ADT Security Eyes Competition- But is ADT Just Another Utility?

ADT Security Eyes Competition- But is ADT Just Another Utility?

I’ve been reviewing recent comments made by Ed Breen, CEO of Tyco International. Tyco, as you may remember, is the parent of alarm system behemoth ADT Security Services, one of FrontPoint’s favorite competitors. It happens that Breen was speaking on a few of the same topics I’ve written on recently – such the impact of several new entrants to the home security market. While the companies are not mentioned in the article, we know who they are: Verizon, AT&T, Rogers, Comcast, and others.

Breen had some interesting comments on the telco incursion into the space. He is not worried. In fact, he thinks it will result in more advertising, which will "lift all boats" and if anyone suffers it will be the smaller companies rather than a giant like ADT. When Brink's Home Security changed its name to Broadview and hit the airwaves with its new commercials, ADT picked up business, he said. He predicts the same effect from other telcos and cable companies entering the business.

We’re in Good Company

It’s not every day that Mr. Breen and I are on the same page, but it happens – and this is a great example. My recent post did question whether these new players can deliver, but I agree that their large advertising budgets will benefit the established alarm companies who have demonstrated expertise with the next-generation goods and services that are increasingly in demand.

While, he said, it won't happen immediately, "I think if a couple of these cable guys or phone guys offer more security than they are now, I think over time it's at the expense of the smaller, local players - and the big, branded players will do very, very well in that environment. You have to remember that only 19-20% of the homes in North America are penetrated with security.

Interactive Services Hold the Key

My belief, and again this is over multiple years, is that this will be about a 40% penetrated service - and I do think interactivity helps that percentage get there eventually, because more people are going to be attracted to the service because of the opportunity to do more things.

He’s right again. The “more things” Breen refers to are the features that FrontPoint has mastered, in some cases for years, and we're way ahead of traditional players like ADT. It’s true that ADT has finally made a push into current technology with the “Pulse” platform, but Pulse is not yet fully rolled out, and has some inherent flaws. If you are shopping, make sure you do your homework: with the best home alarm systems, you can feel good about the following capabilities:

• Turn your alarm system on or off
• Be protected from “Crash and Smash” burglars
• Receive text or email notifications of anything happening at your home, even if your alarm system is not armed
• Display the history of events from your home system (doors opening and closing, motion sensors activated, and more)
• Control Z-Wave enabled lights, locks, and thermostats
• Control your Z-Wave enabled thermostat
• View your home remotely through security cameras, and receive motion-activated video clips

The Big Get Bigger

Breen does know the alarm market statistics. There are 13,000 alarm companies in the US, and the top 100 companies control only half the homes: this is a remarkably “fragmented” sector of the economy. The real question will be whether ADT can maintain its large share as the market grows – and the jury is still out on that question.

We have 25% North America market share with thousands of others having the other 75%. I've always been a believer this industry will consolidate. If it consolidates around a few players, I think we do very, very well in that environment. Between our dealers and our direct sales team, we have almost 9,000 sales people in North America. It’s not like cable, it's not like getting a phone service, where it's an automatic "you're going to get it." That's a utility. With alarm systems, you have to go in and market. So there's a lot of nuances here, and I think we do very well in that environment."

Here’s the rub: at FrontPoint we look at ADT more like a utility than a nimble, forward-thinking provider of the latest home alarm technologies. We have real concerns about ADT’s commitment to staying current with new products and services as they are developed – or ADT’s ability to deliver next generation peace of mind and functionality in a transparent manner, with consistent quality. That’s one reason we are so focused on customer reviews (ours and theirs!), since on-line reviews reveal a tremendous amount a company’s products, pricing, and service levels. Bigger is not always better- and FrontPoint is still the #1 rated alarm company in the US.