Back in February I wrote an article for HomeToys titled “The Industry Outlook for 2001.” Now with the year coming to an end I thought it would be interesting to provide an overview of how 2001 turned out for various home networking-related technologies and market segments.
In the afore-mentioned piece I had indicated that the poor economic outlook may have a significant impact on these areas and to some degree this has come to pass. It wouldn’t be an overstatement to dub 2001 as the tech industry’s “annus horribilis.” The technology downturn has had a particularly negative impact on the more futuristic areas. This is not surprising given that companies have slashed R&D budgets and that unprofitable product lines – indeed entire divisions in some cases – have been axed. In addition, venture capitalists have been far more selective in funding start-ups.
In this environment it is not surprising that not all of the technologies and market segments discussed below have lived up to expectations.
IEEE 802.11b (aka Wi-Fi) – The wireless home networking market in 2001 has undoubtedly been driven by the crossover of 802.11b technology from the enterprise and vertical markets into the residential space. A cursory examination of the shelves at the likes of CompUSA illustrates the broad availability of a range of affordable 802.11b-compliant solutions. The spread of 802.11b technology has occurred despite the fact that the IEEE has yet to ratify its quality of service (QoS) enhancements (802.11e) or release its successor to the fatally flawed Wired Equivalent Privacy (WEP) security protocol. The coming year will see an increase in embedded implementations of 802.11b functionality into notebook PCs, residential gateways, and several other devices.
IEEE 802.11a (aka Wi-Fi5) – There is no doubt that 802.11a has begun to emerge as a legitimate wireless LAN technology. However, there remain some question marks regarding the oft-mentioned range issues, the impact of 802.11g technology and the lack of native backwards compatibility with 802.11b. In any case ABI does not expect to see 802.11a solutions penetrating the consumer market until late 2002, at the earliest.
IEEE 802.11g – The recent approval of a draft 802.11g standard should allow data rates in excess of 20 Mbps in the 2.4 GHz band, while maintaining backwards compatibility with 802.11b. However, final ratification of 802.11g will not occur until the second half of 2002, though 802.11g chipsets compliant with the draft standard should be available earlier. While there is sound rationale for 802.11g to exist ABI believes that it greatly adds to market confusion, not least because it is represents a compromise between Intersil, Texas Instruments and 802.11a component start-ups. It remains to be seen to what extent the market embraces 802.11g, damaging the short to medium-term prospects for 802.11a technology.
HomeRF – HomeRF technology has largely been displaced by 802.11b as the data networking choice for wireless home networking during the course of this year. The handful of remaining HomeRF backers are working to reposition the technology for entertainment networking and cordless telephony. They will be aided by the recent availability HomeRF 2.0 chipsets that allows for data rates of 10 Mbps.
Bluetooth – Bluetooth technology looks set to come through 2001 scathed but still very much alive. As predicted we saw a number of premature articles heralding the demise of Bluetooth. Despite well-publicized interoperability and cost issues, and the growing popularity of 802.11b the fact remains that Bluetooth technology remains viable. There are already indications that optimism regarding the prospects for Bluetooth is returning and 2002 will be witness to a number of positive developments.
Phoneline Networking (HomePNA) – HomePNA technology is currently going through a retrenchment phase. HomePNA 2.0 products have had limited success going through the retail channel, as consumer awareness remains low and wireless offers a more intuitive solution. While HomePNA 2.0 is increasingly appearing embedded into a range of devices, the shipments of these devices remain limited and competition may appear from powerline technology in 2002. The bright spot for HomePNA is the potential afforded by the residential gateway segment and the interest from service providers. Much will depend on the reception to the Voice over HomePNA specification and the next generation HomePNA 3.0 technology.
Powerline Networking – Despite appearances this has been a busy year behind the scenes for powerline networking. HomePlug-compliant chipsets have been developed and the coming year should see the first significant arrival of powerline-enabled solutions. In the meantime Inari-enabled solutions are already available and we should expect to continue seeing other proprietary or standards-based powerline solutions become available next year.
Residential Gateways – The residential gateway space has had a mixed year. On the one hand service providers are slowing the spread of broadband access availability, cutting back on capital expenditure plans and delaying the launch of new services. On the other hand service providers have begun offering home networking packages to their broadband subscribers in conjunction with the likes of 2Wire and Linksys, and there is increasing evidence that the gateway market is a tangible one with healthy growth prospects.
Internet Appliances – Despite falling component costs the news on the Internet appliance (IA) front has been almost universally bad this year. Companies such as 3Com, Gateway, Intel and Sony have greatly scaled back their IA efforts, and funding has been scarce for IA start-ups. However, the maturation of the PC market, greater broadband access availability and the spread of home networking will continue to drive the long-term interest in more application-specific computing devices and new form factors. Much of the attention in the IA space is turning to the set-top boxes and game consoles. In addition, Microsoft is promoting its Tablet PC architecture, which looks similar to the broadly adopted WebPad design from National Semiconductor, but embodies a different philosophy. The Tablet PC is designed as a full-featured computer representing potentially the next evolution of the notebook form factor, while the WebPad and its imitators were conceived as simpler, more limited IA devices.
Structured Wiring – The housing market has remained surprisingly resilient in the face of negative economic news and this has been a boon for the structured wiring market. However, though the growth in the structured wiring market has been healthy this year there is evidence that some homebuilders have resisted embracing structured wiring more aggressively to avoid raising the cost of new homes.
Control Networking Protocols – Progress in this space has been disappointing, with only LonWorks gaining visible traction. 2002 is likely to be a far more reliable indicator of things to come.
Smart Appliances – Development of smart appliances, particularly white goods, with built-in control networking solutions was very limited this year. The smart appliance space was greatly impacted by the economic slowdown and market participants are hoping for increased market activity next year. The lack of a de facto control networking protocol remains a glaring issue that needs to be addressed.
A Last Word
Clearly 2001 has been a mixed bag in the areas discussed above with the number of bright spots being equaled by instances of postponed growth.
The depth of this technology industry downturn has been unprecedented by most metrics. It has reinforced the belief that the tech industry despite its allure is cyclical beyond just the semiconductor segment. Nevertheless over the long-term the technology industry, as an aggregate, should post healthy positive growth.
ABI believes that 2002 will see a steady, but not spectacular, return to growth and that should be a cause for optimism going forward, with the areas discussed in this article in prime position to benefit.
Navin Sabharwal is Vice President of Residential and Networking Technologies with Allied Business Intelligence. His latest study is entitled “Wireless LAN Silicon ICs.”
Allied Business Intelligence Inc is an Oyster Bay, NY-based technology research think tank that offers expert advice and research on wireless, broadband, and emerging technologies. Details can be found at www.alliedworld.com or by calling 516-624-3113.