Electronics and appliances move toward running from a command center - perhaps without a PC

10/12/99

By Doug Bedell / The Dallas Morning News

The much-ballyhooed, supposedly imminent arrival of the high-speed Internet connection in American homes has consumer electronics manufacturers playing a high-stakes guessing game.

Cable and telephone digital subscriber lines, or DSL, are making possible new products that represent a convergence of Net content and home entertainment centers.

But will we prefer to keep the home computer as a command center, as we do now for e-mail, MP3 audio files and streaming video? Or will we willingly surrender control to a new generation of smart TV set-top boxes that pull music, movies and other forms of entertainment from the Net invisibly, then store or stream them around the home?

"The issue is that nobody really knows what they will become or what degree of functionality they will bring," says Van Baker, a consumer market researcher with Dataquest/Gartner Group.

Nonetheless, several companies are developing devices called residential gateways that can perform those tasks and more. They are basing their projects on studies from Forrester Research and other firms predicting that at least 20 million American homes will have the necessary high-speed, high-capacity Internet access in three years or less.

Some, such as Dallas-based Panja, are making products designed to operate with or without a home PC. Panja's coffee-table touch screens provide easy menu access to entertainment and information services as well as to PCs, TVs, DVD players and stereo receivers. Advanced models add control of mundane appliances and systems.

"Using a PC to play music is like using a pickax as a toothpick," says Panja president Joe Hardt. "Don't make me run to my PC to play a music file. It should be less like your PC."

Panja (www.panja.com) is one of the first residential gateway companies to place a hefty bet that consumers will embrace the union of Internet content and home entertainment.

Competitors such as wireless pioneer Sharewave are convinced that a home PC with a broadband Internet connection will be the center for distributing music, video and information to players throughout the home. Others, such Diamond MultiMedia, are focusing on devices that will grab and store content for use at the consumer's discretion - much like the new hard drive-equipped ReplayTV and TiVo video recorders now allow for television alone.

Although fewer than 1 million American homes now have the "big pipe" online connections required for such ambitious schemes, Cahners In-Stat Group estimates that the residential gateway industry will grow to between $2.4 billion and $8.9 billion by 2003.

Panja plans to provide the controls and flexibility to handle a spectrum of Internet applications for entertainment, even to run household appliances - all without a PC. Its hand-held boxes hook wirelessly into cable or DSL, then sort out and push multimedia presentations to home stereos and TVs.

The company takes its name from the Brazilian word panga - a machetelike tool - because, says Mr. Hardt, "we're cutting the PC out of the picture."

This fall, Panja will begin marketing its Panja 1000 that, using subscription services, will cull MP3 files, streaming video and movies from the Internet and convert them to forms that can be used by existing entertainment equipment.

"We believe we are at an inflection point, literally changing how we are entertained. ... The PC is no longer the exclusive intermediary for the Internet," says Panja chairman John McHale.

Couch potato heaven

Inside a mock living room in the company's growing northeast Dallas office complex, he and Mr. Hardt show off their vision.

With the Panja 1000's wireless touch screen, the couch potato consumer can pick out music from a searchable directory of thousands of MP3 files on the Internet. Touching the panel sends a selected file to the stereo for instant play. In effect, the Internet has become Panja's jukebox.

The same principle is used to push video shorts and full-length movies onto big-screen television.

At about $2,500, the Panja 1000 is aimed right now at the affluent, those who have already shelled out for large format TVs, HDTV and other digital models. Custom Panja equipment has been installed in the homes of retired NBA star Michael Jordan, PGA luminary Payne Stewart of Dallas and film mogul Steven Spielberg.

"In the near term, the target is basically some 3 million people who spent $2,000 or more for a television. It's people who spend like that, where entertainment is an important part of life," says Mr. Hardt, who expects prices eventually to drop.

The Panja systems will work with broadband Internet access from any source, Mr. Hardt says, although the company will be marketing cable and DSL modems in partnership with manufacturers. Consumers then purchase add-on services that are delivered to their Panja controller on command.

For $19.95, the company will offer Broadband Blast - access to MP3, MPEG video and streaming audio and video Internet content. A separate service called PanjaCast ($9.95) will provide customized local weather, traffic, news and stock reports on wireless touch panels that can be located anywhere in the home. The idea is to allow the harried executive instant access to only the Internet data he specifically needs.

"We're not trying to replace the search function on the Internet," says Mr. Hardt, noting consumers can still hook computers to the Panja system. "But it's our contention a lot of people want the same information every day."

Residential gateways

Beyond that, the company is producing the Panja 2000 system, which enables remote control from the Internet of household appliances, thermostats, pool heaters, security devices and other home devices.

Residential gateway systems will prove important to the way consumers choose entertainment as the Internet continues to grow in users and usages, analysts say.

And they'll need all the help they can get. The number of online U.S. radio station broadcasts doubled in the last half of 1998, for example. A single source - Broadcast.com - now offers more than 2,000 radio and TV stations worldwide.

When broadband residential access becomes widely available, many experts envision the Internet morphing into the equivalent of a million-station cable network.

Yet, says Forrester senior analyst Tom Rhinelander, people still seem resistant to merging their entertainment with the Internet content. A recent Dataquest/Gartner survey of current cable users showed that only 11 percent were "extremely interested" or "very interested" in ordering movies-on-demand from the Internet.

"That says they are pretty happy with video delivery they have now," Mr. Rhinelander says. "You don't have more time in the day. And people aren't going to consume more just because there's more out there."

Some sort of content fusion seems inevitable. And broadband gateways will open up new ways to use the Internet's vast resources.

"What we're going to see if this convergence really happens is that the PC in essence becomes a set-top box," Mr. Hardt says. "People talk about this as if there were going to be one winner in all this - PC or TV.

"We happen to think there is plenty of room for a lot of winners."

CONVERGING TECHNOLOGIES FOR HOME ENTERTAINMENT

On one hand ...

There are indicators that more consumers will be ready to take advantage of the entertainment opportunities provided by the Internet.

* Forrester Research projects that at least 20 million American homes will have high-speed Internet access by 2003.

Less than 1 million have that access today.

* The number of households with broadband service will increase nine-fold over the next five years, according to predictions by the Strategis Group.

* About 80 percent of 40,000 homes being constructed each year in the United States are being equipped with intelligent electronic control systems that will allow advanced control over household and entertainment devices, according to the market research firm Parks Associates.

* Consumer purchases of high-speed modem equipment like that required for effective Internet entertainment gateways will balloon to $4.2 billion in two years, according to Insight Research Corporation.

*Home theaters on the rise

The percent of U.S. families installing home theater equipment has risen steadily, according to the Consumer Electronics Manufacturers Association:

* In 1995, by 7.8%

* In 1996, 10.8%

*In 1997, 14.8%

*In 1998, 16.6%

* In 1999, 20% projected

...on the other

In a recent survey about consumer attitudes, Dataquest/Gartner Research found that interest in PC-TV convergence may be soft:

* Only 11 percent were "extremely interested" or "very interested" in ordering movies on demand from the Internet.

* About 22 percent said they would like to view their e-mail on their entertainment center TV.

* About 23 percent said they would view Web sites on TV.

* Only 8 percent said they would play Internet video games.

SOURCES: the companies