Ryan Mack used to think of Qwest as a phone company.
He paid Qwest $49.68 a month for local phone service with call waiting and a few other features.
Now, he is paying Qwest $164.03 a month for local-phone service with features that include a DSL Internet connection and satellite television from DirecTV.
That’s a $3.48-a-month savings compared with what he used to pay for local phone, dial-up Internet and satellite television from three different companies – and he gets it all on one bill. (Mack doesn’t have a long-distance plan because he uses phone cards.)
“I used to get all the bills at different times of the month. It was a headache,” Mack said. “Now I am getting DSL instead of dial-up Internet and still saving money.”
As soon as his Sprint cellphone contract expires in April, he says he will buy that service through Qwest as well – and save another $14 a month.
Phone companies across the nation are racing to sell “bundled” services. They want to lock up the American living room by offering a grand-slam or quadruple-play bundle of land-line phone service, wireless phone service, Internet and subscription television. Cable-TV companies like Comcast, which serves Denver and other areas in Colorado, are doing the same.
“The more products you have, the less likely customers are to leave,” said Yankee Group analyst Su Li Walker. “You save money, have one bill and one point of customer service.”
Janco Partners Inc. analyst Donna Jaegers explains it another way.
“More services make it harder for the customer to leave,” she said. “Cellphone contracts often run two years, and your e-mail address is hard to change.”
A big push for bundles
Mack and his wife, Daniele, signed up for Qwest’s Choice Bundles shortly after the Denver-based company launched the offer in late May.
Advertising experts estimate that Qwest is spending millions of dollars on television spots, full-page newspaper ads and direct-mail campaigns that promote the grand-slam bundle across its 14-state territory. Qwest declined to say how much it is spending.
What is clear is that the stakes are high.
Qwest’s local-phone business is shrinking. The grand-slam bundle will allow Qwest to get more money from an estimated 8.1 million residential customers in a mostly rural territory that stretches from Iowa to Arizona and Oregon.
Most importantly, locking the Macks in could lock Comcast out.
Since 2002, the nation’s largest cable company has spent $400 million in Colorado to upgrade its cable television lines to carry high-speed Internet. It is launching Internet phone service this year in certain markets, though Colorado won’t get it until sometime next year.
Comcast sells cable television and high-speed Internet as separate purchases in the Denver metro area. It offers a $10 discount to customers who take both services.
Comcast’s Internet phone service includes discounts to customers who have Comcast cable or Comcast high-speed Internet.
“I think the competition for the home is not just about price but about adding value,” said Cindy Parsons, a Comcast spokeswoman in Denver.
She said Comcast is working to better integrate its products so, for example, a worker stuck late at the office could use Comcast’s high-speed Internet service to program a digital video recorder back home to record a show playing on Comcast cable television.
Time Warner and other cable companies are studying marketing alliances with cellphone providers, said Amanda Sabia, an analyst with Gartner Research. Wireless is the last step before the cable companies have a grand slam of their own.
“Qwest really has to do something (in building a customer base) this year,” Jaegers said. “Comcast is moving ahead aggressively.”
Qwest says its Choice Bundles campaign has received about five times the call volume of other initiatives.
“The message is resonating with customers,” said Mark Pitchford, Qwest’s senior vice president of marketing.
But Qwest has hurdles to overcome.
“First of all, I can’t even get Qwest DSL where I live,” said Jeremy Sweeting, a graphic designer based in Coal Creek Canyon above Golden. “And second, I don’t like a huge corporation dominating my life. I don’t like the idea of giving all my money to one person.”
To try and assuage some of the naysayers, Qwest is allowing customers to assemble their bundles from dozens of options. It is also offering progressively deeper discounts for buying more services. Customers who buy two services save $5 per month, but those who buy local and long-distance phone, DSL, television and wireless save $37 per month from Qwest’s stand-alone prices.
Qwest also has to overcome competing cellphone and cable contracts. Mack and his wife, for instance, would have to pay a total of $300 to get out of their Sprint cellphone contract before it ends in April.
So they’ll have to wait to sign up for cellphone service with Qwest, which resells Sprint service under the Qwest brand.
“The contracts are a hump to overcome,” Yankee Group’s Walker said.
Qwest battles bigger firms
Perhaps most importantly, the grand- slam bundle could help Qwest survive in a fast-consolidating telecom market that soon will be dominated by the SBC- AT&T and Verizon-MCI mergers. Both combined companies will have a market value more than a dozen times that of Qwest’s.
Even though these companies do not offer local phone service in Qwest’s territory, they surround Qwest and can compete with Qwest selling products like Internet phone service and cellphones.
SBC, the majority owner of Cingular, and Verizon control the nation’s two largest cellphone networks. Both also are investing heavily to lay fiber-optic lines to homes.
Though they have formed marketing alliances with satellite television companies for now, their ultimate goal is to use fiber to the home to deliver next-generation television services over the Internet.
Qwest, on the other hand, is held back by more than $17 billion in debt. So Qwest has used reseller agreements with Sprint and DirecTV to keep up with SBC and Verizon and match their grand-slam bundles.
“Qwest was the last of the Bells to roll out a quad-play bundle,” Sabia said. “But now Qwest has all of its pieces. They have to grab as much market share as they can.”
About 48 percent of Qwest’s customers have a bundle, which can be as simple as having local and long-distance phone service. SBC has locked up 60 percent of its customers, while Verizon has 58 percent.
Staff writer Ross Wehner can be reached at 303-820-1503 or rwehner@denverpost.com.
Check the fine print
Qwest’s $139.96 bundle has plenty of fine print. Here’s some of what you get and what to watch for:
Qwest local-phone service is required with any bundle. It’s called Qwest Choice Home and comes with three features, which can include caller ID, call waiting or voice mail, among others.
Qwest long-distance service is called Qwest Choice Unlimited and provides unlimited calls anywhere in the U.S. any time. If usage exceeds 5,000 minutes a month, customers may be required to demonstrate compliance with the plan in an effort to prevent fraud.
Qwest Choice DSL Deluxe with MSN Premium is the DSL service, but it is not available everywhere, especially in mountain or rural areas. There is an activation fee of $99, but customers who order before July 9 will receive free activation. Customers can either rent a DSL modem for $5 a month or buy one for $59.99. Modem shipping and handling is $9.99. Customers can install DSL themselves or pay $49.99 for a Qwest technician to do it.
The Qwest Wireless Cross Country 500 Plan is upgraded Sprint cellphone service. A $35 activation fee will apply to most Qwest cellphones. There is a $200 early termination fee. Roaming charges apply to off-network calls, even within the home coverage area. A $1.75 per month “cost-recovery fee” for each wireless handset will be charged.
The Total Choice digital satellite- television package is a DirecTV subscription. Up to four standard receivers come free with the package. There is a monthly service charge of $4.99 a month for three of those receivers. The service requires signing up for a subscription package within 30 days. Failure to subscribe within the time limit could result in a $150 penalty per receiver. DirecTV’s one-year contract comes with a $150 early-termination fee. Local channels are available in Denver and Colorado Springs metro areas but may not be available in other markets.
ROSS WEHNER
