Consumers think the best telephone companies are actually cable companies, according to the J.D. Power & Associates 2006 Residential All-Distance Telephone Customer Satisfaction Study.

In a major black eye for the telecom industry, the annual study of customer satisfaction ranked cable companies first in five of six regions, with only Verizon coming out on top in the Mid-Atlantic region. Cox Communications, the veteran telephony provider among cable companies, took top honors in the Northeast, Southwest and Western regions.

Bright House Networks was the top-ranking provider in the Southeast and Time Warner Cable had the highest ranking in the North Central region.

"It is dramatic," said Steve Kirkeby, executive director of telecommunications and technology research at J.D. Power and Associates. "The net result is probably what you expect when you see competitors enter a marketplace – consumers are in a position to look at alternatives, and many times, they will move to the alternative. We are also seeing the impact of the Triple Play."

This year's survey shows that price is now a major issue for consumers, ranking second behind convenience in their decision to buy bundled services, he added.

The survey results come as cable is rapidly picking up market share in residential voice, selling digital voice services as part of a service bundle, and more aggressively marketing its voice services as well. The results are also a victory of sorts for Internet telephony since, with the exception of Cox Communications, most cable companies are using VoIP to deliver voice service.

Cable companies are averaging more than 30 points higher in customer satisfaction than the industry in general, Kirkeby said. "That's not insurmountable, but it is statistically significant."

The rankings are based on customer assessments on a combination of six factors including cost of service, performance and reliability, billing, image, customer service, and offering and promotions. Most of the top companies earned their ranking by leading in two or more of the six categories, although Cox was ranked tops in all six categories in the Western region.

Overall consumer satisfaction with the telecom sector continued to decline, and consumers indicated they also are paying more for service. The average price of local and long-distance service went up by 3.4% from $50.70 to $52.40.

The satisfaction index scores fell from 692 on a 1,000-point scale in 2005 to 670 in 2006 and that decline occurred in all six factor areas. There is no blanket advice for the telecom industry on improving its ranking, Kirkeby said, as each company has to evaluate where it has gaps relative to specific cable competitors.

"The companies in play right now need to reinforce their image as being a reliable, dependable and price-competitive provider," he said. "It's a combination of image and price – they need to position themselves as a provider of dependable, reliable products and services. And they need to reinforce the idea that their customers are making the right choice."

Kirkeby also noted that BellSouth, while losing out to Bright House in its Southeast region, did not see its customer satisfaction rating slip despite numerous weather-related service outages last year.