Shoring up consumer erosion with wireless bundles

This summer we've seen a disconcerting trend from large incumbent carriers: the erosion of plain old voice lines, the core bread-and-butter business. While regulatory and political issues seem to have stalled wider deployment of high-speed Internet lines, the impacts of second line disconnections along with other erosion factors seems to have gotten the attention of the regional Bell operating carriers. The "old" answer to competitive erosion threats has been the overdiscussed "triple play" - delivering video services in addition to voice and data. But that is still far on the horizon, and the bleeding has to be stopped today. It seems that they may have hit on a temporary fix: bundling wireless services with landline voice and high-speed Internet access.

On June 29, BellSouth announced some new consumer bundles branded "Answers" that are now available in its markets. The bundles combine local, long-distance (in approved long-distance states), Internet access and wireless through Cingular Wireless. Customers can choose from predefined packages or customize their services based on their needs. Similarly, Verizon announced on Aug. 6 its version of new consumer bundles called "Veriations All." Their bundles are similar to BellSouth's but claim to be a "true" bundle since they are hard wired into their billing systems. Both companies offer substantial savings when a bundle is ordered and all services are invoiced on one bill. However, the real key to these bundles is the inclusion of wireless and the ability to bundle them with wireline services.

Throwing wireless into the bundle mix with the other services provides them with some differentiation that several cable companies can't immediately match. AT&T Broadband has been in the best position to offer a wireless bundle along with cable telephony and cable modem service; but with the changing direction of AT&T, it's hard to gauge how serious and in what timeframe this threat could materialize.

Wireless as the special sauce for consumer bundles makes so much more sense than video. Consider these factors:

• Wireless is more aligned with the existing carrier services and thus carriers should have an easier time with marketing and winning customers to the new packaging. Video services, on the other hand, are an entirely new business, and requires carriers to prove themselves as entertainment delivery companies, which is a challenging task.
• Wireless adoption is still one of the few areas of growth in the telecom space, albeit slower than in the past. Plus, there are wireless data applications coming that can help drive minutes of usage. Most of the U.S. population already has a cable or satellite package, and fewer new capabilities are on the way. Revenue growth from wireless services has more room to grow over the next five years than video services.
• Wireless technology is proven and deployed in the masses. The video technology RBOCs have experimented with is technically complex and expensive to implement.

As the overall consumer communications, entertainment, and electronic markets mature, the jockeying of new customers will become increasingly difficult. These days, it takes more than a simple price cut to win over a sufficient amount of customers. The packaging has to be right, the technology has to be cool, and the services have to be compelling and easy to use. Bundling isn't necessarily a long-term fix - but it's a start. And starting with a related technology and service that is known makes a lot more sense than adopting a totally new business model.

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