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Cable Technology Feature Article

September 30, 2008

CFI Study Finds Consumers Prefer Telecom Bundles Over Cable

By Susan J. Campbell, TMCnet Contributing Editor

Consumers over the past few years have had an overabundance of options in their communications services. One of the biggest pushes by the providers has been to bundle services together into one package and offer it for a discounted price.

Whether or not consumers were ready to go such a route, they now seem to prefer it, as long as it is from the telecommunications company versus the cable company. 

According to the second annual Telecom-Cable Industry Satisfaction Study from CFI Group, consumers would prefer to bundle communications services with telecommunication companies by a 2 to 1 margin to cable companies if given the choice.

Interestingly, cable companies still provide bundled communications to twice as many consumers surveyed as do telecom companies. 
CFI surveyed more than 1,200 households and examined customer satisfaction for video, broadband Internet access and wireless communications using the methodology of the University of Michigan’s American Customer Satisfaction Index.

The results indicate that customer satisfaction provides telecom companies with a competitive advantage. As telecoms roll out high-speed fiber services across their networks, they will be able to challenge cable company dominance in bundles, high speed Internet and video. The biggest challenge will be ensuring the quality of service delivery.
“The cable companies are asleep at the wheel if they don’t see the threat from the telecoms,” said Phil Doriot, program director for CFI Group, in a Tuesday statement.
“But the network upgrades aren’t going to happen overnight, so cable companies still have the opportunity to improve their customer service and cover their Achilles heel.”

The study also identified high rates and poor customer service as the two biggest reasons a customer leaves a cable provider of communication bundles. Customers of telecom companies cite the need for faster access as a primary reason for switching.
Video services like AT&T’s U-Verse IPTV and Verizon’s (News - Alert) FiOS are beginning to make their mark and claim a portion of the market. Already, two percent of survey respondents are using video services from a telecom company. 
“Consumers stand to benefit most from the battle between cable and telecom,” said Doriot. “Telecoms have no choice but to upgrade their systems to offer video and faster Internet because they are losing customers to cable. That should bring more choice to the marketplace, stem the price hikes, and raise the satisfaction bar for the whole industry.”

Telecom companies also have another potential advantage over cable companies — they own national wireless carriers. Only eight percent of surveyed consumers have bundles that include wireless telephone and more consumers are dropping landlines in favor of wireless telephony. Such numbers indicate that there will be a greater push for wireless services included in the bundle, posing a significant challenge for the cable companies, yet significant opportunity for telecoms. 
“Without a wireless play, cable companies aren’t future-proofing their bundles, but new technologies like WiMAX (News - Alert) might change the game,” added Doriot.

Telecoms traditionally enjoy greater satisfaction ratings than cable companies, however churn may be the biggest issue for wireless carriers. Consumers are still driven by their ability to choose when it comes to wireless service and that will be a roadblock for telecoms, providing opportunity for cable companies to present an alternative.
According to CFI Group’s research, the top reasons customers give for switching carriers are better rates, better plans, and better coverage and reliability. If the consumer is happy with the provider that the telecom offers, their loyalty is secure. The pressure remains for the telecom to ensure that the wireless provider delivers seamless satisfaction to protect the base.

Don’t forget to check out TMCnet’s White Paper Library, which provides a selection of in-depth information on relevant topics affecting the IP Communications industry. The library offers white papers, case studies and other documents which are free to registered users.

Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com. To read more of Susan's articles, please visit her columnist page.

Edited by Mae Kowalke