New research: MSOs turn to security for better equipment

Resi industry to see 5 percent CAGR over next few years
Wednesday, June 29, 2016

ENGLEWOOD, Colo.—New findings by market research firm IHS reveal that MSOs are falling short of their goals for penetration within the residential security industry, partly because of their reliance on inferior security products. This is good news for domestic security manufacturers because MSOs are now starting to turn to them for equipment, according to IHS. Research also forecasts a 5 percent CAGR for the security industry over the next few years.

“One thing that we found in our research is MSOs, to keep their package competitive in price terms with ADT, have had to skimp on the cost of sensors and more peripheral gear and accessories, which are lower quality than a Honeywell or a Bosch, for example,” Jim Dearing, market analyst for IHS told Security Systems News. “And if the sensors are not up to scratch, you get a lot of false alarms down the line.”

Dearing pointed out that other than AT&T, most MSOs don’t do the monitoring for themselves, and “false alarms cost money and monitoring companies are really unhappy with high-cost false alarm rates from systems that don’t meet a minimum requirement, so the MSOs are under pressure and have already started to transition away from some of their original suppliers in Taiwan to more professional security suppliers and high-rated equipment.”

This bodes well for American security manufacturers, as the IHS Intruder Alarm and Monitoring Services Intelligence Service says that just over 343,000 residential alarm control panels were sold to MSOs across the Americas region in 2015, while shipments of residential panels to the professional security sector in this region exceeded 2 million units in 2015.

Dearing points out that professional security is expected to grow at a CAGR of 5 percent between 2015-2017, partly because of the impending 2G sunset.

“Loads of dealers and manufacturers are scrambling to use this [2G sunset] as an opportunity to sell more panels or change the communication module, so that can be either a $100- to $150 upgrade or a new panel,” said Dearing, who notes that this presents dealers with an opportunity to upgrade the package and sell the new connected offerings and home automation and really drive up the sale, including a new monitoring contract.

And although the MSO industry is forecast to grow at a CAGR of just below 20 percent over the next five years, Dearing says that MSOs are still falling short of their initial goals when they first entered this space five- to six years ago.

“They have done reasonably well over past few years but it hasn’t been good enough for their corporate headquarters, which are expecting much more and obviously they are competing with each other as well,” Dearing explained.

“Comcast is doing better than AT&T and Time Warner Cable, and this is putting pressure on the other two. Comcast was also recently involved in the purchase of Icontrol, so they are here to stay.”

And with the rise of the smart home, Dearing says there “is evidence to some degree” that smart home and interactive services are helping to increase and drive up the overall penetration of home security in the U.S.

The challenge within the smart home now is figuring out a way to have all the components within a system work together seamlessly. “I have been to quite a few smart home conferences and trade shows over the past six months and interoperability is what everyone is talking about, and the issues being caused by so many suppliers entering the same space with different takes on how it should be done,” he said.