The latest reported Comcast (NASDAQ:CMCSA) customer service scandal reads like a bad joke in an ongoing tragicomedy: A man's house burns down on April Fools' Day, and attempts to cancel Comcast service at the property are repeatedly refused by service reps. Of course, the situation was more complicated than that -- and service was eventually canceled -- but the story has already become the latest notch on Comcast's sizable belt of public relations nightmares.
This latest installment in Comcast's ongoing quagmire is the first big, negative story to hit since CEO Neil Smit's statement during the company's last quarterly call that the cable and Internet service provider was prioritizing improved customer service, but it probably won't be the last, thanks to how Comcast's customer service employees are paid. Unfortunately for Comcast, low customer satisfaction is a potential obstacle to the company's merger with the similarly unpopular Time Warner Cable (NYSE:TWC).
Background on the burned-house story
On April 1, according to reports, a Minnesota man had the misfortune of losing his home to a fire. The damage to the property was extensive, and among the items lost in the blaze was documentation containing the owner's Comcast account number. This proved to be a problem when the man's daughter called to cancel the unusable service. Comcast has a policy in place -- that it says is intended to prevent unauthorized cancellations -- that requires subscribers provide the account number, so the situation arrived at an impasse. Reports say attempts to end the subscription were unsuccessful even after the man provided the last four digits of his Social Security number to verify his identity. Four or five calls and roughly a week later, the cable subscription was finally nixed, but the story surrounding the ordeal was just heating up.
Comcast has stated that the service calls were handled improperly and clarified that it will not charge the homeowner for service past his desired cancellation date and any cable equipment damaged in the fire. The situation has once again highlighted the company's customer service problems, and may promote skepticism about the company's claims that the FCC should ignore the issue when reviewing the Warner merger.
Comcast's image problems and the cord-cutting movement didn't stop the company from adding video and Internet subscribers in the last quarter, but the company seems to recognize that frequent media flare-ups in recent years represent a real problem. The Comcast CEO made it clear that the company was working to improve its customer service, and Executive VP David Cohen recently listed customer service problems as a significant factor in the widespread opposition to the Warner merger. Comcast performed second-worst of the video and Internet services listed on the most recent American Consumer Satisfaction Index and the company was the winner of The Consmerist's "Worst Company in America" tournament in 2010 and 2014. The only company to get lower marks on the ACSI survey was Time Warner.
With so much negative press, it would be easy to have the impression that Comcast has been under the media microscope for years, but the intense focus on its customer service foibles actually kicked off last July with a now-legendary four-hour recording of an attempt to cancel service. The incendiary call was followed by similar stories documenting the travails of ending a Comcast subscription. The company then faced additional PR nightmares after a series of instances in which representatives changed the names of customers to epithets and one in which a woman's rent check was cashed by the company after being accidentally mailed in. Adding little to the appeal of a Comcast-Warner merger, Time Warner had its own incident of replacing a customer's name with an unsavory expletive in February.
Why more customer service controversies are likely on the way for Comcast
Comcast catches a lot of flack for the actions of its representatives, some of it justified, some less so. Given the opportunity, there's no question that the company would, and does, advise its customer service employees against the more extreme actions that have led to some of the big controversies, but the company's payment incentive structure for customer service employees has to be viewed as a major contributing factor in many of the company's biggest public relations blunders.
Reps are heavily incentivized to secure and retain customers, and service cancellations can result in a huge decrease in their take-home pay. Retention specialists in particular tend to have low hourly wages and rely on meeting performance metrics for substantial portions of their income. Falling below a given threshold can mean that customer service employees lose all of their incentive pay, and this setup is bound to create some tense scenarios. So, until the incentive structures for customer service representatives are changed, it's very likely that Comcast will continue to rack up a growing collection of controversies.
Keith Noonan 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.