"The Joy of Bundling Services" By Carol L. Bowers
[[All, This is an interesting article from Phone Plus Magazine that can be found at: phoneplusmag.com
The web site version contains several graphs and charts you may want to view. Regards, Frank C.]]
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The Joy of Bundling Services
By Carol L. Bowers
Wireless, Data Services Increasingly Linked to Long
Distance Offerings
By Carol L. Bowers
Price is no longer the defining point in the competitive long distance
business wars. To win customers, long distance companies now are
adding bundles of other services to their low-rate long distance
packages, according to a new study by ATLANTIC*ACM that shows
the migration to flat pricing is driving the shift toward bundling.
"Price in a way will always move the world, but price no longer can be
the only feature that distinguishes you. A half-a-cent more is not going to
make or break a customer's relationship with its long distance provider,"
says Marissa Piropato, a telecom analyst who conducted the survey at
ATLANTIC*ACM. "These companies have to think differently about
the way they sell their products and services."
In 1998, the 10 most popular services added to long distance minutes of
use were personal communications services (PCS) or other wireless
offerings and data-oriented services such as Internet dial-up, frame relay
and asynchronous transfer mode (ATM), the study showed. One
interesting point: PCS, offered by 25 percent of long distance carriers,
outpaced data service offerings in 1998, and is likely to do so again in
1999, as 11.2 percent more carriers said they would add PCS to their
packages.
"PCS is becoming more popular as customers are becoming aware of its
advantages, and this makes providers realize it must be a key component
of a bundled package," Piropato says. "Also, I think there are more
opportunities for resellers to purchase PCS, so a lot of them are jumping
in."
Another benefit, Piropato says, is that with PCS or cellular and paging
services, customers are tied to the carrier by contracts.
"When you sign up people for wireless services, you're really signing up
customers for two years, which will probably tie them to your long
distance service," Piropato says. "That bundling will keep churn low and
increase revenues."
UniDial, based in Louisville, Ky., is one company that already has
discovered the joy of bundling services. UniDial's president
and chief executive officer J. Sherman Henderson, who also is chairman
of the Telecommunications Resellers Association (TRA), doesn't even
describe his company as a long distance reseller.
"We're a full-service, long distance telecommunications and Internet
services provider. We sell PCS, frame relay, ISDN (integrated services
digital network)--we do every bit of it," he says.
While he believes the success of various service bundles will depend on
the demands of the individual market, Henderson says his company is
betting on the popularity of wireless services.
"We're investing very heavily into the wireless market," Henderson says.
"I think the wireless business is growing. It's cheap, it's convenient, and I
think America's on the move."
Another reason for the growing popularity of wireless offerings: the
potential to charge customers for enhanced services such as fax to voice,
e-mail and perhaps eventually video--all of which will eventually be
available on the wireless handset.
"It already has changed the way we live. Most consumers don't realize
that yet, but they will," he says. "Look at how long it took people to use
VCRs or ATM machines. This is not too complicated--that's why the
consumption level is running so high."
Still, Henderson warns, companies must not be caught in the trap of
thinking that bundled services are the only place for their investment
dollars.
"You have to build out the infrastructures," he says. "The consumption
level is so high we haven't been able to keep pace in the last few years. If
every consumer in America wanted to get a wireless phone and use it
today we couldn't do it, because we could not fulfill the consumption."
The shift in service offerings also applies to wholesalers, who are trying to
meet the demands of the resellers in their market. Sprint Communications
Co.'s wholesale division, for example, has added to the array of services
it sells, most recently introducing--with Sprint Wholesale VPN--a
software-defined voice calling network that lets resellers offer the
appearance and functionality of a dedicated private network without the
infrastructure costs.
"Two or three years ago the industry had a niche orientation, with
prepaid cards, wireless services, equipment providers. Now we're
expanding beyond traditional product lines and product sets to try to be
more full-service providers," says Mickey Freeman, director of
marketing for Sprint's wholesale division. "Frame relay, ATM, dedicated
Internet, paging, cellular--some of these services have been around for a
while, but what's interesting is that they're starting to seep into the
wholesale market. It used to be that the retail division would try to get the
most margin from innovative products early in the life cycle, and then toss
it over to the wholesale division. Now we're seeing a shift in that the
major wholesale carriers seem to be getting higher-end products early in
their life cycle. It's almost as if you're building a product you know will be
a wholesale product."
The recent decision of Sprint to assume ownership and management
control of Sprint PCS, a digital personal communications service, should
be a boon for the company's wholesale division eventually, Freeman
predicts.
"Now that Sprint PCS has come back into the fold, that's potentially very
good news for us," Freeman says. "We have an agency relationship
between Sprint PCS and retail customers, but we'd like to have a
wholesale offering and we'll be working toward that end."
One reason for that shift, he says, is that competition among wholesale
carriers is changing. He notes that 85 percent of resellers buy their
services from three or more carriers and "most of our customers are
pounding on our competitors' doors asking for the same broad range of
capabilities they're asking from us. It's not just about price any more.
They're looking for someone who's going to be there for them, to be a
single source for all their services."
Freeman believes there is tremendous growth potential for voice services,
but adds that data offerings are key to the future of all service providers.
That contention is supported by ATLANTIC*ACM's research, which
shows data services were the second most popular set of services to be
coupled with long distance service in 1998. The study showed 20
percent of carriers offered ISDN services, while 16 percent offered
frame relay services. Another 15 percent offered both ATM and voice
over Internet protocol (IP).
"When we use the term 'long distance,' traditionally we've meant voice
vs. data communications," says Bill Capraro Jr., chief executive officer of
Chicago-based CIMCO Communications Inc. "Now we're talking about
bundling voice with data. Today, the data departments are making the
decisions about service. The voice portion is an afterthought."
Copyright c 1998 by Virgo Publishing, Inc. |
