Taking on the Telecoms
So word is out that Verizon is going into the home security business. We’ve seen this before, of course, when telecommunication companies decided they had the heads-up and the means to provide the service. So why not?
Verizon reportedly has 93 million subscribers. That’s a pretty good start for marketing its new security services. Bundle the packages and get telephone [or what used to be telephone], Internet, TV and now security system monitoring. And if Verizon really wants to compete, installation will become part of it as well.
No doubt Verizon and others like it can cause serious competition. The telecom companies are larger, better financed and have a lock on communication. What they don’t have is a history of providing security services, and that’s why you have less to worry about than you think.
Not only do the telecoms lack the personnel to install and service alarm systems, these companies have no sense of customer service — at least not in the way every alarm company is used to providing customer service. How many alarm companies put their customers through endless voicemail prompts before finally putting a live person on the phone? How many alarm companies schedule repair service days, sometimes weeks, after the request for service? And customers are going to love the “will someone be home between 9 a.m. to 5 p.m. Monday through Friday?”
When offering phone or Internet service these telecom companies may have faced little competition, but that’s going to change when they get into the security business.
My guess is that, at least initially, the telecoms will have to team up with local dealers and perhaps wholesale central stations to provide the service. So the telecom company will be right back to where it is today — providing the communication link, either through POTS, cable or FIOS. However, if the telecoms hold on to the contracts and subcontract the work out, they will grow their recurring monthly revenue (RMR) and equity rather than the alarm companies doing the actual installation, service and monitoring.
Telecom companies will fast discover their new security business is going to open a floodgate of claims and litigation for losses customers will attribute to failure of the alarm system. Whether the telecoms are smart enough to use proper contracts to protect against such claims remains to be seen.
In the meantime, alarm companies with contracted subscribers should not be too eager to waive those contracts and permit them to switch to a telecom provider. Enforcing your existing alarm contracts is going to be essential.
I recently received the following E-mail from Bill Cereske that helps make my point:
For many years, I had the oldest church in San Francisco as my client. We had the contract for their security and fire detection. One day, their fire panel communication went out. The Archbishop of the entire region followed me around (we alarm people do tend to get followed around). I tracked the trouble to a building 300 feet away. A 100-year-old phone and telegraph board faced me. I found my proper connections in a few moments. The Archbishop proclaimed my feats a “Miracle.”
Months later, they dropped my accounts because they could save $1 per month each. I guess miracles are pretty cheap.
That may end up being the bottom line — can the telecoms really compete? I don’t think so, not if they have to subcontract out installation, service and monitoring. Time will tell.
Ken Kirschenbaum is a partner with his daughter, Jennifer, in the law firm Kirschenbaum & Kirschenbaum.
The opinions expressed in this column are not necessarily those of SSI, and the content is informational and not legal advice.
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