The cable industry has its share of critics.
The American public consistently ranks pay television providers as among the worst businesses when it comes to customer service. That makes sense when you consider that most cable companies started with a monopoly in their given territory and treated customers poorly knowing they couldn't go anywhere else.
The introduction of competition -- at least in some markets -- has not helped, as subscription TV ranks as the second worst category on the American Customer Satisfaction Index's annual measure of communications industries. Of course, the only category ranked worse than cable is Internet service providers, which are, in most cases, cable companies as well.
While it's one thing to be disliked by a public tired of high prices, being forced to pay for channels few people want, and four-hour appointment windows, it's another thing entirely when a man paid to be your biggest cheerleader calls you out.
That's exactly what happened to the cable industry when Michael Powell, the former chairman of the Federal Communications Commission who now runs the National Cable and Telecommunications, spoke to The Washington Post on C-SPAN.
"Customer service right now is completely unacceptable," Powell said.
To translate, this is cable's top lobbyist saying his industry has a problem. In individual terms, it's your mom calling you ugly and saying, "No, you're really not that special."
What Powell said
"I think the industry needs to really -- not double, triple -- make a 10-year commitment to the recovery of that relationship," Powell said during the interview. "I don't think it's because they're bad people. I think it's a consequence of their growth."
Basically, Powell explained that he believed that the explosive growth experienced by cable's biggest companies in the 1990s and 2000s are to blame for the industry's current customer service woes. That seems plausible to a point, but it's hardly an explanation for why Comcast (NASDAQ:CMCSA) has been hit with numerous customer service scandals over the last year. These include:
- A customer service call made public during which former Engadget editor Ryan was berated by a "retention specialist" as he tried to cancel his service.
- Numerous instances of customers having their names changed to derogatory terms on their bills after they interact with customer service.
- Comcast customers being outraged by the company turning their home WiFi routers into public hotspots without asking permission.
Powell, despite his complaints about the industry he represents, believes the value proposition for customers is high enough that they will forgive these transgressions.
"I think on a per-channel basis, there's a lot of value," Powell told the Post. "That's why consumers, despite complaining about it, buy it in droves. And I think cable still has a really bright future if it can solve these problems and give consumers the value they're asking for."
Maybe a bit too optimistic
While Powell is right that customers have signed up for cable in droves, that may have been because they lacked better options. The number of Americans who pay for television through cable, satellite, or fiber services fell by more than a quarter of a million in 2013, according to research firm SNL Kagan. That's a sign of things to come as digital streaming services like Netflix, Hulu, and DISH Networks' Sling TV make cutting the cord easier.
Another researcher, Leichtman Research Group, found that all of the major cable companies experienced a drop in subscribers in 2013. Comcast and Time Warner Cable (NYSE:TWC), which are attempting to complete a $45 billion merger, had the steepest drops, but Charter (NASDAQ:CHTR), Cablevision (NYSE:CVC), and the rest of the major players fell as well.
|Multi-Channel Video Provider||Subscribers at End of 2013||Net Adds in 2013|
|Other Major Private Cable Companies*||6,675,000||(260,000)|
Some of those paying customers fled to satellite and phone company pay television services (which tend to be cheaper), and others left traditional cable behind altogether for digital options. It's hard to blame customer service for all the defections, but treating people badly when they have the option to leave is a recipe for disaster.
Powell has called out his industry because it needed a wake-up call. Customer service, which used to be an unnecessary luxury, is now a priority. It's a lesson the cable industry needs to learn -- and learn quickly, or the defections above will just be the tip of the spear.
Daniel Kline has no position in any stocks mentioned. He can't imagine he will cut the cord any time soon. The Motley Fool recommends Netflix. The Motley Fool owns shares of 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.