"Bundled services here. Come get your video, voice and data-we'll even throw it all on one convenient bill."
If it were only that easy for cable operators to sell subscribers integrated packages of cable channels, local and long-distance telephone services and high-speed Internet access.
But more than four years after Congress passed the Telecommunications Act in February 1996, few cable operators are offering bundled services to their subscribers.
Some cable overbuilders, such as RCN Corp., are aggressively selling integrated packages on a single bill. But top cable operators said they're still tweaking their approaches.
And while some cable operators noted that their infrastructure can finally support new products such as cable telephony and high-speed Internet access, finding a way to market those services is another ball game.
"As difficult as vision is, vision is easy compared to execution, which is difficult," AT & T Broadband executive vice president of marketing Doug Seserman said. "Clearly, the vision for selling all kinds of services via the bundled cable plant-we're just now really seeing that as a reality in the industry."
Among the challenges that Seserman and other cable executives are grappling with is finding a billing system that can offer subscribers the option of paying for all of the services on one bill, or separately.
Whether or not operators should offer discounts to subscribers who buy multiple products is another hot issue.
And offering different levels of customer service-similar to the way airlines don't make frequent fliers and first-class passengers wait too long in line-is another strategy MSOs said they are considering.
Cox Communications Inc.-one of the first MSOs to sell packages of video, telephony and data-offers an integrated package in eight markets: San Diego and Orange County, Calif.; Phoenix; Hampton Roads, Va.; Oklahoma City; Omaha, Neb.; Connecticut; and Rhode Island.
The MSO uses Convergys Corp.'s "ICOMS" billing system to bill customers through one platform, but subscribers are sent separate bills.
Cox is "in the process of transitioning" to a system that will bundle multiple services on one bill, but the MSO will continue to give subscribers the option of receiving separate bills, vice president of marketing Joe Rooney said.
"Some customers have told us, I'm going to take my high-speed Internet bill and give it to my boss to be reimbursed. I don't necessarily want him or her to see what I'm buying on pay-per-view,'" he added.
As far as discounting, Cox charges cable subscribers $44.95 per month for its Cox@Home cable-modem service, while nonsubscribers pay $54.95 per month.
In markets where Cox offers telephony, the MSO charges the same rate as the incumbent local-exchange carrier if the subscriber only buys local phone service. It charges customers who also subscribe to cable 30 percent less than what the ILEC charges, Rooney said.
DATA, VIDEO LINKED
Rooney said 90 percent of Cox customers who subscribe to Cox@Home also subscribe to its video package, and 90 percent of the MSO's local telephony subscribers also buy the cable service.
Discounts don't necessarily drive subscribers to order bundled services, Cox director of pricing and bundling Randy O'Neal emphasized. "It's as much about the convenience as it is about discounts or savings. Convenience is really the driver," he said.
AT & T Broadband offers its subscribers separate bills for its AT & T@Home and cable services. AT & T@Home is billed to the customer's credit card. Seserman said 98 percent of cable subscribers get physical cable bills, while a small percentage of subscribers pay the company through electronic-funds transfers.
AT & T Broadband is also pitching local and long-distance partnerships to other cable operators, but so far, the company has only signed contracts with companies it owns stakes in.
In March, the company signed an agreement with Insight Communications Co. Inc., in which AT & T Corp. owns a major stake, to sell an AT & T-branded local telephony service on Insight cable systems.
In February, AT & T Consumer Services struck a deal with Cablevision Systems Corp., of which AT & T owns 33 percent, to offer Cablevision subscribers who sign up for AT & T long-distance service discounts on Cablevision premium-programming packages.
Seserman said AT & T Broadband is working toward offering a single billing solution by the end of the year. "Today, there's no billing and provisioning system that allows us to truly bundle all of these products and services," he added.
Comcast Corp., like many Excite@Home Corp. affiliates, offers free installation for its cable-modem service. But the company doesn't offer discounts to subscribers who buy both data and video packages.
"Over 25 percent of our digital customers have said they just want [Comcast@Home] right now, and they see the value of paying exactly what we're charging for Comcast@Home," Comcast executive vice president of marketing Dave Watson said. "We don't see an early need to discount the service at all. We just have to make it really easy to get."
Comcast launched a telephony trial with Lucent Technologies in Union City, N.J., last fall, but the company hasn't set plans for a commercial deployment. Watson noted that the MSO's customers haven't expressed much demand for local telephone service from the company.
BILLING EXCUSE'
"Our customers are telling us they want the very best video product we can offer, which is digital TV. The second thing they told us they want is high-speed data. Those are the two top priorities for us," Watson said.
RCN, meanwhile, only offers subscribers to its bundled packages a single-bill option. It is currently deploying an Oracle Corp. billing solution in its systems.
RCN president and chief operating officer Mike Adams acknowledged that it was difficult to find vendors that can provide good solutions for offering multiple services on one bill. But he added that this alone isn't a good reason not to launch a bundled package.
"In part, it may be the reason [why MSOs] can't offer the services, and that's a good excuse not to," Adams said.
RCN began rolling out its "ResiLink" bundled package of video, voice and data in September. The $139 monthly package it offers in Boston includes two local phone lines; 16 phone features, such as call waiting; unlimited local and regional calls; 100-plus video channels; 40 digital-music channels; and a cable-modem service.
The competitive provider offers ResiLink in several markets, including Boston; Queens, N.Y.; Philadelphia; and San Mateo, Calif.
Compared with the average penetration levels RCN achieved within six months of launch, when its services were launched on an a la carte basis, penetration levels for each service RCN provides increase significantly when they're offered through the bundled ResiLink package, Adams said.
The company typically picks up 6 percent of the local telephony customers within six months of a market launch, but ResiLink has penetrated 33 percent of the markets where it has launched.
On the cable side, penetration levels have jumped from 16 percent within six months to 26 percent. And for its high-speed cable-modem service, penetration levels jumped from an average of 2 percent within six months to 10 percent, Adams said.
RCN doesn't include long-distance telephony in the fixed ResiLink rate, but 70 percent to 80 percent of customers still sign up for its long-distance service, he added.
"In the ResiLink mode, the typical number is 3.4 services per customer, and the average revenue per customer is $125, so it has a great effect on our business model," Adams said.
Although subscribers may want the convenience of a bundled package, some may be turned off by "sticker shock" when they see the total price of the services combined on one bill.
But most executives downplayed sticker shock, with Adams noting that consumers realize they're paying the same amount or more for services that are charged separately.
LITTLE SHOCK VALUE
Rooney concurred. "Sometimes I think the sticker-shock theory is misguided," he said. "It doesn't take into consideration that our customers are pretty smart. They know how much they're paying for these services today even though they're on different bills."
The next big thing in bundling appears to be offering different levels of customer service to subscribers who buy multiple packages. All of the executives interviewed said they're considering such award programs, which some likened to frequent-flier programs.
"That's the future we're going to, where the multiple-product household is a high-valued customer. That high-valued customer will need high-value customer service, as well as special treatment through discounts, exclusive merchandise, etcetera," Seserman said.
Cox is also considering offering a "stepped-up level of customer care" to subscribers who buy multiple products, Rooney said.
"We should expect that our big-user, high-value customers-who may have more complex questions about their data and telephony products-are going to expect to get an experienced Cox representative every time they call. And that's something call-center technology would allow us to do," he said.
