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PROTECTION ONE, INC.

PROTECTION ONE ALARM MONITORING, INC.

September 7, 2005

VIA
EDGAR AND FACSIMILE

Securities and Exchange Commission

Division of Corporation Finance

450 Fifth Street, N.W.

Washington, D.C. 20549

  Attention:

  Larry Spirgel

  Kathryn Jacobson

Re:          Comment
Letter Dated August 10, 2005 Regarding Protection One, Inc. and
Protection One Alarm Monitoring, Inc.

Form 10-K and Form 10-K/A for the Fiscal Year Ended
December 31, 2004, filed March 17, 2005 and March 24, 2005,
respectively

Form 10-Q for the quarter ended March 31, 2005,
filed May 16, 2005

(SEC File Nos. 1-12181-01 and 1-12181)

Dear Mr. Spirgel and
Ms. Jacobson:

On behalf of Protection
One, Inc. and Protection One Alarm Monitoring, Inc. (collectively,
the “Company” or “Protection One”), this letter responds to the letter, dated August 10,
2005 (the “Comment Letter”), from the staff of the Securities and Exchange
Commission (the “Staff”) regarding the Company’s Annual Report on Form 10-K
and Form 10-K/A for the fiscal year ended December 31, 2004 and its
Quarterly Report on Form 10-Q for the quarter ended March 31,
2005.  The numbered paragraphs below set
forth the Staff’s comments together with the Company’s responses and correspond
to the numbered paragraphs in the Comment Letter.

Form 10-K/A
for the year ended December 31, 2004

Notes to Consolidated
Financial Statements

2.  Summary of Significant Accounting Policies

(b) Revenue Recognition, page 9

1.             We note your
response to our prior comment 9 and your statement that in an arrangement where
the Company retains title to the system, you believe that there is “only one
unit of accounting since there is not a sale of the system.”  Tell us your consideration of EITF 01-8
regarding whether your arrangements contain a lease of the security system.

Response:  The Company had considered the guidance of EITF 01-08 and concluded
that these arrangements do not contain a lease within the scope of FASB
Statement No. 13, “Accounting for Leases.”  This conclusion was based on the Company’s
accounting model which does not

consider
such security equipment as a depreciable asset.
The Company considered the guidance of EITF 01-08, paragraph 9, which states
in part:

“Property,
plant, or equipment, as used in Statement 13, includes only land and/or
depreciable assets.  Therefore, inventory
(including equipment parts inventory) and minerals, precious metals, or other
natural resources cannot be the subject of a lease for accounting purposes
because those assets are not depreciable.”

The
Company does not record and depreciate security equipment as a fixed
asset.  As discussed in the Company’s
response to your prior comment 7, equipment costs are capitalized as part of
the direct and incremental costs related to the origination of a contract.  As noted in the example of a typical
arrangement in the Company’s response to your prior comment 7, the equipment
costs are a part of the total deferred costs that are deferred over the
expected life of the customer to the extent of the up-front revenue with the
remainder of deferred costs amortized over the initial term of the contract.

However,
if one were to conclude that, irrespective of the Company’s accounting model,
such security equipment is subject to further evaluation under EITF 01-08, the
Company believes the right to use equipment is not conveyed to the customer in
its typical arrangements.  The Company
views such arrangements as contracts for services that do not transfer the
right to use property, plant, or equipment from one contracting party to the
other.  Paragraph 12 of EITF 01-08,
provides that:

“An
arrangement conveys the right to use
property, plant, or equipment if the arrangement conveys to the purchaser
(lessee) the right to control the use of the underlying property, plant, or
equipment. The right to control the use of the underlying property, plant, or
equipment is conveyed if any one of the following conditions is met:

a. The
purchaser has the ability or right to operate the property, plant, or equipment
or direct others to operate the property, plant, or equipment in a manner it
determines while obtaining or controlling more than a minor amount of the
output or other utility of the property, plant, or equipment,

b. The
purchaser has the ability or right to control physical access to the underlying
property, plant, or equipment while obtaining or controlling more than a minor
amount of the output or other utility of the property, plant, or equipment,

or

c.
Facts and circumstances indicate that it is remote that one or more parties
other than the purchaser will take more than a minor amount of the output or
other utility that will be produced or generated by the property, plant, or
equipment during the term of the arrangement, and the price that the purchaser
(lessee) will pay for the output is neither contractually fixed

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per unit of output nor equal to
the current market price per unit of output as of the time of delivery of the
output.”

The Company believes the
right to use the equipment is not conveyed to the customer. The primary output
of the equipment is the delivery of the signal used by the Company to provide
the monitoring service.  By contractual
agreement, the customer cannot utilize the equipment for monitoring service
with another service provider. The Company retains the right to physically
access the equipment as needed to provide a monitoring signal and has the right
and the ability to access the equipment for reprogramming of the operating
software, including redirecting the destination of the monitoring signal.

The Company believes additional
evidence suggesting that the equipment is not part of a lease arrangement
includes:

•              The
customer is precluded from tampering with or moving the equipment installed by
the Company.

•              The
customer cannot fire or replace the Company as the provider of monitoring
services with respect to the equipment.

•              The
customer cannot specify significant operating policies and procedures, many of
the most significant of which are specified by a third party, Underwriters
Laboratories (UL), which certifies providers of security monitoring services.

Due to the customer’s
limitations enumerated above, and because the customer does not obtain or
control more than a minor amount of the output, the Company does not believe a
lease component exists in its monitoring arrangements.

The Company further
believes that its typical arrangements do not constitute a lease since it has
the right to replace the installed equipment with any other equipment that it can
utilize to provide the monitoring service required under the monitoring
contract with the customer.  The Company
may exercise this right if it deems the replacement to be beneficial to the
Company and, at a minimum, neutral to the customer.  This conclusion is based on the guidance of
Paragraph 10 of EITF 01-08, which states:

“Although
specific property, plant, or equipment may be explicitly identified in an
arrangement, it is not the subject of a lease if fulfillment of the arrangement
is not dependent on the use of the specified property, plant, or equipment.…”

2.             Your
response to prior comment 9 did not specifically address your deferral of
revenues and direct costs relative to when you price the system lower than you
otherwise would because of an accompanying service agreement.  Provide us with more details of what you mean
by this statement and cite your basis in the accounting literature.

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Response:
The Company’s policy
is (and has been) to defer revenues and direct costs only when the company
retains title to the system which generally results in a lower up-front fee to
the customer (compared to a sale of the system in which title passes) and also includes
a service contract.  The Company’s policy
on establishing the sale price of a system does not consider whether there is
an accompanying service contract, and the Company does not believe that it
sells systems at a reduced price based on the existence of an accompanying
service agreement.

The
language in the Company’s current policy note in its public filings was crafted
prior to the Company’s adoption of EITF 00-21, and upon further evaluation and
consideration of the language, the Company intends to modify the first
paragraph of its policy note in its future filings as follows (added language
is shown in brackets):

“Revenues
are recognized when security services are provided.  System installation revenues, sales revenues
on equipment upgrades and direct and incremental costs of installations and
sales are deferred for residential customers with monitoring service
contracts.  For commercial customers and
our national account customers, revenue recognition is dependent upon each
specific customer contract.  In instances
when we pass title to a system unaccompanied by a service agreement or we
pass title at a price that we believe is unaffected by an accompanying but
undelivered service, we recognize [the associated] revenues and costs [related
to the sale of the equipment] in the period incurred [regardless of whether the
sale is accompanied by a service agreement].
In cases where we retain title to the system or we price the system
lower than we otherwise would because of an accompanying service agreement,
we defer and amortize revenues and direct costs.”

Form 10-Q
for the quarterly period ended March 31, 2005

Notes to Condensed
Consolidated Financial Statements

1.  Basis of Consolidation and Interim
Financial Information, page 7

3.             We note the
reduction of deferred customer acquisition costs and revenues “which have been
subsumed into the estimated fair market value adjustment for customer accounts.”  Tell us what the referenced statement means
and why you believe this accounting treatment is appropriate.  Also, tell us the underlying assumptions used
to estimate fair value of the deferred customer acquisition costs.

Response:  Prior to its adoption of push down
accounting, the Company’s deferred customer acquisition costs in excess of deferred
customer acquisition revenues represented its net investment in internally
generated customer contracts.  The fair
value of customer accounts determined in connection with the application of
push down accounting was based on a valuation study and included the value of
internally generated customer accounts, customer accounts purchased through
dealers and customer accounts acquired through purchases of other

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companies.  Therefore, after the push down accounting
adjustments, the book value of internally generated customer accounts is included
as part of (what was meant by “subsumed into”) the Customer
account asset on the Company’s balance sheet.

At the date of
acquisition, no value was ascribed to the deferred acquisition costs or to the
deferred acquisition revenues when allocating Quadrangle’s basis to the fair
value of its assets and liabilities.  As
noted in the previous paragraph, the fair value of internally generated customer
contracts was included in the determination of fair value for all customer contracts
and reflected in the balance sheet line item Customer
accounts.  The Company
believes this is appropriate since valuations performed in the industry are
typically based on multiples of contractual recurring monthly revenue, and as
such, no separate value is typically ascribed to the deferred acquisition
costs. The deferred acquisition costs and revenues reflected in the March 31,
2005 balance sheet generally represent deferred costs and revenues incurred
subsequent to the application of push down accounting.

*       *       *       *

The Company hopes that the foregoing has been
responsive to the Staff’s comments.  If
you have any questions related to this letter, please contact me at (785) 856-9370.

  Sincerely,

  /s/ Darius G.
  Nevin

  Darius G. Nevin

  Executive Vice
  President and Chief Financial Officer

  cc:

  Richard
  Ginsburg, Protection One, Inc.

  Eric A. Devin,
  Protection One, Inc.

  John M.
  Jennings, Kirkland & Ellis LLP

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