Bungling on bundling: Study shows customers want more choices, not less

Nearly all communications companies have thought about providing bundled, one-stop shopping for telecommunications services.

Electric utilities, soon to be deregulated, have also joined the fray, predicting that one way to retain customers would be to package electricity with communications services (see story on page 26). But analysts question the idea of combining a variety of energy and telecom services under a single brand for the residential market.

The one-stop bundling strategy may be compelling, but it is overemphasized, according to Brett Azuma, Dataquest's director and principal telecommunications analyst.

"Bundling is a big buzzword right now, but it hasn't been thought through as much as it needs to be by some companies," Azuma said. "Many consumers feel more empowered with a dis-aggregated bill."

A new survey by New York-based RKS Research and Consulting backs up that view. The survey of 1000 residential customers conducted in April and May concludes that customers view the new bundled service offerings with suspicion. According to the research firm, residential customers want more provider choices--not fewer--for their energy, telecommunications and home entertainment services.

As of this spring, two-thirds of U.S. households have switched long-distance carriers at least once, according to the RKS study. Within this group, 48% want to purchase utility services from separate providers instead of a single, combined company.

Responses in the RKS survey were sharply divided along socio-economic class lines. Nearly three-quarters of college-educated, more affluent heads of households want to purchase utility services from separate providers instead of a single, combined company. In contrast, the majority of high school graduates with lower household incomes express a preference for a single supplier.

"More sophisticated consumers expect to continue shopping around for energy services and prices, as they have already done successfully with long-distance service," said David J. Reichman, president of RKS Research.

"This market segment is not only demonstrably less loyal to the monopoly utility but clearly opposed to any new alignments that create even larger entities--or supermonopolies--among energy, communications and entertainment suppliers," Heichman said.

According to the RKS findings, 40% of U.S. households are now aware of electricity deregulation, up 15 points from six months ago.

The scores are even higher in the West and Northeast, two areas where deregulation activity is most advanced. In the Northeast, for example, 55% of consumers sampled were aware of deregulation, while California and the West showed scores in excess of 44%.

"There is huge variation regionally, but the potential for a utility to be a threat in this market is pretty strong in certain regions," said Ian Gillott, International Data Corp.'s director of broadband and wireless networking.

When asked which company they would prefer to provide their electricity, telecom and cable TV service, one-third of the U.S. households in the RKS study picked their electric company. In contrast, 19% prefer the local telephone company and 12% the long-distance provider. Only 4% of residential customers would seek such services from their cable company.

Cable TV's low rating jibes with previous surveys, according to Bill Lestage, president of Cambridge Communications Group in Cambridge, Mass.