This is an excerpt from Parks Associates industry report, "Home Networking: State of the Market."

A home network is a digital pathway for components such as sensors, actuators, user interfaces, and controllers to communicate. Most of these components include an electronic network interface that connects to a physical medium such as a wire or a radio for wireless communications.

Local area networks (LANs) were invented to interconnect computers, terminals, and related office equipment so they could interoperate even across brands within a local, or short-range, environment. Enterprise LANs were adapted and scaled for home automation networks. There are many choices in LAN protocols for home automation networks using wired and wireless media. LAN buses connect to a public network such as the Internet via a gateway (Figure 2: Logical Organization of an Integrated Home System). A gateway is an interface between networks running different protocols. A residential hybrid gateway for Internet access contains a modem for decoding the Internet signal plus a router for distributing the Internet data through a wired or wireless home network.

In Parks Associates’ taxonomy of connected devices, smart home devices refer to a range of home automation devices and appliances that are connected to the Internet and can be remotely accessed, monitored, or controlled using a smartphone, laptop, tablet, computer, or smart speaker. The most popular smart home devices include smart thermostats, networked cameras, video doorbells, smart light bulbs, and smart door locks. Connected consumer electronics devices include smart TVs, streaming media players, gaming consoles, smart speakers, compute devices, routers and a few others. Finally, connected health devices include smart watches, fitness trackers, blood pressure cuffs, weight scales, and medical devices like glucometers.

Key points to consider for the home networking market include:

As consumers become more interested in interconnected home systems, the interoperability challenges of distributed components and integrated applications provide opportunities for manufacturers and service providers. Home automation is only possible through interoperability and coordinated actions among applications. However, all these systems are based on the installation of a home network infrastructure, which may now consist of multiple networks possibly interconnected Long-term and cross-brand integration between devices and systems offers new opportunities for growth.

The main issues driving home networking technology choices for consumers are cost, efficiency, and ease-of-use. Even though wired home networks are the most reliable and technically superior, builders and buyers prefer wireless since it is the economical and most convenient solution for most devices. In contrast, installing wires in an existing house can be costly and time-consuming.

There is a market for custom installations in larger houses that consist of a mix of wireless and wired home networking that best meets the owner’s needs. Although Wi-Fi eliminates some wiring, it does not eliminate it all. The best approach is a balanced implementation of Ethernet to each room/floor/wing supplemented with Wi-Fi for portable devices. Additional services and revenue opportunities include equipment installation, configuration, performance testing, provisioning, and integration with consumer electronics (CE) devices. Also, the installer could train the home occupants and offer a monthly or annual paid support service.

Wi-Fi mesh networks have significantly helped extend coverage in problem areas and large houses. Internet Service Providers (ISPs) may increase their appeal by marketing for customer self-installation. When dead spots remain, usually in a large or multi-story house, a Wi-Fi extender or a Wi-Fi mesh network can improve Wi-Fi coverage. Although a package of three mesh devices is more expensive than a long-range router or a single extender, it is usually easier to install than an extender, which is attractive to consumers installing the network themselves.

Multiple System Operators (MSOs) are looking for revenue opportunities from selling, renting, and managing home network equipment. There is a large potential market for support services since most of all US households have fixed broadband and experience significant problems with wireless, especially loss of wireless connectivity for owners of smart home and CE devices.

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