Optimism runs high for residential broadband

In a move to combat the dampening effects of an oversaturated enterprise market, many service providers, application developers, and equipment makers are turning to the residential broadband market as the next big source of revenue.

To that end, delegates at the Broadband Home conference in San Francisco on Monday detailed their plans to move into the suburbs, but many are encountering very different customer demands from those of enterprise users.

Microsoft Corp. touted its eHome division and its vision of total connectivity, which will enable personalized experiences and ubiquitous access throughout the home. The Redmond, Wash.-based giant is banking heavily on the nascent 802.1x standard, which promises to give home users secure wireless access. (The standard has also found its way into the yet-to-be-released Windows XP operating system that many observers are hailing as the new cornerstone of home networking.)

But Microsoft has also had to adapt to the demands of residential users, and entertainment applications are at the top of the list. Specifically, digital audio and photography are driving consumer demand, according to Mike Toutonghi, vice-president of eHome, in a keynote speech. Hence, Microsoft’s next step is to port digital media from the PC to other kinds of devices, such as handhelds and stereo equipment.

Customers also want convenience and control over their services, Toutonghi said, in a call to encourage equipment makers and standards bodies to build cross-service and cross-device interoperability at both the physical and protocol layers.

“It’s really about simplicity,” he said. “Rather than thinking about remote controls and ports, the idea is that things just happen. Devices have to understand how to work together.”

Finally, customers are demanding advanced communications services, Toutonghi said, such as instant messaging and high-bandwidth services such as VoIP (voice over IP), videoconferencing, and unified messaging.

Optimism ran high at the conference, fueled by predictions such as Texas Instruments’ claim that 85 per cent of all homes in the United States will be networked by 2005, and research firm Cahners In-Stat Group’s projection that the home networking market will grow from US$1.4 billion in 2001 to US$9.2 billion by 2006.

“The home market is potentially the next digital gold mine,” said Bernd Lutz, head of the home division at CableLabs, a Louisville, Colo.-based research and development consortium of cable television operators.

“It’s a no-brainer that the market will do well,” agreed George Liddle, director of business development of Sigpro, a contract engineering services firm in Mountain View, Calif., that develops embedded communications systems. “It’s just a question of how quickly we can get rid of some of the inhibitors that are slowing down progress.” Sigpro’s immediate plans include adding interactive voice to multiplayer video games.

Indeed, the product pipeline for home networking gear remains active. On Monday, Lucent Technologies unveiled its LC Angled Polished Connector, a fibre connector that promises to double the density of fiber termination equipment, thus boosting performance for the cable television and residential fibre markets. Also on Monday, AMD rolled out its 1.1GHz Duron processor, which is aimed partly at enhancing residential applications such as digital photography and audio.

But despite that optimism, delegates noted that much work has yet to be done by equipment makers and service providers for the residential market to reach its potential.

“Even with all the investment that Microsoft is making, no single company can do this alone,” Toutonghi said. “We have to work together to make it happen.”

Other observers pointed out that simplicity is key in a market dominated by non-technical customers.

“It’s a little ridiculous,” agreed Guy Kawasaki, chief executive officer (CEO) of Palo Alto, Calif.-based venture capital firm Garage Technology Ventures, who cited the difficulty homeowners face in procuring broadband connectivity as the industry’s biggest flaw.

“Forget about layers, content on demand, and movies,” Kawasaki said. “Right now, people cannot understand [why they cannot get service]. If you fix this problem, you’re 90 per cent of the way there.”

Indeed, the market has not settled yet, as evidenced by the fact that key players have recently shown poor results. For example, Excite@Home headed into U.S. bankruptcy court on Monday, raising concerns among some that residential users will lose their service.

To Kawasaki, those struggles imply that only technologically strong companies with viable business models will survive in the emerging residential marketplace.

“It’s all about technology,” he said. “It’s about physics and electrons. No more of these ‘one percent’ solutions, where if just one percent of the market clicks through, you’ll have a huge advertising budget.”