By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Wireless home networking products had a breakout year in sales in 2003 with consumers adopting the technology in greater numbers than expected. This trend shows every indication of continuing this year as vendors roll out a broader range of consumer friendly wireless-based products.
Particularly amazing to the industry was 802.11g's sales performance. Home-networking kits based on this wireless specification became instantly popular with the average, non-technical consumer at retail, a path not usually taken by a new technology.
"11g took off much faster then expected in 2003," said Belkin's Jonathan Bettino, product manager, "G is leapfrogging the early adopters to the mainstream person."
John Burke, Motorola's broadband consumer solutions general manager, said finalizing the 802.11g specification was an important milestone for the category, but the consumer reaction was even more significant.
"Consumers were willing to put wireless in their home, but also the specification did help resolve some of the customer confusion [over the various 2.4GHz products]," he said.
Driving all wireless sales was the Internet. Although there are a variety of peripheral products on the market, such as security cameras, being able to share a single Internet connection between several computers was, and is, the reason consumers are adopting these products in such large numbers, according to Bradley Morse, D-Link's senior marketing VP.
"The market is staged for huge growth if the pricing is right," Morse said, adding that D-Link plans to lower the prices of its 802.11g devices to the 802.11b range. When D-Link introduced its first 11g product it stratified its merchandise mix by bringing the devices in at 802.11b prices, while lowering the 11b product to a new, lower price point.
Beyond the technical reasons for wireless' popularity is the acknowledged expertise of sales associates at retail. Burke said big box sales associates have fine-tuned their explanatory skills and are now quite knowledgeable, noting that there is always room to grow.
Belkin and Netgear have taken an additional step beyond the basic sales-associate training by placing their own people in select stores to help sell their products.
WiFi 802.11b and 802.11g wireless networks sold well above industry expectations last year. During the first half of 2003 2.6 million 802.11g products were shipped, but this paled in comparison to the 13.7 million 802.11b devices that shipped during the same period, according to data from InStat, Scottsdale, Ariz.
Consumer interest in the relatively new 802.11g technology, which only became available in early 2003, increased dramatically as the year progressed, with shipments in the second quarter rising 87 percent to 1.7 million over the first quarter. However, the older, slower, more trusted, but most importantly, less expensive 802.11b shipments rose 52 percent.
"The biggest trend last year was wireless making up a percentage of the home networking pie than anyone thought possible. At the start of the year people thought Home PNA and Powerline would do better then they did," Burke said.
Vivek Pathela, Netgear's product marketing senior director, cited industry data from The NPD Group that in dollar sales wireless outsells its wired counterparts, while unit sales are about even.
While data and audio transferring were the primary applications that interested consumers during 2003, video will be the hot application this year, vendors said. Despite the fact that the 802.11 standards committee has not, and is not expected to, set the 802.11e multimedia service specification anytime soon, manufacturers have released a small number of video devices and many more are expected next year.
Bettino expects 802.11e to be ratified no earlier than mid-2004 and possibly not until much later in the year.
While 802.11g is capable of streaming video, only a small number of products have been brought to market due to several quality of service (QOS) issues. They center around the video image being jittery and halting when the network gets overloaded. Netgear declined to roll out such a product because of these issues.
"If you use standard 11g today the customer will not get a good experience because the video stutters and lags," he said.
The QOS situation will almost certainly be cleared up with the introduction of 802.11e, but Motorola, D-Link, Belkin and Netgear all see video-capable product hitting shelves before the final specification is ratified because each has developed the capability of fixing potential QOS problems for its upcoming products.
This is the path that 802.11g followed in 2003. Most networking manufacturers introduced products well before the specification was set, then they made available to their customers software downloads that brought the non-compliance products already sold up to the 802.11g standard.
The company representatives would not say when their firms would have video-capable products out, but all touted video as the driving application for 2004.
"Video will become a very important application next year," said Motorola's Burke.
"We are not quite there, especially not for video," Bettino said, but thought most companies will make an attempt to produce the total home-networking solution, one capable of handling data, audio and video, that has been promised for the past several years.
"We are finally going beyond sharing an Internet connection. New applications will emerge in a big way next year with the main theme centered around multimedia networking," Pathela said.
Another factor holding back the mass deployment of video streaming is digital rights management. The content owners are extremely concerned about having their video taken off a secure platform, like a TV or DVD, and then ported around a home. The industry is working on safeguards that will ensure the data is encrypted, but none are ready for distribution at this point.
By the time these advanced networks start to become widely available consumers should be better prepared for taking advantage of their capabilities. Broadband is considered the most important factor since broadband enables the downloading of audio, and soon video, content from the Web.
Internet movie downloading is on the horizon and the growing number of legal music download service are increasing the amount of content residing on a PC that people want to distribute around the home.
The growing number of 802.11g and Wi-Fi equipped notebook computers is another plus for the networking category. A notebook's innate ability to be moved around gives its owner a good reason to purchase a wireless access point for his desktop computer, or buy a wireless residential gateway, Pathela said.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.