Would You Trust Time Warner Cable With Your Home Security?
Cable and telecommunication providers have primarily battled one another over price. "The current form of competition in this entire sector is essentially focused on promotional pricing," says Glenn Britt of Time Warner Cable during the company's Oct. 31 earnings call. "We need to wake up and learn more sophisticated marketing techniques. Anyone can gain share by starting a price war." Ultimately, these tactics aren't as effective as they used to be to encourage churn.
This is why some analysts are projecting that home security will be the next competitive differentiator. "I liken this to other technology-based products like smartphones or tablets that rode a broader macro trend to move from a niche product to more mass appeal," says Alan Ferber of home security provider ADT .
Convenience vs. specialization
There is significant money in this sector. Only one in five homes currently feature monitored home security protection, according to ADT. And this other 80% represents an $11 billion opportunity.
Now, cable and telecom providers, including Time Warner Cable, DirecTV , AT&T , and Verizon , are entering this space and it's shaping up to be a battle of convenience against specialization.
At one end, the cable and telecom companies believe their key selling point is the established relationship. After all, adding one more service to an open account is seamless and cost-effective. To this end, Time Warner Cable has recently introduced a $14.99 a month Internet service option to encourage new accounts.
"And over time, as the customer's speed and capacity needs increase, we'll be well positioned to sell them higher-end products," says Time Warner Cable's Robert Marcus. Currently, Time Warner Cable has 9 million of its 14.5 million customers involved with its bundle services. And company executives have set an initial goal to add 500,000 new customers in the next 18 months with this low-priced Internet offer.
Meanwhile, telecom providers are emphasizing their accessibility and seamless integration afforded by their smartphones. "Wireless enables home automation capability," says AT&T's Randall Stephenson during the UBS Global Media and Communication Conference on Dec. 10. "Home security, home automation, home monitoring. All of that is being controlled by smartphones."
At the other side, established home security providers, such as ADT, are proactively protecting their market share through high-level personal service.
"From a brand perspective, I don't think anybody can challenge the fact that when people think about security, they think about ADT," says ADT President Naren Gursahaney, adding that cable currently only maintains a 1% share of the home security market. ADT, for its part, has 6.5 million customers.
Kitchen table security
These companies emphasize the need for specialized insight by asking whether it is smart to trust a company that delivers HBO with protecting your family.
"Security is generally sold across the kitchen table," says ADT's Gursahaney during his company's Dec. 6 investor day conference. "I think most of these new entrants to the marketplace don't have the necessary field sales infrastructure."
As a way to counter this problem, several companies are buying this expertise. DirecTV, for instance, purchased home security company LifeShield in June 2013. And Verizon acquired security provider CyberTrust for $445 million in 2007.
Still, ADT and other home security companies are also expanding beyond protective services. ADT, for instance, is introducing energy conservation services that allow users to manage lighting and thermostats away from home. ADT executives have developed a new 100-day program to reduce churn by rolling out the red carpet to subscribers for the first 100 days of service. The company recently announced partnerships with State Farm and Southern ConEd.
Wearable security protection
ADT is also entering the market for wearable technology with a personal emergency response solution (Think: help I've falling and I can't get up) that company executives predict will be a $100 million business by 2016. The selling point on this new line is that ADT protects the home and now wants to protect the person.
It remains to be seen if consumers will select convenience over experience for their home security needs. And maybe they won't have to select one over the other. ADT is open to collaborating with teleco and cable providers, with the understanding that it would be co-branded, said company executives during its fall 2013 investor day conference. However, ADT needs to be acknowledged as a partner. Executives aren't interested in providing "white label" services and not receiving recognition.
"I think they bundling our services with other providers, whether they are pure play or whether they have two or three other pieces of the bundle, could be attractive for both parties," says ADT's Gursahaney. "As we both drive greater retention over our respective offers."
There isn't much debate about whether homeowners want to keep their homes secure. The only question is which company will provide these services.
The next step
Want to figure out how to profit on business analysis like this? The key is to learn how to turn business insights into portfolio gold by taking your first steps as an investor. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you what you need to get started, and even gives you access to some stocks to buy first. Click here to get your copy today -- it's absolutely free.
The article Would You Trust Time Warner Cable With Your Home Security? originally appeared on Fool.com.
Fool contributor Larissa Faw has no position in any stocks mentioned. The Motley Fool recommends DirecTV. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.