Electrical Wholesaling has written extensively on the voice-data-video (VDV) market over the years. From the distributor profiles showcasing successes in this business, to the technical discussions of product basics and standard issues, there was still one approach we hadn't tried — until now. This one-stop, A-to-Z resource walks you through key trends, players and technical basics in the home networking market. Save it as a reference for new hires, or keep it on hand to refer to yourself. It defines terms and trends, as well as offers capsule summaries on players in this business you may not have met yet.

First, let's get two definitions straightened out early in this article. A huge difference exists between “home networking” and “home automation,” especially for electrical distributors, independent manufacturers' reps and electrical manufacturers. Home networking provides companies in the electrical industry with sales opportunities created by proven customer demand. In 2002, nearly 30 percent of the 1.3 million single-family homes built in the United States were prewired with structured cable systems. This number will grow to over 50 percent by 2005, according to John Pyrna, vice president of structured cable, Genesis Cable Systems LLC, Pleasant Prairie, Wis.

Pyrna says it's not unusual for a homeowner building a high-end home to choose options that result in a $10,000 cabling package, and that a structured cabling system adds approximately 2 percent to the cost of a home. That means for a $500,000 home the system would cost $10,000; for a $125,000 home, the cost would be $2,500. The homeowner can roll the cost of structured wiring into the tax-deductible home mortgage. This investment can be recouped at resale time.

On the other hand, home automation gets into some pretty esoteric stuff — and struggles to find customer demand for what its enthusiasts say are life-changing features. As far as real-world sales opportunities, home networking covers the nuts-and-bolts of residential structured wiring — residential gateways, cabling, connectors, outlets, wiring devices and related equipment, high-end dimming equipment, testing equipment, labeling devices, and perhaps some security or audio/visual products if you are so inclined.

The specialists that handle true home automation products — the call-from-your-office-to-tell-your-oven-to-preheat-the-roast stuff — are dealing with a much smaller market and more complicated products. Stick with the home-networking side of this business.

Let's take a look at some of the early history of the home networking automation markets, and then some key trends shaping this business.

THE GOOD OLD DAYS AND TRENDS TO WATCH

Keeping it simple. During the heady days of the Smart House in the 1980s, the home networking/automation market was young and foolish. It didn't seem to matter that no one was asking for an automated home built with temperamental technology. The biggest selling point supporters of the Smart House concept could muster was the away-from-home control of kitchen appliances, lighting, sound and security systems. The concept seemed to be grounded in a teenage-like, “Let's build something really cool, just to prove we can do it.” Like the unfortunate teenager who crashed the family car during a joyride, the Smart House lost its wheels. It never really got any traction because of a lack of customer demand.

Today, home-automation proponents tout some of the same features of the original Smart House. This time around, technology is much more reliable, and there is some demand for remote control of security, lighting and audio from owners of upper-crust homes. But it's still a niche market compared to the multi-billion sales being generated by customer demand for basic home-networking systems.

Going wireless. Much of the industry talk about what's the best type of structured wiring systems could be a moot point if wireless technologies can ever rival the data-carrying capacities of conventional structured wiring systems. Wireless technology does have a huge advantage over copper-based structured wiring systems in retrofit wiring jobs because there's no need to tear into walls. But because of concerns over data speeds, capacity issues, signal interference and standards issues, it will be a few years before wireless technology puts a sizable dent in copper wiring for home-networking applications.

The intriguing possibilities of power-line carrier technology. The concept of sending low-voltage communication signals over a building's existing wiring to control lighting, security and some other electrical loads is not new. X10 Wireless Technology Inc., Kent, Wash., has been doing it for years, but electric utilities are now testing this technology on a much bigger scale. For instance, Current Technologies, Germantown, Md., is working with Potomac Electric Co. to provide broadband signals over power lines to about 70 homes in Maryland. The wiring in the test homes needs no additional equipment other than a modem that plugs into the outlet. With the technology, every outlet in a home could become a broadband outlet. According to an Associated Press report, Current Technologies plans to offer always-on, high-speed Web access that's four times faster than a dial-up connection for $30; faster service that could match what cable modems offer would cost more. The prime obstacle blocking the use of powerline technology on this scale is interference on the power lines and issues with utility transformers.

When Federal Communications Commission Chairman Michael Powell visited one of the test homes he said, “This is within striking distance of being the third major broadband pipe into the home.” He said the FCC is excited about the technology and is studying it now to see if Internet transmissions carried over power lines could emit signals inside or outside a home that could cause interference.

The potential of the security market. The security market is intriguing for several reasons: growing demand for home security after the 9-11 tragedies, a product mix that could dovetail nicely with a distributor's existing stock of VDV products and electrical contractor interest in this business.

Residential security systems such as video surveillance access control and burglar alarms are installed at the same time as the power, so it's natural that electrical contractors might look at the security market as a new market opportunity. Some industry observers believe the security market channel is relatively weak, and that savvy electrical distributors could get a foothold in this business.

Becoming buddies with builders. Home builders want no-hassle solutions to their structured-wiring needs, and they don't want to mess around with any more subcontractors or suppliers than absolutely necessary. That's why it's important electrical distributors wanting a piece of the residential security market get to know local builders. Vendors of structured-wiring equipment often have marketing packages directed at builders. Some, like Leviton Manufacturing Co. Inc., Little Neck, N.Y., have inked agreements with builders for the use of their products. If you are not certain which builders in your market offer structured wiring in their new homes, check with local realtors.

PLAYERS WHOM YOU MAY NOT KNOW BUT COULD MEET ON THE STREET

This section of the article will attempt to acquaint you with some of the key players in the market with whom you may not be familiar. If you have read this far, you probably already know who some of the electrical industry's biggest players are in the residential structured wiring market — distributors like Anixter, Graybar, Rexel Datacom and Branch Group; manufacturers like Leviton, Pass & Seymour, Cooper Wiring Devices, Belden, Genesis Cabling Systems, Hubbell Premise Wiring, Ortronics, Siemon, AMP/Tyco and Superior Essex; and the dozens of other vendors with an interest in the VDV business. The market involvement of these companies has been covered before and is beyond the scope of this article. We will visit with them about this market in future articles. Following are introductions to some VDV players in the residential structured wiring market whom you may not know.

Ademco Corp.

Originally founded by entrepreneur Maurice Coleman in 1929 as a sideline to his Brooklyn-based Progress Electric Co., Alarm Device Manufacturing Co. (ADEMCO), Syosset, N.Y., is now part of Honeywell Security and Fire Solutions, Minneapolis. The company promotes itself as the world's largest manufacturer of electronic security systems.
www.ademco.com

ADI

ADI, Melville, N.Y., is a large distributor of alarm, access control and video surveillance products and systems. Like Ademco, it's owned by Honeywell, a $24 billion Goliath. The company stocks over 85,000 products from 400 manufacturers and has more than 100 branches. The company is active in burglar, fire alarm, CCTV, access control, sound, communications, home automation and structured wiring. Last November, Honeywell Security & Fire Solutions (S&FS) announced it had canceled an attempt to find a joint venture partner for ADI.
www.adilink.com

Cable Plus

Cable Plus, Aurora, Ill., is a distributor of cabling products for the home, including copper and fiber-optic cable for voice, data, audio, video, security, fire alarm, and home automation. The company has regional distribution centers in six states and stocks residential cabling products from some names you know, like Leviton, OnQ, AMP, Erico/Caddy and Superior Essex.
www.cableplusinc.com

Elan Home Systems

Do you remember Elan from its Square D days? Before several managers bought the company and took it independent in 1995, Elan was Square D's early thrust into the whole-house audio market. In the late 1980s, Square D outfitted model homes with really fine sound systems to showcase Elan's abilities. I visited one of the homes in an Atlanta subdivision and was impressed with the system and its affordable price tag. The company's Web site says it was the first to integrate music, intercom and TV distribution features that used the home owner's stereos, televisions and telephones to create the entire home-entertainment experience. Elan still manufactures high-end products in the audio end of the home-automation market and was acquired by Nortek Inc. earlier this year.
www.elanhomesystems.com

FutureSmart Systems Inc.

The 9-year-old FutureSmart, Draper, Utah, aggressively markets its home-networking products to builders. The company recently announced a new builder program that takes advantage of its recent partnership with Intel. A company press release said FutureSmart and Intel will bring to market an advanced home-networking product that will provide home owners with benefits such as home control, audio jukebox, video jukebox, home security, lighting control and temperature control. FutureSmart also has a new marketing program intended to help home builders sell these systems.

In 2001, FutureSmart announced a marketing agreement with Cutler-Hammer/Eaton. At that time, a Cutler/Hammer spokesperson said the agreement would enhance its core electrical-distribution products with complimentary home-networking products. FutureSmart has a national network of over 800 installers and integrators selling its products.
www.futuresmart.com

Home Director

Based in California's Silicon Valley, Home Director has sold its home networking to more than 45,000 home owners in the United States and Canada. The company was launched in January 2000 as an independent spin-off from IBM. Investors include Cisco Systems, Motorola, 3Com and IBM. According to a report on www.builderonline.com, Home Director has 15 percent of the home-networking market, tied with Ustec and FutureSmart. Earlier this year, Home Director announced agreements with several California builders to install its systems in their housing developments.
www.homedirector.com

OnQ Technologies

Acquired earlier this year by Leviton, OnQ Technologies is one of the pioneers in the residential-structured-wiring field. Created in 1991 as part of AMP Inc., the company developed the Smart House in cooperation with the National Association of Home Builders. When Tyco International acquired AMP in 1999, the OnQ division was sold to the founding team. It's estimated that OnQ and Leviton have 50-percent-market-share in the residential structured wiring market.
www.onqtech.com

System Depot

The 7-year-old Systems Depot Inc., Hildebran, N.C., is a low-voltage distribution company that sells products in the burglary, fire, access control, surveillance, building/home automation, structured wiring, home entertainment, vacuum and intercom fields. The company has 11 branch offices.
www.sdepot.com

Ustec

Formed in 1992, Ustec, Victor, N.Y., manufactures structured wiring systems and related components that allow residential customers to network computers and electronic products internally, and to access external communications sources like the Internet. Over the past few years, the company has announced agreements with large builders including Centex Homes and D.R. Horton, which builds homes in 23 states.
www.ustec.com

Worthington Distribution

Based in Paupack, Pa., Worthington Distribution was founded in 1975 as a security company, but it eventually evolved into a full-service security company/home automation/system integrator. In June 1992, Worthington Group Ltd. sold its dealer/installer operation to become a national distributor of home automation/system integration equipment and supplies. The company's Web site says today it's one of the largest full-line distributors catering to the dealer/installer.
www.worthdist.com

RESOURCES YOU CAN'T LIVE WITHOUT

Allied Business Intelligence

Allied Business Intelligence, Oyster Bay, N.Y., is a consulting company that focuses on high-tech markets. You will see its sales forecasts for the wireless, automotive, electronics, networking, and energy markets in the business press.
www.alliedworld.com

BICSI

With nearly 20,000 members in 90 countries BICSI, Tampa, Fla., is the largest trade association in the structured-wiring world. It provides training and networking opportunities for voice-data-video (VDV) professionals. By attending BICSI-sponsored courses, members can earn credit toward becoming Registered Communications Distribution Designers (RCDD). The RCDD designation is intended to certify installers as proficient in the design, integration and implementation of telecommunications-transport systems and related infrastructure components.

BICSI's conferences are unlike other electrical industry trade shows. These events are always packed, and they offer attendees a great opportunity to see the latest in VDV equipment and enjoy a fine buffet and free drinks. The association also offers technical training specifically for residential cabling.
www.bicsi.org

Builder magazine

This magazine offers some terrific insight into the business trends that affect builders. The magazine runs a great Web site that's loaded with information on how builders can offer structured wiring in their new housing developments.
www.builderonline.com

CE Pro magazine

If you want to learn about the trends shaping the high ground of the home-automation market, check out CE Pro magazine. This publication does a nice job of profiling the installers of high-end home-automation systems and even offers a Top 100 listing of the largest custom installation companies.
www.ce-pro.com

Consumer Electronics Association

The Consumer Electronics Association (CEA), Arlington, Va., and the Home Automation and Networking Association (HANA) merged several years ago, and HANA is now part of CEA's Home Networks and Information Technology (HNIT) Division. Much of the information is only available to CEA members, but its Web site is still worth checking out.
www.ce.org

Copper Development Association

The Copper Development Association (CDA), New York, actively promotes the use of copper cabling systems in residential structured-wiring systems. The association offers several videos and training CDs to electrical contractors and builders that tout the efficiencies of copper cabling.
www.copper.org

Electronic House magazine

Electronic House magazine promotes itself as the top source for information on home electronics. It has more of a consumer focus than CE Pro magazine.
www.electronichouse.com

EH Publishing

EH Publishing, Wayland, Mass., is the biggest magazine and newsletter publisher in the home-automation and networking market. The 9-year-old company publishes Electronic House, CE Pro, Home Automation, TecHome Builder and Home Networking News, a newsletter.
www.ehonline.com

Electronic House Expo

EH Publishing also runs the Electronic House Expo (EHX), which it promotes as the leading trade show and conference of the $15 billion connected home industry. The Electronic House Expo is produced by EH Events & Education and sponsored by the Consumer Electronics Association. Electronic House Expo/Fall 2003 will be held Nov. 10-13 in Long Beach, Calif. The Spring Expo 2004 will be held March 10-13 in Orlando, Fla.
www.ehexpo.com

Frost & Sullivan Inc.

If you are researching Bluetooth and other wireless technologies, Frost and Sullivan provides plenty of for-pay research in these areas.
www.frost.com

HousingZone

Run by several of the builder magazines in the Reed Business Elsevier Inc. stable, HousingZone is a pretty neat Web site that offers a ton of information on the housing market in general and how home networking fits into the picture in particular.
www.housingzone.com

InStat.com

Run by the Reed Electronics Group, InStat covers the digital communications market. Instat forecasts that sales of products for the residential gateway market will reach $5 billion by 2005.
www.Instat.com

National Association of Home Builders (NAHB)

Based in Washington, D.C., one of NAHB's primary interests is lobbying for legislation that looks favorably on its constituency of builders across the United States. However, NAHB also does a good job of providing research on trends affecting builders and general building statistics.
www.nahb.com

Parks Associates

As you have probably noticed by now, there isn't a shortage of market research/consulting companies that focus on this market. But Parks Associates, Dallas, is a bit different because its primary focus is providing information and analysis to its clients on emerging residential, small office, and light commercial technologies. Run by industry-expert Trish Parks, the 17-year-old company also manages a popular trade show in this market, Connections: The Digital Home Conference and Showcase. The event, which Parks Associates cosponsors with the Consumer Electronics Association, is being held this month in San Francisco. Parks Associates expects that of the 30 million households forecast to have broadband service by 2004, 17 million will have a home network.
www.parksassociates.com

Professional Builder magazine

Like Builder magazine, Professional Builder is a good resource if you are looking for information on trends affecting builders. Professional Builder is one of the sponsors of HousingZone.
www.housingzone.com/pb

VDV Expo

Now in its fourth year, the VDV/Integrated Building Systems Conference & Expo caters to electrical contractors. It's sponsored by the National Electrical Contractors Association (NECA), Bethesda, Md., and will be held next year at the Las Vegas Hilton March 7-14.
www.vdvexpo.com

Yankee Group

Boston-based Yankee Group is another one of the many market research firms that covers the home-networking market along with other technical fields. One of its recent studies said there will be 32.3 million networked homes in the United States by the end of 2007. Driving this projected growth will be the increasing adoption of broadband and multiple PCs, multiple video feeds and multiplayer gaming.
www.yankeegroup.com

Part 2 of this article will offer a glossary of technical terms for residential structured wiring.