Although the year has barely begun, 2015 is quickly becoming an important one for Internet service providers, or ISPs. First, the threat of net neutrality -- especially the threat of burdensome Title II regulation -- continues to weigh on the industry. On the other end of the spectrum (pun shamelessly intended), ISPs continue to work with states to prevent municipal broadband and limit consumer choice while continuing to enjoy healthy profit margins.
On the whole, ISPs make up a rather disliked industry. In the latest American Customer Satisfaction Index, ISPs came in second worst out of 33 industries surveyed, finishing worse than subscription TV and right above social-media websites. And the subscription TV link is important for two issues: First, all major ISPs are also subscription TV providers. Second, and more importantly, as subscription pay-TV viewership continues to wane amid cord cutters and package trimmers, telecommunication companies will depend more heavily on Internet monetization to enrich shareholders.
As such, keeping Internet subscribers satisfied will become even more important going forward. And according to the last ASCI survey, the company doing the best job is Verizon's (NYSE:VZ) FiOS service.
The big winner ...
Verizon is not only the winner here, but it also appears the contest is a clear runaway. By attaining a customer satisfaction score of 71, the company finishes over 9% higher than the second-highest-rated named ISPs: AT&T's (NYSE:T) Uverse and CenturyLink finished with a score of 65 (a catch-all category of "All Others" achieved that rating as well). Better yet, Verizon finishes almost 13% higher than the industry average of 63. AT&T's and CenturyLink's customer satisfaction scores of 65 are more in line with the survey's tight grouping, where four of the named seven companies finish within two points of the mean.
In another positive indicator for Verizon, AT&T, and CenturyLink, their customer satisfaction scores didn't fall on a year-over-year basis. Both Verizon and AT&T reported no change in their customer scores, and CenturyLink improved 1.6% on a year-over-year basis. Overall, the industry reported a decrease in customer satisfaction scores of 3.1%. In an impressive showing, CenturyLink was the only provider that improved its customer satisfaction score in this survey.
And the others ...
Of course, other companies didn't fare as well. And when it comes to Internet service providers, it's not good news for merger hopefuls Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE: TWC). Both finish at the bottom of the pack for customer satisfaction, with ratings of 57 and 54, respectively. In addition, they experienced the worst year-over-year satisfaction drops among the named companies, with Comcast reporting an 8.1% drop and Time Warner Cable reporting a massive 14.3% drop during that period.
Obviously, Comcast and Time Warner Cable could use some goodwill as they await Federal Communication Commission and Department of Justice approval for their merger. And while the conversation initially centered on the post-merger effects on the pay-TV market, opponents now seem to be focusing on broadband market power to oppose the merger. Even conservative firebrand Glenn Beck abandoned his typical no-governmental-intervention stance to implore the FCC to deny the merger when The Blaze TV joined the Stop Mega Comcast coalition.
As cable/subscription TV viewership continues to decline, look for ISPs to more effectively monetize the Internet. Recently, these companies have pushed back against President Obama's push to classify ISPs as common carriers in order to apply Title II regulation that most ISPs consider burdensome. More recently, ISPs have been working with state legislatures to prevent competition from municipalities offering their own broadband services to limit consumer choice in an attempt to keep their margins high. And they wonder why their industry is so poorly rated.
In May, the ASCI will provide its newest report. Perhaps the industry will be rated higher in the new year.