•  The percentage of Internet-enabled households is peaking.
  
• Wi-Fi begins migration from 802.11g products to more robust 802.11n technologies.
  
• Next-generation powerline and phone line networking technologies emerge.
  
• Higher networking data rates open way for widespread multimedia networking.
  
• Video-sharing websites post huge gains as consumers take advantage of the always-on benefit of broadband connections.
  
• New technologies from Microsoft and Intel to drive multi-room entertainment.
  
• Consumers’ appetite for digital imaging and video drives need for networked storage solutions.
  
• Voice over Internet telephone service (VoIP) gains traction.
  
• Ultra-Wideband (UWB) wireless technology enters the market.

The definition of home networking continues to evolve as technology expands to meet the needs of the U.S. consumer. The days of the data-centric home network built around file- and printer-sharing have fast given way to Internet-sharing as more households shift from dial-up to faster broadband access. By the end of 2005, 23 million U.S. households were using network solutions to divvy up the family broadband Internet feed, compared with 18 million the previous year, according to researchers at Parks Associates.

By the end of 2006, that number is expected to jump to 29 million, when the number of broadband Internet households will approach peak household penetration, according to Parks’ forecasts.

In its National Technology Scan (2005), Parks reports that of the 39 million homes in the U.S. without Internet access, only 8 million own a computer. The study concludes that the majority of these PC households will not subscribe to an Internet service at any cost. Some 14 million U.S. households don’t have Internet service at home but access the Web at work or other locations such as a library or Internet café.

Market research firm In-Stat reports that while Internet penetration has peaked at 74 percent of homes, broadband adoption is moving ahead at a healthy clip. Broadband penetration hit an all-time high of 68 percent for active Internet users in February 2006. Consumers have made good use of the always-on state of broadband, bumping up their time spent on the Web from 25 to more than 30 hours per month in three years.

According to the 2005 State of the Connected Home Market Research study by the Internet Home Alliance (IHA), 53 percent of U.S. households have multiple PCs, 70 percent have broadband Internet access and 28 percent have invested in a home network. The findings represent the first time that a network platform is in place that can support home solutions at a variety of levels, according to IHA.

Internet-sharing will continue to represent the vast majority of home network applications throughout 2006, but at the same time, the industry has its sights set on the next era of the connected home: networked entertainment.

Home entertainment will begin to emerge as a driver of both wired and wireless home networking in late 2006-2007 as consumers’ appetite for digital video, imaging and music expands beyond the office PC to other rooms in the house. But the entertainment-based networking market will take some time to develop as networking companies, CE suppliers and service providers try to sort out infrastructure, strategies, usability and compatibility issues. Parks Associates sees shared music and video applications and supporting hardware in use in fewer than one million U.S. homes, or two percent of home networks, by the end of 2006.

Advanced network technologies will help fuel this multimedia expansion by offering the increased throughput and reliability necessary for high-definition video distribution, along with less demanding content including music, digital images and voice. Secondary technologies including networked storage will ride the coattails of next-generation networking solutions.

The need to link multiple devices will drive networking sales in the coming years as consumers seek to share content. According to a study published in fall 2005 by The Diffusion Group, multi-unit penetration of consumer electronics product categories is on the rise among networked broadband households. The report states that in 2005, 29 percent of networked households owned three or more DVD players, for instance, compared with 13 percent in 2004. Networked households, the company says, tend to own significantly more media devices than non-networked homes.

IP-enabled devices will assume a greater role in the connected home, led by game consoles with a built-in portal to the Internet. Strategy Analytics reports that sales of IP-enabled devices leaped 500 percent to 16 million units in 2005, led by gaming devices from Sony, Nintendo and Microsoft. Networked TiVo, DVRs and entertainment PCs also factored into the growth of IP-enabled devices. According to Strategy Analytics, seven percent of the digital consumer electronics market was IP-enabled in 2005, compared with one percent in 2004. The trend will continue during 2006 as manufacturers add connectivity to flat-panel TVs, DVD players, digital cameras and cell phones.