Shaw focuses on broadband, customer service, as Telus takes subs

Shaw Communications Inc. is focused on improving customer service, leveraging its new WiFi network, and selling more Internet service subscriptions to retain customers in its battle with Telus Corp. in Western Canada, said Peter Bissonnette, Shaw’s president. “This is about making ourselves much more customer centric,” Bissonnette said in a phone interview this week. “Whatever our customers are demanding in terms of their experience, our objective is to meet that experience.” The incumbent cableco, operating in Western Canada, is facing tough competition from Telus, which can bundle its mobile wireless services with Internet and IPTV subscriptions as it draws customers from Shaw. Shaw is strong in broadcasting, with specialty channels and the Global Television broadcasting network, though the company does not offer mobile services, which analysts say makes it vulnerable to Telus without a line of attack. As the bigger player in TV, Shaw has nearly five times as many television subscribers as Telus, according to the companies' latest earnings statements. As of Aug. 31, 2012, Shaw had a total of 3.1 million TV customers, including 2.2 million cable and 900,000 satellite subscribers. Telus said it had 637,000 TV subscribers as of Sept. 30. The problem for the company is that Telus, the West's largest incumbent telco, continues to chip away at Shaw's base. Shaw has reported losing a net 120,000 cable TV subscribers in the 2011 and 2012 fiscal years as Telus aggressively markets its fibre-based IPTV product, Optik TV. Canaccord Genuity analyst Dvai Ghose, who rates Shaw’s stock as a sell and who predicted in a research note Thursday that Shaw will lose another 18,000 cable subscribers in the first quarter of 2013, said in a phone interview that the company's biggest liability in its battle with Telus is the absence of mobile services. Ghose said Telus can kick Shaw “under the belt” by going after its main line of business, TV subscribers, while Shaw cannot compete in Telus’ primary line of business, wireless customers. “If Shaw has no ability to hit Telus where it makes all its money, which is wireless, then how on Earth can they cull Telus?” he said. “You have a horribly asymmetrical situation where Telus competes in all of Shaw’s main lines of businesses, but Shaw can’t compete in Telus’ by far most important line of business.” MacDougall, MacDougall & MacTier analyst Troy Crandall agreed in a phone interview that Shaw’s lack of a mobile service puts the company at a disadvantage when competing for customers who want to save on bundled services. He said wireless “is now the star product in any bundle” that gets people interested in other products. Bissonnette said Shaw hasn’t seen any indication that wireless is a driver for customers looking for bundled services. “Customers aren’t coming to us saying, ‘My God, I wish you had wireless because I’d come to you,’” he said. Shaw's strategy, in part, is to respond with stronger customer service, Bissonnette said, building “enduring relationships” with customers to stop them from turning to Telus or one of the company’s other competitors for television services, including emerging, over-the-top, online services such Netflix or Apple TV. “It’s really important to prove that the experience the customers have, when they deal with Shaw, is a positive one,” he said. Shaw invested in its customer call centres over the past year, Bissonnette said, to reduce wait times and improve customers' experiences once they reach a customer service agent. He said the average customer now spends less than a minute on hold when they call the company’s service lines, compared to eight minutes a year ago. The company also continues to situate all of its inbound call centres in Canada, he said, leading to superior, "Canadian-based customer service." He said Shaw is also conducting customer surveys to identify areas where it can better meet customer needs and is using social networking sites and other online tools to reach out to subscribers. Bissonnette acknowledged that customer service alone is not enough, and said Shaw is focused on expanding its WiFi and cable-based Internet services to ensure its Internet customers “don’t miss a thing,” whether they are on the road or at home. Shaw's “carrier-grade” WiFi trial is intended for Shaw's Internet subscribers, where available—such as highways, malls, and urban areas—at no extra cost. “Coverage is available in Calgary, Edmonton, Winnipeg, Vancouver and Victoria and growing daily,” the company's website says. Crandall said Shaw could take some Telus’ wireless customers if it marketed its free WiFi solution as a substitute for cellphones. The strategy could appeal to students or other customers looking for smaller monthly bills, though it would only be effective when Shaw’s WiFi network has comprehensive coverage in major cities. “If they have good WiFi coverage with decent speed … as long as you stay in downtown Calgary, you don’t really need a cellphone contract,” Crandall said. “Mind you, as soon as you leave Calgary, you’ve got a huge problem, because now you don’t have a phone so you’re back to using quarters and a payphone.” Bissonnette said Shaw will “absolutely” promote its WiFi network as a possible substitution for mobile wireless. The company will also try to capitalize on congestion on other companies’ wireless networks by selling them wholesale WiFi capacity, he said. “We’ve certainly made those that would like to know about it, aware of it,” Bissonnette said, noting the importance of AT&T Inc.'s WiFi network in the United States. “It’s a big play in the U.S.” Shaw's free WiFi offering is part of a company strategy trying to ensure that customers get better service when they go with Shaw. Bissonnette referred to new television apps the company released in the past three months—Shaw Go and apps for Movie Central and HBO Canada, which offer content from Corus Entertainment Inc., also owned by the Shaw family—as part of this strategy. The challenge in drawing new customers goes beyond Shaw's absence in mobile wireless, Ghose said. Telus has chipped away at Shaw’s TV customers in part by offering a better quality TV product, he said, an Internet protocol TV (IPTV) service that runs on Microsoft Corp.’s Mediaroom platform. Ghose said it is “discernibly, significantly better” than Shaw’s cable-based products, which run on Arris Group Inc.’s Whole Home Solution and Motorola Mobility LLC’s DreamGallery platforms. Mediaroom offers whole-home personal video recorder functions and remote access, as well as a better interactive guide and faster channel-changing capabilities. “The bottom line is Telus has a better product,” Ghose said. “You can’t get an equivalent product from Shaw.” Bissonnette said Shaw will focus on promoting the quality of its high-definition TV services, and that the company’s switch to digital cable infrastructure, scheduled for completion next year, will free up more capacity, resulting in better, faster Internet and network performance. “This is becoming a broadband world that we live in. Customers come to us because of the difference in the broadband experience, in terms of the speeds we’re able to provide to them,” Bissonnette said. “If you link the broadband experience in the home with what we’re doing with WiFi, our managed WiFi carrier-grade network provides our customers with real value to their in-home experience.” Shaw now has 750,000 kilometres of fibre in its network and builds fibre to the home in new subdivisions, Bissonnette said, and in the long term, the company remains confident in its cable infrastructure. Expected upgrades in cable technology, he said, will allow the company to offer Internet speeds of up to 1 Gbps, possibly within the next two years, he said. Ghose said Shaw’s best option to better compete with Telus may involve partnering with another mobile carrier, or even selling the company to rival cableco Rogers Communications Inc. Bissonnette said neither of those options are on the table. “We believe that Shaw is a tremendous company and has tremendous opportunities going forward,” he said. “There’s still so much opportunity for growth by doing the things that we’re doing in terms of technology and customer service.” He added: “The WiFi play is going to surprise a lot of people … It will blow the socks off of an LTE network.” —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Simon Doyle at sdoyle@thewirereport.ca news@thewirereport.ca

Shaw focuses on broadband, customer service, as Telus takes subs

News | 12/13/2012 10:18 pm EST

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