ADT 2014 Annual Report Download - page 69

FORM 10-K
Through the introduction of ADT Pulse®in 2010, we pioneered interactive technologies that allow our
customers to remotely monitor and manage their home and business environments by adding automation
capabilities to our monitored security systems. This is done in a way that maintains the separate network integrity
and redundancy of a customer’s life safety and security signals. Depending on the service plan that customers
purchase and the type and level of product installation, they can remotely access information regarding the
security of their home or business, arm and disarm their security system, adjust lighting or thermostat levels or
view real-time video from cameras covering different areas of their premises, all via secure access from web-
enabled devices (such as smart phones, laptops and tablet computers) and a customized web portal. ADT Pulse®
also allows customers to create customized schedules and automation for managing lights, thermostats and
appliances, and can be programmed to perform certain functions, such as recording and viewing live video and
sending text messages, based on triggering events. Additionally, in 2014 we introduced the industry’s first voice
authentication and control application for ADT Pulse®, which we believe improves the user experience and
engagement for our customers.
Many of our customers are driven to purchase monitored security as a result of a perceived or actual
increase in crime or other life safety concerns in their neighborhood, such as a break-in or fire nearby. Other
triggers that drive the purchase of monitored security systems include moving to a new home, getting a new job,
becoming a pet owner, getting married or divorced, having a baby and traveling. These life events tend to
heighten interest in solutions which can enhance safety and security and provide customers with greater peace of
mind. We believe many of our customers purchase security systems and monitoring services as a result of
encouragement by their insurance carriers, who offer lower insurance premium rates if a security system is
installed or may require that a system be installed as a condition of coverage.
The majority of our customers use traditional land-line telephone service as the primary communication
method for alarm signals from their sites. However, as the use of land-line telephone service has decreased, the
ability to provide alternative communication methods from a customer’s control panel to our central monitoring
centers has become increasingly important. We currently offer, and recommend, a variety of alternate and back-
up alarm transmission methods including cellular and broadband Internet. See Risk Factors “Shifts in our
customers’ choice of, or telecommunications providers’ support for, telecommunications services and equipment
could adversely impact our business and require significant capital expenditures.”
In our health business, we provide monitoring center supported personal emergency response system
(“PERS”) products and services which leverage our safety monitoring infrastructure to provide customers with
solutions that help sustain independent living, encourage better self-care activities and improve communication
of critical health information. Our core PERS offering consists of a console unit and a wireless transmitter
generally worn as a necklace or wristband by the customer. In the event of an emergency, the transmitter allows
the customer to summon assistance via a two-way voice system that connects to our emergency response center
that is staffed with dedicated PERS monitoring specialists. The monitoring team relays information to the
appropriate local emergency responders, including Emergency Medical Services (EMS), police and fire
departments as well as family members. We offer PERS units for customers with and without traditional
telephone service. The majority of PERS units are shipped directly to the customer for easy set-up, however, if
required trained field support is available upon request.
In addition to monitoring services, we provide customer service for routine maintenance and the installation
of upgraded or additional equipment. Approximately 75% of our customer base is enrolled in a service plan
which provides additional value to the customer and generates incremental recurring monthly revenue for ADT.
Purchasers of our monitored security and home/business automation systems typically contract for ongoing
system monitoring and maintenance at the time of initial equipment installation.
Most of the monitoring services and a large portion of the maintenance services that we provide to our
customers are governed by multi-year contracts with automatic renewal provisions that provide us with recurring
monthly revenue. Under our typical service agreement, the customer pays an upfront fee and is then obligated to
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