Bundling

Bundling is the process of combining multiple products or services and selling them as a single package. Most major telecommunications and computer technology firms bundle at least some of their products and services. In some cases, both products and services are bundled together. For example, Internet service providers sometimes offer personal computers free to customers who are willing to sign up for two or more years of service. E-commerce site builders bundle page design software and online traffic monitoring tools with e-marketing services. Online content providers like the Wall Street Journal Online offer subscriptions that not only include access to an online version of a publication, but also accounts with other online publications, the ability to retrieve archived articles, real-time stock quotes, stock tracking services, and more.

For years, personal computer manufacturers have sold their machines with several software programs already loaded onto the hard drive, and leading word processing programs like Microsoft Word and Word-Perfect have come bundled with spreadsheet, database, and presentation software. The Telecommunications Act of 1996 deregulated the communications industry in the United States, allowing broadcasting, cable, wireless, and telephone industries to compete in one another's markets for the first time and opening up a host of new bundling opportunities. Cable television companies began bundling their traditional cable service with Internet access, as did telephone companies. For example, using digital subscriber line (DSL) technology, which offers a much faster connection speed than traditional modems, in late 2000 Sprint began offering a bundle of local and long-distance telephone services that also included five e-mail addresses, a data line, and six megabytes of Web space.

A particularly noteworthy example of bundling is Microsoft's inclusion of its Internet Explorer browser with its Windows 95 operating system in the mid-1990s. The move allowed the firm to compete with browser rival Netscape, but some critics believe it worked a bit too well. It resulted in an antitrust investigation conducted by the U.S. Department of Justice that eventually made its way to court. A judge ruled that Microsoft must offer a version of Windows 95 unbundled from Internet Explorer, although that verdict was later overturned on appeal. The litigation sparked by the bundling continued, however, until 2000 when Microsoft was found guilty of monopolistic practices and ordered to split into two companies, a ruling that also was appealed.