Big Fish In A Small Pond
By John Vickers

Comparatively speaking, North America’s alarm industry is a pretty small pond.  For instance, annual projected revenues for ADT’s parent company TYCO International, (NYSE: TYC) is about 22 billion U.S. dollars for 1999.  Compare that to the combined annual projected revenues of the top 100 U.S. alarm companies (including ADT) at around 4 billion dollars and you begin to get the picture.  Feeling smaller?

In terms of big fish in a small pond, TYCO International is by no means alone as a parent with an electronic security unit.  Brink’s folks, The Pittson Company is a 3.4 billion dollar entity involved in things like mineral ventures while Protection One’s Western Resources has primary focuses in the supply of electrical power.

Some industry watchers believe however that as electronic home security follows along its evolutionary trail, we will begin to see a convergence of ownership with telecommunications giants.   In these waters swim the Bells, the Ameritech’s, and others.  The bundling of electronic home security with overall communications services does appear on the surface to be a better fit for these parents verses say parentage from  mineral exploration.

With legislative roadblocks now out of the way, late September’s announcement that Bell South’s (NYSE: BLS) was broadening its new home alarm division is what some say is just the beginning of what is to come.  As one of the Baby Bells left over from the breakup of its US parent, this 24 billion dollar communications company offers a myriad of telecommunications services to nearly 35 million customers world wide.  Bell South says equipment and monitoring charges can be included on your phone bill and the move is a good fit with product lines like pagers and wireless phones to provide “greater family protection both inside and outside the home”.  (This is the same Bell South that lost a 100 billion dollar bidding war with MCI for control of Sprint International – the biggest merger ever!)

Here on the north side of the 49th parallel, Ameritech’s partnership with Bell Canada is of similar noteworthiness.  Ameritech is one of the largest companies in the world and its Security Link unit is growing leaps and bounds.  Bell is a unit of BCE, Canada’s global communications company that also has tethers around Nortel Networks.  Many assume that measured success in home alarm growth between these two Titanics will simply be a matter of tinkering with the right marketing pathways which inevitably exist through Bell’s direct communications with its 13 million or so Canadian customers.

Then are those who believe the real horizon in home security lies with the ability of residential consumers to receive the multiple communications services ready to be zapped into living rooms, dining rooms, bedrooms (and anywhere else in your house you can think of) through global giants like IBM, Intel Corporation and Lucent Technologies.  The view is that whoever owns the connection coming into your residence is the one who will have most of the power, or make that – profit.  In this arena your home alarm service is just one small portion of an overall communications connection that offers everything from video conferencing to home automation.  The problem however is that the average home could use a minimum of about $2,000 Canadian in wiring for delivery of such services.  As a result, there are those who believe it could take the better part of a generation for the masses to be fully functional in this new world.  In the interim, look for more ground breaking developments in services delivered over existing cable lines and via satellite technology.

One more point.  Big fish in small ponds shouldn’t be construed as great whites whose only mission in life is to devour weaker prey.  They actually can pay huge dividends for consumers.  For instance, there are global giants spending millions today for control of market shares that will take 20 or 30 or more years to fully develop.  As primary generators of economic activity, what greater accomplishment can the advancement of western societies ask for?

By nature, we often resist change.  It would be this writer’s view however that despite significant change in the delivery of electronic security in recent years, there has never been as many growth opportunities within the industry as there is today.