Bundling continues to push forward, albeit at a slow pace.
A recent Arthur Andersen survey of
telecommunications companies found 66 percent of respondents offer bundled services to business customers, and 61
percent are offering these services to residential customers. About 71 percent of long-distance carriers offer bundles to
residential customers, while 83 percent of local providers offer bundles to business customers, according to the report.
More than half of the wireless carriers said they are offering bundles to both types of customers.
Jim Suzansky, a
partner at Arthur Andersen, said those numbers probably are high because carriers are mixing services but not
necessarily offering true integration.
Customer interest
Nearly 40 percent of non-bundled consumers would
consider bundling all of their telecommunications services with a single provider, and more than 60 percent said they
would consider it if they were offered a 10-percent discount, said a recent J.D. Power and Associates report. About half
of wireless subscribers showed at least some interest in bundling all of their telecommunications services with one
carrier, with 22 percent indicating they are extremely or very likely to bundle services with one carrier.
However,
among wireless subscribers interested in bundling, local and long-distance carriers are their preferred providers by a
large margin, said Peter Dresch, director of telecommunications market analysis at J.D. Power. Only one in 10 wireless
subscribers would choose their wireless provider as their preferred bundler, he said.
Furthermore, about 35 percent
of telecommunications customers are as likely to purchase bundled services-specifically local, long-distance and
electric/gas services-from an electric/gas provider as they are from a local telephone service provider, said J.D.
Power.
“These findings indicate that there is a potential threat to telecommunications companies that currently
offer bundled services,” said Dresch. “Electric/gas utility providers enjoy significant levels of customer
satisfaction and clearly have an opportunity to enter the telecommunications marketplace as their own industry is
deregulated and competition becomes more widespread.”
Advantage AT&T
Industry experts say the
desire to offer multiple services is one of the key drivers of the telecom industry’s recent consolidation.
AT&T
Corp. is one company consolidating the industry in a way that gives it an advantage in the bundling game. The
company’s planned acquisition of cable company Tele-Communications Inc. would complement its wireless, long-
distance and Internet offerings and allow it to offer packages of multiple services. AT&T also is a highly recognized
brand name, a key to bundling success.
The company already is convincing some that it has what it takes to be a
successful bundler.
“The best case of bundling that is sweeping the industry is AT&T’s Digital One Rate
plan,” said Pat White, a principal at Arthur D. Little. “It’s a bundle of local, wireless and long-
distance.
“As time goes on, we won’t treat (wireless, local and long-distance) voice as separate
services,” said White. “If you look out far enough … a minute will be a minute whether you call next door
or across the country.”
Other companies expected to have an advantage are Sprint Corp. and MCI WorldCom
Inc. with their national scope, established long-distance businesses and investments in the growing data
market.
While the regional Bell companies hold some advantages, they also have regulatory and operational hurdles
to overcome. Until they prove their local markets are open to competition, the Bell companies can’t offer long-distance
service, which is key to providing a desirable bundle, said industry experts.
“If you look at the embedded
carriers, they have brand loyalty and historical data, but that also may slow them down to some degree because their
data and systems are legacy,” said Suzansky. “The new entrants have less brand loyalty and less data, but
they also have less history to drag them down.
“This is a race that everyone is still in,” he said.
“Everyone’s still got a shot at the finish line.”
Billing and customer care
“The challenge for
RBOCs and other carriers with legacy systems is that they can’t provide bundled services at a low cost,” said
Noel Dunivant, managing director of FGI Marketing Research and Consulting in Chapel Hill, N.C. “They are
looking at a big capital investment in hardware and software to provide single bills and a single point of contact. They
didn’t build their systems originally to provide that type of integration.”
Rob Simons, director of strategic
accounts at Saville Systems in Boston, said many established carriers have deployed systems that combine billing
information from separate systems and merge them onto one bill, as a way to address the billing aspect of
bundling.
However, that type of approach does not provide the flexibility for carriers to be creative with its bundles
by offering discounts on one service if a certain threshold is reached in a different service, for example.
Jeff Boozer,
director of product marketing at Billing Concepts Corp., a third-party billing clearinghouse and information services
provider, said carriers have had problems with customers wanting more detail than what they are getting on their
bundled bill. Carriers also have run into problems with resolving different billing increments or units and rate structures
that change throughout the day.
However, Boozer said bundling does not necessarily have to entail a single bill. The
idea of bundling, he said, is more about giving a customer benefits based on the total revenue he provides to the carrier
and not whether his bill is split up or combined.
Janice Jens, mobile industry marketing manager at Kenan Systems,
said carriers are looking at bundling to increase their share of total telecom spending. Key to winning that business is
for carriers to have a singular view of the customer and be able to treat certain customers differently depending on their
relative value to the carrier, she said.
Arthur Andersen’s Suzansky said carriers, in a break with tradition, have
indicated an increasing desire to retain customer care as an internal asset rather than outsourcing it.
The Finish
Line
Whether or when bundled service offerings really will take off remains to be seen. Carriers are trying to find
the right mix of services and the most appropriate target market for their bundled offerings.
The success of any
given bundle depends heavily upon the penetration rate of the individual services, said FGI’s Dunivant. Combining a
highly penetrated service such as wireline with a less penetrated service like wireless will yield only as much interest as
there are existing customers in the less-penetrated service.
“Bundling is not an effective way to increase
penetration in a particular category,” said Dunivant, who noted bundles of two services such as local and cellular
or long-distance and Internet are most prevalent and most successful today.
It will be much more challenging to
bundle three or more services, said Dunivant, because the penetration decreases each time you add a
service.
BellSouth Corp. offers a bundle of two services with its Complete Choice Cellular package, which gives
customers similar packages of vertical services on both their wireless and wireline phone.
The company could bring
paging, Internet and video services to the mix in the future, said Richard Cost, national retail channel development
director at BellSouth Cellular Corp.
Billing and customer-care issues have challenged the company, said Cost.
BellSouth is able to offer one bill, but still needs additional flexibility to offer customers a choice from a menu of
services. The company also is looking at different options for customer service. For now it provides a single point of
contact that connects customers to individual business units, said Cost.
BellSouth began its bundling strategy last
year by having its distribution channels sell each other’s products, said Cost.
Century Telephone Enterprises Inc.
also has taken steps toward providing bundled services, beginning with a new brand name-CenturyTel-that
encompasses all of its services: local, long-distance and wireless. The company also made organizational changes
to bring its operating units together.
Bruce Hanks, executive vice president and chief operating officer at
CenturyTel, said the company’s bundling focus is part of an overall strategy to bring value to customers and improve its
marketing and sales channels.
