Cisco in your home (or 3Com/MSFT or xDSL or ...) is needed for delivery of digital video.............
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Cisco's Plan to Pop Up in Your Home
The company whose products power the Net is looking
for new territory to conquer. Its next push: the wired
household.
Jodi Mardesich
It's 6 a.m., and you've just popped a mug
of water into the microwave for tea.
While you wait for it to boil, you check
up-to-the-minute stock quotes--from the
front panel of your Internet-connected
microwave.
Lunacy? Cisco Systems would have you
believe it's a likelihood. The company
whose networking gear powers 80% of
the Internet backbone is looking for new
territory to conquer. It's betting that if
some of the world's toasters and
televisions and coffeemakers get wired
with Cisco Networks software, the
builders of the Internet will ramp up their
purchases of Cisco's really expensive
routers.
It's part of Cisco's plan to connect
everyone and everything using standard
Internet protocols. If Cisco succeeds,
consumer appliances--and the personal
networking they enable--may be the
foundation for a new class of
applications, making Cisco the Microsoft
of what some experts are calling the
post-PC world.
To get the word out that Cisco is serious
about the home, its chairman, John
Chambers, unveiled the plan at the
beginning of January in a keynote at the
annual Las Vegas consumer
extravaganza, the Consumer Electronics
Show. He even showed a video of a
net-connected microwave oven (actually
available for just $50,000 from NCR). On a
perhaps more relevant note, he also
announced a deal with AT&T and TCI,
valued at slightly under $100 million.
Cisco will provide the telco with
equipment to route phone, Internet, and
video traffic over its cable lines. AT&T's
ads touting the service may speak of
"Cisco-powered networks."
Cisco is spreading its message via a $60
million worldwide advertising campaign
filled with emotional pitches and
multicultural children. The company is
even hitting the streets, sponsoring a
12-city shopping-mall tour with At Home
Networks to educate consumers about
cable modems. Cable modems, which are
generally paid for as part of the monthly
cable service fee, are gaining popularity
because they let you bring up Web pages
about 100 times faster than with the
typical 28.8 phone modem connection.
"We want to make Cisco synonymous
with the Internet," says Keith Fox, Cisco's
vice president of advertising.
For now, Cisco's making a lot of fuss over
a tiny market. It gets less than $10 per
license for the Cisco Networks software.
The highest-volume seller of cable
modems, Samsung, ships a mere 15,000
units each month. But market research
firm Dataquest sees the market for
connected consumer devices growing
rapidly. The firm forecasts that about six
million homes will be networked by 2002,
up from a measly total of 15,000 today.
The AT&T and Samsung deals reflect
Cisco's strategy of licensing its software
to partners rather than introducing its
own products. This strategy works, says
Mark Stubbe, vice president of Samsung's
networks division in Dallas. "Working
together, we're able to get new
technology and new services out quicker
than we could individually."
Despite the huge promotional push,
there's less behind the curtain than you'd
think. Cisco hired a chief for its personal
networks division just this summer, and
so far she and her assistant are the only
two people in her organization. "This is a
virtual organization within an actual
17,000-person corporation," says Robba
Benjamin, vice president and general
manager of Cisco's consumer line of
business. Benjamin, formerly an executive
with Sprint and US West, has tapped a
handful of people to form a "personal
networks" steering committee to
jump-start the organization. More than
100 business development staffers and
engineers are on loan for now. Within a
year Benjamin expects her group to
number between 150 and 200.
A nontechie who wanted to be a Milton
scholar, Benjamin says her top priority is
to sign up home users for broadband
networking through their cable providers,
which will equip them with Cisco cable
modems made by Samsung and Sony.
(These modems are the first co-branded
products available to consumers.) So far
there are only 300,000 broadband
subscribers, including users of cable
modems, in the U.S., but market research
firm Forrester Research predicts that
number will mushroom to 15 million
subscribers by 2002.
Cisco also plans to offer digital subscriber
line (DSL) modems, which are speedy but
not as fast as cable modems. Their main
benefit? They use existing phone lines
and let you make phone calls and surf the
Web simultaneously on a single line.
Eventually a simple device dubbed a
"residential gateway" will control home
electronics--from home or remotely over
the Internet.
Once all these fast connections are in
place, new applications will be built that
we haven't dreamed of, Benjamin says.
No longer will you have to go back to the
kitchen to check on the progress of a
roast. Instead, digital probes will send a
temperature and time update to your
personal digital assistant or your TV.
Before we reach this futuristic nirvana, of
course, there are a couple of mundane
details to take care of. For one, how is
Cisco going to connect everything else in
the home to the set-top box or cable
modem? Benjamin isn't saying, but
mentions that Cisco has invested in
ShareWave, a startup making a wireless
home-networking system. She also sits
on its board.
Cisco has formidable competition to
outrun before it can win this market.
Nortel says that it has received orders for
$1 billion of its one-megabit cable
modems. A host of competitors--including
Intel, IBM, Lucent, and Compaq--have
formed the Home Phoneline Networking
Alliance to come up with a way to
network home computers, fax machines,
stereos, and other appliances through
existing phone lines. Then there's the
Bluetooth alliance, comprising Motorola,
Nokia, Intel, and others with a similar goal
of using wireless technology. Cisco hasn't
taken part in either group yet, but
Benjamin says the company wants to
interoperate with both wireless and
wire-line systems.
Given all that, Cisco is wise to get into
the market now, says DavidPaul Doyle, an
industry analyst with Dataquest: "it's
going to be harder to compete once Intel,
3Com, or Bay gets entrenched in that
space." But making useful, rather than
novelty, products is the challenge, says
Michael Harris, president of Kinetics
Strategics, an Internet research firm in
Phoenix. "Conceptually, Cisco can make
devices talk with each other--it does
that every day--but the challenge is to
do it in a low-cost, meaningful way," he
says. Some of Cisco's ideas, while lively
and imaginative, may not fit that
criterion. Now, who really needs a
bar-code-equipped fridge that'll tell you
when to toss spoiled milk?
Magazine Issue:Vol. 139, No. 2, February 1, 1999 |
