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How to ruin a profitable business with service reductions

Ron Walter writes the rising cost of cable, coupled with a lack of service
MJT_RonWalter_TradingThoughts
Trading Thoughts by Ron Walter

The senior at the cable company cashier’s desk was fuming.

“My bill went up $20 to $128,” she stormed. “I can't afford more than $100. I’m a senior. I’m on a fixed income.

“They’re charging me $20 for long distance. I call my brother once in a while and a friend in New Brunswick once a year.”

The cashier politely explained the woman had signed up with Shaw Cable on a promotion saving $20 a month and the promotion had ended, thus the increase.

And she pointed out the woman could just pay for long distance calls as she made them and save money. She decided to take that route, leaving apparently less upset.

The local cable situation has certainly changed over the years. The cost of cable service has increased substantially, while the service has diminished significantly.

Only a few years ago, Shaw’s mandated local cable service consisted of a local program department that videoed and broadcast all sorts of community events. It was like Moose Jaw had a local TV station.

When Shaw’s profit growth declined the company eliminated the local program department. Now the few local programs still done are co-ordinated out of Shaw’s Saskatoon office

But cable rates keep climbing, almost as if Shaw wants to drive customers to Netflix or SaskTel’s Max cable services.

The local programming was mandated by the Canadian Radio Telecommunications Commission (CRTC) when the first local licence was approved. When Shaw bought the local cable operation it agreed to continue local programming.

There are two ways to ruin a thriving business, even a near-monopoly like Shaw.

One: keep increasing the price to make the cost unaffordable;

Two: reduce the service offered to customers.

Shaw Communications, valued by the market at $13.6 billion, regularly churns out between $800 million and $850 million annual profits but only earned $60 million in 2018.

Given the service cuts, that reduced profit is not surprising.

Ron Walter can be reached at ronjoy@sasktel.net

The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.