38070_print by Henrik Werdelin

TRENDS

Includes Consumer Technographics® data

November 1, 2005

Europeans Need Simpler Home Networks by Paul Jackson with Jaap Favier and Manuela Neurauter

EXECUT I V E S U M MA RY Home networking in Europe has passed the novelty stage and is now a valuable technology for the 13% of home PC owners who have it. These consumers use their networks to share an Internet connection between multiple PCs, to connect printers, and for storage. However, networking technologies are still in the geek domain. To move home networking into the mainstream, the PC industry and broadband providers need to focus on killer applications and ease of use. EUROPEAN HOME NETWORKING CUTS THE WIRE Home networking technologies have been available for almost four years. Data from Forrester’s Consumer Technographics Q2 2005 European Study shows that consumers are beginning to warm up to them, particularly in technologically advanced markets like Sweden and the Netherlands.

· Thirteen percent of home PC owners have a home network. Of the 69% of consumers with

access to a PC at home, an impressive 13% now report that they have a home network (see Figure 1-1).1 Technologically advanced markets like the Netherlands and Sweden lead the ﬁeld of home networkers, while Spain lags — even Poland has higher relative levels of network ownership.

· Wireless home networking is gaining ground. Around 5% of home PC owners now have a

wireless home network. This newer, but far more convenient, technology is particularly popular in the Netherlands and the UK, where it accounts for almost half of all home networks. And Spanish consumers are leapfrogging wired networks: 43% of the small installed base of Spanish home networks are wireless.

· Consumer interest in wireless networking is high. We asked consumers about their interest in

five emerging technologies; wireless home networking came in a convincing second after personal video recorders (see Figure 1-2). Consumers with broadband access but without a home network are particularly interested in the technology. Wired home networks lag far behind — an effect of the lack of marketing around wired network offerings and the inconvenience of installing one.

Few New Home Networking Applications Are Emerging Part of the problem with home networking to date has been the lack of a killer application. When we asked consumers what they use their home networks for, we discovered that very few put them to radical uses like connecting their game consoles or home security (see Figure 2). Headquarters Forrester Research, Inc., 400 Technology Square, Cambridge, MA 02139 USA Tel: +1 617/613-6000 • Fax: +1 617/613-5000 • www.forrester.com

Trends | Europeans Need Simpler Home Networks

Figure 1 European Home Network Ownership And Interest 1-1 Home network ownership is highest in technologically advanced markets “Which of the following product types do you own?” EU-7 Netherlands

38%

16%

Germany

12%

France UK Italy

10%

Spain

33%

14%

Home network Wired home network Wireless home network

13%

48%

18%

13%

10%

21%

16%

10%

Sweden

Poland

13%

10%

12%

38%

25% 43%

9% 9%

43%

46%

Proportion of wireless networks

11%

Base: European PC owners Note: Poland not included in the European average 1-2 Consumers are quite interested in home networks “Which of the following product types are you interested in?” Personal video recorder

12%

Wireless home network Home video telephone Wired home network GPRS and 3G mobile devices

12%

11% 11% 11%

15%

18%

17%

Broadband consumers without home networks PC owners All consumers

10% 9%

Base: EU-7 (numbers have been rounded) Source: Forrester’s Consumer Technographics® Q2 2005 European Study Source: Forrester Research, Inc.

November 1, 2005

Trends | Europeans Need Simpler Home Networks

· Three applications rule the usage charts. Sharing ﬁles, a printer, and a Net connection between PCs have remained the top three home networking applications for the past 18 months, but are all more widely used now — even when we apply a stricter deﬁnition of home networking to the older data.2 The availability of networked storage devices, such as XIMETA NAS drives, has boosted consumer sharing of these to fourth place in our list.

· Sharing a Net connection leaps to the top spot. Sharing an Internet link between multiple PCs has grown by 16 percentage points. The arrival of more user-friendly routers from companies like NETGEAR and Linksys, combined with network-centric operating systems like Windows XP and Mac OS X, has made sharing a Net connection across a home network a relatively simple task.

Figure 2 Home Networking Applications “Which of the following do you use your home network for?” 55%

To share an Internet connection across multiple PCs

48%

To share ﬁles between multiple PCs

42%

To share a printer across multiple PCs

34%

To share a storage device across multiple PCs To play networked games across multiple PCs

23%

To play downloaded or PC-based music on your home stereo

23%

To show downloaded or PC-based photos/videos on your TV set

22% 21%

To show photos/videos from a digital camera on your TV set To connect a game console to the Internet To program your VCR/DVD player over the Internet or via the PC

7% 4%

To program home appliances over the Internet or via the PC

For home security

Base: European home network owners Source: Forrester’s Consumer Technographics® Q2 2005 European Study Source: Forrester Research, Inc.

November 1, 2005

Trends | Europeans Need Simpler Home Networks

HOME NETWORKING IS HITTING ITS EARLY-ADOPTING-GEEK GLASS CEILING Will home networking continue its steady growth? With today’s oﬀerings, it seems unlikely — as beﬁts a relatively complex and immature technology, most home networks are bought by geeks and are often self-maintained or given “invisible support” by friends or family members. This approach will not scale up to a larger, less technically astute consumer audience.

· Half of consumer home networks are bought at retail. Home networking equipment is

still a predominantly aftermarket aﬀair (see Figure 3-1). However, continuing eﬀorts by PC manufacturers and ISPs to roll out consumer-friendly home networking bundles will boost the number of consumers getting equipment via these routes instead of in a store.

· Geeks still install the kit . . . Given that 91% of home networks are self-installed or installed by

a friend or family member, the home networking industry still depends on the good will of geeks to drive growth — never a comfortable position to be in (see Figure 3-2). And a little (home networking) knowledge is a dangerous thing: Self-installation of complex conﬁgurable devices means that poorly secured, badly conﬁgured home networks will be with us for some time.

· . . . and try to ﬁx it too. Ongoing support for consumer home networks also falls on the

individual or — even more worryingly — the poor put-upon local techie (see Figure 3-3). There are reasons for optimism, though: 24% of consumers already look to professional organizations for (largely free) support.

November 1, 2005

Trends | Europeans Need Simpler Home Networks

Figure 3 Home Network Installation, Support, And Maintenance 3-1 “Where did you get your home networking equipment?” Bought separately from a retailer

48%

Came with my computer

17%

Don’t know — someone else bought it

14%

Bought separately from my ISP

Came free from my ISP

Base: European home network owners

3-2 “Who installed and set up your home network?” Me

52%

A friend or family member

39%

An independent technical support consultant

My ISP or telecom service provider

The retailer I bought the equipment from 2% Someone from the networking equipment manufacturer 1% My employer 1%

Base: European home network owners 3-3

“Whom would you prefer to support your home network?” A friend or family member

40%

I solve technical problems by myself with no assistance

32%

My ISP or telecom service provider

An idenpedent technical support consultant

The retailer I bought the equipment from

The networking equipment manufacturer

My employer 1%

Base: European home network owners Source: Forrester’s Consumer Technographics® Q2 2005 European Study Source: Forrester Research, Inc.

November 1, 2005

Trends | Europeans Need Simpler Home Networks

R E C O M M E N D AT I O N S

THE IT AND CE INDUSTRIES NEED TO BUILD A TRUE HOME NETWORKING CULTURE We are reaching the limits of early-adopter and “prosumer” adoption of home networking — or, more accurately, we are reaching the limits of the patience of all those poor techies who have helped friends and family set up home networks! To drive adoption, technology manufacturers, telcos, ISPs, and service providers need to adjust their oﬀers to attract the mainstream consumer. This will create a proper, professional home networking market — not just a hobbyist’s playground — and allow genuinely revolutionary applications like IPTV, VoIP, and digital media distribution to ﬂourish.

· Get standards and ease of use right — and then leave well enough alone. Consumers have almost limitless connectivity options; with four flavors of Wi-Fi, powerline networking, MoCA, and wireless USB, plus many others. Consumers get even more intimidated as standards groups constantly update, change, or ratify these standards. To make consumers comfortable, home networking providers must decide on common sets of standards or — even better — make consumer configuration so easy and flexible that consumers don’t care what standard they use. Intel’s Viiv branding aims to get the ball rolling here.3

· Build support and maintenance into packaged broadband and equipment offerings. Companies like 2Wire and Pure Networks have been offering managed home network solutions for some time now, and major ISPs like BT have been experimenting with these types of services. Now is the time to bring these problem-free, engineer-supported offerings to the fore — striking a delicate balance between levels of services and generating incremental revenue.

· Fight for killer home networking apps. The two camps in the disastrous next-generation DVD war are at least in part fighting over ”managed copy protection,” which facilitates (limited) distribution of content around consumer homes from next-generation discs.4 This functionality, which allows a more flexible, extended consumer experience, is precisely the type of application that home networks need in order to take off. Other TV applications, like Slingbox or Sony’s location-free TV, also strengthen the consumer proposition for home networking, as do VoIP services and online game consoles. The technology and connectivity industry need to convince media rights holders that home networking technology is an opportunity in the long term, and not just a copyright infringement threat today.

ENDNOTES 1

Home networking is a complex technology with misleading terminology; as such, less technology-savvy consumers may misreport home network ownership. To accurately represent true home network ownership, we excluded those consumers with dial-up access and just one PC from our data, as it is extremely unlikely that they actually have a home network.

November 1, 2005

Trends | Europeans Need Simpler Home Networks

Europeans are drawn to home networking as a way to share PC resources and, increasingly, to allow broadband connections to be extended to multiple devices. A significant percentage of technology-literate early adopters have already invested in home networking, but today’s solutions are still complex to install and configure. By 2008, these issues will have been addressed and 47% of broadband households in Europe will have a home network. Applying the new definition of having home networking to the Q4 2003 data gives the following top three network applications: share files between multiple PCs, 46%; share printer across multiple PCs, 41%; and share Internet connection across multiple PCs, 39%. See the February 26, 2004, Trends “Europe’s Homes Get PC Home Networking.”

Intel’s Viiv platform is the chip giant’s strategy to use silicon to step up interoperability and copy protection standards in the digital home — and sell more Intel chips in the process. This strategy worked well with Centrino: The resulting adoption of Wi-Fi chipsets in laptops and buildout of hotspots is testament to that. Intel will certainly be successful selling Viiv into Media Center PCs. But to take Viiv and digital home interoperability into consumer electronics (CE) devices, Intel must extend Viiv to include CE components like the XScale processor and be as inclusive as possible in its co-marketing to ensure that the industry embraces Viiv. See the September 14, 2005, Trend “Intel Viiv Tackles Digital Home Barriers With Silicon.”

Two groups are competing for control of high-definition DVD formats to be launched in spring 2006. After a long and tedious run up to the launch, it is now clear to Forrester that the Sony-led Blu-ray format will win. But unless the HD-DVD group abandons the field, it will be another two years before consumers are confident enough of the winner to think about buying a new format DVD player. In the meantime, they will expand their video-on-demand (VOD), downloadable video, and Internet video habits. See the October 19, 2005, Trends “Blu-ray Will Win A Pyrrhic Victory Over HD-DVD.”

Forrester Research (Nasdaq: FORR) is an independent technology and market research company that provides pragmatic and forward-thinking advice about technology’s impact on business and consumers. For 22 years, Forrester has been a thought leader and trusted advisor, helping global clients lead in their markets through its research, consulting, events, and peer-to-peer executive programs. For more information, visit www.forrester.com. © 2005, Forrester Research, Inc. All rights reserved. Forrester, Forrester Oval Program, Forrester Wave, Forrester’s Ultimate Consumer Panel, WholeView 2, Technographics, TechRankings, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each ﬁgure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reﬂect judgment at the time and are subject to change. To purchase reprints of this document, please email resourcecenter@forrester.com. 38070