No Bundle of Joy
Wednesday, March 22, 2006
Lori Mabry thought she was getting a good deal by putting all of her home communications needs in the hands of one company.
Two years ago, the Lanham resident turned to AT&T for a package of services including local and long-distance phone and high-speed Internet, saving at least $50 and the hassle of writing three checks. But when she tried to replace the Internet component of her package with another company, the whole deal fell apart, and Mabry wound up disgruntled.
Big telecom and cable TV companies say such "bundles" of service are the way of the future, and the concept is driving huge corporate mergers that are remaking the consumer marketplace. But customers have been slow to pick up on the notion, and those who have, such as Mabry, sometimes find that the reality has yet to match the vision.
"The assumption that everybody wants a bundle is flawed," said Maribel Lopez, an analyst with Forrester Research. Surveys show that only 5 percent of subscribers buy bundled services, and only about quarter of consumers are interested in buying all their services from a single provider, she said.
Some buyers remember the days of being in the driver's seat as they played long-distance providers off one another for better deals, and they are reluctant to put all their subscriptions in the hands of a single company in an industry whose customer service is notoriously inconsistent. The more services added to the bundle, the fewer people it appeals to, Lopez said.
Customers who buy bundles usually buy only two or three services at once, primarily to get a discount on the total bill. Over time, cable and telephone operators say the bigger selling point will come from tying the services together in innovative ways -- making it possible, for example, to record and view television programming on a cellphone.
From the companies' standpoint, the more customers buy in bundles, the less likely they are to switch providers. That's why phone companies such as Verizon Communications Inc. are spending billions of dollars on fiber-optic lines to deliver Internet and television services -- so they can lure subscribers from cable providers and wrap them up with full-service packages. The pending merger of AT&T Inc. and BellSouth Corp. is also partly about trying to speed the rollout of Internet-based TV.
And consumers are beginning to cross boundaries in search of better deals. Five million households get phone service from their cable provider, and 1.5 million customers get satellite television on the same bill as Internet and phone, according to Bruce Leichtman, head of Leichtman Research Group in Durham, N.H.
Cox Communications Inc., which has more than 1 million subscribers who buy three services from the company, typically offers at least a $10 discount for customers who sign up for two products. Cox, along with Comcast Corp., Time Warner Cable Inc. and several other operators, is in discussions to add wireless service through Sprint Nextel Corp. In the Washington area, cable company RCN Corp. sells its bundles of TV, Internet and phone services for roughly $130 a month.
Verizon partners with DirecTV to bundle satellite television with its phone and Internet services. In areas such as Herndon, Fairfax County and Howard County, where Verizon has its own network to sell Fios television service, a consumer buying the full package of goods gets a discount of roughly 10 percent over what it would cost to buy the services separately. AT&T said its bundle, which includes satellite television through EchoStar Communications Corp., offers about a 15 percent savings.
In addition, most companies offer deeper discounts for new subscribers -- introductory rates that increase after several months or a year.
Convenience and two free months of television and phone service convinced the Dorman family in Herndon to sign up for Verizon's total package of service -- including Fios TV -- in November.
The Dormans signed up for a phone line, another Internet phone, high-speed Internet, and television service, and they say they were told they could cancel services they didn't want after the introductory period.
Initially, the service worked well; a third month went by before they received a bill. But when it arrived, it totaled $305 -- loaded with fees and services they weren't expecting. Some premium services they had canceled were still on the bill, and the Dormans were paying $1.71 a minute for long-distance calls, which they thought should have been more like 10 cents a minute.
"The only reason I did it was to save money, and it doesn't," said Vicky Dorman, who got so angry looking at the bill that she turned to her husband, Jeff, and said, "You deal with it."
The Dormans are in the process of unbundling their bundle, going to a separate Internet phone provider for local and long-distance phone service. But once the billing problems are sorted out, the deal still will have been worth it, Jeff Dorman said, because he will be getting more Internet capacity at a cheaper rate than he used to.
"I think that mergers can be very helpful to the consumer through cost or through convenience," said Edward Johnson III, president and chief executive of the Better Business Bureau for the Mid-Atlantic region.
In some ways, dealing with one company can simplify things for customers, like getting a single monthly bill.
But the complexity of services, and the complexity of merging billing systems, can also create problems, Johnson said. Billing and service complaints to the Mid-Atlantic bureau have increased in recent years, to 6,783 complaints about telephone companies last year from 2,497 in 2003, he said. For cable companies, the number of complaints increased to 909 last year from 483 in 2003.
Susan Slack, an Atlanta resident, feels besieged by glossy mailers offering some form of bundle.
"We're constantly barraged with this -- 'bundle your service' -- but I just don't want this one company doing everything," said Slack, who helps her husband manage a small computer-sales business.
Slack soured on the bundle idea after trying to package services for the business, which gets cellular, Internet and telephone services from Cingular and BellSouth. "Now, for a seven-person company, we get hundreds of pages of bills every month," most of which comes in incomprehensible code, making it hard for her to refute bad charges, she said.
Staff writer Arshad Mohammed contributed to this report.