The burgeoning residential networking market will bring impressive technological capabilities to homes over the next few years. But will homeowners pay extra for the latest high-tech advances when not all of the benefits are readily seen?
July 1, 2000
T he home will never be the same again. Within a few years, homeowners wired to the Internet can expect to regulate appliances remotely — from controlling the air conditioning or heating system to maintain the air temperature at a comfortable 20C, to signalling the microwave to search the web for a savoury recipe on Thai lemongrass soup, to programming the home-entertainment system to play the latest Hollywood film.
Consumer demand for a fast, reliable mode of carrying voice, data and video signals bodes well for structured cabling or wiring — the backbone of the information highway — is finding a significant place among residential users, particularly among buyers of new homes. What is unclear, however, is whether high-speed wiring will capture the lion’s share of the residential market by 2004 — the time that many estimate such matters will be decided.
Industry professionals with experience in this arena estimate that structured cabling adds about one per cent to the selling price of a new home. This means homeowners must be made aware of the benefits of this expense. They must also be shown the advantages of the wired way, when wireless devices like HomePNP, X10 control systems and radio frequency (RF) units cost substantially less money and offer some — though not all — of the advantages of structured wiring.
The fortunes of structured cable are inextricably linked to new housing starts. In the United States, which is about two years ahead of Canada, structured wiring is holding its own, mainly because of a booming economy and strong housing starts. About 1.5 million new homes are being built each year.
Consequently, structured wiring for the residential market is expected to generate sales of over US$1 billion by 2004, an almost three-fold jump from the estimated US$386 million it will generate in 2000, says Kurt Scherf, a home networks analyst with Parks Associates, a Dallas-based research firm. In comparison, the same estimates say wireless devices will rack up revenues of between US$3 billion and US$4 billion.
“In new housing, structured wiring is a hands-down winner,” Scherf says. But he adds that recent consumer surveys show that in new homes, structured cabling will operate alongside wireless devices. “The vast majority of people think both will go together in the home.”
WIRING ALL NEW HOMES
Many industry analysts say that high-speed wiring holds similar potential in Canada, where about one per cent of homes now contain Category 5 cabling. “Structured cabling will become the standard,” says Barry McGowan, Director of Business Development for Voxcom Inc. of Burnaby, BC, a national security systems firm. “In three to five years, every new home will be wired with structured cabling” — what he calls “the asphalt of the information highway.”
Voxcom partly bases its sanguine assessment on a seminar it put on with Canada Mortgage and Housing Corporation in the Vancouver area earlier this year. “When potential new-home buyers saw that this type of concept was available, they were interested,” McGowan says.
Others take a more cautious view. “I foresee that within three years, between 40 per cent and 50 per cent of new homes will contain structured wiring,” says Morris Stelcner, a product manager for intelligent buildings and smart homes for Nordx/CDT in Pointe Claire, QC. “These new homes need to be wired anyways — for cable TV, satellite services and security systems — why not make them Internet-ready?”
True enough. But not everyone really cares about an Internet-ready home. According to Toronto-based telecom analysts IDC Canada, about one in three Canadians have access to the Internet at home. While one can argue that prewiring the home might induce greater interest in things Internet, it does not necessarily follow that everyone will hop on the high-tech bandwagon. Yet, there will always be a small select group of people who have a love affair with technology and the promises it makes.
Here is a look why. The consumer’s adoption of technology seems to follow a predictable pattern. Interest in new things can especially be found among what marketing people call the “early adopters” — people who want to be the first on the block to get a new technology.
In the case of high-speed wiring, Voxcom has identified two main groups of early adopters. The first is made up of Generation Xers, who are familiar with high-speed technology and want to set up things like home networking in their houses. The second group is comprised of audiophiles, typically in their 40s and 50s, who when they move into their final home want the best of everything — including a state-of-the-art sound system.
KEEPING OURSELVES AMUSED
Home entertainment will drive the demand for high-speed connectivity. For instance, in the third quarter of 2000, Hughes Network Systems is scheduled to launch its direct-to-home Internet satellite service, which requires a carrier capable of delivering 40 Mbps. “You won’t be able to find wireless solutions that can cost-effectively deliver that level of bandwidth into the home,” says Russ Straate, director of EM structures for Minneapolis, Minnesota-based Honeywell Inc., which manufactures a home-controller gateway.
Generation Xers, a growing demographic group, display gushing enthusiasm and knowledge of current technologies. Nowhere in Canada is this more evident than in Silicon Valley North, or Kanata, ON. In the heart of the high-tech community is a $1-million demonstration bungalow called the Millennium House. Developed by Phoenix Homes, the 7,200-square-foot home “showcases what could be done with today’s technology,” says Cuckoo Kochar, company president. He and his family plan to move into the model home in July.
Among its amenities is a $100,000 home theatre with THX sound, high-speed Internet access to control the security and lighting systems and a Honeywell system to allow precise temperature control of various parts of the house. It contains the latest wiring, including Category 5e cabling and RG6 coaxial hooked to a sophisticated Nordx hub in the basement.
The model home has sparked interest among Kanata’s high-tech community for similarly wired (but more modestly priced) houses that go for $300,000. “We are selling between 10 and 15 homes a month,” Kochar says.
That excitement for high-speed cable (and what it represents) has not made it a requested item in the Greater Toronto Area, likely because its installation adds between $1,500 and $2,000 to the price of a $200,000 home.
Simply put, buyers struggling to buy a house balk at paying for something that is hidden behind the walls, says Bert Dekkema, president of Dekkema Developments in Unionville, ON, a suburb of Toronto. “If you say to a potential homeowner — ‘Look, it’s going to cost you $2,000 more’ — they say they would rather take the gas fireplace, because it’s something they see and use every day.”
COUNTING THE COST
That is the central point of debate. Will buyers of new homes pay extra for a house that contains the latest in technological advances when not all of its benefits are readily seen? Nordx’s Stelcner says that customers are becoming more aware of structured cabling and its advantages.” They are asking questions such as, ‘Can I have a Category 5 or a high-speed cable in my home?'”
The thinking behind such questions is “future-proofing”, ensuring that the home’s wiring system will be able to manage another telephone, an asynchronous digital subscriber line (ADSL) or other high-tech connection when required. “If you try to put in cable later, it will not only be more expensive, but more messy,” Stelcner says, referring to the inconveniences related to drilling holes into walls.
Wireless modules, however, are not messy to install and cost under $100. “Because of the lower cost of the modules and wireless devices, I don’t see things moving toward structured cabling,” says Mark Odinotski, a homeowner in Unionville. “Everything could be run through the power line.” And that is precisely what the engineer has done to automate his home, having installed X10 modules that plug i
nto AC outlets to control such things as the home’s temperature, lighting and security systems.
Yet, Odinotski concedes that his patchwork system of modules is not ideal, particularly because standards for such devices do not approach those of structured cabling.
A LOOK AT STANDARDS
Standards might not increase excitement among homeowners for high-speed wiring, but they undoubtedly ensure that, once installed, the wiring and the appliances connected to it will work properly. Two standards stand out: the Federal Communications Commission’s regulation in January 2000, which mandates that builders install at least Category 3 cabling, and the ANSI/TIA/EIA-570-A Residential Telecommunications Standard, which the Telecommunications Industry Association (TIA) published in October 1999.
The TIA standard sets up, among other things, a grading system to match the level of services required for the residential user. Grade 1 focuses on basic service, whereas Grade 2 on multimedia applications. For instance, Grade 2 specifies four-pair Category 5 cable, Series 6 coaxial cable and (optionally) fiber-optic cable — all placed in a star topology.
The star topology is the benchmark. In this formation, all cables start at one location (usually at the entrance to the home’s wiring site) and travel directly to their intended destination. This scheme gives maximum flexibility for installing and testing home local area networks (LANs) and improves the signal quality.
“It’s the same way that all your wiring in your home terminates at the fuse panel,” explains Stelcner. “All the outside lines will terminate at the panel.” Homeowners will then go to the panel to activate particular services — similar to the old PBXs used by phone operators to patch in a call. The next-generation systems will use residential gateways, which Stelcner says is up to five years away.
Equally significant is the FCC regulation. “The FCC regulation is extremely important because in the past builders have been installing what’s called Bell wire or thermostat-type wire [Category 1, or POTS],” says Bob Jensen, chair of residential cabling panel TR 42.2 for the TIA.
Jensen, who works for 3M’s telecom systems division in Austin, TX, notes: “That type of wire might not affect homeowners if they have installed only one phone, but in a multi-line household they end up with serious crosstalk.” Crosstalk happens when conductors are located parallel to each other and the signal on one conductor is coupled to another.
TRAINING THE TROOPS
A standard is only as good as its application. For that reason, training installation technicians is imperative. For instance, Stelcner says his company trains contractors and dealers on how to install the wiring properly — in what is typically a half-day training seminar. “After the training, the installer can put in wiring for voice and data at the same time that he is laying down electrical wiring,” he says — a job that can easily be done with a one- or two-person team.
As a comparison, contractors installing cable in commercial buildings take a five-day seminar, mainly because they have to learn more about the effects of such factors as higher speeds (gigabits per second) and longer distances.
Still, it boils down to whether a homeowner wants to pay the cost of becoming wired, Jensen notes. “When you start thinking about bringing in two Category 5es and two RG6s to each outlet, it ends up being a lot of cable.” But, he says in homes that might contain a home-office and a LAN, structured cable is the best option, particularly if future-proofing is a consideration.
Jensen puts forth a strong case, as do many others, that if one wants to take advantage of the latest in high-tech conveniences and home automation, one has to become wired — preferably with Category 5e cabling next to each electrical outlet. “Within a couple of years, you will be able to call up grandma from the refrigerator,” he says, referring to the promise of web appliances (see sidebar above). “Or you will be able to receive a phone call through the bathroom mirror.”
The argument can be boiled down to how one views the virtues of technology and what it offers homeowners 10 years from today, McGowan says. “When you start thinking about structured cabling as the backbone where a web appliance on your desk becomes an information source — and part of your lifestyle — it becomes easier to accept the cost.”CS
Perry J. Greenbaum is a Montreal-based freelance writer, who writes about business and technology for a number of Canadian publications. He can be reached at email@example.com.