In most cases, a sudden influx of players and increased competition would be detrimental for an industry. However, the U.S. intruder alarm market is embracing the plethora of new competitors entering the business because these recent market entrants are partnering with established security suppliers to offer complete home security product offerings and increasing market awareness.
The penetration rate for U.S. residential intruder alarm products will increase by 5 to 8 percent during the next three years, according to a recent study entitled “The World Market for Intruder Alarms” from IHS (NYSE: IHS).
“The penetration rate of intrusion systems in the U.S. has hovered around the 20 percent mark for some time,” said Adi Pavlovic, security and fire analyst for IHS. “The emergence of new market entrants, such as telecommunications companies, is expected to increase end-user awareness of home management systems, which combine traditional home security products with innovative home automation technology.”
While home automation features are driving the penetration of integrated home management systems, the core functionality consists of a basic intrusion system.
Telecommunication companies like AT&T and Time Warner recently have launched their own home security offerings and join a growing list of companies entering the market, which includes Comcast, Cox Communications, Verizon and Lowe’s. Leveraging their existing client base, telecommunications providers are offering home management systems in order to increase their average revenue per user (ARPU). Combining these newer offerings in addition to pre-existing services such as cable, Internet and telephone is becoming an attractive and cost-effective way to entice end users, thus driving the uptake of security products. Most new entrants have partnered with existing professional monitoring companies, while some have decided to launch their own monitoring stations.
Companies like Verizon and Lowe’s are also taking a different approach to the market. Instead of competing with the traditional security suppliers and telcos, they are specifically tailoring products to the self-monitoring market by offering interactive services without a monthly monitoring fee. Lowe’s recently partnered with Verizon to sell Lowe’s Iris product line alongside Verizon’s home security solutions in Verizon stores across the United States. Both systems charge a monthly fee for the service, but it is much lower than the cost of professional monitoring and does not require a contract. Although the use of do-it-yourself and self-monitoring systems remains a small portion of the market today, the potential remains high considering the number of smart phone users and home owners/ renters that may not want to spend on a professionally monitored system.
New entrants are not only partnering with established security suppliers to offer a complete home security product offering, they are also partnering with new manufacturers specializing in the production of specific products, such as Technicolor and SMC. It’s too early to tell what this means for traditional intruder alarm suppliers, but the market will only become more competitive with acquisitions and mergers likely in the not-too-distant future.