Nowhere to Go But Up

Why Charter Communications ranked last in our annual customer service surveyand what the cable provider is doing to improve its reputation

It all started with a bad storm that hit the St. Louis area in July, 2006, knocking out Melanie Hubert's cable and disabling all the devices in her house, including Internet service. When the storm finally cleared, the cable still didn't work. Three weeks and many phone calls later, a repairman from Charter Communications (CHTR), her cable provider, showed up. Frustrated, Hubert canceled her subscription in December and decided to switch to SBC, now AT&T (T).

Her headaches with Charter, though, didn't end there. When Hubert returned her equipment to the cable company, she was told she had a $2 outstanding balance, for which she would be billed. But when the bill arrived, it was for a full month of service. A customer service representative told Hubert it was a mistake, that the bill would be canceled and to ignore it. She did. The next month a collection agency started hounding Hubert for the full month's bill. After filling formal complaints with the Better Business Bureau and the Missouri Attorney General's office, the issue was finally resolved the following February.

"It could have been one phone call. If that person would have done their job and taken care of the back balance that we owed, that would have made us happy," says Hubert. "I'm not the kind of person that would normally like to write to the Attorney General and file a complaint. When we got the letter from the collection agency is when I had enough."

Declining Subscriber Base

Hubert's experience isn't an isolated one: Charter, the nation's third-largest cable provider, came in dead last in BusinessWeek's customer service ranking of almost 200 brands this year. The ranking is compiled using data from customer satisfaction research firm J.D. Power & Associates. (J.D. Power, like BusinessWeek, is owned by The McGraw-Hill Companies [MHP].) The service index score in our ranking for the St. Louis-based cable provider is 549.64, almost half the index score of the top-rated brand, financial-services company USAA, which scores 1030.66. (For more on how we arrived at that score, "read about our methodology".)

"We are not where we need to be or where we want to be in terms of our customer service, but we've made substantial progress," says Joe Stackhouse, senior vice-president for customer operations at Charter. "Customer service is one of the things we want to drive improvement across the board."

The numbers suggest that customers may not agree with Stackhouse. In the last 18 months, the company's subscriber rolls have dropped by 3.5%, to 5.5 million. And Charter's basic cable subscriber base has dropped in six of the last eight quarters. That's not helping the profits of the company, which reported a net loss of $1.6 billion for the full year. In the past year, the stock price has plummeted 67%, to an anemic $1.04.

'They're Totally Unresposive'

Karolyn Friday, 56, says the only reason she stays with Charter is she doesn't want to deal with the phone calls and technician visits it will take to cancel her subscription. Besides, there are no other cable options in her area of Kennewick, Wash. Friday went through one ordeal with her friend Ida, 86, who switched from Charter to Verizon (VZ) but couldn't receive calls from Charter customers after the switch. Although the issue was on Verizon's side, trying to get a responsive representative from Charter to assist was next to impossible.

"The frustrating part was dealing with the lack of customer service," says Friday. "When you do identify a problem and take it to them, they're totally unresponsive.

How hard could it have been that when they finally did do it they did it in a day?"

Charter has the distinction of being the company with the highest number of complaints in the area covered by the St. Louis Better Business Bureau. In the last 36 months, the St. Louis Better Business Bureau has received 3,200 complaints about Charter, the highest of any company the office tracks. "Sometimes, due to the size and scope of the company, one hand often doesn't work with the other," says Scott Thomas, who works as a trade practice consultant at the St. Louis office.

Where do customers say Charter has gone wrong? Charter, which provides service in 29 states, often couldn't resolve an issue in one phone call. On top of that, it had problems with hidden charges, erratic billing, and technical innovation. For example, it was one of the last cable companies to offer phone service and thus was behind rivals when it came to offering bundled services—cable, Internet, and phone.

Worse Than the Rest of Cable

It's no secret that the cable industry rarely gets high marks for its customer service. Part of the problem, says Craig Moffett, vice-president and senior analyst at Sanford C. Bernstein & Co., is that historically there have been very few competitors in any one region, so companies haven't had to compete aggressively for customers. That may be changing with new players entering the game, like telecoms AT&T and satellite and digital cable networks such as DirecTV (DTV) and Echostar (SATS).

"A whole body of psychographic research shows customers will tend to be more satisfied with industries where they made a proactive choice," says Moffett. "The cable industry suffers from its reputation as a quasi-monopoly."

Charter's problems, however, go well beyond those of the industry, says Moffett. These days, cable customers harp mostly about poor programming options or lengthy commercials. The industry rarely suffers from complaints of erratic billing and surly reps—both among Charter's woes.

"Customers vote with their pocketbooks, and they have choices, and we recognize that if they don't get the service they need they'll go to another provider," says Stackhouse. "Our agents and technicians recognize that every day."

The Road to Improved Response

Charter is taking steps to improve its customer service. It built a new call center that lets the company route customer calls to the most qualified agent based on skills rather than geography. The company also shrank the time it takes for a technician to reach a customer's house for service from 8 hours to 2 by making an investment in technology that routes the closest service operator to the house.

That investment may be starting to pay off. The St. Louis BBB office says there are currently no unresolved complaints. Charter works closely with the BBB to resolve customer issues as soon as possible. The company has set up a system whereby complaints to the BBB from anywhere in the U.S. are funneled to one Charter location where agents specifically trained to handle those matters can process them. That allows Charter to address several complaints on a single issue at one time, speeding up the resolution. In this way, complaints that are sent to the BBB are sometimes fixed in the same day.

Says Thomas of the St. Louis BBB: "Charter has more complaints than any other company in our system, but they have been good at working with us." That's a sentiment Charter is hoping customers will soon share.

Lehman is an editorial assistant for BusinessWeek in New York.

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