In detail: Unraveling the triple play bundle

Selling triple play bundles that incorporate voice, video and data has been the ultimate marketing and service drive of both the telco and the cable operator to maintain customer stickiness.

Consumers are attracted to the triple play bundle for two big reasons: convenience of one bill and a potentially lower monthly bill for their services. And since no two consumers have the same usage patterns, telcos often allow them to build a custom bundle to fit their particular needs.    

Much of the telcos' work on offering triple play bundles was illustrated in their Q4 2011 earnings reports.

The top three ILECs--AT&T (NYSE: T), Verizon (NYSE: VZ) and new Tier 1 player CenturyLink (NYSE: CTL)--all reported modest growth in their voice, video and data product package sales:

• AT&T's IP bet: AT&T, despite ongoing voice service and traditional DSL losses, reported that U-verse penetration and the addition of a significant number of subscribers on triple- or quad-play options drove 18.7 percent year-over-year growth in IP revenues from residential customers (broadband, U-verse TV and U-verse Voice) and 4.3 percent sequential growth.
• Verizon's FiOS drive: Likewise, Verizon, which lost more DSL subscribers and POTS line customers, added 201,000 FiOS Internet customers and 194,000 FiOS TV subscribers. But what was more telling about Verizon's growth was that consumer APRU increased 8.5 percent year-over-year, while FiOS ARPU rose to over $148 per month.
• CenturyLink ups broadband, IPTV: CenturyLink meanwhile added 70,000 new broadband customers and increased its PrismTV subscribers by 16,000 with a broadband attachment rate of more than 90 percent.

Video continues to be a big triple play factor at the large telcos. Interestingly, both AT&T and Verizon added 882,000 and 716,000 subscribers during the quarter, surpassing Comcast's (Nasdaq: CMCSA) 465,000 subscriber adds.

Outside of the top three players, triple play promotions continued to provide big paybacks for a number of Tier 2 ILECs, including Windstream (Nasdaq: WIN), FairPoint (Nasdaq: FRP), Hawaiian Telcom  (Nasdaq: HCOM) and SureWest (Nasdaq: SURW):  

• Windstream: At Windstream, consumer broadband revenues rose 9 percent to $464 million. As of the end of Q4, the service provider had 1.2 million broadband subscribers and 445.8 satellite video subscribers. While it has yet to introduce its own IPTV product as it has chosen to continue offering satellite TV service, the service provider added a video streaming option under its new 'Merge' broadband product line.
• FairPoint ramps up: Although it still is in the process expanding broadband access across its New England footprint, FairPoint added over 24,000 new DSL subscribers, far more than the 1,300 it added in 2010. The service provider allows consumers to build their own custom bundles with various speeds ranging from 768 Kbps to 30 Mbps, where available, with voice services and satellite video.
• Hawaiian Telcom's new journey: Hawaiian Telcom added over 1,250 broadband subscribers in the fourth quarter, increasing its total broadband subscriber base to over 103,230. At the same time it also made progress with its IPTV Hawaiian Telcom TV (HTTV), ending 2011 with 1,600 subscribers, or almost 6 percent subscriber penetration of the 27,400 households it has enabled.
• SureWest ARPU climbs: Video services continue to be a driving growth factor in SureWest's triple play bundle. The service provider, which is in the process of being acquired by Consolidated Communications, reported that almost 98 percent of its Advanced Digital TV subscribers bundle Internet and 79 percent subscribe to a triple-play with ARPU of $148.

In the chart below, we list the triple play bundles of the top ILECs and the choices they are providing to consumers as they battle aggressive cable operators leveraging their existing coax to lure away consumers with their own brands of voice, high speed data and video.