Telecommunications bundling has made a strong comeback over the past year, with nearly all of the country’s regional providers offering some form of packaged deal to customers. Those bundles usually include a wireless link either through a direct subsidiary as is the case with Verizon Wireless and parent company Verizon Communications Inc., Cingular Wireless L.L.C.’s with parent’s SBC Communications Inc. and BellSouth Corp., and Sprint PCS with Sprint Corp., or through corporate agreements as with AT&T Corp. and former subsidiary AT&T Wireless Services Inc.
These traditional bundled offerings, which usually have centered on voice communications, have been joined recently by less traditional pairings as a number of telecom firms have announced deals with other media outlets to expand content to consumers.
Earlier this month T-Mobile USA Inc., which like Nextel Communications Inc. and AWS does not enjoy a larger wireline parent similar to other nationwide wireless providers, announced a deal with Comcast Cable to market T-Mobile USA’s HotSpot Wi-Fi service to Comcast’s nearly 5 million cable broadband customers. While not a typical bundled offering that includes a single bill, the deal provides Comcast customers with reduced pricing on T-Mobile USA’s Wi-Fi service and expands the carrier’s presence among broadband-savvy customers.
Analysts applauded the partnership, noting it strengthened T-Mobile USA’s position in an increasingly competitive market.
“The alliance with Comcast is a strategically necessary move for T-Mobile USA as the carrier faces a list of competitors, including Sprint PCS, Verizon Wireless, Cingular and AT&T Wireless that are more and more using packaged bundles of telecom solutions to sell their wireless service-and staving off the `cut the cord’ mentality of today’s consumers,” said Jeffrey Rickard, wireless industry analyst at Current Analysis.
T-Mobile USA had previously announced the bundling of its wireless voice service with its HotSpot Wi-Fi service last year, providing a single bill for both services as well as a 50-percent discount on the HotSpot service.
Rickard added that the Comcast partnership could lead to further bundled opportunities between the two companies including wired voice services using a voice over Internet Protocol solution.
“This small partnership between T-Mobile and Comcast is only a harbinger of what may come,” Rickard noted.
Telecom providers that already offer more traditional bundled packages to consumers are also expanding the breadth of those offerings.
Verizon Communications announced earlier this month a deal with satellite television provider DirecTV to include discounted TV service with Verizon’s telecom-based bundles. Verizon noted the package, which combines its Verizon Freedom unlimited nationwide calling and high-speed digital subscriber line service, is comparable to packages offered by cable TV providers.
“This is Verizon taking its pre-eminent position as a market-focused communications resource and solidifying it with our customers by adding a great deal on entertainment services,” said Bob Ingalls, president of Verizon’s retail markets group.
Sprint announced a similar arrangement on the same day, signing a marketing and sales agreement with EchoStar’s DISH Network satellite TV service that bundles Sprint’s portfolio of telecom services with satellite TV on a single bill.
Sprint said it would offer the bundle in 18 states where the company is the local telephone provider, noting two-thirds of its local consumers subscribe to multiple services.
In addition to broader options for customers, analysts note bundled offerings are an effective strategy in reducing customer churn.
A report from the Yankee Group last month indicated that a bundle of two products reduces customer churn by one-fourth, a bundle of three products reduced churn by an additional one-eighth, and a four-product bundle accounted for another one-16th in reduced churn.
“It is a bigger hassle to cancel two services than one, hence minor annoyances that would lead one to churn don’t lead a bundle to churn,” noted Yankee Group analyst Roger Entner.
Entner warned that bundles are only effective if the components of the package meet consumer approval as even one poorly performing piece could lead to consumers dropping all services.
