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The Real Math on Computer Networks @ Home

Numerous surveys conducted by market research companies (including Dallas-based Parks Associates) indicate that PC penetration in the United States was more than 50% at the end of 1998. Statistics also indicate that an increasing number of US households have multiple PCs.  As more US consumers work from home and rely on PCs for numerous applications (work, school, entertainment, information, etc.), they are taking advantage of steadily decreasing PC prices to purchase additional computers for the home.

The penetration rate of multiple PC households was generally believed to be about 15% as of the end of 1997 and approximately 17% as of the end of 1998.  With an estimated 103 million total households in the US, the number of multiple-PC households is currently at least 17 million.  Among these households, how many have a computer network?   Conventional wisdom says that the number of multiple PC households with a network of some kind is very small.  An October 19, 1998, Business Week article (p.158) indicated that the number of US households with home networks was approximately 300,000.  The context of the Business Week article indicates that the word "networks" refers to computer networks at home.  Virtually all major market research companies assert that currently, the number of homes with a computer network is negligible.

While the phrases "in-home networks" and "home networking" are normally used (or misused) to refer to computer/data networking at home, there are other types of in-home networks as well – home automation networks, entertainment networks, and integrated whole-house control networks. This White Paper will focus only on in-home computer networks.  However, Parks Associates does study all aspects of integrated home systems and in-home networks and provides information on penetration rates and market forecasts for many types of residential systems.

Although the number of US households with a computer network is generally believed to be very small, three consumer surveys indicate that the number is much higher than might have previously been thought.

The Current Household Penetration of Computer Networks

Figure 1 illustrates the results of three consumer surveys: one sponsored by Intel Corp. (www.intel.com/home/network/whiteppr.htm) in February 1997, one conducted by the Consumer Electronics Manufacturers Association (www.cemacity.org), or CEMA, in late 1998, and a third conducted by Parks Associates (www.parksassociates.com) in August 1998.

Figure 1

As Intel's estimate is based on a survey conducted in early 1997, it is logical to assume that the current penetration rate of computer networks among multiple-PC households must be higher than 14%.  The CEMA and Parks Associates surveys indicate that the penetration rate of multi-PC households that have some type of computer network is at least 21% for the second half of 1998.

Assuming that the number of multi-PC households with some type of computer network increased from 14% to 17% by the end of 1997, then approximately 2.6 million households in the US had a computer network at home at that time (17% times 15 million).   Multiplying 21% with 17 million multi-PC households yields 3.6 million for the end of 1998.

Of course, not all the households that have some type of computer network have a complete LAN (Local Area Network) in the true sense of the word. A LAN typically serves at least two major purposes – file sharing and printer sharing.  The Intel-sponsored survey indicated that among the multi-PC households that have some type of computer network, approximately 29% have a single-purpose connection (file, print, or game link), while the rest have a network that would meet the definition of a traditional LAN.   Assuming that the percentage of single-purpose computer networks remains the same at present, then approximately 2.5 million US households currently have a complete LAN at home!

According to Parks Associates’ consumer research, more work-at-homers and 56K modem users have computer networks than other consumer segments.  Among telecommuters who have multiple PCs at home and subscribe to Internet service, 36% say that they have a computer network.  Nearly one-third (29%) of multi-PC households that have a 56K modem (comprising more than one-fourth of online households, according to Parks Associates’ research) have a computer network.

Emerging Computer Networking Technologies

The most prevalent network protocol for a LAN is Ethernet, which typically delivers either 10 or 100 Mbps of data transfer.  Despite Ethernet’s popularity in corporate or business settings, it has not been overwhelmingly popular in the home due to its requirement of a robust cable (typically unshielded twisted pair copper wiring) and the need to "crack the case," or open up a computer to install a network interface card (NIC).  Because of the technical and wiring complications involved in the installation of a LAN at home, only strong technology enthusiasts have heretofore gone through the trouble of connecting multiple PCs together.

The technical and wiring (and cost) inhibitors will soon become less significant, however, as new networking technologies have emerged that eliminate most, if not all, of the complexity in installing a home LAN.  Figure 2 illustrates the major emerging data networking technologies that suit the home.

Among these new efforts, the most noteworthy are HomePNA (Home Phoneline Networking Alliance) and HomeRF (the HomeRF Working Group), which plan to offer phoneline-based and wireless networking solutions, respectively.  Some companies, such as Compaq, Hewlett-Packard, IBM, and Intel, are making a bet on both networking solutions, as is indicated by their dual membership in both HomePNA and HomeRF.  Both consortiums have completed specifications for a technical standard and expect to have inexpensive, easy-to-install, and standard-compliant networking products available in 1999.

The Birth of a New Home Networking Industry

The rapid growth of multi-PC households, the proliferation of the Internet, and the technical/wiring complications of traditional computer networking solutions have set a perfect stage for the birth of the home networking industry.  Parks Associates projects that home networking products will experience a rapid transition from an early-adopters' market to an early mass market.  Figures 3 and 4 illustrate Parks Associates' forecast of the growth of the in-home computer networking market, including the market potential for the "no-new-wires" solutions just hitting the market.

Household LAN products are expected to proliferate in 1999, and as prices drop, they should become even more prevalent in the next century.  Not satisfied with simply serving as a means of data distribution between computers or other information appliances, backers of many of the solutions discussed in this White Paper envision a time when their technologies will serve as backbones for whole-house integration through the convergence of computing, entertainment, and home control systems.

Figure 3

Figure 4

For more information about Parks Associates' consumer surveys and studies on in-home networks, please contact the office at 972-490-1113 or sales@parksassociates.com.

Dallas-based Parks Associates studies the markets for residential electronic products and services.  This includes study of available and emerging technologies, industry sectors and structures, product and service opportunities, and consumer desire and opinions on current and anticipated products.  The Company's expertise includes competitive intelligence, market status, market forecasts, and cross-industry research, all of which are presented in reports, newsletters, workshops, conferences, and consulting services.  The industries that Parks Associates studies include home systems, in-home networks, home security, energy utility, telecommunications, subscription TV, and consumer electronics.

About Parks Associates: Parks Associates is an internationally recognized market research and consulting company specializing in emerging consumer technology products and services. Founded in 1986, Parks Associates creates research capital for companies ranging from Fortune 500 to small start-ups through market reports, primary studies, consumer research, custom research, workshops, executive conferences, and annual service subscriptions.

The company's expertise includes new media, digital entertainment and gaming, home networks, Internet and television services, digital health, mobile applications and services, consumer electronics, and home control systems and security.

Each year, Parks Associates hosts executive thought leadership conferences CONNECTIONS™, with support from the Consumer Electronics Association (CEA®), and CONNECTIONS™ Europe. In addition, Parks Associates produces the online publication Industry Insights in conjunction with the CONNECTIONS™ Conference series.

http://www.parksassociates.com | http://www.connectionsconference.com | http://www.connectionseurope.com | http://www.connectionsindustryinsights.com

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