The Rise of Bundling and Carrier Billing

10 February 2020
Carrier Billing

Previously seen as an ‘old-school’ distribution model, bundling is on the rise.

OTT Video Bundling and Partnerships

According to Ovum, alliances between mobile operators and providers of paid online video entertainment services have grown over the last few years:

  • The increasing availability and maturity of broadband services means that operators are seeking to differentiate and add value to their access products
  • In 2019, VOD providers had implemented over 540 bundling partnerships with TV providers and telcos
  • Mobile operator partnerships and carrier billing are driving growth, especially in Asia-Pacific and developing markets Middle East and Africa
  • Mobile is now by far the largest service distribution channel

Video Is the Vehicle for Telco Growth”

During the Mobile World Congress 2018, Huawei and IHS Markit jointly released two white papers showcasing the value of video services to operators:

  • They discovered an 8% growth in revenue produced by telco subscribers with video packages, surpassing 1.4% growth in 2017
  • Josep Mitja, head of telcos at NPAW and co-founder of Rakuten TV explains that video might only add up to 1% of telcos’s total revenue but in reality, “the reason this service is so useful to telcos is bundling it together with broadband and telephone packages”

Types of Bundling

Content is used to entice customers into subscribing to bundles that include broadband, phone contracts and video content, through:

  • Premium Bundles: “A feature-fuelled offering which gives subscribers numerous package features” e.g. Sky Broadband + Sky Sports
  • Skinny Bundles: “A cheaper and more compact package than premium. This usually only offers a select number of channels from a provider or includes a subscription to an OTT service” e.g. Vodafone’s partnership with HBO – new subscribers gain 12-month’s access to HBO’s content catalogue
  • Hard Bundles: A premium OTT video service is included for free, in a telecoms, broadband, or pay-TV subscription tariff for the duration of the subscription
  • Soft Bundles: A video service is bundled with a main tariff or bolt-on tariff and charged either at a discount or full price. These usually include a standard initial free trial period, or an initial discount

Bundling Case Study – Netflix

Chief Product Officer Greg Peters explains how bundling helped SVOD provider Netflix, to reach those customers who may have been less willing to sign up directly or those who are slower to adopt new technologies, by making it easier to access/sign up:

“If we can actually put a Netflix application, a call to action, maybe even bundle the service subscription as part of their pay TV offering or the mobile offering, they can just click on something and then get right into the service.”

Netflix’s bundling arrangements:

  • In 2017, T-Mobile started bundling Netflix for free for those on its family plan
  • In 2018, Netflix also announced partnerships with Telefonica in Spain and Latin America in addition to KDDI in Japan
  • Netflix expanded its partnership with Verizon, in which Netflix’s mobile app comes pre-installed on Android phones
  • It now works with around ten different bundling partners around the world to bundle their video service with wireless and pay-TV plans

Bundling Case Study – Spotify

In 2018, Spotify teamed up with Hulu and Showtime to create a special package for students at a heavily discounted price ($4.99 per month).

Janet Levine, Managing Director for Invention+, Mindshare North America explains how bundling can create a package deal for future loyalty:

“It can be an effective way to gauge interest in a particular offering. And after students graduate, they become loyal to whatever subscription they were using in college.”

Levine also explains that people now “take [bundling] as a modern version of a good deal.”

Bundling Into 2020 and Beyond

After accruing 10 million total subscribers just a day after its November 2019 launch, Disney Plus is destined for great things. In the US, Disney is offering Disney Plus along with its two other streaming services; Hulu and ESPN+, for $12.99 a month – $5 cheaper than individually subscribing to all three.

Benefits of Bundling

Josep Mitja explains that:

“Telcos use video content to entice customers… In reality, what they want is that [customers] buy their entire service, but the hook is the content. They’re not advertising a better connection. They’re announcing that customers will have access to more content with them.”

Benefits of bundling:

  • Simplified sign up for customers – bundling removes some friction around actually signing up for a service, leading to customer acquisition and subscriber growth
  • Reaching new demographics
  • Access to local knowledge
  • An established billing relationship with customers

Carrier billing is an important facilitator in both signing up customers and arranging payments for OTT services:

  • Secure, one-click payments make it easy for consumers to access subscriptions, which can simply be charged to their phone bills
  • DCB allows users to pay OTT subscription fees as part of their monthly telephone or data bills in markets where credit card payment is unavailable to the average subscriber
  • DCB is also useful in markets where fixed-broadband penetration is low and mobile dominates

Want to unlock new markets and revenue streams through adding carrier billing as a payment method for your goods or services? Contact SLA Digital today.

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