With its announcement this week of rebates for customers who buy long-distance, high-speed data, satellite TV and wireless service, BellSouth reinforces its primary bundling strategy of delivering comprehensive service at a better price than cable companies can.

The company is pleased by the reduced churn and increased penetration of new service areas achieved by its service bundle, called BellSouth Answers, said Randy Kinkaid, senior director of customer-based marketing at BellSouth.

“We know the service bundle creates retention – I can’t share specific numbers, but we do measure it and bundles are effective in reducing churn,” said Kinkaid. “And we know our ARPU growth is increasing quarter over quarter, that we’ve maintained our top line growth.”

ARPU is average revenue per user, a key industry metric. According to the company, BellSouth Answers has penetrated 34% of its retail lines. Four million customers are considered “bundled customers,” which means they buy a voice line, two voice features and at least one affiliated service – long distance voice, wireless, Internet access or satellite TV through BellSouth partner, DirecTV. Eighty-percent of those four million buy long-distance service and more than 40% have either DSL or dial-up Internet access through BellSouth.net.

Under the current BellSouth pricing plan, customers who have a basic line and one voice feature get $2 off DSL service, DirecTV or Cingular Wireless bills. Customers who buy the Complete Choice voice service, which includes a package of voice features, get a $5 discount on the other services. Those who buy Complete Choice and unlimited long-distance service get $10 off the other services.

Those discounts are reflected on the BellSouth bill, with the exception of the DirecTV discount, which shows up on the separate satellite bill. “We do remind people on their BellSouth bill that they are getting that discount,” said Kinkaid.

The rebates announced Monday give customers $75 back if they choose BellSouth FastAccess® DSL (any speed) and DirecTV, and a $25 rebate for those who choose BellSouth Unlimited long-distance service or Cingular Wireless service.

“It’s not just a pricing play, it’s what do we offer,” said Kinkaid. “Particularly when we partner with DTV, which has a good price advantage over cable, we can reinforce that. But also, we have a good relationship with our customers, we can exploit that relationship, and continue to offer good customer service.

“We are going to continue to leverage DirecTV, and wireless, especially with AT&T merger, which brings us a whole new set of customers,” he concluded. “Customers want a single bill and a single source. We’ve given them an extra incentive with the discount. We are still exploring our video options, because we know video is core to the bundle.”

BellSouth is, in fact, testing IP video this year, but hasn’t yet announced further plans.