Combating the entry of the Regional Bell Operating Companies (RBOCs) into the security market can be difficult, but not impossible. After-the-sale follow-through on the part of the dealer can help keep the customer.

Federal regulations now permit regional Bell operating companies (RBOCs) to enter the electronic security market. Qwest Communications, SBC and Verizon all have formidable customer infrastructure in the United States and have no shortage of working capital. But customer infrastructure and capital aren’t enough to be successful in the competitive world of security. To be truly competitive, a company must not only gain customers, it must retain them.  In the future, success may be defined by the service provided.

Is the Rise of the Telecoms the Beginning of the End?

Direct competitors have not flourished since the passing of the 1996 Telecommunications Act: many of the companies that were poised to impinge on the RBOCs’ market share in local phone service, such as Smoke Signal, AT&T or Winstar, haven’t made significant inroads. Some are in financial trouble. As for the cable providers, some, such as Time Warner, must upgrade their networks to offer the broadband services consumers have been told to expect. On paper, the Bells look difficult to beat.

It isn’t as though they don’t have their drawbacks, however. First, the Bells have some of their own upgrading to do. The Bells’ copper-wire infrastructure is not ready for the broadband services they wish to carry, such as DSL, which has a waiting list of millions across the country. And, those customers may not be very receptive to offers of additional services until they have those already asked for.

Competing in a Fractured Market

The RBOCs will also have to position themselves when entering the electronic security field so they do not seem extraneous, a perception that has tainted Microsoft’s introduction into video gaming with its Xbox. And recent articles in the New York Times (“Sitting Pretty: How Baby Bells May Conquer Their World” by Seth Scheisel, Money and Business section, Sunday, 4/22/2001) and in Wired Magazine (“Telechasm,” by Frank Rose, Issue 9.05, May 2001) portray the RBOCs as being slow to innovate.
Finally, as Rose pointed out in “Telechasm,” the Bells could easily be bypassed by other methods of delivering broadband services via satellite, municipally installed fiber networks or direct wireless. The capital that Verizon, SBC and Qwest have could easily be needed elsewhere.

Still, our industry shouldn’t become overconfident. The business model of garnering new clients by luring them away from other companies is as old as the hills, and no one needs broadband capability to monitor a suburban home alarm system outside Chicago. A bit of soul-searching on how we do business will help us prepare.

This anecdote might point to one possible strategy: recently a client of a small security engineering firm wanted to let the company go as maintainer of record on their access-control system. This was a large system in very good repair that was about five years to seven years out of date but still was fine for the needs of the facility in which it was installed. The client’s contention was that he was paying too much for his service agreement, and, frankly, he was right. But the contractor was not able to lower it. Wanting to keep the client’s good will, if not his business, he provided his customer with the name of three other security firms in the area. All sent representatives to the facility. All promised to get back to the prospect “with some numbers.” None did.

Where was the disconnect? The system had proper records onsite and the existing maintainer was willing to surrender them. There might have been a learning curve for the new maintainer, but since the system was in good working order, it certainly seemed possible that it had been installed properly. Their reluctance was this: none of the new contractors, on reflection, had wanted to take on the system as is. They wanted to sell the prospect a new one, a situation for which there is more money up front than in the circumstance where one is only taking over existing maintenance. In most industries, less money is not as desirable as more, but it’s certainly better than none at all.

A Customer Kept Is a Customer Earned
The security field, like any other, exists to provide services the customer wants for a fair return. As a result of this situation, this unhappy client has remained with his original contractor, but he is now soured on an entire industry as opposed to just one provider. The next time he needs to protect another section of his facility, he may hire more contract guards. And the more this happens, the more it translates to less work and less profit for everybody.

The emphasis in this industry in the past few decades has not seemed to be as much on service as it should be. True, it’s a more labor-intensive section of the business. The profits are lower on service contracts, and if one does business in a state such as New York where they’re strictly regulated, one may not be able to rely on revenue other than fee-for-service. This problem is more obvious now, given how investors are more interested in (and have more access to) minute-by-minute fluctuations of your company’s stock, or given how, in the past 20 years, mergers and acquisitions have become more popular; sales growth and customer base growth, in that order, are paramount.

In any business, the longer view is required to get the steadier result, and the above isn’t the only reason. The electronic security contractor installs equipment that now, on the outside, can be expected to work, in some cases, properly for some 25 years to 35 years; those systems have to be maintained for their lifetime in order for the liaison with the customer to have the same potential.

Threat of RBOCs May Be Minimal

As of this writing, none of the RBOCs have made an obvious recent move to enter the electronic security industry. Many of us may also remember AT&T’s ill-fated foray into alarm systems in the early 1990s. But it may still be time to plan for the possibility, just as much as it is time for us to stop thinking of clear divisions between the phone line providers and the computer companies and the alarm installers.
Today, security companies install CPU-based phone systems and do computer cabling and networking. In a way, by diversifying into the electronic security field the Bells are considering taking a similar step. A more service-oriented business model can help us keep customer attrition to them at a minimum.

And if the RBOCs do indeed get into our industry, one never knows; eventually they may need subcontractors!   

Ken Egbert studied electrical engineering at Manhattan College in the Bronx, N. Y. in the early 1970s and started D.N.E. Security Communications in 1987. He is a regular contributor to his local professional association monthly, SECURITY LINE. He welcomes your comments on this article at [email protected].

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