Dish on the TV menu
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September 19, 2000: 10:46 a.m. ET
Survey shows satellite TV clicks with more consumers than cable
By Staff Writer Rob Lenihan
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NEW YORK (CNNfn) - Satellite television is the preferred dish among TV viewers, according to a recent survey, but cable is fighting hard to be the digital main course.
Marketing information firm J.D. Power and Associates found satellite service providers have a substantial lead over all of their cable competitors in such areas as cost of service, program offering, equipment and service capabilities, customer service and reception quality.
For the second year in a row, DISH Network, a subsidiary of EchoStar Communications Corp. (DISH: Research, Estimates), ranked highest in customer satisfaction in the cable/satellite TV industry. DIRECTV, a subsidiary of Hughes Electronic Corp. (GMH: Research, Estimates), was a close second, edged out by DISH Network's service costs, which the survey found was the most critical driver of customer satisfaction.
Kirk Parsons, director of telecommunications at J.D. Power and Associates, said there was a wide gap in overall customer satisfaction between satellite and cable providers.
"Clearly satellite companies are gaining momentum in the market," Parsons said in a statement, "as indicated by our studies over the past four years."
Only two cable providers -- Cable One, a division of the Washington Post Co. (WPO: Research, Estimates), and Cox Communications (COX: Research, Estimates) -- perform above or at the industry average, the Power study said. Cable One, in fact, edged out Cox in the customer satisfaction category; Cox had been a cable carrier leader from 1996 through 1998.
Satellite companies saw increased household penetration rates, with close to 50 percent growth in satellite-only household penetration. In contrast, cable companies showed little change in their market share.
Fee bites
The average satellite customer does pay slightly more for service than the cable viewer. Parsons said the average satellite TV bill is $44.56 per month, compared to the average cable bill of $40.25.
However, Parsons said the cable bill has been rising 5-to-6 percent a year, with the average cable bill coming in at $32.40 in 1996. In comparison, satellite rates have been relatively stable, Parsons said.
The results of the Power survey came as no surprise to James R. Smith, associate professor of communication and media at the State University of New York at New Paltz. Smith said cable providers have more technical issues to deal with and more areas where things can go wrong.
"My bet on the short-term gain is going to be on the satellite providers," Smith said. "They are probably going beyond their market share."
Cable companies do have a sizable piece of the market, with five cable customers for every satellite patron in the United States. Parsons said cable companies are strengthening their competitive positions by upgrading their technology.
Digital technology, essential in supporting telephony, Internet and other broadband applications, is pushing traditional analog operating platforms out of the picture.
The Power study finds the satisfaction gap narrows considerably when comparing cable households with digital service to households with satellite TV. In particular, the level of satisfaction with digital service program offerings and customer service is closet to that of satellite TV subscribers.
About 51 percent of cable TV households also subscribe to Internet service, up from 40 percent in 1999. Among these households, about 7 percent already receive high-speed Internet service from their cable provider—more than double last year's three percent penetration rate.
The study also found that if high-speed access were available for about $45 per month, 33 percent of dial-up households would be at least "somewhat likely" to switch their Internet service to their cable provider in the next 12 months.
"A key driver of the accelerated rollout of digital services among cable TV providers," Parsons said, "is to counteract increasing competition from satellite providers and to protect their most valued customers from switching. The flip side of this drive is a pro-active strategy."
Bundle up
The satellite providers came up short in the competition for all of the telecom marbles. The Power study found almost 50 percent of all cable/satellite TV households would consider subscribing to all of their telecommunications services from a single company.
Forty-three percent of these households would choose their local telephone company, while 28 percent would prefer their cable TV provider. Satellite providers brought up the rear with only 7 percent.
In spite of more satisfied customers, "cable TV's dominant market penetration position provides an advantage to effectively deliver more value through the benefits of convergence," the study noted.
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