Wonder Wire

July 1, 2003
Growing homeowner interest in high-speed residential cabling systems with the capacity to pipe mind-blowing amounts of information to home offices, home

Growing homeowner interest in high-speed residential cabling systems with the capacity to pipe mind-blowing amounts of information to home offices, home theaters, security systems and other electronics peripheries offer electrical distributos interesting new sales opportunities.

Electrical distributors were wary of early attempts to equip homes with proprietary automation systems that offered remote control of appliances and other features that never grabbed the attention of the masses. High installation costs and some technical compatibility issues that were never completely resolved also hindered home-automation systems such as Smart House.

It's a different ball game now in the residential market. Instead of dreaming up ways to automate the most mundane household tasks, many manufacturers are realizing that customers are voting with their wallets for more modest home-automation applications, such as home theater. These manufacturers are developing products to meet this demand.

Other vendors are focusing on structured-wiring systems-the nuts-and-bolts cabling systems that carry the digital signals that drive sound, computer, telephone, video, security and surveillance systems and other elements of newly automated homes.

As one vendor of home-automation equipment said, "the planets are lining up" for structured-wiring systems to become as common as telephone and power wiring in homes of the future because of the following technological and demographic trends:

* Consumer demand for high-speed Internet access. * The popularity of home offices and businesses based in the home. * The increasing number of dual-income couples with discretionary cash to spend on niceties like home-theater systems, lighting control packages and lush home offices. * The affordability of personal computers has enticed homeowners to have more than one computer, and to network them to share printers, scanners and other computer peripherals.

Todd Regar, director of marketing for OnQ Technologies, Inc., Harrisburg, Pa., a manufacturer of structured wiring systems, says home wiring leverages all of these trends. OnQ was until recently a business unit of AMP, Inc., Harrisburg, Pa., until a group of ex-AMP employees purchased it from the company two months ago.

"It's amazing how much the structured wiring market has taken off over the last 18 months, he says. "We just had our first month of business in May. It's like we haven't missed a beat. People are starting to adopt it faster, and the Internet seems to be the killer application."

Sales of these structured-wiring systems to single- and multi-family homes are expected to hit $174 million this year and in five years could top $537 million, according to Parks Associates, Dallas, Texas. The first structured wiring systems for the residential market include the OnQ system; HomeStar wiring system by Lucent Technologies, Warren, N.J.; IBM's Home Director network, IBM Corp., Armonk, N.Y.; the QuickPort system marketed by Leviton Telcom, Bothell, Wash.; the InHouse system by Ortronics, Inc., Pawcatuck, Conn.; and the Siemon Home Cabling, Siemon Co., Watertown, Conn.

These wiring systems, which have been on the market for about the past 18 months, are installed in new-home construction at a cost to home buyers that's usually under $2,000. Structured-wiring system components typically include a central distribution panel and Category 5 twisted-pair wire with transmission speeds of 1mbps (incredibly fast) and R66 coaxial cable using a star-wired configuration to link incoming communications signals through the panel directly to communication jacks in outlets throughout a house.

The full-line electrical distributors who have already signed on to sell structured-wiring systems have found that they must compete head-to-head with specialists in wire and cable and security systems distributors who also want a piece of this market. For instance, security specialist ADI, Inc. is already a big player in this business and has dedicated salespeople to sell the OnQ system. These salespeople attempt to turn on builders and developers to the concept, in hopes that they will install the systems in large housing developments. Anicom, Inc., Rosemont, Ill., and Communications Supply Corp., Stamford, Conn., are two other specialty distributors who got into the structured-wiring game early.

Jack Lichtenberg, a Lucent HomeStar specialist with GE Supply based in Indianapolis, Ind., has had a lot of success selling his system to builders in the Indiana market, and recently inked a deal to install the HomeStar system in a 1,400-home housing development. He sells the HomeStar system with an approach that's radically different from the efforts to sell Smart House in the early 1990s.

"When they first introduced Smart House, they said it was going to do everything from turn on your coffee maker to controlling your lights. Lucent is taking a different approach to that market. The company is taking the approach that most consumers want high-speed Internet access, a reliable telephone system and a video system that's truly interactive.

"People have speed on their mind. They buy a 56K modem and they see that the speed of their downloads are not any faster than their old 28.8 modem and they can't figure out why until they look at the old wiring in their homes. Then they say, 'Oh, It's just plain old telephone wire. What do I do to improve that?' I get that question all of the time."

He also sees the trend toward multiple computers in the home as a key factor supporting the need for a home computer network. "People want the ability to use one printer instead of having to buy a couple of printers. They want to use one file server and, instead of buying four expensive computers, buy one nice one and three relatively inexpensive computers. That consumer demand is just going to grow and grow."

One potential snag for the growth of the structured wiring market could pop up if the housing market goes in the tank, because these systems are primarily designed for new home construction. Few industry observers expect that to happen real soon, because interest rates remain at a relatively friendly level and consumer confidence remains high. However, as the number of baby boomers in their prime home-buying years begins to inevitably shrink, new home construction will not be able to sustain the record growth it has seen over the past few years of nearly 1.5 million homes per year. Even if this construction trails off some, that's still a huge potential market.

The fact that structured-wiring systems focus on new home construction leaves another enormous market for this concept virtually untapped: tens of millions of existing homes. Retrofitting a house with a structured-wiring system is a huge hassle. It can be done, but requires snaking cable behind wallboard, and through wooden studs and insulation. Another factor complicating retrofits of these systems is that they require a star-wiring pattern where each outlet is wired directly to the central distribution panel. This wiring scheme is in contrast to conventional wiring for computer, audio-visual and security cabling, where wall outlets are linked in a daisy-chain design and are wired to each other along the circuit. "You need to wire the house entirely different," says GE Supply's Jack Lichtenberg.

That's why some industry observers are looking to wireless retrofit solutions such as radio-frequency transmission, or transmission of all digital data over a home's existing power wiring through a powerline carrier system, or over in-place telephone wiring. Sending signals over existing telephone wiring is the theory behind the system under development by the Home Phoneline Networking Alliance (Home PNA).

The HomePNA alliance is a group of the largest telecommunications and computer firms that includes 3Com, AT&T Wireless, Compaq, Hewlett Packard, IBM, Intel and Lucent Technologies now working together to provide computer networking over a home's existing phone lines at transmission speeds of 1mbps or higher.

Supporters of concept, which won Home Office Computing magazine's "1998 Technology of the Year," hope to pump out products into the market by the end of this year.

OnQ's Todd Regar believes that when these companies get into the market in a big way it will attract interest to the general concept of adding additional communications systems and computer networks to the home, and that this interest will wash over the structured-wiring systems designed for new construction. "You will see a lot of the big boys getting into it in the next year or two, and you are going to see a lot more wireless systems on the market," he says. "It will be much more of a retail effort. Ours right now is aimed at the professional builder."

The demographic and consumer trends are in place for the structured-wiring market to take off, according to the following statistics from Parks Associates, Dallas, Texas:

* 15 million homes have two or more personal computers. That number is expected to double over the next two years. * 34.3 million U.S. households have Internet access. By 2003 that number will grow to 56.1 households. * Over 25% of all U.S. households had Internet access last year. * By 2000, almost 40 million households will have personal computers. * 21% of all multiple computer households already have some kind of computer network. * More than 43% of all U.S. households have one inhabitant who spends at least some time working at home for his or her primary job. By 2003, there will be 52 million work-at-home households.

Some way, somehow new homes will be prewired with cabling that supports computer networks, home theater, security and other communications and data services. It seems like an unavoidable fact. Home buyers want these features in their new homes, they are willing to pay for them, and when they sell their houses these systems will be marketable features.

If you are considering taking on a structured-wiring system to sell in your market, here are a few ideas to ponder as you start your analysis.

Spend a few hours on the Web to see what's out on the market. In researching this article, EW's editors found an enormous amount of information on structured-wiring systems at the following Web sites: www.homeautomation.org; CE Pro magazine's Web site at www.ce-pro.com; www.onqtech.com; www.ibm.com/us/homedirector; and www.lucent.com/netsys/homestar.

Prepare to dedicate significant sales time to selling these systems. While you may not be able to justify assigning a full-time field salesperson to structured-wiring systems when you first start out, the sale of these systems is different enough from traditional electrical products that you will have to devote a lot of selling time to them. Security specialist ADI is already in the market with a dedicated sales force calling on builders and developers.

Find an electrical contractor interested in getting involved, and make joint calls with him or her on your market's homebuilders and developers. You won't get too far with this product line without convincing large homebuilders and developers that these systems can be an attractive selling feature.

Be ready for new competition. The electrical wholesale market is just one of several channels that vendors use to distribute and install these products. Security specialists, wire and cable specialty distributors and voice/data integrators are already big players in this market.

About the Author

Jim Lucy | Editor-in-Chief of Electrical Wholesaling and Electrical Marketing

Jim Lucy has been wandering through the electrical market for more than 40 years, most of the time as an editor for Electrical Wholesaling and Electrical Marketing newsletter, and as a contributing writer for EC&M magazine During that time he and the editorial team for the publications have won numerous national awards for their coverage of the electrical business. He showed an early interest in electricity, when as a youth he had an idea for a hot dog cooker. Unfortunately, the first crude prototype malfunctioned and the arc nearly blew him out of his parents' basement.

Before becoming an editor for Electrical Wholesaling  and Electrical Marketing, he earned a BA degree in journalism and a MA in communications from Glassboro State College, Glassboro, NJ., which is formerly best known as the site of the 1967 summit meeting between President Lyndon Johnson and Russian Premier Aleksei Nikolayevich Kosygin, and now best known as the New Jersey state college that changed its name in 1992 to Rowan University because of a generous $100 million donation by N.J. zillionaire industrialist Henry Rowan. Jim is a Brooklyn-born Jersey Guy happily transplanted with his wife and three sons in the fertile plains of Kansas for the past 30 years. 

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