A Significant New Market for the Information Age

Presented at Wire & Cable Focus 2000, Providence, R.I., September 20, 2000

I'm here today to talk about what may prove to be the hottest, fastest-growing market for the entire electrical industry for the next five to ten years - structured communications wiring ¹ for the residence. It's already recognized as a dynamic, growing market in new homes, perhaps rising above 10% of the market for the first time this year. But I want to concentrate mainly on what isn't widely recognized: that it's not just a new-homes market, that you can actually string wire - a lot of wire - in existing residences. I'll also say a word about that old standby, building wire, and why its use should be stepped up as well.

Certainly, retrofit is an important factor in the commercial wiring market for local area networks (LANs), where offices get changed around and rewired every few years. Often, these moves, adds and changes are an excuse to upgrade the wiring from Category 3 some years ago, to Category 5 more recently, now to Category 5e, and to what will soon emerge as Category 6 when the standards get approved. Since the market is always ahead of the standards, cables that will meet or exceed Cat 6 standards are already being widely marketed and installed.

But in homes, no one wants the walls torn up and gaping holes here and there, needing to be patched. I've even heard people in the wire and cable business say that retrofitting is too difficult and too expensive - even impossible. I'm here to try to convince you that it's quite doable, that many people today are making good money retrofitting houses and, most importantly, if you're in the business of making Category-type products, you ignore the residential retrofit market at your own risk.

Market Size

Let's do some back-of-the-envelope estimates on how big this market for residential structured wiring might be. As you know, there are two markets, new and retrofit.

New Homes

The new-homes market is relatively well defined and understood. A million and a half homes, give or take a couple of hundred thousand, are built in the USA each year. Of those, roughly 300-400 thousand are multifamily units. These new residences are the "low-hanging fruit" for the structured wiring business. They're easy to wire properly because the walls are open, and running Cat 5 unshielded twisted pair and RG-6 coaxial cable is quite easy for a trained installer.

What percentage of these new homes are candidates for structured wiring, now and in the foreseeable future? The answer is that it's substantial and growing fast. One of the best-known sources of forecasts for residential technology is Parks Associates of Dallas. Parks says that, this year, 2000, about 12% of new homes are being wired for the future (Figure 1).

Even more important, by the year 2004, Parks' mid-line forecast is for 42% of new homes to be wired properly. Right now we're in the early-adopter phase, but competitive pressures on builders, driven primarily by consumer demand, should bring good wiring into the mainstream very shortly, and builders of the near future will have some explaining to do if they choose not to include it in all their offerings.

Existing Homes

For the retrofit market, the numbers get a bit hazier. Roughly 106 million homes and apartments are out there today. With 1.5 million new homes added each year, and only a few taken out of commission due to fire, demolition, etc., the housing stock has steadily risen from 43 million in 1950. This is all to make the point that the retrofit potential will always be increasing, year after year.

How many homes will be retrofitted with structured wiring, say in the year 2004, when 42% of 1.5 million, or about 600,000 new homes, will be wired? Well, in order to match that new-homes market, only about 0.6% of the existing homes out there would have to be wired in that year - not a particularly large number considering the clamor that will come from the new-homes side to get connected for the future.

Copper Use

For the purpose of putting a copper wire and cable number on the potential market, we can start with Category 5. Each 24 gage wire has 1.22 pounds per 1,000 feet. There are eight such wires in a cable, totaling 9.76 pounds. Add the twist and you're right at about 10 pounds of copper per 1,000 feet of cable. A reel of 1,000 feet is a good average number to do a typical house, with star wiring from a central distribution device to each major room. In fact, it is recommended that two runs go to each location, since wire is cheap.

Similarly for RG-6 coaxial cable, the key point for copper is whether the center conductor is solid copper or copper-clad steel. There is a definite trend toward solid copper, with two major suppliers switching within the past year. Copper-clad has the advantage of somewhat greater stiffness to withstand repeated insertion forces, while solid copper has the advantage of being able to carry a low-frequency current to power a remote-control device, such as a camera in the baby's room. Since a cable installed for TV distribution (and for which copper-clad should work fine) might later need to be switched to another use requiring power, it's arguably better to use solid copper. An 18-gage solid-copper-center-conductor wire contains 4.92 pounds per 1,000 feet. If each run has an upstream and a downstream coax, and one Cat 5, which is fairly common, about 2,000 feet of coax might be used per house, or about another 10 pounds of copper, making a total of 20 pounds per house. If a second Cat 5 is run to each location, as is recommended, the total becomes about 30 pounds per dwelling.

So compare 20-30 pounds of copper in a properly wired house to a couple of pounds of station wire (also referred to as quad wire) in a typical underwired house with only basic telephone service, and that's an add-on of 20 pounds per house or more. If we multiply this 20 pounds of additional copper per house times a conservative 1 million houses properly wired in a near-future year, that's a minimum of 20 million annual pounds of copper that doesn't exist today. And that's not all. In a few minutes I'll discuss an opportunity for building wire that could account for even more new copper wire.

Some manufacturers have bundled their Cat 5 and RG-6 cables into a larger cable with a plastic sheath, for the convenience of the installer. One common configuration is two Cat 5 and two RG-6 cables; another adds a couple of fibers to the bundle. Such an approach has obvious advantages if all these wires are to be run to the same outlet, but not if computer, phone and TV outlets are in different places.

FCC Ruling. And by the way, not only is it a good idea to wire homes with Category-type wire; it's also the law! As of 180 days after the January 10 publication of a new ruling by the FCC - specifically July 8, 2000 - all copper telephone wire installed, new or retrofit, residential or non-residential - must be Category-type cable. ² Page 17 of the 22-page ruling reads in part as follows:

"For new installations and modifications to existing installations, copper conductors shall be, at a minimum, solid, 24 gauge or larger, twisted pairs that comply with the electrical specifications for Category 3, as defined in the ANSI EIA/TIA Building Wiring Standards."

This provision was suggested to the FCC by a BICSI committee in 1995. Since then Cat 5 has largely supplanted Cat 3, with six times the information-carrying capacity at almost the same cost. The ruling is not yet well-known by builders or even installers of communications wire, so anything those producing Category-type cable can do to get the word out would be a useful service.

Market Promotion

The Parks Associates numbers look optimistic, and they're based largely on continuously increasing demand for the wired house. That seems reasonable today, with those early adopters jumping on the bandwagon, as they do on every new technological bandwagon. We hear daily about the success of DSL and cable modem ³ services, albeit with a lot of side noise about the problems users have had because of the lack of trained, knowledgeable installers.

But builders don't jump on many bandwagons. They prefer the tried and true. They're not about to install something costing them $500-$2,000 or so without incontrovertible proof that their buyers want it. Where does that proof come from? The buyers themselves. The builder will do nothing unless he perceives that his buyers are demanding a new product, particularly a product the builder himself doesn't understand too well.

CDA Promotional Activities

So that is why CDA has a major program to influence consumers, to influence builders and other professionals, and to help in the training of installers, in order to help move this market along. Every single player in the building business needs to be educated on the advantages of structured wiring in the home. Our CD-ROM product, to be issued later this year, will have tracks for nine separate audiences:

• Homeowners and homebuyers,
  
• Builders of single-family homes,
  
• Builders, developers and landlords in the multifamily market,
  
• Remodelers,
  
• Residential designers and architects,
  
• Realtors,
  
• Distributors of structured wiring products,
  
• Bankers and other members of the financial community and, last but not least,
  
• Installers

For each of these diverse audiences, our CD-ROM will have testimonials from others in their category, as well as material on why structured wiring is important.

The Retrofit Market. We've singled out two of the above audiences in particular for heavy promotion in our program. One is the remodeling community, since it's receiving so little attention today, and structured wiring is not yet on the radar screens of many remodeling companies. In fact, we'll be at the remodelers' show in Detroit next month.

The "no new wires" people would have you believe that structured wiring is for new homes only. We're telling remodelers that they should add this to their portfolios. People who are remodeling their homes are in a spending mode, and a couple of thousand dollars more is often not a big add-on to what they're already spending. (Contrast this to the builder, to whom an extra $50 is a major decision - unless he's sure he'll get it back with a hefty profit attached.)

The other audience we're targeting is the installer. We've already produced a new-homes video, working with The Training Department, on wiring basics and installation techniques. Our latest video, due out shortly, is entitled "Infrastructure Wiring for Existing Homes." This is the first piece I'm aware of that begins to address this lack of available information on installation tools and techniques.

Of course, all this promotion and education is for naught if the consumer doesn't want the product. It's difficult and expensive to reach consumers. We're distributing a quarterly news mat called Home Planning, which is made up of several consumer-oriented stories in each issue. The mat goes to 6,000 daily and weekly newspapers, and our first issue has gotten tremendous pickup around the country. Our second issue was just mailed. We're working with a production company to produce a video - an infomercial if you will - on structured wiring for the home. It's part of a new series to air next year called "American Home."

Wiring Americas' Homes

We're in partnership with an organization known as Wiring Americas' Homes. (Excuse the ungrammatical placement of the apostrophe. The name was picked with the idea that the important Canadian market shouldn't be left out.) WAH is, in turn, sponsored in part by the Home Automation and Networking Association, with most funding coming from manufacturers of wire and cable, termination products and other home systems, as well as miscellaneous organizations such as CDA. At present, I serve as the marketing chair of WAH, and we see it as a strong generic program to promote to consumers.

Wiring Americas' Homes is kicking off its Phase II campaign, with funding of $250,000 for the next year being solicited from present and potential sponsors, to communicate across the continent why every home should be wired for the future. Its tag line is "Get Connected for Living."

The "no new wires" technologies are rapidly developing. Briefly, the first consists of electronics to use the present phone wires - station or quad wires - to the maximum. This technology is known as HomePNA, the initials standing for phoneline networking alliance. The second technology is Power Line Carrier, where signals are piggybacked on existing building wire in the house. This has been around for some time, with trade names such as X-10 attached to it. The last, and potentially most serious, "no new wires" technology is wireless, using radio frequency signals. The consortium developing and promoting this is known as HomeRF. However, none of these alternatives comes close to carrying the 100 megahertz bandwidth of ordinary, run-of-the-mill Cat 5 cable, and the world needs to be told this.

If your company would like to jump on the Wiring Americas' Homes bandwagon, and be a part of this promotion of a structured-wiring solution to delivering broadband to the home, I'll be glad to see that you get the relevant information.

What About Building Wire?

And while we're at it, CDA and its members who manufacture building wire feel there may be a parallel opportunity to replace AWG 14 wire with AWG 12 in residences, with an attendant increase in copper use of about 60% for each foot that's replaced. How can such an increase be justified?

It's easy to overlook just how rapidly our nation has embraced electricity as its main power source in the home. This chart, from U.S. Department of Energy (DOE) data, shows the phenomenal growth of electricity consumption in the residential sector from the 1950s through the 1990s (Figure 2).

Note that the x-axis is zero in this chart. In the 50s we consumed only 113 billion kWh in an average year, while in the 90s, our consumption of residential electricity was nearly nine times as much: 1,005 billion kWh. On an index basis (white bars), that's an increase from 100 to 889 for that 40-year period. Does anyone believe this trend is likely to reverse, or even slow down?

One can argue that this seeming increase is deceptive, since it doesn't take into account the growth in the number of homes in existence over this period of time. When we make that correction and show the consumption of electricity per home from the 50s to the 90s, also on an index basis with the 1950s equal to 100, we have the black bars in Figure 2.

It's still a spectacular increase, with each home and apartment consuming more than four times as much electricity in the 90s as in the 50s. Back in the 50s, most residential wiring was old-style nonmetallic cable, and AWG 14 was standard for branch circuits. But kids in the 50s didn't have neighborhood-shaking sound systems, televisions and computers with all the peripherals in their bedrooms, nor did they have hair dryers and curling irons turned on at the same time.

One can argue that home wiring hasn't kept pace with demand. Certainly the average home doesn't contain four times as much current-carrying capacity as the typical home of the 50s.

One case that can be made is that every room in the typical home should be able to carry a heavy electrical load if needed. For the kitchen and bathrooms this is a given, and they are required by the NEC to have 20-amp circuits, requiring AWG 12 wiring. But home offices, dining rooms, living rooms and yes, bedrooms, all should be supplied with adequate capacity, both in terms of numbers of circuits, numbers and locations of outlets, and size of the wire supplying these outlets. We think AWG 12 should become a standard, even if the more lightly loaded circuits are initially protected by 15 amp breakers. It's all a matter of looking out a few decades and imagining the electrical gizmos of some future time. Historically, we've built our houses to last many decades, but we haven't wired them that way.

CDA has a number of proposals before the 2002 NEC to require minimum AWG 12 wire in residences. On the first round these proposals were rejected, since there was no proof submitted that AWG 14 is in any way a safety hazard.

We'll keep trying, including doing some original research, but we realize that making such a change mandatory is a long, slow process. Let me just conclude this section by saying we're in it for the long haul.

Conclusions

We at CDA see both these areas - structured communications wiring and increased building wiring in residences - as dynamic future opportunities for copper wire and cable. The new-homes market for communications wiring is growing, but selective promotion and education of at least nine different audiences will help to move it along faster. What is needed at present is to tell the story about the wiring of existing homes, to debunk the myths that have arisen that one can't pull new wires in an old house. CDA and its partner organization, Wiring Americas' Homes, hope to tell this story effectively. The communications wiring story needs to be combined with a parallel story on why we need to take a great leap forward in our power wiring of residences. The home will last 100 years or so, but we always seem to be behind the curve in wiring it for whatever present demand we see out there at any given time. Perhaps, the wire and cable industry should, as a group, tell a convincing story why such measures as substituting AWG 12 for AWG 14 is in everyone's interest in the long run.

Useful Resources