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TDG surveys consumer adoption of home networks, and a conversation with Affinegy’s Art Lancaster
Last Friday’s Chart of the Week generated some interesting commentary from TDG members, including our long-time friend Art Lancaster of Affinegy. He noted that the data on consumer demand for home networks did not distinguish between those that already own a home network and those that do not and that such a distinction is important when discussing this issue. Art, you are indeed correct, so this week’s chart does just that. Recall that adult broadband users were asked to answer the following question: “Assuming the price is reasonable, how likely are you to purchase a home network in the next six months?” The way the question was worded, both network owners and non-owners perceived the question as applying to them (“new” means one thing to an owner and something else to to a non-owner, but both meanings are appropriate for their respective audiences). As noted in the graphic, only 9.5% of network owners are to varying degrees likely to purchase a new home network in the next six months, compared with 14.1% of non-owners. Though demand may be lower among current network owners than non-owners (which is hardly surprising), this does not change the fact that it is poor among both segments. Art also pointed out that poor consumer demand does not necessarily mean that operator push is not sufficiently significant to keep this market going. He points to the classic distinction between (a) consumer demand that manifests itself via retail purchases (pull), and (b) operator deployments of home networks in support of related services (push). Back in 2004, we first began discussing that this shift from push to pull was not only inevitable but that prudent OEMs would be prepared for it by developing strong operator relationships. Companies like NETGEAR and Linksys heeded these predictions and today find themselves the beneficiary of significant, lucrative operator sales. Home network diffusion in the U.S. is indeed becoming an operator-driven push market, and this means new opportunities for companies serving these operators. Nonetheless, total in-home network diffusion (a combination of both push and pull) appears to be stalling at around 40% of broadband households. How could this be happening if operators are in fact deploying millions of new home networks? Good question. Perhaps this means that most new operator deployments are within homes that already have a network in place. For example, while living in Dallas, I signed up for AT&T’s Uverse IPTV offering, which required the operator to deploy a new 2-Wire gateway. I already had a 2-Wire network in place, so in reality the operator gateway simply replaced a gateway I had previously purchased. Then again, maybe consumers that use such IPTV services are not aware that they have a home network in place. At this point, we do not have data to determine if this is true. Rest assured that it will be addressed in our upcoming Benchmarking the Connected Consumer primary research project. Regardless of the precise reason, I strongly believe that aggressive consumer education as to the benefits of in-home networks is warranted. The industry cannot simply rely on the non-network-owning population being aware of these benefits. Yes, it is wonderful that operators are pushing more home networks into consumer homes in support of services such as IPTV. But to the extent these networks are deployed in non-networked households, these consumers are unlikely to have any idea how to use a home network for non-operator-dependent services and applications…something the consumer technology industry can ill afford to happen. If you have comments or questions about this Chart of the Week, please contact me at mg@tdgresearch.com . ..and Art, thanks for the feedback and continued discussion. Reprinted with permission from Michael Greeson, Founding Partner, Research, The Diffusion Group
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