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| The Basics | Bundle your telecom to save a bundle?
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Local, long-distance, wireless, Internet, TV: So many bills, so much hassle. See if combining a few would save you money.
By Jennifer Mulrean
Which do you prefer: paying for what you use or using what you pay for?
When it comes to the phone bill, a number of consumers are opting for the all-you-can-eat model of bundled packages. The bundles promise one bill from one provider for two or more of your telecommunications needs -- local, long-distance and wireless phone calls, Internet access and pay TV service. Whats more, you generally pay the same monthly fee no matter how much you use your services.
Flat-fee plans from AT&T, MCI . . . are becoming much more popular, and its often a no-brainer for the customer, says Roger Crisman, senior director of telecommunications for LowerMyBills.com, a cost-comparison site that also sells some services.
Bundling first emerged in 2002, when deregulation dating back to the Telecommunications Act of 1996 made it possible for regional Bell operating companies to carry long-distance service. Today, you have long-distance companies competing in the local calling markets while offering Internet and television services as well.
Were really starting to see a blurring of the lines in these markets, Crisman says.
While fully bundled packages are still rare, many telecom companies are bundling at least two services. And consumers are biting. Through the end of the second quarter of 2003, nearly 20% of consumers were bundling to some extent, according to industry researcher TNS Telecoms.
Certainly, saving money is what companies such as MCI, AT&T and SBC tout in their sales pitches. But with most local and long-distance bundled plans starting around $50, its not a slam dunk. Depending on your calling habits, you may have better ways to save.
Should you or shouldnt you?
In its loosest definition, you could be bundling without knowing it if you pay one price for many different custom-calling features, such as call waiting, caller ID or voice mail.
Sometimes, the savings are obvious. But bundling something like your local and long-distance calling requires a different sort of evaluation, because your phone bill likely is different from month to month. Many Web sites that compare various plans, including LowerMyBills.com, havent yet figured out the best method for evaluating the plans.
To boil it down, here are some of the basic pros and cons of buying bundled services.
Pros:
- Consistency: Consumers really like the idea of knowing how much their phone bill is going to be every month, LowerMyBills.com's Crisman says. In addition to avoiding nasty surprises, this also allows for better budgeting.
- Convenience: Getting one bill for multiple services can mean simpler bookkeeping. In a July 2003 JD Power and Associates survey, convenience was the No. 1 reason consumers cited for switching to bundled packages.
- Savings: How much you can save depends in large part on your calling habits, of course. But a good rule of thumb, according to Crisman, is if youre regularly paying more than $50 per month for local and long-distance calling, you could likely save with a bundled plan. And, he says, No consumer today should have a $100 phone bill (for local and long-distance calling). On the JD Power survey, cost was the No. 3 reason cited by consumers for switching to bundled plans.
Cons:
- Consistency: That same reliability many consumers find appealing also means theres no price break when you use the service less than usual. Go on vacation for a few weeks and you still pay the full monthly fee.
- First-bill sticker shock: The first bill you receive is likely going to be a lot more than that $49.99 you signed up for, says Lee Biddle of the San Diego-based Utility Consumers Action Network (UCAN). It can easily be $100, he says, citing two reasons. One is that companies tend to charge you for two months when you first sign up. Second, you may be charged installation or activation fees for some of the plans components, such as voice mail.
- When $49.99 isnt all-inclusive: Most of the packages advertised prices do not include fees and taxes, so the sticker shock can extend beyond that first monster bill. Biddle says most consumers should expect to pay 10% to 15% more than the base package price.
- International calls not included: With the exception of Canada, international calls arent included in the unlimited calling plans. International calls vary widely depending on what country youre calling, so including them is simply prohibitively expensive for the phone companies, Crisman says.
VoIP: cheaper bundles via the Internet
The $50 in Crismans rule of thumb also coincides with the average amount consumers spent on local and long-distance calling each month in 2002, according to the August FCC report, Trends in Telephone Service. Its not surprising that most of the bundled local and long-distance plans start at around this level.
But there is one exception: non-traditional calling plans that allow you to use Voice over Internet Protocol, or VoIP, to make calls from your regular phone using the Internet as the transmission medium.
Companies such as Vonage, Time Warner, Comcast and Cablevision offer unlimited local and long-distance calling plans using VoIP. Most of them start around $35 (Time Warners is about $40), but that doesnt include the Internet access fee youre already paying. (Vonage also offers an entry-level plan priced at about $25 that includes 500 long-distance minutes.) Most of these try to combat the poor voice quality and latency associated with VoIP by requiring broadband connections, though Crisman says this is still an issue.
There are two things to beware when considering VoIP plans, he says. One, quality is not what were used to, and, two, the jury is still out on whether theyre considered phone services.
On the last point, Crisman is referring to the recent attempts by states such as Minnesota to regulate VoIP companies such as Vonage and thereby charge licensing fees and taxes. A federal judge ruled in favor of Vonage in Minnesota but several other states, including California, are still moving forward with the intent to regulate these companies.
And finally, some of these plans are available on a very limited basis -- Cablevision offers its Optimum Voice plan in just three states at the time of this writing.
Other options
In addition to the VoIP plans listed above, you also can opt for a VoIP solution that skips the monthly fee altogether. Generally, you have to buy equipment, such as a headset, and the voice quality has been an issue. Skype, the latest VoIP solution making headlines, supposedly has excellent voice quality and requires only the headset and a free software download. (You can read more about it at the end of this recent Slate article or by visiting Skypes site; the link is at left under Related Sites.)
Pay-per-minute plans that dont have monthly fees also can be a good way to save. UCAN says the average user talks less than three hours per month for both local and long-distance calling. If all three hours were out-of-state long distance, you could still spend less than $10 if you used the 3.5-cent Pioneer plan cited by UCAN, also listed on LowerMyBills.com for 3.3 cents per minute. (In-state calls are billed at a higher rate of about 10 cents per minute.) To find other discount plans, visit LowerMyBills.com and SaveOnPhones.com. (See links at left under Related Sites.)
If you generally spend less than $50 for local and long-distance, remember that online bill payment could ease the burden of separate bills without buying a pricey bundle you'll never fully use. That's good advice, too, for households with all five telecom services (cable, Internet, cell, local and toll phone service), who might be most eager for a single bill. (Read more about that by clicking here.)
Its simplicity and savings that you want, after all.
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