Over the past 2 years, the alarm monitoring market for physical security has garnered growing interest from various IT and Telecom companies. AT&T entered the market in the mid-2000s with its Remote Monitoring offering for residential customers. However, the solution was premature for a market that was not ready for video surveillance in homes, especially in the low-mid range of the market. However, since that time, various vendors have made forays into the market with varying levels of success. Comcast, Time Warner, Verizon, AT&T, CableVision, and others have entered the market with different solutions catering to residential customers and small businesses. In this post, Compass Intelligence will take a look at what makes the alarm monitoring market attractive to IT and Telecom service providers.
Overview of the Alarm Monitoring Market
Traditional alarm monitoring consists of outsourcing management of intrusion sensors to central stations. Vendors like ADT, Protection 1, and Monitronics monitor alarms for residential and small business customers that do not have the ability or resources to manage their physical security systems. Typical systems include window break sensors, occupancy sensors, carbon monoxide (CO) detectors, and in some cases, video surveillance. The market is highly fragmented with the Top 3 companies accounting for approximately 33 percent of revenues. There are over 10,000 alarm monitoring companies in the industry that account for the approximately $12 billion in revenues in the United States and Canada. The residential market presents great opportunities with a relatively low penetration rate of between 9 and 10 percent, while the small business segment has a lower penetration rate of between 6 and 7 percent.
What makes this Market Attractive to IT/Telecom Service Providers?
The market for alarm monitoring companies is changing rapidly. Over the past 2-3 years, service providers have started expanding their portfolio to include automation and energy efficiency solutions to attract more customers.
Small business customers can now control their physical security, building automation, and energy usage with one comprehensive solution, managed and controlled from a central panel or via the internet with a single user interface. Security systems can also be controlled with the web browser.
Residential customers can manage their physical security, home automation, entertainment, and digital thermostats using a single control panel. There are new features that give the customer the ability to manage their surveillance and door locks with either an application on their smart phone or web browser.
The ability to integrate and manage all systems in the home or small business requires a different set of capabilities that are typically built on an IP network. Communications are generally using existing Wi-Fi networks or Cellular networks. This gives IT/Telecom companies the ability to target residential and small business customers for additional services that can help these companies increase their profitability and increase shareholder value.
What is the Value Proposition for IT/Telecom Service Providers?
IT/Telecom companies tend to sell different services that are bundled to ensure that customers are tied into long-term contracts. By adding security and home/building automation allows IT/Telecom companies to lock in a large number of customers to long-term contracts. Typical alarm monitoring users are accustomed to 2-3 year contracts and this will allow IT/Telecom companies to offer similar services at lower costs. The value proposition of IT/Telecom companies is the ability to provide similar offerings at lower costs. Typically, alarm monitoring contracts range from 2-3 years with an average monthly fee of between $22 and $25 a month. Video surveillance is an add-on service and ranges from an additional $10-$15 a month.
IT/Telecom service providers are uniquely positioned to provide security alarm monitoring to residential and small business customers at lower monthly rates than traditional alarm monitoring. These companies have existing infrastructure in these locations and an add-on service can be provided with nominal installation fees, reducing total cost of ownership (TCO) for customers, while increasing the profitability of these IT/Telecom service providers.
Final Word
The alarm monitoring market is highly fragmented with over 10,000 service providers. IT/Telecom companies have the opportunity to provide similar services as traditional alarm monitoring companies at lower rates. This market also presents the opportunity for these companies to provide additional services and increase their profitability over time. The entry of IT/Telecom companies in the market has penetrated the market, making alarm monitoring services available to low-mid range customers that are not the traditional focus of most companies.
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Dilip Sarangan, Senior Strategist and Consultant at Compass Intelligence has an extensive consulting expertise which include market research, brand management, geographic expansion strategy, and market education and branding strategies. You can you reach him at dsarangan@compassintelligence.com.
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