Influx of telecoms, cablecos into security not alarming, study says

According to IMS Research, the new players will help boost the home penetration rate very rapidly over the new few years
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Friday, June 7, 2013

AUSTIN, Texas—The penetration rate for U.S. residential intrusion alarm products will increase by 5 percent to 8 percent during the next three years, aided by the entrance of the new telecom and cableco players in the market, according to a recent study by IMS Research, now part of IHS.

Adi Pavlovic, security and fire analyst for IHS, told Security Systems News that it’s too early to tell how much the new players already have increased the penetration rate, which has been stalled at about 20 percent for years. Telecoms and cablecos have just entered the market in the past couple of years, so they are very new, he noted. “I would say it’s still under 1 percent,” he said.

However, Pavlovic predicted, “It’s going to pick up really quickly once they do get established. … They all have goals to just spread out across the whole nation and once they do that then they’re making that offer to 100 percent of their client base, and that’s when we’re going to see the penetration rate pick up.”

A sudden influx of players and increased competition is detrimental for an industry in most cases. However, the traditional security industry is unique in embracing the plethora of new competitors entering the business, according to the new study, “The World Market for Intruder Alarms.”

Pavlovic said the industry believes that the entrance of telecoms and cablecos means “they’re going to increase the penetration rate and make [security] a lot more common in the home than it is right now.”

That’s because the recent market entrants are partnering with established security suppliers to offer complete home security product offerings and are increasing market awareness of home management systems, which combine traditional home security with innovative home automation technology, according to the study.

The report notes, “While home automation features are driving the penetration of integrated home management systems, the core functionality consists of a basic intrusion system.”

Pavlovic said the telecoms and cablecos are doing everything from running television ads to reaching out directly to their own customers to market home security/home automation.

 “Just increasing the awareness and the education of that is going to help the traditional guys as well,” he said. “People will say, ‘Wow, I’m curious about that,’ and they might do a little research and compare the traditional guys” to the telecoms and cablecos who “don’t always have the most favorable customer reports.”

Telecommunication companies like AT&T and Time Warner are among a growing list of companies entering the market. The list also includes Comcast, Cox Communications, Verizon and Lowe’s.

“Leveraging their existing client base, the telecoms and cablecos are offering home management systems in order to increase their average revenue per user (ARPU),” according to the report from England-based IMS, whose U.S. headquarters is here.

“Combining these newer offerings in addition to pre-existing services such as cable, Internet and telephone is becoming an attractive and cost-effective way to entice end users, thus driving the uptake of security products,” according to the report. It noted that some new entrants have partnered with existing professional monitoring companies, while some have decided to launch their own monitoring stations.

Pavlovic said the penetration increase of as much as 8 percent in the next several years will be partly due to increased business for traditional companies, but largely due to the telecoms and cablecos.

“It’s mostly going to be them, doing the bundles, the cable, the Internet, the phone and now home security,” he told SSN. “Once they start making that offer to the millions of customers they have, [even] a small percentage of them making that switch to that bundle, that’s going to mean big things to the intruder alarm industry.”

How will the fact that some of the new players offer a self-monitored home security product impact the industry?

“It’s a niche market and most likely will stay niche for now,” Pavlovic said. He said it’s assumed that the market will grow, but it’s too early to tell how much of a threat such products could pose to professional monitoring companies.

He noted that the study is a global one. The intrusion alarm market in Europe is slow because of the poor economy, but “exciting stuff is happening within the U.S.,” Pavlovic said.

“The economy is starting to recover, and construction is doing better so there are going to be a lot more opportunities for intruder alarms, and now the game is changing with the telecoms and the self-monitoring picking up steam,” Pavlovic said. “It should be an interesting next couple of years and it will definitely change the traditional landscape.”