Wednesday, May 21, 2014

The Costs and Benefits of Bundled Information, Communications and Entertainment (“ICE”) Services

            Companies such as Comcast and AT&T use the benefits of bundling as one of the rationales supporting their proposed megamergers.  Have you considered the alleged benefits and offset them with applicable costs?  Didn’t think so.

            It seems that consumers like the bundling concept, perhaps because they perceive savings, or even freebies when they surely do not exist.  Consider the bundling of wireless handsets with service.  Ask most consumers and they blithely report how they got a “free” handset.  Not exactly.

            They get to use a handset on an installment sales basis: during their compulsory two year service commitment, with hefty early termination penalties, consumers not only reimburse carriers for the “free” handset, but pay well beyond the actual cost of the device.  The bundled handset plus service rate substantially exceeds the carrying cost of the handset and the cost of providing the wireless service.  Each and every wireless carrier mandated bundling until TMobile offered a cheaper “bring you own handset” plan after it could not enjoy the fat and happy life of selling out to AT&T.

            The triple play and quadruple play offered now and in the future combines desirable and less desirable services just as cable television program tiering blends desired networks and channels you might never watch. The triple play bundles voice, Internet access and video.  Packaging voice regularly triggers a double payment if you have both wireless and wireline service. With wireless packages now offering “free and unlimited” voice and text, you do not need a cable or wireline telephone option, but that gets bundled in with the video and data that you want.

            Bundling may save you money, but you really should price out the individual and desired service elements and compare their total cost with that of a bundled option.  At the very least claims of technological convergence, corporate synergies and efficiencies are overstated.  Most ventures would rather you not subscribe only to “naked” broadband and cobble together the voice (VoIP), video (IPTV) and data services you want.

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