Why does Northwestel bundle?

The concept of bundling services together is an important one in a competitive environment. Down south, where there are many choices of telephone, internet, and television providers, and by bundling services together and offering a small discount, providers can actively prevent their customers from defecting to competitors.

But there is little to no competition in the North. Which makes you wonder why Northwestel bundles, seeing as the company enjoys, for the most part, a state-sanctioned monopoly.

Assuming Northwestel’s marketing people aren’t simply doing it out of some misguided, blind “me-too” mentality, I’d posit that there are four reasons that Northwestel bundles their services: cross-sales, obfuscation, artificial price inflation, and vanity.

Northwestel’s bundling program can be perceived simply as a mind game to cross-sell you services you don’t need or want. For example, when I subscribed to cable internet I was reminded about Northwestel’s bundling program. I could enjoy a discount on my internet service if I subscribed to cable television. Everyone loves a deal, but if I had subscribed to cable television well, sure, I’d pay less for internet, but I’d be paying more, in fact, for a service I didn’t want.

An important natural side effect of cross-selling and bundling is that it obfuscates the true cost of services. Once you bundle up 2 or 3 services and apply a small package discount, how do you tell which service you’re paying too much for? How do you assess the value of the services you are receiving from Northwestel? Once wrapped up in a bundle, most people can’t.

Bundling may also enable Northwestel to artificially inflate the price of individual services. Say the normal price of a service is its “discounted” bundle price. By adding a bit to that, Northwestel can leverage the bundle to convince customers to normalize the cost. Those of us who choose not to bundle go on paying the artificially high prices. Honestly, I’m at a loss as to why I’m paying $10 more per month for internet access just because I choose not to subscribe to cable TV; it defies logic and is simply an artificial penalty that Northwestel has chosen to impose on me.

Even if Northwestel isn’t simply blindly towing the Bell/Telus/Rogers marketing line of the bundle, consumers will expect it to. Rather than being perceived as a company that doesn’t offer value programs similar to its southern counterparts, Northwestel has chosen to offer a bundle program to save face.

After all, even if Northwestel dropped prices across the board as low as possible and simply offered them individually, it wouldn’t take long for a sourpuss like me to complain about the fact that Northwestel doesn’t offer discount bundles to northerners.

That said, with only a modicum of creative marketing, Northwestel could easily deflect that argument. Instead, the carbon-copy bundling program is imported.

In a competitive marketplace, bundling telecommunications services is a smart idea. Once you’ve engaged with a suite of services from one provider and been granted a discount, you are highly unlikely to seek out the services of a second provider, even if that second provider offers superior quality services or lower pricing.

But in the North there’s virtually no competition and Northwestel enjoys a near-complete monopolistic position. You really have to wonder about the company’s motivation for bundling services.