HOW TO MAKE A BUNDLE

In the past few years, the concept of “the bundle” evolved from a gleam in a service provider's eye to the price of entry for telecom and cable firms. Now that everyone is bringing their own version of the bundle to market, how can you make your bundle stand out from the crowd while also making it profitable?

The answer is to understand which incremental services consumers want right now. A survey of 700 U.S. consumers by Mercer Management Consulting finds demand for such services that represent an important opportunity for profitable growth.

Ideas that seemed impractical in a narrowband world are being re-evaluated by consumers now that broadband and wireless are widespread. New services are arriving that could materially change the economics of telecom and cable companies.

For example, 43% of consumers in Mercer's survey say they're extremely or very interested in receiving one bill at a discount for a bundle of electric, gas and other home utilities. Some 37% want connected home network services. Even landline videophones, which have been discussed for decades, show latent demand among 11% of respondents. What's more, the survey indicates consumers would choose regional telecom and cable firms to provide such services over other companies.

While no one service is large enough to be considered a breakthrough offering, collectively they represent significant growth potential. The average monthly spending among these consumers for phone, Internet and TV services is $165. The new services would add between $41 and $63 in revenues per month. While the potential profitability of individual services varies widely, we conservatively estimate the average monthly EBITDA of incremental services at roughly $19 per customer, representing a major opportunity for profitable growth.

Because no provider has yet established dominance in these new services, there is still room to establish a leading position. Regional telecom and cable firms currently have an edge because of their proven network capabilities and service delivery skills, their broad customer base and their established brands.

However, these firms must overcome several challenges. The first is to develop a deep understanding of who their customers are and what they want The second is to reduce the long engineering and test cycles before a new offering goes into the network. And finally, they must contain the onerous business case analysis that kills most new-growth initiatives.

Consumers are begging for new services, and the economics will work, if telecom companies can get out of their own way.