Cable Technology Feature Article
Shaw Communications: When Cable Operators Go Wireless
By Jon Arnold, Principal, J Arnold & Associates
There seems to be no end to the variations of being a service provider these days, and when you talk about cable operators, Canada is at the head of the pack. Rogers Communications (News - Alert) is the biggest cableco, and if you don't know them, you should. Not only is Rogers the largest cable operator, but they are also the number one wireless operator in Canada. This would be unimaginable in the U.S., but Canada is a different market. Rogers has made many savvy moves over the years, and getting into mobile early - cellular in those days - looks like the best long-term move they've ever made.
There's a lot more to be said about Rogers, but that will have to be another time. I'd like to focus instead on some timely news about another cable operator, Shaw Communications (News - Alert), and their pending move into mobility. Back in 2008, the Canadian government held a wireless spectrum auction to enable more entries into the mobile market. Canada's population is about 35 million, and we have three national wireless providers who virtually dominate the market - Rogers, Bell Mobility and Telus. While these operators boosted their spectrum holdings, the bulk of the new spectrum went to new players. Most of these were pureplay wireless operators, but Shaw emerged as a major buyer too. With spectrum in hand, they are now poised for mobility.
Being a cableco, Shaw's core business is regional, and their mobile plans are no different. Their pickups of wireless spectrum were in western Canada, so there's a neat fit between the two businesses, either on a standalone basis or bundled together. This is important to Shaw, as their reasons for getting into mobility are different from the new pureplay entries, such as Wind or Mobilicity. Shaw's cable customers already have mobile options from the three national operators. Getting their mobile business in some ways is gravy for Shaw, but keeping the customer in their fold is the real value.
In this regard, mobility is really a defensive strategy for Shaw, whereas pureplays are totally focused on customer acquisition. However, Shaw must also protect its cable franchise from IPTV, which has mixed levels of adoption in their region. Telus - the incumbent telco - is definitely the largest threat, but they have been slow coming to market.
In my view, this is the main reason why Shaw didn't rush into mobility like the other spectrum winners did. They simply haven't been feeling that much pressure from IPTV, so they haven't needed to counter right away with wireless. Interestingly, some of North America's most advanced IPTV deployments are right in Shaw's back yard - SaskTel and Manitoba Tel - but these are fairly localized and do not compete with them on the scale of Telus.
Every market has its quirks and western Canada has another dimension relevant to this analysis. Aside from IPTV, satellite is a strong alternative to cable. The two main providers in Canada are Bell and - Shaw. Aside from the fact that it's most unusual for a cable operator to also have satellite - this means that Telus doesn't have a satellite option to compete for Shaw's cable customers in western Canada. Shaw really does hold a strong hand here, and until Telus becomes more aggressive with IPTV, their cable franchise is in good shape. If anything, Shaw competes mostly with itself for TV subscribers, as there will always be a set of customers who could just as well choose cable or satellite. That's a nice problem to have, and there are clearly many ways to be a service provider today.
That alone would be enough reason to talk about them here, but there's another layer that makes this more interesting - and relevant - to service providers, especially incumbents. Aside from their recent plans to enter the mobile market, Shaw has more recently made its biggest move yet. With a lot of help from Goldman Sachs, they have made a $2 billion deal to acquire the television assets of CanWest , one of Canada's largest broadcasters and media companies. You may be shaking your head wondering whether this is another delusional convergence play. We've seen this before, and these bold strategies often end badly - just ask Time Warner (News - Alert) or AOL.
Fair enough, but I think it's different this time around. Shaw has the customers, a great cable network, and a good track record with both new businesses and new technologies. When Shaw entered VoIP, they did not play the price game and compete Vonage (News - Alert)-style for subscribers. VoIP was incremental business for them, and they could afford to offer it as a premium - high margin - service. With wireless, waiting things out has worked in their favor. Everyone is seeing now how tough the competitive environment will be for new wireless players, and Shaw can afford to enter late and learn from the mistakes of others.
Perhaps more importantly, the appetite for mobile broadband continues to explode, and smartphones are getting more popular and affordable. Every mobile operator is transitioning to 4G, and by coming to market late, Shaw can hit the street running and be on par with all the wireless competitors. With mobility being so advanced now, this "convergence play" starts to make more sense. On its own, acquiring CanWest can boost Shaw's cable business, but the bigger opportunity lies in using mobility as a new channel to monetize the content. The iPad craze is just an exclamation point on the pent up demand consumers have for mobile content, and Shaw's move into wireless is much more about distributing video content than it is about telephony.
This is exactly the strategy followed by Videotron (News - Alert), which is Shaw's counterpart in Quebec. The main difference here, however, is that Videotron's parent company - Quebecor - already had the media assets, so they didn't need to make any large acquisitions. I've long felt that of all the new wireless entrants in Canada, Videotron had the best chance of success - mainly because their mobile business wasn't built around voice - it was really driven by content and video.
I very much see Shaw following the same path, and with all the pieces now in place, they are set to become a company to watch. To me, Shaw and Videotron are at the vanguard of what service providers will look like in an all IP and all broadband world - and that time is coming faster than most of us are ready for. Canada may be pretty straight and narrow about a lot of things, but this space isn't one of them, and service providers elsewhere really should be watching to see how operators like Shaw are inventing the future today.
Jon Arnold , Principal at J Arnold & Associates , writes the Service Provider Views column for TMCnet. To read more of Jon's articles, please visit his columnist page .
Edited by Patrick Barnard