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| EMagazine Volume 6 Issue 2 Apr/May 2001 |
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Within the Internet appliance market it is striking that there seems to be a lack of appreciation as to just how pivotal a role home networking and residential gateways will play in the growth of the market. This is manifest by the fact that few devices thus far implement any "no new wires" home networking technologies (that is, phoneline, powerline or wireless) for communication purposes. by Navin
Sabharwal |
The Internet appliance market is just a couple of years old, but has only more recently begun to emerge from the shadows of the PC industry. Industry visionaries such as Larry Ellison of Oracle have long touted the possibilities that lay in network-centric computing. However, it is the Internet that will help unleash the obvious potential in a range of non-PC-based computing and consumer electronics devices.
In ABI's view, Internet appliances will extend the Internet computing experience beyond the PC without necessarily replacing the PC. The home will still have a need for a primary general-function PC.
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In some ways the pioneering Internet appliance product was the much-touted network computer from Oracle. Since then many companies have attempted to target the Internet appliance market. Companies such as Netpliance, Virgin and WebTV have failed to crack the line-powered Internet appliance market, while entirely new devices such as portable digital assistants (PDA) and portable MP3 players have gained real traction, but are not line-powered.
There are many complex reasons why some of the line-powered Internet appliances have failed to take off in high volumes. They include:
- High hardware costs - Liquid crystal display (LCD) panels, memory and networking components have failed to fall in cost as much as once forecast.
- Poor product designs - Many of the initial products were badly designed from the perspective of aesthetics, usability and features.
- Incorrect target market identification - Too many of the early products have been targeted at non-PC households.
- Flawed business strategies - Many of the early pioneers have not been well financed and have not adequately addressed the issue of device subsidization, particularly from the perspective of Internet service contracts.
The failures of Internet appliance pioneers are being noted, and newer entrants into the market are far more savvy.
Drivers
The ultimate market driver for Internet appliances is that the Internet is no longer a medium that will be experienced only on a PC platform. As the Internet evolves in tandem with continuing product development, providing the Internet experience on other platforms will be important in extending the usefulness of the Internet.
In order for Internet appliances to take off, companies need to understand that, particularly in the high PC-penetration markets such as North America and Scandinavia, many of these Internet appliances will be complementary to an existing PC in the home. Consumers will really only adopt Internet appliances when broadband access is more widely available and when sharing Internet access is feasible via home networking.
Over time it is also expected that increased consumer research should allow Internet appliance designers to better craft more desirable Internet appliances. Finding an optimal feature set will require trial and error, and more important, it will need significantly lower hardware prices than today.
Home Networking's Role
Within the Internet appliance market it is striking that there seems to be a lack of appreciation as to just how pivotal a role home networking and residential gateways will play in the growth of the market. This is manifest by the fact that few devices thus far implement any "no new wires" home networking technologies (that is, phoneline, powerline or wireless) for communication purposes.
One of the reasons for this is that the need to share Internet access and to communicate with an existing PC or PCs has not been considered critical because many Internet appliance vendors have targeted their product offerings at non-PC households. Moreover, there is great confusion as to how home networking technologies will shake out, perhaps leaving dominant solutions.
The reality is that most of the Internet appliance devices should be targeted at PC households for better market adoption. Home networking technologies need to become a prerequisite in product design so that Internet appliances can participate in the networked home.
However, ABI would caution that adding home networking support is not simply about adding physical components, but also about developing software that will shield the consumer from the complexities of networking and the relative immaturity of "no new wires" home networking technologies.
Residential Gateways Will Play A Key Part
The proliferation of residential gateway devices is of great importance to the Internet appliance market. In many ways, the broad proliferation of Internet appliances will not be possible without widespread deployment of gateways.
The main reason that the gateway is so important is that it will be key to facilitating bandwidth availability to multiple devices around the home. Given that Internet appliances will often be targeted to homes with one or more existing PCs, it is important that some device acts like a "traffic cop" and resolve the Internet sharing contingency dilemma.
In the long term, the dedicated residential gateway will also be important because the PC will have great difficulty handling the gateway role, especially as there begin to be multiple Internet appliances in each home. This scenario is likely, given that different Internet appliances are suited to different specific functions. The purchase of one Internet appliance by a household does not preclude the purchase of another, especially if they are designed for different applications.
The gateway will also be important because it will help compensate for inherent limitations (due to simplicity and cost reasons) of Internet appliances. Most Internet appliances have little or no onboard storage facilities (that is, no hard disk). For consumers used to saving files from the Internet, this is a major drawback of Internet appliances. The gateway may evolve so that it will incorporate a central file and content storage functionality that can be accessed by multiple devices.
The residential gateway may help enable service delivery, particularly of content-based services to these devices. Hence, it is possible for much of the intelligence and processing power to reside at the gateway, allowing for cheaper and simpler Internet appliances. For example, the gateway could be able to perform a local caching function for streaming audio services to an Internet radio device or help facilitate streaming video services that need buffering to allow for a smoother consumer experience.
As remote device management software and infrastructure become more sophisticated, device vendors and Internet service providers (ISP) will want more access and control of the Internet appliances after they are deployed. This will help minimize support costs and allow for post-sale upgrades of key features. A residential gateway could be of value in these cases.
Conclusion
The Internet appliance market is still very young and as with many markets is experiencing growing pains. For every success story there will be spectacular failures. For example the day after 3Com announced that it was discontinuing the Audrey Internet appliance, Intel announced a deal to supply 250,000 DotStation web terminals to Banco Santander, Spain's largest bank. Patience is therefore important in nurturing the long-term growth of this market.
Navin Sabharwal is Vice President of Residential & Networking Technologies with Allied Business Intelligence. His latest study is titled "Internet Appliances: Network-Centric Computing Opportunities in the Internet Age."
Allied Business Intelligence Inc is an Oyster Bay, NY-based technology research think tank specializing in communications and emerging technology markets. ABI publishes strategic research on the broadband, wireless, electronics, networking and energy industries. Details of these studies can be found at www.alliedworld.com , or call 516-624-3113 for more information.
