U.S. cable companies home in on security

Reuters

By Liana B. Baker

Oct 10 (Reuters) - Consumers are increasingly turning to anunlikely source to secure their homes - the cable company.

Lower prices for critical components such as cameras andwireless technology have been lowering barriers to entering the$13 billion home security market, traditionally the territory ofplayers like ADT Corp.

For cable companies such as Comcast Corp and TimeWarner Cable Inc, home security is another revenuestream to help rebuild margins whittled away by risingprogramming costs and declining numbers of video subscribers. Itis also a way to put to work the billions of dollars that cablecompanies have invested to create high-speed video and dataservices over the years.

And home security subscribers tend to stick around for anaverage of seven or eight years, according to industryestimates, unlike the fickle cable TV subscribers who can belured away by enticing deals from satellite and telecom rivals.

Cable companies "are under pressure on their traditionallines of business so there's some urgency added to add morerevenue," said Jim Johnson, executive vice president ofiControl, the main home security vendor for Comcast, Time WarnerCable and Cox Communications.

Among the recent converts is Bruce Bird, 58, who did notthink he needed a home security system until his New Jerseybeach house was robbed last December. The culprits ripped outcabinets and made off with his flat screen TV just after hespent thousands of dollars to repair damages from HurricaneSandy.

Bird, a pharmaceutical consultant, decided against atraditional security provider like ADT and chose Comcast,already his cable TV company, to safeguard his vacation home onLong Beach Island, New Jersey.

"I kept getting fliers in the mail saying that I had thetechnology, so I just called Comcast," he said.

The service was not cheap. Bird said he spent about $700setting up Comcast's Xfinity home product at his beach house forcameras and sensors, as well as other features that allow him tocontrol the thermostat and lights when he is away.

Bird pays about $49 a month for the security service as partof a $209 bill that includes cable TV, phone and Internet. Usinghis smartphone, he is now able to check the four cameras on thepremises and is emailed photos of whoever enters the house.

TAKING ON THE INCUMBENTS

Comcast, the largest U.S. cable operator with 22 millionvideo subscribers, entered the security market in 2010 and hasnot revealed subscriber numbers.

Time Warner Cable, which serves 12 million video customers,has 30,000 subscribers for its security business, incoming ChiefExecutive Rob Marcus said at a recent investor conference.Consumers can now "watch what your dog or cat or nanny are doingduring the day," he told investors.

The company this week started selling the service in NewYork City, its last big untapped market for home security. AdamMayer, vice president of Time Warner Cable's "Intelligent Home"unit, said the company may create special packages forapartments to crack into wider parts of the New York market.

Privately held Cox, which does not say how many subscriberstakes its product, said it plans to take a "healthy percentage"of a potential $1 billion market in the areas in which itoperates, a spokesman said.

Cable operators will have to outmaneuver incumbents thatinclude ADT, Protection 1, Ascent's Monitronics, withyears of experience, infrastructure and name identification. ADTalone has 6.5 million customers, about a quarter of the U.S.market.

Price is emerging as a key battlefield, with Comcast, Coxand Time Warner Cable offering discounts if customers combinehome security with other services. That puts the prices for homesecurity at $30-$50 per month, slightly below what ADT chargesfor its new "Pulse" product.

Even with the price difference, Imperial Capital analystJeff Kessler said it could take years for cable companies togain consumers' trust.

"People's perception of a cable company is that they'll bethere between the hours of 8 and 5 next week. You can't havethat if you are expecting the police to come in 5 or 6 minutes,"Kessler said.

Still, Kessler estimates cable will add 25 million homeswhile traditional security companies will get 5 to 6 millionhomes in the next few years. He said the larger security playerswill weather the new competition since there will always becustomers who prefer a product from a dedicated securitycompany.

Comcast Xfininity Home executive Mitch Bowling said thathalf of its security customers are new to the company, that 96percent of Xfinity home customers buy at least two other Comcastservices and that two-thirds of these customers have neverbought home security before.

Bank of America Merrill Lynch analyst Jessica Reif Cohensaid adding a home security business could boost Time WarnerCable's stock by $20 and Comcast's by $5.

Cable companies also see opportunities in expanding suchservices to small businesses. They also hope to increase theirhome automation services, which tap their broadband networks tolet customers control lights, appliances and thermostatsremotely.

Wireless carrier AT&T Inc, which rolled out its homesecurity and automation service in 2011, is planning to offerservices in 50 markets by the end of 2013, and go national in2014. Glenn Lurie, the head of AT&T's emerging devices business,said such services could eventually reap $1 billion a year.

Verizon Communications Inc has a product, but it doesnot connect consumers to the police or other authorities in anemergency.

DirecTV acquired a home security company calledLifeShield in June. It will begin trials for the service in thefourth quarter and release it nationally in the first quarter,DirecTV Chief Revenue and Marketing Officer Paul Guyardo said.Home security and automation is a low-churn, high-marginbusiness that compliments DirecTV's video business, he noted.

But not every cable company is charging into the market.Charter, Cablevision and Dish Network do not have products. Dish said it is "constantly evaluatingopportunities" while Charter said it is focusing on its corebusiness.

ADT CEO Naren Gursahaney said in an interview that he is indiscussions with every pay TV company about potentialpartnerships.

"For the most part, they've decided to try the market ontheir own," Gursahaney said. "If there's a desire on their partto offer a best of breed bundle including ADT ... we'd be opento those kind of discussions."

Rates

View Comments (0)