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If the relatively young home gateway market were a prizefight, we might be somewhere in the 5th round of a bout pitting set-top box and gateway device rivals-and both are looking for the knockout.
But the battle has been pretty much a draw thus far, and no one seems willing to put money on a winner. So to cover their bets, many silicon and software makers are coming up with schemes that can adapt to any kind of box.
The contestants
Not surprisingly, one of the most consistent proponents of the set-top box as the home gateway has been Scientific-Atlanta Inc. With USB ports already built into its digital boxes, the Atlanta-based cable systems manufacturer is putting its chips down in home networking early.
"We really still see the set-top as the convergence gateway," says Tony Wasilewski, chief scientist for subscriber networks at S-A. "It already does great video and audio, and it can do related sort of services like enhanced TV and video-on-demand. But it also can be really the best attachment of the big network--the Internet at large--to the home network, and it can do it all in one platform that is integrated."
Wasilewski acknowledges a key hurdle is the perception of the digital box as simply an entertainment device and not a gateway.
"Most consumers would not think of the set-top as a way to do it," Wasilewski admits. "What the cable industry will have to do is bundle and really market the bridge to the home network as the key factor."
But with wireline's Home Phone Network Alliance and wireless Home RF and WiFi brands starting to take hold in home networking, the digital box's location in front of the coax cable outlet gives it a strong boost.
"We don't think that the set-top is the only gateway that you could possibly have to the home, but we think it really is a good candidate and probably the best one for being the convergence gateway, to bring entertainment and other services including Internet browsing and potentially voice into the home," he says. "I think folks will always think of it as an entertainment box, but one that starts to have enhanced communications features, and in a sense that's what S-A has been all about."
In the other camp are players such as 2Wire Inc., which hawks residential home gateways primarily to digital subscriber line customers but also to some cable modem markets. Roy Johnson, vice-president of marketing, doesn't see video and entertainment as a central focus for consumers looking for residential gateways. Instead, he sees the need to link multiple PCs to a broadband connection and in the future adding telephony to the mix.
"There are all of these other things about (Microsoft Corp.'s) Ultimate TV and TiVo trying to be a gateway and that sounds cool, but it's not the central drive of the market right now," Johnson says. "Our take is it will be a device and it will be a gateway, and then there will be this other thing called a set-top box, but it won't be the same device as the gateway."
A major reason for this is consumers are not particularly interested in shipping video between devices via a home gateway. "There are like, six people that want to do that," he says with a laugh. A PC-only network "sounds boring and it isn't very cool, but it is mainstream."
Another strike against the set-top box as a gateway has to do with where it sits in the house. "Especially when telephony is involved, keep in mind the TV is usually nowhere near where the telephone sits in your home," Johnson contends. "So why would you put that inside the set-top box?"
All in all, Johnson says the market is likely more pragmatic about home gateways than many video device manufacturers would like. "Marketing people tend to like to talk about the cool future stuff, but in reality I think people are looking for what's useful today, with the promise of maybe future usefulness," he says.
The customers
To make matters more complicated, consumers are equally divided in what they are looking for in a home networking system, according to Gary Schultz, an analyst for Multimedia Research Group, Inc. The firm recently released a study of home gateways and the market growth through 2004.
"What we are finding is early adopters we surveyed for the report do make a distinction between a PC network for a home and an audio/video network," Schultz says.
For now, most consumers appear more interested in linking their PC equipment via a gateway to share Internet connections between devices, he notes. But there is a potential unification on the horizon, in the form of personal video recorder units--either from providers such as TiVo Inc. or as future digital set-top boxes equipped with hard drives. If that disk storage space starts to reach the 500 gigabyte range, Schultz thinks people may start seeing it as a video repository able to link multiple players as well as the PC side of the house.
"Once you have all of this content storage someplace, arguably it is going to be located close to the TV," he notes. "So theoretically it is possible to merge them, based on the technology we are looking at. But I don't think that is on people's minds when they hook up their PCs and laptops and printers in the house. They are interested in sharing devices."
Adaptation crucial
So what are other players in the home networking market to do? Adapt, apparently.
Take Proxim Inc., a name in wireless networking. With its cable-centric products and business contacts, it was looking for a way to get into the DSL space. Along came Netopia Inc., a voice and data DSL outfit in the small- and medium-sized business market that was looking for a residential angle. The two decided to merge to gain a better competitive position.
While the two companies still are waiting to complete the stock transaction, they already are working on a home gateway, banking on Netopia's business router technology and Proxim's wireless Home RF networking scheme. The product likely will be a DSL device linked to two to four cordless phones via the Digital Enhanced Cordless Telecommunications (DECT) platform.
Proxim already has a partnership with Motorola Inc. to add Home RF routing capability to cable modems and digital set-top boxes. That will supply a cable-centric product that can network multiple computers and entertainment devices.
"It's really a nice DSL and cable mix," says Kurt Bauer, Proxim's general manager.
But what form the home access device takes "depends on how you approach it," Bauer says. "It's going to depend largely on the type of user you approach."
A family that has less interest in Internet connectivity but wants a combined voice, video and data gateway may be a good target for a next-generation digital set-top box as the central device. But a family of computer mavens or someone with a home office may prefer a modem-based device.
"If you tie a bow around all of these, that is this integrated device--voice and data combined," he says.
Similarly, chipmaker Texas Instruments has a brand-new chipset that carries the plugs for every major home networking scheme--from HomePNA to Bluetooth. That chip architecture can be molded to DSL, cable and satellite platforms.
Terry Riley, director of business development and marketing for the broadband communications division at Texas Instruments, sees that as part of an evolution from simple sharing of networks for computer gear to intelligent networks passing around voice, video and data.
"Where the industry wants to head is one integrated box with as many functions on as little silicon as possible to achieve a cost reduction," Riley says.
What the home network will be used for dictates what configuration consumers likely will choose. For example, while Riley says the addition of a high-speed cable modem boosts the digital set-top box as a gateway candidate, there is a flaw.
"The trouble is that is not where you want to do most of your Internet surfing," he says. "If you want to do a lot of Internet surfing, you tend to put it by the primary PC in the house."
"We see both models coexisting--it isn't like one is the way it has to be," he adds. "MSOs will push for the set-top box as the gateway while the ILECs will tend to push for a unit closer to the PC."
New gateway player Wind River has also adapted. With a background as a software operating systems provider for servers and routers, the Alameda, Calif.-based company has recently unveiled a gateway system that can adapt to the broadband connection and support a range of plugs including Bluetooth, USB, DOCSIS and Ethernet.
Dave Fraser, vice president and general manager of the network business unit at Wind River, says the resulting Tornado software package can ride on any kind of gateway, be it set-top box or stand-alone unit.
"There's a lot of money being spent marketing both ends of the spectrum and anywhere in between," he says. "The point is both are valid. I wouldn't want to bet if a set-top box or a separate gateway will win. We think both are valid."
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