Summary Bullets:
- Can’t Get No (Satisfaction): U.S. consumers consistently name their pay-TV/broadband Internet providers as offering their worst customer service experience. Can suppliers drive these operators to improve their customer experience, boosting satisfaction and reducing churn?
- The Good News: New, disruptive service providers, such as Google Fiber, could spur the incumbents to compete not only on broadband connection speeds and TV channel packages, but also on the customer satisfaction front, which includes quality-of-service/experience (QoS/QoE) and price.
Earlier this week, a now ex-Comcast customer’s audio recording of a telephone call with a Comcast customer service representative went viral, highlighting a well-known issue that many pay-TV/Internet/triple play customers (and consumer survey groups) have known for years: consumer satisfaction – or, more notably, the lack thereof – is an increasingly critical factor in customer retention/churn. The customer was calling simply to have his service disconnected, and a process which should have taken a few minutes (at most) was drawn out by the Comcast rep to 18 minutes, due overwhelmingly to the agent’s badgering of the customer in a poor attempt at customer retention (e.g., “Being that [Comcast is] the number one provider of TV and Internet in the entire country, why is it you don’t want the number one provider?”). Comcast has since apologized and stated that this instance was atypical, but the national media soon picked up on the story, expanding the scope of negative exposure.
Numerous U.S. consumer surveys have pointed out that cable/pay-TV companies continually rank at the very bottom in terms of customer satisfaction, and by the same token, “breaking up” with one’s cable TV provider (when a viable alternative is available) actually makes people happy. In my own experience, terminating my service with a certain satellite TV provider was extremely gratifying after they poison-pilled an HDTV set-top box for which I paid $150. I was quite fortunate to have the option of switching to Verizon FiOS, with which the satellite TV provider had no prayer of competing at the time.
For consumers that are lucky enough to choose from at least two triple play providers, and assuming that the service bundles are relatively on par with one another, what factors determine customer selection of the triple play provider? At this point, price is a wash, since in the U.S. market, cable operators and their primary competitors (such as AT&T’s U-verse, Verizon’s FiOS) generally offer tiered bundles and add-ons (e.g., HD DVRs), resulting in packages that are very close if not equal in cost. What about broadband connection speed? If one takes a snapshot on any given day, one triple play provider may offer a higher advertised broadband service than another, but in the most competitive markets, these advantages are relatively fleeting. Over a longer time span, we see triple play providers leapfrogging one another with both minor (e.g., “fastest in-home WiFi”) and major (Comcast’s X1, since matched by Verizon’s Quantum TV offering) service improvements. This pattern will no doubt repeat itself moving forward, but on the downside, these improvements could almost always mean price increases for consumers (there is a reason Verizon FiOS still has the highest ARPU in the world).
So, with most factors being equal, will consumer choice of their triple play provider simply come down to customer satisfaction? The easy answer is “yes,” but there are important caveats. First, despite the long-time dominance of cable operators in North America as both pay-TV and broadband providers, telcos and other alternative operators (municipalities and utilities) are making in-roads, as evidenced by the growth of AT&T’s U-verse service and, to a lesser degree, Verizon FiOS. Second, the eventual, tangible presence of Google Fiber has the potential to inflict a massive impact on the U.S. broadband/TV market, specifically, by spurring cable and telco operators to offer Gigabit broadband connections to match the Google Fiber proposition. Google Fiber does not offer voice services, and therefore does not offer a triple play bundle, but in this day/age, for many customers, wireline voice services are less relevant. Additionally, the customer satisfaction improvement trend creates opportunities for suppliers to drive triple play providers to differentiate the customer experience with different methods. Examples include enhanced self-care tools, tighter integration with mobile devices, robust customer loyalty programs and streamlined Internet of Things (IoT) bundling (i.e., home security, energy monitoring, connected car).
However, Google Fiber’s very aggressive pricing, specifically, 1 Gbps service for $70 (USD) per month, will cause the most pain for the established operators. While Google Fiber is still a long way from becoming a widespread threat to the incumbents, if and when Google Fiber follows through on its high-profile declarations (i.e., providing Gigabit services to 34 cities in nine U.S. metros), we could actually see a dramatically different pay-TV + broadband landscape – one where consumers can get Gigabit broadband and a solid range of HDTV channels (as GF does for $120/month) at much lower price points than the current packages offered by most cable and telco operators. Just don’t hold your breath waiting for Google Fiber services; even in the handful of cities where it is currently available, Google is cherry-picking its serving areas, which must pre-qualify for service with 70% of households in designated ‘fiberhoods’ committing before construction and installation begins. In contrast, cities where Gigabit services rollouts are more ubiquitous include Chattanooga, Tennessee (EPB) and Bristol, Virginia (BVU), while telco CenturyLink is trialing Gigabit service rollouts in Omaha, Nebraska. In the end, the presence of disruptive competition will provide consumers with the next big leaps in pay-TV and ultra-broadband access, hopefully to the point where customer satisfaction is of paramount importance to the operators and their ecosystem partners, and they will compete on this front accordingly.