Triple- and quadruple-play bundles of communication services: Towards “all-in-one” packages?
Agustín Díaz-Pinés was a policy analyst in the OECD’s Science, Technology and Innovation Directorate until earlier this month. We wish him every success in his new job at the European Commission and hope to see him back on Insights soon.
Bundles of services or products are part of our daily lives: having a set menu in a restaurant (starter, main dish and dessert), opening a bank account with a set of financial services (credit cards, cheques, deposit), or buying a laptop with a number of pre-installed software applications. Communication services are not an exception. Most communication bundles today are a combination of the following services: fixed telephony, fixed broadband, pay-television and mobile services (already a bundle of mobile telephony, SMS and data). Most popular bundles in OECD countries are double-play (typically fixed telephony and broadband), triple-play (usually fixed telephony, fixed broadband and pay-television) and quadruple-play (triple-play plus mobile services).
A 2011 OECD study Broadband bundling: trends and policy implications compared prices for basic triple-play bundles. A new report, Triple and quadruple-play bundles of communication services, goes further and compares prices in twelve large OECD economies, not only for “basic” but also for “premium” bundles (those including more advanced services such as premium pay-television channels) by extending OECD price basket methodology. Quadruple-play bundles are increasingly important as some operators are using them to offer discounted prices in exchange for increased customer retention, such as in Australia, France, Poland, Portugal and Spain where, in April 2014, all three fixed broadband operators provided fixed-mobile convergent offers.
In April 2014, the prices of “basic” triple-play bundles varied from $30 to $80 and those of “premium” triple-play bundles were between $50 and $195. Quadruple-play bundles, which include entry-level (“basic”) or unlimited (“premium”) mobile services, could be purchased from $35 to $120 (“basic”) or from $80 to $250 (“premium”). The addition of premium television channels or of unlimited mobile minutes may affect prices significantly.
Operators are also using bundles to introduce innovative services together with traditional communication services, in an attempt to test consumers and try new partnerships and services. Some examples are home monitoring services such as video surveillance services or heating and energy controls; e-learning applications; computer security; cloud storage services; and others resulting from partnerships with over-the-top (OTT) providers (e.g. Spotify, Netflix, Deezer).
While bundles provide significant benefits for consumers (simplified billing, new services or discounted prices) and producers (ability to spread fixed costs across a set of services), competition analysis for bundles faces significant challenges and needs more sophisticated tools and data, such as detailed information to determine whether bundles should be included in relevant markets or whether standalone services continue to be the reference. New competitive bottlenecks, such as premium television content (Hollywood blockbusters or premium sports), to date unknown to communication regulators, may need to be included in competitive assessments and, more importantly, may require new powers that some regulators currently lack.
Imagine a world where customers only purchase bundles, say fixed and mobile services together. If some communication providers are not able to provide all services (e.g. become a mobile network operator), they would be forced to exit the market and thus competition may be diminished. Therefore, regulators should remain vigilant that increased bundling does not undermine competition.
Finally, bundles raise many regulatory and policy issues, in particular in relation to convergence, i.e. services that used to be provided by different networks are now IP-based and provided over the Internet. Convergence creates tensions in the transition from legacy to “converged” policy and regulatory frameworks, which will be one of the topics discussed at the upcoming OECD Ministerial meeting in 2016 on the Digital Economy in Mexico.