Operations Monitored services operations consist principally of alarm monitoring, customer service functions and branch operations. Security alarm systems include many different types of devices installed at customers’ premises designed to detect or react to various occurrences or conditions, such as intrusion or the presence of fire or smoke. Existing alarm monitoring customer contracts generally have initial terms ranging from two to 10 years in duration and provide for automatic renewals for a fixed period (typically one year) unless one of the parties elects to cancel the contract at the end of its term. Since 2002, most new single family residential customers have been entering into contracts with initial terms of three years, and, for most new commercial customers, the initial term is five years. Protection One provides monitoring services from four monitoring facilities in the United States. Protection One Europe provides monitoring services from facilities in Paris and Vitrolles, France. See “Item 2. Properties” for further information. In 2001 and 2002, Protection One completed the installation of a common technology platform referred to as MAS®, or Monitored Automation Systems, that combines the customer service, monitoring, billing and collection functions into a single system. The conversion to MAS® has enabled Protection One to consolidate monitoring facilities, resulting in operational efficiencies and cost savings. Approximately 98.5% of Protection One’s North America residential and commercial customer base is served by MAS®. Branch Operations Protection One maintains approximately 60 service branches in the United States from which it provides field repair, customer care, alarm response and sales services and seven satellite locations from which it provides field repair services. Protection One Europe maintains approximately 31 sales branch offices in continental Europe, primarily in France. Customer Acquisition Strategy Protection One’s current customer acquisition strategy for the United States relies primarily on internally generated sales and a strategic alliance with BellSouth Telecommunications. The internal sales program generated 45,642 accounts in 2002 and 41,856 accounts in 2001. Protection One’s multifamily business markets its services and products primarily to developers, owners and managers of apartment complexes and other multifamily dwellings. Protection One Europe’s customer acquisition strategy relies primarily on internally generated sales. Protection One Europe uses an internal sales force of approximately 300 employees, who operate out of 31 branch locations in France, Germany and Belgium. Protection One Europe’s salary structure for its internal sales force is heavily reliant on commissions but contains a portion of fixed salaries. In addition, Protection One Europe owns a telemarketing company, known as Eurocontact, which provides qualified leads to the sales network.		Competition The security alarm industry is highly competitive. In North America, only four alarm companies offer services across the United States, with the remainder being either large regional or small, privately held alarm companies. Based on total annual revenues in 2001, Protection One believes the top four alarm companies in North America are: ADT Security Services (ADT), a subsidiary of Tyco International, Ltd., Protection One, Brink's Home Security Inc., a subsidiary of The Pittston Company, and Honeywell Security, a division of Honeywell, Inc. In continental Europe, a large number of small competitors and a few large regional competitors have recently been taking steps toward establishing a continental presence. The large regional competitors include the following companies: CIPE, a subsidiary of ADT Security Services and Tyco International, Ltd., which is the largest security company in France, Chubb, a United Kingdom-based company that is also a leading security company in France, Securitas, based in Sweden, which has its principal operations in the guarding industry, but is expanding operations in monitored security, Group 4 Falck, a Danish security company that has significant operations in Scandinavia and has recently expanded into Germany and the Netherlands, and Rentokil Initial, based in the Netherlands, which has operations in France and the United Kingdom. Competition in the security alarm industry is based primarily on market visibility, price, reputation for quality of services and systems, services offered and the ability to identify and solicit prospective customers as they move into homes and businesses. Protection One and Protection One Europe believe that they compete effectively with other national, regional and local security alarm companies due to their ability to offer integrated alarm system installation, monitoring, repair and enhanced services; their reputation for reliable equipment and services; and their prominent presence in the areas surrounding their branch offices. Competitors exist in the market that have greater financial resources than Protection One or Protection One Europe, giving competitors the ability to offer higher prices to purchase customer accounts than Protection One or Protection One Europe might be able or willing to offer. The effect of such competition may be to reduce the purchase opportunities available. Regulatory Matters A number of local governmental authorities have adopted or are considering various measures aimed at reducing the number of false alarms. Such measures include: permitting of individual alarm systems and the revocation of such permits following a specified number of false alarms,