Net Upstarts Break Into Home Security6/15/2007 8:00 PM Eastern
Steady growth in broadband households is driving a frontal assault on another incumbent residential service — home-security monitoring.
The $6 billion industry has been quiet for decades, as big players like ADT Security Services and Brink’s dominated the market but introduced few major innovations.
The basic “door-opens, trips-sensor, call-the-cops” business model hasn’t changed in 40 years, according to leaders of upstart competitors such as Alarm.com, NextAlarm, iControl Networks, uControl and InGrid. These companies are trying to poach existing landline home-security customers, as well as win business from a new generation of tech-savvy homeowners willing to install their own security systems.
The digital broadband challengers offer numerous new monitoring capabilities — including remote video, e-mail and mobile-phone alerts, and Web-management screens — that old-line security companies don’t.
And the cable industry is looking to get a bigger piece of the action by working with the newcomers.
“The [incumbent] security guys are waking up and saying, 'Holy crap, these guys are eating our lunch,’ ” iControl CEO Reza Raji said. The Palo Alto, Calif.-based company is currently in trials with Cox Communications and other operators, which Raji declined to name.
Industry analysts say broadband security companies are in an excellent position to grab business from wireline incumbents. Many homeowners are dismayed to find that when they switch to broadband telephone service their existing security systems won’t work.
|SOURCE: Multichannel News research|
|Alarm.com||Broadband and wireless home monitoring||$25-$40/month|
|iControl Networks (icontrol.com)||Intrusion detection/video monitoring (no call-center service)||$15/month|
|uControl (ucontrol.com)||Home-intrusion detection via mobile, broadband, phone||$20/month|
|NextAlarm (nextalarm.com)||Hooks to existing home-alarm systems||$12/month|
|InGrid (ingridhome.com)||Private-label service for broadband providers||N/A|
But while the broadband home-security market looks promising, it’s not yet clear whether it will become the paradigm-disruptor some predict. “It’s too early to call it a gangbuster or an also-ran,” Parks Associates analyst Bill Ablondi said.
According to Ablondi, 1 million households had self-monitoring security systems in 2006, and his forecasts project 3.7 million households in 2010. At the same time, Ablondi estimates the number of broadband homes will rise to 80 million in 2010 (versus 52 billion in 2006). “There is a significant opportunity,” he said.
A leader in the nascent field is Alarm.com, based in McLean, Va. The company began offering a wireless home-security package in 2003 and will soon hit the 100,000-customer mark. Last month, Alarm.com announced it would begin connecting its platform to broadband also.
The service “uses broadband as the primary communications method, but wireless serves as a backup,” Alarm.com vice president of business development Mary Knebel said.
The company offers text-message and Web-enabled updates and retails primarily through a network of 500 local home-security dealers. Alarm.com charges $25 to $40 per month for monitoring and outsources the dispatching to 230 call centers around the country.
The 45-employee company is currently working on requests for proposals from several cable operators. “MSOs are still in learning mode about the technologies out there and business models,” Knebel said.
So far, the established national home-security companies have been slow to react to the broadband challengers.
ADT, for one, does not have a pure broadband offering in the pipeline. “We do not perceive it as a threat,” ADT director of custom house services Tim McKinney said. “We have a tenure of 120 years. People are looking for reliability and response.”
That said, ADT is well aware that its customers are dropping traditional landline connections. With some extra gear, McKinney said, ADT’s system will interconnect with a broadband pipe. The company is also getting ready to roll out a remote-video product with e-mail alerts for about $10 per month extra.
“Our view of competition is that it all helps fuel the marketplace,” McKinney said.
Ablondi thinks incumbents need to move quickly. “My advice to ADT and Brink’s is to take this seriously and see what capabilities to add to their offerings. If they don’t do it, somebody else will.”
AT&T is one of the few American telephone carriers that has jumped into the home-security market. Last fall, the company rolled out a service that streams live video to either cell phone or Web browser. It also includes motion and entrance sensors, as well as electronic temperature and water sentinels.
LEVERAGING THE PIPE
One startup trying to outfox the big boys is iControl, which is primarily focused on forming partnerships with the broadband providers. The company offers both enterprise software and a hosted model that allows cable companies to brand and sell their own home-monitoring service.
Like several other wholesale home-alarm plays, iControl hopes to be the newest offering in the cable portfolio. “The cable guys feel they can do a much better job of leveraging their broadband pipe,” Raji said. “They are very good at bundling services.”
The company uses GE’s wireless window, door and motion sensors that connect to a high-speed Internet connection via a special router. Raji expects most cable operators will offer installation through their existing cable service technicians.
Today, iControl does not offer an alarm-dispatch call center. That can be farmed out to a third party, said Raji, or handled in-house by the service provider. Big cable operators tend to choose the latter, he added.
In addition to trying to line up reseller deals with broadband providers, iControl is selling self-install home-security monitoring kits on its Web site that range from $99 to $250. It currently offers only self-monitoring capability and no call-dispatch center.
Startup uControl, based in Austin, Texas, is following much the same business plan. It can directly connect to homes via cell phone and it provides remote monitoring via personal digital assistant, cell phone or the Internet.
Most important, its system can connect to already-installed alarm equipment, a quality shared with many of the upstart monitoring companies hoping to poach customers away from ADT and Brink’s as service contracts expire.
NextAlarm, based in Oak View, Calif., depends heavily on contract expirations to sell its service. CEO Alex Elliot said many of his customers are looking for an Internet service that will talk to their home security setup — and is fully compatible with voice-over-Internet Protocol services. “Worse than not working with VoIP, some [incumbent] systems will work with it only some of the time,” Elliot said.
NextAlarm recently began offering a low-cost, non-dispatch monitoring product. Such self-monitoring plans allow customers to look at a breach and decide whether it’s really an emergency before they alert the police. That’s because many local police and fire departments charge citizens for repeated false alarms.