Comcast (NASDAQ:CMCSA) has been the subject of some highly public customer service disasters in recent months, but the negative publicity and general dislike for the company from consumers has had little impact on its bottom line.
That may finally be changing as the City Council in Worcester, Mass., has urged the city's manager to reject Comcast's application to take over the city's cable franchise from Charter Communications (NASDAQ:CHTR). The council voted 8-3 to reject the license transfer request, according to The Worcester Telegram and Gazette, citing the number of public complaints there have been about its "substandard customer service practices."
The vote is not legally binding. City Manager Edward M. Augustus Jr. has sole right to approve contracts, but the City Council wanted to make it very clear that it does not want Comcast in its city of 182,000 people.
District 5 Councilor Gary Rosen said the City Council should not welcome Comcast to Worcester because of its "deplorable and substandard" customer service across the country, the paper reported.
"It's a terrible company," he said. "In my opinion, they should not be welcome in this city. Comcast is a wolf in wolf's clothing; it's that bad. They are awful, no doubt about it. Maybe we can't stop it, but that doesn't mean we shouldn't speak out."
Those are pretty bold statements and show just how much ill will there is toward Comcast.
People really don't like Comcast
In a field that consistently ranks at the bottom of the American Consumer Satisfaction Index, Comcast ranks near the bottom among pay TV providers. (Subscription TV ranked ahead of only ISPs on the latest ACSI survey.) Consumer Reports does an annual survey of readers' experiences with television and Internet service, and, not surprisingly, Comcast was ranked 15 of 17, earning "particularly low marks for value for the money and customer support."
To further rub salt into the wounds, Comcast's potential merger partner, Time Warner Cable (UNKNOWN:TWC.DL)ranked 16th overall for television service in the CR survey, with "particularly low ratings for value, reliability, and phone/online customer support." Both companies "received especially poor marks for value and low ratings for phone/online customer support."
Maybe Comcast is starting to feel the pinch
Comcast has been caught in a storm of negative publicity due to its lousy customer service, which began when former Engadget editor-in-chief Ryan Bloc publicly released a call during which he tried to cancel his service only to be berated by a "customer retention" specialist. Despite that, Comcast actually reported a 5.3% increase in revenue from cable to $21.8 billion in the first six months of the year.
Those numbers are a little bit deceiving, though, as Comcast actually lost 144,000 cable customers during the second quarter, the most recent one it has reported on. The revenue increase comes from the company squeezing more money out of its declining user base. That's a tough strategy to maintain in the long term as there are only so many premium channels and enhanced DVRs a person will want. Comcast should also be concerned that if it pushes individual bills too high then customers may decide to throw in the towel and cut the cord.
Cable in general is losing subscribers, due in part to the growth of streaming services, which makes it difficult to determine how much the growing perception that Comcast has bad customer service is hurting it. It's fair to say that in a market where people are looking for a reason to make the leap to cheaper competitors having a reputation for treating people poorly does not work in your favor.
There may be nothing the city can do
In reality, Worcester's government may have little choice. Charter is swapping approximately 1.6 million customers with Comcast as part of the complicated deal with Time Warner. That leaves the city with a Council that may not want Comcast being stuck with it anyway.
This was not missed by Councilor-at-Large Frederick C. Rushton, who said the city clearly needs better cable service, but noted that federal laws are geared more in favor of cable companies than consumers, the newspaper reported.
"We can make it sound like we are taking on the big boys, but in reality this will go nowhere," Rushton said. "People want better service but I'm not sure the council floor is the way to get better service. We are just bit players in a big play."
That's frustratingly true -- very few cities have more than one traditional cable service available -- but, symbolic or not, what's happening in Worcester shows that there is a level of rising discontent with Comcast. If a relatively large city's government is publicly calling out your business, that's a sign that people are fed up and might no longer be willing to put up with you.
Comcast has not seen a flood of defections yet, but the negative publicity is piling up and the floodgates could open if Comcast does not take heed.
Daniel Kline has no position in any stocks mentioned. He has Comcast cable in his office. The Motley Fool has no position in any of the stocks mentioned. 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.