Leaders In Central Station Monitoring

Oct. 27, 2008
An Exclusive Security Dealer Roundtable

Susan Brady: Our discussion this month is on how state by state licensing requirements affect the central station. Please explain what you have to go through, and the cost, time or anything else involved in being licensed to monitor accounts in different states in the U.S.

N.E. “Corky” McClellan, Vice President, Loss Prevention Services Inc.: The state-by-state licensing system has a negative impact on central stations through trade limitations for legitimate companies. The regulations are developed primarily for installation companies who usually will not provide service in a large number of states. There’s definitely a need for confirmation to the consumer that a monitoring service will be able to perform through all kinds of circumstances and that the people who are providing or want to provide these services can be held accountable for their actions. The standards companies like Underwriters Laboratories and Factory Mutual do a great job of assuring that everything is in place for a central station to be able to provide a reliable service. But the people providing the service must be regulated as well.

Dera DeRoche-Jolet, Alarm Monitoring Services, Inc.: Licensing is a daily business consideration. Every time we discuss business with a prospective dealer, hire a new operator, or renew our insurance policies, we have to consider the licensing implications. We also regularly schedule internal audits of operations and dealer records to ensure continued compliance.

Joseph M. Miskulin, Superintendent, Central Monitoring Services, State Farm Insurance, Central Monitoring Services: We have a full time employee who is dedicated to keeping up with city, county and state licensing requirements for nearly half of her time at work. Since we are a proprietary central station, and only monitor our buildings, we can not pass the cost of licenses and permits on to our customers. All costs to be licensed affects our parent company’s bottom line.

Robert Few, Vice President, Criticom International and Michael Fields, Executive Vice President, Criticom International: State licensing is an expensive aspect of providing monitoring services on a National basis. Criticom monitors accounts in every state. We need two staff members dedicated to ensuring that we remain in compliance with not only state licensing regulations but municipal as well. Regulations vary greatly between states and even more so in local governments, but in almost every circumstance, there are redundant requirements.

For instance, many states require individual licensing, fingerprinting and background checks of our employees. Unfortunately, many states do not have reciprocity and require us to repeat these efforts over and over again. This means that Criticom and all other monitoring companies have to incur redundant labor costs to procure fingerprint cards, administrative processing coupled with a fresh fee for each particular jurisdiction. From an order of magnitude, licensing represents a substantial line item on our income statement.

As a monitoring center, we’re not the only one that suffers. The dealer has to get licensed and oftentimes incur substantial costs in administrating their own licensing requirements. We should also not forget about the subscriber who at times has to register as well.

Morgan Hertel, VP of Operations, The Command Center Inc.: As an example, we have to be able to monitor burglar alarm systems in the state of Oregon, so here is what Oregon requires.

I fly to Salem, OR, to take a 1 day class (which is offered only a few times a year). I have to pass a test, get fingerprinted and a picture taken and go through a background investigation. My application must be notarized and I pay $300 for an Executive Managers (EM) license, which allows me to operate the business and certify that the dispatchers meet the Oregon requirements. Then each dispatcher must be trained, pass a test, go through a background check, pay $100 so that they can dispatch alarms in Oregon, etc.

We have almost the same identical set of rules and requirements in California. So why should I have to do this for every state? I am not even apposed to sending in an application to the state, paying a few dollars to register our company and even our employees; but don’t make us actually have to go there and go through the same thing we have already gone though in California.

Brady: What states are the most difficult to deal with and why?

McClellan: Florida is seemingly impossible for the out-of-state monitoring-only company. You are required to have either a licensed electrician on staff with check writing authority as part of your corporate board or have a current Florida license holder qualify your company. In the latter scenario, the qualifier will be financially responsible for your company and in most cases would probably be a wholesale customer, creating a conflict of interest.

DeRoche-Jolet: States that require a licensed individual to maintain a local residence present the most difficulty, Florida and Virginia come to mind.

Miskulin: Florida has the most stringent rules, from the qualified agent requirements (personal financial background check, criminal background check, years of service in security management, etc.) to the 5 hour exam that must be passed. On top of that, they do not recognize one of the most popular sources of continuing education units (NTS).

Hertel: California, Oregon, Texas, Florida because of their requirement to go there, the costs involved and the ongoing costs to administer the program.

Brady: Does licensing affect your decision to not monitor accounts in a particular state?

DeRoche-Jolet: Absolutely. If the licensing fees, administrative and travel expenses to comply cost us several thousand dollars, we are not going to assume those costs until we have an opportunity to monitor an account base that makes the expense worthwhile.

Miskulin: Again, as a proprietary, we don’t have the luxury to pick and choose where we want to monitor, so we must remain diligent in keeping up with all the different rules.

Hertel: You have to look at the costs of doing business in each state, There has to be enough in sales revenue to justify the costs of the licensing but also all the time involved in obtaining the required license and the ongoing expense to keep the program going.
Brady: What do you think can be done to remedy this situation?

McClellan: While the monitoring business is directly related to the installation business, it should be regulated separately and on a national level. The CSAA is supporting the work of the Alarm Industry Communications Committee (AICC) to get a Licensing and Reciprocity Act passed through Congress.

DeRoche-Jolet: One single licensing standard that ensures quality of services by a central station and accountability of its owners, FBI checks of the operators (completed once per employee, in home state) and nationwide reciprocity.

Miskulin: The most logical answer is to see a national reciprocity law go into effect. Bill Signer, the lobbyist for CSAA/AICC has been working on the Licensing and Reciprocity Act to present to Congress for the past 3 years.

Few and Fields: Licensing does create an additional barrier of entry, which on the positive side reduces fly by night operators and keeps the integrity of the industry intact. Having said that, why not create a national compliance clearinghouse with strict standards? Each state and municipal jurisdiction may rely on their work. From their jurisdiction’s perspective, they no longer have to track as many details. If they still want a fee, so be it. At least we don’t have to send an employee for their 15th fingerprint card in two weeks.

Hertel: What I would like to see is a reciprocity program legislated for all of the U.S. Any UL listed central station could dispatch fire alarms to any state. Any central station that was licensed in their state could dispatch to any other state, using licensed dispatchers. Any dispatcher that was already licensed in their state and had their background checked, and was either CSAA or SIA certified, could dispatch alarms to any other state.