Jim Shaw, CEO Shaw CommunicationsLarry MacDougal
The battle of the bundle is coming to Western Canada.
Shaw Communications Inc. plans to launch cellphone service in late 2011, promising to ratchet up competition in Canada's increasingly crowded wireless industry. The Calgary-based cable company said it plans to spend hundreds of millions of dollars over the next few years building a wireless network, initially in Western Canada.
Shaw's foray into wireless will allow it to bundle cellphone service with its existing cable, Internet and home-phone services.
CEO and vice-chair Jim Shaw is betting that bundling four services will ensure Shaw customers choose it for cellphone service, as an onslaught of new entrants battle for wireless subscribers. The federal government held a wireless spectrum auction in 2008 to allow new competitors to shake up the industry.
"We're going to come with a quad-play, and the other guys who bid for spectrum are coming with an uno-play," Mr. Shaw said in an interview Friday. "To bundle it up - I got to think that's strong."
Shaw has not lacked ambition in spreading its wings well beyond its core cable business, to Internet and home-phone service, where it has gained solid market shares. Like other cable companies, it sees wireless as the crown jewel in its effort to get customers using as many of its products as possible.
But Shaw's Western rival, Telus Corp. , is expanding its TV services to more effectively compete with Shaw's bundle. And the bundling won't stop there. Other cablecos across the country are getting into the wireless game, aiming to sell customers a suite of services.
Vancouver-based Telus is not taking the competition lightly. Although bruised by big losses in its home-phone service that are not likely to stop, it is plowing more than $1-billion into its networks in Alberta and British Columbia this year. It wants to build out its wireless broadband Internet network and its Internet-based TV product.
"Telus's decision to invest in broadband and TV is a smart one," said Greg MacDonald, an analyst with National Bank Financial. "Both of these companies are doing the things they have to do. It's a duopoly. Both players can win."
Mr. Shaw seems to agree: "There's lots of market share for everybody."
Telus's television product, which some analysts consider superior to Shaw's, is likely responsible for the 1,055 basic TV subscribers Shaw lost last quarter; the quarter before that, Shaw lost 1,416 subscribers. To analysts, this is evidence Telus is gaining TV traction. "I would guess that within two years, Telus will bundle wireless," Mr. MacDonald said.
Wireless is the next high-growth area for cable companies, and likely crucial to sustained financial performance. In Quebec, Quebecor Inc.'s Vidéotron Ltée has been much more aggressive about wireless. It outbid other possible new entrants at a wireless spectrum auction in 2008, and plans to launch service this summer on a network it's currently building.
Shaw's relatively slow move into wireless shows its prudence, most analysts say, though some say the delay could be costly. It has been two years since Shaw dropped almost $190-million on spectrum at an auction in 2008, and it has yet to build its network.
"That's been wasted time," said Dvai Ghose, an analyst with Genuity Capital Markets. "They're going to be one of the last new entrants to launch."
But waiting until late 2011 is likely strategic. It throws the door open to launching cellphone service with long-term evolution (LTE) technology, the next big upgrade for wireless networks. It also allows Mr. Shaw time to contemplate sharing broadcasting content across multiple platforms, including smart phones, should the company complete its acquisition of a controlling stake in CanWest Global Communications Corp.
Vidéotron is planning much the same in Quebec, where it will bundle its wireless with cable and Internet and spread its parent company's French-language media assets across all platforms.
Mr. Shaw said part of the reason for wanting the assets is to gain cheap access to CanWest's towers. This would allow Shaw, which already offers Shaw Direct satellite TV outside its Western base, to expand further.
"Why couldn't it work in Montreal, when we have the Global station, we have Shaw Direct there, and we have a wireless product?" he said. "So now we have a triple-play there. Some markets, we'll have a four-play."