News

Consumers Warm to Telecom Bundles

9/26/1999 8:00 PM Eastern

Consumers -- especially those in urban markets and
multiple-dwelling units -- continue to warm to the idea of buying telecommunications
services from a single provider, according to a recent study conducted by Horowitz &
Associates Inc.

The survey -- which polled 800 consumers in multiple
demographic groups -- noted that more than one-half of consumers responding reacted
positively to the concept of bundling, even if multiple services are offered without a
discount.

However, two-thirds said they'd embrace bundling if a
discount of 20 percent to 25 percent was part of the deal.

The most important factor to consumer acceptance, according
to the summary released by the research firm, is convenience. The local telephone company
is the provider of choice for multiple services, followed by long-distance companies,
cable operators, Internet-service providers, cellular-service providers and power
companies.

The poll revealed that one-third of those surveyed had
switched telecommunications providers in the past year. Further, four of 10 indicated that
they would switch providers just to get their services combined. These customers are
already spending an average of $123 per month on varied telecommunications services.

These data appear to be borne out in real-world experiences
related by GTE Communications Corp. (GTECC), a unit of local-exchange carrier GTE Corp.

GTECC has put big marketing bucks behind a bundle it has
been offering to telephony customers in areas of California (Ventura County, the Los
Angeles area), Florida (Tampa area), Washington (North Seattle) and Indiana.

GTECC has the best brand presence in those areas,
executives said. For instance, the telco offers cable through a separate division in
Ventura, so it is known as a provider of multiple services. However, cable is not yet
included in any bundle offers.

The bundled product, "GTE Unlimited," varies in
price. It includes local and long distance, plus special calling features like call
waiting or forwarding.

Pricing is contingent on the number of long-distance
minutes included in the plan. For instance, a $40-per-month version in California offers
customers unlimited local calling, 100 minutes of long distance and two special features,
such as caller ID or call waiting. A similar package in Florida is $36.95, and in Indiana,
the bundle costs $44.95.

For $92 per month in California, the long-distance budget
increases to 400 minutes and the package includes Internet access and paging. Extra
inducements to sign up include a free $50 calling card.

GTECC has been in business for about two years -- launching
bundling first in California, then rolling it out to other regions -- according to GTECC
president of general markets Pam Jacobson.

To date, GTECC has sold 200,000 customers on bundled
services -- a penetration she expects to expand to between 300,000 and 400,000 by the end
of this year.

Jacobson would not specify the marketing budget for bundled
products, but in California, this writer received multiple pieces of direct mail and
billing inserts. Additionally, the products are featured in broadcast ads featuring the
voice of Don Adams (Get Smart), promoted in outbound telemarketing and available
via e-commerce.

Jacobson would only say that GTECC has developed a
"sophisticated lifetime-value computation," and that the cost of acquisition was
on target. Direct mail has generated a 3 percent to 4 percent response rate, significantly
higher than the national average of 1 percent to 2 percent.

Further, GTECC has gained "wallet share" in those
homes: Those who sign on for bundled services tend to buy more services than they had
previously purchased from the telco. Also, those who find themselves talking more than
their allotted long-distance time tend to upgrade to more minutes, rather than modifying
their talk time.

"Our revenue per customer, per month goes up every
month," she said.

GTECC hasn't yet bundled telephony with its wired and
wireless video offerings, via GTE Media Ventures. But Jacobson said she anticipates some
collaborative marketing in the near future.

Want to read more stories like this?
Get our Free Newsletter Here!
September
October

VR 20/20

The Times Center, New York, NY