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Consumers prefer phone company bundles

Consumers aren't happy with cable's offering, and they are looking more at what phone companies have to offer.

Results from a new customer survey suggest consumers would rather subscribe to a triple play bundle of services from a phone company than from a cable operator.

On Tuesday the market research firm CFI Group released results from a customer satisfaction study that indicated that almost twice as many consumers are interested in buying a bundle of phone, broadband and TV service from a phone company than from a cable operator. But because phone companies haven't completed rolling out TV and upgraded broadband services to all their customers, more consumers buy the bundle from the cable company. Only about 2 percent of those surveyed subscribe to TV service from a phone company.

Using the American Customer Satisfaction Index created by the University of Michigan, CFI surveyed more than 1,200 consumer households to examine customer satisfaction with video, broadband Internet access and wireless communications services. The group concluded that consumers are more dissatisfied with cable operators than they are with phone companies, which could give phone companies a big advantage in vying for customers.

According to the study, consumers said that high cable rates and poor customer service were the two biggest reasons they would consider leaving a cable provider. And customers also cited faster Internet speeds as a top reason to switch from cable to a phone company's service.

"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. "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."

But the biggest problem phone companies face is getting their new networks upgraded and built quickly enough to take advantage of customer demand. Verizon Communications has been deploying fiber-to-the-home throughout its territory. But the company has been somewhat slow in getting through the necessary red tape at the state and local levels to get video service into communities, Doriot said. He believes Verizon needs to be more aggressive in moving through the franchise process. But he said where Verizon offers its full Fios fiber-to-the-home package, it is competing well against cable's bundle of service.

While it's critical for the phone companies to offer TV, Doriot said results of the survey suggest that faster speed broadband is the key differentiator between the bundles that will win customers. Verizon could have an advantage here since its Fios service offers download speeds between 10 Mbps and 50 Mbps. And in some locations it's offering upstream speeds up to 20 Mbps. These are much higher rates that what is offered by cable operators.

AT&T's approach has been different. The company is building fiber closer to homes, but it's still using the existing copper infrastructure to deliver faster DSL speeds and its U-Verse TV service. The biggest problem with AT&T is that it's been very slow in rolling out U-Verse. And the faster broadband speeds aren't much faster than what cable operator can offer.

"It's still too early to say that AT&T's strategy isn't working," Doriot said. "But I'm not sure it will pay off when higher speed broadband is available elsewhere."

Doriot said the survey also indicated that consumers are interested in including wireless in their service bundle. Even though AT&T and Verizon also offer the two largest wireless networks in the U.S., these companies have not done much to integrate wireless into their bundle. Doriot says this could be a big opportunity for phone companies to differentiate themselves.

Cable operators don't own wireless assets, but they are working on getting some. Comcast and Time Warner Cable have both invested in the Sprint/Clearwire joint venture to build a national WiMax network. And other operators like Cablevision are experimenting with Wi-Fi.

But cable operators also need to improve their customer service if they want to compete in the long run.

"Nobody is turning cartwheels for either cable operators or phone companies," Doriot said. "But cable has historically scored lower in terms of customer service and satisfaction than the phone companies. And that's a problem for them."

Of course, Comcast's recent dust ups over throttling network traffic and Time Warner's calls for metering broadband service might not be the best ways to win over customers.