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Picking The Right Bundle

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All In One
Buying Bundles Of Telecom Services Can Make Things Easier -- And Cheaper -- For Consumers. The Trick Is Picking The Right Bundle

September 13, 2004

By Shawn Young

There's one thing consumers seem to miss about getting phone service from the old AT&T Corp. monopoly: writing one check and knowing whom to send it to.

New technologies and a competitive phone market have brought consumers a dizzying array of choices for local, long-distance, video, cellphone and Internet services. That has been great for lowering prices. But dealing with multiple companies can be a hassle.

So now a host of companies -- from giant phone and cable carriers like Verizon Communications Inc. and Cox Communications Inc. to Internet-based upstarts like Vonage Holdings Corp. -- are bundling several services into one package, on one bill, often at big discounts to a la carte rates. And consumers are signing up in droves.

About 62% of households now get two or more services from the same company, compared with just 42% two years ago, according to TNS Telecoms, a market-research firm in Jenkintown, Pa. Only four years after they first started getting regulatory permission to sell long-distance service, the regional Bell phone companies that provide most of the nation's local phone service have grabbed about 30% of the consumer long-distance market by packaging long distance with local, wireless and DSL.


A look at some telecom package plans

Vonage Holdings Ltd.
Plan: Premium Unlimited
Price: $29.99/month
Includes: Unlimited local and long-distance calling in the U.S. and Canada using Internet-based technology that requires a high-speed Internet connection. Includes calling features, voice mail and advanced features like the ability to use e-mail to check your voice mail.

Such success isn't surprising. "Consumers like to get one bill and they like the convenience," says Boyd Peterson of Yankee Group, a Boston consulting firm.

That was certainly true for Chicago resident Tom Dorn, chief operating officer of a health-care investment bank. "I had four different carriers for four different services with four different bills, and it was driving me crazy," says Mr. Dorn. "Secondly, I wanted to see if I could save some money."

He estimates that the package of local, unlimited long-distance and high-speed Internet he signed up for from his local Bell, SBC Communications Inc., is saving him about 30% a month. "The unlimited long distance is just awesome, especially with teenage daughters," he says.

But while doing business with one company may be simpler, sorting through the competing service packages can be as complicated as ever. Options range from relatively bare-bones combinations of local and long-distance phone service that can cost around $15 a month from carriers like IDT Corp. to elaborate bundles that include wireless, video and Internet, usually for north of $120 a month, from Verizon, SBC, Comcast Corp. and others.

Consumer advocates urge people whose spending is minimal and who don't use features like call waiting to look critically at package deals. Such people might do best with a rock-bottom cellphone plan or a basic local phone connection paired with a prepaid long-distance calling card like those available at gas stations and grocery stores.

"If it's not the kind of thing you'd spend money on in the first place, it might not be the best plan," says Kenneth DeGraff, a policy advocate at Consumers Union, a consumer watchdog group based in Washington, D.C., who says that flat-rate pricing and a big menu of services sometimes lure people into buying more than they need.

On the other hand, he and others note, for those who regularly spend a lot on communications and use a variety of services, bundles can be sweet deals. Many of the best packages offer flat rates that turn items like voice mail, caller ID or long distance into freebies.

Michael Brown, a food and beverage director in San Diego, says he's definitely saving money on the phone, cable and Internet package he buys from Cox for about $110 a month.
"The cost saving on the phone has really been large," says Mr. Brown, whose local and long-distance bill from SBC occasionally hit $100 a month by itself. When he signed up for the Cox package, he also upgraded from a dial-up Internet connection to broadband, he says.

The benefits to the companies offering the deals are just as great, mainly because package customers tend to stay longer.

David Pugliese, vice president of product marketing and management for Cox, says customers who sign up for packages defect to competing services at about half the rate of basic cable customers, 2.6% of whom leave every month.

"The more services you have, the harder it is for you to switch out," Mr. Peterson says. And if you get your package from your local phone carrier, your local Bell company gets a little insurance that you're not going to disconnect your home phone line in favor of some combination of wireless and cable services.

The competition to offer bundled services is most ferocious between cable operators and the regional Bell phone giants. The two sets of titans own the communications wires that run into most homes and are rapidly becoming one another's biggest rivals. According to Yankee Group, cable companies had 2.8 million phone subscribers at the end of last year, and the Bells are pairing up with satellite companies to offer video services.

"It is a bit of a race to see which provider can offer the best bundle," Mr. Pugliese says.

Still, in their eagerness to win customers, companies may be sometimes guilty of overpromising. Dennis Lyons, a retired restaurateur who lives near Buffalo, N.Y., signed up for a package of local, long distance and DSL from Verizon, and still can't get high-speed Internet service after more than six months.

"They're selling packages that don't exist yet," says Mr. Lyons, whose DSL equipment sits waiting. "You get yourself all psyched up to go four or five times faster on the Internet and you're still pecking along."

Verizon says that although it initially appeared Mr. Lyons's phone line was suitable for DSL, it turned out that over the years the company had loaded the line with electronic devices that would have interfered with Mr. Lyons's Internet connection.

The best way to shop for a package is to start by looking at where your money goes now and focus on getting the best version of the service that's most important to you.
For instance, a household that makes a lot of calls to Western Europe might want to give serious thought to an offer from Primus Telecommunications Group Inc. that includes unlimited local and long-distance phone calls to the U.S., Canada and Western Europe for $19.95 a month. This is an Internet-based service that requires a high-speed connection.

Internet-based phone services, including Vonage and AT&T Corp's CallVantage, are most economical for people who get their Internet connection from a cable company and are willing to disconnect their conventional phone line, a move many consumers still view as risky since the service is in its infancy. Internet phone service won't work if the power or Internet service goes out. And many Internet-based services don't connect to 911 the same way conventional phone lines do.

Still, the service can be inexpensive and offers sophisticated features -- such as the ability to turn voice mails into talking e-mails -- that aren't available with conventional service. Many consumers are experimenting by taking an Internet-based service as a second line, at least for now.

If cellphone service is your priority, a package from your area's Bell company might be the best bet since the Bells run the nation's largest wireless operations. Internet mavens and those looking to upgrade from dial-up to broadband can often choose between their cable and phone companies, where competition between the two has yielded some attractive offers.

Even consumers who aren't that interested in signing up for packages are being nudged in that direction because companies have decided that bundles are their future. In many cases they've adjusted their prices to make a la carte services less economical -- sometimes by raising rates and fees on standalone offers.

MCI Inc., for example, has added $1 to $2 to the monthly fees on about 20 long-distance-only calling plans in recent months, while AT&T has raised monthly minimums, surcharges or billing fees on numerous calling plans that aren't packaged with other services.

At the same time, bundles have gotten cheaper and more varied, and more consumers find they're a better deal than buying a la carte.

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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

1Unlimited calling and other services for all residential plans are based on normal residential, personal, non-commercial use. A combination of factors is used to determine abnormal use, including but not limited to: the number of unique numbers called, calls forwarded, minutes used and other factors. Subject to our Reasonable Use Policy and Terms of Service.

2Shipping and activation fees waived with 1-year agreement. An Early Termination Fee (with periodic pro-rated reductions) applies if service is terminated before the end of the first 12 months. Additional restrictions may apply. See Terms of Service for details.

HIGH SPEED INTERNET REQUIRED. †VALID FOR NEW LINES ONLY. RATES EXCLUDE INTERNET SERVICE, SURCHARGES, FEES AND TAXES. DEVICE MAY BE REFURBISHED. If you subscribe to plans with monthly minutes allotments, all call minutes placed from both from your home and registered ExtensionsTM phones will count toward your monthly minutes allotment. ExtensionsTM calls made from mobiles use airtime and may incur surcharges, depending on your mobile plan. Alarms, TTY and other systems may not be compatible. Vonage 911 service operates differently than traditional 911. See for details.

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