The History of ADT and Home Security

ADT has been in the home security business for almost 150 years, longer than any other company has. ADT began installing home and business alarms back in the mid-19th century. In 1871, a man named Edward Calahan opened a new company called the American District Telegraph Company in Baltimore, MD. Since then, ADT has been providing home and business security products and services.

The modern history of home security started out in two different ways and with two different people and companies. Ultimately, they merged divided again and underwent several iterations. The thread connecting them all throughout the 19th, 20th and 21rst centuries is ADT.

ADT Sensor HistoryFirst Electromagnetic Sensor

Modern home security technology began in Boston with an inventor named Augustus Russell Pope. Pope patented the first electromagnetic sensor. The device worked when an electric circuit closed. You connected doors and windows in parallel and by opening them interrupted the electric current. This caused the magnets attached to the sensor system to vibrate. The vibration caused a small hammer to strike a brass bell, alerting the homeowner or monitoring station that someone entered. A small spring mounted above the door or window kept the current interrupted, so closing the door or window again kept the current from flowing after it was tripped.

Pope did not do much with his invention. However, a man named Edwin Holmes bought the rights to it in 1857. Holmes took the technology and made practical use out of it.

Holmes Electric Protection CompanyThe Holmes Electric Protection Company

Edwin A. Holmes was an excellent businessman. He knew how to market and sell. Using the electromagnetic sensor developed by Pope, Holmes started a company in New York called the Holmes Electric Protection Company.

The new electric telegraph device fascinated people at the time. Holmes capitalized on this fascination by printing advertisements for his company and calling this electromagnetic sensor the “burglar alarm telegraph.” This generated interest, and since he always used the same phrasing and signature on his ads, his “brand” became quickly recognized by the public.

Holmes provided security only to businesses at first. He had some of the famous names at the time, and even now, including many jewelry stores such as Tiffany and department stores like Lord & Taylors. He located his central monitoring station, in the middle of Manhattan on the top floor of the biggest building at the time.

His son, Edwin T. Holmes, helped bring a second major component of modern home security. By the late 1870s and 1880s, cities and companies began installing telephone lines. Edwin came up with the idea of using unused phone lines at night for businesses’ alarm systems.

The Holmes Electric Protection Company successfully merged the two new electrical technologies, sensors and phone, and expanded their security business. However, by 1878, Edwin Holmes became president of the new Bell Telephone Company. He sold the rights to his home burglary protection services but kept the exclusive rights to use the phone lines for the service. In 1905, AT&T bought the Holmes Electric Protection Company along with all rights and patents.

ADT Security Company

Origins of ADT

While Holmes and his son perfected and marketed their new home security technology, the founder of ADT, Edward Calahan, started working on his own version of home security. His system also used telegraph lines to secure homes, but in a slightly different way.

The founder of ADT, Edward Calahan, began his professional life as a telegrapher in New York in 1862. An inventor himself, after working at the stock exchange he quickly realized that stockbrokers needed a system to provide more information quicker to investors. Calahan, using his telegrapher skills and keen mind, invented the gold and stock ticker. Brokers started providing ticker tape readouts to investors through a system of messenger boys.

One day in the late 1860s thieves broke into the home of Elisha Andrews, president of the company that manufactured the ticker tape machines Calahan invented. Calahan devised a way, using telegraph and sensor technology, to protect residences from being robbed. He devised a scheme whereby a certain number of homes in Andrews’ neighborhood would each get a call box. If a burglary occurred, the number of rings would indicate which house the incident occurred at in their sector.

Eventually, Calahan refined this further. He divided each neighborhood in the city into areas and installed a call box in each zone. When the central monitoring station received an alarm, a runner would be dispatched, determine what happened and then notify the police on the pre-installed neighborhood call box.

The system caught on. In 1871, he formed the American District Telegraph Company and the installed call boxes in each region or sector where he had homes connected to the system. The call box system became a standard for police and fire departments all over the world, and ADT made millions.

Eventually, the telephone made runners obsolete, and the proliferation of phones meant that neighborhoods no longer depended on call boxes using telegraph lines for their security needs.

ADT merged with Western Union in the early 1900s. A man named A few years later, Western Union merged with AT&T.

ADT became the home security subsidiary of AT&T, combining the Holmes Electric Protection company’s expertise and technology with ADT.

Monopoly Ruling

The federal government forced AT&T to sell Western Union only five years after the two companies merged. The U.S. Justice Department declared the conglomerate a monopoly. AT&T sold all its interest in Western Union, including divesting itself of all the Western Union subsidiary companies like ADT.

adt-historyThe 1920s through the 1960s

After breaking up with AT&T, ADT managers maintained their edge in the home fire and security markets for decades. The company took advantage of technological advancements in fire and theft systems and integrated it into their products and services line.

World War II enabled the company to grow further. The manpower shortage meant that businesses relied more and more on automated or contracted-out services that did not need many human laborers. Two ADT products introduced at the time assisted in helping ADT maintain and increase their market share in home and business security. One product, called the ADT Teletherm, was the first reliable automated fire detection system. Another, called the ADT Telewave, refined and packaged an automated intrusion detection system.

The post-war economic boom in the United States helped to fuel ADT’s growth as well. ADT began further expansion abroad also and became popular in the UK. By 1964, ADT had over 80% of the home fire and security market share in the U.S.

The Justice Department targeted ADT by the early 1960s, as they did AT&T fifty years prior, for violations of the monopoly law. ADT, with their enormous market share, had become notorious for unfair pricing and service offerings. ADT had the luxury, given their market share, to engage in pricing based on the competition. The Justice Department alleged that the company would provide fire and systems below cost to drive out competitors. The government forced ADT to adopt uniform pricing and service offerings throughout the United States.

The company remained exceptionally competitive and profitable despite the forced change, and by 1968 went public on the New York Stock Exchange. This drove further overseas expansion.

More Progress

Motion detectors became integrated into the home security business by the 1970s. ADT significantly changed the market at this time by introducing a new, electronic, central monitoring system. Now, thousands of alarm systems could be integrated and monitored from one central location 24 hours per day, 365 days a year.

In the 1970s too, insurance companies began offering homeowners discounted premiums if they installed a home security system. ADT had positioned itself well to take advantage of this.

In the 1980s, ADT added more technology to their products. These included Unimode for fire detection, CentraScan that created a more centralized and comprehensive package of offerings, and SafeWatch for residences. All this products proved successful. The company’s market share at 5% was greater than the combined shares of their three closed competitors.

Even though by now virtually every Fortune 500 company used ADT systems, the growth of the home security market contributed the largest percentage to their bottom line. The cost of technology started to drop, and reasonably reliable, technologically advanced, systems became affordable to the average homeowner. The components of a 1980s system cost about $1000, with monitoring averaging $250 per year.

Hawley Group, Ltd.

A UK, Bermuda-based company called the Hawley Group purchased ADT in 1987. Hawley began buying U.S. security firms in the early 1980s. ADT was its largest investment to date.

Hawley changed the name of his company to ADT Ltd. and changed ADT’s name to ADT Security Systems, Inc.

This began a major acquisition phase for ADT Ltd. and an important corporate expansion for ADT Security Systems. Hawley purchased one of the major security companies in the UK at the time, Britannia Security Group PLC. Adding this to his other UK holdings, he then changed the name of the entire group to ADT Security Services.

Under Hawley, ADT began consolidating and aggressively marketing. Using technology as well as taking a hard look at operations, the company went from 162 monitoring stations to 30 in the U.S. and abroad. Operating costs dropped, and the company lowered product and services pricing.

During the early to mid-1990s, new products and marketing techniques increased company revenue and profitability dramatically. They introduced the FOCUS system, which designated perimeter zones monitored independently. This became popular with industry. At a plant or office, during working hours defined zones remained disabled so employees could walk around unimpeded. At the same time, an outer perimeter could remain alarmed to deter intruders.

ADT continued introducing new products and started to focus increasingly on the home security market. The commercial market appeared saturated, but residential security became more lucrative and had lots of room for expansion. Between 1991 and 1993 ADT almost double their residential client base, and a home security market share of nearly 4%. By the mid-1990s, ADT was almost a 1 billion dollar company.

Tyco Purchase

In 1996, a bidding war for ADT among several companies desiring to enter the home security market began. Republic Industries started the bidding at $4.9 billion. Republic shareholders blocked the sale, and a company called Western Resources commenced a hostile takeover bid.

The security firm Tyco International Ltd. then offered $5.6 billion for the enterprise. ADT and Tyco wanted the deal to happen and in 1998 Tyco took over and ADT became part of the Tyco Fire and Security Division.

ADT continued to expand its home security offerings under Tyco. The company entered the GPS services market internationally. They formed a partnership with Sears for a residential security program called “Sears Home Security by ADT.” ADT Revenues continued to grow.

The New Millennium

The home security market began to thrive in the new millennium. ADT averaged 75,000 new residential accounts per month in 2000. ADT entered the airport security market post 9/11 and began monitoring operations at airports nationwide.

Acquisitions in the home security market continued also. Mach-7 Security, SCANA Security and several other companies, became part of ADT.

ADT began a financial services and banking division due to increased demand from the banking sector for monitored security products and services.

One of their largest acquisitions took place in 2010. Broadwater at the time was the second largest home security provider in the United States. The cash and transport company Brinks had spun off their home security business from the corporation and rebranded it, Broadwater. Tyco bought the company for $2 billion and merged it with ADT.

Public Again

In 2012, ADT became a publically traded corporation again. The stock trades on the NYSE, averaging $35 per share in 2014/2015. Over six million residential homeowners use the ADT home security system.

ADT Today

ADT has leveraged 144 years in the home security business into what is probably the largest provider of residential security systems in the world. Despite merging, being acquired, going public, going private and then going public again, their core business remains intact. By continuing to evolve and take advantage of technological breakthroughs as they happen, the company continues to be a giant in the industry.

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