TECHNOLOGIES TO watch - Consumer Electronics Association

TECHNOLOGIES TO watch - Consumer Electronics Association

TECHNOLOGIES TOwatchFIVE TECHNOLOGIES TO WATCH IntroductionExpand your Horizons1Welcome to the latest edition of Five Technologies to Watch. This annualConsumer Electronics Association (CEA) publication dissects newtechnologies that are shaping our future. With so many promising digitaltechnologies, it is tough to choose just five.This year we look at the home operating system, Wi-Fi/ultra wideband,recordable digital video, mobile gaming and hi-res audio. And for the firsttime, the publication has a special bonus section that focuses on the future ofCE. Learn about one of the first nanotechnology-based TVs, how softwareradios will truly allow world phones – wonderful news for internationaltravelers – and some unique applications for biometrics in wearabletechnologies that include highly miniaturized computers and sensors.Even more amazing, holograms soon may be used to avoid driver distractionissues when placing a cellular call while driving and flexible displays are onthe way that wrap around any device – a cell phone, a PDA – even your wrist.3D television? Yep, it’s in the works but still a few years away.Although the economy is facing challenges, the consumer technologyindustry continues to be a bright spot with sales expected to reach$95 billion for 2003.I hope that Five Technologies to Watch increases your curiosity to learnmore about the digital technologies that rapidly are changing our world.What better place to educate yourself than at the 2004 International CES inLas Vegas, Nev. from January 8-11! Come to this current day bazaar to see thedigital wares and services from more than 2,000 exhibitors. For moreinformation, visit the International CES also is the place to learn about technology. CEAhosts more than 100 conference sessions that feature 300 technology expertsfocusing on areas like wireless technology, electronic gaming, mobiletechnology, home networking, home entertainment, emerging technologies,technology policy and business solutions.Come to CES and expand your horizons even further. The future is coming,ready or not.Gary ShapiroCEA President and CEOOCTOBER 20035 TECHNOLOGIES TO watch


THE OVER-RIDING NOTION IS FOR A PC, CENTRAL SERVEROR SOME OTHER CPU-POWERED DEVICE TO ACTAS THE BRAIN OF THE AUTOMATED HOME, CONTROLLINGLIGHTING, TEMPERATURE, SECURITY AND CONTENT.4However, with available wireless offerings insufficient for allapplications due to limitations in bandwidth and stability,wired alternatives will still remain the solution of choice insome cases. For example, the bandwidth intensive video signalsrunning from a set-top box to a TV are likely to be handled bya standard video cable for quite some time. Fortunately, theremay be a universal standard for A/V connections in the formof IEEE 1394, also called Firewire or iLink, in the near future.Because of the tremendous bandwidth, structure and transferprotocols of 1394, it can carry device-to-device instructionsalong with the actual digital content, enabling products to benetworked together in a long chain. The HAVi initiativeattempts to harness this potential.Debugging the Home OSMoving right along with the advancements in the physicalconnection, the over-riding user interface for the automatedhome is evolving too. This interface, sometimes referred to asthe home OS, is built to be the command and control mechanismfor the home and all its devices and content. So far, anumber of PC and non-PC-based systems have emerged aspossible contenders.Make Mine PCMuch of the activity on the home OS front has been in thePC-based category. In fact, product has evolved enough inthis space that consumers can do everything from controllinglighting and other environmental settings to managing digitalcontent. And yet, the offerings really divide in to two functions,those for content management and those for home automation.Perhaps the largest name in the content management categoryis Microsoft. With the release of Windows Media XP, Microsoftoffers a simplified interface to consumers to manage digitalcontent in its many forms. Rather than working with a startmenu, the user has a list of choices right on the main screen,allowing access to the music collection, home videos or digitalpictures. It also enables quick click through to the DVD playerfor movie playback. Users also easily may access the electronicprogram guide listing TV broadcasts coming live via cable,satellite or an antenna, or served up from the on-board DVR.As an added bonus, an infrared remote can issue commands sothe user doesn’t have to be seated at the machine. Particularlywell-suited for users in close quarters, such as a dorm room orapartment, Media XP boxes can also act as the home’s overallmedia gateway and content server. Already, a Media XP box canserve up audio or video content to any other connected PC inthe home or to the home audio system in the case of music. Atsome point, it may even be possible to tie in the mighty Xboxas well, though no definite plans are known. Still to be tied-inare the home automation controls for lighting, security ortemperature settings in the home.While home automation has been around for years, theconcept of PC control has been slowly evolving with thecurrent crop of applications providers. Companies likeLantronix (Premise Home Control), Home Control Assistantand HomeSeer are among the available options forPC-based home automation control. Each of these usesstandard infrared or X-10 controls at the device level to provideusers with a single interface for controlling the various homeenvironment and security settings. Macros are a part of thepackage as well, for scripting commands based on certainevents, such as dimming the lights at a certain time of day orclosing the blinds. For remote access, the applications provide aWeb-interface as well. Some, such as the Lantronix, allow usersto customize the look-and-feel of the interface based on theirown preferences.Some companies on the cutting-edge of interface designs arebeginning to offer voice recognition. Offering the same basicfunctions as the other home automation programs, theHomeSeer application and HAL take it to another levelthrough a voice-activated interface that alows users to changesettings whether at home or on the go. Users simply pick upthe phone, press a key, wait for the voice prompt, and thenissue a command such as “Raise the temperature 10 degrees.”The voice on the other end states its completion of the task.The HAL system takes this a step further by performing5 TECHNOLOGIES TO watchOCTOBER 2003

advanced telephony functions, such as caller ID and customizedmessaging based on specific callers. Other potentialfeatures include customizable alerts delivered via voice fordesired events like a stock market jump or home securitybreach.Shirking the CPUWhile the PC stakes territory in this space, some non-PC solutionsfor home control also are in the works. Having grownout of custom audio and video installation and the need foruniversal remotes, this is the domain of the intelligent remotes.Companies like Crestron, AMX and Elan offer a combinationof hardware and simple embedded software to allow users tosend commands to devices throughout the home, typically viainfrared. In most cases, the solution includes a touch panelremote in each usage area that delivers a command to streamcontent into a given room or to lower the lights, close thedrapes and perhaps raise the temperature.In some cases, these systems will even stream video content tothe touch panel. The challenge for these systems versus a PCoriented model is the complexity of set-up due to the hardwarerequirements. While a PC can be loaded with software toperform multiple functions, in the non-PC solution, typicallyanother piece of hardware must be added each time a newfunction, such as content distribution, is desired of the system.This can quickly add up costs for the consumer, resulting in ahigh price tag for many of these offerings. However, with thehelp of a skilled programmer, the end result is a user-friendlyand powerful solution for content distribution, device controland home automation.Waiting for Hardware to Catch UpDespite the progress in the connection and home OS options,end devices in the home are still behind the curve. Theproblem is a simple one, at least to define – most of theexisting hardware choices have not progressed any further thaninfrared and simple on-screen guides as an interface. As aresult, the command applications largely rely on infrared fordelivering instructions to distinct devices throughout thehouse. Alternatives do exist, such as RS-232 in higher-end A/V,but manufacturing implementation has been minimal.Ethernet, both wired and wireless, is another possibility butonly a handful of products, such as set-top boxes, gameconsoles and audio servers, come with an Ethernet port. Andonly desktop PCs, laptops and PDAs come with on-boardwireless access cards. The same lack of hardware is true of1394/Firewire so far.Technically, the infrared-based world has challenges. For one,infrared is not as reliable as the other alternatives because itrequires line-of-sight between the transmitter and the receiver.Even IR blasters and direct patch cable is not 100 percentreliable; sometimes the end device just doesn’t receive thesignal. But even more important, no standard codes forinfrared commands exist. Each manufacturer develops its owncodes, forcing the user to spend large amounts of time andenergy programming remotes to “learn” the codes. Simplyput, experts agree this is not the most ideal, efficient oruser-friendly alternative.Devices in the home certainly sport other types of connectors,but these aren’t much help either, at least when it comes tointerconnectivity. Standard A/V cabling is meant to delivercontent one-way, removing the possibility of using it for networking.This translates into a current installed base of isolatedboxes in U.S. homes, incapable of participating in a connectedweb of products. As the standards for new cabling types, suchas 1394, solidify in the market, this will certainly change.5OCTOBER 20035 TECHNOLOGIES TO watch

6Convincing Consumers: Digital ContentManagement as the CarrotTechnical issues aside, things are shaping up on the consumerside as well, making the intelligent home concept one to watchover the coming years. In short, digital content is proving to beone of many killer apps.Data from CEA shows a growing number of digital devices inthe home today. Coming with the widespread adoption arevast amounts of diverse digital content that needs to be managed.The rapid growth of digital still cameras is creating largecollections of photos for consumers to store and distribute.Camcorders also are beginning to fill up hard-drives across thecountry with home videos. Another culprit is the emergingdemand for space to store digital copies of TV programs forlater viewing. And perhaps largest of them all is the expandingMP3 phenomenon, whose potential many argue we’ve onlyjust begun to see now that paid services are becoming accepted.Add all of this to the existing need for a way to manage thevast amounts of content and information coming at consumersfrom TV, radio, printed media, the Internet and day-todaycommunications, and you have a critical mass buildingwithin consumers. Some form of centralized information/contentstorage and management device is needed. Enter the audioservers, the multi-function DVRs, the game console Trojanhorses, the hard-drive equipped DVD players and set-topboxes and the Windows Media XP PCs.According to industry analysts, this growing need to managecontent ultimately will help push the PC function into thebasement as a form of content gateway or water heater, leadingthe way toward the ultimate home of the future. Already, manyPC households in the U.S. have one central computer, usuallyin the home office serving the content management andInternet gateway role to some degree. The next logical step, asthe PC gains functionality, is to move this computer to a moreneutral position at the head of the incoming cabling into thehome, typically the basement. Based on current consumerneed, this device would continue to serve as aggregator,distributor and conduit for content and information. However,once treated as a centralized command and control system forcontent, the leap to home automation is a much smaller one.Soon, the central server could be installed with modules forhome security or environmental controls, progressing furthertoward becoming the neural hub of the home.However far-fetched this journey to the basement gateway mayseem, interest is high. A few households have made this leap.The challenge is making it attractive to the bulk of consumers,some of which have not yet made the transition to the digitalworld. One thing is clear to digital adopters; content managementis a required part of it.Computer Use in a Home EnvironmentPenetration of Digital TechnologiesPCDigital CameraDigital CamcorderMP3DTVDVR/ PVRStereo, TV or VCRHeating or cooling systemAny appliances64 %Lights in the house31 %Home security system18 %10 %5 %1 %4 %3 %3 %2 %2 %Percent with a PC controllingthe listed functionsSource: CEA Market ResearchPercent of U.S. HouseholdsSource: CEA Market Research5 TECHNOLOGIES TO watchOCTOBER 2003

CEA ESTIMATES A TOTAL OF FIVEPERCENT OF U.S. HOUSEHOLDSNOW HAVE A WIRELESS NETWORKIN THEIR HOME.Building a Service SectorEven as consumer interest grows in home networking, howconsumers will get the solution they need is an unansweredquestion. Some argue it won’t come from Best Buy or CircuitCity as a do-it-yourself solution. Others contend plug-and-playsolutions will continue to simplify networking, keeping DIY(do it yourself) alive. However, the near- and long-term issuefor consumers isn’t necessarily one of simplicity; it is time. TheHVAC system in a consumer’s home is fairly “simple” withestablished standards, and yet consumers still call a serviceperson to make repairs or install a new component. Thereason: they just don’t have the time to do it, and they knowsomeone else is better qualified to do the job efficiently. Theautomated home concept is similar. Ultimately, this representsanother opportunity for the traditional home PC, homenetwork and custom installation industries.The bottom line is that the average consumer needs help ingetting his or her household to the point of “Jetsonization.”PC networks already exist in about six percent of U.S.households and are used for a host of entertainment options,but something is needed to push the envelope of current usagelevels. Unfortunately, current options are too technical andtime consuming to install and configure. As a result, very fewhomes currently are equipped to accept a system with acentral server and multiple points of access, let alone anentertainment system with home-wide distribution, eventhough many have a PC.Current Uses of a Home PC NetworkStore, Transfer, playmusic filesMulti-player games38 %69 %60 %58 %Experts argue that a new breed of custom installer and servicetechnician are needed to fill in the gap created by newtechnologies. This service provider will become like the HVACspecialists of today, with one exception; instead of just findingout the consumer’s heating and cooling needs and or servicingan existing system, these specialists will come to the home toset–up and maintain a central server-driven network.However, this isn’t just the current crop of home networkinstaller or custom audio specialists. since it also focuses onthe house as a whole system, which distributes A/V contentand data from an incoming broadband connection,as well as environmental controls. The role bundles in thefunctions of the telephone installer, contractor, HVACspecialist, electrician and network installer.In the new service structure, knowledgeable service staff cometo the home to find out the consumer’s desired technical specs.They then install the central server and configure it based onthe consumer’s needs. Newer and upgraded homes could comewith a server installed, down in the basement, next to the waterheater. If the consumer doesn’t personally want to deal withthe water heater, he or she just calls a professional. The sameopportunity exists for a specialist to come in and offerupgrades to the new home security or gaming package.Maintenance also can be set-up as a monthly charge for regularvisits, or perhaps even remote checks of the system.Ultimately a service like the one envisioned above is critical topushing the adoption of both home networks and the PC tothe next stage of evolution. Just as HVAC is too complicatedand time consuming for the average homeowner, so is configuringand utilizing the full capabilities of a PC, particularly bya central server-driven home usage environment. The newservice paradigm represents a fresh opportunity for those inthe service sector with enough entrepreneurial drive and interestto expand this untapped consumer segment.7Host a personal website21 %Percent currently usingSource: CEA Market ResearchOCTOBER 20035 TECHNOLOGIES TO watch

EXPERTS ARGUE THAT A NEW BREED OF CUSTOMINSTALLER AND SERVICE TECHNICIAN ARE NEEDED TOFILL IN THE GAP CREATED BY NEW TECHNOLOGIES.8Keep an Eye on the PrizeDevelopments from connection standards through thehome OS to the burgeoning consumer need for contentmanagement are bringing us closer to the intelligent,connected home of the future. The connected home offerstremendous opportunities for both manufacturers andconsumers as it becomes easier to build and buy technologiesthat allow better management of our homes, our informationand our lives. This category is clearly one to watch. Inparticular, the rewards are great for the company that bringsforward the true home OS, allowing consumers to realize thehome of the space age Jetsons.CEA’s Home Networking InitiativesTechHome Rating SystemThis program promotes consumer awareness, By evaluating thetechnological capabilities of a home to the buyer at point-of-sale,the program increases the desirability and monetary value of ahome for purchase. Visit for Electronic Systems TechnicianTrainingA collaborative effort between CEA and other trade associations,the Consortium for EST offers a curriculum for training installersof home electronic systems. Visit for moreinformation.Learn about Home Networking at CESThe 2004 International CES is the premier place to learn abouthome networking:Visit CEA’s TechHome TechZone to see networking, security, homeentertainment systems, energy management solutions andhigh-speed Internet connections in a home-setting including:■■■■■■■■■■■■Networking or automation productsData or entertainment distribution systems and solutionsSet-top boxesSystem interfaceEmbedded technology productsPC networkingHigh-speed Internet accessData distributionMusic and video throughout the homeAutomated comfort and convenienceEnergy managementSecuritySee the Broadband to the Home TechZone for the newest personalconnectivity developments including many of the above plus cablemodems, PVRs and IP telephone.Other home networking exhibit areas include:LVCC Central Hall for home information, home theater and homesystemsLVCC South Hall for home information, home office andBroadband in the Home TechZone, Accessibility TechZoneand TechHome TechZoneLVCC South Hall for home systems, home theater and theDistributed Audio TechZoneCEA TechHome Demo in the LVCC Grand Lobby: Visit CEA’sTechHome Demo that tours TV stations nationwide toshowcase the latest home networking products andtechnology.5 TECHNOLOGIES TO watchOCTOBER 2003

9Several CES conference sessions dedicated to homenetworking technologies include:CEDIA Installer Training and Certification:CES offers multiple CEDIA sessions as well as three of its professionalcertification prep seminars, giving CES attendees the opportunityto take the professional certification exams for the seminarcourses.CONNECTIONSThe Digital Home Conference and Showcase, produced by ParksAssociates in partnership with CEA, will host a half-day workshopand four sessions at CES focusing on insight, analysis and marketsizing for next-generation broadband and home networking services.Global InventuresGlobal Inventures Inc. presents a series of sessions covering establishedand emerging industry specifications, who’s driving theseefforts and how they are changing the market.Ipv6 ForumFive panels of IPv6 experts cover the challenges and opportunitiesof integrating v6 into billions of devices in the very near future.TechHome Basic TrainingThis course is for those looking to offer residential infrastructure,home networking, home automation and integration services.Other CES sessions dedicated to home networkinginclude:■■■■■■■■Next-Gen EntertainmentEmbracing the Connected ConsumerMovie Distribution and Broadband TimelineThe Wireless Home and the Connected ConsumerTechHome Basic TrainingHome Networking, Where Art Thou?Grading the Smart Home MarketSecuring Your Data in an Uncertain WorldOCTOBER 20035 TECHNOLOGIES TO watch


TECHNOLOGIES TOwatchWI-FI/Comes on StrongGet Ready for the RevolutionYou say you want a revolution? Well, Wi-Fi wants to change theworld. Wi-Fi, which stands for wireless fidelity, is a short-rangeradio technology that lets people hook up to the Internet athigh broadband speeds outside their homes or offices withoutthose annoying wires, cables or phone lines. Over the last twoyears, Wi-Fi has taken off as a hot technology as millions ofbusiness travelers, telecommuters, salespeople, leisure travelers,students, techies and ordinary consumers have sought to usewireless networks to tap into the Internet from their laptops,notebook computers, PDAs, cell phones and other electronicgizmos and gadgets. In a July 2003 speech, Craig Barrett, one ofIntel Corp.’s two top executives, estimated that there werealready about 40 million Wi-Fi users worldwide, with 15,000new users accessing the Internet wirelessly every day.To feed this soaring demand, wireless access points, betterknown as Wi-Fi hot spots, are growing by leaps and bounds asairports, hotels, convention centers, coffee shops, book stores,copy shops, computer stores, hamburger joints, phone companies,cities, community groups and sandwich shops install thestations in their locations. Such major retail and restaurantchains as Borders, Barnes & Noble, Starbucks, Kinko’s, CircleK, Cosi’s, Schlotsky’s Deli and even McDonald’s have struckdeals to turn their outlets into friendly neighborhood Wi-Fizones, with more on the way. Plus, such major telephone companiesas A&T Wireless, SBC Communications and VerizonCommunications and leading hotel operators like Omni andWyndham Hotels are taking the Wi-Fi plunge. As a result, theGartner Group figures that the number of public hot spotsaround the world has skyrocketed from just over 1,200 in 2001to more than 71,000 in 2003. Gartner also estimates that thenumber of regular hot spot users across the globe has morethan tripled from 2.5 million in 2002 to 9.3 million in 2003.Wi-Fi also has taken off inside the home and office suite. Withbroadband connections now in more than 20 million U.S.households, for example, millions of American consumers arehooking up multiple computers, printers and related devices inhigh-tech home networks. Increasingly, they’re turning to Wi-OCTOBER 2003Fi rather than the more established cable or phone lines toprovide these networking links. In a survey conducted inspring 2003, Parks Associates found that wireless radio linksalready account for up to one-quarter of the 10 million-plushome networking connections in broadband households.Besides businesses and consumers, electronics equipmentmanufacturers increasingly are marching in the Wi-Fi revolutiontoo. The number of devices enabled with various versionsof Wi-Fi, which actually is a family of wireless technology standards,has exploded over the last three years. The Wi-FiAlliance, an industry consortium that decides whether Wi-Fiproducts meet technical standards and are compatible withother equipment, now has given its blessing to at least 795 differentdevices, up from 560 at the end of 2002 and just 60 atthe end of 2000. “They (consumer electronics makers) can’tmake it fast enough,” says Brian Grimm, communicationsdirector for the Wi-Fi Alliance. “It’s been amazing in thiseconomy.”Some industry skeptics question whether the much-hypedWi-Fi boom will last. They contend that too many companiesare trying to deliver high-speed wireless connections to theInternet at the same time. They argue that prices for mostcommercial Wi-Fi services are too high, especially when free orsubsidized services increasingly abound. They criticize the lackof a unified, integrated billing system. And they say a solidbusiness model doesn’t yet exist for running a hot spot andselling Wi-Fi service.But, even among the skeptics, few experts think that Wi-Fi willgo away. The industry debate is mainly over just how big a dealWi-Fi ultimately will prove to be.5 TECHNOLOGIES TO watch11

12Public Wi-Fi Hot Spots WorldwideLocation 2001 2002 2003*Airports 85 152 292Hotels 569 2,274 11,687Retail outlets 474 11,109 50,287Enterprise guesting areas 84 624 1,762Stations and ports — 88 623Community hot spots 2 266 5,637Others — 240 790Total Market 1,214 14,753 71,078802.11g, both use the fairly congested 2.4 GHz slice of the radiospectrum while the third standard, 802.11a, makes use of theless crowded 5 GHz range. The 802.11b and 802.11g standardscram data into three channels while the 802.11a offers up toeight channels.The Wi-Fi Family of StandardsStandard Radio Spectrum Top Speed # of Channels802.11a 5GHz 54 Mbps Up to 8802.11b 2.4GHz 11 Mbps 3802.11g 2.4GHz 54 Mbps 3*Estimates Source: Gartner Dataquest, June 2003A Wi-Fi Technical PrimerAs noted, Wi-Fi is a short-range wireless radio technology thatfrees PCs, laptops, notebook computers and other electronicsdevices from physical links to the Internet. Developed andcommercialized by Apple Computer as far back as 1999, Wi-Fiuses public frequencies unlicensed by the federal governmentto flash data over short distances. With a wireless radio antennaand a traditional Internet connection nearby, a hot spot canprovide high-speed Web access over a range of 100 to 500 feet,depending upon the signal interference levels and other barriers.The typical range is about 300 feet.The closely related group of three Wi-Fi standards dates backas far as 1999, when the Institute of Electrical and ElectronicsEngineers (IEEE) approved the original 802.11b standard that’sby far the most popular today. Known by engineers by thesomewhat less catchy name of the 802.11 family, the group alsoincludes 802.11a and 802.11g, the latest version approved bythe IEEE. All three standards shoot data over a small part ofthe radio spectrum at fast, broadband speeds ranging from 11Mbps (802.11b) to 54 Mbps (802.11a and 802.11g).The three different Wi-Fi standards don’t all use the sameradio frequencies to zip data from point to point, however. Thecurrent dominant standard, 802.11b, and the newest standard,Originally envisioned as an innovative, inexpensive solutionto the “last mile” problem of delivering telecom signals tobusinesses, Wi-Fi already has proven flexible enough to gaineven greater acceptance as a consumer technology. In fact, salesof Wi-Fi-embedded products to consumers now are four timesgreater than Wi-Fi sales to enterprises, according to the Wi-FiAlliance. Consumers snapped up 6.8 million laptops, notebookcomputers, PCs, PDAs, display screens, network access cards,media adapters, printers and other products equipped forWi-Fi in 2002, up 160 percent from the previous year andgenerating about $1.9 billion in sales revenue, In-Stat/MDRcalculates.Number of Wi-Fi Certified ProductsTimeNumber of Certified ProductsEnd of 2000 60End of 2001 260End of 2002 560Aug. 2003-Proj. 795Source: Wi-Fi Alliance, July 20035 TECHNOLOGIES TO watchOCTOBER 2003

DESPITE Wi-Fi’s EXPLOSIVE GROWTH OVER THE LASTTWO YEARS, IT’S NOT A SLAM-DUNK THATIT WILL BECOME A MASS-MARKET HIT.Strategic Issues—Hyping, Roaming, Billingand PricingDespite Wi-Fi’s explosive growth over the last two years, it’s nota slam-dunk that it will become a mass-market hit. In fact,some industry executives and observers fret that Wi-Fi proponentsare playing up the technology’s potential too much, similarto what happened during the dot-com explosion a fewyears ago. They fear that, like the dot-coms, Wi-Fi will collapseunder the weight of its own hype.In one possible sign that there’s been too much hype, someearly reports from the field indicate that consumer usage ofpublic Wi-Fi hot spots, while certainly growing at a healthyclip, is not keeping pace with the rapid deployment of hotspots. For example, in a May 2003 study, In-Stat/MDR foundthat usage rates have not grown nearly as fast as the number ofhot spots. The study revealed that daily connects per locationremain very low, especially in the café and retail venues.As a business model, “the widespread availability of hot spotshas not proven out yet,” says Stephen Baker, director of industryanalysis for NPD Group in Reston, Va. “The trend so far isthat use has been spotty. The ones in airports get used but notthe ones in Starbucks.”Also, the surge in hot spots, while definitely strong, has notbeen as fast as several leading operators had predicted. Forinstance, Boingo Wireless, a major Wi-Fi player that’s buildingits own wireless network of hot spots as well as aggregatingthose of other operators, projected last year that it would have2,000 to 5,000 locations covered at the start of 2003. But, as ofmid-June 2003, it had no more than 1,600 locations in its portfolio.Besides the curse of overly high expectations, Wi-Fi is plaguedby serious roaming problems. As in the earlier days of the cellphone business, wireless data users cannot yet sign up for oneWi-Fi service provider and gain access to the rest of them.Although Boingo is trying to solve this problem by aggregatingother providers’ hot spots, it has a long way to go, especially asthe number of hot spots continues to soar.OCTOBER 2003Industry experts say the Wi-Fi industry also must overcomesuch stiff hurdles as slack security at many public hot spotsand the lack of a unified, integrated billing system. Under thecurrent regime, with its mishmash of proprietary networks,consumers can end up paying a different operator or providereach time they use a different hot spot. “The biggest challengeis how to price this,” says Sean Wargo, director of industryanalysis for CEA. “Consumers don’t want to have to subscribeto 10 wireless services.”Indeed, the economic model for delivering hot-spot service isstill very much up in the air. Pricing plans range all over theboard. In Borders stores, for instance, leading hot-spot operatorT-Mobile offers its subscribers a choice of three paymentplans—10 cents per minute with a $6 minimum charge, $29.99a month for unlimited usage under an annual contract or$39.99 per month for unlimited use on a month-by-monthbasis. On the other hand, Verizon offers Wi-Fi service as a perkto all of its DSL and dial-up customers in New York City.Some experts believe that various pricing models will emergeas the Wi-Fi industry matures. They say providers such asVerizon may offer hot-spot use as a freebie bundled with DSLand other services for high-spending “recreational” users. Butother providers, such as Wayport Inc. and other airport andhotel network operators, may continue to impose charges of atleast $7 to $10 a pop on frequent business travelers who needbroadband access for work.Forecasts—Bullish and BullisherEven if they believe that proponents are overselling Wi-Fi’sbenefits and popularity, most wireless industry analysts andconsultants see nothing but a bright future ahead for the technology.They predict that the numbers of hot spots, Wi-Fiusers, electronics devices embedded with Wi-Fi, chipset unitsales and Wi-Fi unit shipments will all continue to soar asmore consumers and businesses become familiar with thetechnology and equipment prices continue to drop.In one widely quoted study, Gartner Dataquest bullishly projectsthat the number of hot-spot users worldwide will more5 TECHNOLOGIES TO watch13

PARKS ASSOCIATES FOUND THAT WIRELESS RADIO LINKS ALREADYACCOUNT FOR UP TO ONE-QUARTER OF THE 10 MILLION-PLUS HOMENETWORKING CONNECTIONS IN BROADBAND HOUSEHOLDS.14than triple to 9.3 million by the end of 2003, with NorthAmerica accounting for about half of the total. In a separatestudy, Gartner forecasts that the number of frequent Wi-Fiusers in North America will jump from 4.2 million in 2003 tomore than 31 million in 2007.Similarly, Gartner projects that the number of public Wi-Fi hotspots will keep exploding. The research firm sees the worldwidetotal of hot spot locations, which is already growingexponentially from 1,214 at the end of 2001 to an estimated71,079 at the close of 2003, more than doubling again to151,768 at the end of 2005.Although not as gungho as Gartner, the Yankee Group is prettybullish too. It sees the total number of U.S. hot spots quadruplingfrom 3.020 in 2002 to 12,080 in 2003. The Yankee Groupthen envisions the total increasing six-fold to 72,480 in 2007.The possibilities for growth are even greater. In the U.S. alone,Boingo estimates, there are nearly two million potential hotspot locations, including conference centers, train stations, airports,hotels, business centers, gas stations, restaurants, barsand clubs, and, most of all, retail stores. “It’s a land grab,”Boingo says.Public Wi-Fi Hot Spots WorldwideLocation 2003* 2004* 2005*Airports 292 378 423Hotels 11,687 22,021 23,663Retail outlets 50,287 82,149 85,567Enterprise guesting areas 1,762 3,708 5,413Stations and ports 623 2,143 3,887Community hot spots 5,637 20,561 30,659Others 790 1,526 2,156Total Market 71,078 132,486 151,768*Estimates Source: Gartner Dataquest, June 2003Total U.S. Public Hot SpotsYear 2002 2003 2004 2005 2006 2007# of hot 3,020 12,080* 21,140* 36,240* 54,360* 72,480*spots*Estimates Source: The Yankee Group, April 2003Thanks in part to sharply falling prices for consumerelectronics equipment embedded with Wi-Fi technology,industry analysts project that unit sales will keep climbingstrongly over the next few years. Analysts generally forecastthat shipment revenues will keep rising too, in spite of thesharp price declines, because of the surge in unit sales.For example, In-Stat/MDR’s figures indicate that Wi-Fihardware unit shipments tripled from 9.6 million in 2001to an estimated 28.8 million in 2003, generating $2.9 billionin revenue. In-Stat/MDR projects that unit shipments willmore than double again to 74.9 million in 2006, generating$3.9 billion in revenue.Total Wi-Fi Market Hardware UnitShipmentsYear Number of Units Revenue2001 9.6 million $1.8 billion2002 18.4 million $2.2 billion2003* 28.8 million $2.9 billion2004* 44.4 million $2.8 billion2005* 60.2 million $4.1 billion2006* 74.9 million $3.9 billion*Estimates Source: In-Stat/MDR, December 2002Likewise, computer chip makers are enjoying banner sales forWi-Fi chipsets as prices decline dramatically. In-Stat/MDRreports that chip unit sales will more than triple from 8.8 millionin 2001 to an estimated 33.3 million in 2003, producing$422 million in revenue.5 TECHNOLOGIES TO watchOCTOBER 2003

15Industry analysts predict that chip unit sales will keep soaringover the next few years. Indeed, In-Stat/MDR sees unit salesnearly tripling again to 94.4 million in 2007, generating $462million in revenue. Even more bullishly, TechKnowledgeStrategies Inc., another market research firm, sees total unitsales jumping from 41.3 million in 2003 to a whopping 155.3million in 2007, producing $700 million in revenue.Worldwide Wireless LAN Chipset UnitSalesYear Number of Units Revenues2001 8.8 million $230 million2002 20.6 million $404 million2003* 33.3 million $422 million2004* 51.9 million $527 million2005* 72.2 million $575 million2006* 86.5 million $567 million2007* 94.4 million $462 million*Figures are estimates Source: In-Stat/MDR, March 2003Key Players and Partnerships—WirelessTandemsIn a major sign that the technology has arrived, the computerindustry giants are storming into the Wi-Fi market. Seeking toboost sluggish computer sales, Intel Corp. unleashed its muchheralded Centrino chipsets for Wi-Fi-embedded notebookcomputers in mid-March with a $300 million marketing campaign.Not to be left behind, Microsoft Corp. inked a deal inlate June with T-Mobile, Wayport and Boingo to promoteupgrades to the renamed Windows Mobile 2003 for Pocket OS(Windows Mobile for short) so that it’s easier for computerusers to find and connect to Wi-Fi hot spots. Plus, CometaNetworks—a partnership of AT&T Corp., IBM Corp., Inteland two venture capital firms—is racing to install 5,000 hotspots in the 25 largest U.S. markets by March 2004 and 20,000hot spots in the top 50 markets by 2005.“We think this wireless capability, this mobility movement, isthe biggest thing to hit our industry since the Internet browser,”says an Intel spokesman. Besides developing the Centrinotechnology, Intel has set aside $150 million in venture capitalfor investments in Wi-Fi-related equipment, products andfirms.Hewlett-Packard and Toshiba are among the other high-techcompanies actively pushing Wi-Fi technology. In mid-June, forinstance, Toshiba introduced a Wi-Fi network camera thatenables users to remotely view live, high-resolution videostreams with audio from any location over the Internet using astandard Web browser.Leading Hot Spot PlayersCompany # of Hot Spots LocationsBarnes & Noble 24 Atlanta, SeattleBoingo 1,600 NationwideBorders 410 NationwideCircle K Hundreds* Arizona storesCometa 20,000* NationwideCosi’s 100 NationwideHughes Network -NA- NationwideKinko’s 1,050* NationwideMcDonald’s Hundreds* NYC, SF, ChicagoSBC 20,000* 13-state regionSchlotsky’s 10 Austin, TXSprint 2,000* NationwideStarbucks 2,100* NationwideSurf & Sip 750* NationwideT-Mobile 2,600 NationwideVerizon 1,000* NYC pay phonesVerizon Wireless Hundreds NationwideWayport 650 hotels, airports*Planned Sources: Companies, news reports, August 2003OCTOBER 20035 TECHNOLOGIES TO watch

16“Wi-Fi is happening,” said David Hagan, president of Boingo.“It’s no longer speculative.”The big phone companies also are plunging into the boomingWi-Fi market. Besides backing Cometa, AT&T Wireless isworking with Wayport to offer hot spots. Sprint is building out2,000 hot spot locations and teaming with Wayport andAirpath Wireless on roaming agreements. VerizonCommunications’ wireline unit is installing 1,000 hot spots inpay phone locations throughout New York City, starting with150 locations mainly in Manhattan. Verizon Wireless isinstalling hundreds more in locations across the country. And,in early August, SBC Communications says it aims to install20,000 hot spots in 6,000 hotels, airports, convention centersand other high-traffic venues throughout its 13-state region bythe end of 2006. Like AT&T Wireless and Sprint, SBC also isteaming with Wayport to offer Wi-Fi service in airports, hotelsand restaurants nationwide.As noted, many of the nation’s major retailers, restaurant firmsand hotel chains also are jumping into the Wi-Fi market. Someof the most notable examples are Starbucks, Borders, Kinko’s,Circle K, Cosi’s and McDonald’s, all of which are rolling outWi-Fi in dozens, if not hundreds, of locations across the U.S.Each of these players is launching Wi-Fi in conjunction withone or more hot spot operators. To cite several examples again,Starbucks, Borders and Kinko’s are all partnering with T-Mobile, while Circle K is working with Toshiba, Cosi’s withSurf & Sip and McDonald’s with Cometa.Consumer Perspectives—“Look, Ma,No Wires!”A rapidly growing group of consumers are taking advantage ofconveniently located Wi-Fi hot spots to connect speedily to theWeb from outside their home or office. In fact, T-Mobile, thelargest Wi-Fi provider in the U.S., reports that its total numberof monthly user sessions skyrocketed 430 percent betweenAugust 2002 and June 2003. The company says its average usersession now lasts for about 45 minutes. Wayport, another leadingWi-Fi provider, says nearly 200,000 people a month nowconnect to its Wi-Fi service. Company officials expect this totalto rise over 300,000 by the end of 2003.Not surprisingly, use seems to be the heaviest among frequentbusiness travelers, who are estimated to be 30 to 36 millionstrong in the U.S. and 86 million strong worldwide. In thehotels that they serve, Wayport executives say they’re seeing 8to 12 percent of the occupied rooms using their Wi-Fi servicenightly. They expect that rate to climb as high as 15 to 24percent.Wayport research also indicates that these tech-savvy road warriorstend to be male executives and salespeople who makemore than $80,000 a year. But, somewhat surprisingly, the averageage is about 40. “We thought it would be younger,” saysDan Lowden, vice president of marketing at Wayport. Researchby Boingo adds that most of these road warriors carry laptopsand cell phones. Some also carry pagers and PDAs.U.S. Business Travelers’ MarketTotal business travelers36.0 millionWith laptopsWith cell phonesWith pagersWith PDAsSource: Boingo Wireless, Aug. 200127.0 million22.3 million10.8 million2.2 millionBusiness Perspectives—Wi-Fi While youWorkLike consumers, businesses are beginning to embrace Wi-Fitechnology as well. They’re just doing it a bit more quietly.Such “early adopter” industries as transportation, utilities andthe finance, insurance and real estate (FIRE) sectors have ledthe way, putting wireless data to broad use in the field.Increasingly, the health care and education sectors also areturning to Wi-Fi to transmit vital information on patients,medications, doctors, teachers and students.5 TECHNOLOGIES TO watchOCTOBER 2003

COMPUTER CHIP MAKERS ARE ENJOYINGBANNER SALES FOR Wi-Fi CHIPSETS AS PRICESDECLINE DRAMATICALLY.17Research analysts expect other types of businesses to followsuit as the use of portable computing devices grows exponentiallyand such hot spot providers as Sprint focus more oncompanies than on consumers. They particularly cite manufacturingfirms, warehouse companies and other large businessesin vertical markets as prime candidates for Wi-Fi.Gartner predicts that an impressive 60 percent of mid-sizedfirms in North America will deploy wireless data systems bythe end of 2003. The research group says low prices, increasedwireless connectivity and the desire for greater business efficiencieswill drive this trend.Future Outlook—More to ComeAs big a deal as Wi-Fi is now, it may be small fry compared towhat’s coming. Several technology startups are working onnew Wi-Fi standards that could send data much faster andfurther than the three current standards. And wireless expertssay an even more promising technology is under developmentthat could blow away Wi-Fi in a couple of years.This technology, known as ultra wideband (UWB), is a newtype of short-range, low-cost radio network that its proponentsconsider “revolutionary.” Instead of shooting data over avery small part of the radio spectrum at fast, broadband speedslike Wi-Fi, UWB transmits a flat signal over a wide swath offrequencies, including licensed and unlicensed bands, at lowpower and even faster speeds.How fast? In fact, researchers have demonstrated transmissionspeeds as high as 500 Mbps. Some manufacturers believe thatspeeds of greater than 1 Gbps may even be achievable, fastenough to download entire theatrical films in a matter ofminutes.As a result of such high speeds, research conducted by Intelindicates that UWB can send 1,000 times more data in a givenarea than the conventional Wi-Fi 802.11b standard and 12times as much as even the newer Wi-Fi 802.11a standard. Intelresearch also suggests that the UWB power drain is 100 timesless than a similar service based on Bluetooth technology,which uses power far more efficiently than Wi-Fi.The big question for UWB is whether it disrupts other parts ofthe radio spectrum. Although proponents say it doesn’tbecause its power consumption is so low, the Federal AviationAdministration (FAA), NASA and such major wireless carriersas AT&T Wireless, Cingular Wireless, Qualcomm, Sprint PCSand Verizon Wireless have all raised concerns about possibleinterference with avionics systems and cellphone networks. Inparticular, the wireless players have lobbied for tight restrictionson UWB.Despite such protests, the Federal CommunicationsCommission (FCC), after extensive testing, approved UWB forshort-range applications in February 2002. The ruling allowsdevelopment of the technology to proceed while researcherscontinue to tackle the interference questions.With the first proprietary UWB devices expected to be on themarket by the end of 2003, proponents say the technologycould lead to a new wave of portable and home entertainmentproducts once common technical standards are developed.They especially see UWB as ideal for home networkingproducts, flat panel displays, car telematics devices and radarequipment, among other things. Some even believe that UWBeventually could compete with existing and next-generationmobile-phone technology.But, because the UWB technical standards still are underdevelopment, the technology’s impact won’t be felt for at leastanother two to three years. In-Stat/MDR predicts that standards-basedUWB products won’t start hitting the consumerelectronics market until late 2005 and 2006. The researchgroup sees hardware shipments then starting to spike to nearly2 million units in 2006 and nearly 6 million in 2007.OCTOBER 20035 TECHNOLOGIES TO watch

18CEA’s Wireless InitiativesRetail Database DevelopmentCEA is building a database to catalog retailers across the U.S.who sell wireless and multi-function devices.CEA Wireless Entertainment Net SubcommitteeThis Subcommittee develops and maintains standards relatedto in-home wireless networks for consumer electronicsapplications.CEA Market ResearchA market research study is looking at consumer use of Wi-Fiand related products and ease-of-use, implementation andinstallation; product ownership; purchase location andretailer experience/knowledge; and knowledge of differenttechnologies.Wi-Fi SIGThe Wireless Communications and HNIT Divisions willinvestigate sponsoring/developing a new Wi-Fi SIG to addressmember needs after the study is complete.The Wireless Etiquette ProgramPromotes the correct use of all types of wirelesscommunications devices.Zone into Wi-FiDiscover Wi-Fi at the 2004 International CES■■LVCC South Hall for wireless accessories, wirelesscommunications, wireless gaming, telephony, BluetoothTechZone, Broadband to the Home TechZoneLVCC Central Hall for home information and wirelessConference programming focused on wireless includes:■■■■■Keynote by Gary Forsee, chairman, president and CEO,Sprint Corp.Keynote by Bill Gates, chairman and chief softwarearchitect, Microsoft Corp.Industry Insider Presentation by Ivan Seidenberg, CEO,Verizon Corp.Wireless SuperSession: Join a panel of wireless carriers andsuppliers as they discuss the capabilities of ultrawidebandand WiFi in mobile products.Several other CES conference sessions are dedicated towireless technologies, including:■■■Integrating Mobile Wireless Networks andthe Wireless LANTimeline to Broadband WirelessNo New Wires NetworkingCEA Wireless Retail Training and CertificationCEA will hold sessions to train retail managers and sales personnelon how to better sell wireless and handheld products.CEA TechKnow Overload Tour in the LVCCGrand LobbyCEA’s educational campaign showcases the latest in wireless productsto college students.5 TECHNOLOGIES TO watchOCTOBER 2003

TECHNOLOGIES TOwatchDIGITAL VIDEO RecordingA DVR in Every Living Room?In the mid- to late-1970s, a new product appeared on theshelves of consumer electronics stores. It was the size of a smallsuitcase with a price tag just as large. And its metallic, coldappearance served to intimidate the average shopper. However,in time, the new device would find a place in nearly everyAmerican home. In fact, the videocassette recorder (VCR)today may be more indispensable than any other homeappliance, with the exception of the television itself.The VCR is responsible for extraordinary change in theAmerican lifestyle and culture. Before its introduction, the TVviewer was a slave to the whims of network schedulers. If afavorite show aired on Tuesday at 8 p.m., viewers would setaside all worldly concerns to ensure that they were anchored intheir favorite chair in front of the television at that time. Otherthan summer reruns, there was no second chance to see theepisode. However, for the first time, the VCR gave viewers achoice. They could record the show and watch it anytime theywanted. Suddenly, they had control over their TV schedule.Many people soon revised their work and leisure schedules. Inthe go-go 1980s, executives spent more late nights at the officein pursuit of the American dream. Families planned longervacations, leading to a boom in the tourist industry. The VCRwas not singularly responsible, but it played a role.The VCR also spawned new businesses and customs, such aswatching pre-recorded movies at home and exchanging copiesof TV shows with friends. It was all about control. Americanscould finally decide what to watch and when to watch it.But now, a new TV recording technology has surfaced thatpromises to change our lives in an even more dramaticfashion. Industry analysts say that digital video recording(DVR) could do everything from eliminating the TVcommercial to altering the traditional network schedule.Some even believe that DVRs, which enable viewers to pauseand rewind live TV, could increase the nation’s growingattention span problem.The predictions may seem far-fetched, but few people accuratelyforecast the impact that the VCR would have on ourcountry. If the DVR has a comparable effect, television is aboutto experience a revolution.However, there still is some doubt that the DVR will becomea household staple, like the VCR. In fact, some say that thedigital recording might become a niche technology favoredonly by the most enthusiastic TV viewers.VCR – 91.5 percent of U.S. HomesDVR – 2.0 percent of U.S. HomesSource: Nielsen Media Research, The Yankee GroupThe Race Is OnSo, what is the future of digital video recording? Is it for real?And, will it replace the VCR? There are three different categoriesof digital video recorders:1. The Hard-Drive DVRIn 1999, two Silicon Valley companies called TiVo andReplayTV launched the first DVRs in the U.S. A few years later,Microsoft introduced a third competitor, Ultimate TV. Due todisappointing sales, Microsoft last year curtailed Ultimate TV’sretail business, but the service still is offered to existingcustomers.The set-top could pause and rewind live TV, record up to 30hours of programming on a hard drive and skip commercialswith a fast-forward feature. TiVo users have to manuallyfast-forward through the commercials while ReplayTV offers a“skip” button that enables its customers to jump 30 seconds ata time. D&M Holdings, which recently purchased ReplayTVfrom SonicBlue, says it will remove the commercial-advancefeature in future models, due to pressures from the TVnetworks. Since the 1999 launch, the DVR companies haveadded features such as home networking and expandedrecording capability. ReplayTV, for instance, now offers aset-top that can record as many as 300 hours of television.19OCTOBER 20035 TECHNOLOGIES TO watch

IN 1999, TWO SILICON VALLEY COMPANIES CALLED TIVOAND REPLAY TV LAUNCHED THE FIRST DVRS IN THE U.S.20The ReplayTV receiver is available as a “stand-alone” at retail.TiVo also sells a stand-alone unit, but the majority of its salescurrently come from its DIRECTV combo receiver. The latterset-top includes both a DIRECTV satellite TV tuner and theDVR service.Echostar, the nation’s second-ranking satellite TV service,offers an unbranded DVR service in select receivers. Andseveral cable operators, including Cox and Time Warner,recently added DVR features to its digital cable set-tops. So,the competition for the DVR audience is growing.However, to date, DVR sales have been disappointing. TiVo,which has generated tremendous buzz in Hollywood andelsewhere, reported in May that it had just 700,000 subscribers.ReplayTV, which has experienced management and financialproblems, is in less than 200,000 homes, according to industrysources. Echostar leads the category with an estimated 850,000subscribers with DVR/satellite TV combo receivers.IDC, the research firm, says that consumers will buy16 million standalone and PC-attached DVD recorders bythe end of 2003.Why hasn’t the DVR adoption rate grown faster? Unlike theVCR, DVR owners must pay a monthly subscription fee thatranges from $4.95 to $12.95. (Echostar recently added amonthly fee for new DVR receivers, but will continue to offerthe service for free to existing customers.) In addition, theindustry hasn’t convinced the average consumer that heneeds a new TV recording machine. The VCR, which can bepurchased for less than $100, still gets the job done. And theVCR has home field advantage – it’s now in 91.5 percent ofAmerican homes, according to Nielsen Media Research.Although research shows that more Americans are awareof the DVR, particularly TiVo, they are not well educatedon its benefits.2. The DVD RecorderThe DVD recorder, which is manufactured by Toshiba, Philips,Panasonic, Pioneer and others, is a new twist on the category.Unlike the original DVR, the DVD recorder enables viewers torecord TV shows onto a hard drive or a DVD. In addition,consumers can transfer home movies onto DVDs, an attractivefeature.Some industry analysts believe that the introduction of theDVD recorder could be a tipping point. A recent IDC studypredicts that consumers will buy 16 million stand-alone andPC-attached DVD recorders in 2003.“DVD recording is at the threshold of mass adoption withconsumers in the U.S.,” says Wolfgang Schlichting, IDC’sresearch director.Although consumers are not familiar with DVRs, theyunderstand DVDs. Studies show that approximately 50 millionAmericans now own DVD players. They might be moreinterested in a new set-top that offers both DVD and DVRcapabilities.With that in mind, Pioneer and TiVo recently teamed up tolaunch a DVD/DVR recorder. The unit, which enables you toschedule and record shows while playing a DVD, marked TiVo’sfirst entry into the DVD recorder market.5 TECHNOLOGIES TO watchOCTOBER 2003

3. The PC-Based DVRCompanies such as Houston-based SnapStream offer digitalvideo recording via a personal computer. The service permitsInternet surfers to schedule and record TV shows and playthem back online. The PC must have a TV tuner card, but thehard drive acts as the server for the stored programming.Sales numbers are not available so it’s difficult to measure itssuccess. However, it’s unlikely that a large number ofAmericans will ever be comfortable watching television ona PC. But, that said, home networking devices now arepermitting consumers to transfer PC-based files to their TVs.In the coming years, the PC-based DVR service could be usedas a programming warehouse. Consumers could literallystore and index hundreds of hours of programming on thePC – and then transfer a specific show to the TV wheneverthey were in the mood.Is It Better Than the VCR?To achieve a mass audience, any new product or technologymust either be demonstrably better than its predecessor and/orfulfill an ongoing consumer need or desire. The Palm Piloteliminated the need for carrying around a large notebook filledwith phone numbers and schedule reminders. And themicrowave answered the busy consumer’s call for a faster wayto cook dinner.Unquestionably, the digital video recorder is a remarkableimprovement on the VCR. For instance:■■■The set-top can record as many as 300 hours ofprogramming without a video tape. Consumers nolonger have to worry about stacking those unwatchedcassettes on their coffee tables.The DVR playback delivers a digital picture that rivalslive TV.Unlike the VCR, which many consumers still don’t howto program, you can instruct your DVR to record ashow by touching a button.■■The commercial-skipping feature enables viewers towatch a show without interruption.The “Pause Live TV” button ensures that you willnever miss a single moment of your favorite showeven if you get a phone call or a family member startsgabbing during the episode.Will DVR Growth Hit Fast-Forward?The digital video recorder is in just two million homes, butsome analysts believe that it will reach 40 million homes in thenext five to seven years. Is that possible? If the history of theVCR is any gauge, the answer is yes.VCR1980 – 1.1M Homes1985 – 20.9M Homes1990 – 68.6M HomesSource: Nielsen Media ResearchWith features like these, it’s easy to understand why DVRowners are so enthusiastic about their new toy. In fact, TiVo’sresearch shows that 97 percent of its customers haverecommended the service to a friend. Consequently, despitethe disappointing sales to date, research firms are bullish onDVRs.However, it’s still unclear if the DVR truly fulfills a consumerneed. Despite the programming hassles, most consumers arecontent with their VCR. It’s durable and reliable. And, evenwhen it does break down, you can buy a new one for lessthan $100.Is the VCR a Market Barrier?Absolutely. It’s the same as if there were suddenly a newproduct to replace the microwave. The high-speed cookingdevice is a staple in most households. Like the VCR, itperforms well and is relatively inexpensive.21OCTOBER 20035 TECHNOLOGIES TO watch

22So, the DVR industry has a difficult task. It must convinceAmericans that the DVR will make their lives more entertainingand efficient. But, at the same time, it also must convincethem that the VCR has outlived its usefulness. The industrycould launch a point/counterpoint marketing campaign todepict the difficulties in using a VCR as well as conveying theexcitement of the new technology. Consumers need a compellingargument to dump their trusty old VCR for the newupstart. Most electronics companies still sell both VCRs andDVRs, however, there’s a growing industry belief thatcompanies should begin preparing for the future. Because ofits higher cost and potential for business partnerships withcompanies such as TiVo, the DVR can generate significantlymore revenue than the VCR.Will the VCR Become a Dinosaur?By decade’s end, you won’t be able to find a new VCR at yourlocal electronics store. The DVR will not be in every home bythen, but its total conquest of the living room will be just amatter of time. Many viewers will hang on to their VCRs untilthe bitter end, but most electronics companies soon will beginto phase out manufacturing. Jeff Samuels, a spokesman forPanasonic, says he believes the VCR will be a “total dinosaur”in three or four years.If you think companies will keep manufacturing VCRs becauseconsumers have videotape libraries, remember what happenedwith Beta. Millions of videotape owners were left out in thecold when Sony and others ceased production of the Beta VCR.Tipping Point?A CEA study suggests that consumers may be getting closer toembracing the new technology.Will Consumers Find the DVR Difficult toUse?Many Americans now have owned a VCR for nearly twodecades. However, if you visited the home of the average user,there’s a good chance that his set-top would be blinking 12:00.Despite products such as VCR Plus, which is designed to bringsimplicity to VCR programming, the recording process stillbaffles many viewers. Sure, they can hit the record button, butdon’t ask them to tape a show two hours in advance.Once you get used to it, the DVR is a snap. You can record ashow in advance by simply clicking on the program grid in theInteractive Programming Guide (IPG). Although that mightseem simple to a tech-savvy viewer, it can intimidate theaverage person, particularly one who is not familiar with IPGs.In addition, a DVR service like TiVo offers a slew of programmingoptions, such as the “Season Ticket,” which enables you torecord every episode of a series with one click. Again, thatbrings simplicity to recording, but not if you’re uncomfortablewith an on-screen interface.How Can the Industry Educate and ExciteNew Buyers?The industry has a tall order. It must emphasize the newfeatures, such as pausing live TV and commercial skipping, toget consumers excited. However, at the same time, it mustcommunicate that the DVR will be easier to use than the VCR.For many consumers, those are conflicting concepts. Peopleusually believe that if a product offers more options, it must bemore difficult to master. Consequently, the industry needs toassure consumers that the DVR will indeed make their livessimpler. This could be done via consumer testimonials incommercials.■Familiar With the Term, “DVR” – 76 Percent■Very or Somewhat Interested in Buying One – 72 Percent■Plan to Buy One In the Next Year – 20 Percent5 TECHNOLOGIES TO watchOCTOBER 2003

Is the Price Right?The starting price point for a new DVR is approximately $250.However, a CEA study says sales could soar if prices wereslightly reduced.Is $200 a Fair Price? – 65 Percent AgreeIs $150-$199 a Fair Price? – 78 Percent AgreeWill Cable TV’s DVR Service Hurt RetailSales?It is possible. Research shows that consumers are tired of stackingbox upon box atop their televisions and stringing yards ofcoaxial cable across their living rooms. And they are equallyweary of bringing home a new set-top and spending severalhours trying to figure out how to hook it up. Consumersexpect a new technology to make their lives more convenient,not less so. This helps explain why TiVo has stumbled; peopleare reluctant to bring home a new set-top to replace the VCR,which works just fine. In the minds of most, buying a TiVo ora ReplayTV is inconvenient.However, cable and satellite TV services now are offering DVRtechnology as an extra feature in existing set-tops. You canclick a remote or make a phone call to sign up rather than haveto trek down to the electronics shop. Echostar has signed upapproximately 850,000 homes for its DVR service, and TimeWarner and Cox are quickly filling orders. In several yearsDVRs will be software, not hardware. Then consumers willgladly put their VCRs on the shelf. (It’s no coincidence thatEchostar has more DVR subscribers than TiVo, which is solelya retail product.)No Pause in Sales?The Yankee Group estimates that the DVR market will jumpfrom two million to 20 million by 2005.Marty Yudkovitz, president of TiVo, contends that his company’s“standalone” retail business will not dry up if cable andsatellite providers add DVR services to existing boxes. “There’sOCTOBER 2003no question that to hit the numbers, we are going to needsome of these mass distributors [cable and satellite operators],”Yudkovitz says. “But if [cable operators] go down a differentDVR path, it doesn’t close the door to us. Consumers are notsatisfied with knockoff DVRs.”However, in the end, it seems unlikely that consumers wouldneed to buy a DVR set-top at retail if the service is available viatheir existing cable receiver. That said, though, it is likely thatboth cable and satellite TV DVR set-tops eventually will findtheir way to retail. Satellite set-tops already are available instores. Cable operators are expected to offer high-end receiversat retail in the coming years.Recording in HDTVDigital video recorders, from companies such as TiVo, aregetting a lot of press right now. However, other new digitalrecording technologies could have a tremendous impact on theHDTV industry and the American lifestyle.HDTV CamcordersThe rise in sales of high-definition TVs (HDTV) will likely createa demand for camcorders that can record in the high-defformat. Impressed by the incredible HD picture, consumerswill be curious to see how their home movies would look withthe same picture detail and quality. Earlier this year, JVC introducedthe GR-HD1, a high-definition camcorder that lets usersshoot and edit real ATSC standard HD content. The camcorderalso allows you to record and save your HD content and view iton several different types of TVs, including rear projection,front projection, plasma and CRT. The video can be playedback in 480i, 480/60p, 720/60p and 1080i.Other electronics firms are expected to launch their ownHDTV camcorders in the coming months. The new technologycould help boost HDTV sales as well as the camcorder business.Consumers love to show their favorite home videos tofriends. The high-def home movie is a great way to introducemillions of Americans to the format. It’s fun to see a movie or5 TECHNOLOGIES TO watch23

BLU-RAY IS A NEW DISC TECHNOLOGY THATCOULD REVOLUTIONIZE BOTH THE MEDIASTORAGE INDUSTRY AND THE HDTV WORLD.24sporting event in HD, but nothing beats being able to watchyour two-year-old with the best TV picture on earth. Onceconsumers get an eyeful of a HD playback, they will be morelikely to buy an HD set.Blu-Ray LaserWhat is Blu-Ray? No, it’s not the nickname of a new baseballteam. Blu-ray is a new disc technology that could revolutionizeboth the media storage industry and the HDTV world.Earlier this year, nine consumer electronics companiesannounced that they would license the technology that allowsfor an incredible 27GB storage capacity on a single-sided 12cmdisc. (DVDs hold just 4.7GB of data.) To read the data, Blu-rayuses a short wavelength blue-violet laser instead of the red laserin current optical drives. The shorter wavelength makes it possibleto focus the laser beam with more precision, which allowsdata to be compressed more tightly on the disc. The discs canbe used in a variety of devices, including digital cameras, cellphones and video recorders. But many industry analysts areintrigued by the technology’s potential impact on HDTV.Blu-Ray was developed to enable recording and playback ofHD video. Using the MPEG-2 compression standard and a36Mbps data transfer rate, a pre-recorded Blu-Ray disc deliversan HD playback as good as the original. And, because of itsgreater capacity, a Blu-Ray disc can store more than two hoursof digital HDTV programming or more than 13 hours of standard-definition.As impressive as that is, industry analystsexpect that storage capacity will increase even further in thenext few years. When consumers learn that they can recordhours and hours of HDTV programming, they may be moreencouraged to buy a HDTV set.features like that, the technology will add tremendous convenienceand entertainment to home video recording.Sony released the first Blu-Ray recorder in Japan last April. Thedevice, priced at $3,800, plays Blu-Ray discs as well as DVDs,DVD-RW, DVD-R, CD and CD-RW discs. The recorder is notexpected in the U.S. until 2005. However, the timing actuallymay be good. In 2005, HDTV sets will likely be in as many as15 to 20 million homes. And the demand for a recordable HDdisc format could be overwhelming.DVR Wrap-UpThe digital video recorder is destined to replace the VCR in thecoming years. The technology is remarkably better and easierto use once you learn the basics. However, the transition willnot be meteoric despite what some analysts say. Americans, ingeneral, are slow to embrace a new high-tech product, particularlyone that would replace an existing product that performswell. To grow at a faster rate, the industry must better communicatehow the DVR will make consumers lives more convenientand entertaining. And, it must offer DVR service throughexisting cable and satellite receivers. When those things happen,the DVR home penetration will skyrocket.The Blu-Ray recorder could replace current recorder/playerformats, such as the VCR and even the DVD. With Blu-Raytechnology, a viewer can jump instantly to any spot on thedisc, edit recorded video and automatically find an emptyspace on the disc to avoid recording over a show. The Blu-Rayrecorder also will support the playback of regular DVDs. With5 TECHNOLOGIES TO watchOCTOBER 2003

View Your Video OptionsCome see the latest video technologies at the 2004 International CES.■■RWPPIThe RWPPI is an initiative to develop, popularize and promotereliable DVD recording products to customers. The alliancepromotes standards, campaigns and shares information—andoffers the CE masses an in-depth tour of the burgeoning nicheat the RWPPI TechZone.DVD+RW AllianceThe DVD+RW Alliance develops and promotes a universallycompatible, rewritable DVD PLUS (+R/+RW) format toenable true convergence between personal computing and CEproducts. More than 80 companies have joined the DVD+RWAlliance to support DVD+R/+RW technology. For moreinformation visit: CES conference sessions dedicated to videotechnologies include:■■■■■■■■■■Finding a Fix: The DMCA DilemmaNext-Gen EntertainmentBeyond Movies: New Revenue Generating OpportunitiesDigital Cable and Satellite Television StrategiesMovie Distribution and Broadband TimelineTV Networks and InteractivityWhere Content, Creativity and Technology TriumphThe Telco-Entertainment PartnershipConsumer Education – The Final HDTV FrontierThe Big Picture of TV Tech25■LVCC Central Hall for analog and digital video products forthe home■LVCC South Hall for video home theater products■LVCC North Hall for mobile video electronics■LVCC Central Hall for video hardware and videodisplay technology■LVCC South Hall for the Flash Forward TechZone, LaunchTechZone, RWPPI TechZone, Broadband in the HomeTechZone and HDTV Sports BarOCTOBER 20035 TECHNOLOGIES TO watch


TECHNOLOGIES TOwatchGET YOUR MOBILE Game OnMobile Gaming Continues to EvolveMobile games have come a long way in the past 30 years fromthe magnetic board variety that used to be played on long cartrips. In today’s mobile and increasingly global gaming arena,gamers can play chess from a cell phone against a player ona different continent. Industry pundits predict that mobilegaming – especially over wireless devices – soon will becomecommonplace. And a recent study by the EntertainmentSoftware Association (ESA) reveals that 39 percent ofAmericans who play games on a computer or console systemalso play games on mobile devices such as handheld systems,PDAs and cell phones. But before you consider your moveinto mobile gaming consider its history.A Short History of Mobile Gaming DevicesMobile games like Mattel’s Football and Milton Bradley’sMicrovision provide some of the earliest examples of the firstmobile electronic games that appeared in the late 1970s.Although simplistic and even crude by today’s standards, thesededicated devices helped catapult electronic mobile gaming offthe ground. During this time the first personal computersbegan to appear and by the early 1980s the market for thesemachines had mushroomed. Before long, computer gameswere popular products, but a feasible portable computer gamingsolution was unavailable.By the mid-1980s early laptop PCs enabled users to play theircomputer games on the go. Meanwhile, the success of earlyhome gaming console systems such as Mattel’s Intellivision andColeco’s Colecovision were creating demand for a portableversion of the console gaming experience. In 1989 Nintendoreleased the Game Boy, and competition from the Atari Lynxand Sega’s Game Gear portable consoles quickly materialized.Ultimately the Game Boy prevailed, and since its introduction,this system has steadily advanced in capabilities and functionality.The latest Game Boy product is the Game Boy AdvanceSP, which launched in March 2003 and features a clamshelldesign and a street price of around $100.The Evolution of Mobile Gaming1976Mattel introduces Missile Attack handheldelectronic game1979Milton Bradley premiers Microvision handheldgaming console1986 IBM launches the PC Convertible, the first laptop computer1989 Nintendo Game Boy portable gaming console released at CES1990 Sega launches Game Gear portable gaming console at CES1993 Apple introduces Newton handheld at CES1996 Palm debuts first Palm Pilots1997Nokia phones ship with simple Snake game,Wireless Application Protocol (WAP) released in U.S.1999Early smartphones appear, combinding PDA and phonefunctions in one device2001Games are offered on cell phones in Japan throughDoCoMo’s i-appli service2002Wireless carriers in the U.S. roll-out mobileentertainment businesses2003 Wireless gaming decks like the Nokia Ngage, are announcedSources: www, www.wirelessgamingreview, www.esa.comBy the mid-1990s, personal digital assistants (PDAs) came onthe scene with their palm-size brand of mobile gaming. Somegive credit to Apple’s Newton handheld, which first appearedback in 1993, for birthing the era of palm computing. Butmost recognize Palm as the company that really started thePDA market. In the late-1990s, cellular phones from Nokiabegan shipping with a game called Snake. Other handsetmakers followed and cell phones have since evolved into alegitimate platform for games. Convergence products likesmart phones, blending phone and PDA functions, appearedshortly thereafter. And in 2002, several domestic carriers beganoffering real mobile entertainment services. This year severalcompanies announced wireless gaming decks that blend theexperience of a game console with other functions such as acell phone or PDA.Familiar Faces of Mobile GamingThe group of portable technologies comprising the morecustomary methods of mobile gaming today includes laptop27OCTOBER 20035 TECHNOLOGIES TO watch

28Quick Facts About Gamers43 percent of people who play interactive games are women.The average age of an interactive game player is 29 years old .For Computer Gamers30 percent of most frequent game players are under 18 years old25 percent of most frequent game players are between18 and 35 years old41 percent of most frequent game players are over 35 years oldFor Console Gamers38 percent of most frequent game players are under 18 years old40 percent of most frequent game players are between18 and 35 years old22 percent of most frequent game players are over 35 years oldSource: ESA, July2003computers, PDAs and handheld PCs, and portable gamingconsoles. For years, business travelers have been playing solitaireon laptop computers during long flights. But companieslike Alienware are taking laptop PC gaming to new heightswith products like the Area-51m, a laptop PC designed to bewhat the company calls “the ultimate mobile gaming machine.”Today’s PDAs and handhelds bristle with computing powerrivaling desktop systems that were considered robust only afew years ago. With stylus in hand, gamers on these handheldsystems get console-like performance with the utility of a PC.CEA believes technological advances among these technologieshas fostered an increasingly viable platform for entertainmentpursuits. Increasing processor power, better graphics capability,improved power frugality and naturally the addition of colorLCD screens have all driven consumers to accept games onthese platforms.For consumers who prefer a dedicated mobile gaming solution,Nintendo’s Game Boy systems have been the only realchoice for the past decade or so. According to the NPD Group,U.S. dollar sales of portable consoles between January and May2003 improved 43 percent over the same period a year ago. InMay 2003, Sony said it planed to enter the portable consolemarket with the PSP, which the company positioned as the“Walkman of the 21st century.” Sony said the PSP will feature aRetail Unit Shares, ASPs for PDAs andHandheld PCs Color Versus MonochromeScreensColor Share Color ASP Mono Share Mono ASP1QTR00 1.6% $674 98.4% $2902QTR00 5.3% $548 94.7% $2853QTR00 7.0% $521 93.1% $2714QTR00 7.1% $497 92.9% $2481QTR01 10.1% $490 89.9% $2392QTR01 20.3% $457 79.7% $2113QTR01 23.9% $445 76.1% $1944QTR01 24.5% $387 75.5% $1551QTR02 38.1% $393 61.9% $1782QTR02 44.5% $380 55.5% $1573QTR02 43.9% $362 56.1% $1324QTR02 48.5% $322 51.5% $1181QTR03 68.5% $314 31.5% $1102QTR03 72.9% $299 27.1% $98Source: The NPD Group / NPD Techworld3D graphics capable screen, stereo sound, USB 2.0 connectivity,rechargeable battery and Memory Stick compatibility allowingwireless communication. The PSP also will utilize universalmedia disk (UMD) technology. UMDs are like CDs, but smaller,and can hold up to 1.8GB of data.Although cell phones are not exactly a familiar face on themobile gaming scene here in the U.S., gaming on handsets isgathering momentum. And wireless technology is pushingmobile gaming into the mainstream through these devices.Many industry observers believe wireless technologies will helpmobile gaming make a quantum leap forward.The wireless gaming wave is finally resonating in NorthAmerica, but in other regions of the world, such as Europe andJapan, connected gaming via wireless devices is much moreprevalent. Supporting this growing worldwide wireless gamingmovement, new technologies such as wireless gaming decksand eventually in-vehicle entertainment systems soon will offermore ways to play games on the go.5 TECHNOLOGIES TO watchOCTOBER 2003

29PORTABLE VIDEO CONSOLE HARDWAREJAN-MAY 2003Wireless Gaming Market Prime For GrowthThe revenue opportunities beckon in the wireless gaming sectoras the installed base grows larger. The challenges surroundingwireless gaming, both technological and market-related,are working themselves out slowly. So if you’re waiting for a“big bang,” don’t hold your breath. Growth projections appearrobust and promising, however the really big money is on thehorizon – at least here in the U.S. But nonetheless, the wirelessgaming race has begun in earnest, and growing the installedbase has been one key factor over the past several years. Asprices have dropped, sales of cellular phones have accelerated.Meanwhile, Strategy Analytics projects handset total unitsales in North America will surpass the 100 million mark asearly as 2004.Following in the footsteps of Japanese carrier DoCoMo,operators here in the U.S. last year launched wirelessentertainment services based on the business model of heavilycompensating the content provider or game developer. Thismodel is one with which industry experts concur. And recentannouncements from carriers including Sprint and Verizonsuggest that demand for wireless games is heating up. Sprintannounced in May 2003 that subscribers had purchased anddownloaded almost two million single and multiplayer gamessince August 2002.International Data Corp. forecasts the number of wirelessgamers in the U.S. could reach 19.6 million by the end of theyear – rising to 112.4 million by 2007. Worldwide wirelessgaming revenues could top $5 billion in 2007 and climb evenhigher to more than $7 billion in 2008, according to StrategyAnalytics.OCTOBER 2003Dollar Change03 vs ‘02Unit Change03 vs ‘0243% 19%Source: The NPD Group / NPD Funworld / TRSTS`North America Handset Sales Forecast2003 - 2008North AmericaHandset Sales(in millions)ReplacementRates (%)Source: Strategy Analytics, May 20032003 2004 2005 2006 2007 200890.4 101.4 109.1 114.6 116.9 117.350.3% 52.6% 53.3% 53.4% 52.5% 51.2%Factory Sales of Cellular PhonesYearUnits(in thousands)Dollars(in millions)ASP1999 33,700 $6,066 $1802000 52,600 $8,995 $1712001 53,400 $8,651 $1622002 58,740 $8,106 $1382003 p 62,852 $8,171 $1302004 p 67,251 $8,406 $125Source: CEA Market ResearchTo facilitate this remarkable growth, the stakeholders in thewireless gaming value chain – network operators, device manufacturers,software developers, etc. – must profit. Cellularoperators (especially in the U.S. market) must help users climba steep learning curve to embrace more data services and mustcorrectly hit their price points with these services. Domesticcarriers have been cautious with their marketing plans – walkingthe line between generating demand and not over-promisingservices. This year, IDC predicts 13.4 million unique userswill join the U.S. wireless game ranks. By the year 2007, IDCforecasts the number of new wireless gamers in the U.S. will be71.2 million.Cellular bandwidth has broadened slowly over the years,enabling better wireless data transfer and game play, but forwireless gaming to really take off, most experts say the pipesneed to be bigger than the 2.5G network presently in use. The3G (third-generation) wireless network should remedy the5 TECHNOLOGIES TO watch

30bandwidth dilemma by using data packets that can beintermixed between voice transmissions. Shiv Bakhshi, awireless market analyst with IDC, believes 3G networks couldbe ubiquitous across America by as early as 2005, but 2006seems more probable. The third-generation cellular networkcould be the final gear in the wireless gaming engine and someexperts suggest that wireless games and entertainment servicescould be the “killer app” driving consumers to purchasecontent-ready phones and join the network. Already, 80 percentof Motorola’s phones shipping this year are expected toinclude high-quality games, IDC reports. And Verizonannounced in April 2003 that 3.2 million handsets in use onits network were capable of accessing mobile content.But keep in mind that network operators likely will beunwilling to spend the billions of dollars necessary to upgradetheir networks over the next few years if they cannot put bothhands in the wireless gaming money pot. Forecasts by StrategyAnalytics estimate the number of active download game usersin North America in 2003 at 1.5 million. And operatorrevenues from service and transport changes stemming fromdownloadable games may only squeak past $50 million thisyear. That is one-tenth less than comparable revenues expectedin Southeast Asia this year.Active download game users on the cellular networks shoulddouble in 2004, which could triple revenues. Active downloadgame users in the U.S. may reach as high as 23.7 million by2008 – which is the year Strategy Analytics believes service andtransport changes for downloadable games could rise abovethe $1 billion mark in the U.S. Expect the competitive pressureon domestic carriers for mobile entertainment services to heatup quickly as increasing numbers of software developers andeven device vendors make games available for download. Inaddition to billings from online game play, analysts recommendcarriers deploy ancillary mobile gaming functions thatcould include gaming chat rooms, online contests or postingscores to drive revenues higher. Promoting applications andgames that incorporate and reinforce the notion of mobilitywill be important as well.Installed Base of Active Download GameUsers (Millions)2003 2004 2005 2006 2007 2008WesternEurope2.9 5.1 9.0 13.5 20.5 35.7NorthAmerica1.5 3.8 6.8 10.2 14.1 23.7SoutheastAsia14.2 26.1 37.0 47.6 60.8 76.0Central andEastern 0.2 0.4 0.9 1.6 3.1 6.6EuropeCentralAmerica, - 0.8 1.4 2.4 3.9 6.4Latin AmericaRest of World 0.0 0.5 0.8 1.6 2.8 5.3Totals: 18.8 36.7 55.9 76.9 105.2 153.7Source: Strategy Anaytics, July 2003Is Your Wireless Device “Thick” or “Thin”?Consumers wishing to get involved in wireless gaming havemany choices, but the future seems to belong to so called “thickclient” devices, which support their own processing power forgaming. Examples of thick clients include Java-enabled devicesor PalmOS or PocketPC handhelds. In contrast, “thin client”devices rely on a central server located on the network toprocess game information and transmit results back to thedevice. Thin client platforms that use wireless application protocol(WAP) and browser-based games are common on thisplatform. A related form of thin clients use messaging platformslike short message service (SMS) to transmit game dataand information – mostly for turn-based games.Thick client gaming devices already account for the lion’s shareof worldwide wireless gaming device revenues, and StrategyAnalytics expects their share of wireless gaming dollars toimprove over the next several years. This growth comes at theexpense of message-based gaming, which may account for lessthan two percent of global wireless gaming dollars in 2008.Supporting the growth forecast for thick clients, a new breed ofwireless gaming decks are appearing on the wireless gaming scene.5 TECHNOLOGIES TO watchOCTOBER 2003

31Download Game Revenues: Service andTransport Charges ($ Millions)2003 2004 2005 2006 2007 2008WesternEurope 66.7 145.1 262.6 398.1 591.9 979.8NorthAmerica 50.2 153.4 303.0 488.5 726.9 1,227.6SoutheastAsia 536.2 1,117.2 1,664.0 2,219.3 2,911.9 3,686.9Centraland EasternEurope 2.3 6.6 14.1 27.7 57.6 133.1CentralAmerica,LatinAmerica - 9.3 19.6 36.7 65.3 116.8Rest ofWorld 0.4 6.1 12.0 23.7 46.3 94.1Totals: 655.9 1,437.5 2,275.3 3,194.0 4,399.8 6,238.2Source: Strategy Anaytics, July 2003Wireless Gaming Decks – Game On?Taking aim at maturing Game Boy players and adult gamers,the avant garde wireless/mobile gaming deck segment is thelatest craze to hit the mobile gaming market. What distinguisheswireless gaming decks from other wireless devices that canplay games (like cell phones) is that gaming is their primaryfunction. Also, like portable consoles, these devices will havegames developed exclusively for them. The first wave of thesedevices should arrive in late 2003 with the debut of Nokia’sNGage and Tapwave’s Helix. The much ballyhooed NokiaNGage is one of the better known products in the evolvingwireless gaming deck segment. Set for introduction in Q42003, the NGage will offer in addition to gaming, a digitalmusic player, FM stereo and tri-band cellular phone.Multiplayer wireless gaming is possible via Bluetooth. Gamesfor the NGage are based on the Symbian OS (operating system)and will come on multimedia cards the size of a postagestamp. Among the software publishers developing titles for theNGage are THQ, Activision, Sega and Ubisoft. Nokia is evenpublishing some of its own titles for the device. Tapwave’sOCTOBER 2003Global Gaming Revenues by Segment ($ Millions)MessageGaming2003 2004 2005 2006 2007 2008156 223 206 188 171 155ThinClient 530 811 915 1,079 1,212 1,220GamingThickClient 656 1,438 2,275 3,194 4,400 6,238GamingTotals: 1,342 2,471 3,397 4,462 5,783 7,613Source: Strategy Anaytics, July 2003Helix is a PDA gaming device that employs the Palm OS, openingthe device to an already large volume of software applications(and games). In Europe, other wireless gaming decks indevelopment include TTPCom’s B’ngo and Atelab’sChameleon.These emerging devices are, in truth, convergence products – acrossroads of functions and features. With slick screens, craftycontrols and a laundry list of features, this new breed of gamingdevice certainly has appeal. But realistically, the success ofthese devices ultimately will depend on the brand strength ofthe games available for them. It remains to be seen whetherthese products will be embraced by a large group of consumersor be relegated to a small niche of hardcore gamers.Analysts expect wireless gaming decks likely will face the samepositioning challenges as other convergence products – is it aPDA, a cell phone or a gaming device? Some consumers mayappreciate the all-in-one convenience of a multi-functionaldevice, while other individuals may not see the value. AMobility Needs study conducted by CEA last year found thatamong respondents with a mobile lifestyle, 49 percentexpressed interest in a combination wireless phone, pager andPDA device; 33 percent expressed interest in phones thatinclude a digital camera. Given these results, it appears thatconvergence products are a fit with a reasonable number ofmobile consumers.5 TECHNOLOGIES TO watch

32Pricing could be another acceptance challenge facing wirelessgaming decks. Initially, the price points for these emergingmobile gaming devices (expected close to $300) could keeppenetration low. But subsidies, either from carriers or softwarepublishers, could bring prices down to levels that appeal to abroader audience. However, considering the price and availabilityof other mobile gaming solutions, some industryobservers question whether sufficient demand exists in the (at least at present) to support these devices. A StrategyAnalytics forecast predicts wireless gaming decks likely willremain a niche player on the global scene – accounting for onlyabout four percent of the expected 704 million cellular deviceunits sold worldwide in 2008. By comparison, other cellulardevices such as phones that include music, video or camerafeatures could comprise 40 percent of cellular device sales by2008.Wireless Game Development EvolvingMobile games are diversionary compared to the immersivequalities of their computer and console-based cousins. Thedevelopment, marketing and distribution of wireless games inthe coming years could make or break the business. Apart fromthe networks, devices and standards, it boils down to thegames themselves and the value consumers place on them.The business model for creating and selling wireless games isbeginning to resemble the computer and console game segments.Wireless game developers such as Blue Heat,Centerscore and Nuvo Studios are partnering with publishersincluding JAMDAT and Gameloft to take their games to market.Some companies like Sorrent and Red Mercury are producingand marketing their own content. Well-known publishersof computer and console games like Sega and THQ arebeginning to create mobile games for wireless devices. Andother top game companies like Electronic Arts, Activision andAtari are starting to license their content for mobile games.Interest in New Wireless Devices AmongRespondents with a Mobile Lifestyle“Very” or “Somewhat”InterestedCombo wireless phone, pager and PDA 49%A wireless phone with a built in GPS 39%A wireless phone that couldsynchronize with a PCA wireless phone with a builtin digital cameraA wireless phone that you canupload/download from the InternetA PDA that could upload/downloadfi l es fr o m the I nt ernetA wireless phone on whichyou could view video footageSource: CEA Consumer Research, Mobility Needs Study, August 200240%33%31%30%26%mass market and a large variety of games should be available.Mobile games can be downloaded electronically or come oncartridges or media cards. Downloadable mobile games aregenerally simplistic in nature and are relatively cheap (andsometimes free). Mobile games on cartridges are usually brandedgames that carry higher price tags.Development of mobile games (especially for cell phones) canbe a challenging proposition, considering the inherently smallscreen sizes, wide variation in button configurations, multipleformats and limited development budgets. But resources existto aide the development community. Consider the annualAssembly event held in Finland, co-sponsored by HP,GameFederation and Nokia, where developers come togetherfor four consecutive days to program games and party.Red Mercury, a key developer of Palm-based games, saysmobile game software should be designed to appeal to the5 TECHNOLOGIES TO watchOCTOBER 2003

Marketing Mobile Games and Other IssuesIn terms of distribution and sales, models vary across the differentmobile gaming segments – ranging from retail off-theshelfsoftware for portable game consoles to downloadable trialgames for cell phones with the option to purchase within 30days or the game locks you out. Most experts agree thatregardless of platform or device, the pay-per-game modelholds the best hope for success.Scott Corley, Red Mercury’s founder, says not to expect aglittering marketing campaign for most mobile games – therevenues just aren’t there. Corley says advertising via word-ofmouthis sometimes the best a developer can expect for thesesimple, off-brand mobile games. Analysts agree, stating thatbranded games that are available via download or cartridge, willhave the highest profit potential. In some cases, marketing plansfor branded games can almost be commensurate with advertisingand media efforts currently seen for many console games.Because branded games, especially the cartridge variety, aregenerally more elaborate and detailed, you can expect to paymore for these games – in some cases almost as much as a consolegame. Instat/MDR Senior Analyst Eric Mantion suggeststhat pricing for mobile games should be in-line with the functionthey serve. “Mobile and wireless games provide us with adiversion, opposed to the immersive experience of today’scomputer and console games,” said Mantion. “I find it unlikelythat consumers will be willing to pay equally for both.”On the public policy front, one issue facing the games industrythat could eventually affect the mobile games business is a possiblemove by Congress to enact a law making it a crime to sella mature-rated game as designated by the EntertainmentSoftware Rating Board (ESRB) to anyone under the age of 18.Some state legislatures also are considering similar laws.However, the ESA, along with leading retail and gamedevelopment groups, has challenged these efforts. Consideringa large share of the growth in the mobile gaming segment willcome from younger age groups, this developing issue is one towatch.Rear Seat Entertainment – Gaming onFour WheelsAt present, the connection between mobile video electronicsand gaming applications is limited to plug-n-play consoleentertainment for rear-seat occupants. And the overall marketfor rear-seat entertainment systems is still embryonic. But earlysigns suggest that this segment could soon develop into a fullfledgedmobile gaming market through the convergence ofmobile video electronics (rear-seat video screens) and in-vehicletelematics. Mobile video electronics include rear ceilingmounted displays, floor consoles or screens installed in theheadrest of the front seats. Also available are system-in-a-bagsolutions that hang from the back of the front seats. Already,several vehicle manufacturers offer mobile video electronics asoptional equipment. And factory shipments of mobile videoelectronics to the aftermarket for this segment look promising.CEA market research shows Audiovox, Kenwood, Sony andPioneer as some of the early manufacturers to enter thisemerging product segment.Automotive telematics is the wireless exchange or delivery ofcommunication, information and other content between theauto and/or occupants and external sources. About 10 percentof all vehicles sold in the U.S. come with some form of telematicstoday, according to the Telematics Research Group. Thesesystems are mostly used by front-seat occupants for information,communication and navigation. Telematics ResearchGroup explains most current entertainment systems in therear-seat are not telematics because they do not have two-waycommunications capabilities. But the trend is to add communicationscapabilities to entertainment systems usually by providinga link to an embedded or integrated mobile phone. Theresulting communications capability transforms today’s mobileentertainment solutions into interactive entertainment systems.Considering the growing wireless gaming trend in theU.S. Forget the magnetic board games, this will keep the kidsoccupied on those long family trips.33OCTOBER 20035 TECHNOLOGIES TO watch

34Ready to Get Your Game On?Mobile gaming has come a long way and the future of thisevolving segment looks bright. Technology is improving thequality of the mobile gaming experience on every front, notonly amid mobile gaming devices, but also of the games themselves.Speedier processors, more vivid displays, expanding datastorage capacity and easier connectivity are enhancing andimproving the performance of mobile gaming devices. Wirelesstechnology and more importantly the introduction of wirelessdata services among carriers is ushering in a new era of connectedmobile gaming. Wireless data services make it easier forindividuals to get the game they want to play, find an opponentor interact with other mobile gamers. Supporting thewireless data services trend, game developers are flocking tothe wireless games space hoping to cash in. Barriers to entryare relatively low and network and Internet-based distributionchannels are taking shape.With the triangle of devices, software and services complete,analysts forecast robust growth in the wireless gaming sectorover the next several years. And new mobile gaming systems onthe horizon such as wireless gaming decks and in-vehicleentertainment systems will provide additional wireless gamingsolutions. Today there are many ways to “get your game on”while on the go, and no matter what method you prefer – alaptop PC, portable game console, PDA, cell phone or in therear-seat of your car – you’ll be entertained. Wanna play?Get Into the Game at CESPlay on at the 2004 International CES where the hottest gaming islive:Visit LVCC South Hall to see electronic gamingtechnology exhibits.Digital Games SummitThe Summit focuses on business issues for the electronicgames industry, including industry outlook, market trends,new business opportunities, marketing and distribution,publishing, licensing, sports, music, online and wireless, newplatforms, retail sales, investments, and how to form strategicpartnerships and alliances.Next-Gen Gaming ConsoleThis SuperSession reviews new integration strategies insertinggaming applications into home products such as mediaservers, PVRs and DVD players. The evolution of interactivityand the future roles of gaming hardware also are discussed.Several other CES conference sessions dedicated togaming include:■■■Hollywood and Games – The Next Threshold ofEntertainmentGame Distribution: Evolution or Extinction?Mobile Phone Apps – Gaming, Text Messaging and BeyondDomestic Factory Unit Sales of Mobile VideoElectronics ProductsJan-June 2003Overhead Monitors 84,365Stand Alone Monitors 54,705■Next-Gen EntertainmentOther Mobile A/V Products(floor consoles, system-in-a-bag,armrest consoles)125,553Source: CEA Market Research5 TECHNOLOGIES TO watchOCTOBER 2003

TECHNOLOGIES TOwatchHI-RES AudioHi-Res Audio Resonates with ListenersThe best is still to come for high resolution audio. While businesshas showed, – buyers of digital video disc (DVD) playerscapable of playing better-than-CD sound audio are definitelyin a spending mood. According to CEA market research,manufacturers shipped 148,000 DVD-Audio (DVD-A) and100,000 super audio CD (SACD) high-resolution audio playersto retailers through May. That’s faster growth than manyexperts originally predicted and on track with the industry’smost successful formats.“Historically there is a similarity between the introduction ofhi-res audio and that of the compact disc (CD),” said SeanWargo, CEA’s director of industry analysis. Each product –CD, DVD, DVD-Audio and SACD audio players – met the250,000 units-shipped mark by the third year. “The audioindustry tends to cycle through periods of growth as each newand improved technology is introduced. Witness the movefrom turntables to tape to CDs and now to music DVDs.”High-resolution audio is poised to further boost its growth,thanks to the introduction of affordable combination unitsthat play DVD-Audio discs and SACDs, plus DVD-Video andstandard CDs. At least 12 brands are available or soon willoffer these so-called “universal” players with entry level pricesstarting at less than $300. Consumers also will find DVD-Audio/Video (A/V) players priced at less than $200 and combinationSACD/DVD-Video players available at around $250.Manufacturers are ramping up production of universal playersat a time when consumer interest in all things DVD is soaring.According to CEA’s study “2003 CE Ownership and ProductPotential” (February 2003) nearly a third, 32 percent, of allnon-DVD-owner households expect to purchase a DVD playerin the next year, a higher percentage than indicated as such lastyear (28 percent).“If DVD-A and SACD players are going to truly mimic history,”says Wargo, “we could see the majority of consumers enjoyinghi-res audio by the year 2015, with an even more rapidacceptance of the new audio technologies across the nextdecade and really driving growth in the audio market.”It is not difficult to see why these 5.1 channel audio formatsjust might follow in the glorious footsteps of DVD. People areprimed for a multichannel music experience because of theirfamiliarity with home theater surround sound. In fact, a CEAconsumer survey found that 30 percent of U.S. householdswere equipped with a multichannel home theater system as ofJanuary 2003.What the Fuss is all AboutWhether one sees the two high-resolution audio formats asbrilliant answers to the industry’s need to kick-start homeaudio sales or as ambitious high-tech overkill, both come withthe full imprimatur of audiophile acceptability. SACD andDVD-Audio offer the potential for frequency response to 100kHz and dynamic-range capabilities of 120 decibels or more,compared to the 93 dB dynamic range of a CD.Perhaps even more compelling is the ability of SACD andDVD-Audio to deliver 5.1 music channels through a surroundsound speaker system to create a sense of realism and of “beingthere,” that often is absent in two-channel recordings.A well-turned-out multichannel, high-resolution recordingprovides a more realistic, immersive experience for the listener.When you attend a concert, you hear music not just coming atyou from in front but also reflected from walls, ceilings andchairs and absorbed by carpeting and even by the people inattendance. Audio component manufacturers have known thisfor a long time; it is why they first tried to sonically duplicatethe experience of a live event with “concert hall” digital signalprocessing settings on their receivers and preamps.A look at recent industry metrics supports high-resolutionaudio’s emergence as a critical tool in the future growth of theaudio industry.A DVD-Audio Interest “mini study” conducted in February2003 by CEA found the surround sound A/V receiver increas-35OCTOBER 20035 TECHNOLOGIES TO watch

NOW HIGH-RESOLUTION AUDIO IS POISED TO FURTHERBOOST ITS GROWTH, THANKS TO THE INTRODUCTION OFAFFORDABLE COMBINATION UNITS THAT PLAY DVD-AUDIO DISCS ANDSACDs, PLUS DVD-VIDEO AND STANDARD CDs.36ingly is becoming a mainstay in Americans’ family and mediarooms. The receiver, considered critical to the full enjoyment ofhigh-resolution digital audio, has found its way into 28 percentof U.S. homes, a result that is consistent with the previousyear’s study. The 2003 study found some 61 percent of receiverowners say they are “interested” or “very interested” in musicDVDs.The broader 2002 DVD-Audio Interest study found that 20percent of respondents believe the sound quality of music CDscould be improved “a lot.”Eager to improve sound quality, most surround sound receiverowners are hooking up their devices to four or more speakers.Of those who have linked their receiver to one or morespeakers, 87 percent have connected it to at least four speakersand 66 percent have plugged in at least five.Surround sound receiver owners show strong potentialinterest in the new digital music format. Of those who havehooked up their receiver to a DVD player, more than three outof five have used their DVD player to listen to music CDs duringthe last year. This finding suggests strong potential interestin the new digital music formats.Choice is what audio content is all about. Consumers canchoose from more than 500 available DVD-Audio titles andmore than 800 different SACDs. Pink Floyd’s “The Dark Side ofthe Moon” on SACD from Capitol Records reached No. 1 on theBillboard catalog chart, achieving 100,000 unit sales in the U.S.Surround Sound Receiver Ownership*YearOverall Male Female 18-34 35-44 45-54 55+

The TechnologySince we are tossing around the term “high-resolution audio,”it helps to know how audio resolution is determined. Fordigital audio content, two yardsticks are usually used to measureresolution, which includes sample rate frequency and wordlength (number of bits). For example, CD digital audio utilizespulse code modulation technology with 16-bit word lengthsand 44.1 kHz sampling rate. Or, put another way, 44,100samples per second of the analog signal digitally describe anaudio tone.DVD Audio, developed three years ago by the DVD Forum(initially Panasonic, Pioneer, Toshiba and Warner Music,among others) also uses PCM but boosts sample rates to 192kHz and word length to 24 bits per sample.DVD-Audio’s data compression technique is called MeridianLossless Packing (MLP). The “lossless” refers to the fact thatall of the original data is recovered from the compressedversion (none is “lost”). DVD-Audio discs, however, also canaccommodate the same audio encoded as Dolby Digital forplaying on existing DVD-Video players.DVD-Audio offers at least 74 minutes of high quality 5.1channel surround sound, plus additional features that are notavailable on CDs such as the ability to store music video clips.DVD-A discs also can include interactive DVD-ROM content.Rather than increasing both word length and sampling frequenciescompared to standard CDs, super audio CD (SACD)developers Sony and Philips came up with a technique calleddirect stream digital (DSD), which reduces word lengths to asingle bit and increases sampling frequency up to 2.8224 MHz(mega as in million), or 64 times the CD sampling rate.SACDs were first launched in 1999 as an audiophile format instereo only. In 2001 the format added multichannel disks andplayers.SACD also requires compression to fit all of its informationonto the disc, which it gets in the form of a technology calleddirect stream transfer (DST). Like DVD-A’s MLP system, DSTis a lossless scheme that offers bit-for-bit accuracy.OCTOBER 2003Both SACD and DVD-Audio have data-storage capacity of4.7GB per layer, which is more than seven times the capacity ofa standard 74-minute, 650-megabyte CD. Because of theirextra data capacity, the DVD-Audio and SACD formats easilysurpass CDs with regard to resolution, clarity, frequencyresponse and dynamic range.The most common SACD is a dual-layer hybrid disc with ahigh-density “semi-reflective” layer and a reflective outer layer.The outer layer is reserved for standard CD audio, allowing the“hybrid” disc to play in lower resolution (CD quality) stereo onCD players. This compatibility with all existing CD playersgives SACD an advantage over its chief rival. On the otherhand SACD discs will not play on standard DVD-Video playersor DVD-Audio players unless they are specifically designed forSACDs.Prerecorded DVD-Audio and SACD discs both come withcopy-protection algorithms to prevent unauthorized duplication.Unfortunately, these same protection standards make itimpossible to send digital SACD or DVD-Audio signals to areceiver or amplifier. Instead, consumers must use the analogRCA-type jacks on the back of players. A few brands, notablyDenon and Pioneer Elite, now have digital audio connectionsinternally from player to receiver. Pioneer Elite uses a one-wayiLink IEEE 1394 connection to keep the audio stream in thedigital domain.As for the future, proponents of DVD-Audio and WarnerMusic Group in particular have been pushing for a doublesided‘hybrid’ DVD-Audio version that would carry a CD compatiblelayer.The SACD camp also is investigating to enhance the formatwith still images and other multimedia content similar to thesupplementary materials found on many DVD-Video discs.Breaking into HTiB’sAlthough simplicity is helping drive sales of theater-in-a-box(HTiB) systems, so is technology. The popularity of HTiB’s —so-called because they incorporate all of the speakers and elec-5 TECHNOLOGIES TO watch37

38tronics needed to turn a TV into a surround sound home theatersystem — are obvious. Factory-level sales shot up 12.8percent in 2002 to $896 million, according to CEA statistics.Suppliers plan to rapidly expand the selection of DVDequippedHTiBs that play multichannel DVD-A and SACDmusic discs this year. That not only will give retailers a biggerladle to dip into the consumer spending pot, it also might helpto kick-start sales in speaker upgrades.The industry’s first SACD-equipped HTiBs shipped in 2001,followed last year by HTiBs equipped with DVD-A/V players.This year the first HTiBs with universal players made theirdebut. For example, Pioneer has five HTiB’s equipped withuniversal players in its lineup. Most recently the companyadded the model HTZ-830DV with a 5.1-channel speakerpackage and a single-disc universal player (suggested price is$1,000). The DVD player also plays MP3 files and has a photoviewer that enables users to view a slide show of digital stillphotos on a TV instead of on a PC. The company’s Elite-seriespackage, model EX-500, features a five-disc universal DVDchanger and a separate receiver.Renewed Marketing EffortsTo get the word out about DVD-Audio, Warner Music Group,Silverline Records, BMG, EMI Recorded Music, 5.1Entertainment Group, Meridian Audio, Dolby Laboratoriesand Panasonic have formed the DVD-Audio MarketingCouncil. According to the group, the council was formed topromote acceptance of the DVD-Audio format to retailers andconsumers. The group says it “will serve as a complete resourcefor all technical, press and marketing information related tothe DVD-Audio format in the United States and Europe.” Thecouncil also plans to educate hardware and software retailers tothe benefits and features of DVD-Audio “while simultaneouslypromoting consumer awareness of this exciting new format.”The SACD format has been gaining more traction in the marketthan DVD-Audio. The industry analyst firm In-Stat/MDRhas predicted 35 percent of all DVD players will include SACDas a standard feature by 2005. Nevertheless SACD’s consumerequipment manufacturers, record companies and recordingstudios met in London recently at the Super Audio Forum todiscuss new ways to promote and establish Super Audio CD.Delegates included senior representatives from UniversalMusic, Sony Music Entertainment and many of the leadingindependent record companies. Forum attendees were told thatdisc replication capacity currently stands at 150,000 units perday. The Forum also reported that there are more than 65 playermodels available from 25 manufacturers with many moreproduct launches planned.Don’t Hide the SoftwareDespite significant technical inroads and almost weekly launchesof new high-res audio hardware, the obstacle remains ofquestionable in-store merchandising patterns of music retailers.Some retailers continue to treat high-res audio as strictly aniche product for audiophiles. Others hide hi-res titles in theDVD-Video section. In a widely reported quote, WarnerRecord’s David Dorn cautioned the 1,600 attendees at thisyear’s National Recording Merchandisers (NARM) conventionthat if these products are “placed somewhere between polkaand comedy, it’s just not going to work.”So, coming to a store near you, with fingers crossed, will besuch potential hits as the 15 Bob Dylan albums fromColumbia/Legacy in SACD. Universal Music says that surroundsound SACDs by Elton John, Sting and Rush will headline theirfall SACD releases. The list includes a 5.1-channel surroundsound SACD of Elton John’s “Goodbye Yellow Brick Road.”The classic Chicago album “Chicago V” is set for release on theRhino label in DVD-Audio. It follows Warner’s DVD-A releaseof the best-selling 1970 album “Chicago II.” Warner plans anadditional 30 DVD-A discs by year’s end. Included in thisgroup will be DVD-A discs by Madonna, Frank Sinatra,R.E.M., the B-52s and The Doors. EMI, which has issued anumber of multichannel SACD titles, debuts in the DVD-Audio format with the 1966 Beach Boys album “Pet Sounds.”5 TECHNOLOGIES TO watchOCTOBER 2003

PERHAPS EVEN MORE COMPELLING IS THE ABILITY OF SACDAND DVD-AUDIO TO DELIVER 5.1 MUSIC CHANNELSTHROUGH A SURROUND SOUND SPEAKER SYSTEM TO CREATEA SENSE OF REALISM AND OF “BEING THERE.”OCTOBER 2003A Connected FutureAs good as high-res audio is, the best is yet to come. Retoolingfor the new era of distributed digital music may be the mostimportant and the biggest bet for the audio industry in severaldecades. The idea is to tap into today’s hottest (and most controversial)trend in music: Americans collect digital song filesby the millions over the Internet. They then listen to them ontheir PCs and portable players. Conspicuously absent from themix is the main home audio system. A number of audio equipmentmakers now are developing music server components,which, together with DVD recorders, will fill this gap and facilitatesharing of entertainment content throughout the home.It can be argued, of course, that bandwidth-restricted MP3 filesare hardly high resolution. But AAC is a step in the right direction,and with the widespread growth of broadband Internetaccess, one easily can foresee a day arriving in the near futurewhen uncompressed, licensed music in hi-fi quality digitalform will be available for download directly into an audiocomponent.At the moment MP3 content services such as Apple’s iTunesprovide consumers with access to legal content downloads atreasonable prices. Apple’s iTunes subscription music service,launched on May 2, has been an unbridled hit with consumers.As of July, music fans had downloaded more than six millionsongs from the iTunes Music Store; in its first week alone, morethan a million individual songs were downloaded. Applecharges $.99 per song and $10 per album. The major shortcomingof iTunes is that it’s targeted only at Apple’s Macintosh userbase, which represents only three percent of the total PC market.That leaves an opening for and other musicdownload services. Targeted squarely at the large universe ofPCs using Microsoft’s Windows operating system, offers more than 325,000 songs available fordownload at prices ranging from $.79 to $1.29.As veteran Marantz executive Ken Ishiwata notes, there is aquestion as to whether the component receiving the downloadedmusic stream will be PC- or CE-based. Ishiwata, whoseofficial title is brand ambassador also spends much of his timedesigning audio equipment. He told reporters in Europe earlierthis year that there is a “real danger” that the PC industrywill move into the traditional CE space. He cautionedagainst taking improvements in PC audio lightly, noting that“we CE guys” have to be “very careful.”One PC company willing to admit it has big intentions in theCE market is Gateway. The company’s Connected DVD players($249) can play back MP3 files or digital photos stored on aPC. They are designed to work with Ethernet or a 802.11bwireless connection and will enable users to find files by usinga TV-based interface that can be navigated via remote control.The wireless player includes a wireless 802.11b card, the wiredplayer a 10/100 PC card and a 10-ft. Ethernet cable. Either ofGateway’s connected DVD players may be combined withother components to create a home theater system that sells forless than $1,000.DVD-Audio has thrown its hat into the PC arena with theintroduction of the Sound Blaster Audigy 2 sound card fromCreative Technology. In addition to DVD-A playback, Audigy 2features the ability to record and play back 24-bit/96 kHzaudio and features THX-certification, a 106dB S/N ratio andFireWire (IEEE 1394) connectivity.Hong Kong’s Oritron brand hopes to shoehorn its way into thenetworked DVD player market with its “on media” product.This $299.99 DVD player streams video, music and photosNumber of Speakers Connected toSurround Sound ReceiverOne 0%Two 9%Three 3%Four 21%Five 43%Six or more 23%5 TECHNOLOGIES TO watchSource: CEA Market Research39

40from a home PC for TV display via wireless Wi-Fi 802.11b orwired Ethernet 802.3 connection. It can handle a number ofaudio, video and still photo compression formats includingMPEG-1, -2 and -4, DivX, MP3, Windows Media Audio andJPEG. The player works with any Windows PC with Pentium 4processor at 1.2 GHz or greater and requires 1 GB free harddisk space for server software.Next year we are likely to see more Internet-enabled DVDplayers based on specifications being developed by the DVDForum. Onkyo’s Integra division provides a sneak peek at thefuture of Internet-ready home audio systems with its Net-TuneEthernet-compatible audio products. Net-Tune receivers arecapable of accessing digitally stored PCM and MP3 files via asingle Ethernet connection from a central server. The serverstores up to 1,300 hours of compressed and uncompressedaudio and functions as the central music library. Net-Tunecomponents also are capable of receiving Internet Radio stationsin MP3 or WMA format using a broadband connectionso as many as 12 different rooms can use individual Net-Tuneready audio components.Tune in to AudioCheck out the 2004 International CES to learn more about audiotechnology including:■■■■■■■LVCC Central Hall for portable audio, accessories, speakers andcomponentsLVCC South Hall for Internet audio products, including theMP3 and Internet Audio TechZoneLVCC North Hall or mobile audio products, including theDigital Car TechZoneLVCC South Hall for home theater products, including audioreceivers and components and the Distributed Audio TechZoneAlexis Park Hotel for high-end audio productsTechKnow Overload Tour in the LCVV Grand Lobby: CEA’sunique educational campaign showcases the latest in audiotechnology to college students and the lucrative GenY market.CES conference tracks have specific sessions dedicated to audiotechnologies, including■■■■■■■Finding a Fix: The DMCA DilemmaNext-Gen EntertainmentChannels of Opportunity in Mobile SoundFast-Lane Audio OptionsWhere Content, Creativity and Technology TriumphMusic Industry InnovationsDissecting the Download MarketCEA forecasts that total U.S. factory sales of home and portableaudio products will top $5 billion by the end of 2003.5 TECHNOLOGIES TO watchOCTOBER 2003

TECHNOLOGIES TOwatchNEW AND EMERGINGConsumer Electronics TechnologiesThe Future is NowIf one of your techie friends tells you that the reason your PDAisn’t working is because some nanoparticles have corruptedyour reconfigured SDR system, don’t believe them. At least notfor another five years or so.That’s how long researchers and analysts believe it will taketo get nanotechnology and reconfigurable software intoconsumer electronics (CE) products. The same is true with anumber of other impressive and exciting new and emergingtechnologies. Meanwhile, these and other technologies willfind their way into other, high-end applications, such as in themilitary and aerospace industries, before consumers can affordto use them in their own hands and homes.“The biggest challenge facing consumer electronics manufacturersis to find some way to add exciting, but complex,features to their products, while hiding the complexity fromconsumers in devices that are small and light, but still havecontrols and displays that are user-interface-ready,” says StuartLipoff, vice president of Applied Value Co. and a member ofthe technical committee of the International Conference onConsumer Electronics.A Big Punch for a Small TechnologyOne of the key candidates on Lipoff’s personal list of CE megatrends is nanotechnology. The federal government is pouringso much funding into nanotech research – Congress hasapproved the spending of $2.4 billion over the next three yearsto foster R&D in nanotechnology – that the NationalNanotechnology Initiative, created last year by Congress, is ontrack to become the second highest-funded science programafter NASA. At the same time, venture capital support isflowing into the field on a pace formerly experienced bybiotech companies. Essentially the ability to manipulate andorganize matter and molecular structures that can bemeasured in nanometers – a billionth of a meter – nanotech iswell on its way to finding applications in defense electronics,medical devices and high-brightness displays for computersand TV screens.OCTOBER 2003Samsung is working on a nanotech-based 40-inch flat-panelTV that could hit dealers’ shelves at any time, possibly makingit the first mass-market use of nanotechnology. The newscreens use carbon nanotubes, or CNTs, comprised of carbonatoms of less than a nanometer in diameter that are bondedtogether to form molecular tubes.Mototrola Labs, the applied research arm of Motorola, alsohas been working on integrating the technology into largeflat-panel displays, among other applications. Dubbed “nanoemissive displays” (NEDs), Motorola believes the technologywill enable manufacturers to design displays of 50-inches orlarger that are only one-inch deep and exceed the imagequality characteristics of plasma and LCD screens at a muchlower cost. Motorola says it is currently discussing the licensingof its technology for commercialization with manufacturers inEurope and Asia.“Demand for large flat-panel displays will not explode untilmanufacturers reach a price point that is reasonable to theaverage consumer,” says Bob O’Connell, director of personaltechnology at International Display Corp. For this reason,O’Donnell says IDC believes the market is ripe for carbonnanotubes that provide a CRT quality image at a significantlylower price than current plasma and LCD offerings.With several major players expected to introduce products forthe mass market, the Institute of Electrical and ElectronicsEngineers (IEEE) is developing a technical standard that willdefine electrical test methods for individual carbon nanotubes.“Our goal,” says Daniel Gamota the IEEE’s working groupchair, “is to speed the emergence of nanotubes in next-generationcircuitry.”Because of their size, roughly 10 times smaller than thefeatures of current-generation electronics chips, data storagealso could be enhanced significantly for computers and anynumber of CE devices.“The trick would be designing the circuits themselves,” saysPaul Nealey, team leader at the University of Wisconsin’sMaterials Reserch Science and Engineering Center on5 TECHNOLOGIES TO watch41

CONGRESS HAS APPROVED THE SPENDINGOF $2.4 BILLION OVER THE NEXT THREE YEARSTO FOSTER R&D IN NANOTECHNOLOGY.42Nanostructures, Materials and Interfaces. “If we can makethese simple designs very inexpensively, then the question forthe chip designers becomes, ‘What can we do with this?’”Nealey says his team still doesn’t know the answer to thatquestion. “But it will be a big research area in the future.”Software Radios – A Real “World Phone”The next “next big thing” to find its way into consumerelectronics may be reconfigurable, software-defined radios(SDR) or phones, which – once they are available globally,could accommodate calls from virtually any mobile orportable phone anywhere in the world.SDR mobile or handheld phones are controlled by softwareresiding within the device. SDR-based phones will be able toadapt to – or interoperate with – virtually any cellular standard(CDMA, GSM, GPRS, cdma2000, etc.) without changing oradding any special hardware to the phone. Subscribers will nolonger have to buy multiple cell phones or PDAs to cover everywireless service they want or need.In other words, SDR technology represents a true “worldphone.” An SDR-enabled device also will be able to downloadnew software for any new or enhanced wireless service, or forpatches to fix problems with current or new software. Severalcomponent companies already are developing chips forSDR-compatible radios, and most cell phone manufacturersand carriers are involved in SDR development at some level.But SDR is only used at the moment in a few service providers’base stations because the technology still is too costly forwidespread adoption. Also, because of its high powerconsumption, SDR technology is likely to show up initially inmobile – rather than portable – communications systems.“The technology is there [for portable devices], but powerconsumption is a major issue,” says Vanu Bose (the son ofAmar Bose, founder of Bose Corp.). CEO of Vanu Inc., whichrecently demonstrated the first handheld SDR device at abriefing for the Commerce Department’s NationalTelecommunications Information Administration, the FederalCommunications Commission (FCC) and the StateDepartment’s International Communications and InformationPolicy Group. The SDR-based cell phone Vanu used in its demowas based on a Hewlett-Packard iPAQ, and supports the familyradio band, the public safety APCO digital standard andcommercial analog FM radio.Mainly because of the power consumption issue, Bose sayshe doesn’t expect portable SDR-based products to become amass-market item for at least five years. That could change withthe advancement of micro fuel cells or some other advancedbattery development. “That could shorten that timelineradically,” he says.Allan Margulies, chief operating officer of the SDR Forum,the lead SDR trade group, agrees with Bose that it will take atleast five years before software-radios are in wide use. In themeantime, he says the U.S. military is developing a family ofsoftware-programmable tactical radios that will providecommanders in the field with voice, data and video. Anoperational assessment is scheduled for mid-2004, withproduction slated for 2005. A separate program, or “cluster,”also scheduled for 2005 production, will provide the U.S.military with SDR-capable radios with integrated globalpositioning system (GPS) and 802.11 wireless local-areanetwork capabilities.Margulies also says the forum is working with the GenevabasedInternational Telecommunications Union (ITU) topromote the commercial development of SDR globally.Biometrics Spawns Wearable TechnologiesBiometric systems now are breaking into the mainstream,but mostly to meet the demands of heightened securityrequirements. Also an opportunity exists for biometrics inwearable technologies, including highly miniaturizedcomputers and sensors.Timex and GPS specialist Garmin are trying to make a dent inthe field with their new Speed & Distance System, a sport-performancemeasuring wrist instrument, demonstrated last year.5 TECHNOLOGIES TO watchOCTOBER 2003

43More recently, Timex introduced the Bodylink System, anetwork of devices worn on the body that together form aninformation and sport monitoring system, sensing heart-rate,speed, distance traveled and other physical performance data.On other more technically sophisticated fronts, tests are beingconducted to enable people to “see” by implanting microchipsbehind the human ear that can transmit images from a tinyvideo camera to electrodes attached to the optic nerve. Alsobeing tested are electrodes implanted in the brain stemconnected to an antenna behind an ear to help deaf peoplehear. In addition, patients at the Massachusetts GeneralHospital’s Pulmonary Function Testing Laboratory are testinga prototype of a ring that can be worn on a finger that containsa miniature optical sensor and transmitter with a batterynormally used in wristwatches to send data on patientmovements.Another example is a wireless device that can be embeddedinto sunglasses that sounds an alarm when body temperaturereaches a pre-set level. The technology, developed by YaleSchool of Medicine Professor Dr. Marc Abreu, was designedmainly for athletes to prevent heat stroke and dehydration,although it can also be used to monitor the female body fortracking fertility.The device works by sensing a small area of very thin skin nearthe eyes and nose. Dr. Abreu found that this area was connectedto a thermal storage center in the brain.Hong Kong-based Giant Wireless Technology Ltd. expects tointroduce commercial versions of the device, called TempAlert,possibly as early as next year.Infineon Technologies, a Munich-based semiconductorcompany, last year offered several prototypes of microelectronicdevices that can be used in “smart” textiles and clothing.These highly integrated chips and sensors use extremely lowpower consumption and can be sewn or woven directly intotextile fabrics for electronic applications ranging from personalentertainment and communications to health monitoring andpersonal security.One possible application developed by Infineon is a prototypeaudio module for an MP3 player that is production-ready forintegration into clothing. The components, include a microcontroller/sound-processing chip, a removable battery/multimediacard module, an earplug/microphone and a flexiblesensor keypad (in the sleeve of a shirt or coat), and aredesigned so they do not interfere with the comfort of theclothing. All of the components are electrically interconnectedthrough fabric strips that contain embedded connectors. Theaudio chip can directly link to microphones, earplugs, memorycards or strips, keyboards, displays, sensors and actuators. Theentire module measures one inch by one inch by 0.12-inches.Infineon addresses the power consumption issue bydemonstrating a thermogenerator that uses human body heatto generate electrical power for the electronic components.Taking its lead from work already done for space applications,the miniaturized thermogenerator uses the temperaturedifferential between the body surface and the surroundingclothing to generate electrical power. Eventually, Infineonbelieves it can eliminate the need for a battery.Infineon suggests that future applications of the wearabletechnology should include integrating GPS (to locate children,for example), or Bluetooth functionality for short-rangecommunications. Also being considered are integratingentertainment electronics, including games, into clothing.Questions that Infineon’s Emerging Technologies Team still iswrestling with are, how to make the electronic contact padsironing-proof and how to package the chips so they canwithstand repeated washing.Research teams at Georgia Tech are tackling the same issueswith CE applications for what they call electronic textiles ore-textiles. One of their major research thrusts has been toproduce garments that can sense the wearer’s vital signs andcommunicate them to remote sites, such as a doctor’s office.The first prototype was demonstrated in 1996 and the GTWearable Motherboard now is close to commercialization forinfant monitoring (to prevent sudden infant death syndrome)OCTOBER 20035 TECHNOLOGIES TO watch

44and remote vital-sign monitoring for soldiers, policemanand firemen. The garments can sense and transmit, forexample, wounds, blood loss and heart rate, among othercritical vital signs. Similar research projects are underway atCarnegie Mellon.Inner SpaceThere’s a company that may have figured a way around theproblem of how to safely take your eyes off the road whiledriving to punch numbers into your cell phone, or use thekeypad of your PDA or on-board GPS.HoloTouch Inc. has developed interactive holographicactuation and control technology that can create larger-thanlifeimages of keypads, independent of the hardware, thatare projected into the air in front of the driver, withoutobstructing his or her view.To do this, an infrared detector scans the plane of thoseholographic images to detect the intrusion of a finger into thedesired portion of the images, identifies which number orsymbol has been selected, and then transmits that selectionfrom the equipment’s internal software the same way pressinga button on a keypad would.However, power consumption and miniaturization requirements,as well as cost, still are issues that may slow the use ofthis technology in CE devices, possibly for a few years. “I can’tsay you’re going to see it in these products in the next sixmonths or so,” says Douglas McPheters, president ofHoloTouch. “Hopefully, we can get this into cell phones andPDAs in a few years.”McPheters says his talks with cell phone manufacturers havenot been encouraging. “From their perspective, [theHoloTouch technology] shouldn’t use any power, should notadd any weight to their products, and they only want to payabout two cents per unit for it. And they don’t want to have todo any development work on this themselves.”McPheters says he hasn’t written off CE applications by anymeans, but for the time being, he is pursuing the military andmedical fields for HoloTouch.Flexible Displays For Very Portable ViewingSome of the newest and fastest-emerging display technologiesare organic light emitting diode (OLED) displays, and organicthin film transistor (organic-TFT) technology on plasticsubstrates, that offer new opportunities for next-generationflexible display devices such as full-color polymer-based activematrix OLED (AM-OLED) displays.The advantage of these displays is that they give productdesigners a lot more – well, flexibility. Flexible displays, forexample, can be worn around a wrist, or literally be wrappedaround just about any handheld device.Several companies, including Motorola, Lucent Technologies,Sarnoff, DuPont, Xerox and Universal Display, are workingto get this technology into consumers’ hands as quickly aspossible. DuPont Displays says it anticipates flexible displaytechnologies will be available by 2007 for use in cell phones,PDAs, Internet access appliances and other devices. DuPontplans to upgrade its pilot plant in Santa Barbara to produceflexible polymer-based OLED displays by the end of 2004.DuPont, Sarnoff and Lucent’s Bell Labs are collaborating onnext-generation OLED research with funding from theNational Institute of Standards and Technology’s (NIST)Advanced Technology Program. Bell Labs has been subcontractedto develop a new class of organic-TFT materials anddesign processes.Meanwhile, Brighthand, which tracks display and othertechnology developments, says manufacturers will continueto look for ways to improve the performance and reduce thepower consumption of LCDs. There’s also a move towardsuper-high-definition LCDs with improved viewing angles.Also, look for more head-mounted microdisplays, which arelighter, use less power and have better outdoor readability.Other Neat StuffOther technologies, such as micro fuel cells, which can producethree or more times the level of power consumption of currentadvanced battery systems, likely will start showing up within5 TECHNOLOGIES TO watch 2003

AN OPPORTUNITY EXISTS FOR BIOMETRICS INWEARABLE TECHNOLOGIES, INCLUDING HIGHLYMINIATURIZED COMPUTERS AND SENSORS.the next several months, but these will be outboard, plug-insystems. Integrating them into very small, very light handhelddevices such as cell phones and PDAs may still be a few years off.Robots have done great things for NASA, and they have beenhighly touted as toys with a great potential for entertainment.More recently, an organization known as the Shmoo Grouphas developed a “hacker droid,” robot designed to movearound autonomously to detect and report to its owners(such as businesses with wireless local-area networks andgovernment agencies) on security problems of Wi-Fi networks.But it may be some time before the Jetsons version of afriendly robot that can actually clean your house is a reality.Another promising area is three-dimensional (3-D) television.Japan Broadcasting Corp. has developed a system with spatialimaging that holds great promise. But there are indicationsthat there still is a ways to go there, too.See the Future of CEThe 2004 International CES is the perfect venue to see emergingtechnologies firsthand:■■The Emerging Technologies Launchpad at CES showcases thelatest consumer technology applications still under developmentincluding:■■■■■■■NanotechnologiesRoboticsBiometricsVoice recognition devicesDisposable technologyNew audio mediaFlexible computing devicesThe Innovations Awards program recognizes outstandingachievement in product and engineering design.45What’s next? Artificial intelligence and virtual reality still showpromise for consumer electronics. And a number of new andimproved man/machine interfaces, including some interestingbiometric techniques, are in the works. It’s just a matter of time.■■Tech TV’s Best of CES awards recognizes the top technologyadvancements in the industry.Attend the session: CNET Networks Reveals the Next BigThings in CE – Now, Next Year and Beyond. Join CNETEditor-in-Chief Janice Chen and CNET Radio Host BrianCooley as they talk to manufacturers and venture capitalists –and help them pick the products that could become the starsof CES between 2005 and 2010.Several CES conference sessions dedicated to video technologiesinclude:■■■Wireless – The Future is Now!Augmented Reality: All too Real?Tech CoutureOCTOBER 20035 TECHNOLOGIES TO watch


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