Who's Winning the Cable Service Provider Wars?

Andy Golub co-wrote this article.

A recent ChangeWave survey of 2,830 respondents finds that price is now the key issue when consumers decide to switch TV service providers.

Nearly one-in-two respondents (48%) who plan to switch their cable, satellite or fiber-optic TV provider in the next six months say price is the number one reason for their planned move.

That’s a big jump from last August, when only 37% of respondents cited price as their chief reason for switching.

Customer Satisfaction

Regardless of price, one segment of the industry continues to lead in terms of customer satisfaction by a country mile.

When respondents were asked how satisfied they are with their current TV service provider, 17% said Very Satisfied while 50% said they were Somewhat Satisfied. But when we broke it down by type of provider, the survey results showed fiber-optic TV services to be in a class by themselves.

Not only did fiber-optic customers give the highest marks to their TV service provider – with an industry leading 42% saying they were Very Satisfied – but that’s up 7-pts since a previous survey in August.

Satellite TV service providers garnered a 25% Very Satisfied rating from their customers, down 5-pts from previously. At the bottom of the spectrum were Cable service providers with a 12% Very Satisfied mark, unchanged from August.

How does this boil down to the individual company level?

Verizon's (VZ) FiOS service tops the list in terms of having the highest percentage of customers who say they are Very or Somewhat Satisfied with their provider (92%). AT&T's (T) U-Verse service comes in second (87%).

DIRECTV (DTV) (85%) and DISH Network (DISH) (82%) came in third and fourth respectively, followed by the major cable companies.

Switching Contest

So who are the industry's big winners and losers when it comes to customer switching?

Certainly it's not the cable service providers – only 15% of customers who plan to switch services cited a cable provider as their next choice. The big industry winners, in a split decision, are the Fiber-optic (43%) and Satellite (41%) service providers.

At the company level, DIRECTV (26%) tops the list of providers that switchers plan to move to in the next 6 months.

Just behind, in a dead heat, are Verizon's FiOS (21%) and AT&T's U-Verse (21%) services.

Comments

[Walt17:]

I expect the trend in customer satisfaction will continue to favor the non-cable providers. HDTV reveals the weakness of decades old cable lines. Which means cable companies will ultimately have to replace a lot of cable. An expensive option to retain customers. And certain to impact their profit margins.

Mar 26 08:45 AM

[CWAmember:]

So said another way, 42% of video subscribers intend to switch to a telco. T and VZ, with rare exception, do not overlap service territories so they do not compete,nor do they have their services available virtually everywhere as DISH or DTV. 42% is about the penetration of FIOS after three years(see Keller TX).

After placing 303K new FIOS TV in the 4th Q, has VZ reached the threshold of critical mass for profitability?

Mar 26 08:56 AM

[BerkeleyBob:]

Dunno. VZ has been spending heavily to expand the technically superior FIOS. I personally will be happy to ditch my cable co. (HDTV, high-speed internet, no phone) in favor of FIOS when it is available in this area. I doubt it will cost much more, if any, than the $150/month odd I pay Comcast now.

Mar 26 01:10 PM

[Steve Biren...:]

Good data. Thanks for posting. I have a couple of thoughts.

First, you compeltley ignore that cable is stealing telephone lines form telcos at a much higher rate than telcos are stealing TV. I understand that TV is the core product and most valuable in terms of ARPU and upsell but cable is not solely reliant on TV.

Second, you also ignore tht cable is still getting over 50% of new broadband subscriptions and penetration of internet in households and broadband in PC households is still rising.

Third, I think this survey is skewed to favor the newest technology. People who have recently made the switch to fiber are going to be very unlikely to indicate less than total satisfaction as if they did that would be admitting they may have made a mistake. I do beleive fiber is superior (and that AT&T will have to go all fiber) but I think this survey overstates be case in favor of fiber switching.

All that said, I presently own T for my clients and do not own any cable stocks. I like the yield and defense it provides. I do think cable stocks are cheap enough to own and the risks of competition from telcos are very much conventional wisdom.

Mar 27 09:08 AM

[The Leprechaun:]

Comcast cable are the terrific folks who, when the service goes out, tell you that they will have it taken care of within 72 hours. Hey what great service.

Then - this one always gets me - I call and ask how much for such & such program and they tell me , "Well, for the first 90 days..." NO, NO, NO!!! How much for the service? All they know is "for the first 90 days".

Over-priced and going up again, but what choice is there? The local governments have allowed this monster and we're stuck with it. Their motto is - if you want internet and cable, just shut up and pay us!

Mar 27 09:51 AM

[i build fib...:]

What i find interesting, is that uverse is almost what fios is in overall satisfaction at a fraction of what verizon spent. att is betting their will be a cheaper avenue for the last mile within a short time .....they are taking fiber to the home on any new construction. But to take verizon's route and start tearing out all copper facilities and taking fiber to the house is ultra expensive and personally i have uverse and it works excellent. Ed Whitacre was very smart to take a cheaper route and have a excellent product at the 1/3 of what verzion spent, yet be able to trounce cable's product. Everybody hates cable and the service they don't have with their gimmick marketing......i'd be shorting cable and buying telco's verizon and att at their cheap prices right now!!!!!

Mar 29 12:41 PM