Cable companies that are aggressively enticing telephone customers with attractively priced service bundles are also outperforming traditional phone companies in satisfying customers, according to the J.D. Power and Associates 2006 Residential All-Distance Telephone Customer Satisfaction Study.

The study, which measures customer satisfaction with both local and long-distance telephone service, finds that cable companies rank highest in customer satisfaction in five of six U.S. regions.

In 2005, just one cable company -- Cox Communications -- led any of the regional customer satisfaction rankings. It now ranks highest in three regions, while newcomers Bright House Networks and Time Warner Cable each rank highest in one region. Verizon is the sole traditional phone company ranking highest in a region.

"While telephone service offered by cable companies is relatively new to the market, large numbers of customers are being lured to switch with enticing cost savings and highly attractive bundles of video, voice and data service," said Steve Kirkeby, executive director of telecommunications and technology research at J.D. Power and Associates.

"The importance of pricing as a reason to bundle service with a single provider has increased dramatically this year, no doubt a result of significant price competition introduced when cable companies began offering local and long distance telephone service to new markets," he added.

Although price competition plays a significant role in the industry today, customer-reported spending on local and long distance service has increased 3.4 percent from 2005.

On average, customers report paying $52.40 per month for local and long distance service -- up from $50.70 in 2005. Customers of cable providers report paying an average of just $42.40 per month, while reported spending with traditional telephone companies averages $53.59.

"We're seeing that for the first time customers are most often contacting their all-distance carrier about rates, pricing and features while questions about billing have dropped dramatically, spotlighting how intense competition and simplified rates are changing customer focus," said Kirkeby. "However, the study findings consistently indicate that price alone will not satisfy or retain customers."

The study finds customer satisfaction in the telephone industry continues to decline. Overall, satisfaction index scores have dropped from 692 (on a 1,000-point scale) in 2005 to 670 in 2006. Satisfaction has fallen in all six factor areas measured in the study, dropping most significantly in the areas of customer service, image and billing. The other areas measured are performance and reliability, cost of service, and offerings and promotions.

"Although cable companies entering new markets average satisfaction scores that are more than 30 index points higher than the industry as a whole, and despite nearly doubling their share to just under 10 percent of the telephone service market, cable companies are not yet a large enough force to propel overall satisfaction higher," said Kirkeby.

"Overall satisfaction drops as the industry continues to struggle with consumer uncertainty caused by several large, well-publicized mergers and divestitures among the traditional phone companies. Changes such as these always take their toll on customer satisfaction," he noted.

The study results by region are:

• Northeast Region: Cox Communications ranks highest, receiving the highest ratings in the region in performance and reliability, billing, image, customer service, and offering and promotions.

• Mid-Atlantic Region: Verizon ranks highest, outperforming other carriers in billing, image, cost of service, and offerings and promotions.

• Southeast Region: Bright House Networks ranks highest, with top ratings in the region in customer service, billing and image.

• North Central Region: Time Warner Cable ranks highest, with the highest ratings in the billing and cost of service factors.

• Southwest Region: Cox Communications ranks highest, with particularly high ratings in customer service, billing and image.

• West Region: Cox Communications ranks highest in the region for a fourth consecutive year, receiving top ratings in all six factors.