Cable Companies Might Have a $7 Billion Customer Service Problem

For cable companies, the bad news about public perception keeps getting worse. 

First the beleaguered pay TV providers were rated next-to-last on the most recent American Customer Satisfaction Index, dropping 4.4% to a 65 rating. The only industry to score worse was Internet service providers. Since all the major cable companies are ISPs as well, it seems the only thing people like less than cable companies is another division of those same businesses. That's like someone telling you, "The only thing I like less than your appearance is your personality."

Now, a new study released last week from management consultancy cg42 paints a grim picture for the nation's five biggest cable companies: Comcast  (NASDAQ: CMCSA  ) , Time Warner Cable  (NYSE: TWC  ) , Cablevision (NYSE: CVC  ) , Charter, and Cox. Based on a survey of more than 3,000 current customers, cg42 used what it calls its "Brand Vulnerability Index" to measure consumer frustrations with each cable company and rank the providers according to their risks of customer attrition and revenue loss.

Responses were collected, analyzed, and modeled to produce a ranking of the cable companies by vulnerability, from most to least, finding that the most vulnerable brands are also the two in merger talks. Here is a look at the list. 

  1. Comcast
  2. Time Warner Cable
  3. Charter
  4. Cablevision
  5. Cox

An overwhelming 53% of customers told the study they are frustrated by their primary cable provider. The top-reported frustrations were uncompetitive pricing, "nickel and diming," and the fact that there are better deals for new customers than existing ones. People also expressed displeasure at the lack of choice due to limited competition.

Leaving more than half of your industry's customers dissatisfied is a fairly impressive feat. The biggest question the study raises isn't "Why are people so upset?" but "Why have they stuck around for so long?" 

Could it really cause people to leave?

In the early days, cable companies had literal monopolies. A town or city contracted -- usually in a long-term deal -- with a cable provider that had an exclusive franchise to operate within the community. Those sweetheart arrangements were necessitated by the fact that multiple companies were not going to spend money building infrastructure simply to compete for customers. Rolling out pay TV across the country was expensive, and offering local kingdoms to providers enticed them to bring the service essentially everywhere, not just the most densely populated markets.

In recent years the cable monopoly has dimmed, but most Americans still have limited choices. The satellite companies -- DirecTV (NASDAQ: DTV  )  and Dish Network  (NASDAQ: DISH  )  -- offer an alternative for almost everyone, but at the moment those companies only offer pay TV, not Internet service. (That will change if AT&T (NYSE: T  )  and DirecTV complete their merger.) Still, for the vast majority of Americans the option of having cable and Internet from one provider means going with a cable company. That might be distasteful with so many people disliking those entities, but when the alternative is less convenient, most people seem to stay put.

The same can be said of cord-cutting. Even if you drop cable altogether and watch TV using digital streaming services, you still need Internet access. In many markets customers have two choices for ISPs -- the cable company or the phone company. Both are scored poorly by ACSI, and customers don't usually switch from a company they don't like to one they dislike a little less.  

Will this finally change?

The cg42 report finds that after years of frustration consumers may have reached a breaking point. The research firm's study said that the cable companies have $7 billion in revenue in jeopardy across all brands examined and that those companies are in danger of losing much of it. 

"Only a small portion of this total is expected to recirculate among these five competitors, while the remaining sum will exit the category in favor of satellite companies as well as streaming options and other new offerings," according to the study.

"The astronomical levels of customer dissatisfaction we've found in the cable industry are unmatched by any other industry we've ever examined," said Stephen Beck, founder and managing partner of cg42. "With more customers exploring other options, it's critical for traditional cable providers to understand how their frustrating services and policies are impacting customer behavior—and ultimately their balance sheets."

It's important to note that while $7 billion is a huge sum to put at risk, it's only 9% of the surveyed companies' total current revenue. Still, losing 9% of your business because you can't manage to treat your customers well is significant. Some of the other survey findings suggest the numbers could get worse: 
  • 72% of consumers worry that they'll be worse off the larger cable companies become.
  • 53% of frustrated consumers would leave their current cable company if they actually had a choice.
  • The majority of consumers would prefer to have one provider for all content rather than using multiple providers.

The first two bullet points suggest that people are dissatisfied and would consider leaving, while the third is only relevant because the DirecTV/AT&T merger will offer the first widespread one-bill alternative for large swaths of the nation.

How the survey was conducted

BVI surveys four components of brand vulnerability, including frequency of customer frustrations; customer sharing behavior (such as disclosure of frustrations on social media); the impact of frustrations on customers' likelihood to leave; and the uniqueness of a frustration to a particular cable provider. The study also breaks consumers down into three categories --Traditionalists, or cable-only subscribers; Omnivores, or people who use both cable and streaming services for content; and Cord Cutters, or those who have decided to leave their cable companies. The highest levels of frustration were found among the Omnivores.

What happens next?

Ideally cable companies, or at least a cable company, would see that consumers may soon have options they never had before. A long-entrenched practice of treating customers poorly is hard to change, and it seems unlikely that the industry will be able to pivot. It's possible that one of the five -- soon to be four -- major players sees the light and does what T-Mobile has done in the mobile phone industry -- shake up the status quo and act differently.

Sadly, that's unlikely, and cable companies are more likely to follow the record and newspaper industries down a path of disaster. Anyone with an Internet connection can see that the business of selling pay television is changing, with leverage returning to paying customers. If cable wants to remain the giant it is now it has to change and prioritize keeping people happy over wringing out every last nickel. That's a very difficult pivot to make and nothing currently being done by the big five suggests it's likely to happen.

Your cable company is scared, but you can get rich

You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 


Read/Post Comments (23) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 10, 2014, at 8:58 PM, segarolow4 wrote:

    You think its bad now. Just wait until Comcast gets Time Warner.

    Then this will really stink.

    They will start the Fast lane B.S.

    Put caps on your net use.

    Your net speed will drop.

    And this is just the start.

    The FCC Idiots are in bed with Comcast...

    And the Fools in office in DC are to..

    Get ready to bend over and smile. The Cable shaft is coming to your town soon.

  • Report this Comment On June 10, 2014, at 9:13 PM, Pelcans wrote:

    We cut the cord.. Netflix way to go

  • Report this Comment On June 10, 2014, at 10:09 PM, wcorvi wrote:

    I just cancelled Cox non-cable and am looking forward to the vast improvement of a 300 baud modem!

  • Report this Comment On June 10, 2014, at 10:29 PM, Missm wrote:

    I cannot stand COMCAST!! Or how about ATT Uverse, another terrible greedy company with really poor customer service!!

  • Report this Comment On June 10, 2014, at 10:47 PM, Upyourscomcast wrote:

    Can't wait for Google Fiber.

  • Report this Comment On June 11, 2014, at 12:11 AM, loofllams wrote:

    There is too much technology out there and too many nerds, in garages as well as in large corporations for us to be dependent upon cable for our internet. When the breakthrough comes it will be quick and decisive and the cable companies will disappear. Could the delivery system be in the electrical grid or perhaps our water pipes. Perhaps the LOON project or in satellites. Maybe a new WI-FI transmitter that is low power but has a signal of two miles that everyone can buy cheaply and re-transmit with. When it happens we will finally ba able to tell the cable companies where to get off, They are after only middlemen.

  • Report this Comment On June 11, 2014, at 12:40 AM, hbk72777 wrote:

    The minute Google hits Chrarlotte, I'm done with Time Warner.

    I had FIOS when I lived on Long Island, loved it, but there's no competition here.

    They will pay big time, no one will resist Google

  • Report this Comment On June 11, 2014, at 1:31 AM, Richard233 wrote:

    At some point, politicians will realize that attacking the cable companies and forcing reform is a winning proposition.

    Imagine cable companies only allowed to act as carriers, not as middlemen. They only act as single point of billing and every channel has to be available on its own, no bundling.

    Suddenly instead of paying for hundreds of channels we don't care about, we pay only for the 12-20 we might actually want.

  • Report this Comment On June 11, 2014, at 1:32 AM, AleBrewer wrote:

    Just turn it off. There are alternatives.

  • Report this Comment On June 11, 2014, at 6:11 AM, dflagstaff wrote:

    Reporting the Cable crisis. Many here in Milwaukee, WI were/are employees of Time Warner Cable. When the acquisition was announced last fall when Charter, alone, was attempting to buy out TWC. That fell through. Then Charter and Comcast together decided they would team up and buy out TWC. That succeeded. During all this, employees were FORCED to accept commission reductions in the call center. FORCED? YES!! Employees were forced to sign documents or loose their jobs to accept the reductions of commissions. Also during all of this, TWC decided to eliminate positions. How? They reviewed employee's and decided they would terminate employees based on minor infractions. WHY? They used disciplinary reasons to make sure they wouldn't have to pay unemployment. Not only did TWC decide to terminate employees, around 200 positions in the call center, but they are trying to make sure these former employees wouldn't receive unemployment compensation, and they would fail in finding other employment based on their reasoning for termination was disciplinary. How's that for unfair, mistreatment and absolutely disgusting? I know, I have a family member that worked in the call center. We had to adjust our household income to accommodate the commission reductions that began last fall. Then termination for tardiness on 2 occasions by 5 minutes or less. No warnings or written warnings. He tried to file for unemployment and TWC denied it by saying it was disciplinary reasons. Unemployment DENIED!! Of the 200+ terminated employees since January, only a handful have been able to receive unemployment. The rest, including my household, are still fighting to receive unemployment benefits. Nice heh?

  • Report this Comment On June 11, 2014, at 7:16 AM, JennyOh wrote:

    There IS an alternative if you have a TMO or Sprint tower in your area. Switch to Sprint for an unlimited cell phone plan and tether your phone (mine has 4g with almost 30 mb download and 12 mb upload speeds) for 70 bucks a month, and that of course is unlimited data. So I have a cell phone, I can text, and when I want to use the computer I just tether it to my cell phone. If you get an unlocked HTC MAX, it has a hot spot unlocked and as long as you aren't downloading tons of movies and stuff illegally, I doubt they will say anything, as I've been using my phone for the past 3 years and occasionally exceed 5 - 6 gigs per month while my brother has exceeded 10. So, compare a Verizon cell phone bill with limited data, and add in Cable Internet and you have easily hit 150 bucks a month... If you only have a tablet or two and maybe one computer or Roku, then give it a shot. You always have 14 days to take the phone back if it doesn't meet your needs..

  • Report this Comment On June 11, 2014, at 7:44 AM, runninggun1024 wrote:

    Does this mean I can get my soul back from my cable company they been holding a mortgage own?.In my small TENNESSEE community COMCAST is the only cable company that can do business in our town according to a secretary that finely told us after no one else would talk about it especially the mayor and his henchmen.When we ask why she said I don't no and as we were leaving three tennessee police officers stopped us and ask why we were asking questions about cable and said if we needed anymore questions answered to ask the chief of police not the mayor.my opinion

  • Report this Comment On June 11, 2014, at 8:26 AM, Jimza1Skeptic wrote:

    I always laugh at all the complainers. I do not have cable. Over the air with antenna gets me enough TV for what I need.

    I also only have Netzero free dial-up. Get 10 hours a month. More than enough for writing emails and paying bills and reading few financial articles.

    I can always go to a library if I need high speed access for something (non secure).

    I have better things to do like bike riding, 3 nights I have tennis, basketball & softball leagues.

  • Report this Comment On June 11, 2014, at 9:43 AM, breakone9r wrote:

    One thing that seems to be overlooked here is the face that Networks are -still- monopolies. Even if another company were to take over, they'd STILL have to pay the networks and local TV stations JUST TO GET PERMISSION to re-broadcast.

    There is the problem. The root of it. The cable companies can't offer you a la carte because of the networks. Trust me, they'd love to be able to offer you that. But they can't.

    It's just that the cable companies are the customer-end of the deal.

    It sucks for the consumer. AND for their provider.

    Cable companies have TRIED to bring the networks in line.. every time it's tried, the channels advertise "OH NOEZ!! IN TWO DAYS YOUR CABLE COMPANY WILL NO LONGER CARRY THIS STATION!@ CALL THEM AND DEMAND THEY KEEP THIS CHANNEL!" So.. they do.. and the cable company ponies up massive increase in price the network/channel is demanding... and then?

    They pass that price onto us. The ones who griped and complained that they were not keeping the channel.

  • Report this Comment On June 11, 2014, at 10:21 AM, TTES wrote:

    Where I live, we only have Cox as our option. And, unfortunately, those in the "cord cutter" camp are not getting away with as much as they might think.

    Getting rid of cable and sticking with Netflix, Hulu, etc., might sound like a great way to save, but Cox has already started instituting data caps for internet access, which I'm sure they will use to start forcing cord cutters to upgrade to even more expensive internet plans.

    So, really, is there a TRUE way to save on cable?

  • Report this Comment On June 11, 2014, at 10:43 AM, sabebrush6 wrote:

    I would drop Comcast in a minute, but I can't get any other service. Direct TV is out because of too many large trees block reception.

    I am thinking about just dropping TV all together like my kids have and go find fun things to do. They said after a week of no TV, they found they didn't miss it at all. They both said they also lost wait because they were busy having fun & doing things. Not just setting around. $1,500 a year to set in front of a stupid boob tube for a couple hours a night does seem a bit expensive.

  • Report this Comment On June 11, 2014, at 11:04 AM, stockingshorts wrote:

    With lousy customer service numbers like this it shouldn't be long before some other provider steps in and captures the business. There are new technologies coming which do not require a hard line into the home or business. The Monopolies need to die a horrible death. There is absolutely no reason for someone's cable/internet bill to be as high or higher than their POWER BILL. There is no reason we should suffer with slower internet speeds than other countries get for the money we pay. There is no reason for these cable/internet companies to "Throttle Back" our down load speeds to stick it to customers who are sick of the games these monopolies play.

    Things need to change in this Pirate industry for the betterment of the customers.

  • Report this Comment On June 11, 2014, at 11:06 AM, stockingshorts wrote:

    COX has got to be THE WORST cable/internet provider in the Nation.

  • Report this Comment On June 11, 2014, at 11:30 AM, sonnykohler wrote:

    I would love to cut the cord, but, because the Cable/Phone companies have a monopoly on ISP, it is nearly impossible in my area.

    While we do watch a lot of NetFlix, Hulu and HBOGo on our Playstations, the issue is that, when we have had Comcast remove or reduce our cable service (since we're not using it), suddenly our internet speeds become very poor so they do not work well.

    The Cable/Phone/Satellite companies will really have something to worry about once they no longer hold the lock as ISPs, but, until then, they will remain monopolistic and putative to those of us that would like to ditch them.

  • Report this Comment On June 11, 2014, at 11:38 AM, LeetsB3 wrote:

    Cable from the beginning was structured within the states to let those in the know become rich. And they did..... a small investment of 35K turned into 7M for many. The set-up of the cable system is overseen by a local committee... which means nothing and has no leverage. I found out when I complained to the Attorney General. The reason was that I was paying taxes on something that I did not want but had to take if I took the package. I complained and was told to consult my Local Committee. You see the over-all bigger problem is just that....that they are controlled by the Government not the State but administered by the State. This should let you know how the Obamacare plan will ring out in the coming years. Control by Government, administered by State... SCREWED BY ALL.

  • Report this Comment On June 11, 2014, at 1:22 PM, grizzlyohio wrote:

    I have been a cable customer for over 40 years, I have also been a cable internet customer since 1999. I am personally hoping that Google launches their satellite wi-fi service within the next couple of years, once that happens I will be leaving the monopoly known as Time-Warner. They are honestly the worst company I have ever experienced.

  • Report this Comment On June 11, 2014, at 1:43 PM, xusmeplz wrote:

    I have lived in most regions of the country and have seen that no matter where you live it is pretty much the same. Limited choices and high costs for your television choices. I cut Directv in favor of Netflix and Hulu Plus. Now there is a company that will be providing IPTV. If you have an internet connection then it will be available to you. It is time that people have a choice.

    605tv.com

  • Report this Comment On June 11, 2014, at 9:50 PM, statusQuo wrote:

    dflagstaff , I have two questions.

    (1) Was TWC charging the ISP customers for the HDTV cable equipment upgrades in 2009?

    (2) Do they hold off on necessary maintenance and repairs of the current equipment until the next technological upgrade cycle, like delaying repairs to the older SDTV equipment until they could replace it with the then-new HDTV system in 2009?

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