Shaw Communications set to launch Wi-Fi network, shelves wireless phone service plan

CALGARY – Shaw Communications is giving up its plans to launch a wireless phone service, choosing instead to invest in a larger and faster Wi-Fi network.

The Calgary-based telecommunications company said Thursday that competition is too fierce in the wireless industry and that entering the market wouldn’t be beneficial to its shareholders. Instead, the company will focus on building a Western Canada-wide Wi-Fi network that will let customers use Shaw services outside their home.

The decision was reached after Shaw (TSX:SJR.B) launched a review of the assets, including how wireless would fit within its existing service bundles that include Internet and cable television, as well as the costs needed to build a competitive network.

“The wireless business is challenging from a number of perspectives and it became clear from our review that the economics of a new entrant wireless provider are not compelling,” CEO Brad Shaw said on a conference call with analysts Thursday.

That’s because new entrants lack the economies of scale and scope to compete effectively against well-established players, the company said.

Shaw said the wireless industry has changed dramatically since it bought wireless licences at an auction in 2008 that opened up Canada’s wireless industry to a number of new entrants, most of which have already launched.
“We do not feel the economic benefits related to an entry into wireless are sufficient to justify the capital investment that is required.”

Instead, Shaw plans to focus its efforts on launching the Wi-Fi network; a move it says will achieve similar objectives without risking more than $1 billion to launch a traditional wireless phone network.

Shaw “can build extensive Wi-Fi coverage at a substantially lower cost relative to a traditional wireless network and still provide our customers with an excellent broadband wireless experience,” it said.

The company’s change of heart came as its executives observed a shift in how consumers are using their smartphones and tablets, with many users seeking Wi-Fi in order to access richer media, larger documents, and applications like Apple’s FaceTime.

When it purchased the wireless spectrum in 2008, Shaw viewed the acquisition as a complementary product to its existing services as more people gravitated to wireless devices.

However, the market has become saturated with new entrants including Wind Mobile, Quebecor’s Videotron (TSX:QBR.B), Mobilicity, and Public Mobile.
EastLink Communications is also planning to launch its own wireless services in Halifax.

Those competitors are in addition to established players Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T).

Telecom analyst Maher Yaghi says Shaw could be waiting for one of the new wireless players to tank before making an offer for the company – giving Shaw an established wireless business for less than the cost of building a new network.

Shaw noted that consumption habits have evolved since it purchased wireless spectrum, with more Canadians using their home Internet to access high-quality streaming video services like Netflix over their television sets and tablets.

In July, Shaw launched its answer to those all-you-can-eat entertainment companies with Shaw Movie Club, a subscription based movie service.

Shaw said that its decision also falls in step with major international wireless carriers who are launching their own Wi-Fi networks to take some of the strain off their 3G and 4G traffic, which some users complain has been bogged down by devices like the iPhone which are notorious for using a lot of data.

“Wi-Fi is in virtually all portable consumer devices and customers are actively seeking Wi-Fi hot spots to reduce data costs and improve their wireless broadband experience,” the company said.

“We believe cable operators are uniquely positioned to take advantage of Wi-Fi.”

Shaw Communications is the owner of Global Television.

With files from The Canadian Press