& cplSiteName &

Will Service Providers Steal ADT's Customers?

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
4/11/2012
50%
50%

Several major U.S. MSOs and telcos are rushing into the home security and automation market, but this potential growth opportunity may not evolve into a material business anytime soon, Sanford C. Bernstein & Co. Inc. warns in a new report.

Comcast Corp. (Nasdaq: CMCSA, CMCSK), AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ) and Time Warner Cable Inc. (NYSE: TWC) are attracted to this market because the residential and small business segment for security and automation services is big (US$12 billion and 30 million homes), profitable (margins in the range of 50 percent), and fragmented (the top three, dominated by ADT Security Services Inc., together hold just 30 percent market share). There also seems to be room for growth as just 23 percent of homes currently take home security and automation services.

While Bernstein does believe that the MSOs and telcos are positioned to get their "fair share" of the existing home security market while also targeting the emerging home automation sector, the investment bank's researchers are not confident that the strategy will evolve into a big profit-maker.

The firm notes that each point of the current market is worth $120 million in revenues and $60 million in EBITDA. If cable were to grab 5 percent of the market in five years, that's still just $300 million in EBIDTA. If Comcast were to get 40 percent of that, we're still talking about $180 million in annual EBITDA, contributing less than 1 percent to the EBITDA that Bernstein is predicting for the MSO in 2016.

But that sort of prediction hasn't stopped the majors from going after the market. Among MSOs, Comcast expects to have its service, Xfinity Home, rolled to most of its markets by year-end, while TW Cable already has its IntelligentHome service available in a handful of markets ahead of expected, broader launches. AT&T and Verizon have also developed their own set of services through partnerships or spurred along by recent acquisitions. (See Comcast Goes Big With Xfinity Home , TW Cable Picks iControl, Verizon's Over-the-Top Home Control and AT&T Dives Deeper Into the Smart Home.)

Build versus buy
Many have speculated that ADT could become an attractive M&A target for Comcast and turn the MSO into a market leader virtually overnight. That idea's been fueled by the fact that ADT's CEO (and former General Instrument Corp. and Motorola Inc. exec) Edward Breen resigned from the Comcast board last year. (See Will Moto Go Back to the Future?)

But Bernstein's analysts note that Breen's resignation is understandable because Comcast and ADT were becoming competitors. And that's not the only reason. "ADT's geographic footprint doesn't match that of any Cable operator, nor does its technology, nor does its principal focus on security rather than automation. An organic growth strategy is far, far more likely, in our view," the research firm concludes.

If that's the case, Comcast and its big service provider peers may have a long, patient march ahead if they expect to turn their budding home security plays into future profit-drivers.

— Jeff Baumgartner, Site Editor, Light Reading Cable



(4)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Jeff Baumgartner
50%
50%
Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 5:36:41 PM
re: Will Service Providers Steal ADT's Customers?


If it will indeed be an uphill battle for MSOs to make much of a dent to their bottom lines, then one has to wonder why so many service providers are still jumping into this business and making a go of it. What do they see that the Bernstein analysts don't?


And (shamless plug) that's something I'll certainly try to cover when I moderate a session on this home automation topic on May 23 at 11am ET at The Cable Show in Boston. Hope you can join us then, as we'll have execs on the panel from Comcast, iControl, TW Cable, Rogers Communications and Cox Communications.  JB

joanengebretson
50%
50%
joanengebretson,
User Rank: Light Beer
12/5/2012 | 5:36:38 PM
re: Will Service Providers Steal ADT's Customers?


I always wonder about broadband providers' forays into the alarm business because they normally see it as a fourth or fifth service they can offer as part of a broadband bundle--but if you ask a traditional alarm company, they will generally tell you they would much rather use wireless communications than broadband. Their take is that if they touch the customer's broadband connection, the customer will perceive that they are the cause of any future problems they may have with their computer--and what customer doesn't have computer problems?


Perhaps the risk is a bit less for a broadband provider since they are more involved in the broadband connection to begin with. But there's also the issue of the unreliability (real or perceived) of broadband (a.k.a. Internet) networks. You may say wireless neworks are unreliable, too--and they are--but those issues are largely ameliorated when you put a transmitter in a place with good reception and leave it there.

Flook
50%
50%
Flook,
User Rank: Light Beer
12/5/2012 | 5:36:32 PM
re: Will Service Providers Steal ADT's Customers?


Instead of trying to take over this market, why don't service provders see/explore how they can cooperate with existing home security companies in way that is beneficial for both and leads to further innovation and better home securit

skirstein
50%
50%
skirstein,
User Rank: Light Beer
12/5/2012 | 5:31:47 PM
re: Will Service Providers Steal ADT's Customers?


I'm certainly no insider, but from the outside it certainly seems as though these additional services provide not only a barrier to exit / disincentive to switch; they also represent largely marginal additional revenues rather than having to pass a margin hurdle on their own.


 

Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, September 14, 1:00PM EDT
What Is Agile?
Kent J. McDonald, Product Owner, Agile Alliance
UPCOMING COURSE SCHEDULE
Friday, September 16, 1:00PM EDT
How to Implement Agile
Alan Bateman, Director, Agile Transformation
Wednesday, September 21, 1:00PM EDT
What Is DevOps?
Colin Kincaid, CTO, Service Provider, Cisco
Friday, September 23, 1:00PM EDT
How to Implement DevOps
,
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
F5 Virtual Network Function Integrations With Partner Orchestration Platform

8|24|16   |   6:38   |   (0) comments


F5's Kishore Patnam, product manager for F5's service provider solutions, discusses why service providers are moving towards virtualization and how his clients are utilizing F5's solutions.
Between the CEOs
CEO Chat: Intel's Alexis Black Bjorlin

8|17|16   |   06:23   |   (0) comments


Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Telecom Innovators Video Showcase
Accelerating Telecom Digital Transformation With Nominum DNS

8|1|16   |   12:04   |   (0) comments


Light Reading's Steve Saunders gets an update from Nominum CEO Gary Messiana on how his company is helping carriers on the digital transformation journey.
LRTV Custom TV
Reinventing Operations for a Virtual, Software-Defined World

7|28|16   |   5:23   |   (0) comments


Heavy Reading Senior Analyst Jim Hodges speaks with Accenture's Larry Socher and Matt Anderson about what service providers must do to transform their business to get the benefits of SDN and NFV including: leveraging DevOps, introducing real-time OSS and implementing analytics.
Women in Comms Introduction Videos
Fujitsu Sales Leader Shares Lessons Learned

7|27|16   |   5:12   |   (1) comment


As Fujitsu's only female sales leader, Annie Bogue knows the importance of asking for what you want, being flexible (she's been relocated five times), keeping a meticulous calendar, 'leaning in,' working harder than everyone else around you, being aware and more.
Telecom Innovators Video Showcase
VeEX Test & Measurement Solutions

7|25|16   |   08:57   |   (0) comments


Cyrille Morelle, president and CEO of VeEX Inc., talks test and measurement with Light Reading's Steve Saunders at BCE 2016. This includes innovative products such as VeSion Cloud-Based platform for network monitoring; MTTplus Modular Test platform for Access, Business, Carrier Ethernet, Transport and Core services; and OPX-BOX+ for Fiber Optics.
LRTV Custom TV
VeEX: Live From BCE 2016

7|25|16   |   03:20   |   (0) comments


VeEX's Senior Director of Business Development, Perry Romano, explains how VeEX provides tools to help install, maintain, monitor and manage network infrastructure efficiently and effectively. The portfolio of products on display include the RXT-6000, MTTplus and TX300s.
LRTV Custom TV
Real-Time Telemetry & Analytics for Intelligent SDN Orchestration

7|25|16   |   03:09   |   (0) comments


Packet Design CEO Scott Sherwood discusses how real-time network telemetry and analytics are enabling a new breed of SDN orchestration applications.
From the Founder
The Russo Report: Driving Disruption

7|25|16   |   07:44   |   (2) comments


In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Women in Comms Introduction Videos
Ciena's VP Offers a Career Crash Course

7|20|16   |   4:14   |   (2) comments


How did Ciena's Vice President of Sales, Angela Finn, carve out her career path? Simple, she tells WiC. She stayed true to her company, customers and principles. She shares her advice for women on how to be authentic and credible, as well as for companies that want to make a real change to their culture and practices.
LRTV Custom TV
NFV in 2016: Part 2 – Climbing the Virtualization Maturity Curve

7|19|16   |   06:56   |   (0) comments


Many of the initial use case implementations are single-vendor and self-contained. The industry is still climbing the virtualization maturity curve, needing further clarity and stability in the NFV infrastructure (NFVi) and greater availability and choice of virtualized network functions (VNFs). Interoperability between NFVis and VNFs from different vendors ...
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Five of the Top 10 most targeted countries in Check Point Software Technologies' global Malware & Threat Index for Q1 2016 are in Africa.
Hot Topics
Cisco Developing 'Monica' Digital Assistant
Mitch Wagner, West Coast Bureau Chief, Light Reading, 8/22/2016
'Most Wanted' Kobi Comes Home
Ray Le Maistre, Editor-in-chief, 8/23/2016
Rocket Fiber Lights Up Detroit With Gigabit
Elizabeth Miller Coyne, Managing Editor, 8/22/2016
Arista Banned From Importing Products – Cisco
Mitch Wagner, West Coast Bureau Chief, Light Reading, 8/23/2016
How the Padres Hit an IoT Home Run
Mitch Wagner, West Coast Bureau Chief, Light Reading, 8/25/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
There's no question that, come 2020, 5G technology will turn the world's conception of what mobile networking is on its head. Within the world of 5G development, Dr. ...
Animals with Phones
Live Digital Audio

Bridging the tech skills gap is a major challenge for service providers and suppliers alike today – and the challenge is two-fold when it comes to increasing the number of women in the comms space. Level 3 Communications has made it a priority to overcome both challenges by implementing several unique programs focused on building the right candidates from within – in addition to filling the funnel by supporting STEM and other education programs. During this radio show, you’ll learn about these programs from Mary Beth McGrath, SVP of Global Talent Management at Level 3, and the best ways to bridge your own skills gap so that you are motivated and equipped for change. Plus you’ll have the chance to ask Mary Beth your questions live on the air.