Can the telecoms/cable companies break into the alarm industry? I’ve got news for you, they already have. And although the companies that traditionally bring you an un-healty dose of The View and Jerry Springer re-runs are making another go of it to gain market share, it appears as if they are gaining some ground.
When I was in college back in 2000 (an eternity ago) I remember the buzz about Time Warner Cable piloting their entrance into the alarm intrusion world in select markets. They failed. They didn’t understand the business. They didn’t realize what all the other alarm companies had already realized; there were a lot of headaches that came along with the alarm business that they were not prepared for.
About two years ago I had a conversation with the President of a major national alarm company (he will remain anonymous) who said that he felt the telecoms were making the same mistake, but in doing so they could essentially taint the marketplace by their low-price offerings. In other words, if the telecom/cable companies set the monthly monitoring floor substantially less than what the market will bear in order to gain market share, due to their sheer size, they could change the perception that quality monthly monitoring does not bear much value. This is a problem for the industry as a whole. Unreliable communication networks, coupled with sub-par “Brand X” equipment lead the customer to believe that this is the most that they can expect for their family’s protection. Even though the telecoms/cable giants can provide some watered-down version of a security system that appears to be protecting their home in the form of a no-name android tablet, they are truly not receiving the same type of protection you could expect from an actual alarm company. Not by a long shot.
He went on to say that he had hopes that just a few short years in the industry would be enough for the telecoms/cable companies to realize that 1) they could not weather the storm of law-suits that alarm companies have to deal with on a regular basis and 2) customer’s would realize that waiting 2-3 days for a service call with a 4 or 5 hour window MAY work for the cable/telecom industry, but it does not work in the alarm industry. That conversation was 2+ years ago, and they haven’t slowed down since.
Even though they are gaining market share and continuing to grow, it does not mean they are doing it at a profitable rate. There are other indications that the telecom giants do not understand the alarm business. Currently the most effective way for alarm dealers nationwide to gain new accounts is by good-old-fashioned door knocking. Particularly in the summer. The alarm dealers pay their reps anywhere from $300-$1000 per alarm sale. The telecoms offer far less. In addition, the telecoms have the advantage of gaining instant-access to information about new homeowners, but do not seem to be capitalizing on that unique advantage, not to the best of their ability anyway.
So then the question is how do they get new customers? Low cost, the convenience of “bundled” monthly fees, cheap equipment, all lead to new customers, but at what price? Even if they have boatloads of cash, at some point they have to look inside the boat and see if the leaks are too sever to continue. It will be interesting to see what direction they go, but my guess is that they will continue to throw money at the venture, and at the same time hurt the industry as a whole.