The most hated companies in America have a knack for angering people. Whether it's due to high prices, subpar products, or terrible service, these companies excel at creating outrage among their customers.
The cable industry in particular has its share of despised businesses. It's a monopolistic arena, where the lack of competition gives customers few choices among providers. In turn, cable companies have little incentive to offer low prices or top-tier customer service.
Maybe no company epitomizes this situation better than Comcast (NASDAQ:CMCSA). The cable titan was recently named one of the most hated companies in America by 24/7 Wall St, after The Consumerist awarded it the title of worst company in America last year.
A recent report by the American Customer Satisfaction Index helps to explain why Comcast is so reviled.
The survey showed that customer satisfaction with subscription TV service and Internet service providers came in dead last among all 43 industries the index covers. Worse still, the ACSI data, which is based on 14,176 customer surveys collected in the first quarter 2015, show that customer satisfaction continues to deteriorate for the largest pay-TV providers, with the decline resulting from poor customer service combined with higher prices.
Yet even among pay TV providers, Comcast's plummeting customer satisfaction score was noteworthy, with the cable giant suffering a "huge drop" of 10% to a score of 54 out of 100 after its failed merger with Time Warner Cable (UNKNOWN:TWC.DL).
Unfortunately, Comcast's satisfaction score for its ISP business also fell, slipping 2% to 56 out of 100. In fact, that placed Comcast at the bottom of the ISP category, a segment for which ACSI notes that "Customers are frustrated with unreliable service, slow broadband Internet speeds, and rising subscription prices -- and they resent being locked into service contracts."
All told, Comcast earned the distinction of ranking near the bottom of the two lowest-ranked categories in the American Customer Satisfaction Index.
"There was a time when pay TV could get away with discontented users without being penalized by revenue losses from defecting customers, but those days are over," said Claes Fornell, ACSI chairman and founder. "Today people have more alternatives than ever before. Consumer abandonment of pay TV is shaking up the industry, and lower satisfaction could mean even more cord cutting by subscribers ahead."
The cord-cutting trend Fornell mentioned is beginning to take a toll on Comcast's business, with consumers abandoning their cable providers in favor of online video streaming services. Netflix in particular is a major threat, with the streaming leader's ubiquity and growing original content library helping it rapidly expand its subscriber base. Unfortunately for Comcast and its shareholders, this trend remains unlikely to change in the foreseeable future, and it may even accelerate.
Surprisingly, these issues have yet to be reflected in Comcast's stock price. Over the past two years, Comcast's stock has risen nearly 40%, compared with a roughly 25% return for the S&P 500 during that time. Yet analysts have begun to question whether Comcast's strong stock price gains may be nearing an end, with the commoditization of Internet services and the cord-cutting phenomenon likely to continue to eat into profits in the years ahead.
Management has announced a slate of initiatives to combat these challenges, which include hiring more customer-service reps and paying customers $20 if technicians don't arrive on time for an appointment.
However, it's uncertain whether these more customer-friendly actions can drive the type of lasting change needed to rebuild Comcast's reputation. And even if they do, it may not be enough to stem the decline in cable subscribers that's likely to take place in the years ahead. That's because consumer preferences are changing, and they're moving away from Comcast.
Joe Tenebruso has no position in any stocks mentioned. The Motley Fool owns and recommends 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.