Cable, satellite get rotten grades

Survey finds customers unhappy with TV companies

If you thought that U.S. consumers hold the federal government in the lowest regard, think again and look no further than the latest American Customer Satisfaction Index.

Another poor showing in the annual survey for cable and satellite TV companies Tuesday led some experts to warn that sector players better get their act together amid a weak economy and heated competition -- or risk losing out longer-term.

The study also provided one explanation for why DirecTV has been steamrolling other pay TV service providers in terms of subscriber growth and retention in recent quarters.

The survey by the University of Michigan on Tuesday showed customer satisfaction with cable and satellite TV firms is up from last year and higher than at any point since the research was launched in 2001.

However, the industry remains at the low end of rankings across all sectors, with a 64 average satisfaction rating, up a scant 3.2% over last year's 62 rating, out of a possible 100. This tied the sector with newspapers and bested only the troubled airline sector. The federal government earned a 68 satisfaction rating in another ACSI survey in December.

It could have been worse, but DirecTV scored a 68 rating and small cable operators, including Cablevision Systems, collectively earned a 69.

Meanwhile, Paul Allen's Charter Communications, cable giant Comcast Corp. and satellite TV firm Dish Network tumbled, with the latter two recording their lowest ratings ever.

The fact that the satisfaction study came on the last day of the 2008 Cable Show in New Orleans gave some industry observers particular pause.

"The picture is not pretty," said Sanford Bernstein analyst Craig Moffett. "The pay TV group is, overall, a disaster, ranking worse on average than the IRS."

Moffett warned that while "it was good enough to be the 'best of the bad' " among TV distributors in the past, that's no good anymore amid heated competition from telecom firms, video games, online video and the like.

"Weak customer satisfaction -- for the whole industry -- is an enormous Achilles heel for pay TV and perhaps more than any other factor threatens the foundation of the pay TV model," Moffett said.

ACSI founder Claes Fornell argued that in the sluggish economic environment, companies need to keep customers satisfied. "Households are under pressure from falling housing prices, tight credit and rising food and fuel costs, making it more difficult for satisfied consumers to spend more even if they want to," he said.

Comcast and Charter in recent appearances and conference calls have vowed to improve customer service. In his first-quarter earnings call, Dish chairman and CEO Charles Ergen admitted that his company's customer service centers often pick up the phones after too many rings and have been overwhelmed with complaints of late.