Home Automation and Communications System are Ready to "Take Control"
During the PC era, the nexus of info-tech innovation was business, especially in the office. As we enter “the post-PC era,” the nexus of innovation is shifting to the consumer, especially in the home. And this digital home is where most technological innovation will occur over the next five years in the $101 billion consumer electronics industry.
Traditional industry boundaries no longer characterize hardware, software, and service providers to the digital home. For example, consumer electronic giants Sony, Philips, Panasonic, Sharp, Samsung, and Toshiba are adding greater processing power, memory, and Internet connectivity to their devices ? in other words, they’re invading traditional PC territory.
Home automation companies like Honeywell and Rockwell are adding broadband access and wireless networking ? traditional telecom territory ? to their security, heating, cooling, and lighting systems.
One of Apple’s hottest products is the iPod, a music device more characteristic of a consumer electronics company than a personal computer firm. Each day, it becomes less clear which markets these companies are targeting.
In fact, today’s household electronics market includes increasingly cross-functional and inter-connected home devices. This inter-connectivity requires an integrated communications network across the home. Unfortunately, most consumers already have difficulty connecting home electronics. Since the average American household has more and more video, audio, cable, phone, and computer devices located in different rooms, it is critical that these machines work together.
In view of this, Sony, Samsung, Philips, Nokia, and HP recently formed the Digital Home Working Group to develop and implement standards so devices can interconnect automatically via the Net. Sensing this shift, a number of players in the market have changed product strategies to begin offering integrated home solutions.
Unsurprisingly, the shift of technological innovation to the home means that women will be the driving force in many of these purchases. Today, almost a third of women consider themselves “early adopters” of technology. Women are involved in three of every four electronics purchases, according to the research firm Rockbridge Associates. Radio Shack reports that the percentage of its customers who are women has doubled in the past seven years, from 20 percent to 40 percent. And even if they’re still shopping less often for tech devices, they already are spending more money than men are on technology, according to the Consumer Electronics Association. In 2003, women accounted for $55 billion of the $96 billion spent on consumer electronics.
The excitement and hype tends to center on applications like video, entertainment, and gaming, which we’ll discuss later in this program. Yet, much of the innovation and profit will come from the crucial infrastructure that makes our lives easier, safer, and more comfortable. And it’s that infrastructure on which we will focus right now.
To better understand the trends that are creating the digital home and driving the “post-PC era,” we need to divide this infrastructure into three distinct, but closely related markets:
1. Household communications. 2. Household automation. 3. Household devices.
Let’s examine the trends in each of these markets ? and their implications for today’s businesses.
First, we’ll discuss household communications. This category consists of home networking equipment and software, and gateways to external telephone / cable / Internet service providers.
We anticipate considerable growth in this market over the next five years. Jupiter Research predicts home networks will be in 27 percent of U.S. households by 2008. In-Stat expects the market to grow to more than $9 billion by 2006, with broadband services a key driving force behind that growth.
Broadband service enables fast access to the Internet via cable, DSL phone line, or satellite. Nielsen/NetRatings reports that 49.5 million people, or 38 percent of all home Internet users, now connect to the Internet via broadband.
The number of broadband users grew 27 percent, adding more than 10 million to their ranks, just during the six-month period from May 2003 through November 2003. During the same six-month period, narrowband dial-up usage remained flat, at 69.6 million users.
Proliferation of PCs and other electronics in the home increases the need for improved communications “plumbing” to connect these devices. A household local area network, or LAN, enables these devices to talk with each other to:
? Exchange files, including text, spreadsheets, images, audio, and so on. ? Share a common set of input and output devices, including printers, scanners, and other devices. ? Access the Internet simultaneously, using a single broadband gateway. ? Play the same game, view the same image, or listen to the same song in different rooms simultaneously.
A home-based LAN can be built in several ways, using:
? A network of dedicated data cables wired between rooms. ? Existing phone lines. ? Existing power lines. ? Some form of wireless system.
Each of these methods has its advantages and disadvantages:
An Ethernet network using a network of data cables is still the fastest technology, with speeds of up to 100 megabits per second. It is extremely reliable and easy to maintain but can be expensive and confusing to set up, especially when retrofitted into an existing home. It can connect an almost unlimited number of devices, but each room requires planning and forethought. Fortunately, about 20 percent of new homes contain some sort of structural wiring for building an Ethernet LAN.
Phone-line networking, also called Home PNA, is inexpensive, easy to install, and reliable. However, it can connect 25 devices at the most, and is 10 times slower, at 10 megabits per second, than the fastest Ethernet network. An Ethernet network is better for exchanging huge data files between PCs.
Power-line networking is inexpensive, easy to install, and uses the existing electrical wiring of the home so there’s an outlet in nearly every room. The older version, called Passport, is slow, with speeds of 50 to 350 kilobits per second. Passport works only with Windows operated PCs; it can limit printer functions; and regular home power usage can interfere with its operation. The newer version, PowerPacket, is not affected by these limitations and achieves speeds of 14 megabits per second .
Today, setting up a Wi-Fi network is relatively inexpensive and technically pretty simple ? Wi-Fi cards and access points can be had for less than $100 each. Yet Wi-Fi is still not without its complications. For example, it is often unsuited to older homes with thick plaster walls. Other potential sources of interference include microwave ovens, some mobile phones, and nearby competing Wi-Fi networks. The most widely used Wi-Fi standard, 802.11b, has a maximum speed of 11 megabits per second, which is marginal for streaming video and unacceptable for multiple streams of high-definition television. Luckily, 802.11g and 802.11a are both faster ? at 54 megabits per second ? and the prices are coming down quickly.
Many people find that a wireless network can add flexibility to working at home and can sometimes ease the integration of work and family life. Others note that there’s a problem when work is accessible all the time, in every place. In this networked world, it’s becoming increasingly true that the office will always be with people wherever they go. Yet, if the user can achieve the right balance, Wi-Fi promises greater flexibility in geography and scheduling.
The second critical infrastructure of the digital home is home automation. This includes such applications as temperature controls in various zones throughout the house, and being alerted to home security problems, whether at home or on the go. Increasingly, the Internet provides the communications backbone for the home automation system.
As functionality rises and prices fall, companies that can provide these systems will encounter eager customers, according to market surveys. Almost one-third of today’s consumers say they would like to use the Internet to monitor their homes, while 36 percent want their homes to e-mail them at work about happenings there, including deliveries and children arriving home.2
The so-called “home operating system” is the brains of the home automation system. The overriding notion of the home operating system is that a PC acts as a gateway, funneling content into and out of the home and connecting all devices and users inside and outside the home environment.
Rather than completely going away, the PC will increasingly become embedded in the infrastructure. In fact, some experts believe the PC will end up off-site at a utility, with only the networked peripherals physically in the home.
While these “home operating systems” have been around in various forms for decades, smarter consumer electronics devices, the increasing power of PCs, and the interconnectivity of the Web are converging to drive major changes in this market.
For example, Home Automation Inc. markets WebLink software, which enables homeowners to control their “home operating systems” remotely using a PDA, Web-enabled cell phone, or Internet-connected PC. The WebLink software, which resides on a home PC, generates Web pages that can be viewed from any Web browser in the world. These Web pages let homeowners monitor and adjust lights, thermostats, security devices, and other appliances.
Similarly, Shell teamed with Motorola and Sun Microsystems to develop the Shell HomeGenie system. HomeGenie is a home operating system that provides consumers with Web-based remote access of their household devices. Users can control these devices remotely through most Web-enabled PCs, cellular phones, or PDAs. They can even monitor their homes remotely using wireless cameras. These cameras incorporate motion detectors that trigger the home operating system to send the owner an e-mail or text message if it is activated. The owner can then log on remotely to view what the camera has detected.
These increasingly sophisticated home operating systems were built by combining growing PC intelligence and Internet capability with inexpensive older control technologies like the X-10 standard, as a way to monitor and manipulate the home environment remotely. However, this is just the beginning.
In fact, we expect that they will eventually develop into truly powerful control networks to be used throughout the home. This brings us to the third area of the digital home ? household devices.
For over a year now, a start-up company called Be-at-Home has been marketing software that Web-enables a variety of brand-name, off-the-shelf products through a single home server.
Much like Home Automation Inc.’s system and Shell’s HomeGenie, users interact with the system via the Web. However, Be-at-Home also interfaces with a hand-held bar-code scanner that reads the UPCs of products. The system builds a shopping list that it can e-mail to any Web-enabled grocer for home delivery.4
Web-enabled kitchen devices like “smart refrigerators” will soon start appearing in homes. And that’s just the start. At the recent Consumer Electronics Show, an oven received a “Best of Innovations” award and drew admiring crowds. It’s called “Tonight’s Menu Intelligent Oven,” or TMIO, and its users don’t even have to be home to cook. The TMIO combines refrigeration and Internet control with a home cooking unit.
Users place fresh food in the TMIO before they leave for work. The food stays cool until a programmable cooking cycle begins. If the users’ plans change, they can adjust the oven settings via the Internet while they’re away from home. This smart device, which will be available commercially in 2005, already knows how to cook a multitude of dishes, but owners can add favorite recipes as well.5
Sears, which sells 38 percent of all the appliances in the U.S., sees a huge opportunity in leading the way to the “networked kitchen.” Aside from the convenience that smart appliances could provide for homeowners, they could save millions in costs for Sears if the company can apply remote diagnostics to servicing refrigerators, stoves, and washing machines.
Based on these developments, we offer the following forecasts:
In the household communications segment, we forecast constantly growing demand for Wi-Fi networks over the next three years. According to a newly released survey by the Consumer Electronics Association’s eBrain Market Research, 11 percent of on-line consumers ? approximately 7 million U.S. homes ? have already installed a wireless network. And 49 percent of those who don’t yet have them are interested in installing a home wireless network.
In the household automation segment, we expect major growth in the automated home controls market in the next four years. From 2003 to 2008, ABI Research estimates the automated home controls market will expand from $1.5 billion to over $3.8 billion, pushed in large part by mainstream consumer adoption.
In the household devices segment, we anticipate an avalanche of Net-connected appliances over the next three years. In-stat/MDR predicts that 370,000 will be sold in 2007 worldwide. These integrated devices will compete to be the coveted “media hub” in the home.
Although multi-media standards are currently under development ? by groups such at the Digital Home Working Group ? we anticipate considerable turmoil in this space as players across industries ? software, television, home automation, audio, personal computers, and telecommunications ? unveil their own incompatible versions of these devices. This leads us to expect a shakeout of players into two or three groups with competing standards over the next two years. The stakes are very high. Ultimately we predict that several of the largest firms competing in the home electronics industry will fail over the next four years.
Powerful audio and video servers will centralize music and video files in digital libraries. Their contents will be streamed to play-only devices throughout the home.
A digital portal at the home entrance will greet Bluetooth-enabled devices. Bluetooth is a short-range Wi-Fi standard that allows various devices to talk to each other. This portal will automatically download newly created audio and image files from digital music players and cameras into the home’s electronic music and video library.
Most kitchens will include a new appliance ? the digital butler. The digital butler will allow other devices to work together by relaying Bluetooth messages across appliances, and will facilitate all communications between the Internet and the kitchen.
Expect most refrigerators to have a PDA docking station by the end of the decade. It will match the contents of the refrigerator with a selection of recipes whose cooking instructions will be tailored to the day’s schedule. The PDA will automatically contact the digital butler with any schedule changes during the day. The digital butler will, in turn, adjust oven settings to accommodate new arrival times.
References List :
1. Vision, January/February 2004, "Getting Wired," by Phillip Swann. ⓒ Copyright 2004 the Consumer Electronics Association. All rights reserved.2. Vision, January/February/March 2002, "The Evolving Home Network," by Lisa Montgomery. ⓒ Copyright 2002 by the Consumer Electronics Association. All rights reserved.3. For information about the Shell HomeGenie, visit their website at: www.shellhomegenie.com4. Vision, January/February/March 2002, "The Evolving Home Network," by Lisa Montgomery. ⓒ Copyright 2002 by the Consumer Electronics Association. All rights reserved.5. Nashville City Paper, January 9, 2004, "Home Appliances Star at Las Vegas Show," by Kathleen Kemper. ⓒ Copyright 2004 by City Paper, LLC. All rights reserved.6. To find out more about automated home controls, visit the ABI Research website at:www.abiresearch.com/servlets/Press
