Despite efforts to clean up its act, Comcast (NASDAQ:CMCSA) can't avoid negative publicity over how it treats its customers.
The company, which launched a massive customer service overhaul in May, couldn't have been pleased when its billing practices were criticized in a letter to Federal Communications Commission Chairman Tom Wheeler, co-signed by six Democratic United States senators. The letter was specifically about what Sens. Ron Wyden (Orgeon), Bernie Sanders (Vermont), Jeff Merkley (Orgeon), Al Franken (Minnesota), Ed Markey (Massachusetts), and Elizabeth Warren (Massachusetts) called "unfair billing practices."
And while the overall industry was referred to in the letter, only Comcast was specifically named. Senators repeatedly called out the company -- which saw the FCC shoot down its planned merger with Time Warner Cable (NYSE:TWC) -- even though it's not the only company charged with the transgressions the senators are calling into question.
What does the letter charge?
The senators noted that billing is the subject of 30% of complaints regarding Internet service, while it's cited as the reason 38% of the time when it comes to television service (the most of any type in both cases). They also said that they believe part of the reason this happens is that "a lack of competition has left many Americans without robust competition when purchasing cable and broadband."
That seems like an area where everyone in the industry would be equally at fault, but the letter then went into two lengthy paragraphs calling Comcast on the carpet for its billing practices. The senators specifically brought up equipment rental, saying that "rental charges are one of the numerous and often obtuse fees consumers face."
That comment could be followed by a Time Warner Cable example, as that company follows similar policies to Comcast, but the senators chose to call out the largest provider of cable on its own.
"Comcast charges a monthly modem rental fee of $10 -- recently increased from $8 -- and makes an estimated $275-300 million a quarter from these fees," said the letter, noting that consumers did have the right to buy their own modem, but that may not stop the charges, they wrote. "We are troubled upon hearing complaints of consumers being charged the modem rental fee after they have returned the rented equipment to Comcast or being charged the rental fee having never rented the modem in the first place."
The letter also explained that because many people use auto-payment services, they may not even notice or even see the incorrect charges. But even when they do, the senators charged, they may not find a quick solution.
"Many consumers report having to call and remedy this problem throughout several billing cycles. In fact, customer help boards found online at Comcast's Help and Support Forum contain complaints about this exact problem," they wrote.
How Comcast answered back
Basically, the letter pointed out that billing issues were the top source of complaints while name-checking Comcast. That at least implies that the company is more guilty than its rivals of the practice. At no point did the senators say they were merely using the company as an example, nor did they mention any other providers.
Comcast answered the claims made in a statement printed by ARS Technica:
Comcast operates in a highly competitive environment across all of our lines of business. Acknowledging some of our issues with customer service, we have undertaken a substantial, multi-year effort to reinvent the customer experience, including improving billing systems, reliability, and all of our interactions with our customers. We are investing hundreds of millions of dollars in this effort and are working hard to improve and we won't stop until we have made the changes necessary. We take every FCC complaint seriously, and respond to each one on an individualized basis. We are also using the information from complaints in our ongoing efforts to improve the overall customer experience.
Basically, the company said the same thing it has been saying since it announced its customer service overhaul in May. "We stink, but we're trying to get better."
It's time to put up and shut up
When Comcast released its customer service plan, it was hard to not be skeptical, because the announcement came right after the FCC made it clear that how it treated consumers was a reason it wasn't allowing the TWC acquisition to go through. It was at least worth considering that the company was more interested in the appearance of doing better in case it had to ask the FCC for anything going forward than it actually was in getting better.
But hiring 5,500 people, a substantial number of which have already been hired, over "the next few years" is not an insubstantial commitment. It's easy to assume Comcast was just licking its wounds from the failed Time Warner Cable deal and trying to look better to the FCC, but the company has committed a lot of money to cleaning up its relationship with its customers.
This letter gives it a prime opportunity to prove to consumers, shareholders, the Senate, and the FCC that it wants to make real changes. A major way to do that would be to not only clear up and respond to billing problems, but also to get rid of consumer-unfriendly practices.
At the very least that means making it much more clear that modems can be purchased, not rented. And if the company really wants to turn over a new leaf, offering modems as well as cable boxes on a rent-to-own plan, in which subscribers only pay for its value plus a reasonable retail markup, would go a long way.
The senators who wrote this letter shouldn't have singled out Comcast for an industrywide problem, but the cable company shouldn't have followed its rivals in letting this be an issue, There's a clear opportunity here to show that Comcast is a changed company, not just one trying to look different without actually changing.
Daniel Kline has no position in any stocks mentioned. He used to get tired after sledding. Now he gets tired watching his son sled. 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.