ADT 2012 Annual Report Download - page 99

Industry and Competition
We estimate that the market for residential and small business electronic security system sales, installation,
monitoring and service in the United States and Canada is expected to be approximately $13 billion in 2012 and
that it has grown at a compound annual growth rate of approximately 1% - 2% per year over the past five years.
We believe the primary factors driving industry growth include heightened concerns about crime, especially for
an aging population that is increasingly concerned about security related to break-ins and theft of high-value
items. We believe that a combination of increasing customer interest in lifestyle and business productivity and
technology advancements, which are decreasing the cost of Internet Protocol-enabled security equipment, will
support the increasing penetration of interactive services and home/business automation.
The security systems market in the United States and Canada is highly competitive and fragmented, with a
number of major firms and thousands of smaller regional and local companies. The high fragmentation of the
industry is primarily the result of relatively low barriers to entering the business in local geographies and the
availability of wholesale monitoring (whereby smaller companies outsource their monitoring to operations that
provide monitoring services but do not maintain the customer relationship). We believe that our principal
competitors within the residential and small business security systems market are Protection One, Inc.,
Monitronics International, Inc. and Vivint, Inc.
Success in acquiring new customers in the residential and small business security and home/business
automation markets is dependent on a variety of factors, including company brand and reputation, market
visibility, service and product capabilities, quality, price and the ability to identify and sell to prospective
customers. Competition is often based primarily on price in relation to value of the solutions and service. Rather
than compete purely on price, we emphasize the quality of our electronic security and home/business automation
services, the reputation of our industry leading brands and our knowledge of customer needs, which together
allow us to deliver an outstanding customer experience. In addition, we are increasingly offering added features
and functionality, such as those in our ADT Pulse interactive services offering, which provide new services and
capabilities that serve to further differentiate our offering and support a pricing premium.
As we move into the interactive services and home automation space, we face new competition from
competitors such as cable and telecommunications companies. However, we believe our robust field sales force,
including our nationwide team of in-home sales consultants, our solid reputation for and expertise in providing
reliable security and monitoring services through our in-house network of fully redundant monitoring centers,
our reliable product solutions and our highly skilled installation and service organization position us well to
compete with these new competitors.
In the PERS market our primary competition is Phillips/Lifeline. We believe we have the opportunity to
enhance our position in this segment, and that as the demographics of the United States and Canada continue to
change towards an increasingly older population, the market is poised to experience significant growth.
Seasonality
Our business experiences a certain level of seasonality. Because more household moves take place during
the second and third calendar quarters of each year, our disconnect rate is typically higher in those quarters than
in the first and fourth calendar quarters. There is also a slight seasonal effect on our new customer installation
volume and related cash expenses incurred in investment in new subscribers; however, other factors, such as the
level of marketing expense, can offset any seasonality effects. In addition, due to weather related incidences
during the summer months, we may see increased servicing costs related to higher alarm signals and customer
service requests as a result of customer power outages and related issues.
7