The wireline parent companies of Cingular Wireless L.L.C. are dangling discounts, converged bills and the potential of cross-platform services as they try to convince customers to bundle Cingular wireless services along with high-speed Internet, video and wireline phone services.
As the AT&T brand re-emerges with the company’s purchase by SBC Communications Inc., the wireline giant has kicked off an estimated $500 million advertising campaign that focuses on the new AT&T Inc.’s ability to provide bundles, including cellular service through Cingular with a $5 monthly discount. Cingular’s other parent, BellSouth Corp., recently began a promotion that offers Visa gift cards to new customers who sign up for services through BellSouth-including a $50 gift card for new Cingular subscribers who agree to a two-year contract.
“Bundling is a very big effort for us,” said Tyler Wallis, associate vice president of voice and wireless services for AT&T. “We’ve done a lot of hard work to do the integration.”
Besides the bundling efforts involving Cingular, Verizon Communications Inc., parent of Verizon Wireless, offers multiple-play bundles and Sprint Nextel Corp. is busy shaping its joint venture with four cable companies. But it’s still unclear what effect bundling will have on carriers’ roles within their partnerships or parent companies, and some analysts say wireless operators could be looking at a double-edged sword.
As senior analyst Andy Castonguay of Yankee Group sees it, simply packaging multiple services together may not have much of an impact on wireless carriers. If enough customer information gets shared across services, he said, bundling could be a boon that serves as a new marketing channel to reach affluent customers.
On the other hand, Castonguay noted, the discounts that make bundling attractive could eat into carriers’ revenues, and if wireline parents begin fiddling with contractual terms to sweeten the deals, that could spell trouble for their wireless offspring.
“It’ll be a challenge for companies like AT&T to have multiple brands trying to work together and really try to expand the business of each individual company,” Castonguay said.
At Cingular, spokesman Clay Owen said he didn’t think Cingular’s situation has changed dramatically with the launch of the new AT&T. Sales through BellSouth and AT&T made up about 4 percent of the company’s gross additions in the third quarter of 2005.
“We’re hoping to continue to increase sales through our parent companies,” Owen said. “Bundling is a big part of that.”
For consumers, bundling is touted as a way for them to simplify their bills and save money. AT&T’s Wallis said that 65 percent of AT&T customers have more than one service from the company. According to BellSouth, more than 4.9 million residential customers subscribe to its bundles.
But Eddie Hold, vice president of wireless services for Current Analysis, doubts that customers will want to put all of their telecom eggs in one basket when it comes to wireless. While broadband, video and even landline voice might make sense together, he compared adding wireless to that bundle to a barnacle attached to an otherwise sleek boat.
“Just because your wireline provider happens to offer wireless doesn’t mean they’re your best choice,” Hold said, noting that wireless purchases depend on network coverage, handset choices, and the services that friends and family have.
Hold said the few dollars per month in Cingular savings offered by the carrier’s parents has little influence, since customers may worry that they won’t be able to easily separate the services if they needed to. And despite saving on individual pieces of a bundle, he added, customers may still balk at getting a very large bill for all the services instead of multiple bills of more palatable size.
A bigger problem for carriers, Hold said, is that wireline parents don’t really want their wireless offspring to start urging people to give up their landlines-but wireline replacement is a space with substantial growth potential for cellular services, as wireless penetration rises past 70 percent.
“Their growth area isn’t just taking customers away from the other wireless providers,” Hold said. “It’s increasing the (average revenue per user), convincing people that they should be using more of your services and less of theirs.” And that, Hold says, means getting people to talk on their cellular phones instead of their land lines.
Still, Hold sees potential for convergence with wireline and wireless companies-but it’s data convergence, not voice convergence.
“The future of wireline is definitely the broadband connection,” he said.
According to Wallis, AT&T is already working with Cingular on feature level integration that involves the Internet. At the Consumer Electronics Show, Cingular and AT&T partnered with Yahoo Inc. and Nokia Corp. to offer a Yahoo! Go Mobile service that would be built-in on Nokia 6682 handsets from Cingular. Slated to become available in February, the service will allow subscribers to access Yahoo e-mail, messages, calendar and address books. When people take a picture with their camera phones, the image can be automatically uploaded to a Yahoo Photos account instead of languishing on a phone. Another product in the pipeline, Wallis said, would allow subscribers to program their digital video recorders from their Cingular phones.
Cingular also is working with BellSouth to develop new products and services-which can make for an interesting company atmosphere, Owens said, since Cingular must work with both companies but at the same time not reveal to each of them what it’s working on with the other.
“I think we’re still really early in the game in terms of fixed/mobile convergence, and bundling is a first stage in the longer convergence continuum,” said Yankee Group’s Castonguay. “The industry’s ability to bundle these things and have a roaring success is still clearly in doubt.” RCR
