This week, In-Stat (see disclosure) predicted the market for residential gateways — devices combining a home networking router and broadband access modem — would reach 50 million by 2015. But doesn’t mean the digital home has stopped evolving.
The rise of gateways should be of surprise to no one today, even though just a decade ago most consumers were lucky to have a basic Linksys router. The broadband market, however, is mature now, and retail consumer networking providers like Netgear and Belkin have seen the core home networking business slow dramatically. This is in part due to the penetration of home networking reaching 70 percent of U.S. households, but also due to the growing importance of the service provider channel, where low-cost, private-labeled hardware from Taiwanese or Chinese ODMs are increasingly the order of the day.
In short, we’ve finally achieved the past decade’s home network holy grail: a digital home centered around the entertainment network and the consumer’s desire for anywhere and everywhere media. And that’s driving the following three trends:
Forget NAS: Content Will Live in the Cloud
Over the last decade, technology companies have envisioned a world where networked storage would become a consumer technology as more people looked to store media centrally on Networked Attached Storage, or NAS, to play anywhere in the home. Some networked media drives have entered the home, mostly in the form of DVRs, but consumers today are largely streaming content from the cloud.
Why the shift? In part because faster broadband and the wide adoption of home networking has enabled the use of services such as Pandora and Netflix on a variety of devices, but also because consumers simply prefer ease-of-use, low-cost and the big content libraries available from consumer web services. This shift has given rise to the thin clients for entertainment such as Roku and Apple TV-like devices, which are tailored for web streaming.
Beyond Wi-Fi: The Rise of High-Speed Interfaces
No doubt about it, Wi-Fi is the engine that powered the home networking market over the past decade. Faster and faster speeds, pervasive connectivity and the rise of mobile computing has made Wi-Fi a must-have for any modern connected consumer.
But as the demand for rich-media streaming around the entire home grows by the day, Wi-Fi is having trouble as a one-size-fits-all technology. New use-cases, such as distributed entertainment and connected TVs, have resulted in more momentum for powerline networking, and this has in turn resulted in a spate of acquisitions by the big broadband chip makers in the last year as they round out their portfolios.
But wireless technology is still evolving, too. This includes Wi-Fi, whose next evolutionary progression, 802.11ac, will bump speeds to 1 Gbps. Perhaps more interesting is the continued jockeying for ultra-high-speed wireless, including HDMI replacement technologies such as WHDI, WireslessHD and 802.11ad, which is the IEEE’s answer to 60 GHz networking.
It’s About the Software
In the digital home, as with most consumer technologies, value is shifting from the hardware to software. Consumers care less about speeds and feeds today, while the rise of apps in the mobile computing space has resulted in consumers expecting the same choice and simplicity they get on their phones on their primary viewing screen, the TV.
Look for new players like Samsung, Google and Apple to increasingly control the central command console for the home network, due to their software agility. And the entrance into the space by these players is putting pressure on the more traditional players to keep up or adopt similar platforms. At the same time, existing players like Cisco and Netgear have been investing heavily in user-experience and software, to mixed results, but no doubt expect this trend to continue.
Disclosure: Michael Wolf is a former employee of In-Stat. He does not own any shares in the company.