By K.B. Sherman, Contributing Writer
Shrewsbury – Representatives of Shrewsbury Electric and Cable Operations (SELCO) briefed the Board of Selectmen during the board’s Nov. 24 meeting on plans to raise its rates. SELCO, a nonprofit business, plans to raise rates charged to customers in order to pass through increased prices from content providers.
Michael Hale, SELCO general manager, began the presentation by stating that ever increasing industry changes in the next five years will surpass all industry changes since 1964. Consumers, he claimed are “cutting the cable cord” with the move from pure cable service to ever more internet-based content reception.
“The video model is broken,” said Hale, “with no fix in sight.” The industry is changing so quickly that smaller companies like SELCO have to adapt quickly, he added.
Hale said that SELCO realizes that customers are gradually using less cable service because they are protesting ever higher cable rates while using more cable alternatives. The exception is sport channel use, which is still demand, has no alternative yet, and whose costs continue to increase at a faster rate than any other cable content. Further, he noted, cable industry bundling continues to force consumers to buy a multitude of channels in order to receive the one they really want.
The number of SELCO cable subscribers has increased from 10,946 in 2013 to 11,721 currently. Further, in 2014, for the first time, the number of internet users surpassed the number of cable subscribers as more and more content is delivered over the Internet. However, as internet use is more expensive than cable, the money paid by consumers has risen and will continue to do so as more people are receiving content on devices other than their TV sets.
CCG Consulting recently completed an analysis for SELCO which found that SELCO continues to charge below the industry average for cable service and that SELCO loses money on providing cable service. They noted that there is an opportunity to add to products offered home security, fiber optics, and remote appliance control. Increased public access service was also discussed although this loses money for SELCO. In general, CCG recommended that SELCO change its business model from service provider to business service for the benefit of both SELCO and its customers.
SELCO proposed the following: a basic cable rate increase from $18.72 to $19.95/month and an expanded basic rate increase from $26.13 to $30.00/month, for a total increase of $5.10/month. For expanded channel reception, content providers are continuing to bundle such content as sports and specialty channels such as Oprah Winfrey’s network with many other channels consumers don’t necessarily want, but for which consumers must pay. In addition, local channels, which cable providers are required to include, are charging ever higher retransmission rates. Two local Spanish language channels may be dropped by SELCO because they are demanding a new six-figure annual pass-through charge. The digital channel tier charge will increase from $14.95 to $16.95/month, as well as a franchise fee of $3.35/month, both pass-through charges. Viacom is increasing its rate by $3.43; Disney/ESPN by $2.08/month; and other channels also increasing their pass-through rates. Despite all the above, SELCO still charges far less than, say, Grafton, with a $3.35/month franchise fee versus $8.82 for Verizon in Grafton.
Selectman Moira Miller noted that “SELCO is doing a nice job” in a challenging environment. Selectman Henry Fitzgerald asked that in such a chaotic environment, would the basic cable business be in danger of ever disappearing. Hale responded that it would.
The board then moved to accept SELCO’s report and fee plan.