Only 18 months ago Australians were being told they would soon have free Internet terminals in their homes linking directly to their local grocery store or stockbroker. IBM and others were rolling out flat screen, bare-bones devices they hoped big companies would sponsor - intending to lock in the expected business-to-consumer boom created through these appliances.
It never happened. The dot-com crash, consumer and corporate wariness and cultural factors combined to virtually kill that market before it was created.
However, these terminals are only one example of an "Internet appliance", a term that covers a wide range of products from the much discussed but little-used Internet fridge to set top boxes, smart phones, wireless PDAs and even new-generation video game consoles.
Internet appliances are sometimes defined as any non-PC device that can be connected to the Internet - and that may be where the problem lies for the Australian market.
Where's the need?
According to US-based Strategy Analytics, more than 35 million European households as well as 17 million American households own an Internet appliance, while the number for the whole of Asia Pacific is negligible. IDC estimates that the Asia Pacific market last year amounted to less than 100,000 units, although it predicts the market will grow at a compound annual rate of 83 per cent to reach 18.9 million units by 2005, which compares more than favourably with an estimated 17 million PCs in the same time frame.
While IDC predicts that developed countries such as Australia, Hong Kong, Korea and Singapore (which already have high home PC penetration) will seek new Internet-enabled products to be used as an adjunct to the PC, some local industry people are not so sure.
New technologies manager for Philips Sound & Vision, Ciril Kosorok, says Australia has one of the highest PC household populations in the world where all PCs sold since the introduction of Windows 95 in August 1995 have included a fax modem for Internet access. He says that plus the fact low-cost Internet cafés are available throughout Australia, including those in airports, hotels and youth hostels, has negated the need for Internet appliances here.
"InternetTV set top boxes that are non-ISC-specific have been available at the likes of Harvey Norman and Strathfield Car Radio for a number of years, with little consumer interest. I also suspect the European numbers for appliances most likely include notebooks," says Kosorok.
Philips, like Samsung and other electronics giants that market a range of Web appliances in Europe, has been reluctant to release them in Australia. However, it will test the water soon with an Internet radio that uses a broadband connection to access more than 1,000 stations worldwide.
The networked home
Korean company LG Electronics is more confident. It has unveiled a range of Internet appliances it sees as becoming the core of the "networked home" of the future - and Australia will be one of its first markets.
LG Electronics Australia's managing director, Christopher Kim, says the digital TV will become the hub and server for a network consisting of a range of seamlessly interconnected Internet-enabled whitegoods.
"A networked home is one where all electronic appliances are linked to a single system, to support two-way communications," he says. "This means that the status of all Internet-enabled devices can be checked remotely, and suitable instructions relayed. For example, a commuter can start cooking dinner, or turn on the heating, with a simple mobile phone call from the train, bus or car. The convergence, or fusion', of technologies will mean that there will be no clear-cut line between traditional white goods and IT products."
On May 30 the company unveiled an Internet-enabled washing machine and refrigerator to go with its Internet microwave and air conditioner announced a month earlier. Stephen Reid, LG Australia's marketing and planning manager says the products could be available locally as early as next year.
IDC says the term "Internet appliance" (or information appliance) also refers to smart handheld devices (SHDs), Internet gaming consoles, e-mail/Web terminals and iTV, and predicts that Internet SHDs and Internet gaming consoles will take an early lead.
But once again, the major industry players in Australia are wary. Sega's Dreamcast was the first Internet-enabled games console on the local market but it sold poorly and its Internet features were rarely used.
While in May Sony Computer Entertainment (SCE) America announced it would launch a broadband Internet strategy for its PlayStation 2 console in November, a similar launch by its Australian counterpart has been put on hold indefinitely. To connect to the Net PS2, owners will have to buy a network kit and hard drive and SCE Australia is not yet convinced that there is a market for it here. SCE Australia CEO Michael Ephraim says that although SCE had been in talks with Telstra about providing a broadband service for PS2 for sometime, the company was yet to be convinced there was a big enough market.
Corporate and government requirements
While the consumer market is not yet receptive to Internet appliances, it is a different story in the corporate and government markets where there is growing demand for smart handheld devices that can connect to the Net.
Freedom Technologies CEO Ashley Bloch is convinced there is an existing and rapidly growing market for handheld Internet appliances. Freedom specialises in providing corporate solutions using Symbol and Palm devices, and Bloch says the company is forecasting an enormous increase in IT spending on mobile handheld applications and devices - all for the traditional business reasons of efficiency and cost saving.
"The new mobile data networks, the hardware and the applications are all moving in the right direction to make it easier to access information either through the Internet or through corporate networks," he says, and handhelds are often more efficient and cost-effective than notebooks, particularly for people in the field.
Hewlett-Packard's Peter Leihn and Ericsson's marketing manager of wireless Internet applications, Andrew McLorinan, agree with Bloch. Leihn, who is HP's market development manager for emerging categories, is working on several corporate deals for the company's Jornada handheld range, but he says the consumer market is yet to take off.
HP is looking at a variety of applications to allow its Jornadas to access the Net wirelessly, including linking them by Bluetooth to an Ericsson phone, which in turn would be linked to the new higher speed GPRS (general packet radio service) network.
"Admittedly Bluetooth is not the cheap solution yet that everybody expected, but I believe there are a number of different industries that can justify the investment today," says Leihn. "There is application for it in the finance and banking sector and there is certainly use for it and GPRS-enabled devices in field force automation.
"For $2,500 you can have a handheld device that can sit in a hot car in the sun all day if necessary [because it is more resilient than a notebook] and still be able to download data as required. Some organisations are finding they can justify that expense because it is more practical and versatile."
McLorinan is confident there will be a wave of new devices being connected to the mobile Internet. He says people renew their phones every 18 months, and as they do they will gain access to packet networks and a more efficient mobile Internet.
He says cultural differences play a role in the marketplace. In Japan, where handheld Internet appliances have boomed, there is less space in the home for a PC and people spend more time on public transport, providing them with the opportunity to use handheld devices. "Australia's market will not be the same as other places," he says, "but there are still some pretty powerful reasons why people here are going to have mobile Internet in their pockets."