Comcast Signals More Hard Sell Tactics to Increase Residential Customer Revenue if it Acquires Time Warner Cable

Recently, a recording of a Comcast customer rep who would not promptly implement a customer request to cancel service went viral on the internet.  See Brad Chacos, Listen to the Comcast customer service call from hell, PC World July 15, 2014.

“Instead of merely honoring the request, the Comcast rep turned aggressive, barreling down a spiral of circular questioning to try to get Block to say why he was canceling. “Why is it that you’re not wanting to have the No.1 rated Internet service, the No. 1 rated TV service?” the rep borderline shrieks, over and over again. “What about those savings, those services, are you not wanting?””

Initially, Comcast blamed the rep, issuing a statement deploring the conduct, stating:  “The way in which our representative communicated with them is unacceptable and not consistent with how we train our customer service representatives.”

Subsequently information surfaced indicating that the rep was zealously doing pretty much what he was trained — and specifically rewarded — to do:  deter unsatisfied customers from cancelling or reducing services.  See Comcast on hellish customer service call: Rep did ‘what we trained him’ to do.  An internal Comcast memo has surfaced which states:

“The agent on this call did a lot of what we trained him and paid him—and thousands of other Retention agents—to do,” Watson wrote. “He tried to save a customer****  “We will review our training programs, we will refresh our manager on coaching for quality, and we will take a look at our incentives to ensure we are rewarding employees for the right behaviors,” Watson said.”

According to PC World,

“That last comment may allude to a post on Reddit last week, reportedly from a former Comcast employee, that outlined how Retention specialists get sizeable bonuses if they keep enough customers from canceling service. In other words, representatives have a big incentive not to give up, even when the customer is dead-set on leaving.”

The introduction of Comcast “hard sell” tactics for Time Warner customers may be a major economic factor in the proposed merger now under review by state and federal regulators.  A paper from the Technology Policy Institute,  An Economic Analysis of the Proposed Comcast/Time Warner Cable Merger, by Scott Wallsten, assessing the pending application of Comcast to take over Time Warner Cable, indicates that the major drivers of value to Comcast will be cost cutting at Time Warner Cable, coupled with increasing hard sell tactics to glean more money from residential customers:

The paper indicates that part of the estimated $1.5 Billion in “merger synergies” may come from cost cutting at Time Warner Cable:

“On the cost side of the ledger, Comcast estimates that the “synergies”—presumably through gains from scale efficiencies—will yield cost savings of $1.5 billion a year in operating expenses by the third year and continuing into the future, plus short-term “capital expenditure efficiencies” of $400 million, or about 10 percent of TWC’s operating expenses (Figure 1).4 Reducing costs without reducing output is unambiguously a net economic benefit.”

In addition — and resonating with the viral recording of the high pressure Comcast agent — it is apparently Comcast’s plan to increase revenue by being more aggressive than TWC on the phone, in order to “upsell” customers to buy more services whenever they call for unrelated purposes:

“Finally, we do not know how the merger will affect real prices. Comcast has made no secret of its desire for the merger to yield “revenue synergies.” 19 Indeed, Comcast apparently sees these increased revenues as the more important benefit. Neil Smit, President of Comcast Cable, noted at the 2014 Deutsche Bank Telecom and Media Conference, I think the revenue synergies are greater than the cost synergies. On the revenue synergies side the first would be in the residential area where we would seek to bundle more and that is call center training, that’s teaching people to sell another RTU on a call, on a service call, fix a billing problem, upsell to a third product, so just bundling better. You get higher ARPU, higher retention, lower churn rates.20 The question with respect to prices, therefore, is whether these financial benefits to the firm reflect increased demand resulting from offering a better service, or simply a better ability to extract more of the rents than TWC.”

Hard sell tactics may harm vulnerable elderly and low income customers living on limited budgets.  The combination of cutting TWC costs and jobs in NY, and harvesting more revenue from Time Warner customers through high pressure telephone sales tactics may benefit Comcast, but this can hardly be seen as a positive benefit to New York.

Interestingly, the TPI paper does not draw a conclusion in favor of the merger.  TPI is an IT and telecom industry funded think tank, whose list of a variety of powerful supporters includes Comcast and Time Warner Cable.  Rather, the paper concludes with a suggestion that the case for approving the merger will be made through the provision of proprietary information to regulators.  In other words, a decision allowing the merger may be based on information not in the public record.

“Conclusion

Mergers have benefits and costs that, in theory, could lead to net benefits or net harms.37 Comcast’s acquisition of TWC has generated a level of controversy consistent with the $45 billion price. Nevertheless, the question regulators and antitrust authorities must answer is the same as it is for any merger: do the expected benefits that flow from increased efficiencies outweigh the chances that the merger could increase the incentive and ability of the combined firm to behave in anticompetitive behavior and the magnitude of those effects. This paper explored the various arguments for and against the merger. Hopefully, with the proprietary data available to it, government officials will be able to conduct more rigorous analysis that allows them to reach a conclusion that yields the highest likelihood of improving economic welfare.”

As we have maintained, the proponents of the transfer of ownership of Time Warner Cable to Comcast have the burden of proof to show net positive benefits to New York flowing from the proposed transfer.  The state of the public record to date does not provide the necessary details and assurances of meaningful benefits that outweigh the considerable risks.  See

The public has been encouraged by the PSC to submit comments on the proposed merger.More than 2,700 comments have been received to date, most of them against the proposed takeover.    Comments can be submitted online at the PSC site for the case file.  Comments are requested by August 8, 2014, but will be received until the time of decision.  Currently, action on the merger is anticipated at the PSC’s October 2, 2014 session.

Gerald A. Norlander

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