Consumer Satisfaction With Fixed Network Services Creates Opportunity for Attackers

U.S. consumers appear to have wide differences in “satisfaction” with triple-play services they buy from some service providers, compared to others, according to Consumer Reports. Polling 81,848 customers of fixed network services, Consumer Reports found Verizon's FiOS was near the top of the rankings in every category, while AT&T Inc.'s U-verse was in the middle.

Comcast's TV service ranked 15th out of 17 providers, while Time Warner Cable's was 16th.

Comcast and Time Warner Cable also were in the bottom half of phone and Internet service providers and among the 14 firms selling triple-play services, according to Bloomberg.

Though Verizon executives might be pleased, the industry as a whole ranks at or quite close to the bottom in consumer satisfaction among all industries. Of 43 industries tracked by the American Consumer Satisfaction Index, for example, Internet service providers rank 43rd.

Linear video service providers rank 41st. Even mobile service providers ranked no better than 39 out of 43.

The best-scoring industry were the TV and credit union industries, both scoring 85, while the ISP industry scored 65.

To be sure, “customer satisfaction” is not a foolproof proxy for “loyalty.” In many cases, “unhappy” customers will not change suppliers. In other cases, even “happy” consumers will churn.

You can probably imagine instances where even unhappy customers will not change suppliers. They might believe all the suppliers are roughly the same. On the other hand, you can probably imagine scenarios where even happy customers will change providers, as when one provider offers the “same quality at a lower price.”

But there are signs executives should be concerned. For starters, as Verizon’s performance shows, consumers are capable of perceiving quality differences that result in higher satisfaction.

To the extent that higher satisfaction is related to lower churn, satisfaction will matter.

The other issue is that “value” appears to be a growing source of pain for subscribers to linear video entertainment packages, and “prices” would seem to be part of the reason for the dissatisfaction.

One might surmise that other issues, such as slow speeds and congestion, as well as outages, account for the low satisfaction scores for ISPs.

But value related to price is likely a bigger issue for linear video subscription services.

If the average monthly cost of a triple-play bundle is $154, then the annual cost is $1,848, more than the average household spends on clothing, furniture, or electricity, according to Consumer Reports.

Given that “value” is a big issue, bundles that save money should help. They do, but even buyers of bundles seem “unimpressed with what they were getting for their money,” Consumer Reports says.

“Even WOW and Verizon FiOS, which got high marks for service satisfaction, rated middling or lower for value, and out of 14 providers, nine got the lowest possible value rating,” says Consumer Reports.

To be sure, some industries just have a harder time in the “customer satisfaction” area. Airlines and fixed line communications and video entertainment providers traditionally do not score high in consumer satisfaction surveys. The fact that both those industries are susceptible to service interruptions might explain the ratings.

To be sure, outages are certain to cause unhappiness. In the case of high speed access, slowdowns caused by congestion likewise are going to reduce satisfaction with the product.

If high speed access and video entertainment are the foundations for tomorrow’s fixed network revenue streams, such unhappiness is a danger. To be sure, most linear video service providers now operate much more consistently, with fewer outages, than in the past.

And one might argue that the more-reliable performance has lead to higher satisfaction, something that seems to be true especially for satellite video providers and Verizon’s fiber to home service.

Perhaps oddly, ISPs scored lower than fixed line voice providers for satisfaction. One reason for that finding might well be that unhappy fixed network voice customers already have left, while remaining customers are using the service less and less.

Also, users of fixed line voice services might not be as aware of outages as they are with video services.

A television user might have the service in use five to seven hours a day, and certainly will know immediately if there is an outage.

In contrast, a fixed network voice user might experience many outages, but never know.

Still, the potential dangers for incumbent triple-play providers is obvious.

If consumers consistently are dissatisfied with linear video services and even high speed access, and if the fixed network business is built on those two services, then the danger of new competitors entering the market is high.

Almost nothing is more attractive for a would-be entrepreneur than large markets with high gross revenues, served by competitors who are disliked to a great extent by their customers.

Google Fiber represents the realization of the threat in the high speed access business, while steaming video represents the danger to the linear video business.