Advising on the commercial impact of technology and
    market changes in telecoms, software and IT services

Author: Dan Bieler

Deutsche Telekom, Vodafone and O2 have launched new bundled offerings at the IFA, the world's largest consumer electronics exhibition, in Berlin.

• Deutsche Telekom announced a package with flat rates for fixed-phone and Web access, Call&Surf Comfort, for €49.95 per month. It also launched T-Home Classic, a DSL telephony and a DSL connection (6Mbit/s), offering video-on-demand through T-Online, with 1,200 movies to choose from. The service is charged at €65.84. A third new offering, T-Home Complete Basic, combines VDSL-based IPTV, Internet access and DSL telephony. The offer comprises 60 channels, video-on-demand and access to TV archives and is charged at €80.84.
• Vodafone, meanwhile, announced its new flat-rate package 'Flat hoch drei' ('flat to the power of three'). The offering comprises a mobile element (on-net), DSL Internet access and domestic fixed voice. The package costs €49.95. The offer is made available in cooperation with the Vodafone subsidiary Arcor.
• O2 Germany launched its DLS offering as well. O2 Germany users can now get their DSL from O2 Germany (via O2 owner Telefónica) and no longer require a Deutsche Telekom line. The offer costs €50 for a DSL and fixed-line and mobile on-net flat rate (€45 for existing O2 Germany customers).

Comment: For years most Germans kept track of the best per minute offerings through a whole barrage of magazines and Web sites. Now German consumers have to get used to thinking in packages.

All mobile operators, with the exception of KPN's E-Plus, which has no fixed-line subsidiary (although it allegedly plans a co-operation with Kabel Deutschland) have jumped on the bundle bandwagon. Germany is catching up with the leaders of 'packages', such as BT's now classic Options 1-3.

In our view, the average consumer has a straightforward request: simplicity and a good deal. In this sense the new bundled packages must be welcomed as they provide better price transparency to the consumer. But we are not sure that all the new offerings automatically translate into a 'good deal' to the flexible consumer.

The argument of benefiting greatly from having just 'one bill' might be lost on the price-conscious customer. For example, Deutsche Telekom's T-Home Complete Basic for €80.84 implies roughly a €30 price tag for IPTV (i.e. the difference to Call&Surf Comfort, which costs €49.95). The price-conscious consumer could get flat-rate domestic fixed and DSL access from Arcor for €44.85 and take out an average cable subscription for around €10. In other words, IPTV has to be a lot better to justify the premium.

The offerings from Vodafone and O2 are interesting as they combine a mobile element (which is also available at Deutsche Telekom from €67). Interestingly, they are hardly convergent solutions, but a mobile-fixed bundle. But this simply technology-light approach to convergence might well convince German consumers to take a closer look.

The real issue in all of this is whether users care about bundles and whether triple-play per se has an attraction for them. We think that the current ICT developments point in one direction: price as the deciding factor. Given similar service quality, the better deal will win. Pricing pressure is set to continue.