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Toronto police considering non-response

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Wednesday, June 4, 2014

Toronto, the largest city in Canada, is mulling the possibility of not responding to private alarms, citing a false alarm rate that looks bad even within that context.

According to a report from the Toronto Star, just 300 of the 20,000 private alarm calls Toronto police responded to in 2012 turned out to be legitimate. As a result, an internal police steering committee is reviewing the cost-savings that could be reaped by scaling back on alarm response (among other services), the report said.  

By doing so, the committee estimates the police force could realize $613,222 in savings, according to the report. That amounts to 10,960 officer hours.

Additionally, the committee recommended police stop taking reports on lost or stolen property whose value does not exceed $500.

From a law enforcement perspective, it’s sensible to do away with writing redundant reports for lost property, particularly when other institutions are better suited to deal with such events. But what could a non-response policy portend for alarm companies who would then have to provide private response services themselves? Not only do companies stand to incur the costs associated with this; they also stand to lose what many in the industry view as the most vital element of the value proposition of an alarm system—the guarantee of police response in the event of a legitimate alarm.  

False alarms (and what to do about them) remain among the most polarizing issues in the alarm industry today. It continues to define, and sometimes roil, the relationship between private alarm companies and law enforcement.

So what’s can be done? The theories about how to mitigate false alarms tend to diverge and dovetail, making the issue especially complex and difficult to navigate, much less reach a conclusion on. Some believe a clear and properly enforced ordinance, bolstered by measures such as cross-zoning and enhanced call verification, will do the trick, with fines for offending alarms helping to offset the losses. Others say private response is the inevitable long-term solution.

Others still, such as PPVAR, believe the relationship between law enforcement and the industry can and should remain intact so long as the alarm installed base evolves technologically and municipalities move toward a verified response approach (that's not to say the industry is in full agreement over what constitutes a verified alarm). The organization also espouses new video verification standards.

The issue continues to be a fraught one, with no definite solution in sight. To be sure, many cities have made great strides with false alarm reduction. But cases such as Toronto are a resounding reminder that there’s room for improvement.

Vivint to shut down new sales center in Washington state

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Wednesday, June 4, 2014

It was big news last summer when Provo, Utah-based Vivint opened a new 400-employee sales center in Liberty Lake, Wash., suburb of Spokane. But now, barely a year later, Vivint is closing that center, the company says.

Starr Fowler, Vivint's VP of human resources, provided this statement: "It has been a pleasure to be part of the Liberty Lake community, which has hosted one of Vivint’s sales centers for the past year. Due to a reallocation of resources, the Vivint Liberty Lake office will close on June 27, 2014. At that time, all employees are eligible to receive severance, and some employees will be offered the opportunity to relocate to Provo, UT. If of interest, employees are encouraged to apply for other positions with Vivint, and their application will be considered. Vivint remains committed to providing world-class customer service to its more than 800,000 customers across North America.”

It’s not clear exactly why Vivint is reallocating resources away from the center. According to reports from Washington state media, it's also unclear whether Vivint ever reached its planned goal of hiring 400 employees.

The new center was billed as part of the home automation/ home security company’s plan to diversify its sales channel by increasing inside sales. Vivint has been known primarily as a door-knocking company. Vivint has said the Liberty Lake center was its second inside sales center and its first outside of Utah.

Vivint received a $150,000 incentive to open the Liberty Lake center from an economic development fund managed by the Washington governor’s office, according to The Spokesman-Review.

Why the change in plans? I'm going to try to learn more from Vivint execs.

 

Sequoia pumps $57m into SimpliSafe

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Wednesday, May 28, 2014

In the modern security environment, there’s no shortage of relatively new, tech-savvy companies intent on revising the traditional alarm monitoring business model. That some of these upstart companies, such as Cambridge, Mass.-based SimpliSafe, are now attracting serious outside investment interest is a development that bears watching.

SimpliSafe, which provides wireless security systems and professional monitoring services without long-term contracts, recently partnered with Sequoia, a prominent venture capital firm in Silicon Valley, to raise $57 million. On its website, the company claims to have 100,000 customers.

SimpliSafe describes itself as a “disruptive tech company working to help people live safely,” while touting its in-house maxim that “being safe should be simple.”

Interestingly enough, SimpliSafe doesn’t fit perfectly into the DIY/MIY mold; it’s really more of a hybrid between those types of systems and more traditional security units. A Wall Street Journal blog noted that a SimpliSafe system with sensors and other burglary protection components, along with a hardware package, typically costs about $260. The company also offers monitoring services for $14.99 per month, but doesn’t require customers to purchase them.

In a company blog, Chad Laurans, CEO of SimpliSafe, said the following: “We’ve eliminated unnecessary middlemen, so we can pass the savings onto our customers and pour our resources into product innovation and customer service.”

Down the road, one of the biggest threats to central station RMR could be the proliferation of increasingly sophisticated DIY/MIY systems that unite ease of use and installation with competitive pricing models. As of yet, there’s no clear writing on the wall that says central station RMR will suffer the effects of “disintermediation” at the hands of innovative MIY products. But a $57 million infusion is no small sum for the security industry. It goes without saying that an investment of this scale can be transformative from a product development standpoint.

It will be interesting to see if this pared down version of security and alarm monitoring indeed proves to be disruptive, and if so, how the monitoring industry responds to the challenge. 

Google’s Dropcam security push and Apple’s smart home “big play”—should security companies be worried?

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Wednesday, May 28, 2014

Recent news reports say that Google may buy startup Dropcam, which makes video cameras that stream video to a user’s computer or cellphone, as a way to get into home security. And The Financial Times has reported that Apple is soon expected to make a “big play” into the smart home, launching a new software platform that will allow users to control security systems and home features such as lights directly from their iPhones.

Should security companies be worried? Not really, according to a report today from Imperial Capital, a New York-based full-service investment bank.

If the Dropcam report turns out to be true, it would mean Google is adding a security component on the heels of its entrance into home automation with its recent $3.2 billion purchase of Nest Labs, maker of smart thermostats and smoke alarms.

But the report, authored by Jeff Kessler, Imperial Capital’s managing director of institutional research, said it doesn’t believe the Dropcam purchase would have a negative impact on security companies or other pure play home automation companies, like Control4.

The reason, it says, is that “security companies generally are not participants in the do-it-yourself (DIY) market and do not target particular groups that may be interested in such products (e.g., college students, young professionals living in high rises).” Also, the report said, although “Dropcam could be a good entry product for those that do not understand or are not familiar with security products, it does not replace the security, home automation, and customer service capabilities which the likes of ADT or Control4 provide, and nor do we believe that it wants to.”

What about the potential Apple smart home/security play?

The report says: “We wonder if Apple will open up its “big play” to allow a broad base of installers, service, and responders to interact with it, or will it be another closed end system, in which the homeowner, or more likely the apartment owner, can check on what is going on at home on an Apple iPhone, and then have the responsibility of “making the call” to police or health responders based on what they have just seen on the iPhone. Another uncertainty is if the police would trust this system, or would law enforcement be more likely to respond to a more familiar source that has verified the same incident.”

The report summarized by saying that while the new developments are exciting and will be particularly attractive to those who don’t own homes, the lack of professional monitoring is a drawback.

“Remember, these monitoring stations (to be accredited) have to show that their average time to make a decision to dispatch or not to dispatch is less that 30-35 seconds, have tremendous redundancy, and can typically be trusted. We simply do not believe that Apple users will get that service.”

In fact, the report says that these DIY products could indirectly help professional security companies by introducing a younger generation to the idea of home security/home automation, which could lead those customers to “potentially switch to a larger, more powerful, and more comprehensive platform in the out years.”

Alarm.com, a leading provider of interactive security services, also weighed in to me on the new developments involving Google and Apple.

That Vienna, Va.-based company stressed that security is the backbone of the smart home and noted that professional monitoring is a key differentiator, but said security companies need to make sure homeowners know that.

"The key purchase driver for home automation is security.  We see this in both consumer surveys and purchasing trends," Alarm.com said, in a statement.

Also, Alarm.com said, the announcements "validate the popularity of a growing range of connected devices and services. Security dealers should tap into this underlying consumer demand by aggressively marketing and selling a complete range of connected home technologies with professionally monitored security at its core."

 

Samsung leader departs

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Wednesday, May 28, 2014

Samsung Techwin America’s EVP Frank De Fina announced May 28 that he is leaving Samsung for personal reasons.

"As of June 2, I will no longer be there. I made the decision on my own, the departure is amicable," he said. A replacement has yet to be named, though De Fina said there are "a couple of obvious potential choices. There is a very capable management team there."

De Fina joined Samsung in February 2010, and said he is proud of how far Samsung has come in the security industry since then. "Five years ago we didn't even appear on the IMS [Research, now part of IHS]  list [of top IP camera providers]," he said. "This year our business grew over 75 percent." And he expects to "move up a couple of notches on the IHS list."

De Fina, who has "retired" twice before, said he is not even going to say he's retiring now. He is simply "taking a breather" and will likely return to the industry, perhaps in a consulting role.

Asked about the biggest challenges getting Samsung up to speed, he said "building the brand and credibility in the security space."

"I will take credit for organizing a great team," De Fina said. "But the credit for building the business goes to [that team]," he added.

"I'm leaving Samsung in much better shape [than when I arrived] and the team is spectacular," he said.

Before Samsung, De Fina was the long time president of Panasonic Systems. He retired from Panasonic Systems in 2008 to run Paul Reed Smith Guitars for two years before joining Samsung.

De Fina can play guitar in case you didn’t know. Here’s a video that my former colleague Sam took at the PSA-TEC jam a few years ago. Scroll down to the video; it features Paul Michael Nathan on harmonica, Frank De Fina on guitar, Daved Levine on bass, and Jerry Cordasco on drums.

The biggest opportunities in the security industry? De Fina said he did lots of research during a recent month-long tour of the Silicon Valley. "I spoke to big name companies [Google, Yahoo, others] and asked them what their [security] concerns are. "They look at us [the security industry] as a bit naive" in terms of cyber security. They also are concerned about the physical security of some critical infrastructure in this country such as data centers and cell towers, De Fina said.

De Fina identified the biggest challenge for integrators as shrinking margins. He recommends that integrators "pay attention to solving the problems that are not so easy to solve ... to reinvent themselves to mimic the growth opportunities I mentioned earlier."

De Fina is vice chairman of the Security Industry Association Board of Directors Executive Committee.

He was instrumental in the establishment of a security degree program that will be launched in 2015 at Mercer Country Community College.

He also holds positions in the International Biometrics Industry Association (IBIA) and is a board member of the Paley Center for Media (formerly Museum of Television and Radio) as well as a member of the board of the New York Friar’s Club Foundation.

Private equity firm invests in mPERS company

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Wednesday, May 21, 2014

The PERS market has become somewhat notorious for its lack of acquisition activity, a surprising reality given the demographic trends in America that appear to favor such a market.

Many industry watchers on the private equity side attribute the lack of acquisitions to valuations that have yet to ripen. Some hold that as churn decreases, generating longer average account lives, outside investment is bound to pick up. With greater scale and higher multiples, the acquisitions will follow.

Enter Stonehenge Growth Equity Partners, a Tampa-based private equity firm that recently invested an undisclosed amount in MobileHelp, a mobile PERS provider based in Boca Raton, Fla.,—this according to multiple reports, including an article form the Tampa Business Journal.

Stonehenge summarizes its investment strategy on its website, noting that it typically invests in growth stage businesses and “aims to catalyze rapid growth of companies in up-and-coming markets.” The firm also says its typical investment size is between $1 and $5 million, and that it typically targets companies that have at least $3 million in revenue and are profitable.

Like many investment firms, Stonehenge likes the recurring revenue business model.

No question, then, that MobileHelp fits many of the firm’s ideal investment characteristics. Henry Edmonds, president of The Edmonds Group, an investment bank in St. Louis, said it’s very good news that private equity investors are supporting PERS businesses. He added that it’s unsurprising Stonehenge chose to invest in MobileHelp, which Edmonds characterized as a “leading provider of mobile PERS solutions,” that has distinguished itself in an increasingly competitive market.

“I think we’ll see a lot more of this as people get beyond the early stage and nascent products and once they’ve established a niche in the industry as MobileHelp has done,” Edmonds said. “I think it will be likely that these kinds of companies will attract new capital, because it’s an exciting space.”

He described the PERS and mobile PERS market as “the wild wild west,” in a certain sense, because there are a lot of products currently vying for attention.

“But if you can rise above the fray as MobileHelp has done, it’s a great opportunity because of all the current and expected growth in mobile PERS and mobile security,” Edmonds said.

I’ll be following up on this story in the coming days. I plan to piece together an article about the implications of this investment, bringing together the perspectives of MobileHelp, Stonehenge, and others on the private equity side who’ve been monitoring the PERS valuation market for some time now.

Good news for security companies: Cable Guy’s customer service ratings fall to new lows

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Wednesday, May 21, 2014

Professional security companies proudly point to the good service they give consumers as an important differentiator between them and their giant cableco and telecom competitors. And a new consumer satisfaction survey suggests they don’t have to worry about losing that edge to the Cable Guy anytime soon—because it shows new dips for Time Warner Cable and Comcast, and AT&T and DIRECTV don’t fare too well, either.

The American Customer Satisfaction Index released its annual measure of the communications industries this week. The ACSI report measures consumer satisfaction in such categories as Internet service providers (ISPs), subscription TV service, fixed-line and wireless telephone service, computer software and cellphones, according to a news release. Ratings are done on a 100-point scale.

“Customer satisfaction is deteriorating for all of the largest pay TV providers. Viewers are much more dissatisfied with cable TV service than fiber optic and satellite service (60 vs. 68). Though both companies drop in customer satisfaction, DIRECTV (-4 percent) and AT&T (-3 percent) are tied for the lead with ACSI scores of 69. Verizon Communications FiOS (68) and DISH Network (67) follow.”

AT&T’s and DIRECTV’s dips in customer satisfaction are of particular note because I just wrote about how AT&T’s $48.5 billion plan to buy DIRECTV could impact Digital Life—AT&T home security/home automation offering—and the security industry.

Hmmm…a dip in customer satisfaction regarding any part of those companies’ businesses doesn’t seem like a positive—especially if they want to bundle services!

There’s also a $45 billion pending deal for Comcast to buy Time Warner Cable. Both of those companies have home security/home automation offerings but they’re not making customers very happy, at least when it comes to TV and Internet service, according to ACSI.

“Cable giants Comcast and Time Warner Cable have the most dissatisfied customers. Comcast falls 5 percent to 60, while Time Warner registers the biggest loss and plunges 7 percent to 56, its lowest score to date,” the news release said.

The release also has a prepared statement from David VanAmburg, ACSI director: “Comcast and Time Warner assert their proposed merger will not reduce competition because there is little overlap in their service territories. Still, it's a concern whenever two poor-performing service providers combine operations. ACSI data consistently show that mergers in service industries usually result in lower customer satisfaction, at least in the short term. It's hard to see how combining two negatives will be a positive for consumers.”

Customers also aren’t happy with their Internet service from such providers, according to ACSI.

“High prices, slow data transmission and unreliable service drag satisfaction to record lows, as customers have few alternatives beyond the largest Internet service providers. Customer satisfaction with ISPs drops 3.1 percent to 63, the lowest score in the Index, the release said.

“At an ACSI score of 71,Verizon's FiOS Internet service continues to lead the category, surpassing AT&T, CenturyLink and the aggregate of other smaller broadband providers, all at 65,” according to the release. “Cable-company-controlled ISPs languish at the bottom of the rankings again. Cox Communications is the best of these and stays above the industry average despite a 6 percent fall to 64. Customers rate Comcast (-8 percent to 57) and Time Warner Cable (-14 percent to 54) even lower for Internet service than for their TV service. In both industries, the two providers have the weakest customer satisfaction.”

However, customers are happy with their cellphones. That rating is “up for a second straight year, rising 2.6 percent to a new all-time high ACSI score of 78.”

The release said, “Steady growth in the use of smartphones, which have much higher levels of customer satisfaction, helps drive the overall industry gain. However, as data usage increases, costs to access overloaded networks are high, leaving customer satisfaction with wireless service providers stagnant at an ACSI score of 72.”

ACSI found that, “among wireless phone providers, Verizon Wireless separates from the pack after climbing 3 percent to 75. T-Mobile (69), Sprint (68) and AT&T Mobility (68) are tightly grouped behind. As smartphone adoption continues to grow, network demands increase along with costs to the consumer, each contributing to stagnant customer satisfaction.”

Also interesting were the ACSI POTS ratings. “Customer satisfaction with fixed-line telephone service dips 1.4 percent to an ACSI score of 73, but remains the most satisfying of all types of telecommunications. However, the score is due to shrinking landline usage. As more households abandon fixed-line service for cell phones, the customers that remain tend to be the most satisfied,” the release said.

PlateSmart to take LPR to the cloud

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Wednesday, May 21, 2014

I spoke with John Chigos, CEO of license plate recognition provider PlateSmart, which bills itself as the only “software only LPR solution.”

It’s a newer company that got its start at the 2012 Republican National Convention in Tampa. “That was our beta,” Chigos said.

Chigos officially introduced the product to the market in 2013 and it’s now deployed in locations such as the Port of Tamp, Florida hospitals, a large fashion house (for use at its distribution points, in traffic safety monitoring applications, and college campuses.

The 20-employee firm, based in Oldmar, Fla., is privately held. It has “growth equity from [undisclosed] VCs, and will continue to do that until we reach sufficient size to continue growth internally,” Chigos explained.  
 
The company is in growth mode right now, Chigos said, “bringing on additional sales and marketing people as well as increasing our development staff.”

Unlike the LPR “hardware/software solutions,” Chigos said he envisioned an open platform that would work with all kinds of hardware and software. PlateSmart is ONVIF compliant, works with Exacq, OnSSI and other VMS providers and it has relationships with a number of analog and IP camera providers including Pelco, Panasonic, Samsung and Axis.

Chigos says PlateSmart can “use existing equipment and [end users] get more robust analytics.”

Because no hardware is involved, customization is quick, he said.

PlateSmart offers a mobile application, designed for law enforcement, and a fixed-location platform called ARES. The next step will be to offer Platesmart in a cloud-based SaaS form, making it affordable smaller organizations, and also giving installers a new revenue stream.  

In addition, PlateSmart can read “jurisdictional data … it can recognize the state, province or country and provide that data with the plate-read,” which provides more data and accuracy for the end user, he said.

It can also read the color of the vehicle, which can help determine if a car has the correct license plate.

PlateSmart’s basic package is two cameras but it can easily scale to a couple hundred cameras, he said.

What about privacy concerns? Chigos said that “LPR does not provided the information many people believe it provides. Our technology carries out the process of [identifying vehicles of interest] for law enforcement …it’s not for enforcement on the other side of the equation [ie.] who’s running a red light.”

He describes PlateSmart technology as “speeding up the process [of identifying vehicles] that law enforcement and security have done visually for decades.”

Furthermore, he says “we never touch, see, or handle the [license plate] data. Only the end user of the technology can see or act on the data.”

Companies that get involved with LP data, particularly selling that data, are the ones that cause legitimate privacy concerns, he said.

Chigos quoted research group IHS, saying the worldwide market for LPR is estimated to be $600 million today and is projected to grow to $1 billion by 2018.

“Applications for LPR are growing everyday,” Chigos said. “It’s going to be a mainstay of security in this country because it delivers information in real time.”
 

ADT’s new $25m mPERS partnership to also enhance lead generation

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Wednesday, May 14, 2014

ADT has invested $25 million in a new partnership with Life360, a provider of location-based services and family networking technology that has more than 33 million customers, ADT announced this week. The partnership is expected to lead to cobranded mPERS solutions and also “provide a valuable lead generation source for ADT,” the company said.

During a discussion of ADT’s disappointing Q1 results earlier this year, CEO Naren Gursahaney cited some “lead generation challenges,” the company had been having and said ADT planned to expand its lead generation activities in response.

On May 13, ADT announced the Life360 partnership, which it said will “enable the development of innovative, cobranded mobile security applications to provide greater safety and security services to families.” According to a news release, ADT is taking a minority ownership stake in the company, “through a $25 million investment, leading a $50 million Series C financing for Life360. The investment forges a mutually beneficial bond for the two companies to work together to advance personal security solutions available to the more than 33 million families who use Life360.”

Arthur Orduña, senior vice president and chief innovation officer for ADT, said the partnership allows ADT to expand security outside the home. “Today, ADT provides security and monitoring solutions for families wherever they are. This partnership with Life360 fits within our innovation strategy to reinvent the idea of ‘security’ for our increasingly mobile lifestyles. It’s a perfect pairing as ADT and Life360 are both leaders in their categories that share a very similar vision and mission – to provide peace of mind to families,” Orduña said in a prepared statement.

The release said the two companies plan to release a new codeveloped mobile application in late 2014. The new mobile app “will integrate features from ADT Chaperone, an existing ‘on-the-go’ personal security offering from ADT. The upcoming mobile application from ADT and Life360 will provide direct access to ADT’s 24/7 monitoring centers that can connect users to police, fire and emergency medical responders,” the release said.

According to Orduña’s statement, “Soon every family will be able to use the app to meet their unique needs, whether it’s providing a chaperone for a child walking home from school and verifying they reached their destination, or knowing to arm the home’s security system when the house is vacant.”

The app will be free. Also, the release said, “and upgraded security features from ADT will be available at a nominal monthly subscription fee.”

Chris Hulls, Life360 founder and chief executive officer, issued a statement saying: “Mobile is at the center of the connected home, and given security is a critical element for today’s families, our integration with ADT offers customers the value of one of the world’s largest security and home automation providers, plus the connectivity of the largest family network.”

 

Kessler examines future of Monitronics

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Wednesday, May 14, 2014

Good news for Ascent Capital, the parent holding company of Monitronics, according to a recent research report conducted by Imperial Capital’s Jeff Kessler. The takeaway is that the monitoring company’s Q1 2014 earnings—$484 million in revenue, EBITDA of $321 million—were consistent with estimates and the company is “not experiencing impact from the entrance of cable/telcos."

As a result, Imperial Capital is maintaining the outperform rating and one-year price target of $94, about 43 percent above the company’s recent share prices, recorded in the report at $65.80.

The share price is being impacted currently by skittishness surrounding the big new market entrants, referred to as a “false negative perception about the competition from cable/telcos.”

“We believe that Ascent remains fundamentally strong and is not seeing any slowdown as a result of cable/telcos entering the security space,"  the report says.

As far as the new competitive landscape, Kessler believes traditional security companies remain Monitronics’ primary competitors. He also envisions something of a schism taking place between traditional large security companies and the newcomers who established themselves first in other industries.

The former, according to the report, will continue to command their share of business in the market for critical life safety systems, while the latter will bring to market more of a “home services,” lifestyle-focused package. The report said that existing skepticism about the “commitment to service” of the cable/telcos could hinder their ability to gain share from the largest security providers.

Kessler’s report was extremely thorough, full of many fascinating prognostications about not just Monitronics but the industry at large. Needless to say, a lone blog post can hardly do it justice. Here’s a sample sentence from the report that certainly piqued my interest:

“We believe smaller, undercapitalized security companies who do not have the capital to install Alarm.com or iControl wireless interactive systems may face real competitive threats.”

The report also touched on the implications of the enormous advertising budgets of the new market entrants, as well as the positive effects of Monitronics’ acquisition last August of Security Networks.

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