Does Service Bundling Reduce Churn?

Article Source: Journal of Economics & Management Strategy, Vol. 23, No. 4, pp. 839-875, 2014
Publication Date:
Time to Read: 2 minute read
Written By:

 Jeffrey Prince

Jeffrey Prince



This study considers whether firms that sell telecommunications services as a bundle find it easier to retain customers. The data shows that bundling does reduce “churn” for pay television, broadband, and telephone service.


Policy Relevance:

Bundling help firms maintain revenues from shrinking markets. Policymakers should not intervene with the decision to bundle.


Key Takeaways:
  • “Bundling” occurs when a firm sells two or more services in a package for a single price. From 2007 to 2009, almost all cable television operators offered a bundle of telephone, broadband, and pay television service (satellite or cable) known as “triple play.”
  • “Churn” is a customer’s abandonment of a service provider; this paper asks whether consumers that purchase a bundle of services are less likely to “churn.”
  • If bundling reduces churn, bundling will affect competition in video markets.
    • Firms could gain market power and raise prices.
    • Bundling creates barriers to entry, as new entrants find it harder to attract customers.
    • Bundling could help keep certain markets from shrinking.
  • The data shows that bundling does reduce churn for telephone, broadband, and television service, however, the effect was not the same every year for every type of service.
  • The effect of bundling was most noticeable for markets in turmoil, for example, when customers began to drop some kinds of service; the role of bundling in keeping certain markets from shrinking is very important.
    • The purchase rate of pay television in 2009 was 2.2% higher for bundled households.
    • By bundling, the cable companies saved about $259 million in revenue.
  • Consumers consider broadband a substitute for television; in 2009, as it became possible to stream more video online, many more households bought broadband but not pay television.
  • Bundlers had lower income and education levels than those that purchase services separately.
  • Whether bundling leaves consumers better or worse off overall depends on benefits that consumers obtain with the bundle; generally, policymakers should not intervene in firms’ bundling decisions.



Shane Greenstein

About Shane Greenstein

Shane Greenstein is the Martin Marshall Professor of Business Administration and co-chair of the HBS Digital Initiative. He teaches in the Technology, Operations and Management Unit. His areas of interest include: digital economy, information technology, networks, and technological innovation. Professor Greenstein is also co-director of the program on the economics of digitization at The National Bureau of Economic Research.