Editor’s Corner—AT&T, Verizon light up wireline/wireless bundles to battle cable, but will subscribers bite?

digital transformation
Sean Buckley, FierceTelecom

AT&T and Verizon are once again offering a series of wireless/wireline services bundles, hoping to attract customers with higher data buckets and cash incentives. These types of "quad-play" bundles have been around for over a decade. So the key question is, how well will they resonate with consumers this time?

For consumers that subscribe to quad plays, there are some initial benefits: getting all of their wireline voice, wireless, broadband and video services on one bill, for one.

Verizon has extended its Fios/wireless bundle to the end of September, but purchasing an unlimited wireless plan is no longer required.

Likewise, AT&T is offering a $10 discount for wireless and fixed wireless bundles in parts of nine states. The service provider also offers a DirecTV/Mobile bundle that includes unlimited wireless data and streaming service DirecTV Now starting at $70 a month. It's also offering triple and quad plays for its FTTH and higher-speed DSL service sets.

These two carriers are likely trying to counter Comcast’s debut of Xfinity Mobile and other bundled services from the likes of C Spire.

Jeff Moore, who leads Wave 7 Research, says these packages don’t typically sway users’ carrier choices.

“Bundles such as these can provide a modest amount of savings for consumers, but over the years, we’ve seen many such efforts come and go,” Moore said. “Wireless/wireline bundles have a weak history, as the bundles seem to be way down the list of criteria for choosing wireless and wireline services.”

Bundling video, broadband, wireless

Service providers are using the bundle in various ways, with built-in incentives that play to users’ bandwidth hunger.

Take Verizon: The service provider launched a promotion in March that gives Fios users 50% more wireless data for life. In March, Verizon began offering Fios customers a credit for signing up for its latest wireless service plan.

Under the plan, customers would be eligible to get a $250 Verizon Wireless gift card and $250 in bill credits when switching to Verizon Unlimited and signing up for Fios TV, internet and phone.

Existing Verizon Wireless customers that reside in a Fios-capable market will be able to add Fios TV, internet and phone with a two-year contract. New Verizon customers that take both offers will be able to get $500 back.

Verizon’s moves here could be viewed in a number of ways. Now that the telco’s Fios footprint has been relegated to the Northeast following the sale of its California, Florida and Texas properties to Frontier Communications, Verizon needs to find innovative ways to lure new customers while keeping existing ones happy that like the convenience of fixed broadband and wireless from one provider.

“I’m unaware of any particular market impact,” Moore said. “Fios is sold at only a small percentage of Verizon stores in Verizon’s ILEC markets and there seems to be very little in the way of marketing apart from some direct mail marketing efforts.”

AT&T is seeing similar trends by bundling wireless with video, mobile and broadband services.

John Stephens, CFO of AT&T, told investors during its first-quarter call that the new race to offer unlimited wireless data plans is having an effect on how it packages its bundles.

The reintroduction of unlimited plans made an already competitive market even more so,” Stephens said during the earnings call, according to a Seeking Alpha transcript. “We were disciplined with our response, which was to launch new Unlimited Plus plans that give customers a $25 credit for bundling DIRECTV or DIRECTV NOW with their mobile service.”

But AT&T and Verizon aren’t the only carriers offering integrated bundles.

C Spire, which began its life as a wireless-only company, is incorporating wireless/wireline quad-play bundles in areas where it offers its FTTH 1 Gbps service.

Under its C Spire Home Services quad play, a user can get 1 Gbps service, C Spire TV, digital home phone and C Spire wireless service. C Spire wireless customers get a $10 a month additional discount.

A churn reducer

Similar to the way wireline-centric providers like CenturyLink saw IPTV reduce churn, AT&T and Verizon are seeing comparable trends. 

AT&T reported during the first quarter that in areas where it only offered standalone TV, it saw higher churn.

“Churn was up, particularly in markets where we don't have broadband to bundle with video,” Stephens said. “Competitive pressure from cable and the increasing number of over-the-top video alternatives resulted in our video subscribers declining in the quarter.”

As a result, the telco has been not only offering wireless/wireline bundles, but also realigning its broadband tiers.

In April, AT&T realigned broadband offers down to three main speed tiers:

  1. Internet 50: Customers can get 50 Mbps for $30 when purchased as part of a bundle.
  2. Internet 75 and Internet 100: Under this plan, users can get 75 Mbps up to 100 Mbps are $50 per month when customers also purchase another AT&T qualifying service with combined billing and a 12-month agreement; and
  3. Internet 1000: Eligible customers who reside in an AT&T FTTH-enabled market can get 1 Gbps symmetrical speeds for $70 as part of this bundle.

“We're taking steps to address the situation, including simplifying offers and bundling them with unlimited wireless,” Stephens said.

Verizon is in a similar situation. While Fios subscribers continue to grow, the pace has slowed in recent years as its FTTH-capable markets have matured. And with no plans outside of its Boston build to offer Fios, growth will likely continue to level off. Cable will also continue to attack Verizon’s customer base in areas where it only provides lower-speed DSL with their higher speed services via coax cable.

During the first quarter, Verizon reported that it added 35,000 new Fios internet subscribers, but lost 13,000 Fios video customers, a factor it attributes to more users turning to online video options.

Cable’s wireless competition looming

Another potential reason why AT&T and Verizon are getting more aggressive with quad-play bundles is the looming wireless threat from cable operators such as Charter and Comcast.

Comcast recently began offering a mix of unlimited and limited data plans, marketing bundled mobile service only to existing users of its high-speed internet services through already established promotional mechanisms such as direct marketing, call centers and stores.

Customers that have signed up for Comcast’s X1 video system will pay $45 each for up to five lines on an unlimited data plan, while a regular Xfinity broadband subscriber will pay $65 a line for unlimited service. Comcast is also offering a pay-by-usage option priced at $12 per gigabyte.

While this is not the first time cable has tried to make a go at wireless, this latest entry comes at a time when cable continues to gain an upper hand over the telcos on the broadband front.

According to Leichtman Research Group, the top cable operators added nearly 1 million subscribers in the first quarter, while telcos collectively lost 45,000 subscribers. Expect cable operators to aggressively tout their ability to offer higher speed cable speeds via DOCSIS 3.1 with a wireless alternative to customers.

Whether it’s cable or telcos creating new plans, the question is how effective are wireless/wireline bundles?

Seeing that that these types of bundle offers have come and gone over the past decade, the jury is still out on how effective they will be in helping large integrated wireless/wireline carriers retain and attract new customers.—Sean | @FierceTelecom