CALGARY and MONTREAL – Last week the two biggest Canadian cable companies without traditional wireless assets told their shareholders and other investors they see their wireless future in Wi-Fi – and they plan to lobby the federal government hard for more spectrum.
On March 31st, the Federal Communications Commission altered some of its rules on unlicensed wireless spectrum, making more of it available to network providers in the 5 GHz band. “The new rules will make 100 MHz of spectrum more accessible for use in homes and congested spaces like convention centers, parks, and airports and increase the potential for more unlicensed spectrum innovation,” reads the FCC announcement. The order also eliminates a rule prohibiting outdoor operations in the band and also increases allowable power levels in that band.
Even with existing Wi-Fi rules and technology, American cable operators have moved aggressively with their Wi-Fi rollouts, not only offering their own customers free Wi-Fi in hotspots spread throughout their territories, but also offering the same to customers of other cable companies. It has proved to be a powerful customer retention tool. Users don’t want to leave their broadband provider when they know they can access unlimited data, via Wi-Fi, in tens of thousands of places in their cable company’s regions.
This is the same wireless strategy being pursued by Shaw Communications. In his company’s Q2 results conference call Thursday, CEO Brad Shaw noted that 400,000 customers now use Shaw Go Wi-Fi regularly and that its wireless strategy is contributing to positive customer retention (and Bay Street noticed that the company’s customer losses were far less than expected).
“On the churn side, we still continue to see the benefits as customers sign up and use the service,” said Shaw. The company has now activated over 35,000 Wi-Fi hotspots.
Added Jay Mehr, EVP and COO: “The lower churn from our Wi-Fi enabled internet customers now, when you multiply the difference against the household numbers that Brad talked about that are now using the service, it’s now enough to have a directional impact on the quarterly numbers.”
"We believe Shaw's Wi-Fi product is just starting to gain momentum (especially with wireless prices continually on the rise) and we believe it is beginning to benefit Internet churn metrics materially.” – Jeff Fan, Scotia Capital
Scotia Capital telecom analyst Jeff Fan concurred, saying in a research note to clients, “for those who thought telco IPTV would gain TV subscribers from cable at a torrid pace indefinitely and are still puzzled about Shaw's Wi-Fi move, this quarter's subscriber performance may just start to shift their thinking. We believe Shaw's Wi-Fi product is just starting to gain momentum (especially with wireless prices continually on the rise) and we believe it is beginning to benefit Internet churn metrics materially.”
Shaw added almost 13,000 broadband subscribers in the second quarter ended February 28, compared to 8,000 in the same quarter a year ago and Street estimates of 6,000. “We believe this is helping TV losses as well,” wrote Fan. Shaw lost 21,000 TV customers, versus 30,000 a year ago and a 28,000 Street consensus estimate.
Earlier on Thursday, Cogeco hosted its Q2 results call with analysts and addressed its potential for wireless growth, too. It left the door open for a more traditional wireless phone strategy – via the launch of an MVNO – only if the federal government follows through on rule changes.
“The federal government is now entertaining views about wholesale wireless services. We are participating and will be participating in those discussions and who knows, if a favourable regulatory outcome emerges, we may well get involved in an MVNO operation. But, as you know, in the current state of affairs, MVNOs are not a profitable proposition,” said CEO Louis Audet.
“It’s a possibility and it will have to be evaluated when the new rules of the game become available.” (A mobile virtual network operator rents a wireless network in order to sell wireless service to its own customers. Comments on changing the domestic wholesale roaming regime are due into Industry Canada May 1st.)
More interesting though may be Cogeco’s planned aggressive Wi-Fi expansion. The company launched hotspots a number of years ago in some of its footprint but they weren’t reliable and their availability not well marketed. That’s about to change.
“We are now deploying in a more purposeful manner, perhaps a more intensive manner, Wi-Fi across our markets and you will now start seeing announcements as we complete an investment in a given city and solidify the reach and quality of our coverage there, you will see announcements come out on a regular basis,“ said Audet.
“You will start seeing that every two months or so.”
"We’ve expressed a desire to see the same decision come from Industry Canada for Wi-Fi in Canada." – Peter Bissonnette, Shaw Communications
However, Shaw and Cogeco executives know they need more spectrum for Wi-Fi and are calling on the federal government to follow the U.S. lead to make more available, as soon as possible. “We are very aware of what is going on in the U.S. and we’ve met with various Industry Canada representatives… we’ve expressed a desire to see the same decision come from Industry Canada for Wi-Fi in Canada because it will become ever-more important for us to have that spectrum available for us,” said Shaw president Peter Bissonnette.
The company recently opened up its Wi-Fi network to all during the Winter Olympics and saw a dramatic spike in usage, which showed them the need for more spectrum will soon be pressing.
When we asked Cogeco after their conference call whether they support Shaw’s push to get Industry Canada to open up more unlicensed high frequency spectrum for data, the answer was an unequivocal yes.
“Cogeco strongly encourages Industry Canada to follow rapidly the March 31 FCC decision and modify the rules governing the operation of Unlicensed National Information Infrastructure (U-NII) devices operating in the 5 GHz band, aligning to the U.S. framework,” said René Guimond, the company’s VP of public affairs and communications in an e-mail. “Canadian rules needs to be quickly changed likewise.
“This will accelerate growth and expansion of new Wi-Fi technology that can offer faster speeds of one gigabit per second or more, increase overall capacity, and reduce congestion at Wi-Fi hot spots. This additional spectrum will allow Cogeco to offer better and faster services to its residential and business customers.”
