Study claims telcos can overtake cable

A new consumer satisfaction study by the Cloes Fornell International Group reports that consumers say they will consider a service bundle sold by a telecom company over one sold by a cable company, and casts some doubts on whether the first-mover benefit is as significant as conventional wisdom would dictate.

The study, “How Customer Satisfaction Impacts Telecom and Cable’s Battle for the Consumer,” was released today by Michigan-based CFI Group. It finds higher customer satisfaction scores for telecom players, based on their history of providing better customer service, said Phil Doriot, one of the study’s authors.

“The undercurrent of the whole thing was that the telecom players have more brand credibility, more trust, the most history of service delivery,” he said.

The study found that while cable companies have the current edge in terms of bundle sales, telecom providers have the edge in future growth due to higher satisfaction scores. For example, 20% of households that do not already purchase service bundles say they plan to in the next year. Of that number, 54% would prefer a telecom service bundle versus 44% who would prefer a cable service bundle.

Among current bundle customers, however, cable has a 68% to 32% lead.

For its report, the CFI Group analyzed data from the University of Michigan’s American Consumer Satisfaction Index and from its own recently released Call Center Satisfaction Index, which measured the impact a call center experience has on customer satisfaction.

The report states that cable and satellite TV companies came in on the low end of the Call Center Satisfaction Index, which didn’t cover wireline telecom providers. In addition, the CFI report states, customer satisfaction for broadband providers ranks DSL above cable modems, satellite TV over cable TV, and telecom bundles over cable bundles.

Any customer dissatisfaction with cable bundles would open the door to telecom companies to recapture customers lost to cable, Doriot said.

“Conventional wisdom says first guy in the room with the bundle wins the game and I don’t think this confirms that,” he said. “Even though cable companies got out there with a bundle first, people would prefer to bundle with telecom. There’s a reason for that. And my complete interpretation is that telecom companies should stop playing defense, push out there and compete.”

The report does find that consumers with bundles are more satisfied than those still buying services separately. But Doriot said there is evidence consumers won’t necessarily stay with the first bundle. Consumers also cited high rates as a reason for switching broadband access providers, he said.

“I think there is less confidence and more watchful behavior on the side of the consumer with regard to accelerating prices once the bundle is in place and lack of support and flexibility that might cause them to change providers,” Doriot said.

Cable scores low in the ACSI research – in the 50s to low 60s and when CFI Group measure the likelihood of customers to switch service providers, it ranged from 15% for the best cable company – Brighthouse – to 25% for the lowest ranking company, Cablevision. Likelihood to switch providers was lower for satellite companies, in the 11% to 19% range. Poor customer service was cited by 43% of cable customers as a reason for switching, while 31% of satellite customers offered that reason.

The report states that wireless plays a less important part of customers’ decisions to buy a bundle. Only 14% of those willing to switch wireless services said they would do so to get a service bundle.