Soon Bill Gates and Paul Allen won't be the only ones on the block to have elaborate home computer networks connecting every room in their homes to the Internet and to their digitized music and movie collections.
On display at the Consumer Electronics Show starting tomorrow in Las Vegas will be simpler, more affordable devices for the masses that do nearly as much as the racks of network equipment the software billionaires built into their Eastside mansions in the late 1990s.
These boxes - called home gateways or media centers - are expected to be highlights at the annual showcase of the latest consumer technology.
They'll share the spotlight with skinny televisions, DVD recorders and thousands of other new products appearing at what's billed as the nation's largest technology trade show.
This year's show will also be a proving ground for consumer electronics companies and technology companies competing to see who can build the devices that will control and deliver home entertainment in the coming decade.
Those companies are also fighting for bigger shares of the $81 billion consumer-electronics market now that the market for PCs has softened.
On the show's opening day tomorrow, Gates is expected to announce that Microsoft and Samsung are developing a "media center" based on its Windows operating system. On the same day, former Microsoft executive Steve Perlman is expected to launch a home-entertainment platform he developed with support from Allen and AOL Time Warner.
Analysts say the new boxes show that the convergence of computers, home electronics and entertainment is finally happening, but it may still take a few years before they are widely accepted.
"If you look out six or seven years, this is going to end up being more popular than PCs," said Josh Bernoff, an analyst with Forrester Research in Cambridge, Mass.
"The number of people who want a PC and don't have one yet is pretty small," he said. "On the other hand, over 99 percent of the population has a TV set, around 70 percent has cable and well over 80 percent has either satellite or cable. All of those people who are paying for TV service are certainly in a market for a product of this kind."
But it remains to be seen who will build the box that everyone wants, whether it's based on a PC or something else, and whether it runs on software from Microsoft or one of its competitors.
"The question is what operating system will it be," said Al Gillen, systems-research manager for IDC, a consulting company in Framingham, Mass. "If you ask Microsoft, the answer is, it will be a Microsoft product."
Microsoft created its "eHome" division last year to develop networking products based on Windows, including products that extend the usefulness of PCs running the new Windows XP operating system.
The division is headed by employees who had built elaborate networks at their homes in Seattle and Issaquah and engineers who helped install the network at Gates' waterfront mansion in Medina.
"Tens of millions of people buy PCs and, as a result, the PC is one of the most popular, accepted consumer-electronics devices in the home today," said Kevin Eagan, a general manager in the division. "We realize it's one of the most powerful and one of the most difficult devices for people to tame. Its potential is just beginning to be tapped."
Out of personal experience
Eagan is building his second home network at a new house he purchased on Bainbridge Island. He moved from an older house on Capitol Hill where he spent hundreds of hours and thousands of dollars building a network from scratch. When he moved out, the house had a dozen computers, a rack of equipment in the basement, digital cameras linked to its security system and a touch pad that controlled it from the kitchen.
"In order to solve the hard problems for people, you have to experience the pain of going through trying to solve that problem the hard way," he said.
EHome's first products are on a schedule to be available for the 2002 holiday season, but Eagan and others declined to say just what Gates will announce tomorrow.
Clues lie in Microsoft's job listings, however. The company is seeking engineers to develop products related to audio-video entertainment, home networking and home automation. They would develop software that enables consumers to connect their televisions, computers, portable devices and touch-sensitive screens around the home, all of which will be linked by a "powerful, centralized consumer-grade appliance."
A Samsung representative confirmed that Samsung and Microsoft will announce at the show that they are developing a "media center" based on Microsoft technology.
After WebTV
Perlman, who is developing his product at a company in Silicon Valley code-named Rearden Steel, was also inspired by personal experience setting up a home network. He worked at Microsoft for two years after the company paid $425 million for WebTV, a product he developed that enables people to surf the Internet using their television.
After he quit Microsoft in 1999, Perlman began tinkering at his Lake Tahoe home. He built a network linking his satellite receivers, cable tuner and CD, video and DVD players. It became a sort of centralized jukebox accessible through touch screens in every room. It also has a flat plasma screen television that folds down from the ceiling like a prop in a James Bond movie. "It's supposed to be a mountain home and I didn't want the technology too obtrusive," he said.
As he put the system together, Perlman compared notes with Allen, a Rearden Steel investor who had installed a similar system at his Mercer Island house.
"I had this capability a few years ago. It basically cost about $1 million to install it," Perlman said. "But I realized that this is fantastic, this is what everybody wants. You don't want a stack of boxes and remote controls in a central room."
Taking on Microsoft
Perlman refused to disclose details of his new product until a press conference tomorrow afternoon. But last week CNET, an online news service, reported that Rearden Steel is producing software that could make television control boxes into devices that record and store digital media.
That means Perlman could be competing with Microsoft, which not only is positioning Windows-based PCs as entertainment centers, but also produces software for advanced set-top cable boxes. Microsoft also operates Ultimate TV, a satellite-TV service that evolved from WebTV and runs on a set-top box that records and stores shows in a digital format.
Perlman's largest backer is Microsoft archrival AOL Time Warner, and another backer is EchoStar, a Littleton, Colo.-based satellite-television company trying to create the nation's largest pay-television service by acquiring the DirecTV satellite service for $26 billion.
Perlman and Microsoft won't be the only ones introducing home-media centers at the Consumer Electronics Show. Santa Clara, Calif.-based SONICblue is coming to Las Vegas with a $1,499 device that records and plays CDs, downloads digital media from the Internet and stores up to 650 CDs worth of music and distributes the music throughout the home over telephone wires.
Steve Baker, an analyst with NPD Intelect in Reston, Va., said the new products are exciting but it's too early to say which will dominate. "As the traditional information-technology world and consumer electronics worlds collide, you've got big companies and everybody wants a piece of the mass market," he said.