An Alarming Opportunity

By Gary Chambers

When a small teleservice company reaches the market saturation point, it cannot expand its client base any further without diversifying. Every business owner knows this and many see that a logical diversification is to add an alarm monitoring service. But things start to get more complicated after that decision is made.

The startup cost for an alarm monitoring station can be as low as $6,000, but it can break the $50,000 barrier.  Deciding which cost structure applies to you will depend on your client base. If it includes high-risk locations such as banks and jewelry stores, your monitoring hardware and software may have to be certified by Underwriters Laboratories (UL), dramatically increasing your startup costs. For services dealing primarily with households or regular small to medium sized businesses, the cost can be ninety percent lower. Offering fire alarm monitoring for commercial buildings is another fast track to a more expensive UL certified system because most jurisdictions in North America insist that all fire alarm systems in commercial locations are UL certified.

The first task then, is to understand the role of Underwriters Laboratories in the alarm industry. An underwriter is a corporation or person who posts the equivalent of a bond or promissory note, to provide the necessary funds to settle an insurance claim. It is obviously in the interest of underwriters that insurance claims are kept to a minimum, and when claims occur that they are covered by insurance premiums. Underwriters rely on insurance actuaries to work out equations balancing risk levels against premium loads, but where do the actuaries obtain the data they need to determine a level of risk? In many cases, the actuaries look to Underwriters Laboratories.

The UL logo appears on billions of products all over the world, indicating they were tested and have passed UL’s scientific standards. With most items, the UL experts examine one prototype to make sure it meets requirements for its product type, and then all subsequent items built to the same specs can carry the UL logo. But Underwriters Laboratories takes a different approach to alarm systems. Not only must the alarm equipment meet their standards, but also the business where it is installed must also be certified and is subject to spot checks.

“There are some insurers where you can’t get a policy unless you have a certified alarm system,” explains Dan Parker, UL’s Alarm Systems Team Leader, based at the organization’s head office in Chicago, Illinois. He adds, however, that UL certification is not mandatory. “It’s strictly a volunteer thing, although it may be pushed a little bit by a local fire authority.”

Fire inspectors and insurance companies encourage UL certification to the point that throughout the United States it is virtually impossible to establish a fire alarm monitoring station without UL compliance. Nevertheless, there are situations where a cheaper non-certified system is a viable choice.

To begin with, there are some North American jurisdictions (within Canada and Mexico) where federal statutes allow non-certified stations to monitor fire alarms for most businesses. In Canada, for example, government officials are more concerned with making sure that banks, liquor stores, and other high-risk locations have top quality alarms to discourage thieves. Teleservice companies may monitor most other commercial and residential locations for both fire and general security. There are also jurisdictions all across North America where even high-risk commercial locations can use non-certified systems, provided they keep all their alarm monitoring and response in-house.

It is also wise to remember that security services are among the fastest growing industries in the world today, and it is not an increased fire risk that is driving all that growth, rather an increased crime rate. Most small businesses and residences that install alarms do so to combat the threat of burglary or robbery and these types of alarms can usually be monitored by a non-certified system. In fact, the majority of alarm systems fall into this category.

For the small teleservice company considering an expansion into alarm monitoring, the advice is simple. If you need to open a UL certified service, your first step is to contact Underwriters Laboratories for clarification and advice on how to identify, acquire, and establish a certified system in your community. You also need to be ready to spend anywhere from $30,000 to over $50,000 depending on the type and number of clients you want to serve. The following are the contact details for Underwriters Laboratories in the USA, Mexico, and Canada:

Underwriters Laboratories

USA, Headquarters
333 Pfingsten Road
Northbrook, IL 60062-2096 USA
Telephone: 847-272-8800
Fax: 847-272-8129
northbrook@us.ul.com

Canada

7 Crouse Road, Toronto ON, M1R 3A9. Tel: 800-463-6852 or 416-757-3611
Fax: 416-757-9540
Customer Service: customerservice@ulc.ca

Mexico

Eduardo del Muro
Phone: 5255 5294-7660
Fax: 5255 5294-7089

For teleservice companies who want to diversify into alarm systems but cannot face the expense of a UL approved system, one of the most innovative solutions is now available from ABM Data Systems of Austin, Texas, wholly owned by Ultrak, developers of Phoenix 2000, possibly the most widely used alarm monitoring software in North America.

ABM’s General Manager, Jim Burkey, says his company has completed beta-testing of a complete alarm monitoring system in a single package. It is so new that the firm has not even given it a product name yet. It is currently called “Central Station In A Box,” but Burkey’s marketing wizards are pushing for a shorter moniker, possibly “Desktop Lite.” It is a turnkey operation ready to start doing business as soon as it is unpacked, and it will retail for a ballpark price of $6,000.

ABM’s top manager explains that the product is a response to the fact that many teleservice companies and in-house security managers do not have time to learn the language and technology of the alarm industry. They want a fast, easy, and cost effective solution. Central Station In A Box has the capacity to handle a 1,500 alarm client database and uses Ultrak’s Phoenix 2000 software. It includes an alarm signal receiver and all other necessary hardware.

“All they will have to do is hook it to their phone line and start monitoring,” says Burkey, adding that for another $600, ABM will also reduce the staff and management training curve by providing the product’s accompanying training programs on interactive CDs.

Although this product is so new it has not yet received its final name, Burkey says ABM is ready to ship the hardware and software immediately to interested buyers. ABM can be reached at 512-345-6900.

Gary Chambers has been a freelance journalist since 1971. He has worked for newspapers, magazine, and broadcasters in Canada, US, and Great Britain.

[From Connection MagazineJuly/Aug 2002]

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