SNET Matches BellSouth as the Highest Performer in the 1999 J.D. Power and Associates Residential Local Telephone Service Satisfaction Study

Business Wire, August 5, 1999

AGOURA HILLS, Calif.--(BUSINESS WIRE)--Aug. 4, 1999--

Cable TV Providers Emerge as Competitive Alternative

to Local Telephone Service

BellSouth shares top honors with Southern New England Telephone (SNET), tying as the dominant local telephone service providers, according to the J.D. Power and Associates 1999 Residential Local Telephone Service Satisfaction Study(SM) released today.

While both companies perform well above the industry average in all seven factors that impact customer satisfaction, they receive their highest customer ratings in different areas. BellSouth performs significantly well in customer service and corporate image/communication, two of the most critical factors in determining customer satisfaction. SNET, on the other hand, performs exceptionally well in the billing, network capabilities and calling card areas.

"The solid performance of both BellSouth -- which has led the industry for the past three years -- and SNET reflects their strengths in areas dealing with both product and service delivery," said Kirk Parsons, director of telecommunications accounts at J.D. Power and Associates. "The ability to consistently exceed customer expectations in all areas will serve them well in an increasingly competitive marketplace."

The study also reveals that there is potential competition in the local telephone environment from alternative sources such as cable TV providers. For the first time, the study uncovers satisfaction performance and usage information among traditional cable TV companies that are now offering both pay TV and telephony services as a bundled product.

Even though cable-based providers represent a very small percentage of the total households with local telephone access, there are some early indications they are making significant inroads in those areas where they do offer this bundled product.

As a group, cable TV providers, if included in the study rankings, would have placed second behind BellSouth and SNET in overall local telephone satisfaction. In fact, their customers gave them the highest ratings in customer service. Cable TV providers also are rated highly by their customers in cost of service/promotions, billing and network capabilities factors.

Additionally, according to the study, customers who subscribe to cable TV providers spend an average of $5 less per month on local calling than the industry average of $29. However, this represents approximately $248 million in lost revenue to the traditional local telephone carriers.

Consumers in the typical households that report receiving both pay TV and local telephone service from their cable company are younger, less likely to have a college education, have smaller household incomes and have larger families and reside in more rural locations than the general population.

"Given the acceleration of companies trying to offer a full range of broadband services, it is clear that there is a competitive advantage in offering multiple services and that the cable TV providers have, at least, a short-term lead on offering the entire package," Parsons said. "In fact, the marketplace looks ripe for change given the fact that a number of consumers are willing to switch their local provider."

According to the study, 45 percent of respondents said they would consider switching local providers if offered a competitive alternative -- an increase from 41 percent in 1998. Citizens has the highest number of customers, at 56 percent, who might switch their local telephone service if offered a better alternative, followed by Sprint at 52 percent, US West at 51 percent, and GTE, Southwestern Bell and Frontier at 50 percent.

This is not surprising since increased switching intent is highly correlated with lower levels of customer satisfaction as reflected in the overall rankings.

Finally, the study reveals that consumers are uncertain about what changes convergence and ongoing merger activity will bring to the marketplace. For example, nearly 63 percent of households are concerned that recent pending mergers may result in monopolies that may not serve them well.

Correspondingly, the majority of local telephone providers, especially the regional Bell operating companies such as Southwestern Bell and Bell Atlantic -- which have been the acquirers in the current merger activity -- have seen their satisfaction levels decline the most in a number of measures. The largest shortfalls have been in the area of billing, cost of service and corporate image, particularly in the corporate reputation.

"As the industry continues to consolidate and becomes more competitive, it will be imperative for the local companies left standing not to lose sight of what's important to consumers," Parsons said. "As our research has shown in the U.K. -- where one in 10 households now receive their telephony services through cable companies -- consumer willingness to accept and pay for alternative methods of delivering basic phone services will increase."

The study, which is based on responses from consumers in 12,185 households nationwide that subscribe to a local telephone service provider, represents an initial analysis of the U.S. telecommunications market. Forthcoming reports will include customer satisfaction results for cable/satellite, wireless and Internet providers.