Higher satisfaction with alternative video services motivates cord cuttingThursday, September 29th, 2016
Higher Overall Satisfaction with Alternative Video Services Motivates Customers to Cut the Cord, J.D. Power Finds
- AT&T and Verizon Receive Multiple Awards across Product Segments, Regions
NEW YORK — Overall satisfaction with alternative video services such as streaming and transactional-based OTT (over the top) offerings is considerably higher than it is with traditional pay television service, spurring an increase in cord-cutting from 2015, according to three J.D. Power studies released today.
The related studies are the J.D. Power 2016 U.S. Residential Television Service Provider Satisfaction Study(SM); the J.D. Power 2016 U.S. Residential Internet Service Provider Satisfaction Study(SM); and the J.D. Power 2016 U.S. Residential Telephone Service Provider Satisfaction Study(SM).
The annual wireline studies, now in their 15th year, evaluate residential customers’ experiences with TV, internet and phone services in four geographical regions: East, South, North Central and West. The ISP and telephone studies measure customer satisfaction across five factors: network performance and reliability; cost of service; billing; communication; and customer service. The TV study measures satisfaction in those same five factors plus a sixth: programming. Satisfaction is calculated on a 1,000-point scale.
The TV study finds that, compared with pay TV service providers, satisfaction is significantly higher with paid streaming video services like Netflix, Amazon and Hulu; skinny bundle offerings like SlingTV and PlayStation Vue; and programming apps like HBO Go.
For example, customers rate their primary alternative video service higher than their TV service for the overall experience (7.92 vs. 7.18, respectively, on a 10-point scale), which is largely driven by much higher ratings for the overall cost of service experience (7.99 vs. 6.42). Customers also rate their primary alternative video service higher than their TV service for the overall performance and reliability (7.98 vs. 7.82), programming (7.87 vs. 7.76) and billing (8.04 vs. 7.54) experiences.
Subsequently, with relatively low prices and increasing rates of adoption, alternative video services are helping drive the cord-cutting trend. Nearly two-thirds (63%) of customers have used an alternative video service in the previous year, up from 58% in 2015. Additionally, 73% of customers who plan to cut the cord on TV service in the next year indicate they will use an alternative video service.
“This finding partly reflects age demographics since younger customers are more likely to use alternative video services than older customers, and younger customers are more satisfied with alternative TV service than older customers,” said Kirk Parsons, senior director and technology, media & telecom practice leader at J.D. Power. “Despite their higher satisfaction, customers who have used an alternative video service in the previous year are much more likely than those who haven’t used one—14% vs. 4%—to cut the cord on TV in the next year.”
However, customers who cut the cord on TV are not necessarily lost for TV providers, and increasing their satisfaction raises the likelihood that they will reactivate TV service or upgrade their internet service in the future. Among customers who plan to drop TV service during the next 12 months, 44% say they expect to reactivate it during certain times of year. Overall satisfaction among customers in this group is 845, compared with 575 among those who do not plan to reactivate TV service and 561 among those who don’t know if they will reactivate it.
Key Study Findings
Residential Television Service Provider Satisfaction Study
- AT&T U-verse/DIRECTV ranks highest in TV customer satisfaction in the East (782) and South (764) regions; Verizon FiOS (776) ranks highest in the West region; and DISH Network (747) ranks highest in the North Central region.
- Among customers who switched providers in the previous 12 months, the most commonly cited reasons for switching are “cost was too high” (25%); “moved locations/previous provider not available at new location” (24%); “competitor offered a better deal” (17%); and “customer service was poor” (10%).
Residential Internet Service Provider Satisfaction Study
- Verizon ranks highest in ISP customer satisfaction in the East (735), South (755) and West (755) regions; AT&T (717) ranks highest in the North Central region.
- Slightly more than one-third (34%) of customers purchase premium speed internet. This compares to 37% in 2015 and 27% in 2014. Performance and reliability satisfaction among customers with premium speed internet is 763, while satisfaction among those without premium speed internet is 694.
- Over a typical three-month period, 42% of customers experienced a website connection error or failure to load (vs. 45% in 2015); 48% experienced a website that was excessively slow to load (vs. 51%); and 36% experienced a general service outage (vs. 37%). The incidence of customers experiencing an email connection error—28%—is unchanged from 2015.
Residential Telephone Service Provider Satisfaction Study
- Cincinnati Bell ranks highest for the first time in telephone customer satisfaction in the North Central region (765); Verizon ranks highest in the East (757), South (766) and West (770) regions.
- Nearly half (46%) of highly satisfied residential telephone customers (overall satisfaction scores of 900 or higher) say they “definitely will not” switch providers in the next 12 months, compared with only 12% of dissatisfied customers (scores below 550) who say the same.
The 2016 U.S. wireline studies are based on responses from 31,072 customers nationwide who evaluated their cable/satellite TV, high-speed internet and telephone service providers. The studies were fielded in four waves: November 2015, February 2016, April 2016 and July 2016.