Comcast announced a new promotion last week that offers 12 months of free basic cable service for new customers who also sign up for an additional service. Customers who don’t want an additional service can get Comcast’s basic service of about 20 -30 channels for $10/month. The promotion is tied to the digital TV transition of February 2009 and entices potential customers to avoid the transition “hassle” by getting “free” cable service. “The simple fact is that basic cable is the easiest path through the digital transition and now consumers can get it for free,” said Derek Harrar, General Manager and Senior Vice President, Video Services for Comcast in a company statement. This move is similar to strategies pursued by other video service providers, who are hoping to leverage the digital TV transition for new subscriber additions.

But is this strategy a leading indicator for the future? Should basic core services like basic cable and basic telephone service be offered for free, used as a “carrot” to entice customers to buy “more important” services like broadband? Maybe a very basic phone service, with no LD, access to landline 911, and maybe outgoing service only (to avoid telemarketers) should be a free component of a bundled offering. Such a wireline service may appeal to a customer who previously cut the cord for wireless only, but also needs broadband. There is a growing portion of the population who find the value of traditional wireline phone service elsewhere – either through wireless or broadband/IP services. But, if they could get the security of landline 911, and an extra dial tone in their home as a free value add for subscribing to broadband (or video from a telco’s perspective), maybe a telco’s bundled offering may look more attractive than a comparable cable offering. I realize this idea is not appealing to the hundreds of ILECs who are a part of the current access/settlement system (in fact, it couldn’t work in the context of today’s regulatory structure), but I wonder whether it’s inevitable. In this possible future scenario, the current settlement system adapts to broadband as the underlying service, as opposed to voice.

This scenario cuts both ways. From a cable company’s perspective, a growing portion of the population is turning to the Internet as a source for their video content, and no longer see value in paying for a broad package of video as a part of a traditional subscription pay-TV service. But, if they could receive basic TV (which includes local broadcast affiliates) as a free value add for buying broadband, maybe the cable bundle is more attractive. In a true IP/broadband world, very basic phone and video service is relatively easy to deliver, and has little impact on bandwidth and network performance. Maybe the digital transition is opening the door to a future where free basic services are a regular component of a bundled offering. Thoughts?

A new customer satisfaction study conducted by CFI, a Michigan based customer satisfaction market research firm, reveals that consumers prefer to receive bundled offerings from telecom carriers over cable companies by almost 2 to 1. The second annual Telecom-Cable Industry Satisfaction Study surveyed 1,200 households for satisfaction with video, broadband Internet access, and wireless communications using the University of Michigan’s American Customer Satisfaction Index methodology. The study’s authors suggest that “customer satisfaction provides telecom companies with a competitive advantage.” Interesting survey findings include:

• Nearly 60% of surveyed households now have bundled services (telecommunication, internet, and video), a 13% increase since 2007
• Until fiber becomes more accessible, cable will have the edge in speed, but customers are increasingly sensitive to rising rates and poor customer service coming from cable providers
• Poor customer service accounts for 40% of churn from Cable TV service
• Of customers who will switch carriers, 40% say that the competition offers better rates and plans
• Nearly 50% of households are interested in VoIP and IPTV, but awareness for either has changed little over the past year
• When telecom customers switch to cable, the primary reason is
  faster internet access
• Twenty-nine percent of customers have no intention of bundling at all, preferring instead to pick and choose the services that best meet their needs
• Providers tend to offer special programs and rates to new customers, while effectively ignoring loyal customers, resulting in extreme dissatisfaction

The last bullet point really struck a chord with me. I often wonder about the strategy of offering the best deals to new customers, often at the expense of existing loyal customers – at least from the existing customer’s perception. I recognize the goal with such a strategy is growth, but I wonder if that growth strategy ultimately alienates existing subscribers, causing them to churn away, and thus defeats the purpose.

These study results also seem to somewhat contradict recent J. D. Power customer satisfaction findings, which said that cable companies are beating telcos with telephone service satisfaction. It’s not an apples to apples comparison, but it does reveal elements of the bundle appear to be up for grabs. When put in the context of the whole bundle, cable seems to be losing (at least if you believe these CFI results). But when each service is looked at individually, different results may occur.

Charter has launched a very aggressive triple play bundle promotion for $69.97. The offer requires a 12 month term, and Charter claims the promotion will save subscribers $600 over the 12 month timeframe. The promotion also offers a double play of phone and broadband for $54.98/month or cable and broadband for $19.98/month. The offer is only open to new Charter customers. Additionally, Charter is offering a $100 gift card if new customers sign up online. The promotion runs through the month of December.

Verizon launched a new bundle today that links a wireless and landline together under one bill. The new bundle offers a landline with unlimited local and long distance calling, a wireless account with 200 “anytime” minutes, unlimited calling between the landline and wireless number, and unlimited calling between Verizon Wireless customers for $59.99/month. Customers can sign up for this new bundled offering on-line, through a customer call center, or through Verizon Wireless retail stores.

Sprint and its cable MSO partners have announced that Pivot will be the brand name of their joint wireless service offering. The phone handsets will have a Sprint logo, while a Pivot brand will be present on the handset screen. The cable MSO partners for this venture include Comcast Corp., Time Warner, Cox Communications, and Advance/Newhouse Communications. They intend to aggressively target the business community with bundled offerings. The implications here are huge. Check out our feature story on this development.