Once cellular-based alarm systems are installed, they are highly reliable because they usually can communicate with multiple cell towers, manufacturers say.

Some alarm dealers have begun to steer customers towards systems that use cellular communications, which enable value-added capabilities such as remote control from cell phones.

There is no mention of the alarm industry in a December 21, 2009 proposal from AT&T asking the Federal Communications Commission to allow telephone companies to phase out the traditional telephone network, instead relying on their broadband data networks to deliver voice over Internet protocol (VOIP). But if accepted, and depending on how it is enacted, AT&T’s proposal could have a dramatic — some say unacceptable — impact on the alarm industry.

“While broadband usage — and the importance of broadband to Americans’ lives — is growing every day, the business model for legacy phone services is in a death spiral,” AT&T wrote in its proposal. AT&T noted that more than 25 percent of households have given up traditional phone service (known as POTS for “plain old telephone service”) in favor of wireless or VOIP. “The high costs associated with the maintenance and operation of the legacy network are diverting valuable resources that could be used to expand broadband access and to improve the quality of broadband service,” AT&T said.

The proposal did not provide details about how the proposed transition would occur, instead urging the FCC to request input from stakeholders on a wide range of topics, including what type of phone would be used and how it would connect. And because critical factors such as network reliability and backup power were not detailed in the proposal, the alarm industry is unclear on whether millions of alarm systems that currently rely on traditional phone service would continue to function if AT&T’s proposal were to be adopted.

According to an estimate from Peabody, Mass.-based alarm equipment manufacturer AES Corporation, about 20 million of the 25 million monitored alarm systems in the United States rely on digital dialers that use POTS — either on its own or in combination with another technology. The remaining five million rely on IP data or cellular communications or a combination of the two, or on private wireless equipment such as the mesh-based IntelliNet system that AES provides. These alternative communications technologies have become increasingly popular as more and more customers are opting not to have a POTS line.

But whether a change-out of this type is required when a customer switches to VOIP is a matter of debate within the industry. Some say VOIP works fine if it comes from a service provider that uses its own managed network and if the service is properly wired within the home. These people point to the cable companies as examples of this type of provider, arguing that if telephone companies are allowed to shut down traditional voice service, a replacement service based on VOIP with appropriate safeguards could work fine with traditional alarm systems.

The Alarm Industry Communications Committee has asked the FCC to consider two such safeguards, notes AICC chairman Lou Fiore. The AICC represents several security associations including the Central Station Alarm Association, the Electronic Security Association, and the Security Industry Association, as well as other member organizations.

“The POTS network has been extremely reliable because until recently you had banks of batteries at the central office,” Fiore explains. “You could have power blackouts and the phones would work fine because you had this battery backup.”

As phone companies begin to deliver phone service over data networks — a phenomenon that already is occurring with services such as AT&T’s high-speed U-verse offering — some network components that are critical to service delivery are no longer located in the central office but instead are installed remotely. These network elements no longer draw power from the central office but instead have a local power source. These local power sources have battery backup, but the batteries may not be capable of powering the equipment for the same length of time that the central office could support.

Another concern is scheduled maintenance, Fiore says. Data networks typically are taken down for software upgrades and maintenance. These outages may last only a short time, but are a big problem for alarm transmission, which requires signals to get through immediately. “They tend to do this in the middle of the night, which is when a lot of alarm events happen,” notes Fiore. “We need to make sure the phone companies do the right thing there.”

But some industry sources are skeptical whether safeguards such as these are sufficient to enable a VOIP-based service to support reliable alarm transmission.

“There are no assurances that the dynamics of compression are being managed for our equipment,” notes Gordon Hope, general manager of Honeywell’s Melville, N.Y.-based AlarmNet unit.

With some VOIP services, the transmission of alarm signals between the customer and the central station may work fine initially, but may degrade over time, Hope says. As the VOIP provider’s traffic grows, the provider may introduce a higher level of signal compression to save bandwidth — and that can interfere with the alarm system’s ability to transmit properly, argues Hope.

The Shift Is Happening Anyway

Although sources disagree on details such as these, virtually everyone interviewed for this article agrees that the shift away from traditional phone lines is a major trend — and one that’s gaining momentum.

“In this economy, as people look at their monthly bills and what they can get rid of, they value security but they don’t necessary value their phone line,” notes Shawn Welsh, vice president of marketing and business development for Chicago-based Telular, a manufacturer of cellular alarm communications equipment. “They’re willing to pay a few dollars more for cellular monitoring and save by giving up their home phone line.”

Even if future phone service can support traditional alarm communications, the shift away from traditional phone lines is happening anyway. And, unfortunately, not all customers consider the impact on their alarm system when they make that switch. This sometimes leaves the customer’s home vulnerable, a big concern to the alarm dealer — and some customers end up canceling their alarm service as a result.

Recognizing this shift, some dealers already have begun to rely more heavily on alternative communication methods based on wireless or the Internet or a combination of technologies. Those alternatives, sometimes known as next-generation transmission, are likely to represent a higher and higher percentage of alarm systems moving forward, whatever happens with AT&T’s proposal.

Hope argues that dealers that move toward next-generation transmission also may receive higher valuations from other companies wanting to acquire them.

“We’ve been expecting and looking forward to this change for years,” comments Mark Hillenburg, product architect for Springfield, Mo.-based Digital Monitoring Products. “We’ve achieving better reliability, features and functions. It’s a better product than if we were using old-fashioned POTS.”

Dealers Push Alternative Solutions

Joel Hilliard, general manager for Advantage Protection System, a Corpus Christi-based dealer, sees IP transmitters with cellular backup as the preferred choice for businesses moving forward. Businesses typically have a data network already — and by using IP alarm communications, Advantage Protection can leverage that network to minimize costs. Because IP transmitters check in frequently with the central station, businesses get prompter notification in the event of a transmission problem than they would with traditional phone lines — and if there is a problem with the data network, the system has cellular for backup.

In the residential market, Hilliard believes wireless is the best choice. “Even if they have a regular phone line we try to sell wireless,” comments Hilliard, who says the company is successful in selling cellular connectivity for 80 percent of its new accounts.

A key selling point is reliability, Hilliard says. Unlike traditional digital dialers, cellular-based systems are not vulnerable to line cuts. “Cellular systems usually have backups to different towers and they’re totally stationary,” Hilliard adds. Referring to signal strength indicators, he says, “If you get five or six bars that doesn’t change.”

Both cellular and IP communicators are faster than traditional digital dialers, notes Jon Adams, operations center manager for Atlas Security of Springfield, Mo. “We want customers to get a response from the monitoring company as quickly as possible,” he says.

Like Advantage Protection, Atlas also steers residential customers towards cellular — and Adams expects customers to respond even better to that approach as a result of the AT&T proposal. “It’s easier for us to approach customers about making changes to their security systems when we can say this is something that is being passed down,” he says.

A key advantage of cellular alarm systems is that they operate independently of the customer’s own cellular service and are not affected if the customer changes providers for wireless or any other communications service, Adams explains. Customers also like the value-added features available with some cellular-based alarm systems, such as the ability to receive text messages from their alarm systems or to remotely control the alarm systems from their cell phones.

Other companies that emphasize cellular communications include Tulsa-based A&H Security, which uses cellular for virtually all new system sales and Scottsdale, Ariz.-based Safeguard Security and Communications. Safeguard uses cellular for all new systems and will even replace customers’ digital dialers with cellular communications at no charge when those customers switch away from traditional phone service.

Providers and users of alarm systems that rely on private radio systems for communications point to many of the same advantages as cellular communications — such as immunity to phone-line cuts, redundant communications and independence from other communications services. In addition, proponents say private radio systems have the added advantage of being immune to changes in cellular network technology.

An Encore to the AMPS Sunset?

Talk of traditional phone service going away is certain to trigger security dealers’ memories of the shutdown of analog mobile phone service (AMPS) a year or so back. That event required security dealers to swap out about one million AMPS communicators, recalls Michael Sherman, president of AES Corporation. In addition to being time-consuming and costly, that requirement also caused some security dealers to lose customers.

If telephone companies are allowed to phase out traditional voice service, and if the replacement service based on VOIP proves to be incompatible with today’s digital dialers, the security industry could face a similar situation but on a much broader scale. The number of systems involved would be about 20 times larger, Sherman says.

Alarm dealers can minimize the risks involved under that scenario by moving to alternative forms of communication today, argues Gordon Hope, general manager of Honeywell’s AlarmNet unit. “It’s a fundamental challenge,” he says. “Some dealers get it, some are beginning to get it, and some are in denial.”