The time has come

Since being developed by a cross-industry group of planners and engineers in the mid-1990s, the residential gateway has been the focus of a number of abortive start-ups and numerous missteps. Several recent developments, including the predominance of multiple home computers and the availability of several broadband network choices, have brought the residential gateway idea back to the forefront, with many prominent vendors and carriers involved.

To understand the residential gateway concept, consider today’s residential access environment. Several different networks to the home are in place or planned. These include the existing twisted pair (and fiber), telephone network, and the coax (and fiber) cable TV networks. In addition, there are direct broadcast satellite networks, hybrid fiber/coax networks, fiber to the home networks, asymmetrical DSL networks, ATM networks, switched digital video networks, PCS networks, and probably others. These are not all necessarily at the same place and same time—although that coincidence is not precluded. These are not only competing networks, they are also incompatible at various levels of the OSI model, meaning that they are incompatible in more than their basic physical interface characteristics.

This incompatibility and competition among the networks in functions, price, availability, and in other areas mean that, ultimately, residential customers will face the prospect of dealing with a complicated multi-node switching problem. A high percentage of these same customers have trouble programming a VCR. It seems inconceivable that they will be able to deal with this problem. If they cannot, there are only two options: Forget the model of multiple networks bringing diverse capabilities to the home, or devise a technology-based solution that will handle this function and hide the complexity from the consumer.

The residential gateway serves a traffic cop function—controlling and routing traffic so as to allow maximum use of all facilities.

The residential gateway is a solution to this dilemma. It inserts a control function between external networks and in-home networks and devices. The residential gateway serves a traffic cop function—controlling and routing traffic so as to allow maximum use of all facilities. This version is known as the whole house residential gateway. It is intended to interface with all conceivable outside networks and to offer all types of functions in the house: control and monitoring, communications, entertainment, and data access.

Thus, the residential gateway is an intelligent cross-connect device. The residential gateway provides two key functions:

• The location to terminate all external access networks to the home, with multiple residential services being delivered over each type of access network.

• The location to terminate all home networks, such as telephone, television, computing, alarm, telemetry, data, etc.

Figure 1 illustrates the residential gateway’s place in the network, while Figure 2 illustrates one approach to the design of a whole house residential gateway. Other approaches are certainly possible. This figure indicates the relationships of the prime areas to be considered: backplane (bus) selection, memory and processor requirements, operating system and operations management system. The network interface units are selected to match the appropriate external network. The customer premises interfaces are selected to match internal home networks or specific home appliances. The processor serves to operate the backplane as a switching point to allow highly flexible translations and interconnections while hiding the complexity from the customer.

Other versions

The preceding paragraph relates to the original idea of the whole house residential gateway, . However, other types of residential gateways now predominate in the market. The following classification scheme will illustrate other types of residential gateways.

Today the device situation is such that there is an almost bewildering variety of residential gateway products available, or soon to be available. However, the industry is still in a start-up stage, partly because of this confusion of products. Figure 3 describes the basic gateway types.

Figure 3 Residential gateway types defined

Whole house residential gateway This is the closest to the original concept. It address entertainment (video and audio); communications (telephony); high-speed data access; and controlled and monitoring (HVAC, security, lighting, etc.) functions Internet residential gateway This is the version that is intended to directly address the multiple computer, multiple high-speed access problem in the home. Set-top residential gateway These are the CATV-based, digital solutions. They are the descendents of the analog TV set-top box, but with full digital capabilities, and many features. Source: B & C Consulting Services

The actual offerings from various vendors will make imperfect fits to these categories. However, in many cases the fit will be good, and to add categories would likely add confusion.

Many features and services are either enabled or improved by the residential gateway. One question that arises is which of these features is supported by each of the three classes of residential gateways. Figure 4 outlines that support. This table presents generalization only. Each product has individual features. This table can be thought of as an average of the features provided by each class of residential gateway.

Figure 4 Residential gateway types cross-reference
Feature group	Whole house residential gateway	Internet residential gateway	Set-top
Entertainment	X		X
Internet/data	X	X
Telephony	X
Home control	X		X
Enhanced capabilities	X	X	X
Source: B & C Consulting Services

Some of the set-top residential gateways support Internet features, and some of the Internet residential gateways support entertainment features. This is not a breakdown in the classification system but rather a move by some products in those categories from a given classification towards the whole house version.

Of these products, the Internet gateway has become an instant hit. The reason is that customers can easily see the very real advantages of this product. It offers immediate savings in the cost of added printers, multiple access lines and convenience. This version of the residential gateway, which may be the simplest of all, truly considers the customer first, and this has always been the key to success in this market.

The home office phenomenon is having a dramatic impact on the residential gateway markets. Surveys indicate that at least 30% of the work force is working at home at least part of the time.

The new environment

The home office phenomenon is having a dramatic impact on the residential gateway markets. Surveys indicate that at least 30% of the work force is working at home at least part of the time. New home buyers have indicated that 81% of them are interested in home offices as a feature of any new home.

A similar survey indicated that 37% of all existing homeowners are interested in a home network of some kind. One recent projection indicated that between 40% and 50% of all new home computers are bought to go in a home that already has one computer or more. All of these impacts are driving the desire for home networks and the convenience of residential gateways. Figure 5 is a projection for households with computers and  multiple PCs.

The existence of multiple computer households makes the need for a residential gateway obvious. As previously mentioned, the addition of a gateway can yield savings in terms of printer costs, peripherals cost and line rental costs that are apparent to anyone who cares to do the math. While the residential gateway usually applied in this case is not the whole house unit originally described by the residential gateway group, it does have a business case that promises a win-win for all concerned. The lack of a clear business case has always been a prime inhibitor to the widespread deployment of residential gateways.

The all-important business case

The first question is the nature of the business case. The business case for the residential gateway (or really for anything) must stipulate the way to meet the conditions implied by the following equation:

Value (of the product or service) = Cost + Profit

Although many may object that this is a gross oversimplification, it will serve our purposes to allow us to outline the major issues facing a successful residential gateway business plan. The implication of this equation is the need to identify applications, services, or benefits that will be recognized by a set of customers as providing enough value to support the full costs of the product and an acceptable profit.

With respect to the equation, it is apparent that we must identify a set or sets of customers who will be able to perceive value in the residential gateway. The value must be enough to offset the total costs of the residential gateway (life cycle) and provide a sufficient profit to allow development of a stable business. As noted in the previous section, we now have that condition in terms of the large number of households with multiple computers, all desiring shared access to high-speed access lines. With this condition satisfied, the value is obvious.

How do you support the capital and life cycle costs of the residential gateway box? This has been a driving question since the origination of the residential gateway idea. The following is a concise list of the possibilities:

• Telco or facility service provider provides and maintains. The end customer leases or pays for the box as a part of a service agreement.

• The end customer buys the box and owns it.

• The home/subdivision developer buys the box, and the homeowner owns it.

At first these were considered to be mutually exclusive options. But it has become apparent that all of the options are really the same—in the end, the consumer must pay for the box, and he does so in all of the above options. Thus, the end customer must see the value in the residential gateway as sufficient to pay—either directly, through lease/tariff fees, or through a higher cost for his home—for all of the costs of ownership. It must be conceded that this position can be temporarily modified if a residential gateway provider—home builder or network owner—decides to subsidize part of the residential gateway costs for other advantages. But this doesn’t change the basic fact of the economic necessity of the end user bearing the costs because those other advantages will ultimately be costs to the end user.

Thus, much of the debate about ways to support the residential gateway box and its annual charges has proved to be superfluous. There is no other way. The customer must pay for the box. Maybe indirectly, but he still must pay for it.

A significant fact is that the residential gateway with the lowest number of features is the most widely accepted in today’s market. The Internet residential gateway, which in several cases has only the two features of allowing multiple computers to easily access a high-speed line and a firewall, is clearly the most accepted of today’s residential gateways. This illustrates the importance of perceived value by the end customer.

These values transcend the cost of the units. This simple fact has changed in the interim since the residential gateway was conceived. At that time the idea of high-speed networks being readily available (obviously not yet ubiquitously available, but moving in that direction) was a distant dream. The necessity of sharing a high-speed line with multiple home computers was not thought of as an imminent, strong driver.

Now we have nearly 60% of the homes in the country with a PC and nearly 20% with at least two. High-speed access is growing at a rate that appears to be only limited by the providers’ ability to serve. Consumers now can easily see the value of an Internet residential gateway.

What are the carriers doing?

Although they have been relatively quiet, most of the major incumbent LECs are busy positioning themselves for this market. Pacific Bell is offering a combined asymmetrical DSL and LAN service. It provides a router for termination of its ADSL lines in the home that will allow multiple home computers to interconnect and share the high-speed line. This is known as FasTrak LAN access ADSL service.

Verizon has been perhaps the most active in this field. Before the merger of Bell Atlantic and GTE, Bell Atlantic was offering a home networking service to homebuilders. Their product is a whole house residential gateway, using the Home Director (formerly IBM) product.

Also before the GTE/Bell Atlantic merger, GTE was (and now continues under the Verizon banner) operating a Connected Family Home Lab in its Irving, Texas headquarters. According to Russ Sivey, director of new service initiatives, this is a “house within a building” that allows testing and demonstration of new products or potential products in a real-life environment.

Verizon has also begun a very interesting technical trial. They have offered existing ADSL customers the opportunity to purchase an Internet residential gateway using the 2 Wire product. The customers accepting the offer have the unit shipped to them and install it themselves.

BellSouth has also been conducting trials. The RBOC recently completed a technical trial of telephony over ADSL with small business and small office/home office customers in the Atlanta area. This trial was based on the use of IPAXS equipment. BellSouth is also planning a market trial later this year in which Internet residential gateways will be placed with existing customers of their ADSL offerings.

It is evident that the consumer now recognizes a sufficient value level—of at least a constrained set of features—for an Internet residential gateway. The process of extending that recognition to other residential gateway types will be much easier than was previously the case in trying to sell benefits that were somewhat esoteric. This is already proceeding on a number of fronts with great success.
Clifford R. Holliday is President of B and C Consulting, Colleyville, Texas. His e-mail address is c.holliday@ieee.org. Material in this article has been taken from the author’s report for IGI Consulting, Inc. “Bringing the Lightwave Home.” Details are available from IGI Consulting’s Web site at www.igigroup.com.