Fiber-Optic Trumps the Cable and Satellite Providers

By Paul Carton
April 9, 2009

Not so long ago consumers were abandoning traditional over-the-air TV broadcasting for cable and satellite service providers. Times have changed.

The latest ChangeWave consumer survey on TV service provider trends shows the newest entrant - fiber optics - is having a radical impact on the marketplace. The survey of 2,874 U.S. and Canadian respondents was conducted March 4-11, 2009.

Cable Still Leads but Fiber-Optic Providers Have Momentum

We asked respondents which TV service provider they subscribe to. The results from our last two years of surveys show a definitive market transformation is occurring.

While cable continues to hold the lion's share of the market - 63% of respondents say they currently subscribe to a cable TV service - that's 3-pts less than last December and an 8-pt drop from two years ago. At the same time, satellite providers (26%) have held steady.

So where's the growth? It's fiber optic TV service providers - up 3-pts since December 2008 and a five-fold increase in the past two years.

What does this mean at the individual provider level?

Cable Providers: Comcast (24%; unchanged) remains the overall market share leader, but is stuck at the same share level it held two years ago. Its closest rival in the cable market - Time Warner (10%; down 1-pt) - has lost share for the second consecutive survey and is down to its lowest level of the past two years.

Satellite: The satellite front remains the same as previously, with DIRECTV (13%; unchanged) maintaining its lead over DISH Network (10%; unchanged).

Newcomers Stealing the Show - Fiber Optics: Verizon FiOS (5%) and AT&T U-verse (3%) are relative newcomers to the TV service providers industry, but each has picked up 1-pt since December and shown consistent growth since they were first rolled out.

There's no great mystery why. Not all TV services are equal.

Customer Satisfaction

If you look at customer satisfaction levels, you can see the clear difference between types of providers.

While Satellite subscribers (27% Very Satisfied) remain far more content with their TV service than cable subscribers (13% Very Satisfied), fiber-optic services are in a class by themselves. By a huge margin, their customers give them the highest satisfaction rating (41% Very Satisfied).

At the company level, the wide divergence in customer satisfaction ratings becomes even clearer.

Verizon's (VZ) FiOS service tops the list with the highest percentage of customers who say they are Very Satisfied with their provider (48%). AT&T's (T) U-Verse service comes in second (40%).

The two Satellite providers - DIRECTV (34%) and DISH Network (DISH) (22%) - come in third and fourth respectively.

Bringing up the rear in terms of customer satisfaction are the cable companies, with Time Warner (9%) and Charter (9%) ranking dead last in terms of customer satisfaction.

Future Share: Who are Customers Switching Their Service To?

Looking ahead, we asked respondents if they planned to switch TV service providers in the next six months. A total of 14% report they'll be switching, up 2-pts from previously.

But which companies are going to gain when customers switch?

Considering the above satisfaction ratings, it's no surprise that more than two-in-five of those planning to switch say they'll choose a fiber-optic service - a 3-pt jump since the previous survey.

As the following chart shows, Verizon FiOS TV (28%; up 7-pts) tops the list of where switchers plan to move to in the next six months - registering by far the biggest gain of any service provider.

In addition, more than a third of potential switchers say they'll transfer to a satellite service provider - and within this group DIRECTV (25%; down 1-pt) has a two-to-one market share advantage over DISH Network (12%; down 2-pts).

But once again, the cable service providers are at the end of the line.

Reasons For Switching

We also asked those who were switching to tell us the primary reasons behind their plans to switch, and price remains far and away the top reason.

Better than one-in-two (51%) who plan to switch cite Price - a 3-pt increase since December 2008 and a gigantic 14-pt move in the past nine months.

Bundling of Services (15%; up 4-points) now ranks second as a reason for switching, while New Service Features (11%; down 4-pts) has fallen to third.

Bottom Line: Once not so long ago it was cable and satellite that were the upstarts providing an attractive alternative to traditional over-the-air TV broadcasting. Now it's fiber optics, a relative newcomer in the TV service provider market that has grabbed the momentum among consumers.

While Verizon's FiOS TV and AT&T's U-verse still trail their cable and satellite competitors, they've both experienced strong growth since their introduction. And if customer satisfaction is a good indication of future growth potential - and it is - both FiOS TV and U-verse are positioning themselves to dominate the industry going forward.