Companies Step Up Home-Networking Efforts

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Panasonic Consumer Electronics is pumping $10 million into
silicon developer Epigram Inc. to help foster solutions for the young but potentially huge
high-speed home-networking market.

The investment -- the first from a new venture fund created
by Panasonic's parent, Matsushita Electric Industrial Co. Ltd. -- reinforces the
growing interest by major mainstream consumer-electronics powerhouses in tapping home and
small-business demand for simple networking.

"We're interested in Panasonic because we believe
that a billion types of devices will get connected to the Internet in the future,"
said Jeff Thermond, Epigram's president and CEO. "And the traditional
data-communications manufacturers, with the exception of 3Com [Corp.], do not have what
you typically think of as consumer brands."

Epigram's "iLine 10" chip set supports
network connectivity over existing home phone lines at speeds of up to 10 megabits per
second.

Besides the investment from the new Panasonic Digital
Concepts Center, Epigram and other PDCC partners get access to its 20,000-square-foot
incubator facility, plus Matsushita's manufacturing and research-and-development
resources.

The Sunnyvale, Calif.-based company was already working
with 3Com -- which also has investment stakes in Epigram-Nortel Networks, Texas
Instruments Inc. and Cisco Systems Inc. as commercial partners -- but it welcomed a new
foothold in consumer-oriented solutions.

Attention from consumer-electronics giants such as
Panasonic, Sony Corp. and others is widely regarded as crucial in spurring the growth of
the nascent home-networking market.

The home-networking equipment currently being developed
would enable such applications as multiplayer gaming or access to sophisticated video,
audio and text content deliverable via cable's broadband pipe to the home.

It is also a framework for multiple personal computers,
televisions, VCRs and other devices to share a single Internet connection or peripherals.

"It's not as if everybody's out there
clamoring for home networks," said Karuna Uppal, an analyst for consumer-market
convergence at Cambridge, Mass.-based The Yankee Group. "But there are some segments
of consumers that may not know that they're looking for a home network, yet they are
looking for the functionality that a network would allow."

The Yankee Group estimated that about 500,000 new home
networks will be installed in 1999, jumping to 2 million next year.

Announcement of the Panasonic investment came on the heels
of a deal unveiled two weeks ago by Microsoft Corp. and 3Com to jointly develop cobranded
home-networking kits, with availability planned for OEMs (original-equipment
manufacturers) by this summer and for retail by the fall.

The initial kits -- based on the standards of the Home
Phoneline Networking Alliance and the Universal Plug and Play technology being pushed by
Microsoft -- will link devices at 10 mbps via home phone lines or Ethernet, with plans to
later offer wireless or home-power-line-based links.

The companies also indicated that while the initial
products would focus on PC connectivity, other devices, such as handheld PCs or gaming
machines, should eventually fit into the mix.

"What's driving this is the growth of broadband
in the next few years," said Adam LeVasseur, Microsoft Hardware Group's product
manager for home networking. "Right now, we think that there are 15 million to 20
million multiple-PC homes, and with lower-priced PCs and broadband service, we see that
doubling over the next three years."

Panasonic sees that as an opportunity to create a landscape
whereby its core products -- TVs, VCRs, DVD players and the like -- share capabilities
across the network.

"The whole reason of doing home networking is to be
able to share resources along multiple appliances," said Paul Liao, chief technology
officer for Matsushita Electric Corp. of America.

"I wouldn't say that the vision is for everything
to migrate to one place. I think that capabilities will be distributed across multiple
appliances and distributed across home networks," Liao added.

Panasonic has already made some halting steps toward
getting more involved in broadband equipment. The company is still developing a
standards-based cable modem after an earlier joint effort with Harmonic Lightwaves Inc.,
announced in January 1998, failed to bear fruit.

Liao said Panasonic wants to have a product certified under
the industry's initial Data Over Cable Service Interface Specification 1.0
interoperability protocols, but it might aim for later enhanced standards, depending on
how market demand develops.

In another step toward home networking, this summer will
mark the debut of Panasonic's "MicroCast" device, which enables consumers
to channel their PCs' output to their home televisions over wireless connections.

Liao said the setup allows the viewer to use a single
Internet connection for both PC and TV, and it does not require the two devices to be in
the same room.

3Com was already developing a lineup of home-networking
gear under its "HomeConnect" brand, incorporating Epigram's chip set to
network PCs, peripherals and other devices over home-phone wiring.

But Neil Clemmons, 3Com's vice president of consumer
marketing, said HomeConnect would complement the upcoming 3Com-Microsoft kits, with
planned products possibly combining cable or digital-subscriber-line modems with
home-network adapter cards.

"What you'll see is that HomeConnect products
will bridge more into the wide-area space, while the Microsoft-3Com products will stay
more within the local-area space, which is the home," Clemmons said.

He added that several MSOs had expressed interest to 3Com
about bundling the upcoming networking products in conjunction with their own high-speed
Internet-connection services.

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