Residential Market Opportunities in Home Networking

Cahner’s in-state group recently predicted that the connected home market, which consists of home networking equipment and software, residential gateways, and home control and automation products, will grow from $1.4 billion in 2001 to $9.2 billion worldwide by 2006. The high-tech market research firm’s report, The Digital Domicile: The Exploding Market for Home Networking Technology and Services declares that home networking is one of the few bright spots in today’s otherwise challenging technology market.

According to the report, several factors are driving the home networking market’s positive direction, such as the recognition among consumers of the need for network security; the release of Windows XP, the first real user-friendly home network operating system from Microsoft; the predicted emergence of the home server; and the gradual building interest in home networks among broadband service providers. “After years of asking questions and learning about connectivity, the consumer has begun to see the value of networking a home, despite a tough economic environment,” said Michael Wolf, In-Stat’s director of local area network (LAN) and enterprise services.

A recent survey of 2,500 households conducted by Parks Associates, in Dallas, demonstrates steady consumer demand for home networking. The survey indicates that consumers are mostly seeking home networking solutions to share Internet access and peripherals and also for entertainment applications. “With a more detailed profile of the purchasers of home networking solutions, we are better able to build forecast models that we believe are more accurate in presenting the outlook for this market,” said Kurt Scherf, vice president of research.

State of the market

Convergent Media was established as the low-voltage division of Collins Electrical Construction Co., St. Paul, Minn., in 1999 to specialize in the residential structured premise wiring market. “The new construction segment of the home networking market is the easiest in terms of installation and it is the most cost-effective for the client,” said Ralph Burrell, manager of strategic initiatives. The growth of the home networking market in the upper Midwest, even through a tightening economy, is mostly attributed to scarcity of available rental units, which is driving young professionals to purchase housing instead. And these consumers, who are computer and network savvy, are demanding modern home networking systems. At the other end of the demand spectrum, according to Burrell, are computer-literate, aging baby boomers who are moving into retirement communities.

The home networking market for new construction in the Chicago area also continues to enjoy great growth. “Builders are using structured premise cabling systems as a way to differentiate themselves from the large number of players in the field and to provide themselves with a competitive edge,” said Ed Mattox, president of Inland Electric Corp., Shorewood, Ill.

The upgrade and retrofit segments of the home networking market, however, may not offer electrical contractors the same level of opportunities that new construction does. Upgrading or retrofitting an entire cabling system is technically more difficult in older homes and can be prohibitively expensive. “We are seeing demands, however, for both upgraded Category 5 or Category 5e cable to be run to the home’s main computer outlet and for existing security systems to be outfitted with improved cabling,” said Burrell.

Mattox agreed that home networking is not enjoying any great growth in the retrofit or upgrade segments. “The market is fragmented and most homeowners don’t even know whom to call if they want upgrades at all,” he observed. He does predict, however, that in the next to 10 years, as the new homes built in the early part of this decade begin to age, the market for upgrading home networking systems should begin its growth. “The initial infrastructure will already exist, making the job easier for the contractor and more cost-effective for the homeowner.”

Power Concepts, Inc., Forestville, Md., which performs most of its work in higher-end renovations that tie Category 5 cabling to home office servers, connecting phone and broadband cables to the existing structured premise wiring system, and tying together security and fire and environmental controls into a home management network, takes the view that the upgrade and retrofit segments of the market are indeed positioned to grow as Internet speed increases. “As more families rely on the Internet at home for various functions, they will need more than one PC that requires interconnectivity for applications such as file sharing and high-speed access,” said Len Bodnar, president.

What about wireless?

Wireless communication systems might be making great inroads in office and other commercial buildings to enhance the existing computer network infrastructure, but in home networking, the general consensus is that nobody wants it. “Homeowners are not demanding wireless systems in the home because it does not provide more functionality and costs too much,” observed Burrell. He added, however, that some demand exists for the more expensive wireless security systems, which are easy to install.

“We don’t see any demand for wireless in the home,” observed Mattox. He cites a couple of reasons for homeowners’ indifference, including still undeveloped technology and wireless’s inability to guarantee access. “It is just as easy for a homeowner to plug a laptop into a jack to gain computer mobility with assured network access,” he said.

There is a little more hope for wireless in the retrofit, rather than the new construction market segment, although the technology is still far behind hard-wired systems. In addition, wireless costs need to be reduced before it becomes cost effective to use for the residential retrofit market. “When costs are substantially reduced, however, people will begin to demand wireless as a standard option in the home,” predicted Bodnar.

Future of the market

Leviton Integrated Networks from Leviton Manufacturing Co., Inc., Little Neck, N.Y., is a structured wiring solution that supports high-speed Internet and computer networking, whole-house audio, multi-room video, and home security and surveillance features. According to Ian Hendler, channel manager, the number of residentially based offices is an important driver in the home networking market. Hendler cited that there are about 18 million home offices in the United States today, and it is predicted that by 2003, that number will climb to 30 million. In 2001, about 23 million homes had two or more PCs in them, yet in just two short years, that number is expected to climb to 35 million. “In 2003, there could potentially be 80 million devices being used to access the Internet,” Hendler said.

“Similar to commercial environments, the next biggest technological step we’ll see will be an increase in speed from 10 Base-T to 100 Base-T,” Hendler said. This will greatly increase the speed with which data moves within the network, providing enhanced video and entertainment options for the homeowner, he further predicted. In addition, the installation of Internet gateways in the home that support the 100 Base-T speeds will allow computers to share broadband access, create faster home networks, and provide firewall security. “The electrical contractor that understands these concepts can promote the more advanced systems to the homeowner,” he added. “The home networking market will expand greatly as the Internet is increasingly used as a communication tool and the need for security becomes an even more integral part of our daily lives,” added Mattox.

Finally, according to Burrell, the home networking market will only continue to grow as “more people telecommute, e-commerce recovers from the downtown in the stock market and becomes a thriving business model, and lifestyle changes and increased reliance on the Internet drive homeowners’ demand to ride the technological wave,” he concluded. EC

BREMER, a freelance writer based in Solomons, Md., contributes frequently to ELECTRICAL CONTRACTOR. She can be reached at (410) 394-6966 or by e-mail at

About the Author

Darlene Bremer

Freelance Writer
Darlene Bremer, a freelance writer based in Solomons, Md., contributed frequently to ELECTRICAL CONTRACTOR until the end of 2015.

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