Telcos told to do better at bundling

Stuart Corner
Sunday, 06 September 2009 15:47

IT Industry - Strategy

According to telecoms market researcher, Heavy Reading, telcos will need to become much more sophisticated in the way they exploit the potential of all-IP networks to create service bundles for consumers: simply discounting the price for a bundle of services just won't cut it.

Heavy Reading was commissioned by Ericsson subsidiary, Redback Networks, to survey telco executives on their attitudes to and experience of bundling. Responses were obtained from 119 executives from telcos around the world.

Heavy Reading says "while bundles have generally proved quite appealing to end users, and have become more complex over time, they still generally are based on discounting the price for multiple services, and are consequently sold on price."

It says that such a strategy "leaves operators vulnerable to a re-commoditisation of basic service offerings, as all service providers imitate bundles developed by pioneers in each national market. Meanwhile, fixed-mobile convergence has made limited progress, with early service focused largely on simple convergence of telephony, a service that has not proved that appealing to end users."

Heavy Reading concludes that "more is required if bundles are to widen their appeal and impact...On average, respondents to our survey believed, for example, that service bundles that blended communications and entertainment elements could increase ARPU by around 5-10 percent, and four in ten thought such bundles would reduce churn substantially."

Heavy Reading sets out a number of principles that it says "should inform the development and deployment of technologies that enable bundling in future." These are: flexibility, in order to lower or remove boundaries between communications and entertainment, voice and messaging; adaptability, to allow elements to be easily added and subtracted in a way analogous to Web-centric mash-up techniques; and openness, so that the elements making up bundles come not just from the telco itself, but from third party Web sites, portals and developers.

Heavy Reading says that, for inspiration, telcos need look no further than the Web giants who have continually added new elements that are blended with old ones. "The shining example is Google: its value proposition is a better search engine, but it has continually blended new elements into that basic proposition. All of these elements have helped Google stay ahead of its competitors, and mean that ten years after launch, and despite the ferocious competition that characterises the Web, it still owns 63 percent of the search market in the US; its share has actually increased in 2008."

Facebook is cited as another example but with a different approach. "Although it creates some applications itself, it has also thrown open its site to third-party developers, creating an avalanche of new 'blended' applications that are based on Facebook's open API. For the most part, these new applications blend new elements into Facebook's basic value proposition - social networking with friends and family. Currently popular applications that have been blended into Facebook in this way include the ability to share and search photos and videos; sharing movie or music recommendations; the ability to 'poke', message and email friends, individually or as groups; networking via games such as Scrabulous and Texas Hold ‘Em, and the ability to run Facebook applications on mobile devices."

And, Heavy Reading points out, telcos have a number of advantages over web companies, including: direct relationship with (and knowledge of) customers; proven, trusted ability to handle real-time communications; the ability to operate effectively in both fixed and mobile networks; the ability to provide quality-controlled (not best effort) video and other 'difficult' applications; the ability to identify device, network, subscriber and location; knowledge of when individuals are online (presence); the ability to operate across three screens - TV, PC, mobile device; the ability to bill customers for services and service elements; and control over the main gateway into the home.