Changewave Research: TV and Internet Service Provider Trends

ChangeWave Research: TV and Internet Service Provider Trends

TV and Internet Service Provider Trends

Fiber-Optic Providers GainingGround inTV and Internet Markets

Paul Carton and Andy Golub

Overview:Recent ChangeWave consumer surveys haverevealed a shift occurring away from traditional TV viewing towards new types of online services and entertainment – a trend with worrisome long term implications fortraditional TV service providers.

But focusing on the current picture, a recent ChangeWave survey of 2,922 U.S. and Canadian consumers – summarized below – shows the biggest winners and losers in the market share battle among service providers.

In this report we also summarize recent ChangeWave survey results on Internet usage trends and their impact on providers.

Home TV Service Providers

Current Share

The market continues to transform among Cable, Satellite and Fiber-optic TV service providers.

Cable (65%) still owns the bulk of the current market, even though it’s been slowly ticking downward for much of the past 2+ years. We note, however, that they have gained 2-pts since our previous survey in March. At the same time, Satellite providers (25%; down 1-pt) haveremained relatively flat.

Nonetheless, the core growth story over the past two years has been with fiber-optic TV service providers (11%).So what does this mean at the individual provider level?

Cable Providers: Comcast (23%; down 1-pt) is still the market share leader,but has been gradually slidingfor the past year.Time Warner (11%; up 1-pt)remains a distant second – still stuck at the same level of a year ago.
Satellite: DIRECTV (13%; unchanged) continues to hold the market share advantage over DISH Network (9%) – which dropped 1-pt to its lowest level ever in a ChangeWave survey.

Fiber:Verizon FiOS (5%) and AT&T U-verse (3%) have been gaining share steadily – albeit slowly – ever since they rolled out their fiber services.

Customer Satisfaction

Fiber TV providers boast a big lead when it comes to customer satisfaction levels – with an overall 38% Very Satisfied rating.

While not nearly as satisfied as Fiber-customers, Satellite subscribers (27% Very Satisfied) remain far happier with their TV service than Cable subscribers (13% Very Satisfied).

This difference becomes most evident at the company level:

Customer Satisfaction Rating by Individual Provider – Very Satisfied

Verizon (VZ) continues to have the most satisfied customers (47% Very Satisfied), followed by AT&T’s U-verse service (39%) and then DIRECTV (34%).

The cable companies rank at the bottom in terms of customer satisfaction – with Time Warner (11%) and Comcast (11%) tied for dead last.

Future Share: Customer Switching

Looking ahead, we asked respondents if they planon switching TV service providers in the next six months, and only 12% report they’ll be switching –down 2-pts from March.

Among this group, Price(50%; down 1-pt) is the top reason why respondents plan to switch, while Bundling of Services(10%; down5-points)continues to be of lesser importance.

So which type of TV provider are switchers moving to?

More than one-in-two (54%) switchers say they’ll choose a fiber-optic service – representing an8-pt increase since our previous survey just three months ago.

Verizon FiOS TV (28%; unchanged) remains the top provider that switchers plan to move to in the next six months. But AT&T’s U-verse service (23%) has jumped a big 7-pts since our March survey and currently has the most momentum among providers.

Among satellite companies, DIRECTV (20%; down 5-pts) still maintains atwo-to-one market share advantage over DISH Network (10%; down 2-pts) – but both have hit new lows.

Cable providers bring up the rear – with just 4% of switchers saying they’ll sign up with Comcast (up 1-pt) and 1% for Time Warner.

Internet Service Providers

In a ChangeWave survey earlier this year we took a look at Internet usage trends among 2,435U.S. and Canadian respondents.Here’s what we found:

Verizon Leads in Internet Service Customer Satisfaction

Similar to the trends we have identified in the TV Service Provider market, Verizon’s Internet service (48%) has the highest percentage of customers who say they are Very Satisfied with their provider. Cablevision (CVC; 47%) comes in a close second.

Importantly, Verizon’s FiOS Internet customers are twice as likely as other Verizon customers (DSL or Wireless) to report they are Very Satisfied (70% vs. 32%) with their service. A similar trend was found for AT&T’s U-verse Internet service(71% vs. 31%), although it currently has a muchsmaller market share than FiOS.

Verizon and AT&T are Top Choices for Customers Switching ISP

We also asked respondents if they planned to switch Internet service providers in the next 6 months, and again Verizon was the big winner. Only 9% of Verizon customers say they're likely to switch. In comparison, 17% of AT&T customers report they’re likely to switch, as do 22% of Time Warner Cable and 24% of Comcast subscribers

Which companies will gain as customers switch their Internet service providers? In another positive finding, Verizon (22%) and AT&T (22%) top the list of where potential switchers say they’re likely to end up.

Bottom Line: The fiber-optic companies are excellently positioned to be the biggest winners in terms of future market share growth. The greatest problems for Verizon and AT&T continue to lie in their ability to build-out their networks fast enough to vastly expand their coverage.

While cable and satellite providers still lead in terms of current share, their problems continue to grow. Our ChangeWave survey results are consistent in terms of the probably outcome –a future in which cable and satellite will no longer be able to keep up with their fiber competitors.

Summary of Key Findings

The ChangeWave Research Network is a group of more than 20,000 highly qualified business, technology, and medical professionals – as well as early adopter consumers – who work in leading companies of select industries. They are credentialed professionals who spend their everyday lives on the frontline of technological change. ChangeWave surveys its Network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™

Table of Contents

Summary of Key Findings...... 5

The Findings...... 7

Section One: Home TV Service Providers...... 7

Section Two: Internet Service Provider Trends...... 14

ChangeWave Research Methodology...... 19

About ChangeWave Research...... 19

I. The Findings

Introduction

Recent ChangeWave consumer surveys haverevealed a shift occurring away from traditional TV viewing towards new types of online services and entertainment – a trend with worrisome long term implications for traditional TV service providers.

But focusing on the short term, a recent ChangeWave survey of 2,922 U.S. and Canadian consumers, summarized below, has identified winners and losers in the current market share battleamong providers(Section One).

In Section Two we have also summarized some recent ChangeWave survey results on Internet usage trends and their impact on providers.

Section One: Home TV Service Providers

Current Share

The market continues to transform among Cable, Satellite and Fiber-optic TV service providers.

Nonetheless, the core growth story over the past two years has been with fiber-optic TV service providers (11%).So what does this mean at the individual provider level?

Here’s the complete breakdown for Cable, Satellite and Fiber-optic service providers:

What service provider do you currently subscribe to for TV programming at home?

Cable Service Providers (65%)

Current
Survey
Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Aug ‘08 / Previous Survey
May ‘08 / Previous Survey
Feb ‘08 / Previous
Survey
Nov ‘07
Comcast / 23% / 24% / 24% / 25% / 26% / 24% / 26%
Time Warner
(Road Runner) / 11% / 10% / 11% / 12% / 10% / 12% / 11%
Cox / 5% / 5% / 5% / 5% / 5% / 5% / 4%
Cablevision / 3% / 3% / 3% / 3% / 3% / 3% / 3%
Charter / 3% / 3% / 4% / 4% / 4% / 4% / 5%
Rogers / 2% / 1% / 2% / 2% / 1% / 2% / 2%
Other Cable / 13% / 12% / 11% / 11% / 11% / 11% / 11%
No Answer / 5% / 5% / 6% / 5% / 6% / 6% / 5%

Cable Providers: Comcast (23%; down 1-pt) is still the market share leader, but has been gradually sliding for the past year.Time Warner (11%; up 1-pt)remains a distant second – still stuck at the same level of a year ago.

Satellite Service Providers (25%)

Current
Survey
Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Aug ‘08 / Previous Survey May ‘08 / Previous Survey
Feb ‘08 / Previous
Survey
Nov ‘07
DIRECTV / 13% / 13% / 13% / 13% / 13% / 13% / 11%
DISH Network / 9% / 10% / 10% / 10% / 11% / 10% / 12%
Other Satellite / 1% / 1% / 1% / 1% / 2% / 2% / 2%
No Answer / 2% / 2% / 2% / 2% / 2% / 2% / 2%

Satellite: DIRECTV (13%; unchanged) continues to hold the market share advantage over DISH Network (9%) – which dropped 1-pt to its lowest level ever in a ChangeWave survey.

Fiber-Optic Service Providers(11%)

Current
Survey
Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Aug ‘08 / Previous
Survey
May ‘08 / Previous Survey
Feb ‘08 / Previous
Survey
Nov ‘07
Verizon FiOS TV / 5% / 5% / 4% / 3% / 3% / 3% / 3%
AT&T U-verse TV / 3% / 3% / 2% / 1% / 1% / 1% / 1%
Other Fiber / 2% / 2% / 1% / 2% / 1% / 1% / 1%
No Answer / 1% / 1% / 1% / 0% / 0% / 0% / 0%

Fiber:Verizon FiOS (5%) and AT&T U-verse (3%) have been gaining share steadily – albeit slowly – ever since they rolled out their fiber services.

Customer Satisfaction

Fiber TV providers boast a big lead when it comes to customer satisfaction levels – with an overall 38% Very Satisfied rating.

While not nearly as satisfied as Fiber-customers, Satellite subscribers (27% Very Satisfied) remain far happier with their TV service than Cable subscribers (13% Very Satisfied).

How satisfied are you with your current TV programming service provider?

Customer Satisfaction Rating by Type of Provider

Cable Service
Current Survey
Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Aug ‘08
Very Satisfied / 13% / 13% / 12% / 12%
Somewhat Satisfied / 53% / 51% / 54% / 55%
Somewhat Unsatisfied / 23% / 24% / 24% / 24%
Very Unsatisfied / 7% / 8% / 7% / 6%
Don't Know/No Answer / 4% / 4% / 3% / 2%
Satellite Service
Current
Survey
Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Aug ‘08
Very Satisfied / 27% / 27% / 25% / 30%
Somewhat Satisfied / 50% / 52% / 58% / 53%
Somewhat Unsatisfied / 16% / 15% / 13% / 13%
Very Unsatisfied / 4% / 4% / 3% / 2%
Don't Know/No Answer / 2% / 2% / 1% / 2%
Fiber-Optic Service
Current
Survey
Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Aug ‘08
Very Satisfied / 44% / 45% / 47% / 41%
Somewhat Satisfied / 45% / 44% / 43% / 50%
Somewhat Unsatisfied / 8% / 7% / 5% / 6%
Very Unsatisfied / 1% / 1% / 4% / 0%
Don't Know/No Answer / 1% / 3% / 2% / 2%

This difference becomes most evident at the company level:

Customer Satisfaction Rating by Individual Provider – Very Satisfied

Verizon (VZ) continues to have the most satisfied customers (47% Very Satisfied), followed by AT&T’s U-verse service (39%) and then DIRECTV (34%).

The cable companies rank at the bottom in terms of customer satisfaction – with Time Warner (11%) and Comcast (11%) tied for dead last.

Future Share: Customers Switching

Looking ahead, we asked respondents if they planned to switch TV service providers in the next six months, and only 12% report they’ll be switching –down 2-pts from March.

Do you plan on switching cable, satellite or fiber-optic TV service providers in the next six months?

Current
Survey
Jun ‘09 / Current
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Aug ‘08 / Previous Survey May ‘08 / Previous Survey
Feb ‘08 / Previous
Survey
Nov ‘07
Yes / 12% / 14% / 12% / 10% / 11% / 11% / 14%
No / 70% / 69% / 71% / 72% / 71% / 70% / 67%
Don't Know / 18% / 16% / 17% / 18% / 12% / 14% / 15%

Among this group, Price(50%; down 1-pt) is the top reason why respondents plan to switch, while Bundling of Services(10%; down5-points)continues to be of lesser importance.

If yes, what is the primary reason behind your plans to switch TV service providers?

Current
Survey
Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Aug ‘08 / Previous Survey
May ‘08 / Previous
Survey
Nov ‘07
Price / 50% / 51% / 48% / 37% / 40% / 34%
New Service Features / 13% / 11% / 15% / 16% / 16% / 17%
Prospect of Better Customer Service / 12% / 5% / 11% / 10% / 11% / 9%
Bundling of Services / 10% / 15% / 11% / 13% / 16% / 19%
Technical Problems / 6% / 8% / 7% / 8% / 7% / 9%
Other / 8% / 7% / 7% / 13% / 9% / 10%

So which type of TV provider are switchers moving to?

More than one-in-two (54%) switchers say they’ll choose a fiber-optic service – representing an8-pt increase since our previous survey just three months ago.

Among satellite companies, DIRECTV (20%; down 5-pts) still maintains a two-to-one market share advantage over DISH Network (10%; down 2-pts) – but both have hit new lows.

Cable providers bring up the rear – with just 4% of switchers saying they’ll sign up with Comcast (up 1-pt) and 1% for Time Warner.

Here’s a look at the complete findings:

What TV programming service provider are you most likely to switch to?

Cable Service Providers (13%)

Current
Survey
Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Aug ‘08 / Previous Survey May ‘08 / Previous Survey
Feb ‘08 / Previous Survey
Nov ‘07
Comcast / 4% / 3% / 5% / 6% / 7% / 5% / 2%
Time Warner
(Road Runner) / 1% / 1% / 3% / 1% / 1% / 2% / 1%
Charter / 1% / 1% / 0% / 2% / 0% / 1% / 0%
Cox / 1% / 0% / 0% / 0% / 0% / 0% / 2%
Rogers / 1% / 0% / 0% / 0% / 0% / 0% / 2%
Cablevision / 0% / 0% / 0% / 0% / 0% / 0% / 0%
Other Cable / 5% / 5% / 7% / 6% / 4% / 6% / 6%

Satellite Service Providers (32%)

Current
Survey
Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Aug ‘08 / Previous Survey May ‘08 / Previous Survey
Feb ‘08 / Previous Survey
Nov ‘07
DIRECTV / 20% / 25% / 26% / 21% / 28% / 28% / 31%
DISH Network / 10% / 12% / 14% / 14% / 9% / 9% / 11%
Other Satellite / 2% / 2% / 1% / 0% / 2% / 3% / 3%

Fiber-Optic Service Providers (54%)

Current
Survey
Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Aug ‘08 / Previous Survey May ‘08 / Previous Survey
Feb ‘08 / Previous Survey
Nov ‘07
Verizon FiOS TV / 28% / 28% / 21% / 25% / 27% / 29% / 27%
AT&T U-verse TV / 23% / 16% / 21% / 17% / 14% / 12% / 10%
Other Fiber / 3% / 2% / 1% / 1% / 1% / 2% / 2%

Section Two: Internet Service Provider Trends

In a ChangeWave survey earlier this year we took a look at Internet usage trends among 2,435U.S. and Canadian respondents. Here’s what we found:

Current Market Share

What type of Internet service do you use at home?

Current
Survey
May ‘09
High-Speed Cable / 52%
High-Speed DSL / 34%
Fiber (e.g. FiOS) / 6%
Wireless (e.g., Air Card, WiMax) / 3%
Dial-Up / 2%
High-Speed Satellite / 1%
Do Not Use Internet Service at Home / 1%

Better than half (52%) of respondents say they currently use high-speed cable Internet service at home, and 34% say they use high-speed DSL.

While only 6% are using Fiber, its current area of availability is quite limited. And as the above results point out – the future looks very bright for fiber providers.

And who is your home Internet Service Provider (ISP)?

Current
Survey
May ‘09
Comcast / 20%
AT&T / 16%
Verizon / 11%
Time Warner / 11%
Cox / 5%
Charter / 4%
Cablevision / 3%
Rogers / 2%
Other Local Cable Company / 9%
Other Local Phone Company / 8%
Other / 5%
Don't Know/No Answer / 3%

Comcast (20%) leads in terms of current share among Internet service providers, with AT&T (16%) second, followed by Verizon (11%) and Time Warner (11%) tied for third.

Verizon Leads in Internet Service Customer Satisfaction

How satisfied are you with your home Internet Service Provider (ISP)?

By Current Internet Service Provider (ISP)

Total / Verizon / Cable-vision / Cox / AT&T / Comcast / Time Warner Cable / Charter
Very Satisfied / 35% / 48% / 47% / 35% / 34% / 33% / 26% / 24%
Somewhat Satisfied / 51% / 43% / 43% / 49% / 52% / 51% / 61% / 60%
Somewhat Unsatisfied / 10% / 5% / 6% / 11% / 10% / 13% / 10% / 13%
Very Unsatisfied / 3% / 3% / 1% / 5% / 2% / 3% / 2% / 2%

Similar to the trends we have identified in the TV Service Provider market, Verizon’s Internet service (48%)has the highest percentage of customers who say they are Very Satisfied with their provider. Cablevision (CVC; 47%) comes in a close second.

Cox (35%), AT&T (34%) and Comcast (33%) satisfaction ratings were mid-tier while Time Warner (26%) and Charter (24%) bring up the rear.

A Closer Look at Satisfaction Ratings for AT&T and Verizon

Total / AT&T
U-verse / AT&T DSL/
Other / Verizon
FiOS / Verizon
DSL/
Other
Very Satisfied / 35% / 71% / 31% / 70% / 32%
Somewhat Satisfied / 51% / 29% / 54% / 26% / 55%
Somewhat Unsatisfied / 10% / 0% / 11% / 1% / 9%
Very Unsatisfied / 3% / 0% / 2% / 2% / 4%

Future Share: Verizon and AT&T are Top Choices for Customers Switching ISP

We also asked respondents if they planned to switch Internet service providers in the next 6 months, and again Verizon was the big winner.

Only 9% of Verizon customers say they're likely to switch. In comparison, 17% of AT&T customers report they’re likely to switch, as do 22% of Time Warner Cable and 24% of Comcast subscribers

How likely are you to switch home Internet Service Providers (ISPs) over the next 6 months?

Current
Survey
May ‘09
Very Likely / 5%
Somewhat Likely / 13%
Unlikely / 78%
Don't Know / 4%

By Current Internet Service Provider:

Total / Comcast / Charter / Cable-vision / Cox / Time Warner Cable / AT&T / Verizon
Very Likely / 5% / 6% / 6% / 6% / 5% / 4% / 4% / 4%
Somewhat Likely / 13% / 18% / 16% / 10% / 14% / 18% / 13% / 5%
Unlikely / 78% / 71% / 75% / 81% / 76% / 74% / 78% / 88%
Don't Know / 4% / 4% / 3% / 3% / 6% / 4% / 5% / 3%

A Closer Look at Breakdown of Likely Switchers for Verizon:

All
Verizon
Customers / Verizon
FiOS / Verizon
DSL/
Other
Very Likely / 4% / 0% / 7%
Somewhat Likely / 5% / 0% / 8%
Unlikely / 88% / 100% / 81%
Don't Know / 3% / 0% / 4%

Who are you most likely to switch to?

Current
Survey
May ‘09
Verizon / 22%
AT&T / 22%
Comcast / 8%
Time Warner Cable / 3%
Cablevision / 1%
Charter / 1%
Cox / 1%
Rogers / 1%
Other Local Cable Company / 2%
Other Local Phone Company / 5%
Don't Know / 23%
Other / 7%
No Answer / 3%

Other Internet Usage Trends

Over the past 90 days, which of the following devices have you used to access the internet for personal use? (Check All That Apply)

Current
Survey
May ‘09
Traditional Desktop Computer / 83%
Traditional Laptop Computer / 74%
Smart Phone / 24%
iPod (Apple) / 8%
Media Center PC / 7%
Wii (Nintendo) / 6%
NetBook Computer / 5%
Traditional Cell Phone / 5%
Xbox 360 (Microsoft) / 3%
PlayStation 3 (Sony) / 3%
Tablet PC (Ultra-Mobile PC) / 2%
Other MP3 Player / 1%
Other / 2%

Beyond Traditional Desktop (83%) or Laptop (74%) computers, Smart Phones (24%) and iPods (Apple; 8%) rank as the top devices respondents used to access the Internet over the past 90 days.