Video services

JD Power Ratings Not All Sunshine for Telcos

5:10 PM -- Today's J.D. Power and Associates "2010 Residential Television Satisfaction Study" is great news for AT&T Inc. (NYSE: T), in particular, and dreadful news for Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. , in particular, but it also generally reveals a trend that will impact the entire pay-TV industry. (See AT&T, Verizon Top JD Power TV Ratings.)

So as my favorite ex-Cubs manager Lou Pinella once said, long ago, when things were going well early in the season for the Cubbies, "Let's not get too giggly here."

The J.D. Power research found that consumers are much less happy about how much they are paying for cable or satellite TV. Measured on its 1,000-point scale, customer satisfaction with the cost of TV service dropped 14 points, to 541, this year over last. Cable customers were particularly unhappy, as their customers were 22 percent less satisfied with the cost of cable than AT&T and Verizon customers, and 18 percent less than satellite TV customers.

But with cord-cutting already on the rise, and the economy not rebounding as fast as many had hoped, indications of consumer concern over pricing create a dilemma. The number of consumers taking just basic cable rose from 40 percent to 44 percent -- that growth can be attributed to the economy or to the fact that consumers now have many other options for their premium viewing, including streaming video downloads.

Frank Perazzini, director of telecommunications at J.D. Power and Associates, says it may be too early to tell whether that's where things are headed.

"Our study represents the fact that the impact of the economy is still being felt, people are pulling back to basic cable and exploring other avenues for content, especially the Internet," Perazzini says. "Longer term it remains to be seen what is going to happen -- will premium content be available via the Internet, directly or in some other fashion? If that's the case, we could see a lot of cord-cutting. But it is still a little too soon to tell."

Perazzini says AT&T "built on its lead" by figuring out the price-value equation, and by getting its back-office systems right.

"AT&T's cost of service and offers/promotions were attractive, and they are strong on billing," he says. "They are executing the administration of their service and providing folks with the price performance they are looking for."

For all its bells and whistles, IPTV is coming down to price performance. How old school.

But with content not getting cheaper, attempts to lower prices for video services can only cut into profits or, in the case of most telco video providers, increase the loss-leader status that video has in their service bundle.

That's going to put extra pressure on pay-TV providers -- cable, telco, and satellite -- to deliver more on the performance end, without expecting to bulk up the bill.

So if you are a cable executive, J.D. Power just delivered nothing but bad news. If you are a telco video provider, it's only a good-news/bad-news scenario.

— Carol Wilson, Chief Editor, Events, Light Reading

shygye75 12/5/2012 | 4:21:47 PM
re: JD Power Ratings Not All Sunshine for Telcos

Cord-cutting is probably not an option, in that the cord-cutter is still going to need Internet service to watch all that high-quality video content. And how does service abandonment square with the growing installed base of high-end TV sets?

shygye75 12/5/2012 | 4:21:46 PM
re: JD Power Ratings Not All Sunshine for Telcos

Heavy Reading is now doing a survey that will focus in part on just this subject. Results will be presented to attendees at next month's TelcoTV event in The City That's Home to The Happiest Place on Earth (East Coast). I'm sure everyone awaits those results with bated breath (or baited breath, if your plans include a trip to SeaWorld).

But I'd say that video service providers are already dealing with this issue through the bundling strategy. Telcos and cablecos are increasingly reluctant to separate out services from the bundle, and those separated services come at a much higher price than when they're included in a bundle. At least for now, there's minimal cost savings to be realized from terminating one part of the triple play. I'll guess that if OTT video really does become a threat to pay TV service, bundling will continue to be used as the carrot to keep customers in the fold.

cnwedit 12/5/2012 | 4:21:46 PM
re: JD Power Ratings Not All Sunshine for Telcos

I hope Adi isn't flying to Orlando. TelcoTV is in my other least favorite place on the planet, Las Vegas.

cnwedit 12/5/2012 | 4:21:46 PM
re: JD Power Ratings Not All Sunshine for Telcos

Cord-cutting in this case applies only to the pay TV service - consumers cut the cord and just buy broadband Internet access. There's a debate as to whether this is a growing trend or not. J.D. Powers says it's not really, or not yet.

But if more premium content becomes available on the Internet, either via a paid service like Hulu or Netflix, the trend could take hold, especially when you consider that many of those new TV sets include direct Internet connection capability.

shygye75 12/5/2012 | 4:21:45 PM
re: JD Power Ratings Not All Sunshine for Telcos

That's what I get for looking at the wrong event calendar. And not fact-checking. And posting after my bedtime. Anyway, maybe we'll still do the session from Orlando and use one of those nifty telepresence things.

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