AT&T’s impact on the residential security market

Dealers say telco’s entry could benefit entire industry

"The independent dealers are going to have to realize this isn’t your father’s alarm company anymore. Things are changing," he said. "Technology has moved and allowed these companies to come in, specifically the Z-Wave technology that has brought automation and control into the homes. Customers are now going to demand it. They’re going to see this stuff coming out, they’re going to see this advertising and if you’re not on that bandwagon and you’re not offering the products that these other companies are offering, you could find yourself left in the dust."

Where McVeigh said smaller dealers can differentiate themselves is in the level of customer service that they can offer.

"There is a definite void. The larger companies are going to be looking towards this wireless technology and try to get the quick in and out, which is nice, but it’s not all encompassing," he said. "There are a lot of customers out there that are going to want a more specialized, a more custom, and a more concierge-type feel to their installation. This is where these smaller companies are going to fit nicely into it and if they grasp that and take hold of the ability to go in and individually customize these systems for these customers."

Kessler said that although the telco and cable firms obviously have the capital to challenge the biggest companies in the industry, they will face the quandary of getting customers of these established dealers like ADT and Protection 1 to leave those companies who they’ve trusted for years.

Jim Callahan, president of Atlanta-based Ackerman Security Systems, said that he’s seen a number of companies enter and exit the security industry during his 32 years in the business and that how AT&T will fair in the space remains to be seen. However, he believes that since their entry into the market is more technology driven with the utilization of iPhones and iPads to control a myriad of home devices, that they may have more staying power than previous entries by telcos who entered the industry will just a pure security play.

"In my opinion, at the end of the day, it’s going to come down to execution and that’s where these types of companies have failed. That’s been their Achilles’ heel," Callahan said. "I mean let’s face it, the consumer’s general perception of phone companies or cable companies is pretty low. They’ve been the butt of jokes on Saturday Night Live now for probably 25 years. I don’t think the security industry is doomed. I believe we are all going to benefit from what’s going on. What I think will be an interesting thing and what we need to watch is what level of success these companies can generate in the short term."  

Though Kessler indicated that accounting for many of these large cable and communications firms has changed, Callahan said that because companies usually have to take a loss on installing security systems and equipment before they recoup that money in RMR over time, it will also be interesting to see how that plays with the company’s management and investors.

"Initially that depresses earnings and the whole reason I think they’re getting into this is to find ways to improve earnings so they seem to be diametrically opposed," he added.  "The question will be will they be able to keep their boards and their shareholders happy while this is going on?"

One of the things that Callahan said his company has been focused on is educating their customers and the markets they serve that they also offer the services being touted by AT&T and others.

"I think the challenge will be for dealers who make the mistake of just sort of ignoring this," he said. "If an end user who is interested in these types of  things -video, locks, lighting or energy savings - understands that a security provider offers these things, at the very least I believe they would make a comparison between what is being offered by the cable company or phone company and at the end of the day, because of the uphill that these organizations have with a perception of their service, many people will select their alarm provider because they are accustomed to that more hands-on, close relationship."

Brad Glore, past president of the Georgia Electronic Life Safety and Security Association and vice president of Columbus, Ga.-based United Monitoring Services,  said that AT&T is going to have to make a "substantial investment" to be successful in the industry.