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Triple-Play & Beyond: Australian Market Case Study

This paper provides an analysis of telecommunications product bundling, focusing in particular on the impact of the relatively advanced bundling strategies adopted in the Australian market. We examine in detail the bundled offerings of Australia's two largest operators Telstra and Optus and explore the benefits enjoyed by operators when combining a single customer relationship with multiple product offerings. There are four potential benefits associated with service bundling for a mobile or fixed operator:

1. Cost savings in billing, customer care, marketing and support help to reduce the cost of servicing the customer
2. A longer customer life cycle results from an increased barrier to churn - where the customer depends on the provider for more than one service the barrier to churn is greater
3. Cross/up-selling opportunities are increased through a stronger customer relationship
4. The cost of customer acquisition can also reduce through a multi-product or service based sale

All of these benefits are explored in more detail in section 4.2 of this paper.

Often the customer motivation for bundling is a discount or the inclusion of some service element for free. In return for these benefits, operators generally seek to lock their customers into a contract for as long a term as possible (at least 12 or 24 months).

While extended contracts create a further barrier to churn, they suggest a lack of confidence in the level of differentiation achieved with current bundled offers in the Australian market. In section 4.4 of this paper we explore the scope for increased service differentiation through differentiated service bundling, moving away from the purely discount driven bundling which is currently a feature of this market.

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1	Overview	1
2	Bundling of Telecoms Products in Australia	2
3	Australian Market Landscape	3
3.1	Fixed Line Market	3
3.2	Mobile Market	4
3.3	Broadband Market	5
3.4	Protected Investment Through Contracts	5
4	Bundling in Australia	6
4.1	Advantages & Disadvantages of Bundling	6
4.2	Operator-specific Benefits of Bundling	7
4.2.1	Cost Reduction	7
4.2.2	Acquisition	7
4.2.3	Cross-selling	8
4.2.4	Retention	8
4.3	Net Present Value (NPV) Impacts of Bundling	8
4.3.1	Bundled vs. Single Product Customer Comparison	9
4.3.2	NPV impact of bundling an existing customer	9
4.4	Differentiated Service Bundling	9
5	Australian Case Illustrations	10
5.1	Overview	10
5.2	Bundling Case Illustration I: Telstra, Australia	11
5.2.1	Telstra Bundled Offers in the Australian Market	12
5.2.2	Telstra's Bundling Terms and Conditions	12
5.2.3	Success of Telstra Bundling Campaigns	13
5.3	Bundling Case Illustration II: Optus, Australia	14
5.3.1	Optus Bundled Offers in the Australian Market	14
5.3.2	Optus Bundle Terms and Conditions	15
5.3.3	Success of Optus Bundling Campaigns	15