Plugging into Home Automation

April 1, 2003
The residential datacom market is finally revving up. Sure, electrical distributors have been supplying residential contractors with low-voltage cabling

The residential datacom market is finally revving up. Sure, electrical distributors have been supplying residential contractors with low-voltage cabling for years, but now some are seeing a demand for related home-networking products as well.

Routers, hubs, jacks, faceplates, home-monitoring cameras, related switches, coaxial equipment and home-theater speakers are just some of the products distributors must carry to supply the market for home networking.

As more consumers begin to understand that linking lighting, entertainment, security, telecommunications, heating and air conditioning into one centrally controlled system can make their homes more comfortable, safe and efficient, the demand for home automation will grow.

Rexel Branch Electrical Supply Inc., Upper Marlboro, Md., is benefiting from an upsurge in demand for home automation in its market area. Bill Albert, datacom market segment manager for Rexel Branch, estimates that 30 percent to 40 percent of the homes being built in Washington, D.C., and its surrounding areas have some sort of home networking. “I wouldn't be surprised if within five years 80 percent to 100 percent of the (new) homes have some sort of home networking,” said Albert.

Although Rexel Branch has offered home-networking products for more than three years, it didn't start marketing them aggressively until eight months ago. That's when the distributor teamed up with Leviton Manufacturing Inc., Little Neck, N.Y., on training Rexel Branch's customers and marketing the manufacturer's Integrated Networks, which offer application modules that support Internet and computer networking applications, whole-house video and audio, and family and home monitoring.

“We have worked aggressively with Leviton in getting many of our customers trained,” said Albert. “In the last eight months, we've conducted six training seminars, and we have a waiting list for future training.”

Branch Electric coordinates the training and provides a facility, and Leviton provides its certified trainers. The seminars teach basic Cat. 5 installation. “When you're installing communications cables, if you bend it, or kink it, or strip it back and untwist the pairs inside, you can damage the integrity of the cable, and it won't provide the performance that you're looking for. In this training they cover many of these types of issues so that the contractor understands how to properly install this cable as well as how it is installed with the Leviton products,” said Albert.

The training and the introduction of products has helped Rexel Branch's electrical-contractor customers break into a market they'd had difficulty penetrating. Verizon Connected Services Inc., Beltsville, Md., which specializes in the design and installation of premises communications products and services, controls much of the Washington-area home-networking market.

“What we heard from many of our electrical contractors was, ‘We want this business. We're tired of seeing Verizon trucks on our job sites,’” said Albert. “In the past, they didn't have anything to offer their builder, so the builders would say, ‘You do the electrical work, and we'll have Verizon do the home networking.’ Now these same electrical contractors can go to their builders and say, ‘We have something to offer that competes with what Verizon has been putting in.’”

Harris Electric Supply Co., Nashville, Tenn., is another distributor benefiting from home networking. “We see it as a very strong very high-growth marketplace for us,” said Darryl Minkin, datacom specialist at Harris Electric.

Although Harris Electric Supply's datacom division has existed for more than three years, it didn't really focus on the residential side of the market until about a year ago. “It was then that manufacturers we work with began to bring product out to the marketplace that we were able to position to our customers,” said Minkin. Pass & Seymour/Legrand, Syracuse, N.Y., came out with the P&S home networking panel, and CommScope Inc., Elm City, N.C., added home-networking products as well.

Since then, Harris Electric has seen steady growth in home-networking product sales. “We're working with some builders that are installing this in all the houses they're building,” said Minkin. “Although it's more often installed in higher-priced homes, there are some builders with 1,500-square-foot homes that are installing these systems.”


Increased competition in the residential construction market, combined with consumer demand for new technologies in the home, will drive a larger number of home builders to offer pre-installed home networks over the next few years, according to a report by Parks Associates, a Dallas-based research firm.

“Many home builders have embraced wired home networks to create product differentiation, but consumer demand is the key factor in driving the tremendous growth forecast for structured wiring installations,” said Kurt Scherf, Parks Associates vice president of research and co-author of the report.

The report forecasts that as many as 48 percent of all new homes will be pre-wired with structured wiring solutions by the end of 2004, with the market for structured wiring installations generating sales exceeding $1 billion by 2004, up from an estimated $386 million last year.

Manufacturers are also fueling the upsurge in demand for home networks by introducing products. The number of manufacturers offering structured wiring solutions to home builders has more than doubled in the past two years. “This increasingly crowded market will create a need for competitive pricing in pre-wired home networks and prompt new and innovative developments in connected solutions for the home, which will both ultimately benefit the end consumer,” said Brian Canny, co-author of the report.

“Right now the biggest factor driving the market is the home owner,” said Harris Electric's Minkin. High-speed Internet access is important to home buyers with home offices or those who have school-age children using the Internet for homework, Minkin said.

Rexel Branch's Bill Albert was surprised to learn a new upscale neighborhood in Washington, D.C., had only about 15 percent of its homes going in with an advanced wiring system. When he learned the neighborhood was a retirement community, it made more sense.

In addition to demographics, geography and economy also effect an area's market for home networking. The demand for pre-installed home networks is much stronger on the coasts and in high-growth, high-tech cities.

Frost Electric Supply, headquartered in Maryland Heights, Mo., and serving the St. Louis metropolitan area, isn't seeing much home-networking business. “I'm not having luck selling it because there are not enough people wanting to spend money on the upgrade,” said John MacArthur, vice president, Frost Electric Supply. “Not that they won't in the future — I'm watching this — but right now it's less than 1 percent of my voice and data volume.”


For distributors in areas that haven't seen much demand for home-networking products, there's still time to position themselves.

Brook Electrical Distribution Co., Lincolnshire, Ill., is currently outfitting itself for the home-networking market. “We had electrical contractors who were servicing medium to high-end builders who wanted to get into this market because their customers were asking for it,” said David Rosenstein, president.

In response to customers' demands, Brook devoted a specialist within the company to home networking and has been assisting contractors with marketing information regarding related products. The distributor has also held seminars for contractors and sent out mailers.

Brook is also building a separate datacom division, Brook Data Comm (BDC) to service existing customers, as well as gain new customers on the commercial side. Brook hired several former Anicom employees to man this new unit, which opened its doors in Darien, Ill., in March.

Although Brook plans to run its datacom division completely separate from home networking, other distributors have found synergies between the markets.

Harris Electric approaches the markets as separate focuses, but the two people dedicated exclusively to datacom business spend time on both the commercial and residential sides of the table. Additionally, all the distributor's residential salespeople are trained on home-networking products and are aware of the opportunity the market presents.

According to Rexel Branch's Albert, distributors with datacom divisions that currently cater to commercial, industrial and institutional markets have a good start in breaking into the market for automation products. If those distributors also have a strong residential contractor customer base, their home-networking horizons are even brighter.

“We had a lot of things in place that made it easy for us,” said Albert. “If we were a distributor that didn't have a datacom division or didn't have a division dedicated solely to the home market, then it would have been a lot tougher to move as quickly as we've been able to move and penetrate the market as well as we've been able to.”

The relationships Rexel Branch has built over the last 20 years with its Project Homes sales division helped pave the way. Project Homes works solely with home builders and the electrical contractors that work for those home builders.

The distributor's relationship with Leviton also played a part. “What has really helped us move this product is that Leviton has done a fantastic job of getting in front of the builders and convincing them to make it either a standard or at least an option in homes,” said Albert. “Once the builder buys in, it's a matter of the contractor determining where they're going to get it. In a lot of cases, they already have a relationship with our Project Homes division.”

Harris Electric's Minkin agrees that partnerships with forward-thinking builders can be key. “What we're seeing here is the home builder is dictating a good bit of that market.” Working more directly with home builders is high on Harris Electric's agenda. Minkin said Harris Electric plans to meet with builders and provide a lot of training in the next few months.

Offering seminars and training for electrical contractors and home builders is another important step in capturing home-networking sales. “Electrical contractors have the same general needs in terms of inventory, delivery capabilities and knowledgeable salespeople,” said Albert. “However, I think the knowledge of the product and the ability to help train them as they're entering this market is probably weighted a little heavier than normal.”

“The two biggest things that I'm hearing from electrical contractors are that training is important, and being available to help them to work through the design of what they're going to be installing,” said Harris Electric's Minkin. That's where his certification as a registered communications distribution designer (RCDD) from BICSI comes in handy. Albert says that Rexel Branch employs two specialists with BICSI certification as well.

“Our ability to help train these customers and our datacom sales force's technical knowledge has helped us tremendously,” said Albert. “These customers are getting into something that's new to them. They're using products that are new to them, so they're going to have more questions.”

The distributors with answers will probably get the business.


Home Automation and Networking Association (HANA)
Founded in 1988, HANA, Washington, D.C., is the trade association of the home-control industry. (202) 712-9050

Parks Associates
The Dallas-based market research and consulting firm was established in 1986 to study residential and light-commercial technologies and services. (972) 490-1113

EH Publishing Inc.
EH Publishing Inc., Wayland, Mass., publishes four magazines catering to the home automation market: CE Pro, Electronic House, Popular Home Automation and Home Networking News. (508) 358-3400

Custom Electronic Design & Installation Association (CEDIA)
CEDIA, Indianapolis, Ind., is an international trade association of companies specializing in planning and installing electronic systems for the home. 800-669-5329

BICSI, Tampa, Fla., is a nonprofit telecommunications association. (813) 979-1991