It's a mixed bag for cable and satellite TV providers. Although cable TV service continues to lose market share to satellite, penetration of digital cable has increased 11 percentage points, according to J.D. Power and Associates.

The company's 2006 Residential Cable/Satellite Satisfaction Study study finds the industry-wide penetration of digital cable has increased from 30 percent in the 2005 study to 41 percent in 2006, largely fueled by the increased availability of digital video, data and voice bundling options.

Currently, 29 percent of U.S. households subscribe to satellite service alone -- up 2 percent since the 2005 study -- while 58 percent of households subscribe only to cable -- down from 60 percent in the 2005 study.

An additional 1 percent of households subscribe to both cable and satellite services, with a total of 88 percent of households with either or both.

"Digital service is the key for consumers in taking advantage of the aggressively marketed 'triple play' bundle of digital video, voice and Internet services," said Steve Kirkeby, executive director of telecommunications and technology research at J.D. Power and Associates.

"With analog cable subscribers increasingly converting to digital, this becomes a major advantage for cable companies in the race against satellite providers to maintain market share."

Increased popularity of bundled services is also a likely contributor to a decrease in monthly payments for cable subscribers. Cable customers report spending $58 monthly -- down $1 from 2005 -- while satellite subscribers report spending $61 per month for service, up $3 from a year ago.

Although satellite providers still have a significant lead over cable providers in overall customer satisfaction, cable providers continue to close the satisfaction gap. The difference in satisfaction scores between cable and satellite subscribers is currently 50 index points on a 1,000-point scale-down from a 69-point gap in 2005.

Satisfaction for cable and satellite providers has fallen 29 and 48 points, respectively, since 2005.

"Recent mergers and acquisitions within the cable industry will undoubtedly impact satisfaction in the very near future," said Kirkeby. "During an acquisition, subscribers are likely to be more sensitive to how their carrier is going to impact the reliability of service and whether there will be any changes to the price structure or payment plan. These two areas are the most critical factors driving a customer's intent to switch carriers."

DVR Usage Grows

The use of digital video recorders (DVRs), which allow viewers to freeze and record live TV, has increased significantly since 2005. Thirty-eight percent of cable subscribers and 25 percent of satellite subscribers report that they are using DVRs supplied by their provider. Another 24 percent of cable and satellite customers report using TiVo as their DVR.

For the first time, the study measures customer satisfaction with cable and satellite TV providers in four regional segments: North Central, East, West and South. The shift to an expanded regional ranking structure in the study was made to provide respondents with choices more applicable to their regional markets.

Within each segment, six factors are measured to determine overall customer satisfaction: customer service, performance and reliability, image, billing, cost of service, and offerings and promotions. Study results by region are:

North Central Region: WOW! ranks highest in the region with an index score of 708 points-the highest satisfaction score in the study. WOW! receives top ratings from customers in five of the six study factors: customer service, performance and reliability, billing, cost of service, and offerings and promotions. DIRECTV follows WOW! in the North Central region rankings with a score of 677 points.

East Region: DIRECTV ranks highest in the East with an overall index score of 686 points, receiving the highest ratings from customers in performance and reliability, billing, image, cost of service, and offerings and promotions. Cox Communications follows with an overall score of 664 points.

West Region: Cox Communications ranks highest in the region with a score of 690 points. Cox receives top ratings from customers in customer service, performance and reliability, image, billing, and offerings and promotions. DISH Network ranks second overall in the West with a score of 662 points.

South Region: Bright House Networks ranks highest in the South region with an index score of 682 points. Bright House receives the highest ratings from customers in customer service, image, billing, and offerings and promotions. DIRECTV follows Bright House in the South region with a score of 676 points.

The 2006 Residential Cable/Satellite TV Customer Satisfaction Study is based on responses from 15,819 U.S. households that evaluated their satellite or cable TV provider.