Across the telecommunications industry, companies are taking baby steps toward the quadruple-play bundle of voice, video, high-speed Internet and wireless services. Typically, luring customers to adopt those bundles can include monthly discounts from the price of services if they were purchased separately, sometimes in combination with additional discounts for the first few months.
Bundles are supposed to benefit telecommunications providers by helping them reduce churn, increase their average revenue per user and keep customers happy by offering them discount prices and the convenience of a single bill. According to Pyramid Research senior analyst Ozgur Aytar, the per-month discounts on bundles range from 15 percent to as high as 50 percent.
Still, she said, “It’s difficult to assess whether those discounts are meaningful at all. In a lot of cases, we found that the stand-along pricing is not very competitive.”
Comcast Corp., for example, charges $55 per month for unlimited digital voice as a stand-alone product in the Denver market, according to the company’s Web site-$10 per month more than the $45 unlimited voice package offered by rival Qwest Communications International Inc., which itself involves a $5 discount for buying both local and long-distance service.
Comcast’s price becomes more competitive at $45 per month if a customer chooses to bundle digital voice with either cable TV or high-speed Internet service, and $40 per month (plus a $3 modem fee) with both of the options.
Depending on the provider, the savings associated with bundling also may not be permanent. In some cases, the bundled rates are only good for a limited amount of time before reverting back to the regular price.
“Even though the discount might seem like you’ve saved … you’re still paying quite a bit, and if you were to build your own bundles from different providers, you might save even more,” Aytar said.
Wireless is slowly becoming a part of the bundle, but has not yet been extensively discounted-$5 off a monthly bill is typical-or integrated with wireline offerings. However, Sprint Nextel Corp. has indicated that integration is high on its agenda, as part of its joint venture with several cable companies. Services and devices that integrate wireless and cable-as well as encourage customers to bundle those services together-are expected to start appearing in test markets in the third quarter.
Embarq Corp., which recently completed its spinoff from Sprint Nextel, is touting itself as “the convergence of voice, data, Internet, wireless and entertainment” and is promising integrated features such as a single voicemail box for home line and wireless. The local line business also will have an Embarq-branded mobile virtual network operator using Sprint Nextel’s wireless network. Qwest already has a wireless offering that makes use of Sprint Nextel’s network and offers a $5 service discount for bundling wireless with other Qwest services.
Aytar said that Pyramid Research had found that in the United States and abroad, cable companies are doing a better job than incumbent telcos in selling more than one service to their customers. But as Aytar pointed out, the availability of a triple- or quadruple-play bundle doesn’t necessarily mean that customers will pick up all four services. What is more likely, she said, is that having the options available will increase the chance that customers will choose at least two services from a single provider and possibly three.
Eddie Hold, vice president of wireless services for Current Analysis, noted that bundling is being driven by wireline companies-not wireless ones, even when wireless service is included in the package.
“You always have this very uncomfortable relationship between the wireline and the wireless side of a particular company,” Hold said. “I guess the defense for bundling is, people have wireless anyway, so you might as well try to make sure it’s all part of your parent’s network,” Hold said.
He added that double-play bundles of voice and broadband make sense, but consumers are likely to avoid tacking on wireless and satellite television from a third-party as a video play, due to different customer- care systems and contract requirements.
Customers “want to know who to go and yell at,” Hold said, while at the same time “they don’t want the complication of having to unbundle things.”
