The view from the living-room couch

As far as customers are concerned it's more about the TV than the IP. Quality service remains the killer app

Rad Feuerhelm is your average television customer in Olathe, Kan. The 60-year-old retiree enjoys watching recorded movies and appreciates a crisp picture on his big-screen TV that makes him feel like he's a part of the football game. He's not ancient but not exactly young, he'll tell you. When his grandfather was given the chance to invest in American Telephone & Telegraph for a quarter a share, he declined, saying AT&T would never catch on and make it across the “Indian Nation.” Now, as the telephone company's brand has crept into Feuerhelm's home through his landline telephone, high-speed Internet service and television set, he'll also tell you that he's a satisfied customer. He likes the IPTV service because the guide is intuitive and recording his favorite shows is simple. “If I can do it, anyone can do it,” he said.

Alan Weinkrantz, on the other hand, will admit he's not the typical user. An AT&T customer for nearly three years, Weinkrantz's almost entirely IP house features a home theater with a 2Wire set-top box (STB), digital receiver, 51-inch Sony high-definition television (HDTV), Slingbox and Apple TV, along with a Samsung 28-inch flat panel and Bose system set up in his daughter's room. For about three months, Weinkrantz even had both Time Warner's service and U-verse installed in his home. While he owns a public relations firm representing several technology clients, he has no allegiance to AT&T. Rather, tracking his experiences with the telco has become a hobby of his and the topic of his blog, 3screens.net.

“I've had three ‘ah ha’ moments in my life doing this,” Weinkrantz said. “One was realizing that I had a TV signal going through my home and that my TV in my house has an IP address. That is interesting. My second ‘ah ha’ moment was watching a Coldplay concert in HD over IP. That was pretty cool. And the third ‘ah ha’ moment was having Apple TV in my house disrupting AT&T — me handing Apple $3 for a movie rental on a separate bill, using AT&T's network but not going through them.”

While these are ‘ah ha’ moments that Feuerhelm might never have, the experiences of these different customers illustrates an important point for IPTV providers. It doesn't matter how many channels, features or applications a telco can add. In the end, all that really matters is how customers perceive the value they are getting every time they hit the couch and grab the remote.

In fact, the average customer may find it hard to separate satisfaction with the IPTV service itself from what Phil Dorio, a partner with CFI Group and head of its telecom practice, calls the “positive halo” of free goodies and incentives that come along with subscribing. Because IPTV is still in its early days, service providers are inclined to pull out all the stops to acquire customers and build their subscriber base.

“In terms of customer satisfaction, I think a lot of people who have the product are quite happy with it,” Dorio said. “But the question would be, how happy are you outside of the very aggressive bundled price that you've received and the other sort of marketing incentives that might have gone along with the package deal to move from your cable package to IPTV?”

Most customers will admit that they are unaware what infrastructure is delivering their TV to their home. Or, if they do know, they don't really care all that much. As one customer put it, “cable is cable.” For a telecom service provider, this false perception exemplifies the precarious situation they are in: Match the quality, service and features of cable TV, but offer consumers a compelling reason to switch.

“The customer has relatively little interest in understanding all the details involved and all the hoops the provider has to jump through to do whatever it is they are doing for them,” Dorio said. “The customer is just basically interested in the benefits. If I've got TV on all the time when I want it, and I've got the variety of content that I think I'm interested in and is appropriate for me and it's priced relatively well, I'm not sure as a customer if I care if it's coming over IP or down from a satellite or over traditional coax.”

Perhaps the only time customers are acutely aware of the infrastructure is when it is being installed over the course of two to eight hours. A scanning of consumer blogs confirms that a customer's level of satisfaction can be affected right off the bat based on the installation process and its often-unmet promises. For example, residential areas are not always wired to accept broadband into the home. Unlike with quick phone installations, the wiring of homes for IPTV — especially older ones — requires the integration of many different elements. While telcos might not be able to predict installation times, Dorio said that their job is to explicitly communicate the possibilities. The same applies for the actual features that are available over IPTV when a consumer subscribes. While 40 HD channels, games, digital video recorder (DVR) and interactive elements might be available from a service provider, the offerings typically aren't ubiquitous due to the logistics of a particular region, neighborhood or even house.

“There is a disillusionment due to the lack of expectation-setting,” Dorio said. “But also, customers don't exactly know what to expect, and given the opportunity to over-expect, a lot of customers do that — particularly with new technology.”

According to a SureWest spokesperson, the IPTV pioneer created a short video for its customers and call center representatives that takes them through the step-by-step process of what may happen during a home installation. Because SureWest's infrastructure is fiber directly to the home, additional wiring in older homes often is needed to ensure customers receive the service's full benefits. The goal of the video is to manage the expectations for what installers may face.

“It is a slower process getting it rolled out because it is brand new,” Dorio said. “In a lot of cases, the telecoms have underestimated the amount of time it would take to do an installation. They are getting better at that. … It's not that they miscommunicated, they just didn't communicate enough with the consumers signing up about the potential day they would have to stay at home with the installer as he or she installed new jacks and ran new wiring and so forth to the locations where they wanted television.”

Over at Feuerhelm's home in Olathe, the installation process was a breeze. The technician even spent two additional hours ensuring Feuerhelm knew how to navigate his new interface and work the remote control. Getting to this point, however, took months of confusion and deflected questions from AT&T.

“[AT&T's] box was right across the street from my house,” Feuerhelm said. “We tried for about three months to get it, and they kept saying it's not available in my area. I said, ‘How could it not be available in my area when you dug up my yard to put the cables through?’

“It took them three months before they were finally able to connect me,” he added. “It was just right across the street. It was the strangest thing: The people two houses down got it, the people across the street got it, but from my house down to the corner, we couldn't get it. They never did explain why.”

Multiple times, AT&T marketers would quote a price for the service, fill out the paperwork and then come back only to say it just wasn't available in his neighborhood yet. After two months of this, Feuerhelm asked the technician for an explanation. When the tech couldn't offer a satisfactory one, Feuerhelm called a supervisor who assured him he'd have the service within the week. Feuerhelm, angry with his cable provider for upping prices and adding an additional charge for his beloved NFL channel, was willing to wait for AT&T and had the service in place before the following Sunday.

Feuerhelm's experience is not all that unusual. Dorio's neighborhood was in line to have the technology put in place last year. With the pavement dug up and wires halfway in the ground, Dorio thought he'd be enjoying IPTV within the month. Two weeks after they began, however, AT&T was out of there as fast as it came — only torn-up ground and filled-in holes remained. Dorio is still waiting on his IPTV.

While slow to get IPTV off the ground, AT&T has made promises to reach 30 million homes with its fiber-to-the-node network, adding 1 million customers by the end of 2008. Verizon, which sells a hybrid radio frequency/IPTV product, has stated plans to deploy its FiOS TV to as many as 18 million users, up from its current consumer pool of 2 million.

Although IPTV seems to be catching on in most markets where it is offered, the reason is not necessarily the IP infrastructure. Consumers sign up for the service largely because of price promotions or bundling, and the quality of the TV viewing experience still trumps any advanced features that carriers might offer. Most average consumers do not even realize that features such as AT&T's U-bar, Yellow Pages search functions and games are available. As such, HD content is surpassing features as the most significant differentiator.

In response to a Telephony Unfiltered blog entry, U-verse customer Paul Simon commented that for someone who has never seen HD offerings via satellite or cable, U-verse looks pretty good. But he added that his previous Time Warner HD signal was of much better quality with fewer issues such as shaky background images, color incongruity and fading.

“We have an occasional picture freeze/skip, and our DVR STB needs to be reset every few days, although we haven't had the recording problems that some users have reported on the U-talk and U-verse users message boards,” Simon wrote.

On the other side of the coin, Milwaukee U-verse customer Carol Strong sees HD as the service's best feature. While she has seen some problems with tiling and color degradation, she doesn't mind the interruption. She understands working out the glitches of a new service takes time.

“The other features are pluses and things to do once in a while, but for me it is TV and my programming,” Strong said. “HD is more important than features. I watch everything I can in HD. I am just awed by it.”

Debating glitches in quality and reliability is inevitably an endless circle. For every positive review, there are three negatives, and vice versa. While new features and more HD content are ways to retain customers, the real difference between cable, satellite and telecom is most likely to arise through competitive pricing and solid customer service. A trained staff of technicians and customer service representatives can make or break a service, IP or otherwise.

When AT&T began its largest IPTV rollout in the Chicago suburbs in late January, Steve Mitchell, vice president and general manager for AT&T Illinois, said the company cannot afford a bad customer experience right now. “We want a controlled environment,” he said. “It is not yet available everywhere yet, so people may get grumpy. We just can't rebound from a bad customer experience.”

Dorio said that customer satisfaction can be driven down significantly when consumers have to make sense of a multiple-page bill, often interacting with a customer service representative in the process.

“Almost assuredly, that first bill you get is for a month in advance and a pro-rated month, and if you've got a bundled price where you've got not only your IPTV but also your high-speed Internet and voice service and maybe your wireless all rolled up into one bill, it is a very confusing sort of bill,” Dorio said. “The telecom providers have not done a great job in educating their own call center staff around how to tease apart the bill from the big bundled price and effectively communicate what all the charges are for customers.”

That said, Dorio pointed out that most evidence suggests telcos and satellite companies are doing a better job with customer service than cable companies. The cablecos bring “a lot of baggage” and are known for their year-over-year price increases. When paying a premium, people expect premium customer service, which typically is not the case with cable, he said. Essentially, bad customer service is exacerbated by the fact that, as the incumbent, the cableco is unlikely to build out its infrastructure or update its network.

Outside of interactions stemming from problems with the service, telcos have the opportunity to make a positive impression during everyday interactions. Weinkrantz recommends IPTV providers equip their service technicians with coupons, extra remotes and instructions to promote the retail locations.

“To me, the story is not about who has more HD channels than you do or price differences — pricing will always be pretty competitive,” he said. “It goes back to the real issue of: How do you enhance the customer experience, and how do you reduce the cost of service calls by remotely doing things you can't do on cable?”

The answer to enhancing customer experience may lie partly with more entertainment features, partly with allowing interactivity on the TV set, partly with decreasing prices and partly with adding HD — the whole package. At this point, however, most customers have indicated that what's most important to them is the broader picture of how IPTV service providers can make life easier, more efficient and, above all, more entertaining.

THE PROMISE OF IP

WHILE A GOOD-QUALITY, reliable television viewing experience is still the No. 1 requirement for most consumers, the biggest telco advantage remains in the IP network. The nature of the infrastructure allows IP providers to integrate services, take advantage of Internet partners and add interactive features that are not feasible over cable. As more applications become widely deployed, IPTV providers are counting on them becoming visible on customers' radar and serving as another differentiator in the battle between satellite, cable and telco.

In addition to serving as an Internet portal that offers Yellow Pages functions search and games on demand, IPTV service offers a variety of applications.

• AT&T's U-bar, available in select markets, offers customizable on-screen stock quotes, sports highlights, local traffic and weather information.
• Whole-home DVR service, which is expected this summer from AT&T, will allow STBs to access video content from a DVR STB in another room.
• Photo sharing on a TV is possible through Flickr or an embedded middleware application.
• Voice-over-IP service allows users to view call histories on the TV; display, screen and forward calls; and enable “do not disturb” and international call-blocking options.
• With Cinema Center, movies can be purchased from Amazon and trailers can be viewed prior to purchase.
• Cellular integration allows users to remotely configure channel favorites on a home TV.
• Although not yet available, a Web cam feature will let viewers in different locations watch live events via switched digital video.