Broadband Bundling: Trends and Policy Implications

Bundling can provide both benefits and drawbacks to broadband customers.

In general, bundled services are less expensive when purchased together and consumer surplus from one good in the bundle can help “subsidise” another less-valued element. Bundling also allows the integration of products in a way that benefits consumers. In other cases bundles can lead to situations where customers are worse off. Consumers may be required to purchase a bundle which contains one product they value and others they do not. Bundling also raises some significant concerns regarding transparency and consumer “lock in”. Bundles may make it difficult or impossible for subscribers to switch providers of certain bundled services and not others. An OECD data collection of over 2 000 offers of stand-alone and bundled services from 90 firms across 30 OECD countries reveals that broadband services in the OECD are overwhelmingly sold as mixed bundles, allowing users to choose among stand-alone offers or bundled services. Of the 90 operators surveyed, 77% allow users to buy stand-alone broadband service. 17% tie broadband service to a fixed-line voice service and 4% require a television package to obtain broadband access. Only 2% of the offers surveyed required subscribers to take a triple-play service to have broadband. Broadband bundles are typically sold with a significant price discount over stand-alone prices. The average bundled discount compared with buying the services separately is USD 15 (PPP) per month or 26%. The average price of a triple-play bundle across all countries and operators is USD 65 (PPP) per month, while the median price is USD 59 PPP. The average entry-level price for a triple-play bundle is USD 41 PPP per month.