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Cable Creams Telco on Telephone Customer Satisfaction
11 Sep, 2008
Using the latest J.D. Power ratings for customer satisfaction on phone service as a barometer, cable companies are not only beating telephone companies at their own game, they are crushing them. There has to be some sense of embarrassment on the telco side. Five factors are examined in determining overall satisfaction with the J.D. Power survey. In order of importance, they are: customer service, performance and reliability, cost of service, billing, and offerings and promotions. Cable voice providers rated higher than telcos in every region of the country. TDS Telecom was the highest rated telco, placing second behind Wide Open West, in the North Central Region. Telcos didn’t place any higher than third in the remaining four regions. The two largest telcos, AT&T and Verizon, ranked below the region average in several regions. Other interesting findings of the survey include:
- Satisfaction levels among customers who use Web channels for service inquiries are higher than satisfaction levels among customers who use a telephone to call a service center. On average, satisfaction averages 641 on a 1,000-point scale among Web users, compared with 626 for telephone users
- Overall satisfaction is higher among customers who bundle two or more services with one provider, compared with customers subscribing to phone service alone
- Satisfaction among "triple-play customers" -- those subscribing to telephone, cable and Internet service -- is 23 index points higher than among those customers subscribing to just phone service
I can hear the spin masters now explaining why cable is winning this satisfaction battle. Arguments will be made that cable is on a “honeymoon” with customers because they’re relatively new to the scene and are aggressively competing on price. There is some truth to that, but if there were ever a wakeup call to telcos, this should be it. Cable is beating telco at their own game – handily. We’ve known for some time that it’s easier for cable companies to add voice than for phone companies to add video, perhaps giving them a tangible advantage. It looks like cable is leveraging that advantage to the fullest. I have to admit that I was amazed at how easy it was to switch my phone service to Comcast last year. The technician came in (on time even), and within 30 minutes, had completely siphoned my $90 monthly ARPU contribution to Verizon, and handed an even better monthly ARPU of $140 on a silver platter to Comcast. I was floored by how uneventful the process was and how quickly the switch was made. Give cable their due. They have taken on the challenge of voice service quite competently, and appear to be having great success with it. These J.D. Power results only add to the evidence.
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Should Telephone Service be Free?
12 Oct, 2008
Comcast announced a new promotion last week that offers 12 months of free basic cable service for new customers who also sign up for an additional service. Customers who don’t want an additional service can get Comcast’s basic service of about 20 -30 channels for $10/month. The promotion is tied to the digital TV transition of February 2009 and entices potential customers to avoid the transition “hassle” by getting “free” cable service. “The simple fact is that basic cable is the easiest path through the digital transition and now consumers can get it for free,” said Derek Harrar, General Manager and Senior Vice President, Video Services for Comcast in a company statement. This move is similar to strategies pursued by other video service providers, who are hoping to leverage the digital TV transition for new subscriber additions.
But is this strategy a leading indicator for the future? Should basic core services like basic cable and basic telephone service be offered for free, used as a “carrot” to entice customers to buy “more important” services like broadband? Maybe a very basic phone service, with no LD, access to landline 911, and maybe outgoing service only (to avoid telemarketers) should be a free component of a bundled offering. Such a wireline service may appeal to a customer who previously cut the cord for wireless only, but also needs broadband. There is a growing portion of the population who find the value of traditional wireline phone service elsewhere – either through wireless or broadband/IP services. But, if they could get the security of landline 911, and an extra dial tone in their home as a free value add for subscribing to broadband (or video from a telco’s perspective), maybe a telco’s bundled offering may look more attractive than a comparable cable offering. I realize this idea is not appealing to the hundreds of ILECs who are a part of the current access/settlement system (in fact, it couldn’t work in the context of today’s regulatory structure), but I wonder whether it’s inevitable. In this possible future scenario, the current settlement system adapts to broadband as the underlying service, as opposed to voice.
This scenario cuts both ways. From a cable company’s perspective, a growing portion of the population is turning to the Internet as a source for their video content, and no longer see value in paying for a broad package of video as a part of a traditional subscription pay-TV service. But, if they could receive basic TV (which includes local broadcast affiliates) as a free value add for buying broadband, maybe the cable bundle is more attractive. In a true IP/broadband world, very basic phone and video service is relatively easy to deliver, and has little impact on bandwidth and network performance. Maybe the digital transition is opening the door to a future where free basic services are a regular component of a bundled offering. Thoughts?