January 13, 2014
Cable & Phone Companies Stumble into Home Security
Some of them have been here before. By “them,” I mean cable and telephone companies. And by “here,” I am referring to the electronic security industry – and home alarm systems in particular. When these erstwhile competitors dabbled in home security before it did not go well, and they all left this space for greener pastures: but now they are back, with a vengeance, and this time have brought huge advertising budgets.
As I’ve written before, those of us who have already been providing peace of mind for years (or even decades!) call these interlopers the “new entrants.” And that’s because they are just that: companies who forgot what they learned before, and who until recently didn’t know a door contact from a dead bolt: they have now decided to add home security and home automation to their “bundled” product offerings. A recent article looks at the new entrants from an interesting perspective – and it worth the read.
Cable and telecommunication providers have primarily battled one another over price. "The current form of competition in this entire sector is essentially focused on promotional pricing," says Glenn Britt of Time Warner Cable during the company's Oct. 31 earnings call. "We need to wake up and learn more sophisticated marketing techniques. Anyone can gain share by starting a price war." Ultimately, these tactics aren't as effective as they used to be to encourage churn. This is why some analysts are projecting that home security will be the next competitive differentiator.
I am impressed! This writer goes straight to the heart of the matter by revealing that declining numbers of video subscribers and increasing customer cancellation rates are providing a major impetus for the new entrants to add home security to their offerings. The truth is, home security subscribers have a much longer life than cable subscribers -as long as it’s a :real alarm company providing the service.
A Huge Market
There is significant money in this sector. Only one in five homes currently features monitored home security protection, according to ADT. And this other 80% represents an $11 billion opportunity. Now, cable and telecom providers, including Time Warner Cable, DirecTV, AT&T, and Verizon, are entering this space.
A Built-in Advantage?
At one end, the cable and telecom companies believe their key selling point is the established relationship. After all, adding one more service to an open account is seamless and cost-effective. Currently, Time Warner Cable has 9 million of its 14.5 million customers involved with its bundle services. And company executives have set an initial goal to add 500,000 new customers in the next 18 months with a low-priced Internet offer.
Ah, but we’re overlooking a major stumbling block: cable consumers are often fed up with the low level of service they receive, and may be hard-pressed to trust their cable provider with home security – no matter how convenient. Comcast and Time Warner have been reported as two of the ten most hated consumer service providers in America. In fact, the CEA (Consumer Electronics Association) ran an in-depth survey of cable subscribers, and found that only a third of them would feel comfortable having their homes and families protected by their cable provider. Ouch!
How About the Alarm Companies?
At the other side, established home security providers, such as ADT, are proactively protecting their market share through high-level personal service. "From a brand perspective, I don't think anybody can challenge the fact that when people think about security, they think about ADT," says ADT President Naren Gursahaney, adding that cable currently only maintains a 1% share of the home security market.
A Matter of Trust
These [alarm] companies emphasize the need for specialized insight by asking whether it is smart to trust a company that delivers HBO with protecting your family. "Security is generally sold across the kitchen table," says ADT's Gursahaney during his company's Dec. 6 investor day conference. "I think most of these new entrants to the marketplace don't have the necessary field sales infrastructure."
Homeowners Do Want Peace of Mind
It remains to be seen if consumers will select convenience over experience for their home security needs. There isn't much debate about whether homeowners want to keep their homes secure. The only question is which company will provide these services.
The question remains whether the cable and telco companies new to home security have what it takes to compete. What these companies don’t seem to grasp is that peace of mind really is a different proposition: just because you have an Internet “pipe” into a consumer’s home, that doesn’t mean homeowners are ready and willing to sign up for your latest “bundled” offering… especially when you are not doing a terribly good job with your current (less critical) services. Frankly, the stakes are that much higher when you are protecting people’s homes and families.
Cellular is Safer – and More Reliable
It’s also interesting to note that every single one of these new entrants, without exception, uses the cellular network for primary or backup transmission of alarm signals. Yup: they all use cell, because they know that cellular is safer. However, most of them use the Internet for transmitting a majority of their overall signals from the home, which is why the systems are referred to as “IP-enabled.” And as regular readers of this blog know, the best home security systems rely on a safer and more robust cellular connection for everything – not just for alarm monitoring, but for the advanced interactive services as well.
As one a few truly nationwide “real” alarm companies that is focused on protecting your home and family, FrontPoint is happy to see the increased consumer awareness of interactive monitoring services and home automation that new entrants bring to the general public – especially since are exactly the advanced features that FrontPoint has offered since our inception in 2007. We also know that the more people research their options, the more they are choosing a proven provider like FrontPoint. As the leader in wireless home security, we specialize in the best protection: that’s why we’re the #1 ranked alarm company in the US. FrontPoint systems are safer, smarter, simpler, more affordable, and virtually impossible to defeat. And, unlike the case with some of our wannabe competitors, you’ll be thrilled with our service.