Bundling Drives Growth, Helps Operators to Compete on Price

Horowitz Study: Cable Operators Don’t Sacrifice Revenue with Triple Play

By Linda Moss -- Multichannel News, July 31, 2007

Monterey, Calif. -- Bundling permits cable operators to compete on price without “sacrificing revenue,” but it shouldn’t be used to “force” customers to get higher-end services they don’t need, according to a study prepared by Horowitz Associates.

Howard Horowitz, president of the consulting firm that has his name, outlined the findings of his study and offered suggestions regarding successful bundling during a panel Tuesday at The Independent Show here.

“Now cable has price as an asset,” Horowitz said. “That’s downright revolutionary.”

He did a local market study based on four focus groups conducted at Buckeye CableSystem, which has 150,000 subscribers in Toledo, Ohio.

Buckeye’s vice president of sales marketing, Florence Buchanan, was also part of the panel. AT&T is Buckeye’s competitor on phone service in that market, where the cable operator launched phone service last February, according to Buchanan.

Buckeye is offering a triple-play bundle -- video, voice and phone -- at $99 per month, which is not just a promotional price, Buchanan said. The operator is also exploring offering “cheap phone” service on its own in 2008, according to Buchanan.

“That is something our owner wants us to consider,” she said. “I’m not saying we’ll launch that, but we want to consider a cheap phone to grab that customer who wants just telephone and, maybe, at some point in time, you can bundle them up to either a two-pay or three-pay.”

Bundling has also proved to be a winning strategy for 300,000-subscriber Bresnan Communications, according to panelist Steve Brookstein, the cable company’s executive vice president of operations.

“We’ve seen bundling turning around our basic growth,” he said, adding that churn has been dramatically reduced among bundled customers.

Bresnan is figuring out its rate strategy for 2008, according to Brookstein, and it is planning to mitigate its price increase on video-only customers.

“If you’re going to take a $3 or $4 rate increase on a customer who’s paying $115, $120 [per month], that percent increase is a lot less versus taking that same $2 or $3 rate increase on video-only customers,” he said. “Our greatest vulnerability is clearly our video-only customers, so the bundling strategy has allowed us to ramp down our rate increase among that vulnerable video-only customer.”