The New Year is in full swing and for some of us it’s meant setting up new gizmos and gadgets acquired over the summer break.

There’s no denying our fascination with technology is growing at a rapid pace and, with so many internet-connected devices to choose from these days, it’s an extremely competitive retail market. That’s why it’s becoming increasingly common to see retailers offering ‘bundled’ broadband services to sweeten the deal, such as a free device or extra data as part of your broadband package.

Bundling has been a popular feature of the Australian telecommunications market for years. Offering benefits to both consumers and retailers, the trend is expected to continue to thrive in the coming years.

Research* from UK analyst firm, Ovum, forecasts the number of Australian customers purchasing bundled services will increase 37 per cent to reach almost six million by 2021. In that same time period, household penetration of broadband bundles is predicted to grow from 48 per cent to 62 per cent.

In the ‘Bundling dynamics in the Australian market’ report, Ovum attributes the prevalence of bundling to two things: value for money and simplicity.

Current state of play

For the retailer, the ability to combine standalone products or services means greater opportunities to cross-sell and potentially acquire new customers in the process.

From a consumer perspective, bundling means these products will likely come at a discount or with some added benefit. This could be in the form of a reduced price for a secondary product or service, increased calls, unlimited data allowance, or an additional product component or feature. These services are then provided in one single, convenient bill and point of contact.

The selling of pay TV, internet access and phone lines as a bundle has become more common place over the past few decades. This is now expanding with the recent addition of home automation and the ‘Internet of Things’ market. Services over the nbn™ broadband access network are increasingly taking a central position in retailer bundling strategies.

Figure 1: Australian Broadband Bundle Subscription Forecast: 2017–21

Source: Ovum

Bundling becomes even more vital with the nbn™ access network

The arrival of the nbn™ access network has made bundling important for retailers because it provides a platform for product differentiation through the inclusion of unique content, hardware or service capabilities, elevating the value proposition.

In addition to price, differentiation may be around customer segmentation, speed, quality of experience, content and value-added services.

The changing face of bundling

Over the next five years, Ovum expects legacy dual play (two product) subscribers that take fixed broadband and fixed voice, to decline between 2017-2021, as users look to substitute fixed voice services (even IP home voice services such as those offered on a service over the nbn™ access network) with more relevant services, such as a mobile service.

Further growth is expected in legacy triple play services (includes pay TV to the bundle), although this growth is slower than growth in quad plays (includes mobile as the fourth element in the bundle).

The most interesting growth will be in next-generation bundled subscribers, which include new dual or triple plays that appeal to evolving consumer tastes. Such bundles include fixed broadband combined with only Over-The-Top (OTT) TV (e.g. Netflix) or mobile only, or would include fixed broadband offered alongside two services, such as pay TV and OTT TV, a bundle which is aimed at the family.

Consumers want more relevant bundles, with OTT video and mobile

Ovum’s Digital Consumer Insights 2017: Multiplay survey data is key to understanding changing tastes around how the Australian consumer wants to purchase telco services and, importantly, what they do not want in the bundle. The survey, conducted in Q4 of 2016, found that 35 per cent of consumers wanted to change either their bundled service provider or bundle, or both in the next year. Of this, 17 per cent said they were considering changing both the service bundle and service provider, which presents a bundling opportunity for internet and phone service providers offering services over the nbn™ access network. The two key reasons for switching service providers were to get a “better/cheaper deal” or “faster broadband speed”.

2021: The future of bundling

Most telecommunications bundles today are aimed at the average household. In 2021, bundling will rely on segmentation and innovation around new combinations, particularly with the expected completion of the rollout of the nbn™ access network.

Looking to the US, there are some challenger cable companies that have found success bundling fixed broadband, fixed voice and a popular OTT video service, such as HBO Now. Future next-gen bundles in the US will feature fixed broadband bundled with mobile. Both are offered by cable operators, the disrupters of the traditional bundle in the US.

Segmentation plays a key role, especially as “new growth” groups such as millennials show a high propensity for content in the fixed broadband bundle, but may not want to pay for full and expensive pay TV in the bundle.

The road to 2021 will be much more fragmented in terms of content availability, and that makes the new landscape complicated for consumers that want potentially five or six OTT video services. Tier 1 telcos can act as content aggregators and potentially provide a conduit for all content, both their sourced content (e.g. sports rights) and those of third-parties (e.g. Netflix), by providing this through a single set top unit and one convenient bill for consumers.

Looking forward, the options for bundling will no doubt extend beyond broadband, fixed line calling, mobile and video (pay TV and OTT) to include more vertical services, such as utilities (e.g. electricity and gas) as seen in France, and even financial services.

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*Ovum’s ‘Bundling dynamics in the Australian market’ report was commissioned by NBN Co.