You are correct that the NEC VAR announcement is important for WIND investors. First, any VAR arrangement with a major technology player is extremely important. It means that the VAR partner ships product with WIND’s software included free of charge, with obvious implications for revenues abd market share.
The NEC announcement is particularly important because it introduces a term that is just starting to see the light of day: “residential gateway”. What is it, and what does it mean?
Lately, the mantra of the computing and communications industry has been to get broadband communications into the home, the so-called “fat pipe”. Cable modems, DSL, Fiber Optic cables, satellite TV, fixed wireless and, without doubt, 3G PCS wireless solutions are vying, with varing degrees of success, to be the fat pipe.
I believe the giants in the industry (Intel, Cisco, NEC, all major telephone companies, all major cable companies, Nortel, etc.) have been focusing for years on the natural follow-on question. What does the fat pipe connect to, and how does data content get distributed throughout the house?
Everyone clearly sees that a single fat pipe entering the home could enable all entertainment media (TV, Music), voice telephony and web-based Internet connectivity. The pipe should have a single entry point to eliminate a host of difficulties involving system admin, security and in-home data- and tele-communications.
The pipe shouldn’t connect to a PC because (a) PC’s are anti-consumer and (b) telephony service requires failsafe operation. This means that the device it does connect to is more than a DSL or cable modem.
The pipe shouldn’t connect to a set-top box, because it is not just a multi-media plaything. The connection device needs the capability of empowering a home network, not just a TV.
I think it is pretty obvious that fat pipes best attach to a home, or residential, gateway satisfying the following wish list:
1. The gateway is high-available, reliable, always on, always connected.
2. The gateway is consumer friendly, essentially by being plug-and-play. It doesn’t look like a PC, nor does it act like one.
3. The gateway provides a single global IP connection point to the home, while being connected to all in-home devices on a subnet.
4. Outside connectivity would include one or more modules like analogue telephone telephony, DSL, cable modem, satellite, PCS 3G wireless, fixed wireless, fiber optic cabling.
5. Inside connectivity would include coaxial cabling, twisted pair telephone wiring, 820.11(a or b) wireless radio, Bluetooth wireless, and other connectivity contenders.
6. The software stack would include Network Address Translation, Java/Jini, all needed network protocols, a myriad of security features, including intrusion detection, firewall protection, possibly encryption, VoIP, and anything else with an acronym at least 4 characters long.
7. Besides all the connectivity hardware, the device will probably be endowed with significant hard disk capacity, enabling it to the support the home with network storage.
Devices like this are called a home or residential gateway, and they will begin to emerge soon, probably with numbers rising faster than DSL and cable modems combined. I think key enablers of home gateways are practical Bluetooth and 802.11 capabilities, both of which seem to be getting ready for prime time. By “practical” I mean inexpensive solutions with sufficiently hidden network administration to qualify as being consumer friendly.
My guess is that every single major player in the network/telephony/cable-operator/satellite-operator space not only sees the importance of a home gateway like I just defined, but has been developing their version, along with the head-end hardware and software. The NEC announcement substantiates this guess. If I am right, then it is critical that WIND form all the alliances to dominate this space, which the rash of recent announcements (TMS, Bluetooth, NEC, Java-rich Tornado for Internet Appliances) suggest has happened.
Think of the home gateway as a new-economy replacement for the popular Tollbooth metaphor often revered by investors.
In my model, I will be collapsing the DSL and cable modem lily ponds into a single, combined home gateway lily pond. Given the obvious importance of the home gateway, I would expect this lily pond to be in the top three or four of WIND’s lily ponds.
Allen |
