& 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, July 27, 1:00PM EDT
The Changing Face of the Data Center World
Rodney M. Elder, Senior Solutions Architect, Equinix
UPCOMING COURSE SCHEDULE
Wednesday, August 3, 1:00PM EDT
The Central Office Re-Architected as a Data Center
Guru Parulkar, Executive Director, Open Networking Research Center, Open Networking Lab
Wednesday, August 10, 1:00PM EDT
Telcos & Open Source 101
Phil Robb, Senior Technical Director, OpenDaylight
Friday, August 12, 1:00PM EDT
The Role of Open Source in NFV
Jim Fagan, Director, Cloud Practice, Telstra
in association with:
From The Founder
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.
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.
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   |   (0) 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 ...
Telecom Innovators Video Showcase
Versa Networks' Kumar Mehta on SD-WAN Managed Services

7|19|16   |     |   (0) comments


In Silicon Valley, Steve Saunders sits down with Versa's Kumar Mehta for an interview focused on why service providers are building SD-WAN managed services, and how Versa's telco customers are innovating.
LRTV Custom TV
Juniper Networks & The Evolution of NFV

7|19|16   |   06:01   |   (0) comments


Senior Juniper Networks executives talk to Light Reading Founder & CEO Steve Saunders about NFV developments and the recent independent evaluation by test lab EANTC of Juniper's Cloud CPE solution.
LRTV Interviews
CenturyLink Goes Beyond Managed WiFi

7|19|16   |     |   (0) comments


CenturyLink's managed WiFi allows enterprises, such as retailers and resorts, to track guest WiFi usage in order to help them better communicate with customers.
LRTV Interviews
AT&T Launches Network Functions on Demand

7|17|16   |   05:26   |   (0) comments


Roman Pacewicz, Senior Vice President, Offer Management & Service Integration, AT&T Business Solutions, discusses the operator's launch of its Network Functions on Demand service.
LRTV Interviews
Enterprise Pitch for Ciscosson

7|14|16   |   04:43   |   (0) comments


After seven months of near silence, Cisco and Ericsson executives publicly discussed details on their extensive partnership. Among the tidbits shared by Martin Zander, VP, group strategy programs, Ericsson, and Doug Webster, VP service provider marketing, Cisco: The partnership was initially launched to serve the service provider market, but is already gaining ...
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
September 27, 2016, Philadelphia, PA
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 6-8, 2016,
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
Verizon Sports Big Plans for Yahoo
Alan Breznick, Cable/Video Practice Leader, Light Reading, 7/26/2016
Kevin Lo's Move to Facebook: Sign of Things to Come?
Patrick Donegan, Chief Analyst, Heavy Reading, 7/20/2016
Verizon's Next With VNFs
Carol Wilson, Editor-at-large, 7/21/2016
Facebook Gets Its Drone On
Ray Le Maistre, Editor-in-chief, 7/22/2016
Ericsson Ejects CEO Vestberg
Ray Le Maistre, Editor-in-chief, 7/25/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
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. ...
I've enjoyed interviewing many interesting people since I rejoined Light Reading, but William A. "Bill" Owens certainly takes the biscuit, as we say where I come from.
Animals with Phones
Live Digital Audio

Our world has evolved through innovation from the Industrial Revolution of the 1740s to the information age, and it is now entering the Fourth Industrial Revolution, driven by technology. Technology is driving a paradigm shift in the way digital solutions deliver a connected world, changing the way we live, communicate and provide solutions. It can have a powerful impact on how we tackle some of the world’s most pressing problems. In this radio show, Caroline Dowling, President of Communications Infrastructure & Enterprise Computing at Flex, will join Women in Comms Director Sarah Thomas to discuss the impact technology has on society and how it can be a game-changer across the globe; improving lives and creating a smarter world. Dowling, a Cork, Ireland, native and graduate of Harvard Business School's Advanced Management Program, will also discuss her experience managing an international team focused on innovation in an age of high-speed change.