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Verizon's home security cards revealed--Commentary from a security industry luminary

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Thursday, January 6, 2011

I have been following Verizon's nudgings around the security industry since I met one of the company's marketing folks at ESX in June. And now that they've unveiled their new Verizon Home Monitoring and Control solution at CES in Vegas, I've got the story on that as well (just take a look at our top story on today's newswire).

In my research on the solution and in my interviews of the key players and industry commentators, I turned to security industry mainstay, George DeMarco who is the chairman of ESX.

George assured me he'd been talking about this kind of thing for quite a while and promised to get back to me as soon as he'd had a chance to do a little looking around of his own. As promised, George got back to me in an email at midnight of Jan. 6, the day CES dawned in Vegas. As luck would have it, I just happened to be going through my work email at the time (George and I are THAT devoted to security!) I've included select portions of George's remarks in my general Verizon story, but I felt that his response--more than just a simple few remarks--constituted a cogent and thought-provoking look at the way the winds are blowing. So compelling was George's response that I've decided to include it in its entirety below. Please enjoy George DeMarco's take on the changing state of the security industry, and what we should all be thinking about.

The electronic security industry has been going through a metamorphosis for some time. This is a result, in my opinion, of the advent of Fortune 500, multi-national and large, well-funded companies over the last ten years. Recently, we had Ascent Media, a content provider for media and entertainment services, entering the security monitoring business in a huge way. Now we have Verizon, with a market cap of $106 billion, announcing their official entrance into the "connected home" arena, offering cameras, motion sensors, smart door and window locks and energy efficient devices.

What we are witnessing is the evolution of the industry, being driven by new players focused on penetrating a very large market opportunity or increasing their customer share. Energy savings and remote access into the home will become a huge driver for homeowners in their buying decisions and Verizon recognizes this value proposition for their customer base. It is fast becoming a race to capture the attention of customers interested in convenience, savings and security, and consequently capturing the recurring revenues associated with these services.

ESX chariman George DeMarco

Technology is allowing suppliers and service providers the ability to deliver more desirable products and services that offer more powerful solutions for end-users. I believe these newest non-traditional players are "thinking on the fringes" of the box and are ready to storm the castle so to speak. The question is can companies, such as Verizon, deliver that personal touch expected by so many end-users. And, of course, from a regulatory aspect, is Verizon prepared to go it alone or will they be partnering with the industry. The industry says past history has proved that these companies have failed miserably; however, past history is no guarantee of future performance. From my viewpoint, I think competition is a good thing ... just don't underestimate your competition.

Think about this ... Verizon has 93 million customers nationwide. This number is extremely compelling as they develop their go-to-market strategy and uncover their execution results. How many of their customers own homes?  How much will it cost them for lead generation? How effective will they be penetrating their own customer base? What is their current bundling strategy? What is the percentage of customers that choose all their available services in a bundled offering?

This is where I offer words of caution ... be careful, be very careful. At some point, they will get it right and many alarm dealers and integrators will simply say what the heck happened. The current business environment offers a great opportunity for long-time industry professionals to reevaluate their game plans and consider writing new play books to effectively compete at a higher level, no matter who your competition is, today or tomorrow.

More creative dealer incentives

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Tuesday, January 4, 2011

I wrote a story a while back about Baltimore-based AlarmWATCH doing some creative dealer incentives. They brought competing dealers out for a day of tailgating and football. Now this morning I came across another monitoring company setting up some friendly competition with a cool payoff for dealers.

SentryNet's sending dealers on a cruise to Cozumel...

"SentryNet is planning their annual dealer conference in 2011 and has booked cabins and meeting space on the Carnival Elation for their dealers and the few lucky vendors who sign up.  Dealers are earning their tickets to get on-board by doing what they do anyway; putting accounts on-line with the industry’s best independently owned monitoring station.  They receive bonus points for using enhanced services and attending industry meetings, on a state and national level."

That's cool. Sounds like a nice way to encourage dealers to get out and grow their businesses.

"We have been gathering our dealers annually for the past 16 years in different locations to educate, entertain and celebrate. These annual dealer seminars are usually held at fun locations so we can get together for two or three days. We provide CEUs, with a mini trade show in an atmosphere that encourages our dealers to share success stories and network with colleagues. Many dealers have established and maintained friendships over the years at these meetings. It also gives vendors and dealers a chance to network one on one in a relaxed atmosphere that helps build the personal relationships necessary for doing business together. Vendors usually sign up early to get a good space and a chance to be on the agenda for panel discussions or CEU classes," said SentryNet VP of operations Michael Joseph. "The prime locations are our way of thanking our dealers for their business. Past years have included locations at resorts, casino’s, and historic venues; generally in the southeastern US. Last year’s event was held in Clarksdale, Mississippi, 'the birthplace of the blues and home of Morgan Freemen’s Ground Zero Night Club.'"

The ocean-bound dealer conference will include a mixer and mini tradeshow as well as class time for those dealers and employees who need to attain their NTS CEU’s for licensing renewals.

“We believe this will be our best attended and most remembered conference,”  David Avritt, president and owner of SentryNet said in the release. “We stress to our dealers when you work hard, you have to learn to play hard and in the end you will succeed.  This is just one way we can assist them in the process.”

More information on SentryNet’s 2011 Dealer Conference can be found at SentryNet's site.

 

One down, three to go for Mace; ADT on Good Morning America

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Tuesday, January 4, 2011

Mace took another step toward its goal of becoming a pure-play security company this week, with the sale, announced Monday, of its Arlington, Texas car wash.

A manufacturer of personal defense spray, security products, and owner of CSSS, a wholesale monitoring station, Mace still owns three car washes. Two are under agreement and one is under lease.

The sales price for the Arlington, Texas was sold for $350,000. Mace received $279,000 in cash after paying off a related mortgage and closing costs. I wrote about Mace's progress last month. The remaining car washes will bring extra cash (some of which will be used to pay the remainder of a $4.6 million settlement to Louis Paulino the company's former CEO) One car wash is valued at $1.8 million, another at $775,000, and the final one at less than $100,000.

Mace CEO Dennis R. Raefield, said in a statement, “We are pleased to announce this sale in our continued progress in exiting the car wash business. We anticipate a complete exit in Q1-2011.”

In separate, unrelated news, ADT’s  new interactive services product Pulse was scheduled to be featured on Good Morning America at 9 a.m. this morning.  Allison Rhodes, the “safety mom” was scheduled to talk about ADT’s product. And, if you saw a guy waving an ADT sign (blue, octagonal and trademarked, by the way)  outside the NBC studio on this cold January morning, that would be a frozen Floridian, Bob Tucker, ADT spokesman.

Favorable forecast for security industry

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Monday, January 3, 2011

A new strategic business report on the security industry explains how many alarm companies weathered the economic recession and paints a rosy picture for the industry over the next few years.

The market research report, announced today by Global Industry Analysts, says technological innovation, increased concerns about crime, and the greater affordability of security systems and services are all factors driving growth.

The report, titled “Alarm Monitoring Services: A Global Strategic Business Report,” predicts that the global alarm market will reach $43.3 billion by 2015.

One reason for that, the report says, is that “security systems are fast becoming lifestyle products for the consumers, thus opening [a] new high-end market for the manufacturers and service providers.”

The report says that to offset the slump in the home construction industry during the recession, manufacturers, distributors and dealers “adopted novel technologies and services.” Now, the report says, “companies offering various novel and unique products as well as services are garnering considerable business in the burglar alarm market.”

The report notes: “Consumers are increasingly demanding alarm monitoring companies for the management of the administrative functions of CCTVs, alarm systems and access controls.”

Also, while the report states that some companies folded during the slump, when the lack of demand for new homes had a negative impact on the home intrusion market, “the rate of home as well as business break-ins increased at a considerable pace.”

“This offered a whole new segment of consumers to the alarm companies, post recession,” the report continues. “Gradual revival of the housing sector and growing customer awareness about the need to install a cost-effective and efficient home security system is likely to fuel demand for alarm monitoring services in the near future. Moreover, increased investment by government entities in various home security products as well as services would provide further impetus for growth of homeland security services.”

Major players profiled in the report include ADT Security Services, G4S PLC, Global Security Solutions, Guardian Protection Services, Niscayah Group AB, Protection One, Reliance Security Group, Securitas AB, Siemens AG, UTC Fire & Security, and Vector Security.

More information on the report is available at: http://www.strategyr.com/Alarm_Monitoring_Services_Market_Report.asp

 

Post storm updates

 - 
Wednesday, December 29, 2010

I got back from vacation just in time for the big ‘ole snowstorm that shut down the East Coast Sunday and Monday.

Some of you who live in more hospitable climates might think that was poor timing; not I. As long as my power doesn’t go off for too long, I love a Nor’Easter. This one, at least in the Portland, Maine area, dropped enough snow to make it a work-from-home day, but we only lost power for a couple hours at my house, not long enough for my Mac or my iphone to lose its charge, or for the pipes to freeze, or for my kids to get nervous about me, then, losing my sense of humor. Really no technical difficulties at all, just a good snow day.

So, who said nothing happens in the business world over the holidays?

Busy couple of weeks in security land indeed.

I interviewed Aisling MacRunnels on Monday about 3VR’s plans for the $17 million it scored on Dec. 21 It’s the second time I’ve spoken to Aisling in a couple weeks. She’s 3VR’s new CMO, and she came to 3VR after running marketing for Sun Microsystems. We posted that story yesterday.

And how about the Ascent Media/Monitronics $1.2 billion deal going down after five on Friday, Dec. 17?  It’s well known that Monitronics has been available for purchase for a number of years. More than one person told me—after word started circulating last August that Monitronics was officially on the block—that the fact that this deal was being actively shopped said something good about the improving business climate and general confidence in security investments. If this deal actually went down, I heard, it would bode very well for the industry. Monitronics has a complicated capital structure. Having done many different rounds of funding, it has lots of investors who got in at various stages, valuations and time horizons. And, that makes it hard to make everyone happy.

I’ll be interested to see the final numbers on the deal. As Dan noted in his second-day story,  there’s a lot of missing information right now. And, because Monitronics is a dealer-based business, we really need to get a clearer picture of account creation costs and attrition rates before the deal can be compared to ADT/Broadview, Pro One and several other 2010 transactions.

And speaking of numbers and figuring, just before my vacation and as we were shipping off the January issue of SSN, I wrote a story about a new Total Cost of Ownership [TCO] study  that compares the cost of a hypothetical IP system with a hypothetical analog system for a retail application. Network camera maker Axis touted the study in a Dec. 8 press release, and I spoke to Axis's Fredrik Nilsson for the story I wrote. The study, by Lusax, a Sweden-based research group, found that the breakeven point where an IP system is less expensive than an analog system is 14 cameras.

The study was criticized by some, including Ari Erenthal of B&H Photo in Manhattan. A frequent commenter on Security Systems News stories and blogs, Ari contacted me with some criticisms. In general, he believes the study’s specifications were designed in such a way “to give the IP system the most advantages possible.”

He emphasized to me that he is not necessarily a proponent of one type of system over another. “I’m a security practitioner. My customers use surveillance as a tool to achieve security. I’m not supposed to be dedicated to one or another technology. I look at the need, and [give advice] to fill the need,” he told me. He also said “there are a lot of good reasons to choose an IP system, but price is not one of them.”

Furthermore, he noted that he’s a big fan of Axis cameras and is very likely to recommend an Axis product when he does an IP set up.
 In addition to a general comment, which I included in the story, Ari sent me some more specific criticism of the study and a “binding quote” which is good for 30 days. (Time’s running out on that 30 days at this point—you’ll have to call Ari to see if he’ll extend it for you.)

Below is a synopsis of what Ari sent me that I thought some of you installers out there may be interested in.

1) Erenthal said the camera requirement is too vague.  “The study says 12 indoor domes.” Erenthal questions; “What lux, what lens, what other features? The study does say 480 VTL ... I haven’t recommended a 480 VTL camera in years ... because your average camera is 520 or 540 or even 560 VTL.” Erenthal surmises that 480 VTL was specified to force the bidders to choose from “the few available 480 VTL cameras that have not been discontinued.” The specification for “Quality ‘brand’ name cameras” is vague, he said, and that allows researchers “to look at any dissenting bid and say, no, that isn’t what we meant—those cameras aren’t quality or brand name. “
“I specified 14 Bosch FlexiDome XT+ series domes. They’re indoor/outdoor, DN rated, 540 VTL, 3.7~12mm, which means they’re good for almost any application you can think of (not knowing exactly the application beyond ‘retail’). Retail price is $289.95” 


2) Erenthal said the length of the cable runs is another problem. The study calls for an average cable length of 100ft/camera (video coax) and 65foot/camera, he said. “Why not use Siamese cable to a power box at the DVR? It makes no sense to run two lines and then put the power at a location 45’ from the DVR unless you’re trying deliberately to run up installation costs. ... Therefore, I ignored that and put 1500’ of Siamese and a power box on my quote.”

3) Erenthal does not like the DVR specification. “They specify mid-end ‘brand’ name DVR H.264 compatible incl. storage, and for storage parameters, they ask for “In Store, Minimum 7 days @ 24 hours/day, Open Store: 15 fps (18 h/per day), Close store 1: fps (6/day). Outside Store Minimum 7 days @ 24 hours/day. 10 fps avg. (24 h)”
“These requirements are clearly chosen to maximize the attractiveness of an IP solution. It also never specifies a DVR, just ‘mid end brand name.’ I chose the Paragon 264 from Everfocus with a 2TB hard drive installed. That’ll give you 30 fps per camera, 24 hours a day, for about 6 weeks at D1, way past the required specs, for $2,599.95’ 
Ari says his total cost is $7,357.21 not including shipping, compared to the Lusax installation cost of  $10,000.

A few hours before the Monitronics deal was announced on Dec. 17 Samsung and GVI Security announced that their partnership is kaput. No hard feelings, but they’re breaking up as of Jan. 1, 11, ending the deal where GVI was master distributor for Samsung. I spoke to Samsung’s Frank De Fina that day. Here’s that story. And I caught up with GVI CEO Steve Walin yesterday about the termination of the partnership and GVI’s plans for 2011. Here’s that story.  

Other news? I caught up with Genetec EVP Alain Cote about Genetec's acquisition of Sipelia. Here’s that story. Oh, and summer-model company Pinnacle Security is in hot water again, this time in Ohio. Here’s Tess’s report on that.

HID’s parent company Assa Abloy closed the $1.62 million ActiveIdentity deal on Dec. 17; made plans to acquire Cardo on Dec. 16—Assa Abloy wants to keep Cardo's Entrance Solutions division and ditch Cardo’s other operations in wastewater solutions and paper processing equipment business; on Dec. 23, Assa announced that it would a pay $80 million for LasarCard. HID can’t talk further about the LasarCard deal until it’s closed, but I’ll be speaking tonight to Jay Beaghen of Imperial Capital. Imperial was the exclusive financial advisor to LasarCard on the deal.

Will any more deals get done before twenty-eleven dawns?

 

Contracts won by fire marshal's wife raise alarms

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Wednesday, December 29, 2010

It’s not what you know but who you know that will help you in the business world, or so the saying goes. A recent Connecticut newspaper report about a town fire marshal and the contracts his wife won for her fire alarm company raises the question of whether their personal relationship played a role.

The story published yesterday by the Post-Chronicle said that Jennifer Badamo won a contract of nearly $170,000 for her company, Pull Stations, to install a fire alarm system in the Hamden, Conn. town library in 2008. Town officials say they didn’t know at the time that Badamo was the wife of town Fire Marshal Brian Badamo, according to the newspaper.

The connection has come to light now as town officials are investigating a complaint about the fire marshal, the story said. A condominium association is claiming that work that Pull Stations did at the condo complex was not needed and instead was “a sham” that Brian Badamo came up with to help his wife’s company, according to the newspaper.

The paper said the association contends Badamo threatened to shut the building down if it didn’t get a new fire alarm system and recommended his wife’s business for the job.

However, the state Department of Public Safety has said the fire marshal acted properly when he found the building violated code by not having a fire alarm system on its first floor, the paper reported.

When it comes to the town library, the town’s mayor in 2008 approved the contract with Pull Stations after the fire marshal and the fire chief said the library was in urgent need of a new system because of a continuous period of false alarms from the library, the newspaper reported.

Pull Stations’ bid of $169,880.95 for the job was lower than the bids of more than $200,000 made by two other alarm companies in late May of 2008, the newspaper said. It’s not clear from the story when Pull Stations submitted its bid. The story says the company turned its contract in to the town in July of 2008, but that the contract was undated. The town’s purchasing agent told the newspaper that proper purchasing procedures were followed.

The town has a code of ethics that says any official or  town employee should file a disclosure form with the town if involved in business involving significant financial or personal interest, the paper said. It said the town clerk has no such letter by Brian Badamo. The newspaper said Badamo has been on injury leave since November and that his wife declined comment.

 

Home security camera helps solve Christmas crime

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Tuesday, December 28, 2010

Saw this little post-Christmas heart warmer of a story that highlights how a home security camera likely aided in the return of a stolen dog to its family, and thought I’d share.

The Las Cruces Sun-News, a New Mexico newspaper, reported that a 2-year-old German Shepherd was stolen from the fenced yard of Alex Estrada’s family home right before Christmas. Estrada had given “Bruno” to his father as a gift in 2009 and the dog had become a family favorite, particularly with Estrada’s son, who was heartbroken at the loss, the paper said.

Fortunately, though, the family’s video surveillance camera had captured footage of the theft, the paper reported. The camera showed the man who took the dog was driving a two-toned black-and-silver pickup, according to the paper.

Estrada reported the theft to police and also to the Sun-News, which published a report on Christmas Day saying the dog’s theft was caught on camera.

The day after Christmas, Estrada got a phone call from a couple in another community who found the dog wandering loose. The paper said Estrada “believes the thief likely dumped Bruno when he realized the theft had been captured on video.”

 

Pinnacle employees ‘secure hope’ helping others

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Wednesday, December 22, 2010

I blogged here this fall about Pinnacle Security’s plans to help people through its new charitable initiative called Pinnacle: Securing Hope. Now here’s an example of that new program at work.

The Utah-based summer model company just announced that 80 employees from Pinnacle’s division in Canada recently got back from two weeks in Honduras, where they performed such philanthropic work as building four homes and providing for residents’ energy needs in other homes by installing solar panels and hooking up electricity. In some cases, it was the residents’ first introduction to electricity.

The volunteers donated a total of $250,000 in time and supplies, according to Pinnacle.

“When we presented our employees with the opportunity to participate in this kind of project, we were overwhelmed with volunteers,” Stuart Dean, Pinnacle’s VP of communications, said in a statement. “That response speaks to the kind of people we have at Pinnacle. We are proud to continue our 'Pinnacle: Securing Hope' program and anticipate many similar endeavors in the near future.”

When Pinnacle announced the program in October, company COO Steve Hafen described it as an extension of the security company's mission of protecting people. He said the philanthropic efforts by the company and its more than 2,000 employees would include raising funds to help the continued recovery of victims of the earthquake in Haiti, and providing hands-on help to the needy in places such as Honduras and Mexico. Pinnacle also recently conducted a holiday food drive in its home state.

Graham Wood, division VP of sales for Pinnacle Security, Canada, called the trip to Honduras “extremely rewarding.”

“We were so pleased to be able to work with the community in such a meaningful way and are glad to be part of an organization that fosters and supports humanitarian opportunities,” he said in a statement.

Next place the group of Pinnacle employees plans to visit next year to provide the same kind of donations and services? Africa.

 

Fire regulation: What Toronto may giveth, it may taketh away

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Wednesday, December 22, 2010

An interesting development has been reported regarding a zero-tolerance false fire alarm regulation in the city of Toronto—a bit of a puzzling one given public outcry about the tough rule.

I wrote recently about the new regulation because residents of that Canadian city were reportedly disconnecting their fire alarms to avoid the high fines it imposes. The cost for a false alarm is $350 per truck and three trucks routinely respond to each alarm, bringing the total fine to $1,050.

But now those fines could climb even higher, according to a story in the Toronto Sun newspaper this week. The paper reported that a newly proposed budget item calls for boosting the rate from $350 to $410 per hour per vehicle dispatched.

The fee hike is being proposed at the same time a city councillor is leading an effort to relax the city's regulation to allow residents one free false alarm per year.  Hmm ... is Toronto trying to help solve the problem or fan the flames?

The City Council passed the zero tolerance law earlier this year, and it reportedly has been a boon to city revenues. But Councillor Gloria Lindsay Luby has told me that councillors didn’t realize at the time how hard it would hit city residents. She knows of four or five in her ward who’ve unplugged their alarms out of fear they’d face the hefty fines.

Luby has been working recently to persuade the City Council to go back to a previous regulation passed in 2006 that would allow residents one free false alarm per year. “That way I think we do away with all the issues,” Luby told me this week.

The good news, Luby said, is that the Council unanimously agreed earlier this month to send her motion on to a standing committee she sits on. That committee will review the proposal in January and it should go to the full council in February for consideration, she said.

Luby told me she hadn’t seen a proposal to increase the fee for false alarms so couldn’t comment on it. She said any such plan would also be part of her committee’s review.

On its face, it appears that the higher fee could be at odds with the city’s efforts to ensure that its false alarm ordinance isn’t so onerous that it causes residents to disconnect their fire alarms. Even if they get one false alarm free, that accidental second one could cost as much as $1,230 under the new proposal (presuming three trucks routinely go out)—still a scary thought for many homeowners.

This is how Stan Martin, executive director of the Security Industry Alarm Coalition, put it in an email to me this week when I asked him his thoughts on Toronto’s fee hike proposal:

“I believe Toronto will realize, like other cities that have tried to squeeze unreasonable fees and fines from citizens, that the effort will not yield the desirable results (of increased revenue)... citizens will either stop using devices that generate those signals or they will resist, delay, complain or just not pay ...  leaving the city with large uncollected balances on the books and unhappy citizens—a loss-loss.”

 

More holiday good-heartedness... plus, Deion Sanders!

 - 
Tuesday, December 21, 2010

So, I've been doing a lot of writing about Monitronics, lately. I wrote about two recognitions they got from market research company Frost & Sullivan in the last couple weeks. And then on Friday, the announcement came out that they had been acquired by holding company Ascent Media for $1.2 billion. That's a lot of cash... And a lot of due diligence looking into a company that, according to Ascent CEO William Fitzgerald, "has grown revenues and EBITDA organically for 16 consecutive years." Nice work guys.

I first started writing about the possibility Monitronics would soon sell back in August and at the time, Jennifer Holloway predicted the company's sale before the end of the year. Spot on, Jennifer. Spot on.

Now just today, I received a press release that Monitronics has been pitching in on the charity front. That's another favorite blog topic of mine: taking a look at what security companies are doing to help those in need.

Deion Sanders’ nonprofit, PTA (Prime Time Association) hosted its annual Christmas party in Fort Worth to deliver donated gifts to 7,000 children and their families on Saturday, Dec. 18. Monitronics was represented by Lakesha Moore, and Travis Prater. During the event, needy children were provided with toys and clothing.

From the Monitronics release:

"We are less than a week away from Christmas, but Santa came early for many children on the 'nice list' Saturday. Monitronics and Deion Sanders’ nonprofit, PTA (Prime Time Association) joined forces, once again, to deliver smiles to local children."

Good work guys. Again, from the release:

"'PTA believes that one of the most lasting experiences in childhood is Christmas—each and every child deserves to have that experience,' said Sanders. “With the help of companies like Monitronics, we are able to reach more and more local children every year.'”

Prime Time Association is a 501(c)(3) nonprofit organization founded by Deion Sanders in 2008. Their mission is to serve communities by reaching and teaching youth through sports and education. They promote positive self images and invest in the mental, spiritual, physical, financial, and overall well­being to build stronger kids by reinforcing education.

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