KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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More comments on unhappy with central station
October 11, 2021
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More comments on unhappy with central station from article on September 25, 2021
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Ken,
I am responding to the article on September 25, 2021, “Problems with new central station” and the follow up article on October 2, 2021. I am happy that I did not jump so fast to respond because of the “we would love to help out this dealer” which was an incredibly self-serving advertisement to capitalize on someone else problems.
I won’t dignify the author or the represented company other than to say that that organization is as much at fault for the issue the dealer (remember the dealer who first said they had a problem) is experiencing.
There was a company (the one the dealer was contracted with the first six months of this year) in the contract monitoring business who was a late entry (for the lack of a better term) in the marketplace. For this company to gain market share it made the decision to undercut what would be normally considered standardized pricing (industry standardized in the same manner as the contracts you sell as being industry standardized and accepted as state-of-the-art).
The reason the dealer is having a recent issue is because his provider filed for Bankruptcy (previously written about here in your blog) and was sold at auction to yet another monitoring company who practices in predatory pricing practices.
I should also note that the contract company who is “looking to help” is also a practitioner of these same pricing models.
The dealer is either a victim or a beneficiary of these pricing schemes. Let’s take the later first, he may have been a beneficiary, meaning if he was paying some ridiculous rate, he benefited until the bill collector showed up and I have no sympathy for him because he probably laughed all the way to the bank each month, rather than pay a reasonable price.
Before I write about the dealer as a victim, let’s talk about a reasonable rate. It could be thought of as the “minimum wage” or “a living wage”. Dealers everywhere have been raising rates because of labor costs, taxes, gas, vehicles, insurance both health and commercial, but when was the last time a dealer ever called their central station service provider to ask if the central station was making money on their account? Strangely enough I had one such dealer ask me that from the west coast last week before your original article came out but I will write more on this later.
So, is the dealer a victim? Yes, if he is a small dealer paying standardized rates, he was one of the many small companies that kept the company afloat for as long as it did. Unknowingly, he has been a victim since the first day he started with the now bankrupt company.
Oh and the company offering to help, I came across one of their customers once who asked me to quote my services. They were already a beneficiary paying in the low $3’s, and without any shame they wanted to pay mid $2’s. BTW, they wouldn’t sign your contract which was just another reason to refuse to do business with them.
There are many alarm companies out there who are beneficiaries of predatory pricing and I say predator because the central station wants to be the biggest, even though they come up with fancy scenarios to justify such pricing but if they lost all the small guys they too would be on their way to bankruptcy court.
So my message to the “dealer” and dealers everywhere, did you ever wonder why the manufacturers raise their prices and your central station provider has not in their 40 years? Did you ever wonder why your insurance, cost of labor, cost of vehicles, etc has gone up but not your central station services? It’s because you are either a beneficiary or you are paying a fair rate which I can tell you is unsustainable with wages soaring because governments are mandating a $15.00 dollar an hour minimum wage. So if the kid flipping hamburgers is making $15, central station operators will be making a bunch more.
But I have a question for dealers, why do you think the most advanced central station service providers are going to smart phone apps, emails, texts, etc? It’s to gain more efficiencies than raise your pricing. However until it’s fully automated which could lead to the elimination of the need for dealers, there are not enough efficiencies to be had.
And my message to central station providers who charge major cable companies less than a dollar, Why? Providers who work for technology behemoths for less than $2 dollars, why? What would happen to your bottom lines if the full or standardized rate paying dealers did not subsidize your operations with standardized rates? Maybe bankruptcy is in your future as well.
Dealers should consider themselves as professional partners with their service providers as well as invested in the success of the service provider or one day they too will become the victim as did “dealer”.
Ken, not to pick on you, but what has been the trend of your hourly rate ever since your started your practice? What were you charging 40 years ago when we first met?
Bart A. Didden, President
U.S.A. Central Station Alarm Corp.
Port Chester, NY
Milford, CT
St. Paul, MN
Pasco,WA
877-872-1266
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Response
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Bart, how do you really feel about your competitors and central station pricing?
Your frustration as a central station owner really isn’t too different than the frustration a dealer feels when confronted with competition among dealers for customers. The alarm industry is very competitive on all levels. However, it may not be the correct view to think that all central stations have the same operational costs and margins, or generate the same profit, or loss. There’s a lot more than what the base monitoring charge is, even when there is a range between $1.50 and $6.00 in the same central station depending on who is being charged.
Central stations, like many businesses, can be grouped in various categories starting with small to large. One way of viewing a central station operation is looking at how many accounts are monitored. Another way might be how many different dealers it services. Yet another way might be what type of monitoring does is actually being provided.
It’s likely impossible for one central station is figure out the economics of another central station, especially when they are in different categories. Can a central station with one location monitoring 100 dealers and 15,000 accounts understand [with any precision] the economics of a central station with 5000 dealers and a million or more accounts, maybe operated from one or more locations? Guessing is the best you can do and it might be well off the mark because you have no real way of knowing if the central station expenses, from advertising, promoting, employee compensation, rent and officer and owner compensation. Keep in mind that the most profitable business can be sucked dry by an owner who pulls too much out of the business, and too much is defined as more than the business can pay and still stay afloat.
It is easy for a central station owner to justify a base monitoring charge of $6 or more. Why hasn’t that upper limit increased? Well I am sure it has over the years, because it wasn’t $6 40 years ago. But it has to keep pace with what a dealer can charge for monitoring, and there is often other monitoring charges that need to be figured into the mix now that manufacturers are offering automated monitoring platforms and charging RMR for that service; so it’s no longer only the dealer and central station sharing the monitoring charge.
Fierce competition is of course always at play especially for desirable dealers. I hesitate to define what a desirable dealer is, but it certainly involves one who has lots of accounts, pays more than average for monitoring, pays on time and has accounts that don’t send more signals than they should.
And while it’s easy to chastise competitors for lowering the bar for monitoring charges you may wonder how you would respond when presented with a huge dealer promising tens of thousands of accounts, especially if you are able to handle that kind of volume.
Many dealers are focused on price when selecting a central station, though arguably there are other considerations that should be looked at such as the central station’s reputation for reliable service and its willingness to help, cooperate and generally assist the dealer grow its business.
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
www.KirschenbaumEsq.com
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