As broadband continues to penetrate ever further into our residential landscape, many customers have begun to see the benefits of installing a home network to share this valuable (not to mention expensive) resource. For those of us who have more than one computing device, a home network is almost a necessity, and will remain so as more and more devices are introduced.

However, as expensive and unappealing products continue to flood the market, potential customers have a hard time deciding which technology to use, and how much to pay for it. Though manufacturers are quick to promote their favorite technology, confusing acronyms such as 802.11b, HomeRF, Ethernet, and HomePNA do little to spurn networking sales among the uninformed public. Furthermore, manufacturers are struggling to provide a useful product at the right price for skeptical (and increasingly price-conscious) customers.

Therein, what exactly is it that people want in a home network, what will they pay, and how should hardware manufacturers market their products?

First of all, hardware manufacturers have notoriously pushed products that consumers have little interest in, or understanding of, their operation. Instead of listening to what customers want or need, high tech manufacturers have pushed out wildly advanced products that people have little use for, or that fail to meet a prescribed need. One example is the fact that Telecom Companies have basically ignored consumers’ wishes and pressed ahead with the build-out of high speed 3G networks, when all consumers really want is a cheaper mobile phone service, a better range and fewer dropped calls. Instead, Telecoms are attempting to charge more for phones, and more for a service, with an even smaller geographical reach.

Home networking suffers from a different malaise, with more rampant infighting than most sectors are familiar with. Competition has sprung up between 802.11b, Bluetooth, and HomeRF manufacturers, when there should be little competition. Blindly promoting one technology over another does not lead to strong sales; instead, it leads to consumer confusion and missed opportunities. Manufacturers should spend their time promoting the application and uses of their respective technologies, rather than trying to “one-up” one another.

Still, what is it that people want in a home network, and what will they pay?

Because of the nascent state of wireless and home networking, consumers are more apt to pay for ease-of-use than they are to pay for technological enhancements. A case in point is AT&T Broadband, which is offering customers the option of purchasing Linksys home networking products, and then allowing AT&T to install and monitor the products for a monthly fee. Though tech-savvy customers would balk at the monthly charge, and rightly so, many customers have signed up for the service in the hopes of removing the installation headache and letting someone else do all the work. Therein, until customers become more confident and comfortable with the new home networking technologies available, they will continue to pay for ease of use.

But what exactly do customers see as useful, or enough so that this usefulness will lead to sales?

Samsung and LG believe that “network-able” washing machines and microwaves are the answer, yet I suspect that public response to this initiative will be less than favorable for the Korean manufacturers. Instead, ease-of-use, attractive price points, and applicable products will sway customers. Networking kits used to be the simple answer to a one-size-fits-all network, yet manufacturers failed to update the technologies in the kits fast enough for client interest, thus they have all but disappeared from retail sites. Customers are looking for a way to share their broadband connection as effortlessly as possible. Switches and broadband routers have been popular for shoppers in this respect, with routers and new CPE (consumer premise equipment) products offering an even greater array of choices. From wired to wireless, Phoneline to Powerline, potential customers have a good choice of networking products to utilize.

Though manufacturers may wonder where the best place to sell their home networking products is, many have already found that retail electronic and computer stores are their best bet. Customers have responded well to advertisements in their weekend paper highlighting networking products available at the local Best Buy or CompUSA. With the use of rebates and highly promoted price drops, customers are becoming more attuned to the importance of a home network, and to their choices in this respect. Delving deeper into the interest that customers have in promotions, we see that most are influenced by price and brand name. It makes sense that customers who are unfamiliar with a new technology will make a purchase from a retail location they trust, versus an e-Commerce site that may or may not be safe, or particularly trustworthy for purchasing. According to ARS research conducted in the first quarter of 2002, those routers, access points and other CPE products that have received the most attention are those that are priced around the $150-175 price points.

Manufacturers would do well to pay attention to what customers will really find appealing, and what they can offer these potential clients that will make them want to throw down their hard earned cash. In this respect, being first-to-market will only result in a few sales by early adopters, and a greater chance of failure. In the case of home networking, not being first-to-market is actually a benefit, as manufacturers can learn from the mistakes of their competition, and wait until component and fab (contract manufacturers such as Flextronics, Celestica, etc) costs drop, which will allow them to undersell their competition. The prevailing companies in the home networking arena will be those that carefully weigh the attractiveness and ease-of-use for their products, as well as offer an attractive price point; being the first to offer a network-able toaster will have little benefit to a manufacturers’ bottom line.

Many research companies continue to place the blame of slow home networking sales on the ineffective marketing by networking manufacturers. Though these analysts may have a valid point to make, the marketing of home networking products has improved in the last six to eight months. Weekly fliers and promotions have drawn considerable attention to the usefulness of a home network, and customers have begun purchasing home networking products with greater frequency than ever before. However, manufacturers in this industry still have a ways to go before they see far-reaching signs of reprieve to this once-staggering market.

To sum up, networking hardware manufacturers would benefit from digging deeper into the residential homeowners’ psyche before developing confusing, expensive products and services to a disinterested population.

Randall Anzalone currently tracks the Networking Hardware Sector for ARS, with a focus on wireless home networking. Within this area, Randall provides competitive analysis on current industry trends and key technologies.

ARS Inc. is a competitive market intelligence company that analyzes daily market, channel, and product changes and informs clients what is happening and why, analyzes relevant impacts, and predicts what to expect in the near term.

For more information about ARS or Randall Anzalone, please visit the ARS web site at .