There are several very good reasons service providers sell bundles of services. First of all, in a competitive market, where any single service sold by any single provider might only reach share of about 20 percent to 30 percent, an expensive access network can be justified, and remain financially viable, only when the network owner can sell multiple services.
In other words, selling a single customer three or four services at $30 a month, with household share between 25 percent to 33 percent, produces about the same amount of revenue as selling a single service to 95 percent of households.
Second, bundling reduces customer churn. In some cases, a triple play or quadruple play customer exhibits churn as much as 2.6 times lower than single service customers.
It isn’t so clear whether the new emphasis on ownership of fixed and mobile network assets in some markets, such as Europe, is viewed as so strategic in other markets.
In a way, the new interest in bundling mobile and fixed network services is an example of fixed mobile convergence, albeit involving consumer services more than enterprise-focused features.
That early interest, centered on unifying business customer voice and messaging, is not what the present bundling format is about.
Aside from the focus on consumers, not business customers, today’s bundling is more a response to the realities of competitive markets, where lower market share forces a “scope” approach, since a “scale” approach no longer works so well.
“Scope” involves the sale of multiple products to a single customer, where “scale” normally refers to the sale of a single product to more customers. The big distinction is scale within an existing market, and scale referring to growth in out of region markets.
Scale is not so viable within any specific highly-competitive markets where a firm already operates. On the other hand, scale can be gained by growth in new territories outside of the current domain.
In that sense, both scale and scope remain vital growth and revenue strategies. Scope applies within existing markets, while scale refers generally to growth outside the existing operational footprint.
The caveat is that sometimes “gaining scope” requires “gaining scale,” as when a mobile service provider buys fixed network assets where the mobile operator already provides service.
In such cases, a single move--acquiring a cable TV operation, for example--simultaneously provides scope and scale advantages. The scope comes from the ability to sell three new services. The scale comes from adding the additional customer accounts.