You might suppose that with a little bit of history now visible, most observers would conclude that VoIP works best in a bundle. There are some obvious data points.
U.S. cable operators are piling on customers in the consumer space by bundling VoIP with other services. Successful U.S. service providers active in the smaller business or medium to enterprise spaces are bundling voice with access services.
Stand-alone VoIP providers, meanwhile, are struggling.
In fact, one might note a certain danger for all “one product” market approaches. Satellite video providers are working on ways to provide voice and terrestrial broadband access services. Earthlink has been struggling to expand beyond “dial up Internet access.”
But that’s not the only story. We might argue about how successful Skype has been selling stand-alone long distance. But it has built a $1 billion a year revenue stream based largely on selling minutes of use, inspiring a raft of competitors offering IP-based calling from mobile phones, browsers and standard phones.
In fact, a recent survey by The Yankee Group suggests that 15 percent of U.S. households use some form of PC-based IP calling.
Web conferencing services collectively sell about $1 billion a year in IP-based services and typically are sold as “stand-alone” services.
Beyond that is a growing movement towards unified communications where voice is available as part of a software business model, and consequently the issue of “bundled” or “stand-alone” sales is not terribly relevant.
Still, for business models predicated on the sale of recurring revenue services, bundling has been helpful. Consider Cbeyond and PaeTec, two of the more successful competitive local exchange carriers. Both have a basic business strategy of bundling voice with broadband access.
Over the last year, Cbeyond had internal revenue growth of 31 percent, and growth in customer locations served of 31.5 percent, while average revenue per customer per month remained basically constant. Average revenue was $757 per customer in June 2006 and $745 in June 2007.
In the most recent quarter Cbeyond’s revenue increased 28.9 percent.
Paetec’s results were quite materially affected by its merger with US LEC, but excluding US LEC’s results, total revenue for the quarter ended June 2007 increased $15.3 million, or 10.5 percent, over the June 2006 quarter, and $31.2 million, or 10.9 percent over the 2006 six-month period.
The point is that selling a multi-product bundle tends to work better than a single-product bundle for the basic broadband access and voice “lines” business, whether that is in the consumer or smaller business spaces. That is not true for more specialized services, though. IP
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