Sorry, no takers for home networking!

Reshma Kapadia

NEW YORK: Big Internet media firms are revving up plans to let families share

music and surf the Web on different devices simultaneously, but with one Web

connection. However, so far consumers have not been clamoring for the home

networks.

Internet service providers such as AOL Time Warner Inc. and EarthLink Inc.

are gearing up for home networking, but analysts say such services won't take

off until more consumers have high-speed, or broadband Internet access.

"Only four percent of online households have said they are likely to shop

for home networking gear so it's hardly something people are clamoring

for," said Jupiter Media Metrix analyst Dylan Brooks. "The biggest

challenge is overcoming consumer reluctance."

That reluctance led to the early demise of Audrey, the kitchen-countertop

Internet device from 3Com Corp. The company pulled the plug on Audrey last week

after it failed to generate any substantial consumer interest. Nevertheless,

companies including AOL Time Warner and Earthlink are hoping to jump-start the

market as Internet service providers face a soft advertising market and slower

growth for dial-up Web access.

Atlanta-based EarthLink is expected to unveil a new home networking service

this spring. AOL Time Warner also plans to build on its pact with personal

computer maker Gateway Inc. and their ‘touchpad,’ which lets users access

Web services through a device other than a PC this summer.

Getting in early



The big companies see home-networking as a way to get a foot in the door with
high-speed, or broadband, Internet services that will later pay off with

higher-cost offerings such as interactive TV and digital music delivery.

"Home networking really goes part and parcel with broadband," Brooks

said. "The major hook for broadband in terms of applications has to be

beyond using the computer to get on to the Web faster."

For now, home networking means sharing the Internet connection with others in

the home and perhaps sharing a printer. "That is initially the primary

reason (people) are buying it, although EarthLink sees home networking in

general as a real opportunity to offer value-added services," said John

Ellis, director of broadband products at EarthLink, adding that the company

starting looking at the market mid-last year.

"Some of the early work and announcements (for the touchpad) was to be

used in a shared environment so you are going to see more roll out of that as it

goes golden this summer," said newly appointed AOL president of product

strategy Peter Ashkin. "But really it's about broadband because home

networking, even if it is here today, is not compelling without the broadband

aspect. We will sense the first glimpses of it in the summer," he added.

Broadband holds the key



The number of homes with more than one PC is quickly growing along with the
desire to be able to share one printer or one connection for the PCs, helping to

set the stage for home networking. "While it's true, historically, that

there have not been a lot of people who have bought home networks, I think with

the evolution of broadband and the fact that so many households are out there

with multiple PCs, we will see it take off," EarthLink's Ellis said.

Dial-up access has reached a level of maturity in the United States, with

every three out of five people in the country having access to the Web at either

home or work, according to Nielsen/Net Ratings. By 2003, Jupiter expects about

23 percent of online consumers will be accessing the Web through a high-speed

connection and revenue from the high-speed access will comprise about half of

the total $12.1 billion Web access.

"Broadband penetration today is still relatively small, but we are

seeing huge growth there. We are rolling out DSL in a significant way and trying

to make sure that once you have connections we are able to provide you with

other things like the network aspect of it so that more users are able to use

the same connection simultaneously," Ashkin said.

AOL Time Warner said offering high-speed access over cable lines is a high

priority, but the company is in wait mode on several initiatives, including ways

to leverage some of Time Warner's content assets in the high-speed environment.

"There are a number of other hurdles we have to go through before that

happens," Ashkin said.

As a condition to approving the merger of AOL and Time Warner, US regulators

said the combined entity had to sign up some of AOL's rivals before it could

deliver AOL's high-speed services over Time Warner's cable pipeline.

Types of home networking and devices



Among the challenges keeping home networking from blossoming into the next
sector is the lack of devices that have generated interest. Some early devices

include Netpliance Inc.'s iOpener and Compaq Computer Corp.'s handheld iPAQ

pocket PC. "There is a lot of hype about Internet devices and they are all

collapsing because people really do like PCs. There is a warm, fuzzy factor that

goes along with the PC and you know you are not cutting yourself off from

(doing) something," said Meta Group vice president Steve Kelynhans.

"If these appliances didn't cost so much, people might get over it, but

that isn't the case - at least for the next two to three years," Kelynhans

said. Nevertheless, Kelynhans said companies have to dip their toes into the

water because now is the time to establish their name and take control over the

direction of the market.

"The market's growth is going to be a slow burn. It's not something that

explodes into fire. It will smolder and build. I think it will become

increasingly and incrementally important each quarter for the next two to three

years," Kelynhans said. "Where (the market) really flips over is the

day consumer electronics manufacturers start embedding networking capabilities

in stereos, DVDs, CD players and TV."

(C) Reuters Limited 2001.