Why home entertainment packages are a waste of money

We review John Lewis' broadband package and consider what sort of packaged products can offer good value?

John Lewis recently introduced free broadband for six months to anyone who buys an internet-enabled device through them. Line rental completes the package on offer.

It raises the question of how to tell whether you're getting a good deal when you buy home-entertainment packages – or any products or services that are bundled together, for that matter.

The John Lewis broadband package with internet device

But first, let's look a little closer at the John Lewis deal.

The first part of the package is the internet-enabled device itself. Devices include:

• Tablets
• Smart TVs
• Laptops
• Radios
• Desktop computers
• Printers
• Cameras
• Mobile phones
• Gaming (which means things like computer consoles).

John Lewis offers three different broadband deals to go with it and, to complete the package, there's the unavoidable line rental.

The standard broadband package comes with freephone customer support all day, everyday, a free wireless router, and no activation fee.

The broadband costs £11 per month (but nothing for six months) with a decent 20GB of monthly usage (perhaps the equivalent of 15 to 25 films, or 50 hours watching iPlayer). The speed is “up to” 16MB with an average speed of 5.6MB.

You also have to pay for line rental at a minimum cost of £13.50pm, which includes free evening and weekend calls. Line rental isn't included in the six-months-free offer. Local and national calls cost 12.5p to connect and 7.5p per minute. Calls to mobiles cost 12.5p to connect, and 12.5p per minute during the day and 7.5p per minute in the evening.

You commit to a 12-month contract, but can thereafter quit with just one month's notice. You get one free house move per year.

I like the relatively simple terms, the free customer support, and the lack of nasty activation fees or lengthy tie-ins. John Lewis has a reputation to maintain as a quality brand, so we can hope that it's correct to call its own connections “fast and reliable”.

While I have seen few reviews on the internet, it was rebranded from Waitrose broadband last year. Waitrose had 2.3 stars out of five at the Review Centre. Since more people complain than to praise, you need to see how the reviews compare to other broadband providers. Waitrose's broadband was pretty much on a par with TalkTalk, below Titan, O2 and Be, but above Virgin, Sky, BT and Orange.

Packaged deals rarely offer value

I'm going to give you a few examples of types of packages, but not just within home entertainment, as this applies everywhere.

Let's start with mobile phones. 52% of people are on packages that are too big for them, according to Billmonitor. That's a lot of people overspending.

For people like me, who either barely use their phones or could get by without using them so often, it's smart not to get a package. I had to analyse my own bills in a spreadsheet to calculate it, but it's clear that it makes more sense for me to buy a second-hand phone and a SIM card separately, and to pay for each text, call, and MB of internet usage. If I wanted mobile-phone insurance, I'd also be much better off buying that separately.

Now, looking at the cost and small print of home insurance packages, the add-ons of legal cover and home emergency cover are much less impressive than many would think, and my best estimate is that these are usually hugely overpriced when sold in a package. The financial regulator seems to take a similar line, as it has started to grumble about such add ons.

As a final example of a package, we'll take the John Lewis broadband package itself. Consider the cost of the internet-enabled device from John Lewis. Yes, it comes with a John Lewis five-year guarantee, but that's just another product that has been packaged in – and it's not really free.

You are likely to find that you'll be better off buying the device separately, paying an independent insurer to give you a five-year guarantee, and then buying your internet service separately, even if that means losing the six free months.

How to work out whether a package is going to be good value

In my long experience of analysing packaged products and services in every industry, it is almost universally more expensive to buy like this. Rather than benefiting from the discounts for multiple purchases, we're tricked into paying more than we would if we went to separate providers for each part.

If you have limited research time, there's a simple rule to follow. Follow this all your life and you might occasionally miss out on a package that would have been your best choice, but overall you should expect to be a lot better off.

The rule is this: if a company offers the same bundle of products and/or services to lots of customers, it is probably not the best deal for you. It stands to reason: a business can't offer genuinely discounted deals to everyone because it would probalby go bust. It certainly can't do that while maintaining quality. So only if you have individually negotiated a packaged deal can you usually break this rule.

That might sound cynical to you. It is certainly deeply unsatisfying, but we shouldn't dismiss something because we don't like to hear it. It is what I have repeatedly learned, with very few exceptions, by reading hundreds of contracts every year, by comparing numbers and product features in spreadsheets, and through hundreds of hours of analysis time.

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