Consumer Satisfaction With Video, Wireless Up, Sprint Gains Most

Customer satisfaction with cable and satellite TV rises to its highest level in 10 years, up five percent, with nearly all companies registering improvements, according to the American Customer Satisfaction Index.

Sprint Nextel seems to have made the largest gains over the last two years, jumping by double digits for each of the past two years. That's important as Sprint Nextel's customer service was widely seen as the cause of its high churn over the past several years. The improvement in customer satisfaction is mirrored by steadily better churn performance over the last couple of years.

Both Verizon’s FiOS and AT&T’s U-verse lead the way with scores of 73 and 72, respectively. Satellite TV still leads over traditional cable, with Dish Network soaring 11 percent to 71 to overtake rival DirecTV for the first time since 2005.

DirecTV fell four percent to 68 as aggressive pricing promotions by DISH, coupled with a price increase by DirecTV, has the two satellite TV providers moving in opposite directions.

All four of the largest cable providers show some improvement. Charter Communications makes the biggest leap, gaining 18 percent to 60. The company is now statistically tied with Comcast and Time Warner Cable, both up three percent to 61.  Cox Communications gained two percent to 67 to lead all traditional cable companies for a seventh straight year.

“Having enjoyed near-monopoly status in most areas for many years, cable companies had little incentive to provide quality services at a good price,” says Claes Fornell, founder of the ACSI.  “Now that satellite and fiber-optic TV providers have created a competitive challenge to cable, the cable companies have started to step up customer service and realize some gains in customer satisfaction, but they still remain far behind both satellite and fiber-optics.”  

Traditional local and long distance service improved four percent to 75, the highest level in more than a decade.  AT&T is on top after a six-percent surge to 75, followed closely by Cox Communications, unchanged at 74, and Verizon, up three percent to 73. CenturyLink and Comcast round out the bottom of the industry, with CenturyLink gaining three percent to 70 and Comcast rising two percent to 68.

Customer satisfaction with wireless telephone service set a new all-time high for the second consecutive year, rising four percent to 72.  T-Mobile gained three percent to 73, tying for the lead with Verizon Wireless, which declined one percent.

AT&T Mobility improved three percent to 69. Two years after the iPhone was introduced as an exclusive product, AT&T seems to have made strides to relieve some of the strains on its network caused by the rapid influx of iPhone customers.

Sprint Nextel had the largest improvement, gaining 11 percent to 70 a year after a similarly large 13 percent jump, pushing the wireless carrier from well below to very close to the industry average.

Perhaps the most-intriguing bit of commentary provided by ACSI was the brief note that "with wireless looking to be the future of telephone service, providers are ramping up efforts to provide new services, simplified usage plans, and better pricing." Note the language: "wrieless looking to be the future of telephone service."

Dish Network Reports Slower Growth

Dish Network experienced slower subscriber growth during 2007, though it is hard to separate out the impact of better performance on this score by competitors, internal issues, slower housing starts and macro economic factors. “During 2007, our subscriber base continued to grow, but at a slower pace than in previous periods,” the company says.

“We believe that our slower subscriber growth was driven in part by competitive factors including the effectiveness of certain competitors’ promotional offers, the number of markets in which competitors offer local HD channels, and their aggressive marketing of such advantages," the company says.

In part, Dish Network was hampered by a delay in the launch of new satellites to support high-definition services. The company argues that the delay lead to gains by competitors better equipped to deliver lots of HDTV signals.

Dish executives also say subscriber growth was affected by worsening economic conditions which included a slowdown in new housing starts.

But there also were "operational inefficiencies" as well, and piracy and other forms of fraud seem to have been issues as well. All of those developments "affected both the growth of new subscribers and the churn of existing customers," Dish says.

Although video entertainment traditionally has been viewed as "recession proof," that thesis might be tested this year if there in fact is an economic slowdown underway, or starting. The problem is that economists need six months worth of data to declare that a recession started, six months earlier. We might not know for sure until the summer or fall whether that is the case.

Any one of the aforementioned developments could lead to slower growth. The problem is that it isn't clear how important each of the factors was. Given the number of new HDTVs being sold, it is conceivable that relative lack of HDTV programming alone could account for slowing growth, even if the other forces were not at work.

To some extent, the satellite delay is simply bad luck. But the fraud issues ought to be largely under Dish Network's control.

Neither are housing starts under company control. The issue is that more weakness likely will follow, not because of housing starts, but because in many markets owners seem to be selling second homes bought largely as investments. In the interim, it is likely many of those locations will be disconnecting some services.

If a slowdown in growth continues, it will be tough to figure out, in retrospect, what actually caused the slowdown, as several forces are operating at once, at least at Dish Network.

Lots of SMEs Now Buy Video

Entertainment video of the sort delivered by cable, satellite or telephone companies often is thought of as a consumer application. But there's new evidence that lots of small and mid-sized businesses and organizations buy video services. To be sure, bars have long been a key business customer for video services.

What is striking is the degree to which lots of businesses now want to have video services available at the workplace. Whether for employee benefit or keeping up with the news (branch offices of financial services firms, for example), SMEs now appear to be far more willing than formerly to buy entertainment video services.

Qwest Really Isn't Interested in IPTV

Qwest Communications International Inc. no longer will pursue cable franchise agreements with Colorado cities or build community-wide TV service in areas where it's recently won franchise approval. That's more confirmation of Qwest's strategic direction in video, which is to rely on its partner DirecTV for linear TV services.

Though Qwest plans to upgrade its broadband capacity in 10 major markets and 10 smallers ones in the company's 14-state service area, that is solely for the purpose of broadband-based services other than entertainment video.

Qwest still supports the idea of statewide television franchises. But it won't seek such a franchise.

Digital TV Transition: Not Y2K

In February 2009, all over-the-air analog TV broadcasting will be shut off. Some observers are concerned that consumers aren't acutely aware of the coming changes, resulting in massive disruption of the TV experience on the day of the analog broadcasting shut off.

Maybe not. The only potentially-affected customers are those who rely solely on over-the-air signal reception. Customers of cable, satellite or telco TV services won't have to do anything. To be sure, cable, satellite or telco TV providers will have to supply a new digital decoder if one is not already in place. But the point is that the providers will take care of their own customers, and that's 85 percent to 90 percent of all TV viewers.

Of those customers who have over-the-air connections, those who have bought TVs with digital tuners will not notice anything other than universally-better pictures. So the real issue lies with a single-digits number of viewers who have analog-only tuners.

By the time the transition nears, every mass market electronics retailer will have taken steps to push the sale of digital decoders. So this will not be anything like a feared "Y2K" event.

at&t to Drop DirecTV

at&t will stop offering DirecTV services to its customers toward the end of the first quarter. The not-unexpected move came as at&t found itself reselling both DirecTV and Dish Network services as a result of its acquisition of BellSouth, which had been a DirecTV partner. In its own territory, at&t has been partnering with Dish Network.

The Dish Network contract itself expires at the end of 2008, but at&t's longer business relationship with EchoStar, which offers the Dish Network service, probably is decisive.
DirecTV has to have anticipated the decision and has to be expected to roll out new channel and direct sales efforts early next year, to compensate for the loss of sales momentum from at&t.

It will have a lot of work to do. By some estimates, at&t accounted for an estimated 15.2 percent of DirecTV's gross additions but 58 percent of net subscriber growth. And though DirecTV probably will end 2007 with strong subscriber growth at the same level it saw in 2006, 2008 obviously will be more challenging.

Cable Squeezed on Both Ends

Most observers expect telco-delivered video to gradually take market share from cable operators, though modestly over the next couple of years. Most observers also think satellite-delivered services have crested, and will be lucky to hold onto their current market shares.

But one suspects there will be more change, longer term, than most observers now expect. For starters, video demand itself could shift to other IP formats, including at least some forms of Web video. So far, there isn't all that much evidence of shift. Consumers haven't embraced any of the devices and services that port video over to TV screens, though there continues to be evidence of a lessening of interest in linear television on the part of younger consumers.

Nearer term, satellite providers remain aggressive about high-definition TV services and pricing, and most consumers seem pleased with their satellite service.

And as compelling as many consumers find triple-play or quadruple-play services, not all buyers will find the pricing the most-compelling attraction. Some services, networks or suppliers are going to be picked as "best of breed" by some portion of the market, despite the fact that a bundle can be purchased from two providers in a market.

That will continue to put some incremental pressure on cable providers, who are using bundling, as telcos are, to lock in and protect the current customer base.