In the home-networking market, data networks — routers, access points, and residential gateways — continue to dominate deployments.
Broadband connections worldwide will grow from more than 400 million households in 2008 to 658 million households in 2013, which will spur a parallel increase in data networks, from 202 million households in 2008 to nearly 350 million households by 2013.
Most of these data networks will come from broadband service providers, which are increasing their role in home networking through RG deployments, which represented 36% of all data network rollouts in 2008 and will grow to 55% by year-end 2013.
However, the notion of the home network will soon expand beyond traditional data applications. Parks Associates classifies home-networking evolution in a three-stage process.
Stage 1: In stage 1, distribution was dominated by retail, particularly in the U.S. For most consumers, the “home network” allowed multiple computers to access an Internet connection at the same time. As notebook sales overtook desktop sales, home networking expanded to include a PC that connects wirelessly to the Internet through an access point or RG.
Stage 2: In Stage 2, broadband service providers have increased deployment of RGs. Home-network nodes are still predominantly routers, access points, residential gateways and bridges. The numbers of other networking devices are low, with broadband- and home network-connected game consoles dominating the “connected CE” market.
Penetration of devices such as TVs and set-top boxes with embedded home-networking features is limited, although 8% of networked households (about 2.8 million U.S. households) indicate that they have a networked TV.
Stage 3: The 2009 International Consumer Electronics Show showcased multiple connected TVs, connected Blu-ray players, and “cloud media” set-top boxes. As manufacturers enhance the capabilities of networked CE, these devices will be able to receive online content and services and distribute content “upstream” to Web-connected devices such as computers and mobile platforms.
This “place-shifting” phenomenon began with third-party companies such as Sling Media and Orb Networks, and manufacturers are now embedding these innovations into end-user products.
Stage 3 of home-networking development will feature residential gateways deployed by service providers and functioning as media managers. Verizon Communications’ Home Media DVR exemplifies a system in which the residential gateway serves as an intermediary between PC and TV. In addition, the cable industry, which has had limited home networking deployments, is showing more interest in using gateways to terminate QAM and IP programming and then transcode as necessary. This configuration allows gateways to serve as distribution hubs for this content.
Drivers are aligning to move connected CE to Stage 3 within a short period of time. For the main actors in this market — service providers, CE vendors and the consumer — several key catalysts have emerged that will put the connected CE market on a solid growth trajectory.
Service-provider competition: As more players enter the video space, operators need to differentiate their core offerings in order to acquire new subscribers and retain their existing base. Multiroom DVR capability is a good example of home networks adding differentiation and fostering additional revenue.
Differentiation and potential new revenue sources among CE manufacturers: The game console’s migration to a multiservice platform is a success story that many CE vendors hope to emulate. Today, manufacturers hope these new features will provide differentiation and boost sales margins, but future business plans may expand to include revenue from transactional and ad-supported content and services.
Consumer desire for multiroom, multiplatform, and mixed-media use: Consumer demand for features like multi-room DVR is an indicator of future interest in additional networked scenarios, including links between stationary and mobile/portable devices and access to content from outside of the home (“place-shifting”).