Comcast's Better Customer Service Era Is Off to a Rocky Start

Source: Comcast,

Comcast's (CMCSA -5.82%) commitment to better customer service is off to a rocky start. In a September blog post titled Reimagining the Customer Experience, Comcast Cable president Neil Smit outlined Comcast's commitment to treating its customers better, and named Charlie Herrin Senior Vice President of Customer Experience.

However, any positive momentum in response to this customer-service pivot appears to have quickly dissipated due to a new bombshell complaint. A California man, Conal O'Rourke, claims Comcast got him fired from his former employer, PriceWaterhouseCoopers, in response to a billing dispute and his complaints concerning Comcast's poor customer service.

"Completely unacceptable"
Looking to quickly respond to his first publicity-worthy challenge, Mr. Herrin wrote another blog post Wednesday entitled, A Public Apology to Conal O'Rourke. Mr. Herron wrote [emphasis added]:

What happened with Mr. O'Rourke's service is completely unacceptable. Despite our attempts to address Mr. O'Rourke's issues, we simply dropped the ball and did not make things right. Mr. O'Rourke deserves another apology from us and we're making this one publicly. We also want to clarify that nobody at Comcast asked for him to be fired. 

Although the company categorically denied asking for Mr. O'Rourke to be fired, the story sent a chill throughout the Internet. The idea of one business reaching out to another one to notify them about an employee's actions taken in the context of his personal and confidential account -- even if excessive -- leads to both privacy concerns, and worries about the treatment of employees. In the end, this may cost Comcast's investors more than Mr. O'Rourke.

Merger holdups
For those questioning the timing of Comcast's customer service focus, it's prudent to mention the company is in the midst of the acquisition of Time Warner Cable (NYSE: TWC). The combined entity will be the biggest pay-TV company in the United States, boasting nearly 35 million subscribers, or roughly one in four households. However, according to a recent American Customer Satisfaction index, the only pay-TV provider with worse customer service than Comcast is Time Warner Cable.

The merger is in the process of FCC and DOJ review. And while things like market power and pricing concerns tend to dominate headlines, these two companies' histories of poor customer service hasn't been forgotten. A state commission, The New York Public Service Commission, has stated they will be tough with their scrutiny of the deal in the wake of more than 3,000 comments from customers on the matter.

Although the state commission cannot ban the companies from merging, they could impose conditions so tough the economics would not work out for the companies. The decision has been delayed, in part due to "substandard customer service."

Not the time for pay-TV providers to upset clients
On the surface, the deal should have a hard time getting approval from the FCC and DOJ due to its extreme market power. The U.S. Government uses something called a Herfindahl-Hirschman index to determine market power. The math is somewhat-complicated, but when the index approaches 2,500, the Federal Government in the past has been hesitant to approve. According to technology columnist Kevin Roose, the HHI post-merger approaches 2,500.

However, the powerful trend of cord-cutting has set the market power argument on its head. Many households are no longer seeing the value in paying expensive cable bills for hundreds of channels they don't use and, instead, are opting for streaming-based services from Netflix, Hulu, and Amazon. As a matter of fact, an Experian Marketing Survey found that 6.5% of households have cut the cord and no longer have pay-TV. That's up from 4.5% in 2010. The last thing Comcast and Time Warner want to do is to anger customers while presenting a product that many are now questioning the value of.

Final thoughts
Comcast's customer service focus hasn't started the way they wanted it to, and that's unfortunate. The company has for years treated customers poorly due to their geographical monopolies. Now that many are leaving pay-TV altogether, it's a good idea to treat each customer better... or at least not cause them to be fired when they complain.