer users to easily connect their home PCs on the cheap--without the hassles of running new wires through the walls. That could unleash demand: Some 15 million U.S. homes already have more than one PC, and the number is likely to double in the next few years, largely because of the rise of sub-$1,000 PCs. By 2002, predicts John W. Todd, vice-president of Wedbush Morgan Securities Inc. in Los Angeles, 7 million households will be networked, creating a $4.2 billion business for home-networking gear and software.
But what will motivate consumers to connect their home PCs and other information appliances? Money. With a home network, people with more than one PC won't need more than a single printer, modem, or Internet connection. Instead, PCs and other gizmos will connect to each other over a network, sharing peripherals and a single Net account. That could save hundreds of dollars in a multi-PC home. The technology will be especially compelling with the speedy digital subscriber lines (DSL) and cable-modem connections to the Net now making their way into homes. "Shared Internet access will be the killer app of home networking," says Forrester analyst Bruce Kasrel.
Companies are swarming to get a piece of the budding market. Over the past 18 months, venture capitalists and corporate investors have dumped more than $140 million into a dozen startups chasing home networking. Industry giants Intel Corp. and Microsoft Corp. are investing heavily in it, believing it will help sell PCs. At the same time, traditional networking companies, such as 3Com and Bay Networks, will roll out home-networking products in the first half of next year. "This is a big-ticket game," says Wedbush Morgan's Todd.
Maybe. But will home networking play in Peoria? Even though the technology is getting simpler to install, it faces several challenges. Perhaps most significant, many people don't see a need for a network in their home. Robyn Roberts and her husband, who together run an online investment service from their Woodside (Calif.) home, already have network wiring built into the walls of their new house. But they've decided not to connect their six PCs and four printers. "We don't need to be attached," says Roberts. "And it would be a real disaster for us if the network went down."
ONLINE PARTY. Increasingly, however, consumers are warming to the notion of a wired home. Jon Toolson, a retired engineer living near San Diego, recently plunked down $170 for a two-PC wireless-networking kit called Aviator Wireless Network, from San Jose (Calif.) startup WebGear Inc. Aviator plugs into PC printer ports and broadcasts data around Toolson's house at 1 megabit per second (Mbps). That's only one-tenth the speed of most wired office networks but 25 times faster than the speediest modems on the market. Toolson uses it to connect his PC to his wife's--allowing them to share one printer. Best of all, it lets them both go online simultaneously, through a single modem. "We used to have to take turns," Toolson says. "Sharing the modem just amazes me."
There are three ways to get as connected as the Toolsons. Companies such as Tut Systems Inc. and Epigram Inc. are devising methods for sending data overthe telephone wiring already built into every home. Intelogis Inc. and Intellon Corp. aim to use electrical wiring. And the largest group, led by WebGear and ShareWave Inc., is trying to cut the cord entirely with wireless radio networks. The common goal: to create networking schemes that cost $100 or less per connection and are as easy to set up as home stereo systems. Says Neil Clemmons, vice-president for consumer marketing at 3Com: "You have to be able to get it installed and operating within 15 minutes."
Or less. The approach of Intellon and Intelogis is as simple as it gets: If their technology is built into PCs, just plugging your computer into a wall socket would put it on a network. Though PCs won't ship with the technology until next year, Lynn Carter recently bought a $250 PassPort Plug-In Network from Intelogis for his Utah home. In the past, his five kids, who have their own PC but no phone line in their play room, were constantly using Carter's modem-equipped PC to get on the Net. Now, they can surf the Web from their own machine using Carter's modem--even when he's doing other work on his PC. "You can't even express the beauty of this thing," Carter says.
Almost as simple is using home phone wiring for a network. With just one wire from the PC to a phone jack, customers will be able to link to the Net and simultaneously connect with other PCs in their homes. The leader in this category is Tut Systems in Pleasant Hill, Calif., which has devised a way to send data at 1 Mbps through phone wiring. The company, which lost $9.2 million on sales of $6.2 million in 1997, is backed by $39 million in capital from venture-capital firms and corporations including Microsoft, Compaq Computer, and AT&T. With products from licensees set to hit the market by Christmas, Tut expects to go public soon.
DIGITAL MAGIC. Tut has a rival hard on its heels. Startup Epigram in Sunnyvale, Calif., says it can zip data over home phone wiring 10 times faster--the same speed as office networks. That's fast enough to move more than just Web pages: Epigram aims to let users ship digital voice and video around their homes, for instance, linking a digital videodisk player in the living room with a TV in the den. Like Tut, Epigram will license its technology to chipmakers and networking companies--though Epigram's products won't be introduced until next year.
Startup ShareWave has the same vision of multimedia networking, only without using wires at all. The El Dorado Hills (Calif.) startup has $42.5 million in funding--and is the first ever to be backed by the computer industry's big three--Intel, Microsoft, and Cisco Systems. ShareWave's wireless technology will use small transmitters built into PCs. When ShareWave licensees ship products in early 1999, they'll be able to transmit data at 4 Mbps over radio waves--fast enough to carry compressed digital video. The pricing isn't set, but it's expected to cost less than $100 per PC.
By this time next year, analysts say, home networking could be built into most new PCs. But even if it's virtually free, computer and networking companies will need help getting people to use it. That's why it'll be critical to win the support of the cable and phone companies that offer high-speed Net access--and could be prime distributors of home-networking gear. By 2002, Forrester projects, nearly 16 million U.S. homes will be served by DSL and cable modems. That could provide strong impetus for growth. Still, networking makers will have to hope that more than just baseball fans aspire to be like Barry Bonds.