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The April 3, 2005 Issue Provided by System Dynamics Inc.
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Our Fifth Anniversary: Looking Back, Looking Forward

Anniversaries are times for celebration, for looking back on what's changed and forward to what's coming. We published our first issue of the Broadband Home Report five years ago. On this anniversary, we reflect on the status of the broadband home in 2000--mostly a vision--and look at where the industry is today. Then we examine what the future might hold.

Looking back, we can see that many of aspects of the broadband vision have come to pass: widespread availability and penetration of broadband access, the growth of home networking, and the growing use of broadband for "media" applications like music, video, and voice. Others--such as "whole home" networking and media servers--are not as far along. And still others--like the rise of personal broadband--were not on our radar screen in 2000.

Broadband in Early 2000

We've been watching and writing about all aspects of the Broadband Home for five years. We published the first issue of this newsletter in April 2000. Two months later, we held our first Broadband Home Conference in Silicon Valley.

To turn your mental clock back to early 2000, it helps to look at some of the trade publication headlines and clips of the time. Here are a few from Multichannel News:

  • "Backbone Help on the Way, from Start Ups Enron, Edgix" Feb 7, 2000
  • "Expect to see a Motorola device with both HomePNA and HomeRF connectivity". March 27, 2000

and from Cable Datacom News

  • "@Home Tops 1 Million Customers"
  • "SBC Communications, America's largest local telephone company, announced it finished the first quarter with 201,000 DSL lines in service, a 75-percent increase since year-end 1999. ... Bell Atlantic said it finished Q1 with only 62,000 DSL lines in service and ... will likely miss its year-end target of 500,000 lines by at least 20 percent."

Five years ago, residential broadband was in its infancy. Broadband was in about 2% of US homes, most installed during the preceding year. Korea, now a broadband leader, had less than one million broadband-equipped homes. Broadband modems were proprietary devices, and modem prices were high. Standardized DOCSIS cable modems were just starting to enter the market and the ITU had just given final approval to the G.lite DSL standard.

In 2000, Home RF was a contender for the home wireless networking standard. --> Click for larger pictureHome networking was in its infancy. The "wireless wars" were under way, with two technologies--HomeRF and 802.11--competing for market share. HomeRF had attracted many of the big players, including Intel. A few smaller players had organized the Wireless Ethernet Compatibility Alliance (WECA) to test and certify interoperable products based on the brand-new IEEE 802.11b standards; WECA's first two "Wi-Fi Interoperability Certifications" were issued the week after our first report. Other forms of home networking were in development, but few products were available and none had reached any market share. Very few homes had Ethernet or routers.

There was lots of talk about home gateways but very little action; vendors thought they would sell them to broadband service providers who would install them in homes as a vehicle for application services. There was lots of talk about VoIP but none deployed in consumer markets.

There were practically no portable digital media devices - no iPods, very few digital cameras or digital camcorders. Mobile phones were used only for voice.

Most consumers, if they were aware of broadband at all, saw it as useful only for PC applications - faster email and faster web browsing. At the same time--the tail-end of the "dot-com" boom--some companies had introduced products to deliver digital media content such as videos to broadband users; for lack of "eyeballs," most went out of business in the next few months as the bubble burst.

Where are we now?

Over the past five years, residential broadband has taken root and is approaching maturity throughout the developed world. Broadband is increasingly taken for granted. It is already installed in 70% of households in Korea and about one-third of households in the US. Neilsen/NetRatings recently reported that 55% of active US Internet users--and more than two-thirds of Canadian users--connect from home with broadband connections. After a slow start, broadband penetration is increasing rapidly throughout Europe.

Different "flavors" of broadband are dominant in different regions--cable modems in North America, ADSL throughout Europe and many parts of Asia, fiber in some countries and wireless in other. Competition for standardized broadband modems has driven the price down to a few tens of dollars. Instead of lowering speeds to cut modem prices (like G.lite running only up to 1.5Mbps) we see the emergence of VDSL2, with speeds claimed to be capable of up to 100 Mbps.

As homes increasingly have multiple PCs, home networking is becoming mainstream. Wi-Fi has taken off beyond expectations, with more than 1500 devices receiving Wi-Fi certification. The Wi-Fi Alliance is now often out in front of the IEEE in adopting and standardizing new technologies--such as QoS and improved security--to meet the needs of the market. Other forms of home networking--over power lines, phone lines and coaxial cable--have achieved some market share. An increasing percentage of new homes are built with structured cabling.

Many "gateway" devices--incorporating broadband modems, home networking and application processing--are sold into the consumer markets. Some have been sold through service providers, but many more are sold at retail.

VoIP is growing rapidly. In the US, Vonage has more than half a million subscribers. Cable operators are moving quickly to deploy VoIP-based primary telephony. AT&T is moving quickly from circuit- to packet-switched telephony for consumer markets. "End-to-end" IP telephony is not far off.

Archos PMA 400 Portable Media Assistant --> Click for larger pictureThe iPod is the latest craze and many other portable digital music players are entering the market--including new mobile phones. We just received a Hilton Hotels promotion saying the alarm clocks in their hotel rooms are "A Small Electronic Friend You Can Plug An MP3 Player Into". Digital cameras and camcorders have displaced analog devices. Portable video players are now appearing.

Consumers increasingly use broadband to download music and use "Podcasting" to get other audio material; some download movies. Companies are again developing audio and video applications to take advantage of broadband--this time with enough "eyeballs" for a viable business.

Wi-Fi enabled cities like St. Cloud signal a move toward personal broadband --> Click for larger pictureWith the rapid growth of Wi-Fi hot spots and notebook PCs, consumers look to get broadband wherever they are.

Where Are We Headed?

With all that has been accomplished, the future promises a wide range of new possibilities, some of which are embryonic. Here are some key areas that will see significant growth and change over the next five years:

  • Whole home networking will carry digital media throughout the home (and to your car in the garage)
  • Higher bandwidth--growing to 100 Mbps to and within the home--will enable real-time media applications and undoubtedly will spawn new uses we may not yet recognize.
  • Personal broadband will let people have their broadband wherever they are and transition easily and seamlessly between various environments.

Let's look under the covers at these trends.

"Whole Home" Networking

In the past (and still largely today), homes have had one set of wires for telephones, another for video, and sometimes another for audio and one more for security. With broadband service, many people use Wi-Fi to connect multiple computers to the broadband modem; others use Ethernet or HomePlug.

With all media moving from analog to digital, it makes sense to have a unified network for all these services. The network must accommodate a mix of stationary and mobile devices. It must be suitable for new construction and existing homes, multi-dwelling units (apartments/flats) and single-family homes.

Media Applications

The most important requirement is to support media applications--video, audio and voice--on the same network with data. Unlike data--which can tolerate a wide range of network performance--media applications are highly sensitive to network speed and quality of service (QoS). The network must provide sufficient speed for these applications, and must implement QoS; otherwise, the media applications will be unsatisfactory for consumer use.

High definition video is the most sensitive of the applications, since it requires both high speed and QoS. Voice and audio need less speed, but require QoS to avoid pops and clicks.

Mix and Match

"Unified" is not the same as "homogeneous"--consumers will "mix and match" different technologies to meet their need. The whole home network will have a mixture of "flavors" of sub-networks, which may include structured cabling using Ethernet, Wi-Fi, HomePlug, coax, phone line, ultra wideband and interconnection to 3G. Wired technologies work well for stationary devices like desktop PCs and TVs, while wireless technologies are required for mobile devices like notebook PCS, PDAs, portable phones and MP3 players.

Having devices work together requires more than just networking technologies. It also requires common standards so networked devices can "talk" with each other. Key PC and consumer electronics companies are working together through the Digital Living Network Alliance to define a common language for networked media devices.

Networking Technologies Evolution

Here is a brief view of how some of these technologies are expected to evolve.

Structured cabling based on Category 5e cabling with Fast Ethernet can provide a single wired infrastructure throughout the house. Ideal for new construction, it is fairly expensive to retrofit into existing houses, and the broadband industry has been seeking "no new wires" solutions that provide the same capability. Fast Ethernet operates at 100 Mbps, sufficient to support all the digital applications for years to come. All of the emerging technologies also aim to provide 100 Mbps throughput, and all use Ethernet for interconnection.

For new construction, structured cabling is still the best solution. For retrofit, some structured cabling can provide a "backbone" between floors or from one end to the other of a long house; this can be combined with other technologies to form an integrated network.

Several emerging technologies based on existing wiring provide an alternate way to provide a 100 Mbps backbone network:

  • The next generation of powerline networking technologies should reach the market this year. We've written about several of these emerging technologies including HomePlug AV and DS2. If these achieve their goals and get embedded in consumer electronics devices, it would make sense to use powerline to interconnect stationary devices. Nothing would be easier for the consumer than "plug it in and it's networked!"
  • Emerging technologies based on existing coaxial cable and telephone wiring are also candidates to provide a backbone network, and products should reach the market this year or next. Telephone jacks and video jacks appear in many fewer places than electrical outlets, so we think powerline holds the highest promise--if it can fulfill its objectives of performance and reliability.

With a backbone in place, ultra wideband may play a role within a room. At CES in January, we saw an impressive demo combining HomePlug AV with UWB to carry HDTV.

802.11n is the first wireless technology which provide whole home netwokring. --> Click for larger picturePerhaps the most promising networking technology now in development is IEEE 802.11n--the third generation of Wi-Fi. This is the first wireless technology that may itself provide both sufficient bandwidth and sufficient range for whole home networking. It is aiming at throughput of 100 Mbps--enough for two channels of high-definition TV, several more of standard-definition TV, and lots left over for voice, audio and data. Its use of MIMO technology promises to greatly extend the useful range. Our recent tests of 802.11g enhanced with MIMO suggested that these promises may well be met. Publication of the 802.11n standard is still about two years away. We expect to see products based on draft standards in 2006 and interoperable Wi-Fi certified products in 2007.

Toward 100 Mbps

While home networking is moving toward 100 Mbps, broadband access has lagged far behind. Early "broadband" access services operated at very low speeds--often less than 1 Mbps. In the US today most now operate at a few megabits per second downstream and a few hundreds of kilobits per second upstream. By contrast, some markets--mostly outside the US--have had fiber-based services operating at 100 Mbps for several years. Korea and Japan now have "fiber to the curb" services operating at close to that speed.

Today's new target speed is "broadband at 100 Mbps". Targets are generally useful devices for focusing attention. Whether it was getting "a man on the moon" in the nineteen sixties or "lowering greenhouse emissions" today, such targets clearly serve a purpose.

However, 100 Mbps seems to have taken on a somewhat "religious" coloration. It is easy to preach its virtues with little regard for the economics--or the real needs. The underlying infrastructure of all existing broadband access systems and the Internet is full of bandwidth-limited "choke points." While a few users will soon be able to operate at speeds approaching 100 Mbps, substantial additional investments will be required to upgrade the entire infrastructure to support large numbers of simultaneous users operating at these speeds.

Today there are very few applications--apart from peer-to-peer networking--that could take advantage of such high speeds. And it is very unclear what future applications will need such high speeds. Besides high-definition video, very few consumer applications need speeds of more than the 3 to 5 Mbps they get with today's cable modems and ADSL.

We suspect that high-bandwidth consumer applications will first emerge from entrepreneurial companies in societies with wide penetration of "real broadband" running at or near 100 Mbps, and these companies may gain a competitive advantage over companies in less-fortunate societies. It is probably this competitive risk that provides the strongest argument for public policy (in the US and elsewhere) in favor of widespread deployment of 100 Mbps. But it is far from clear that most governments have the will--or the money--to do much more than preach.

Our readers in places like Korea, Japan and Sweden, where higher bandwidth is already the norm, may have different views informed by their own experiences. We look forward to hearing from our readers regarding what some of these "big bandwidth" applications may be over the next five years.

A Shifting Focus: From Home to Person

Over the past five years, we've seen a key shift in consumer services to a greater focus on the individual, rather than the home. Today we take it for granted that mobile telephone services are associated with individual people rather than a whole household or a specific location. This transition from home-focused to person-focused is starting to be replicated in data and even video communications. Once again, we look at Korea as a key market where this transition is already underway.

We have thought about this transition in the context of our newsletter and where to draw its subject matter boundaries. We identified our domain as "the Broadband Home" and have been expanding outside the home as consumers want broadband wherever they go.

Wi-Fi equipped Kodak EasyShare-One Camera --> Click for larger pictureSome of the technologies, applications and user needs can't easily be segregated between inside and outside the home. For example, a Wi-Fi network may cover not only inside your house but also the surrounding area. Companies have exploited these capabilities to offer services to wider geographies, as seen with metro Wi-Fi.

The Aireo is a Wi-Fi connected MP3 player. --> Click for larger pictureA wide variety of new portable media devices have appeared on the market. Increasingly, these devices have built-in wireless communications so they can be connected without wires. Some have Wi-Fi, others 3G or other wireless technologies.

The Motorola MPx is a mobile phone, PDA, email and Internet device with Wi-Fi and more. --> Click for larger pictureThe Sony Playstation Portable is an example of the new Wi-Fi connected mobile devices --> Click for larger pictureWe've reflected this in the stories we've written. The tone at first was focused on what you couldn't do: in September, 2000 we wrote The Broadband Home -- "You can't take it with you when you go". As wide-area wireless technologies started to emerge, we started writing about "broadband anywhere" and "personal broadband". Most recently, we wrote about mobile video in The Next Big Thing: Video-on-the-Go.

The Double "Triple Play"

For many years, we've heard about the "triple play": voice, data and video delivered over a common wired infrastructure. Many cable companies are now offering the full triple play, and telephone companies are preparing to join.

Some companies believe that the new basis of competition will move beyond the traditional "triple play". Some are focused on the "quadruple play," adding mobile voice to the mix.

Those looking furthest forward are focused on what might be termed the "double triple play"--fixed and mobile voice, data and video. Their belief, and ours as well, is that your location shouldn't limit your communications, information and entertainment options. You'll get the services you want and need, most cost effectively and with transparency between the mobile and fixed versions, up to the limits that technology, devices and user behavior can accommodate.

Although we'll continue to use the "Broadband Home" moniker for what we write, our focus will follow the industry: with consumer broadband increasingly meaning broadband services and technologies, wherever the individual wants to use them. We thank you for being with this on this exciting ride, and hope you'll come along for the next five years. We're sure it won't be dull!

For further reference: