There exists a huge business opportunity for networking within residences. There are many companies who covet this market, and are working hard to capture it with their customary techniques of proprietary technology, more/less standard interfaces, customer lock-in, and rapid obsolescence.
The open source software movement suggests an alternative approach, which is to build systems based on standard components and free source code, and to build businesses based on common knowledge and good service. This approach promises lower costs, greater reliability, trustworthinesss, in sum much more value. We believe that this approach will not only dominate the market, it will liberate it.
Residential networking systems need to be tailored to meet the specific needs of their users. As such, it is impossible to craft a single system description to meet all, or even most, needs. However, we do believe that most systems will include some or all of the following:
The key feature of this system is that there is an Internet-connected server computer which runs a robust suite of open source software, which provides the user with a consistent, flexible, powerful command of the system. How the house itself is connected into this system will vary considerably.
However, describing this system merely shows the tangible product that the end-user sees. What makes this system work is the support infrastructure that designs, installs, troubleshoots, upgrades, and maintains the system. XC's mission is to build this support infrastructure, and in doing so to move the industry from the drawing board to everyday life.
The potential end-user market for XC services includes virtually all residential housing units in the US (115M, of which 68M are detached single-family residences). One indication of how rapidly this market may be penetrated is the projection of growth for broadband Internet connections: one such projection is that by 2002, 16M US households (1-in-4 on-line homes) will use broadband connections. The strongest target market will be residences with a broadband Internet connection that want to connect more than one computer to the Internet. Such residences will need, at minimum, a firewall/router appliance, which we can provide service for as an entry-level product. We believe that, as the software matures, and as new wireless networking technologies become viable, we will see significant business in this sector.
However, the preferred solution for networking in residences is structured wiring (in-wall cable bundles, connected to a switch box in an equipment closet), and structured wiring is an important part of high-end, full-blown home networking and automation systems. We believe that such systems will become very common in new single-family housing, and ubiquitous in higher end houses. Recent figures show that the rate of house starts is 1,249,000/year, and that the median price for new house sales is $165K (mean $203K). Several factors make new single-family houses very attractive as an initial target market:
The general system that we propose for single-family new houses can easily be adapted to existing houses (perhaps more emphasis on wireless, less on structured wiring), new and existing multi-family residences (apartments, condominiums), temporary residences (hotels), even mobile homes. Small businesses also share some subset of interests, especially those that are home-based.
Another way of subdividing the market would be by consumer interests and skillsets. For example, access to downloaded music is one driving interest in broadband adoption. The logical next step would be to pipe downloaded music throughout a whole home audio system. This combination of fast Internet access and home networking opens up numerous possibilities for specific features that appeal to specific customers.
One market niche of special interest is the DIY (Do It Yourself) market. At present, home automation systems are either very expensive, or require a lot of specialized knowledge (and a dollop of forbearance). Our goal with regard to DIY is not to sell to them. Rather, we hope to recruit them into making significant contributions to our cumulative expertise, much as technically savvy users contribute to open source software projects.
Real and potential competition for this market reads like a who's who of the high tech world: Microsoft, IBM, Intel, Lucent, Honeywell, Cisco, phone companies (Qwest, AmeriTech, AT&T), cable companies (AOL/Time-Warner), consumer electronics companies, and so forth; plus there are many small companies. The common thread of all these companies is that they base their product propositions on more/less proprietary technology. We can compete effectively with any such approach.
There are also quite a few retailers, and we have noted varying degree of interest from major chains like Home Depot, Radio Shack, and Sears.
We are not aware of any company which is pursuing this market as we are: as a vendor-independent, open source, services provider. However, there are several industry associations which provide somewhat similar services for affiliates (CEDIA, HANA), and there is at least one small company that is attempting to build a franchise organization.
It would be appropriate to divide these competitors into several groups:
We will succeed because we will represent the interests of the market. End-users will be attracted to us because our open source strategy and non-proprietary knowledge base will assure them that through us they will get the most value for their money.
Trades people and general contractors will be attracted to us because we will build the end-user market for them, and because we will assure them that they will always have access to the most cost-effective, best value components and systems know how available.
Technology providers will be attracted to us because we will in due course be able to deliver the market to them at much less cost than they would incur in building their own end-user marketing organizations.
We should also find support from anyone who worries about incomprehensible secretive technology, owned by private interests, taking over our lives. XC seeks to empower the market to take command over technology that affects our everyday lives. This empowerment is a force which proprietary interests may very well adapt to, but which they damn sure cannot compete with.
Any organization, especially early in its formation, is critically dependent on the skills and integrity of its founders. Failure to execute is always a risk.
There is a substantial critical mass of technical information and expertise which must be garnered before XC becomes a credible force in the industry. This knowledge base does not currently exist, so there is a bootstrapping period where we have to recruit help based on the faith that we will attain critical mass. Failure to deliver on that good faith would undermine the company.
This is a highly unorthodox business plan, which is likely to make it a tough sell, especially to venture capitalists. However, we believe that the synergy XC promises to franchises and affiliates will encourage them to be a sufficient source of capital.
There are risks that some exclusive lock-in strategy (e.g., a killer patent) might give a vendor an edge which might allow them to compete with us. While we do expect to see many patented devices at the periphery of the network, we cannot imagine how such a lock-in strategy would undermine the network itself.