The Triple-Play Bundle Strategy of Cable and Telephone Companies in the Current U.S. Telecommunications Market

Abstract

The development of Internet Protocol technology and the Federal Communications Commission's competition-promoting policy have brought about triple-play offering services that combine video, voice, and data services in a single package at a discount rate for telecommunication consumers. As cable and telephone industries offer similar bundles, the price competition promise to increase, which may lead to thinner profit margins. That companies bundle services despite the fact that selling 3 services independently at regular prices would bring greater benefits to the companies is referred to as the “prisoner's dilemma.” In this situation, a company commits a “one minimum and one maximum” strategy to prevent its existing consumers from switching over to its competitors and to attract new consumers. Using data regarding the triple-play bundle from 69 U.S. cities, this study reveals that both cable and telephone industries minimize price differentiation for the triple-play offering. Furthermore, this study demonstrates that both industries maximally differentiate in the video service category compared to the other 2 services in the triple-play bundle: voice and data.