AT&T Inc. (T:US), looking for growth outside its slowing phone business, plans to start selling home-security services in a move aimed at challenging market leader ADT.
The service lets users watch camera footage of their home and adjust temperature as well as lighting remotely by using a computer or smartphone, AT&T said ahead of the service’s debut today at the International CTIA Wireless event in New Orleans. The service, called Digital Life, also includes 24-hour security call-center monitoring.
AT&T, the largest U.S. phone company, joins Verizon Communications Inc. (VZ:US) and Comcast Corp. (CMCSA:US) in entering the so-called smart-home market. The move highlights the need for phone and cable companies to find sales growth outside the stagnating wireless-subscriber market and the slowing pay-TV business.
“It’s a fragmented industry, which is one of the reasons why we think it’s the right time to jump in,” said Glenn Lurie, AT&T president of emerging devices.
AT&T plans to sell Digital Life nationally to anyone with a high-speed Internet connection, starting with trials in the next few months in Atlanta and Dallas.
AT&T will offer a range of home security and automation services, through a system that can include video cameras, sensors, lighting controls and thermostats. The hardware was developed by Xanboo, a company AT&T acquired in 2010. AT&T didn’t disclose prices.
Tyco International Ltd. (TYC:US)’s ADT unit dominates the home- security industry, according to research firm Current Analysis Inc. Tyco’s security-solutions business had sales of $8.63 billion last year, Bloomberg data shows. ADT advertises Pulse, a security and monitoring package for $50 a month with a $200 installation charge. Verizon sells a home monitoring and control package for $220 with a $10 monthly service fee.
“This product is a monumental leap ahead of anything else in the marketplace,” Lurie said. AT&T’s advantages include simplified user controls and technology that lets users operate the system from anywhere via the Internet, he said.
For AT&T, the incentive is to try to win a portion of a market that still has room for growth. Whereas almost all U.S. adults already have mobile phones, only one in five homes have security systems, according to Current Analysis.
One challenge for AT&T will be to offer the service without sacrificing profit margins. Operating profit (T:US) at AT&T’s wireless business was more than 24 percent of sales last year, compared with less than 16 percent (TYC:US) for Tyco’s security-solutions unit, according to Bloomberg data.
“We have been evaluating this for a long time, AT&T doesn’t launch services that hurt margins,” Lurie said. “We are very excited about the opportunity to grow revenue with this business.”
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