NEW YORK-Ubiquitous connectivity, driven by consumer demand rather than carrier plan, could well develop into a completely new kind of convergent telecommunications, said Joan Barten Kline of J.D. Power and Associates.
“Access may become a new product category altogether, instead of the bundling of different services,” said Barten Kline, director of research in communications and energy services for J.D. Power, Westport, Conn.
“The comfort level with remote and wireless communications and the capacity to interact with the Internet create a desire for seamless connectivity, which will drive this. Looking at it from the aspect of usage and behavior, I see the wireless user as the initiator.”
Her initial skepticism several years ago that bundled telecommunications services generally are a mere marketing tool has been replaced with the conviction that they are, in fact, “something real,” Barten Kline added.
“Bundling is finally coming together into a service that will be interesting to watch,” she said.
“In the past few years, it’s been really slow because it has not made that much sense to consumers. But it becomes more and more valuable as services become more complex.”
Two years ago, ISG Telecom Consultants, Palm Harbor, Fla., operated according to the philosophy that “stand-alone services would be a thing of the past by 2000,” said Joseph Isaacs, founder and chief executive officer.
While its expectations may have proven premature, ISG still believes “convergent services will be one of the major plays of the next 10 years-good pricing and service all rolled into one,” he said.
The players
In one way, this will mark the eventual return of the model that existed “before AT&T (Corp.) was broken up,” Isaacs added. However, there will be three very distinct differences.
Telecommunications consumers looking for one-stop-shopping will have many more kinds of services and service providers from which to choose. In addition, end users will benefit price-wise from competition and accompanying technology advancements.
Internet service providers, inter-exchange and competitive local exchange carriers, smaller wireless providers, “all kinds of companies are trying to bundle wireless, Internet, broadband, local exchange and long distance,” Isaacs said. Even traditional resellers are seeking certification as carriers so they can tap into this more lucrative means of resale.
“We have never had such an influx of (clients who are) wireless companies trying to get into long distance,” he said.
Cable TV companies, electric and gas utilities and even England’s Virgin-known best for its airline and music stores-also are poised to enter the convergent services fray, said Bonnie-Jeanne Gerety, a partner at Arthur Andersen, Atlanta. She specializes in communications industry product introduction, life cycle management and sales and marketing.
“Bundling is a new philosophy for companies, and it’s only begun to be done,” she said.
“We’re only in the first or second innings of the game, and it’s too early to tell who the winners and losers are.”
The hardwired human psyche
There is one interesting development in recent years that bears watching, according to several people interviewed, including Gerety and Barten Kline. Established long-distance carriers still lead in consumer perceptions about which company is most trustworthy as a source of bundled services. However, they have lost some of their edge to incumbent local exchange carriers. That is so despite the widely acknowledged leadership of AT&T Corp., which has pushed the bundling envelope and retains strong brand identity with customers.
While unscientific, the personal lament of Susan Culler in her role as an individual consumer may shed some light on this part of the debate.
“I wish Bell Atlantic could put mobile and landline on one bill, but they can’t,” said Culler, who is vice president and director of Tapestry customer care and billing solutions for American Management Systems, Fairfax, Va.
“I was solicited by another (wireless) carrier, but it has a dead zone in my neighborhood.”
Rapid technological advances and deregulation of telecommunications and other industries cannot undo basic impulses hard-wired into the human psyche through evolution, said John Grace, executive director of Interbrand, New York.
“It used to be called `parish marketing’-little boutiques in the neighborhood near the church,” he said.
“There is forever the latent preference to shop locally if, and this is a big if, you can get equal quality, service and price.”
Interbrand specializes in establishing, maintaining and enhancing the brand identities of many kinds of companies.
“A brand is a relationship between a company and a consumer that secures loyalty and future revenues. Companies have an economic need to develop a national brand in an efficient way, but at the same time each of us lives in a town,” Grace said.
“National carriers centralize operations somewhere else. We sense that, while we may be treated well, the company doesn’t really know us.”
Name your price
Within limits, a powerful brand does enable a company to charge somewhat of a premium for its services. A new survey to which 500 businesses of varied sizes and industries responded indicates they will pay up to 10 percent more for the services of “an excellent incumbent provider,” said Steven M. Martin, a principal of communications industry practice for Deloitte Consulting, Washington, D.C.
Isaacs of ISG Telecom said consumers, under one condition, have proven willing to pay more for individual elements of the bundle than they would if they purchased each separately. Overall, they must save money compared with what they would have spent buying all of the bundled elements individually.
For business customers Deloitte Consulting surveyed, price is the primary consideration only in the initial purchase decision, said Barbara Deskey, the Atlanta-based senior manager of communications industry practice.
Business customer retention depends on “improved responsiveness and better account teams,” she said.
“The ability to provide one-stop-shopping has declined pretty significantly in importance when it comes to whether these customers will stay with their (telecommunications) providers.”
Business customers probably have an easier time of it “doing best-of-breed shopping around,” said Marty Rosensweig, a vice president of American Management Systems.
On the other hand, he noted, many telecommunications carriers are taking the approach of “I don’t want you unless you’re a bundle.”
In contrast to the findings of Deloitte Consulting, The Strategis Group, Washington, D.C., said its recent survey of businesses of all sizes indicates that 66 percent are interested in bundles of at least two services. A third of respondents expressed preference for a package of six: local, long distance, cellular/personal communications services, paging, Internet access and enhanced data services.
Leg work
It is by no means easy for providers to offer bundled services. However, those difficulties pale in comparison with the hurdles carriers face in integrating their back offices to handle the new demands imposed by the combined offerings.
“There is converged billing but not yet converged operations support, customer care and provisioning systems,” AMS’ Rosensweig said.
Poised on the horizon and ready to stir the pot even more is another development under way on the landline side: the move to unified services over Internet Protocol networks.
“Single IP networks are based on open standards that enable providers to bring services to market quickly,” said John Delaney, senior consultant for Ovum’s communications strategies group, London.
“Combined with targeted marketing efforts, bundled services and enhanced levels of customer service, providers will be able to harness service opport
unities created by e-commerce and create brand recognition.”
That’s the good news. The inherent downside has only dawned on carriers within the past six months, Delaney said. IP networks will transmit undifferentiated and unidentified bits of data, thereby creating a billing nightmare. Work is under way to develop means to attach identification tags to the data bits.
At least on the wireless side of telecommunications, carriers can afford to kick back and see how their wireline counterparts tackle this opportunity cloaked in dilemma, he said. That is because wireless providers probably have a window of about five years before third-generation networks go into commercial operation.
As a counterpoint to concerns about making network and back-office technologies meet the challenge of converged service offerings, the human factor remains the biggest unanswered question.
“We can set aside the fears we had years ago about sticker shock if I have to write one $200 check instead of four for $50,” Rosensweig of AMS said.
Interbrand’s Grace, however, said he remains a skeptical inquirer when it comes to the outer limits of what size of bundle consumers are willing to accept.
“It’s possible financial services, utilities and telecoms will bundle,” he said. “I’m not saying that will work. It depends on consumer preference.”
Gerety of Arthur Andersen said the concept of mass customization, in which individual or corporate consumers tailor their own package of services, may be realized at some point in the future.
On the other hand, AMS’ Culler said, “People don’t necessarily want to individualize their services completely; customers want simple packages but with options to the package.
There is another overarching and practical consideration when it comes to bundling, Grace cautioned. When the elements in the bundle become commodities, as is rapidly happening, “only the unique services will succeed, but they are expensive to provide.”
