Hate your cable company? You are not alone. An American Consumer Satisfaction Index (ACSI) report released earlier this year found that subscription TV is the near the bottom of all ACSI industries when it comes to satisfied customers. Of 43 industries, only Internet service providers fared worse; that's probably due to the same companies providing both Internet and pay-TV service.
And the problem is only getting worse, as subscription TV satisfaction fell 4.4% in 2014 to a rating of 65. Every company reported year-over-year decreases in customer satisfaction. At the bottom of the list were the large legacy cable providers. If you have Comcast (NASDAQ:CMCSA) or Time Warner Cable (UNKNOWN:TWC.DL) and hate your service, congratulations, or something.
Comcast seeks to be a nicer company
Between these two laggards, Comcast rated higher with a customer satisfaction score of 60. However, its score decreased 5% on a year-over-year basis, more than the overall industry. And as the largest pay-TV provider in the United States, Comcast sets the standard for subscription TV customer service, good or bad.
Comcast has apparently gotten the message, announcing the hiring of a senior vice president of customer service in a September blog post from Comcast Cable President and CEO Neil Smit entitled "Reimagining the Customer Experience." But In the month that followed, the cachet of positive press was reversed when it was reported Comcast had a part in getting a customer fired due to a billing dispute.
Why does Comcast care about customer experience now?
After decades of poor customer service, many wondered why Comcast would now suddenly care about customer experience. Others cynically pointed out that Comcast is buying the fourth-largest U.S. pay-TV provider, Time Warner Cable, and needs positive press while it pleads its case to the federal government and various state regulatory authorities.
In an effort to presumably become the all-star of poor customer service, Comcast wants to acquire the only subscription TV provider with a lower ranking than itself. Time Warner Cable's customer service score came in last year at 60. Its score fell 7% this year (to 56).
While the government will mostly focus on market concentration to avoid extreme pricing power, the companies correctly note they really share no geographical overlap. Therefore, pricing power with subscribers won't substantively increase because each company operates like a geographical monopoly with pricing power already.
Why buy Time Warner Cable then?
While many subscribers argue against the merger due to the monopoly power the combined company could wield, this deal could actually save customers money. That's due to a word that sounds like monopoly but is a little different: monopsony. Essentially it's the power associated with being the only buyer among many sellers.
Right now, the exploding costs of programming and content are raising cable bills. Channels produce content, add their profit margin, and then send it to cable providers for you to foot the bill (after the cable provider adds its profit, of course). If Comcast and Time Warner combine, the new company would deliver pay-TV to roughly one-third of all subscribers. This large subscriber count would bring increased negotiating power with content providers to lower content costs.
Of course, there's no guarantee that lower content costs would find its way to your pocket.
Fed up? Cut the cord
Of course, lower costs do nothing to absolve poor customer service, billing inaccuracies, and whole day service call waits. If you are fed up you have a powerful choice: cut the cord. What seemed impossible nearly a decade ago has become fashionable. Enabled by streaming services such as Netflix and Hulu, many Americans are going without pay TV. An Experian marketing survey issued in May found that 6.5% of all U.S. households did not have pay TV, up from 4.5% in 2010.
HBO and CBS are looking to cut pay-TV providers out of the distribution process by establishing Internet-based streaming services that will be available for a monthly fee. Cable as you know it will be vastly different in the next decade; if Comcast and Time Warner Cable continue to anger subscribers, it is entirely possible for them to be cut out of the process entirely.
Jamal Carnette has no position in any stocks mentioned. 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.