A gateway to the FUTURE

Feb 26, 2001 12:00 PM, Liane H. LaBarba

Human nature breeds curiosity and a thirst for all things new. That thirst drives us to develop and embrace innovations that just might be able to correct our past and simplify our future.

So although innovations in telecommunications have radically reshaped the way we communicate, that same human nature also forces us to beg for more: More connectivity. More bandwidth. More services. More scalability. We want it all, not just certain elements.

For many of us, the demands sprout in the work place, but they often manage to follow us home at night. If we can get high-speed Internet access at work, why not at home?

And the demands reach far beyond sheer high-speed access, branching out into other applications such as linking telecommuters with corporate offices or controlling a home alarm system from the other side of the country.

Most of us might just long for amenities similar to what the Jetsons enjoyed. The cartoon characters buzzed down hallways on conveyor belts, so why couldn't we turn the dishwasher on from the office? Or maybe we'd like to download and transfer movies from one computer to another within our homes.

While the interest in deriving more functionality out of a standard high-speed connection is clear, the challenge facing service providers lies in finding a way to uniformly serve customers with different demands. Many providers are turning to broadband gateways to act as virtual technology melting pots that can bring together multiple technologies without compromising the end user service. The greater challenge for service providers is to find a technology that does indeed work on a broad scale, but doesn't lose out on functionality as a result.

Businesses and consumers alike may be hungry for more advanced and sophisticated services, but service providers have the challenge of finding efficient methods to deliver those services.

Broadband gateways offer a way to reach out to those customers, both at the customer premises as well as deeper in the network. Although there is a lot of variation in terms and definitions, residential gateways—sometimes referred to as home gateways—reside in customers' homes.

The residential gateway enables consumers to connect electronic devices such as PCs, kitchen appliances, audio/video equipment and security systems to their phone service and high-speed Internet access. By connecting the electronic devices, consumers can perform Jetson-like tasks such as adjust heating or air conditioning via a home computer.

“Home networking products came out a while ago, but they were missing the gateway to tie everything together,” says Roy Johnson, vice president of marketing and business development for 2Wire. “It's OK to hook computers together without a gateway, but you have to turn one of the PCs into a router,” he says.

The home networking market is expected to reach $680 million by 2001, according to Aberdeen Group.

That growth will be driven by consumer demand for more convenience, functionality and cost savings, says Ethan Cohen, senior analyst at Aberdeen Group. “There is no question that the home networking market will take off in the next two years,” he says. “It will be driven by high-speed [Internet] connections and services such as video streaming.”

Cahners In-Stat Group predicts that the residential gateway market alone will leap from $100 million in 2000 to $5 billion in 2005 as a result of the rapid implementation of integrated voice, video, and data services and home networking.

Verizon Communications is trying to test its customers' interest in home networking through a trial it started in January. That trial is being offered to existing Verizon DSL customers in the “Verizon West” area, the old GTE footprint. “It is a 90-day trial that we will run until April 11,” says Linda Christensen, senior product manager for new product development at Verizon. “It's for current DSL customers who may or may not have Verizon as their ISP.”

Verizon is offering the 2Wire residential gateway to customers participating in the trial. “We are using the 2Wire HomePortal 100, which is basically a combination of a router, hub, bridge and Web browser in one box,” Christensen says.

Using the gateway, users can share a single broadband connection for all PCs in their home. Because the network-ed PCs within a home share that connection, users can also set up home LANs, share files and play interactive games.

“It hides all other computers behind a single IP address,” says Christensen. Speed is not affected because the various functions ride on different frequencies. POTS, asymmetrical DSL and home LAN run over a different frequency than other functions, for example.

Although residential gateways must be able to connect a variety of devices, they must also support several different home networking technologies. That broad-based support is a necessity because of the vast amount of available solutions.

The 2Wire box supports Ethernet, the Home Phoneline Networking Alliance (HPNA), wireless networking and universal serial bus (USB) capability. Because of the added available bandwidth, users can transfer large files such as video across a home network or connect five or more PCs.

The 2Wire residential gateway doesn't require any additional wiring, Christensen says. “You can plug-n-play with existing CAT5,” she says.

Although HPNA sounds good, Aberdeen Group's Cohen points out that it does have problems. “Most people don't have that many phone jacks,” he says.

In addition to the discussion surrounding HPNA, many debates have surfaced over the two current wireless home networking methods and which should be incorporated into residential gateways. Apple Computer, 3Com, Lucent Technologies and Nokia all support 802.11B wireless standard, which transmits data at 11 Mb/s. But it isn't cheap. IBM, Intel, Motorola and Proxim are supporting a cheaper standard, HomeRF, which has a rate of 2 Mb/s.

“We are the only vendor with all four interfaces [Ethernet, HPNA, USB and 802.11B],” 2Wire's Johnson says. “We have done a lot of work on ease of installation and setup for all of those,” he adds.

That ease of installation is extremely important, Christensen says. “This way, it is all plug-n-play, no truck roll is needed and [the software] can be installed via CD-ROM,” she says.

And from Verizon's end, nothing has to be done. “We just bill the customer for the equipment. We are really just selling the CPE until services [are developed] to be managed through the gateway,” Christensen says.

Although the capabilities of the residential gateways are evident, the questions service providers grapple with include whether their customers are ready for the technology and if the equipment itself is up to par.

2Wire is “one of the first gateway makers that is truly ready, not just beta or alpha,” says Christensen. Even though Verizon is running a trial with the 2Wire product, most vendors still view the equipment as fairly new, which likely will result in slower customer adoption.

“There is a lot of innovation going on [in the residential gateway] market, but it is still young,” says Jennifer Stagnaro, chief marketing officer at CopperCom. “It will be important in the early days to [regional Bell operating companies] because they are interested in deploying services to the residential markets.”

Despite the fact that interest may exist from both the service provider and customer side, the gateway technology may simply be too young. “The services and application delivery just aren't there yet,” says Schelley Olhava, senior analyst at IDC. “There hasn't been much about what providers are doing. Carriers aren't even talking about it under non-disclosure.”

Most providers apparently are reluctant to venture into offering home connectivity solutions, and as a result some vendors are temporarily scaling back efforts in the residential gateway space. For example, both Cisco Systems and 3Com are putting operations on hold, most likely to let demand increase and resolve technology issues such as what interfaces will be used.

The current lack of customer desire, coupled with the young technology and poor high-speed access penetration rates, may be holding up the development. “Cisco and 3Com pulled back about a month ago,” Olhava says. “They felt the market wasn't ready yet, and the products were too expensive,” she adds.

Others agree that cost will be a significant factor.

“The cost of the CPE is a real challenge because it won't take off if it is prohibitive,” says Stephen Gleave, vice president of marketing at Jetstream Communications. “The price needs to hit $300.”

In its trial, Verizon and 2Wire are landing within that range. The provider is charging $199 for the portal and an additional $60 if an adapter is necessary.

But according to Cohen, although the Verizon model works in theory right now, it is not entirely compelling. The offering would likely strengthen as other providers began selling competing services.

“People don't really know what they want until companies show them,” says Cohen. But companies such as Cisco apparently don't want to continue efforts until the market solidifies, he says, adding, “Cisco has a tendency to watch trends and then go out and build a better box.”

In addition, the low penetration rates for high-speed access are a definite setback to deployment because such services won't stand a chance if the market is too slim.

With bandwidth being such an integral part of our future, it is doubtful consumers will want to be left out of innovations surrounding that connectivity. And although we may want that connectivity and the services it brings, service providers must reach customers with the needed bandwidth, not a fraction of it, if they expect to be able to deliver.

“Reach is always an issue,” says John Nevius, CPE product line manager for Copper Mountain. “Value added services are great, but if you can't get the services to the customer, it doesn't matter how good your infrastructure is.”

Most likely, service providers are still trying to sort out what that next killer app will be before they invest too heavily in one technology. But while it is easy to point fingers at service providers, the equipment vendors must also step up and do their part. And for vendors, that means they must work harder to work together to sort out the technology differences and preferences.

“The market will take off, it is just probably going to take another two years to do so,” Cohen says.

• The supply of broadband connectivity becoming pervasive

• Service providers looking to value added services for differentiation

• Continued