
Updated August 2008
The arrival of Internet-based content and services is propelling the consumer electronics industry into the next phase of its evolution. This is a disruptive change that will rival the impact of the transition from analog to digital technology.
If you consider analog to be the first generation, or 1.0 version, of CE, and the adoption of digital technology the 2.0 generation, we are now evolving into the evolution’s third phase, the era of Consumer Electronics 3.0.
In a nutshell, Consumer Electronics 3.0 is characterized by the growing availability of new broadcast and Internet-based broadband content, delivered to a multifunction set top box in the living room, which is in turn connected to the TV and other connected devices in the digital home.
It is probably a great understatement to say that the ability to access a spectrum of Internet-based content and services is about to provide consumers with more choices than they have ever imagined before.
Anything in the way of premium, special interest and niche content may ultimately be made available, everything from IPTV feeds and on-demand movies to documentaries, how-to videos, news programs and sports highlights from anywhere in the world.
The ability to access this content from a variety of wired and wirelessly connected CE devices, in addition to the PCs and handheld devices we use today, will give consumers a new dimension of control over when and where they consume their favorite digital fare.
The mashup of the Internet and the world of consumer electronics will not be without its challenges, as content producers and network operators cope with increasing audience fragmentation. Intel believes that the Consumer Electronics 3.0 era will also provide important new business opportunities for CE product manufacturers, content producers, service providers and application developers.
The big question is: what new services and usage models will consumers want enough to pay for?
Here are some survey findings:
One thing seems certain. As IP services, applications and usage models evolve, service providers will need to deploy new services on a continuous basis. Cost-effective multifunction client devices with the headroom to handle new applications and services will play an important role in this dynamic, service-driven environment.
The arrival of IP-based content and services in the living room is ultimately about consumer choice: providing consumers with the content and services they want, in the formats of their choice, on their favorite devices, at the time and place they choose.
This transformation also promises to provide consumers with a continuum of control over their media experiences, enabled by the performance of new generations of connected CE products.
Many of these changes will not be easy to implement, and they will not happen overnight, but their power to disrupt traditional business models should not be underestimated. Intel is now actively engaged with the consumer electronics industry to help all members of the value chain prepare for the Consumer Electronics 3.0 evolution.

Figure 1 - The Internet is the key disruptor that will drive evolution of Consumer
Electronics 3.0. Key elements include the convergence of content from many sources
delivered to the home over Internet protocol (IP) networks and enjoyed by consumers
on a variety of wired and wirelessly connected CE devices.
The availability of new content choices and IP services has the potential to stimulate a new competitive approach focused on helping consumers experience the new content, services and experiences they want.
Here are some of the changes Intel expects:
We are about to witness the evolution of new usage models made possible by the convergence of broadband and IP services with traditional broadcast content. When the set top box in the living room connects with the Internet, consumers will find themselves in a new world. In addition to passively ‘watching TV’ in the traditional mode, they can explore a fascinating array of premium and specialty programming options delivered by a service provider.
Since IP broadband lets data flow in both directions, consumers can choose from a rich variety of interactive services like playing online multiplayer games, complementing their sports viewing with IM chat, and using the combined capabilities of the set top box and TV to interact with e-learning, e-commerce and e-banking applications.
Viewers can complement broadcast programming by using Internet widgets especially designed for viewing on their TVs. Widgets will enable a theoretically limitless range of new Internet services. Viewers will be able to exchange instant messages and keep track of their fantasy league statistics while games are in progress in real time. Educators and parents will complement nature programs with e-learning resources. Grandparents will meet online to share family photos or play online games. Teens will shop for clothes and music liked to their favorite shows, and everyone in the family can receive updates on topics of personal interest.
IP-based content and services may hold important new opportunities for monetization, but the most important question is: what new services will consumers actually use – and pay for? Intel believes detailed, quantifiable research into consumer values and usage models represent an essential first step toward identifying consumer preferences in specific cultures and geographic regions.
The vision is exciting: the living room of the digital home will provide a new environment for the mass market consumption of software-based services and applications, ranging from online games and video phone communications to e-learning. But to move this vision closer to reality, we need to make these applications and services easy to develop and deploy – and easy for people to use.
The emerging digital home is projected to be a networked environment, filled with a spectrum of connected devices, from digital TVs and set top boxes to home media servers, digital media adapters and handheld devices.
Here are just a few of the requirements:
Intel is involved in all of these areas.
Consumer Electronics 3.0 has great potential for OEMs, service providers and content producers. While much more exploration will be needed, here are some ideas:
OEMs are beginning to reduce device commoditization by providing compelling new device features and capabilities. Combining integrated functionality with bundled value added services, such as e-learning, e-commerce or home control is one way to achieve differentiation in a competitive market segment.
Another strategy is providing exclusive access to content through Web portals. OEMs can also differentiate their products by helping consumers aggregate their preferences with advanced search and browse technology and by helping users manage their digital media libraries with storage and data management applications.
Service providers need to sell more premium content and services for higher ARPU while building subscriber loyalty. As new IP services emerge in the living room, consumers will integrate them into new usage models, such as combining a video phone application with an online game application to create a social network. This trend may encourage consumers to engage with more services and content, more often, and for longer periods.
Consumer Electronics 3.0 may also encourage consumer loyalty through personalization services and the sharing of licensed content with mobile devices to create so-called ‘Sync-and-Go’ usage models. Service providers have yet another monetization opportunity in the form of targeted advertising based on expressed consumer preferences and personalization, essential to helping advertisers overcome the effects of audience fragmentation.
Content producers want to maximize content delivery and drive increased consumption. The Consumer Electronics 3.0 environment will help content owners extend their brand reach to consumers on three-screens: TV, PC and handheld. As content owners establish rights for broadband distribution of TV programs, movies, music and games, they have new opportunities to create entertainment bundles delivered directly to their customers or made available through Internet portals.
This trend provides content owners with opportunities to expand their catalog and experiment with Web-based direct-to-consumer distribution models, while exploring new opportunities for co-marketing with OEMs and service providers.
Industry standards are one of the keys to quality of experience, helping to ensure that connected consumer electronics devices interoperate, delivering the platform capabilities needed to support a new generation of consumer usage models. In addition to accelerating time-to-market for OEMs, standards will help enable the differentiated features, functions and capabilities needed to give CE products a competitive edge.
Implementing this vision will require industry standards in a broad range of categories, and Intel is involved in each of these areas:
| Access to the Digital Home | Digital video terrestrial broadcast standards; CableLabs Open Cable*; DSL |
| Access to Content | Media codecs; HD-DVD and other media standards; emerging standards for IPTV |
| Network Connectivity | IEEE 802.1AV, 802.3 and 802.11; HomePlug AV (HPAV)* (powerline); HomePNA 3.0*(phone and coax); MoCA* (coax); WiMAX* (802.16); WirelessHD |
| Device Connectivity | HDMI, DVI , Bluetooth |
| Interoperability | Digital Living Network Alliance (DLNA); UPnP* Forum |
| Platform Support | CE Linux; Windows Embedded CE*; Windows XP Embedded* |
The digital home presents the consumer electronics industry with a new competitive opportunity. While it develops better and faster applications, the industry must also make it easy for consumers to navigate through tens of thousands of potential choices to access and manage the new content and services they want. One of the most important tools to accomplish this is a new generation user interface (UI) designed specifically for the 10-foot, big-screen TV viewing environment.
Intel’s Digital Home Innovations Team is at the forefront of advanced consumer electronics UI research and development. Intel is working with leading university researchers and visionary interface designers to advance UI technology to provide consumers with a new dimension of control. The effort points the way to future interfaces that will help consumers harness the performance of future consumer electronics platforms.
In addition to ongoing research in the areas of consumer usage models, advanced interface design and standards, Intel is leading the development of technologies and products designed to meet the challenge.
The Internet is about to arrive in the living room, providing millions of consumers with access to new content and services delivered on a variety of connected devices. The proliferation of new content and services is a disruptive trend that will create new revenue opportunities for the CE value chain. By bringing the evolution into clear focus, and enabling solutions, Intel is working to help the industry meet the challenge of this disruptive technology.
In addition to conducting worldwide user experience research, leadership in standards, and advanced user interface development, Intel’s Consumer Electronics Group is developing the media processors, platform technologies and ecosystem needed to create new generations of set top boxes and other connected CE devices.