Comcast’s corporate headquarters, Comcast Center, is the tallest building in Philadelphia. It’s covered in mirrors, which makes it the perfect metaphor for the company, one former employee says; no matter where you go, the glare is in your eyes.
It seems a lot of people share that sentiment.
Comcast earned Consumerist’s “Worst Company in America” title twice, first in 2010 and again this year, 2014. It ranks at the very bottom of the American Consumer Satisfaction Index, underperforming even the rest of the cable industry, where “high prices, poor reliability, and declining customer service” are endemic.
In mid-July, AOL executive Ryan Block placed a call to Comcast customer service in an effort to cancel his service. What ensued was an 18-minute, Kafkaesque struggle with an overly persistent employee, which Block partially recorded and posted online. The recording went viral, and has now been listened to more than 5 million times. The interaction was covered by every major news network, immortalized in a New Yorker cartoon, and included in a David Letterman top 10 list (“Lesser-known Labors of Hercules”). “It hit the cultural zeitgeist something fierce,” Block says. “I guess it touched some kind of nerve. It was a keyed-up, aggressive version of a call I think most people have had.”
Thousands of Comcast customers across the country have experienced similar customer service nightmares when dealing with the company. Usually these involve multiple rounds of phone calls, missed technician appointments, and unexpected fees. In fact, forums like comcastmustdie.com and the Comcast section of Reddit have been created to give customers a dedicated space to vent.
Comcast is the largest cable company in the US, the product of a deliberate, then aggressive, growth strategy that involved buying up short-lived companies from cable’s early days
Despite being reviled, Comcast is enormously successful. It’s the largest cable company in the US, the product of a deliberate, then aggressive, growth strategy that involved buying up short-lived companies from cable’s early days. Most recently, Comcast bought NBCUniversal as part of an effort to own more of the programming it serves, making it the largest media company in the world. It is also the 57th most profitable public company, ahead of Intel, Anheuser-Busch, and Goldman Sachs.
For its next act, Comcast wants to acquire Time Warner Cable: America’s second-largest cable provider with a similarly poor reputation of tormenting its customers.
Comcast says the merger will allow it to deliver more programming, faster internet, and other improvements for customers, while allowing the combined company to compete against new media challengers. "We will continue to invest hundreds of millions of dollars in our network to continue to create innovative products and services for Comcast and Time Warner Cable customers," says D’Arcy Rudnay, Comcast’s head of communications.
The company says Block’s call prompted a customer service review that resulted in real changes. Eleven employee-coaching courses that used to be optional are now mandatory, and Comcast is reviewing training materials for customer service and sales. The company also created a task force to revise "the messages we use in emails or calls to customers, in our automated phone system and in other communications, to reinforce that the overall customer experience is our top priority."
But a majority of Americans still oppose the merger, according to a poll commissioned by the Consumers Union, which opposes the deal, fearing that a consolidated cable industry will lead to price hikes and less incentives to improve customer service. (Another poll commissioned by Reuters found almost exactly the same result.) Others worry that an all-powerful Comcast will speed up or slow down services like Netflix in order to prioritize its own content and maximize profits.
The proposed merger is being reviewed by several regulatory bodies, including the Federal Communications Commission, Department of Justice, and New York’s Public Service Commission, in order to evaluate its impact on the public interest. There is a good chance the deal will be approved. So how disastrous would such a merger be?
The perks of being a monopoly
Comcast and Time Warner claim a merger won’t create a monopoly because they don’t currently compete anyway. In fact, no one in the cable industry competes — which is why most people only have one choice for cable.
The cable industry’s spirit of cooperation is underscored in the "divestiture" section of the proposed merger, in which Comcast, Time Warner, and Charter Communications propose trading customers the way kids might trade baseball cards.
The transaction involves some contortions. Time Warner will transfer 3 million customers to Charter, and Charter will transfer 1.6 million customers to Time Warner. Then, Comcast will transfer 2.5 million customers to a new, yet-to-be named, publicly traded company, referred to as "SpinCo" in filings. SpinCo will be 67 percent owned by Comcast shareholders, 33 percent owned by a Charter-owned holding company, and managed by Charter.
Map of Comcast, Time Warner Cable, and Charter coverage areas before and after the merger. Under the proposed deal, 3 million Time Warner subscribers would go to Charter, 1.6 million Charter customers would go to Time Warner, and 2.5 million customers would go to a new company, referred to as SpinCo in filings, which would be owned 67 percent by Comcast shareholders and 33 percent by a Charter-owned holding company. In the end, a combined Comcast-Time Warner would have 30 million subscribers, while Charter would be the next-largest cable company with 8.2 million subscribers, including the ones it will manage through SpinCo. Data on the divested subscribers is sourced from public filings. Coverage areas are based on broadband coverage areas from the National Telecommunications and Information Administration, cross-referenced with public filings, and are accurate to the nearest zip code. Comcast has not released the exact breakdown of subscribers included in the divestiture transaction. As a result, dots indicate which designated market area subscribers belong to, but do not indicate the number of subscribers included in the transaction. Map by Ryan Mark.
The deal would double Charter’s subscriber base, while keeping Comcast’s market share under 30 percent in order to appeal to regulators. Everybody wins — except, maybe, the customer.
While they don’t compete with each other, cable companies do face competition from satellite, DSL, and 3G and 4G wireless providers. Unfortunately for customers, those technologies are far inferior. Satellite television is unreliable in bad weather, and unavailable in areas blocked by trees or buildings. Meanwhile, existing DSL and wireless services are frustratingly slow for modern internet uses like streaming video, transferring files, and loading web applications for professionals.
"The other options are hardly worth the money," says Bonnie Smalley, who worked in customer service at Comcast and won an award for her work tweeting as @ComcastBonnie. She quit in 2011. "Right now, [Comcast] has little incentive to provide you with decent service. Who are you going to run to when you disconnect your service? Nobody, and they know it."
In other countries, regulation has forced cable companies to compete with each other. In the early 2000s, France ordered state-owned monopoly France Telecom to lease the use of its network to competitors at regulated rates. This "local loop unbundling" supercharged competition. New companies entered the market by piggybacking on France Telecom’s network, then built their own.
The French typically pay about a quarter of what Americans shell out for a "triple play" phone, TV, and internet package
As a result, the French typically pay about a quarter of what Americans shell out for a "triple play" phone, TV, and internet package, according to a 2012 book by the Pulitzer Prize-winning financial reporter David Cay Johnston.
The US tried to implement similar unbundling regulations in the mid-’90s, but incumbent cable companies repeatedly challenged them in court, set prohibitively high prices for the use of their networks, and applied pressure on politicians. Eventually, government officials were forced to reverse the policy.
Today, Comcast is the seventh-largest single source of lobbying dollars on Capitol Hill, spending $18.8 million to lobby Congress and federal agencies. The National Cable and Telecommunications Association, which spends $19.8 million, is the fifth. The cable industry has also had success lobbying on a local level, in order to prevent cities from building their own broadband networks that would compete with cable.
In Comcasted, a book by Philadelphia Inquirer reporter Joseph DiStefano, an early cable investor describes how the Comcast founders achieved their success. "They have minded their business exceptionally well," he says. "Fundamentally, though, they are monopolists."
Comcast and the internet
When Comcast was acquiring cable companies in the ’90s and early 2000s, their emphasis was on television. "[Their philosophy was], ‘We’re a cable TV company, everything else is ancillary to cable TV," says a technician who worked at AT&T Broadband when it was bought by Comcast in 2002.
That’s no longer true. If current trends continue, internet will soon be the cable industry’s primary business. Comcast’s residential internet subscriptions now bring in half as much money as its TV subscriptions and could eclipse TV by 2015. Meanwhile, the cable industry just had its first (small) net loss in TV subscribers ever, which analysts attributed to customers watching shows online rather than on TV.
The most vocal opposition to the Comcast-Time Warner deal therefore comes from internet advocates, who are worried about three things: persistently slow and expensive service across the United States; higher barriers to entry for new internet-based companies; and Comcast’s ability to control what customers see and do on the internet.
In 2008, the FCC warned Comcast for blocking access to the file-sharing site BitTorrent, which is notorious for facilitating internet piracy but also has many legitimate uses. Meanwhile, Comcast’s size enables it to extract fees that smaller cable providers can’t; for example, Netflix now pays what it calls an "arbitrary tax" to ensure high quality for its video streams.
Unless the FCC writes new rules, there will be nothing to stop Comcast and other giant internet providers from selectively boosting speeds in the future
Weakened net neutrality rules —which require that all content transmitted over the internet be treated equally — have broadband advocates worried about the power companies like Comcast wield.
Under the terms of its merger with NBCUniversal, Comcast is prohibited from blocking websites or selectively slowing traffic until 2018. But the company hasn’t said what will happen after that.
And unless the FCC writes new rules, there will be nothing to stop Comcast and other giant internet providers from selectively boosting speeds in the future. Once its NBCUniversal obligations expire, Comcast could decide to prioritize its own video-streaming service, Streampix, while asking companies like Google, Skype, BitTorrent, and Facebook to pay to have their bits fast-tracked. Any startup that wants to compete with those incumbents will have to pay fees as well or be relegated to the second-rate public internet.
The beginnings of competition
For now, fiber is the only technology that really threatens cable.
Kansas City was the first city to offer Google Fiber, which is the "single biggest frustration to agents," says one Time Warner employee who works in a retention department and is tasked with talking customers out of canceling their accounts. "I can count on one hand how many times I’ve saved a person from switching to Google in the last year," he says. "I see a [Kansas City] area code on the caller ID and I brace myself."
Google Fiber is only available in three cities and AT&T’s GigaPower fiber service is only available in two, but they’re pushing forward with construction. Verizon FiOS has 5.9 million internet customers, although the company has stopped its buildout.
"I can count on one hand how many times I’ve saved a person from switching to Google in the last year."
The cable industry could use its lead to lay fiber nationwide, or address its longstanding customer service issues so that customers won’t be as eager to jump ship.
Instead, cable companies are responding by doing what they’ve always done: buying each other. (Comcast’s bid for Time Warner actually comes after a failed bid from Charter.) Economically, consolidation is a low-hanging fruit: more subscribers translate directly into greater revenue as well as more bargaining power with content providers.
In a recent company memo, Comcast executive David Cohen cited satellite, Google Fiber, and "more choice of pay TV providers than ever before" as evidence that Comcast needs to get bigger. "Comcast believes that there can be no justification for denying the company the additional scale that will help it compete more effectively," he writes.
Life after the closing
In June, the Time Warner branch in Broomfield, Colorado, held its quarterly all-hands meeting, the first since Comcast announced its intention to buy the company for $45 billion. Chief technical officer Michael LaJoie broke character for a moment. "This isn’t exactly a merger of the two most beloved companies in America," he said.
For the rest of the meeting, LaJoie, chief operations officer Dinesh Jain, and chief strategy officer Peter Stern echoed the lines that company president Rob Marcus had been writing in internal emails: We’re so excited to become part of the Comcast family. We’ll be able to deliver a superior product to our customers. We’ll have more leverage with content owners. It’ll be better for customers, better for employees, better for everyone.
Except, "there was zero talk about improving customer service," one attendee told The Verge.
"This isn’t exactly a merger of the two most beloved companies in America."
I had multiple long conversations with D’Arcy Rudnay, Comcast’s head of communications, and Tom Karinshak, senior vice president of customer experience, and it’s clear that Comcast is trying to address some of its deep-seated problems. "Improving customer service at Comcast is our number one priority," Rudnay says. "We continue to work on it, we have been working on it. It’s very important to our customer experience."
The company is in the middle of a multi-year effort to convert its all-purpose call centers into "Centers of Excellence" that specialize in one area, designed to prevent customers from being repeatedly transferred. A new universal billing and troubleshooting system is currently being introduced, which should reduce frustrating employee errors.
But based on interviews with more than 150 current and former employees, part of a three-week investigation by The Verge, some issues seem intractable.
Comcast spends more than $2 billion a year on customer service, a painfully large number for a publicly-traded company eager to maximize shareholder returns. That is perhaps why Comcast pushes its employees in customer service and tech support to make sales — a skewed incentive when customers are calling in with a problem. The company also overbooks technicians, leading to late and missed appointments, and relies heavily on contract labor, where quality control can be difficult.
Finally, Comcast is still struggling with the legacies of the many companies it acquired but never fully integrated, leading to mistakes in billing and miscommunication with customers. The company is working to streamline its systems, but even Rudnay acknowledges that the effort is only in its "first, second, or third inning."
None of this bodes well for customers of the new Comcast-Time Warner. Furthermore, while the acquisition will result in cost-savings for Comcast, the company says, those savings won’t necessarily accrue to customers. "We’re certainly not promising that customer bills are going to go down or that they’ll increase less rapidly," Comcast executive vice president David Cohen has said.
"We're certainly not promising that customer bills are going to go down or that they'll increase less rapidly."
Stopping the merger won’t fix what’s broken in the cable industry. "The reality is, the poor customer service, the anti-consumer stance on net neutrality, the constantly inflating prices, these are all downstream symptoms to be expected from any company allowed to accumulate too much wealth, power, and influence, while also being totally almost completely unchecked by regulation and free-market competition," Block says, reflecting on why his Comcast call became a meme.
But ultimately, a straightforward merger of two of the most unpopular companies in the country seems unlikely to result in happier customers.
"This is not getting bigger to provide cheaper service, or economies of scale, or to provide better service," a billing systems manager who worked at Comcast from 2008 to 2013 tells The Verge. "This is getting bigger for the sake of bigness. This is really like, ‘I own 10 Subway stores and now I want an 11th one.’
"Well, if your 10 Subway stores have Cs from the health department, I don’t know if you should get an 11th one. Maybe you should work on getting them cleaned out."
Update: This story has been updated to reflect that fact that the Consumers Union, which commissioned a public poll on the Comcast-Time Warner Cable merger, openly opposes the deal. Another poll conducted by Reuters found similar results: a majority of Americans think the deal will be bad for consumers.
Lead photo by Michael Shane. Russell Brandom contributed reporting. Chaim Gartenberg and Melissa Smith contributed research.
Disclosure: Comcast Ventures is an investor in Vox Media, The Verge's parent company.