In a recent blog post titled Reimagining the Customer Experience, Comcast (NASDAQ:CMCSA) Cable president Neil Smit offered the biggest mea culpa from the company in regards of how it treats its customers. After noting that the company has "made progress," he promised the company would improve. In addition, the company named Charlie Herrin Senior Vice President of Customer experience.
Finally it appears that Comcast has gotten the memo: According to a recent American Customer Satisfaction Index, the company has the second-worst customer service ranking in the nation. The winner? Time Warner Cable (NYSE:TWC) -- a company Comcast seeks to acquire in an apparent attempt to form the Voltron of amazingly awful customer service (more on this later). Can Comcast turn around the ship? And, more importantly, should you believe them?
A history of poor customer service
Unfortunately, the American Customer Satisfaction Survey is only more of the same for Comcast. After hitting its high-water mark at 64% in 2001, the company has continued to fall. Its current ranking of 60% is 6.25% lower than that first year and nearly 5% lower than the year before. With that being said, the nadir of its rankings is a 54% satisfaction in 2008; perhaps that's the progress Mr. Smit was referencing.
And while Comcast appears to be the most discussed company in regards to its lousy customer service -- although they make it rather easy when recordings of the company refusing to cancel service by hostile, aggressive sales scripts and/or passive aggressive waits of three hours until they close to avoid closing an account -- this industry overall is rather poor. The leader in the Subscription Television Service category -- AT&T's U-verse -- only earned a 69% approval rating this year.
Is this window dressing?
Still, one has to ask if this is just window dressing designed to respond to the new social-media age. One in which the landscape has turned decidedly more pro-consumer due to the ability for each conversation to become viral. And while the earlier-referenced events have only recently came to light, as noted, Comcast has had rather dismal rankings for over a decade -- why now?
As a quasi-monopoly in the geographies in which it operates it really didn't matter how they treated their clients –the simple fact is many didn't have a choice. However, as a near monopoly the company is regulated more heavily by the US government -- therefore, one could see how the economic cost/benefit analysis favored providing as little customer service as possible but above the level that the government would investigate. It's also prudent to mention that Comcast spent nearly $19 million in 2013, good for seventh place among all lobbying clients that year.
Are these two reasons why Comcast needs to improve its reputation?
On the surface, there appears to be two rather distinct reasons why Comcast needs to improve its customer service -- one is only a short-term concern and the other is a long term threat. In the short term, the company needs Federal Communications Commission, or FCC, approval in order to merge with Time Warner Cable due to its extreme market power if the acquisition is approved.
Both the FCC and the U.S. Department of Justice are currently reviewing the merger. However, the New York Public Service Commission recently announced they would be delaying a vote on merger approval, citing substandard customer service as the reason for the delay. Although state regulators cannot stop the merger, they could make it so difficult on a state-by-state basis that the merger would lose its economic feasibility. Right now, Comcast needs goodwill and positive press in regards to its customer treatment.
Even if this is sorted out, Comcast faces a more prevalent and long-term threat to its existence: cord cutting. A recent Experian Marketing survey reports the number of U.S. households without pay-TV at 6.5%; that's up from 4.5% in 2010. As streaming, Internet-based services like Netflix, Hulu, and the Roku box continue to expand and improve, Comcast needs to present a better customer service experience to hold on to customers instead of relying on a lack of choice.
While one can't -- and shouldn't -- assume the reasons for Comcast's change of heart, it is rather convenient to pivot toward customer service when it appears to be a risk to its bottom line. That said, customers should encourage Comcast's about face considering they'd serve a massive 34 million households post-merger (if approved).
For investors, this is good news as well. When pay-TV is viewed from a value standpoint versus streaming services, more people are failing to see the value and abandoning the format. The last thing Comcast wants to do is to continue to anger its subscriber base as a viable option propagates.
Jamal Carnette has no position in any stocks mentioned. The Motley Fool recommends Apple, Google (A shares), Google (C shares), and Netflix. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.