Making telco bundles extinct

With home phone lines becoming redundant and the rise of non-fixed pricing regimes clunky telco bundles may soon be a thing of the past.

The Australian telecommunications landscape is changing rapidly and with it is the holy grail of telco services – the bundle, which is being eroded to the point of non-competitiveness. The way things stand right now there is a good chance that the age of the bundles is on a road to extinction.

There are two main reasons that will eventually see the bundle rendered as another archaic pricing construct.  

Firstly, the way we use telecommunications is undergoing a rapid change and the supremacy of monolithic telcos is under threat from faster, more agile players. These niche outfits are driving content, applications and software and their efforts have in turn been coupled with an increase in mobile data and non-reliance on fixed line services.

Then there are the major structural changes that are taking places to the industry and pricing. Things such as mobile global roaming, and content are now driving larger costs. To some extent these are being offset by a rise in the “all you can eat” type pricing which has larger usage inclusions. However, the question here is why purchase something more expensive when new pricing niches are available?

It used to be the case that by bundling several telco services together, you would obtain a pricing advantage. However, there are now so many niche telcos, services on offer and types of product offerings that there is no need to purchase standard products from a “one stop shop”.

Moreover, there are now a raft of new carriers and providers (some who own their network and others who aggregate wholesale or resell others networks) that they can focus on different market segments who have different wants and desires and price towards that demographic.

The birth of the triple-pay model

Many years ago, working at British Telecom, I had a chance to see the dawn of ADSL broadband services. At the time, it was seen as crucial for the telcos get the “triple-play”; fixed lines, mobile and data (not mobile data). The reason to get the triple play was the more hooks you had with a customer (or a business client) the less likely they were to churn away from you. Also, it became more difficult to churn because of the switching cost you created.

The real key to this triple-play model, from a customer perspective, was that you could deliver a discount to the customer when they purchased multiple services from you. The customer did, and they felt, that they were getting better pricing than they would have obtained if they purchased each individual item separately or if they purchased two out of the three possible bundled options.

This old paradigm is now under threat and here’s why:

  • The advent of smart phones and mobile data coupled with the decline of fix lines.
  • The larger take up of and proliferation of cable television and the way that that's bundled with internet services.
  • The proliferation of wholesale aggregators
  • The proliferation of wireless offers
  • The way the business now provides a smart phone which is a great source of internet and phone for most users.
  • The fact that there are smaller (even state based) geographic based operators and ISPs that can target demographics or regions with lower overheads.

Bundles don’t mean better pricing

It is now no longer the case that a bundle will deliver a better pricing outcome than purchasing the constituent components separately. In fact, buying separately (and smartly) will most likely yield better pricing outcome.

On the flip side, by having multiple suppliers and contracts, one has to look at is the various costs of managing multiple carriers and the administrators burden that that might bring.

Again, this is where changes in the markets will help anyone, especially businesses. Because of the nature of software solutions the emphasis that was once put on having a one-stop shop has now changed dramatically.

What we are now focused on are different carrier products, finding the outcome we want, through the services we need for the best price. The bundle discount is no longer great enough to incentivize the convenience of a “one stop shop”.

For example, what is the benefit of getting it $20 bundle discount when you have to bundle a fixed line with your broadband connection when you no longer use a fixed line? What you are better off doing is buying a mobile phone that allows you to substitute the fixed line usage into your smartphone.

Also, as wireless / mobile data is becoming one of the main areas to access the internet there's no longer the imperative to have an internet connection at home. A mobile phone is all you need.

So the real bundle now is the mobile data that comes with the voice plan and is all rolled into your phone handset. All of the old bundles are now contained within one device that lets you access all the content and allows you to tether to any device, anywhere.    

Tony Simmons is the managing director and founder of The Full Circle Group, an independent telecommunications consultancy firm focused on Telco expense costs and management.  

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