AT&T Digital Life: Industry threat or stimulus?

Telco ramps up market entrance

Morehead said that currently the issue is that AT&T has to be very aggressive to move the needle at all for its business. “AT&T has $127 billion in revenue! Keep in mind that ADT is the largest company in our industry and it has $3 billion in revenue. A large company like AT&T essentially needs to set up a company that is larger than the largest company in our entire industry and it needs to do this quickly to make it worthwhile.  If AT&T launches in 50 markets and gets 20,000 subscribers per market for 1,000,000 subscribers per year, that is 3,000,000 subscribers in three years (assuming no attrition). These are huge numbers for a new player!  If they charge $40 per month per account, after three years, they have only increased the company's total revenue by less than 1 percent. Furthermore, given traditional creation costs, AT&T will lose money for that three-year period. Losing money for three years on every customer to get1 percent revenue growth is a pretty big gamble. As an industry, our security system creation costs tend to be worse than the wireless industry, so I think that will be a bigger challenge than they realize as well.”

He added that as an industry all players need to prepared for a deluge of competition from cable and telephone utilities and each need to focus on what they are good at. “If each of us focus where we excel, then we should be fine. If you focus on service, keep doing that. If you focus on video, keep doing that. With less than 20 percent market penetration in the residential market, there is enough opportunity here for many companies. The real question that security customers and the security industry should be thinking about is how we will handle the AT&T customers if/when AT&T decides to exit the business (again).  Given the proprietary equipment that AT&T is using, consumers that choose AT&T will face a real challenge if they ever want to switch to a true security company.  Consumers are better off making the investment now in choosing a security solution that will be there for them in the decades to come.”

Sarah Cohn, director of Media Relations for ADT Security Services in Boca Raton, Fla., also commented on the added awareness AT&T will bring to the marketplace.“With nearly 140 years of experience, our customers have told us that what matters most to them is the quality and reliability of our home automation and security solutions. Telecom and cable companies have been in the security space before, and we welcome their re-entry because we believe it will not only raise awareness of smart home technology, but also expand the category, ultimately helping to attract new customers to ADT Pulse.”