Finally a Use for LMDS

Satellite_dish_(Television)Vivint provides a range of security and home monitoring products and has recently also become a wireless ISP in a few markets such as San Antonio, El Paso, and a few towns in northern Utah. What I found interesting is that they are using the LMDS spectrum.

LMDS stands for Local Multipoint Distribution Service and is a licensed spectrum operating between 27.5 GHz to 31.3 GHz, close to the range of various microwave frequencies. The LMDS spectrum was sold in a very robust A band that was an 1150 MHz swath of bandwidth and a B band of 150 MHz of bandwidth.

This was auctioned to the public in 1998. I know a number of companies that bought the spectrum then and I know a few who created business plans using LMDS that all failed. There were two problems with using LMDS. The first was the chicken and egg issue that all spectrum faces. A spectrum can’t really be used commercially until somebody develops cheap gear to use it and the vendors won’t develop cheap gear until they get a large buyer who will buy enough gear to finance the R&D. After the spectrum hit the market there were a few beta tests of equipment that didn’t work well, but no big user and the market died.

The other issue is the practical application of using the spectrum. In 1998 this was touted as being able to deliver a wireless DS3 which is about 45 Mbps. That was a lot of bandwidth in 1998, but over time that is no longer particularly great. And the spectrum has real-life limitations. On a point-to-point basis it can go, at best, about 5 miles and on a point-to-multipoint basis it can go, at best, about a mile and a half. The spectrum can achieve those distances in areas without a lot of humidity (which is why Vivint is deploying it in the dry southwest). It also is easily deflected by trees and buildings, another reason to go to west Texas and Utah.

So this spectrum has basically gone mostly unused for a decade and a half. A lot of license holders have a few point-to-point links working on it just to preserve their license, but I am sure there are license holder who just let it go. Vivint is buying rights to the spectrum in these markets from XO Communications and Straight Path Communications.

It looks like Vivint has found a strategy for monetizing the equipment. They obviously found radios that will work on the spectrum, which is not that unusual today now that we have software tunable radios that can work on a wide range of spectrums (something we didn’t have in 1998).

Vivint is also dealing with the distance and bandwidth limitations in a very creative way. They are selling in urban/suburban areas giving them a decent density within the range of a given transmitter. They are then using point-to-point radios to bring bandwidth to what they call hub homes. They are giving these homes free Internet connectivity for housing and powering their equipment. From each of these homes they will serve up to 24 other homes. That small number of subscribers is what allows them to offer the 100 Mbps bandwidth. If they serve more homes the effective bandwidth would quickly drop.

Vivint prices 100 Mbps bandwidth at $59.95 per month. For the wireless customers they are also offering VoIP plus cloud storage. Plus Vivint has a wide range of security and other products they can sell to a household. It’s not a standard bundle, but it’s a pretty good one.

This doesn’t look like a bad business plan. With the range of services they sell they are probably averaging more than $85 per customer per month on average, and maybe more. And they are gaining some economy of scale and report having over 15,000 customers.

This business plan certainly isn’t for everybody. It wouldn’t work well in places like humid Florida or Louisiana. It also wouldn’t work well in towns that are solid trees. This business plan takes a lot of discipline to be successful. Once they have established a hub home the business plan is only going to work if they can find other customers in the same local area, within 1.5 miles. I figure that they knock on doors to find customers around every hub home. The math would be terrible if they only got a few homes per hub.

They also have to find licensed LMDS spectrum holders and they obviously have in these markets. But that might not be possible in other markets. This business plan must be urban in order to have enough density, and this looks totally infeasible in rural areas.

I have to credit Vivint with finally finding a market use for this spectrum. In today’s marketplace it sounds like they have put together a very marketable suite of products including bandwidth at an affordable price. This is what competition looks like. While LMDS spectrum is only going to work this well in arid places, the idea of a non-traditional bundle is one that others ought to consider.

The Internet of Things is Here Today

Consider the following pricing chart from Vivint, one of the nationwide leaders in home security. This particular pricing chart happens to come from Fort Wayne, Indiana.

 Comparison Chart

This may not look like it, but this is the beginning of the Internet of Things and I think the way that Vivint has packaged this is brilliant. Just a few years ago this company and every company in the security business would have been selling only the features in the first column. But now they have added on energy management and home automation which are the first steps into the Internet of Things. To make this work they will install a gateway in the home that is capable of monitoring or communicating with the devices in the home and also communicating back with the cloud.

This is just the beginning. As more home-ready services are created Vivint will certainly add some of them on as enhancements to the packages listed or will create new packages. The next big field is already hinted in the last item, the medical pendant. We are not too far away from the time when sensors will be able monitoring your health and keeping a constant record of your heart beat, blood pressure and other vital signs. And a few years after that, micro sensors will be in your blood looking at your blood chemistry, looking for cancer etc.

A company like Vivint will have to decide what things they will support because the scope of the Internet of Things will become immense. It’s been predicted that much of the Internet of things will be done with Apps. But households still need the gateway and will want an expert to make sure things like security and smoke alarms are connected properly. I see a prominent role for businesses willing to go into the home to make sure that everything works well together.

Since there will be so many options in the Internet of Things it’s likely that a carrier will choose a few standardized packages that will fit a large percentage of the population and will leave customized packages to somebody else. For example, even today there are a ton of other options available in the energy management field and Vivint has chosen a few common options. Today a household can also do things like control blinds for allowing or blocking sunlight, coordinate ceiling fans, change the hot water heater settings dynamically during day, and interface with external solar panels.

I believe a lot of homes are going to want these services. I also know that customers will choose somebody they know and trust if given a choice of vendors. The Internet of Things is going to grow over time while traditional services like voice and cable TV wane. If you are going to survive as a carrier selling to households, then selling the Internet of Things needs to be in your portfolio.

Why Aren’t You in the Security Business?

Security camera

Security camera (Photo credit: Wikipedia)

The security business is booming. Both residents and businesses want security cameras and other monitoring devices to keep an eye on their property when they aren’t there. Everybody with a wireline network should be considering offering security services of some type. There are a number of different ways to approach the security business, as follows:

Security Cameras. Your customers are interested in security cameras. They may want them for the traditional purpose of watching their business. But they now want them for a whole lot of other reasons. Farmers want them to keep an eye on livestock and on expensive farm machinery. Residents want to keep an eye on the babysitter, the pets or the kids when they aren’t at home. People want to be able to see who is at the front door before they answer it.

Your customer can go to Walmart or Radio Shack and pick up a run-of-the-mill camera. But given a choice, your customers probably want a quality HD camera, professionally installed. There is a huge difference in the picture quality between an older analog security camera and the new HD cameras. It’s the difference between being able to see that there is somebody in your home and the ability to read the name tag on the pocket of their shirt.

Most of your customers are not going to be comfortable with or have the knowledge needed to install an HD camera properly. Ideally cameras ought to be installed on coaxial cable rather than using WiFi so that it will work if the WiFi gets knocked out. To be effective a camera also ought to be on some kind of backup power if the customer wants to be able to see what is happening if the power to the premise is cut. You will want to choose cameras that come with the ability to let the customer see what the camera sees using their cell phone.

Why is this a business opportunity? I have been advocating in this blog that telecom businesses need to decide if you are going to be a full-service provider or a dumb-pipe provider going into the future. If you are going to be a full-service provider then you should look for opportunities to go into customer’s homes and businesses. Services like installing security cameras are not going to drive a lot of revenue. Instead, it will pay for a few hours of your installer’s time, but it will give you a chance to get to know your customers better, to upsell them on other services and to create loyalty since you are the provider who will take the time to visit and listen to them.

Recording. While there isn’t a lot of money to be made in installing cameras, you can sell a monthly service to record what the cameras see. This requires you to establish a high-speed connection to the camera and to have recording devices capable of storing and retrieving video. Ideally you will only record a camera when there is something to record. This can be done by including a motion detector that will trigger the recording. Any recordings you save should also record a time stamp so that you know when the recording was made.

There are off-the-shelf systems for recording video in this manner and you don’t have to reinvent the wheel. But investing in this kind of product line means that you will need to do the math and figure how many customers you will need to justify getting into the business. The normal pricing for this service would consist of a monthly fee to record the images plus a fee when customers want to retrieve recordings over some set limit of times.

Monitoring. The next level of security involves monitoring and this gets into the area of more traditional burglar alarms. There are a number of well-known nationwide brands of security monitoring like Frontpoint, ADT, Vivint, Pinnacle and Life Shield.

How can you compete against the nationwide firms? The burglar alarm business has two components – selling / leasing the hardware and the monitoring function. You can buy the same security system hardware used by any of the nationwide firms. There is a wide array of different systems available. The nationwide companies make a lot of money on the hardware and the installation. They generally advertise a low price but then quickly try to upsell customers to get additional hardware. You should be able to compete and beat the pricing that these firms offer on hardware. And you can offer this without the somewhat sleazy sales tactics that many of them use. Tout yourself as the ‘honest’ firm and many people will be interested.

Second, you can now buy monitoring services on a wholesale basis. There are security monitoring centers that will act as your back office to monitor the alarms and dispatch fire and police as needed. You can easily mark-up their fees and still make a nice monthly margin for monitoring a customer.

Many customers have been through the mill with the nationwide firms since many of them deploy high-pressure sales tactics. Customers are going to prefer to go with somebody they know and trust and who gives them what they need for an affordable price without the high-pressure sales.

The Full Deal. There are also upper-end security systems available that come with the latest high-tech monitoring devices. There is a wide array of different sensors available today that let a business test for all kinds of events. The upper end systems typically are for businesses that want to do a better job of monitoring both security and safety at their premise.

Any carrier can obviously get into the high-end security businesses because anybody can buy the systems used. But my word of caution is that this business line requires a lot of research and the companies you will compete with know what they are doing.