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April 1, 2003
Electrical distributors should always be looking for unique selling propositions that will separate them from their competitors. I believe a market with

Electrical distributors should always be looking for unique selling propositions that will separate them from their competitors. I believe a market with this potential is home networking, the subject of Managing Editor Sarah Tobaben's cover article on page 24. The home networking market includes not only the wiring systems that support high-speed Internet access, but the products that link multiple computers and peripherals in the home, home entertainment systems, security wiring, telephone wiring and intercom systems.

Sarah spoke with distributors who have gotten an early start in home networking, and her article offers other distributors with an interest in this emerging business some tips on what it will take to succeed as a source of supply for home networking products.

The thing that intrigues me about this market is that it seems like an almost perfect fit for distributors whose electrical contractors customers are already wiring homes in the residential construction business. Many of the vendors are the same, too. Over the past two years, several of the largest electrical manufacturers have put together home networking packages.

Perhaps most interesting is the staggering growth potential of home networking. This is a young market. Even if a distributor has taken a pass so far on selling into voice/data applications in commercial, retail, institutional, industrial and government applications, they can still get into voice/data in the home.

Although most industry studies say less than 10 percent of all new homes are now pre-wired with the structured cabling systems that will support high-speed Internet access, home theater, security, intercom and other home networks, that figure is expected to skyrocket as broadband Internet access becomes more widely available. This penetration level is quite low, but when you figure that new home construction over the next few years is expected to level off at a still-healthy 1-million-plus starts, that's more than 100,000 new homes being built with home-networking products.

Trish Park, president, Parks Associates, Dallas, a market research firm that tracks the residential networking market, says about 39 percent of all homes currently have Internet access, but only 2 percent of those home have high-speed access. By 2010, she expects those numbers to rise to 65 percent and 35 percent, respectively.

One of the firm's other reports said the demand for “residential gateways” will approach $3 billion in sales and triple from 8.6 million units in 2001 to more than 33 million units by 2005. The firm defines residential gateways as, “A network interface device that provides means to access a service delivered to the home, such as telephony, cable TV, and Internet service.” This definition may be expanded to include a “whole-house, intelligent network-interface device. Add on the sales of the related structured cabling, outlets and supporting hardware, and the potential market quickly becomes huge, when one considers the fact that electrical contractors are in the best position to do this work because they are already on the job site doing the power wiring.

This market is not without its risks. Product obsolescence can be a factor in this market, once you move away from the basic wiring system and into any of the more automated products that require programming. Questions also exist about who will win the all-important last mile from the long-distance cabling networks to the customer's service entrance: cable television companies offering cable-modem service, phone companies or new entities offering DSL service, or the satellite services that avoid beam service direct to homeowners' dishes.

There is also the huge question of retrofitting existing homes with new home-networking systems, and the hassles that presents. Proponents of wireless networking technologies for the home are racing to come up with a workable solution to these challenges.

All and all, it's a market that you can develop into a truly unique selling proposition. Check it out.