That new phone company smell may be fading if results of a customer satisfaction survey released by the University of Michigan last week are any indication.

Although cable TV companies have generally scored high in customer care and customer service studies of voice service providers in recent years, the American Customer Satisfaction Index, which is based on a survey conducted during the first quarter of every year by U of M researchers, showed that customer satisfaction with new telephony players such as Comcast and Cox actually declined within the last year.

“There has been a notable drop in perceived value. What it means is people might not be getting what they want for their money,” said Claes Fornel, a U of M professor and head of the ACSI research. “Maybe the novelty [of having a new telephone service provider] is wearing off.”

The study referenced the fact that many new voice players — cable TV companies included — entered the market by attempting to lure customers away with low introductory prices, and that satisfaction may have waned after the discounts expired. The wireline telephone players as a full category earned a satisfaction score of about 70 out of a possible 100. Cox matched that industry average, but its score of 70 this year was down 8% from the 2006 survey. Comcast scored a 67, about 3% lower than in 2006.

The new research is by no means the first or final word on customer satisfaction. For instance, J.D. Power and Associates issued a residential customer satisfaction study late last year that ranked Cox in particular above its traditional telco competition in at least two regions of the U.S.

The ACSI measures customer satisfaction across a wide range of industries, and the key telecom categories include fixed-line telecom service, wireless service, cable TV/satellite TV service and satisfaction with cellular phone manufacturers. In their core cable TV category, cable TV companies' ratings weren't any better — and worse in some cases (see graphic). The cable TV industry as a whole scored a 62 this year, which was the lowest among more than a dozen industries that the ASCI measures annually.

Fornel said the research has not yet attempted to measure customer satisfaction with video services provided by telcos, but that it probably will in the future. “All of this is converging, so we want to continue to update the survey,” he said.

Unlike many industry surveys that focus on samples of just a few thousand customers, Fornel said the ACSI starts with a base group of about 300,000 customers of all kinds of services and then weeds that down to about 80,000 customers, who are asked a battery of questions by phone.

Fornel said customer satisfaction among the major wireless service providers has gradually improved in recent years. Even in an era of increased signal coverage and emerging mobile broadband services, dropped calls still rate as a key customer satisfaction issue; however, because wireless customers have gained number portability and many pre-existing long-term contracts have expired, customers have been quicker to jump away from carriers with poor service.

“When there are no barriers to switching providers, the market starts to sort itself out,” Fornel said. “And customers go looking for a better experience.”

ACSI OVER TIME
(first quarter 2007 companies and industries)