Alarm industry readies for demise of 2G and POTS
Many alarm dealers and integrators see the end of 2G and POTS as an opportunity for their company.
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Late last year, AT&T petitioned the Federal Communications Commission to begin a process that would allow the telecommunications industry to transition away from traditional, landline telephone service to new services based on IP technology. Instead of continuing to invest in plain-old-telephone-service or POTS as it is often referred to, the company said that it wants to spend $14 billion over the next three years to expand wireless and broadband networks.
This news didn’t come as a great shock to many people in the alarm industry. According to Bob McVeigh, vice president and general manager of Norwalk, Conn.-based Security Solutions who also serves as chairman of the Electronic Security Association’s Industry Affairs Committee, this transition away from copper-line phone networks is going to impact dealers differently depending on their individual business models. For example, McVeigh said companies whose business models primarily revolve around a product line that uses cellular or some other type of communications technology are going to be well-positioned and the least impacted by this migration.
“Some companies are already making the shift. They are smart enough to know that this is a serious problem and they’re turning the ship to move towards an alternative product rather than POTS lines,” McVeigh said. “They are stopping the hemorrhage now, but there are still all of those existing clients that need to be taken care of and those are going to be the tough decisions.”
McVeigh believes that the most of the bumps in the road for dealers in making the switch will come in the form training customers.
“The cellular providers have done a fantastic job of training us so that we couldn’t imagine carrying a cell phone for more than two years before we get the latest and greatest and move on, so it’s very easy for them to migrate to a better of different technology,” said McVeigh. “For us, for some reason, 20 years for an alarm panel has become commonplace to let it last and it is just ridiculous to think that a technology will last that long. We, as a community, need to train our customers that things are different now and you need to migrate.”
Overall, the sentiment from security dealers and integrators is that the sunset of 2G and the demise of POTS is actually an opportunity—a chance for companies to go back to their customers and talk about new interactive services and automation in particular.
According to the recent 2013 ESA MegaTrends Survey, some 95 percent of respondents are currently involved in alternative alarm signal transmission, meaning cellular and other forms of wireless and radio-based communications.
“What’s really changed today is the advent of the communications channel,” said Patrick Egan, president of Select Security, as he spoke to his peers at the 2013 ESA Leadership Summit. “We are in a world that’s rapidly changing.”
Michael Pope, president of Safety Technologies Inc., said that with phone lines going away, there is going to be attrition. However, his company started to talk to customers about interactive services when they wanted to initially contact them about POTS going away. “Of those companies who called to cancel their service, because they were canceling a phone line, some 75 percent were converted to interactive services. It’s just so much easier to sell them on interactive services than have a conversation simply about POTS going away. POTS or GSM going away doesn’t mean that much to them, but interactive services does,” he said.
Pope said integrators and dealers should not wait for their customers’ contracts to expire to have the conversation on interactive services.
While the industry does see the positive side of touching the customer with new services as a lead in as they talk to them about the end of 2G and POTS, that doesn’t mean that there isn’t concern or that there isn’t a lack of work to be done to reach the thousands and thousands of current industry subscribers and get them to execute a changeover.
“POTS is going away, and I have a problem,” admitted Mike Miller, vice president of Moon Security. Miller, a past president of ESA, said some one-third of his customers are 2G and his sales people are currently contacting those subscribers to get them to transition to other technologies. “At the same time, we will get them to upgrade their control panels,” he said. “Some of the subscribers will be able to use their same control panels and just switch out the communications module; others will have to get new control panels. We are being proactive in our customer touches. Also, if someone calls to cancel, we are working on a program to give them a $50 per year technology credit for up to five years so that they can use it to add interactive services rather than just lose them altogether as a customer.”
Miller said that first and foremost, attrition is what the company worries most about with the end of 2G and POTS. “But overall it’s a good opportunity— to see our existing customers, sell add-ons and upgrades, update contracts and make good customer touches.”
Sam Fiske, general manager and chief operating officer of Smoky Mountain Systems, said that his western North Carolina service area is rural America and it’s a different market. “The technology is behind in our market and it’s an even greater continuing challenge with POTS lines going away,” he said.
Maria Malice, vice president of COPS Monitoring in Arizona, said that the third party monitoring provider is already set up to receive any or all 3G and beyond radio signals, but the biggest dilemma is to get their installing dealers on track with their customers.
“When the area codes split in our region, dealers had a year and a half to change over their accounts, but there were still problems when it happened. The biggest concern is that our dealers have to get out and touch their customers about this—we don’t know when it’s really going away, 2G or POTS. But in Tucson, 2G is already gone!” she said.
Malice said that if dealers aren’t paying attention, they will be hit hard. “The other issue is dealers moving their customers from POTS to VoIP lines. “Some of their subscriber panels aren’t communicating any more. They might have to change out their panels for this as well.”
Bob Ryan, senior vice president of Sales & Marketing for ASG Security, said as far as the demise of 2G, the company has been focusing on its new systems installations. “Every new system we install can communicate at least with 3G,” he said. “But in essence, this is all about buying more time, isn’t it? We always have to change with new communications technology, like the demise of POTS. So now, our path to get out of POTS is selling enhanced services and 100 percent wireless. But instead of the end of POTS, we are talking about the enhanced services, so you don’t have to have the discussion on the end of POTS. It’s a Trojan horse. When we upgrade customers, we are making a stickier customer.”
Chet Donati, president of DMC Security, admitted that it is a hard endeavor to change over customers, but they’ve had their eye on ever morphing communications technologies and have been doing a lot more cellular signaling. “We have been relatively proactive and when a customer calls for an upgrade they are pretty understanding about changing out the lines. But theoretically, a lot of us will get caught with our pants down.”
McVeigh worries that many of the smaller companies, which make up the vast majority of alarm dealers, could be caught off guard.
“And that is the frustrating part for me is what to do with those guys because they’re the vast majority of our membership – a couple of guys in a truck trying to eke out a living,” McVeigh said. “They may have 500 to 1,000 accounts out there that they are using to build their nest egg for their future, but the communication providers are coming by and pulling the rug out from under them. They may or may not realize what is happening. That’s the hard part.”
McVeigh said not picking an alternative communication technology to POTS isn’t an option because dealers are going to lose and have been losing them for some time now. “You need to change. You need to move off of this one,” he said. “This isn’t something you just let the younger kids do. You either need to move and do something different or sell your company to somebody that will.”
Joel Griffin is the editor of SecurityInfoWatch.com, and this article originally appeared on the website. Former SD&I editor in chief Deborah O'Mara co-wrote this article.