April 20, 2011
AT&T purchases video technology company, then shuts down distribution pipeline. Can AT&T bring it all in-house?
Rumors continue to swirl about cable and phone companies entering the very competitive realm of home security – as described in this prior post. Comcast has been testing residential protection “bundled” with other services in Texas, while Verizon is running a product trial in New Jersey. The Verizon service, oddly enough, is not monitored by a 24 hour response center! And now AT&T, which last year bought a next-generation standalone video platform called Xanboo, is reportedly blending the Xanboo technology into AT&T’s own product line.
AT&T, which in 2010 acquired home security and automation provider Xanboo, is now telling Xanboo dealers to stop selling Xanboo products by July 5. In a March 31 letter, AT&T said “AT&T is currently in the process of integrating Xanboo into AT&T's portfolio of services and affiliated companies. At this time, AT&T anticipates modifying or eliminating current Xanboo products and services and winding down its existing processes. The purpose of this letter is to notify you that your agreement shall be terminated effective as of midnight, July 4, 2011.”
What Does This All Mean?
Okay, time for a brief explanation. In the alarm industry, the companies who provide the products and services to end users are called “dealers” (think FrontPoint, or ADT). Dealers don’t make the products or services themselves: technology companies do that, and the dealers work with the end users. FrontPoint is a great example of an alarm services dealer, partnering with GE Security and Alarm.com for the best wireless equipment and interactive monitoring services combination in the industry. ADT uses primarily Honeywell – good, but always a bit behind, and currently losing market to GE.
When AT&T bought Xanboo, the Xanboo services (mostly video: good, but expensive!) were sold through dealers across the US. Now AT&T is shutting the dealers off, and going direct to end users. I wish them luck, since the dealers are always better at selling and supporting these technologies than the phone and cable companies. This blurb from my earlier post speaks volumes about the AT&T strategy – and the challenge these non-alarm companies face.
With the telecommunications market increasingly focused on “bundling” a variety of services together for customers, the Canadian wireless and cable giant Rogers is set to break into the home security services market in the coming months, president and CEO Nadir Mohamed said in a speech on Wednesday. Because bundled customers are less likely to switch providers for lower prices at a competitor, this is another example of communications providers trying to be all things to every household.
Will it Work for AT&T?
Alarm industry participant George De Marco said he was not surprised by AT&T’s decision to abandon its current sales channel strategy for Xanboo. “This strategic shift by AT&T’s management reflects their goal to deal directly with the consumers and by-pass the existing go-to-market strategy for Xanboo. I believe AT&T will be re-vamping and re-branding the product line to deliver the Xanboo service model under an AT&T bundled service offering.” He advised every alarm company to “preempt attrition“ by doing the same thing. “In other words, alarm companies should approach their customer base with the newest technologies before someone else does.”
The key word is attrition – the rate at which your customers are going away. In the alarm industry, the companies who keep their customers the longest always win, since these successful companies spend less time and money replacing customers that go away. Cable and phone companies are working hard to reduce their attrition, and they think bundled services can hold the key – services like home security.
We agree with the strategy of providing the latest technology – it’s actually the foundation of the FrontPoint business model, and is one of many reasons why we have the lowest attrition in the alarm industry. We started with 100% safer cellular monitoring, included advanced interactive features, added in video services, and now even offer home automation for remote control of locks, lights, and thermostats. After you factor in honest sales and advertising, no hidden fees, the best interactive, wireless home alarm technology at the best price, and world-class service – it’s no wonder that FrontPoint is #1 ranked home alarm company in the US. AT&T has a long, long way to go before they can compete with us!