The three principal components which comprise the SDT Network system are the Moles, the Data Control Center (DCC), and the Owls. The technologies associated with hardware items within these components are currently commercially available. The software packages to be installed in both the Moles and the DCC are the result of six years research and are designed to distinguish between the seismic signal produced by a tornado and seismic signals produced by other processes, both natural and man-made. As VorTek’s understanding of the tornadic seismic signals continues to increase, the Company will continue to refine the software to minimize false alarms, while maximizing the probability of detection. The system hardware, however, will remain relatively constant, with changes being introduced only when new improved items, such as geophones, are commercially available.
Of the three components to the SDT system only the Owl will be offered for sale to the public. VorTek will retain ownership of the Moles and the DCC. Thus, all software improvements to the system will be installed in Company-owned hardware. Such changes will be invisible to the individual subscriber. The Owl can be refined as necessary but such upgraded versions will be generally introduced on a city-by-city basis. At some future date, for more sparsely populated or rural areas the Mole-Owl combination may be introduced. Such introduction, however, will only commence when the Mole-Owl combination has been proven to be capable of operating reliably with minimum false alarms in a stand-alone mode.
Our goal is to be recognized as the most accurate and reliable source for warning the public of a tornado on the ground. By means of the SATT software the most tornado-prone states and cities can be identified. Initial efforts will involve selection of one city for the installation of the first network. Once the network is installed, sale of the Owls along with one year’s subscription, will commence. Upon the successful installation and start-up of this first network, additional networks will be established in other tornado-prone cities. Ultimately VorTek will be operating SDT networks in 42 different cities. In each city VorTek will work closely with the one broadcasting company which transmits the alarm signal and has exclusive rights to display the seismic data. In addition, VorTek will develop a good working relationship with both the local EMA officials, as well as NWS personnel.
The Owl represents the only hardware item to be offered for the sale to the public. The price of the Owl, $55, will be slightly higher than the price of a standard version of the Weather Alert radio, but it will be less than the price of the programmable version and also less than the list price for the Tornado Alert System The annual subscription fee is roughly equal to the monthly cable TV fee for most subscribers and will also be very close to the monthly fee charged by home security companies to monitor home security systems.
By means of public surveys in the 42 candidate cities some understanding can be developed pertaining to the relationship between market penetration percentage and sales price. Based on the development of such relationships the price of Owls and the annual subscription rate will be adjusted to maximize profits.
Promotion of the SDT system will be handled on a city-by-city basis. As part of the contract with the cooperating broadcast agency, the television/radio station(s) involved will air promotional material for the SDT network and the Owls at no cost to VorTek. In each site emphasis will be placed on the relatively high probability of exposure to a tornado by each resident. The high false alarm rate produced by current detection systems/procedures will also be emphasized. By means of the SATT software for each tornado-prone city the public will be advised of the most tornado-prone months of the year, as well as, the most likely time of day for tornadic occurrences. Maximum use will be made of prior media exposure by EAI. In the Southeast, special emphasis will be placed on the fact that the most likely time for tornadoes is at night.
Because of VorTek’s experience in tornadic risk assessment a significant amount of publicity can be generated at no cost based on press releases authored by the VorTek staff. In addition, by means of the VorTek Web Page, which will be registered with all major Web search engines, information concerning both the SDT network and Owls will be transmitted to Internet users on a worldwide basis.
VorTek, based on orders received via the Internet and television shopping channels, such as the Home Shopping Network, will sell the Owls directly to the public as its primary means of distribution. Under certain conditions, as a secondary means of distribution, VorTek may enter into contracts with large electronic supply outlets such as Radio Shack or large general merchandise outlets, such as Wal-Mart and K-Mart.
As a third option, VorTek may elect to use high-technology mail order houses such as DAK Industries Inc. of Canoya Park, California, and Edmund Scientific of Barrington, New Jersey, as distributors. As a fourth option, safety and home-security system distributors may be used. With the advent of Internet marketing, however, these alternate approaches for distribution may prove to be economically unviable.
The market program for each tornado-prone city will be tailored to take into account the most probable months and the most probable hours of the day for tornadoes in each region. Extensive use will be made of the SATT software to determine for each tornado-prone city the appropriate tornadic statistics. By releasing such statistics to the news media a significant amount of interest in the risk posed by tornadoes can be generated. In areas where tornadoes primarily occur late at night, special emphasis will be given to the need for a warning system which alerts subscribers to the presence of a tornado (on the ground) within a few miles of their residence.
In each of the 42 tornado-prone cities or regions which have been identified, a market penetration rate of 10% is projected to produce a profitable network by the end of the second year of operation and to recover all initial nonrecurring costs within three years. As shown in the Financial Plan, in such a network by the end of five years of operation for the average tornado-prone city, with an 80% subscriber renewal rate, the number of Owls sold would be 42,380 with 33,342 subscribers. In the case of actual cities these numbers would vary depending on the population of each city compared with the average.
Sales programs will be designed and implemented on a city-by-city basis. Under certain conditions the price of the Owl may be reduced to increase the number of annual subscribers.
A number of companies offer products and/or services which could be linked in some way to the products and services of VorTek. Development of mutually beneficial working agreements with such companies is highly desirable.
Recently VorTek has entered into an agreement with SurfSimple Technologies to provide SDT products and services as part of a mass communications warning system for a number of counties in tornado-prone regions of the U.S.
In addition to SurfSimple, companies involved in the development and manufacture of seismic instrumentation represent obvious candidates. The most important (and most costly) part of each Mole is the commercially available low-frequency geophone, manufactured by such companies as Mark Products and Geotech Instruments. Because the number of geophones involved could reach more than 1200, with a total value in excess of 1 million dollars, establishing a good business agreement between VorTek and Mark Products and/or Geotech Instruments will be important for all companies. Such an agreement will provide for VorTek to receive geophones of highest quality at a most favorable price. In addition, VorTek will benefit from the expertise of Mark Products/Geotech Instruments concerning the possible use of more advanced geophones or other seismic devices, as they become available. There is the distinct possibility that Mark Products/Geotech Instruments will be interested in developing a geophone especially suited for tornado detection.
The broadcast industry, both television and radio, because of their involvement in the display of the seismic data and the broadcast of the coded alarm signal, represent another very important candidate for some sort of working agreement. A third potentially significant candidate would be the home security and safety industry. Another candidate industry, which has shown considerable interest in the SDT concept, is composed of weather monitoring/warning system manufacturers such as Weather Technologies.
Initially the Moles might be assembled in house but the Owls would always be manufactured by a subcontractor. A large established manufacturer of solid-state electronic systems, such as SCI, would be a likely choice for the manufacture of Owls.
VorTek will provide internal product support personnel to maintain both the Moles and the Data Control Center. Such personnel will be located initially in Huntsville and will visit each network on a regular scheduled basis to test the operation of all Moles and the DCC which comprise the network.
VorTek will provide a toll-free number for inquirers from Owl owners. The manufacture and assembly of Owls will be carried out by a subcontractor and for that reason damaged and defective Owls will be shipped directly to the Owl subcontractor for repairs.
Based on the assumption that sufficient start-up funding can be obtained in the form of investment capital the principal business risks that VorTek faces are as follows:
1) problems associated with the mass production of the Owls,
2) problems relating to establishing and maintaining good working relationships with television and radio
broadcasters, and
3) problems in developing high public confidence in SDT system performance.
With regard to the first business risk noted, concerned with the mass production of the Owls, EAI will utilize a well-established manufacturer of solid-state electronic components, such as SCI Systems Inc. of Huntsville, Alabama, with whom working arrangements have already been established. The establishment and maintenance of good working relationship with cooperating television and radio broadcasters will require an understanding of the business philosophy of the broadcast industry. VorTek must demonstrate its willingness to listen and adapt to the views expressed by broadcasters. The development of high public confidence in SDT system performances can be achieved by the production of a reliable product with clearly written operating instructions for the consumer, which would be periodically tested by means of coded test messages.
The principal technical risks faced by VorTek include:
1) unforeseen complications in achieving and maintaining network operations,
2) excessive background noise throughout the region covered by a network, and
3) unexpected seismic sources producing excessive number of false alarms.
With regard to the first technical risk, because of the newness of the idea, unforeseen complications in SDT network operations are inevitable. Such problems can be overcome, however, by the use of sound engineering judgement combined with advice from seasoned seismic authorities. This will include carrying out careful testing and calibration procedures for all Moles before and after installation. The second technical problem area, concerned with excessive background noise, must be dealt with during the seismic inspection of potential sites for the Mole installation. The SDT network must be configured so as to avoid areas of high background noise. The production of an excessive number of false alarms due to the presence of unexpected seismic sources can be avoided at least in part by proper site selection for Mole installation. Some modification to the Mole signal processor software and/or the Data Control Center software may be required.