Managed vs Unmanaged Networks for Home Security

1. Managed vs Unmanaged Networks for Home Security AICC Meeting September 10, 2013 Roy Perry – VP Ecosystem Alliances

2. What Are Managed vs Unmanaged Networks? • “Managed” means all the devices in the path are under the management and control of a single responsible party • Home routers are “Unmanaged”, and so introduce an element beyond the party’s control, and increase technical and support costs, especially for single path communications Licensed Spectrum Security Panel Service Platform Cellular Cell Modem Managed Unlicensed Spectrum Security Panel Licensed Spectrum Ethernet Broadband BB Modem Home Router Managed Unmanaged Battery Power Grid Power

3. Context for Discussion • Total cost of ownership/operation increases when using unmanaged networks due to many factors • Panels that transmit alarm signals for fire/smoke must conform to NFPA 72 which has supervision requirements that increase costs to central stations • This analysis does not include the support costs associated with supporting other home monitoring and automation applications (eg video, lights, locks, thermostats)

4. Not a “Broadband vs Cellular” Issue • A home network vs service provider network issue • A licensed vs unlicensed spectrum issue • An active vs passive supervision issue • A powered vsunpowered issue

5. Why Does It Matter? • Unmanaged home networks introduce significant service quality issues that create risks for customers and costs for dealers and central stations • Vulnerable to service interruption with loss of power, miswiring, router failure, user error, wifi interference, wrong passkey • Increasing complexity due to increasing variations in home routers • Cable and telco provided routers with aggressive firewall policies can block third party devices • The total cost of ownership may exceed the cost of paid cellular connections

6. Cost of Involving Home Networks • Customer support costs • Increased support costs for home security dealers and central stations • Increase in customer contact, trouble tickets, troubleshooting, truck rolls • Hardware costs • Increased hardware costs to work around home routers • Central station supervision costs • Increased supervision costs due to more incidents requiring central station response • Customer churn and dissatisfaction costs • Training costs for IT skills • For installers, technicians, and customer care

7. 1) Customer Support Costs • Additional support load (inbound calls, Tier 1 tickets, truck rolls) • Additional complexity   • Additional time to resolve • Unique challenges per customer

8. Quantifying Customer Support Costs • Alarm.com Findings • 10x home network tickets vs cellular • Motorola White Paper (2011) • “Reducing Costs, Increasing Retention by Automating Home Network Support” • Quantifies support costs associated with home networks • Roughly 30 percent of inbound calls to carriers or cable operators deal with Wi-Fi issues • Each call costs about $5 (5 min avg = $1/min/call)

9. 2) Hardware Costs • Adding dedicated broadband modem/router • To bypass home router (~$120) • Adding dedicated wifi access points • To bypass customer wifi (~$60) • Adding UPS (standby power) equipment • IP based fire alarm communications does not specifically require standby power • Cable modems and routers will fail during power outages, unless UPS used • UPS can achieve standby power equivalent to cellular, but 8 hour UPS for cable-modem-wifi-router expensive (>$200)

10. 3) Central Station Supervision Costs • NFPA 72 imposes supervision requirements on central stations • Single path connections must exchange signals no less frequently than 5 minutes (eg 2010:26.6.3.1.4) • Single path cellular has had special exemption (24 hours for commercial and 30 days for residential) • Dual path connections no less frequently than 24 hours • Upon loss of connection, the central station must respond • Must call occupant or local dealer • Many home router vulnerabilities (loss of power, misconfigured/bad router, etc) • NFPA 72 2013, Section 14.2.7.2 updated • No longer any distinction between technologies except for dialer (DACT) • 60 minutes/6 hours for commercial • 7 days/7 days for residential (tightens cellular from 30 to 7 days) • Dramatically reduces supervision costs but will take years for adoption

11. NFPA 72 Supervision Requirements(5 Minute Supervision Required for Single Path Until 2013 Code Adopted By Local Jurisdictions)

12. State Adoption of NFPA 72 Editions(As of July 2012, Only 1 State Had Adopted 2010) Source: Data from law.resource.org updated as of 7/31/12

13. 4) Customer Churn and Dissatisfaction • Router password is often forgotten or unknown, frustrates installers and customers and results in longer installation times • Future home network problems may be blamed on home security provider • Customers hold alarm company responsible when monitoring fails, not router manufacturer or network provider or power provider • This results in decreased customer satisfaction and increased churn through circumstances beyond dealer control

14. 5) Technician IT Training for Home Networks • Installers, customer care, and technicians must now be trained on how to setup and troubleshoot home routers and wifi networks, and how to escalate issues to ISP

15. Broadband Can Be A Managed Connection Too • Some cable operators use a dedicated cable-modem/wifi router to bypass home router • This reduces support costs but increases hardware cost, opportunity cost • ~$120 for cable-modem/wifi router • Consumes static IPv4 address • Future: Embedded cable modems could be used in panels with benefits similar to cellular (operation during power failure and bypass of home router)

16. Does Dual Path Help? • Dual path reduces supervision costs, since NFPA 72 supervision is relaxed from 5 minutes to 24 hours • Updated to 7 days for both single and dual path in 2013 Code • Dual path can actually increase support costs, since it adds a second path that must be supported • Cellular backup meets requirement as dual path, but is not continuously active (only used upon failure of alarm transmission via broadband) so requires test signal monthly (weekly in new 2013 code) • Redundant managed/managed active/active dual path in theory is highest reliability, but cost prohibitive today

17. Service Platform Single vs Dual Path Arrangements Unmanaged Grid Powered Standby Powered Security Panel Cellular S1. Managed Cell Modem Single Path Security Panel S2.Unmanaged Broadband BB Modem D1. Unmanaged/ Managed Active BB Modem Home Router Broadband Security Panel Standby Cell Modem Cellular BB Modem Home Router Active Broadband D2. Unmanaged/Managed Security Panel Dual Path Active Cellular Cell Modem Active Dedicated BB Modem Dedicated BB Router Broadband D3. Managed / Managed Security Panel Standby Cellular Cell Modem

18. Cost Analysis – 2010 Code Compliance

19. Cost Analysis – 2013 Code Compliance

20. Cost Rankings of Solutions (2010 Code)

21. Cost Rankings of Solutions (2013 Code)

22. Key Conclusions • Single-path managed (S1) connection to home security panel avoids customer network problems and therefore reduces support costs • Single-path unmanaged (S2) connection (eg using customer router) offers lower connectivity cost but introduces support and supervision costs exceeding the savings • Dual-path managed/unmanaged active/standby (D1) is no more reliable than single-path managed (since cellular used in both cases), but introduces support costs even though secondary path may rarely be needed Bottom Line: NFPA 72 Supervision requirement of 5 minutes remains in effect until 2013 Code adopted; compliance when using IP-only can be costly; need states and localities to adopt asap; recommend cellular or dual path in the interim.

23. Thank You Roy Perry rperry@alarm.com

24. Backup Slides

25. 2010 Code

26. 2010 Code (cont)

27. 2013 Code