Home Security SOS

Broadband connectivity is the cure to residential security ailments

• By Paul Dawes
• Feb 29, 2008

Monitored security is a $30 billion industry with approximately 24 percent household penetration and consistent year-over-year revenue growth. The top 100 home security dealers rack up approximately $7 billion in revenue each year; they added more than 400,000 new customers in 2006.

Given the industry’s growth and reach into households across the United States, it may seem difficult to identify any major areas of concern. But if you look closely, you’ll find the home security industry is performing significantly below its potential.

The Industry in Perspective
Traditional monitored home security has been in the United States for more than 30 years. It’s followed the same evolution as many other industries with recurring monthly revenue—once an expensive luxury item for the upper-middle class, now an affordable must-have for the masses (albeit with a three-year contract required). With companies now offering fully installed systems for $99 and monitoring fees from $25 to $35 a month, home security never has been more accessible.

Although the industry has started appealing to the average American, home security merely is limping along compared to other service industries. Broadband Internet access is now in 60 percent of U.S. households. More than 80 percent of U.S. homes have a mobile phone, and VoIP is already at 10 percent penetration—even though it’s only been available for three years and users need broadband service to get it. These successful industries highlight the stagnancy of the home security industry.

Perhaps it seems more intriguing to whip out an iPhone at the tavern instead of installing a motion detector in your living room. But, if you step back from the details, what you find is that high-growth, recurringmonthly- revenue industries, such as broadband, mobile and VoIP, have something that home security doesn’t—a perceived daily value—making them more appealing to the average consumer.

Peace of Mind
Home security dealers have done a wonderful job of stimulating purchases by marketing the core benefit that security provides. But peace of mind isn’t tangible and, in many cases, consumers forget the value the service is supposed to provide and eventually stop using it. And when the security monitoring bill arrives in the mail each month, the consumer questions what they actually got for the $30—an unlikely scenario for broadband and mobile users.

Perhaps the protection that home security provides is what causes its own problem. If you don’t get burglarized, then why do you need a security system? Or, is the fact that you haven’t gotten burglarized due to your home security system? Who knows. But one thing is certain— if you don’t use something, you forget its value. And if you forget its value, you aren’t going to pay $25 to $35 a month for it.

The Cure
Perhaps the answer is to add daily value for the customer to bring home security in line with the other successful service industries.

The rapid growth of broadband offers the home security industry an opportunity to enhance its product and service offering to build a better mousetrap. Companies are starting to offer broadband connectivity to security systems, allowing the end user to control the system from a personal Web portal—a great first step on the road to innovation and much-needed evolution in the home security industry. Web-based solutions can deliver e-mail and text messages to end users so they know instantly when events occur in their home. At the same time, the broadband connection provides an always-on link to the central station.

While this is a baby step to providing daily value, consider the benefits this offers consumers that traditional home security can’t. Now you know when your children arrived home from school. You know when the housekeeper arrived and left. You even know when the dog walker picked up the dog for a stroll.

And this is only the beginning. Adding low-cost IP cameras to home security offers an entirely new level of connectivity and solves a host of problems that consumers didn’t know they had. Imagine seeing live video of who’s at the front door and disarming the home security system from your Web portal so the person can enter. Just received an email that your front door was opened? How about having a picture or video clip of the person entering the door attached to the e-mail so you know who it is and when he entered? Imagine how many false alarms will be negated because homeowners can validate a real emergency by accessing their Web portal or mobile phone to see what’s happening.

The combination of monitored home security and remote home monitoring offers a strong platform to build on. To further increase daily value, add simple conveniences like remote home control functionality to the value equation. There’s no reason a home security system can’t do more than home security. Enabling end users to remotely control lighting, thermostats, door locks and more connects consumers to their homes in ways that have proved impossible to date.

Watch the Industry Grow
Integrating new and innovative functionality into the existing home security paradigm is not only feasible, it’s already happening. Home security companies have announced their intention to start offering a fully integrated solution to customers. This is the perfect platform for ISPs to leverage as they enter the home security industry. It allows them to piggyback on the broadband pipe they’ve already connected, giving them a better home security solution than traditional home security companies offer today and providing an additional service.

Just as TiVo transformed the TV-watching habits of consumers, this new concept can alter the way people think about home security. It provides the consumer with enhanced functionality and greater peace of mind, thus it’s a better value than what’s out there today. The real value is the daily consumer interaction with the home that increases usage, perceived value and end-user satisfaction. This is the type of innovation the industry needs to grow, as it will appeal to more people and will result in less customer turnover.

U.S. monitored security is poised to be a $75 billion industry—but not without innovation. Combining peace of mind with features that add the same type of daily value found in other consumer service industries is the path to get there.