Industry Analysis Report

The manner in which security alarm systems transmit signals to their central stations is rapidly changing. Landline transmissions are moving from traditional phone lines to Voice over Internet Protocol (VoIP); and wireless transmissions are increasingly becoming digital, instead of analog. In both cases, the shift from analog to digital continues to move forward at warp speed.

This month Security Dealer surveyed readers to find out how these changing trends in alarm transmission are affecting dealers’ planning and business decisions. The results were interesting because they show high percentages of dealers in various categories, which mean that some dealers are making moves now in response to the changing technologies while others don’t feel a sense of urgency yet. Take a closer look and see for yourself…

AMPS SUNSET
On February 18, 2008—just 13 short months away—the Federal Communications Commission (FCC) will no longer require cellular carriers to provide analog mobile phone service (AMPS). On that date, a.k.a. the “AMPS Sunset,” it is expected that most, if not all, cellular carriers will stop providing AMPS, and as such, any existing alarm systems that would send a signal via analog cellular would not work. Granted, in most cases the wireless signal is only used as the backup (in case the primary landline doesn’t work), but nevertheless it is a very serious matter.

In the Security Dealer “VoIP and Cellular Alarm Transmission Trends” survey, 47% of respondents say they are buying digital cellular monitoring equipment to replace AMPS for existing customers. Slightly fewer (41%) are buying digital cellular monitoring for new customers.

When forced to pick which one action would have the most impact on their firm regarding AMPS, 32% of respondents chose upgrading from AMPS to digital for existing customers, whereas only 15% chose buying digital cellular for new customers. This clearly shows that dealers are more concerned about getting their existing customers properly upgraded and avoiding “unpleasant surprises” when the AMPS service is shut off next year. Although, on this same question, it should also be pointed out that the number of dealers expecting little or no impact by the AMPS Sunset on their business due to minimal use of AMPS by their customers was actually pretty high at 39%.

While it should go without saying, the Alarm Industry Communications Committee (AICC) strongly recommends that no new AMPS radios should be installed at this point. Furthermore, the committee urges any repairs needed on existing AMPS radios should instead result in a digital cellular radio replacing the AMPS radio.

VOIP

With promises of cheaper, more convenient service that still works well, it’s easy to see why many consumers are switching their landline telephone services to VoIP, which uses digital packets that are sent over a computer network instead of using analog telephone signals. However, such a switch made by the consumer will often adversely affect their alarm system (i.e., prevent it from successfully sending an alarm to the central station). Despite the fact that the customer didn’t consult with their security dealer before switching to VoIP, it is not uncommon for the customer to be unhappy with their security dealer for this added headache. Complicating matters, the consumer who had expected to save money by switching to VoIP is further upset when he discovers he has to shell out more money to upgrade his alarm system to be compatible with VoIP. As all too many dealers have found out, this can lead to losing a customer.

When asked to pick a few categories where VoIP would impact their businesses, 56% of dealers said they were buying VoIP equipment for existing customers, 52% said they were buying it for new customers, 32% expected negative impact from customers who are not yet aware that their monitoring will not function over VoIP, and 10% expected at least one customer cancellation due to VoIP.

When forced to pick which one category would have the most impact on their business regarding VoIP, answers seemed to be divided rather evenly across three categories. 30% of respondents said purchasing equipment to install VoIP-compatible monitoring for new customers, 29% said purchasing VoIP equipment to upgrade existing customers, and 25% were expecting little or no impact due to minimal use of VoIP by customers.

While further data needs to be collected to understand why 25% of respondents expected little or no impact to their business due to VoIP, it would certainly be a mistake for a dealer to think that just because VoIP hasn’t penetrated their geographic region yet that it won’t anytime soon. VoIP is undoubtedly on the way with its number of users multiplying each year, and security giants such as ADT and Brinks have seen the trend as they are working with VoIP carriers to ensure their networks can be a primary way to transmit alarm signals.

EDUCATE YOUR CUSTOMERS
Whether it’s the AMPS Sunset coming up in February 2008 or your customers switching from plain old telephone service (POTS) to VoIP, be proactive in educating them. While your customers likely won’t be happy to hear that their alarm system could be adversely affected by the AMPS Sunset or by switching to VoIP, they will ultimately be glad that you leveled with them before they made an uninformed decision.

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