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Telcos Give Bundling Another Try

Firms are bundling telecom services, including local, long distance and cell phones, Internet, and TV. Will customers go for it?

The telecommunications bundle, the packaging together of a number of telecom services, is growing in popularity as more service providers offer the bundles and many observers believe the phenomenon will receive intense scrutiny as Congress moves to update telecommunications legislation.

Typically, a bundle will package at least three separate services like local telephoning, long distance telephoning, Internet service, TV reception, or cell phone service.

“It’s the three-headed monster of telecommunications,” said Pete Wilson, vice chairman of telecommunications management company Vercuity, in an interview Friday. “Today, skillful marketers can leverage an existing customer base and double it just by using the bundle.”

Wilson said bundle strategy was often flawed in its early days in the 1990s, but today it can represent a good deal for the companies offering bundles and sometimes, too, for consumers.

Earlier this week Consumers Union sounded the alarm on bundles after Sen. John Ensign (R-Nevada) introduced legislation that in effect would update the Telecommunications Act of 1996.

“To get the services they want,” said Consumers Union senior policy analyst Jeannine Kenney in a statement, “consumers will be forced to buy a costly package of others they don’t want or need.” The issue is certain to be reviewed in legislative hearings on telecommunications.

The nation’s telephone and cable companies maintain that bundles of services are a good deal for consumers. Wilson said bundles make sense for some consumers, although he and his firm usually urge their business clients to avoid packages of services. They can generally purchase them cheaper separately, he added.

“The early ones (bundles) were bad deals,” said Wilson citing the attempts by long distance providers to send out $100 checks to entice consumers to sign up for a bundle of local and long distance calling. Wilson noted that if a consumer wanted to drop one feature, the consumer had to drop the entire bundle. It is difficult to drop the pieces individually.

The use of bundles has been growing as service providers offer Internet access. Wilson said VoIP service will simply be added to take the place of long distance when Internet telephoning takes hold in the future. He said the three major Baby Bells – BellSouth, SBC Communications, and Verizon Communications – have effective bundling programs as do some of the cable TV firms.

In the future as deregulation measures grow, Wilson said additional utilities like electricity could be included in telecom bundles. If broadband over powerline (BPL), currently in several pilot tests, catches on, bundles with electrical power are likely to appear.

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