2. Alarm Communications Lou Fiore January 19, 2012 Dallas, Texas

4. AICC Members CSAA CSAA ESA ESA SIA SIA ADT ADT AFA Protective Systems AFA Protective Systems Alarm Detection Systems Alarm Detection Systems Bay Alarm Bay Alarm COPS Monitoring COPS Monitoring DGA Security DGA Security Protection One Protection One Security Network of America Security Network of America Security Networks Security Networks Select Security Select Security Stanley Convergent Stanley Convergent United Central Control United Central Control Universal Atlantic Systems Universal Atlantic Systems Vector Security Vector Security Vivint Vivint AES Intellinet AES Intellinet Alarm.com Alarm.com Axis Communications Axis Communications Bosch Bosch DMP DMP DSC DSC Honeywell Honeywell Interlogix Interlogix Inovonics Inovonics Linear Corp Linear Corp LogicMark LogicMark Napco Security Napco Security Numerex (Uplink) Numerex (Uplink) RSI Videofied RSI Videofied Telular Telular Visonic Visonic FM Approvals FM Approvals Intertek Testing Intertek Testing Underwriters Laboratories Underwriters Laboratories

5. AICC’s Current Topics Nationwide Monitoring License Nationwide Monitoring License Telecommunications Service Priority Telecommunications Service Priority Frequency Auctions – HR 607, S911, Frequency Auctions – HR 607, S911, HR 3116, HR 3630, etc. HR 3116, HR 3630, etc. Sprint and Verizon as presenters re CDMA Sprint and Verizon as presenters re CDMA Next Generation 911 Next Generation 911

6. Today’s Topics

7. The Current Status and Future of POTS The Current Status and Future of POTS National Broadband Plan National Broadband Plan Digital Cellular Digital Cellular Cable Cable IP IP Private Radio Private Radio “D” Block “D” Block NFPA 72 NFPA 72 Government Intervention Government Intervention Summary Summary

9. State of Affairs POTS is leaving us. POTS is leaving us. Cellular will continue to change. Cellular will continue to change. Competitors from outside are leveraging their communications advantages. Competitors from outside are leveraging their communications advantages.

10. Today’s Communications Environment Undeniable shift from wired to wireless services Undeniable shift from wired to wireless services  Decreased demand and availability of PSTN service  Quality of service issues with VoIP as the service spreads  Cellular changes as carriers migrate to faster service The ability to acquire wireless spectrum – at any price – is a formidable barrier to continued expansion for the wireless carriers. The ability to acquire wireless spectrum – at any price – is a formidable barrier to continued expansion for the wireless carriers. The FCC has declared a “spectrum crisis” due to lack of new spectrum needed to address exploding demand. The FCC has declared a “spectrum crisis” due to lack of new spectrum needed to address exploding demand.

11. What’s Happening to Plain Old Telephone Service?

12. Impact of Cellular on POTS Notice the “bubble” at age 22 to 26. Source: CDC

14. New Generation of Customer Comfortable with the Internet Comfortable with the Internet Vast majority have portable devices Vast majority have portable devices Many have multiple portable devices Many have multiple portable devices This generation will not be tethered This generation will not be tethered Demand new applications for their devices Demand new applications for their devices Device life: Typically 18 to 24 months Device life: Typically 18 to 24 months

16. Convergence of Voice, Video and Data Voice Data Video

17. There are more wireless accounts than people in the USA! There are more wireless accounts than people in the USA! 35% of adults in the USA own smartphone. 35% of adults in the USA own smartphone. Mobile phones are a main source of Internet access for 25% of the smartphone population. Mobile phones are a main source of Internet access for 25% of the smartphone population. 25% of smartphone users mostly use their phone instead of a computer to access the Internet. 25% of smartphone users mostly use their phone instead of a computer to access the Internet. *The Pew Internet & Life Project *The Pew Internet & Life Project

22. The National Broadband Plan 1. Design policies to ensure robust competition, innovation and investment. 2. Ensure efficient allocation and management of spectrum, poles, and rights-of-way, to encourage network upgrades and competitive entry. 3. Reform current universal service mechanisms to support deployment of broadband and voice in high- cost areas; and ensure that low-income Americans can afford broadband. 4. Reform laws, policies, standards and incentives to maximize the benefits of broadband in public education, health care and government operations.

24. Quantifying the PSTN Legacy Transition Cord cutting is happening in a rapid pace, especially the younger segments. However, PSTN lines (overall) are also dropping organically. As of May 2010, 23% of respondents in a study lived in a mobile-only household. The same study also found that 37% of adults in the 18-24 and 30-34 age groups lived in a Mobile-only household. Source: FCC

25. Quantifying the PSTN Legacy Transition Recommendations: 1. 1. The FCC should take steps to prepare for the inevitable transition from the PSTN 2. The FCC should take steps to expedite the transition, with a target date of 2018 3. Provide incentives for operators to provide broadband services (that can support Voice) to rural areas and underserved America 4. Fund PSAPs so they can accelerate integration with IP/Packet network (so E911 can work with IP) 5. Realign regulatory requirements to emerging technologies 6. Assist Broadband and OTT providers by working with Security and Emergency Alarms industry associations to push for IP adoption e.g. NFPA 72 7. Bring the National Broadband Plan in alignment with the PSTN Sunset timetable and assure that adequate broadband/mobile capability is available everywhere that the PSTN is today Source: FCC

26. After the PSTN: Non-carrier stranded assets Recommendations: 1.Target 2018 as the end of the PSTN. 2.Develop timeline to ensure smooth transition which addresses stranded assets 3.Assure that mobile and/or broadband replacements are available everywhere PSTN is currently provided. The need will be greatest in rural areas. Source: FCC

27. Demand for POTS Demand for POTS is trending sharply downward. Demand for POTS is trending sharply downward. Government is pushing RBOCs away from POTS Government is pushing RBOCs away from POTS Government pushing a shift to Broadband Government pushing a shift to Broadband

28. Actual Data AT&T had 36 Million POTS lines in 2006 AT&T had 36 Million POTS lines in 2006 Down to 20 Million POTS lines in 2011 Down to 20 Million POTS lines in 2011 Declining industry-wide at about 5 to 7% per year Declining industry-wide at about 5 to 7% per year

29. “EoIP” Everything is moving to IP Everything is moving to IP Only 10% of the population still get their video “over the air.” Only 10% of the population still get their video “over the air.” The future is IP The future is IP All media will be delivered by IP All media will be delivered by IP in the not too distant future. in the not too distant future. Google is reportedly readying an Internet- served pay television service that will roll out in Kansas City next year.

30. Cable’s Entry Some success with “Digital Voice” due to “bundled services” Some success with “Digital Voice” due to “bundled services” For every 2 wired systems lost, For every 2 wired systems lost, Cable picks up one Cable picks up one Tremendous growth in Broadband Tremendous growth in Broadband

31. VoIP

32. Issues for Alarms (as presented in 2007) Pass alarm DACT signal formats in an undistorted fashion Pass alarm DACT signal formats in an undistorted fashion Ensure Line Seizure is not compromised Ensure Line Seizure is not compromised The ability to provide for our control panels to "see” a telephone line equivalent (voltage and dialtone) The ability to provide for our control panels to "see” a telephone line equivalent (voltage and dialtone) VoIP and cable/ISP hardware should have sufficient backup power. VoIP and cable/ISP hardware should have sufficient backup power.

33. MFVN in NFPA 72-2010 Manage and maintain their network to ensure service quality and reliability Provide a service that is functionally equivalent to traditional analog phone service (dialing, dial plan, and loop voltage treatment), Provide real-time transmission of voice signals that carry alarm system formats unchanged, Provide both professional installation and subscriber information …….which preserves primary line seizure for alarm system interconnection, and Have disaster recovery plans to address both individual customer outages and widespread events of a catastrophic nature, including network power restoration equivalent to traditional landline telephone services.

34. Recent Events with NFPA 72

35. NFPA 72 The next edition (2013) will see DACT and a second technology (not two phone lines). The next edition (2013) will see DACT and a second technology (not two phone lines). The current (and perhaps final) draft of NFPA 72-2013 requires a 6 hr DACT test rather than 24 hrs. The current (and perhaps final) draft of NFPA 72-2013 requires a 6 hr DACT test rather than 24 hrs. The 2016 Edition will probably “sunset” DACT altogether. The 2016 Edition will probably “sunset” DACT altogether. Digital Cellular, Two-Way radio, Private One-Way Radio and IP will survive as your only communications alternatives. Digital Cellular, Two-Way radio, Private One-Way Radio and IP will survive as your only communications alternatives.

36. Radio

37. Spectral Efficiency “The number of conversations both voice and data” This number has doubled every This number has doubled every two-and-a-half years for the past 104 years. CISCO: “Globally, mobile data traffic will double every year through 2014, increasing 39 times between 2009 and 2014.” CISCO: “Globally, mobile data traffic will double every year through 2014, increasing 39 times between 2009 and 2014.”

38. The Shannon-Hartley theorem tells the maximum amount of error- free digital data that can be transmitted over a communications channel (e.g., a copper wire, radio channel or an optical fiber) with a specified bandwidth in the presence of noise. tells the maximum amount of error- free digital data that can be transmitted over a communications channel (e.g., a copper wire, radio channel or an optical fiber) with a specified bandwidth in the presence of noise.

39. Beyond 4G? Haken Eriksson, CTO of Ericsson, says 4G is at that limit. Haken Eriksson, CTO of Ericsson, says 4G is at that limit. Talk of 5G about 2020 might just be a tweak to 4G Talk of 5G about 2020 might just be a tweak to 4G The only possible real expansion is more spectrum The only possible real expansion is more spectrum or “Sub-dividing spectrum” or “Sub-dividing spectrum”

40. What’s needed? According to the FCC, 500 MHz of spectrum is required by 2014.

41. However, vast amounts of existing spectrum is underutilized or un-used. The FCC and NTIA* are recovering bandwidth for new cellular applications. The FCC and NTIA* are recovering bandwidth for new cellular applications. The FCC has issued an “NOI” asking for creative ways to recover spectrum not efficiently being used. The FCC has issued an “NOI” asking for creative ways to recover spectrum not efficiently being used. * National Telecommunications and Information Administration * National Telecommunications and Information Administration

42. Current and Future Alarm Industry Wireless Offerings Digital Cellular Digital Cellular Honeywell AlarmNet Honeywell AlarmNet AES Intellinet AES Intellinet SDR and “cognitive radio” SDR and “cognitive radio” “D” Block “D” Block

43. Current Situation

44. Today’s Communications Choices “Traditional” POTS “Traditional” POTS VoIP including MFVN VoIP including MFVN Digital Cellular Digital Cellular Private Radio Private Radio IP and the Internet IP and the Internet

45. Dealer Decisions and Needs

46. RMR (including stability of RMR) RMR (including stability of RMR) Control of your business environment Control of your business environment Bandwidth requirements Bandwidth requirements Costs: Monthly v. Equipment costs Costs: Monthly v. Equipment costs Stability with Technology Changes Stability with Technology Changes Customer Retention Customer Retention Reliability Reliability

47. Cellular Technology Used for Primary and Backup Communications Used for Primary and Backup Communications Drop in solution for landline replacement Drop in solution for landline replacement

48. Benefits of Cellular Flexible installations Flexible installations Cost effective landline replacement Cost effective landline replacement Increasingly ubiquitous Increasingly ubiquitous It can support enhanced services It can support enhanced services

49. Caveats to Using Cellular Monthly fee Monthly fee Unavoidable sunsets Unavoidable sunsets

50. Challenges to using Cellular Competitive forces will move cellular to 4G Competitive forces will move cellular to 4G Current Digital Cellular will be squeezed out in 5, 7, 10 years Current Digital Cellular will be squeezed out in 5, 7, 10 years 10 years for 3G 10 years for 3G Then what: 4G,“5G,”…….. Then what: 4G,“5G,”……..

51. Digital Cellular Technology Longevity GPRS is slowly degrading in most markets GPRS is slowly degrading in most markets AT&T will selective re-purpose 800MHz spectrum for 4GAT&T will selective re-purpose 800MHz spectrum for 4G By 2014 – 2015, GPRS may have performance issues By 2014 – 2015, GPRS may have performance issues Major markets likely to be impacted first Major markets likely to be impacted first Dealt a blow with the AT&T/T-Mobile merger scrapped Dealt a blow with the AT&T/T-Mobile merger scrapped 1XRTT and EVDO longevity more assured 1XRTT and EVDO longevity more assured Verizon through 2018 … at leastVerizon through 2018 … at least Sprint will go longer than 2018 … possible 10 yearsSprint will go longer than 2018 … possible 10 years LTE and WiMAX are the [current] future LTE and WiMAX are the [current] future Verizon (LTE), AT&T (LTE) and Sprint (WiMAX and LTE)Verizon (LTE), AT&T (LTE) and Sprint (WiMAX and LTE) Will be “data-only” for a while VOIP is deployedWill be “data-only” for a while VOIP is deployed “All-IP” technologies are far easier to deploy and grow“All-IP” technologies are far easier to deploy and grow

52. Digital Cellular 2.5G (GPRS), 2.75G (EDGE) will migrate to 3G by 2016 2.5G (GPRS), 2.75G (EDGE) will migrate to 3G by 2016 Cellular is migrating to 4G but probably not until 2020 Cellular is migrating to 4G but probably not until 2020 Some say 4G will probably be the last iteration Some say 4G will probably be the last iteration Sprint and Verizon now saying 1xRTT version of CDMA* will be viable for 10 years Sprint and Verizon now saying 1xRTT version of CDMA* will be viable for 10 years *Code division multiple access *Code division multiple access

53. 3G to 4G A 4G network can be up to 10 X faster than 3G, A 4G network can be up to 10 X faster than 3G, letting consumers browse the web, download songs and stream movies more quickly letting consumers browse the web, download songs and stream movies more quickly U.S. wireless companies also promise that building out their 4G networks will help bring Broadband access to those rural areas that currently lack reliable high-speed Internet. U.S. wireless companies also promise that building out their 4G networks will help bring Broadband access to those rural areas that currently lack reliable high-speed Internet.

54. Bottom Line Digital Cellular at customer sites will go through some turmoil for at last a decade. Digital Cellular at customer sites will go through some turmoil for at last a decade.

55. Mesh Technology

56. A wireless mesh network is a communications network made up of radio nodes organized in a mesh topology. A wireless mesh network is a communications network made up of radio nodes organized in a mesh topology. The coverage area of the radio nodes working as a single network is sometimes called a mesh cloud. Access to this mesh cloud is dependent on the radio nodes working in harmony with each other to create a radio network. The coverage area of the radio nodes working as a single network is sometimes called a mesh cloud. Access to this mesh cloud is dependent on the radio nodes working in harmony with each other to create a radio network. A mesh network is reliable and offers redundancy. When one node can no longer operate, the rest of the nodes can still communicate with each other, directly or through one or more intermediate nodes. A mesh network is reliable and offers redundancy. When one node can no longer operate, the rest of the nodes can still communicate with each other, directly or through one or more intermediate nodes.

57. Ad-hoc Network formed “ad hoc” (or “as needed”) when wireless devices come within communication range of each other. formed “ad hoc” (or “as needed”) when wireless devices come within communication range of each other.

58. A Mesh Network Example

59. AES Corporation Proprietary Google Map of an AES Network covering 7000+ Sq Miles 59 AES Corporation Proprietary

60. Threats Auctions – a constant threat Auctions – a constant threat Narrowbanding i.e. FCC action to 6.25 KHz Narrowbanding i.e. FCC action to 6.25 KHz Usage fees – possible via the American Jobs Act? Usage fees – possible via the American Jobs Act?

61. Challenges to using Mesh Equipment costs Equipment costs Bandwidth Bandwidth

62. 450 to 470 MHz Part 90 Business Band Part 90 Business Band Security Industry dedicated, CSAA coordinated frequencies at 460 to 466 MHz (only for Listed C/S’s) Security Industry dedicated, CSAA coordinated frequencies at 460 to 466 MHz (only for Listed C/S’s)

64. IP and the Internet Uptime issues Uptime issues – software upgrading, etc – software upgrading, etc Backup power issues Backup power issues Ideal for backup to another medium Ideal for backup to another medium Offers high bandwidth for video Offers high bandwidth for video

65. Newer Systems There will be a trend toward “proprietary” radio systems (owned by alarm companies) There will be a trend toward “proprietary” radio systems (owned by alarm companies) such as such as AES Intellinet AES Intellinet

66. Current Situation

67. Today’s Communications Choices “Traditional” POTS “Traditional” POTS VoIP including MFVN VoIP including MFVN Digital Cellular Digital Cellular Private Radio Private Radio IP and the Internet IP and the Internet

68. Dealer Decisions and Needs

69. RMR (including stability of RMR) RMR (including stability of RMR) Control of your business environment Control of your business environment Costs: Monthly v. Equipment costs Costs: Monthly v. Equipment costs Stability with Technology Changes Stability with Technology Changes Customer Retention Customer Retention NRTL Listings & AHJ Attitudes NRTL Listings & AHJ Attitudes Reliability Reliability

70. DRAFT 5/5/1170 RMR Sharing Partial Retain All POTS√ Using subscriber’s phone line VoIP√ Using subscriber’s VoIP line Digital Cellular √ Shared with cellular carrier Private Radio √ Your Network – You keep all RMR IP & The Internet √ Using subscriber’s Internet line

71. 71 RMR Stability ThreatenedStable POTS√ VoIP√ Digital Cellular √ Private Radio √ Your Network – You keep all RMR IP & The Internet √

72. DRAFT 5/5/1172 Control of your Business Environment Partial Control (No Communications Control) Total End To End Control POTS√ With Carrier – POTS “sunsetting” VoIP√ With Carrier - Voice has priority Digital Cellular √ With Carrier - Technology stability issues Private Radio √ Your Network - Frequency auction issue IP & The Internet √ With Carrier – downtime issues

73. POTS No upfront investment VoIP Digital Cellular Moderate upfront investment Private Radio Highest upfront investment IP & the Internet No upfront investment Costs: Monthly v. Equipment costs

74. 74 Stability with Technology Changes UnstableStable POTS√ Maximum of a 10 year life VoIP√ Becoming more stable √ Digital Cellular √ Periodic Changes Private Radio √Stable IP & The Internet √ Becoming More Stable √

75. DRAFT 5/5/1175 Customer Retention Due to Dissatisfaction UnstableStable POTS√ Historically stable but threatened going forward VoIP√ Elusive with communication failure issues Digital Cellular √ Technology stability issues Private Radio √Stable IP & The Internet √ Elusive with communication failure issues

76. DRAFT 5/5/1176 NRTL Listings and AHJ Attitudes Accepted Not Accepted POTS√ Historically accepted with some apprehension VoIP√ Listed but spotty with AHJs √ Digital Cellular √ Listed and almost universally accepted Private Radio √ Listed and almost universally accepted IP & The Internet √ Listed but spotty with AHJs √

77. DRAFT 5/5/1177 Reliability Considered Reliable Considered Unreliable POTS√ Issues going forward VoIP√Issues Digital Cellular √ Private Radio √ IP & The Internet √√Issues

78. DRAFT 5/5/1178 What’s Best for You? One size does not fit all. Tradeoffs Cash Upfront Investment vs. Ongoing Costs How long will you keep your business? Build long term value vs. selling account sooner Control of your business End to end control of your business or trust 3 rd parties for communications What “bandwidth” is required? Primarily monitoring alarms or significant video monitoring too.

79. DRAFT 5/5/1179 Today’s Communications Choices POTS VoIP Digital Cellular Private Radio IP & The Internet

80. DRAFT 5/5/1180 Cash POTS Lowest initial cash outlay and ongoing cost if shared line using subscriber’s phone line VoIP Moderate initial cash outlay and ongoing cost if shared line. Digital Cellular Moderate initial cash outlay plus ongoing monthly costs. Private Radio Highest initial cash outlay but no ongoing monthly costs. IP & The Internet Moderate initial cash outlay but no ongoing monthly costs.

81. DRAFT 5/5/1181 Control of your Business POTS your “partner” is a telco carrier VoIP your “partner” is a VoIP provider Digital Cellular your “partner” is a digital cellular provider Private Radio No partner – total control IP & The Internet your “partner” is an Internet provider

82. DRAFT 5/5/1182 How long will you keep your business? POTS Low investment but Low ROI if dedicated phone lines are required. Best for short term account flipping??? VoIP Moderate Investment but Low ROI if dedicated phone lines are required. Better for short term account flipping. Digital Cellular Moderate Investment but Low ROI if dedicated phone lines are required. Best for short term account flipping. Private Radio Higher investment but highest ROI given no monthly communications costs. Best for long term value creation. IP & The Internet Moderate Investment but High ROI if sharing Internet service. Good for longer term value creation.

83. DRAFT 5/5/1183 Bandwidth required POTS Low Bandwidth – audio and video clips VoIP Digital Cellular Can do wider bandwidth but at a cost Private Radio Lowest bandwidth IP & The Internet Highest available bandwidth

84. Bottom Line You share RMR using Cellular You share RMR using Cellular You don’t have a “partner” with AES You don’t have a “partner” with AES You have full control with AES You have full control with AES IP gives you maximum bandwidth IP gives you maximum bandwidth AES requires the greatest upfront investment AES requires the greatest upfront investment

85. Summary Look at your business Look at your business Pick the technology that best suits Pick the technology that best suits your environment, your environment, your customer needs, your customer needs, your financial situation, and your financial situation, and your long term plans your long term plans Develop a plan. Develop a plan.

86. Questions?

87. Thank you!