Home > netflix, shaw, telecommunications > Shaw’s last stand against Netflix

Shaw’s last stand against Netflix

May 27, 2011

Shaw has written the next chapter in the ongoing usage-based internet billing saga - and it sure is an intriguing one.

The company announced new internet plans Wednesday night in conjunction with a follow-up consultation with customers. This, of course, follows on the hearings it had with customers a few months back after UBB exploded into a big political issue.

On the surface of it, Shaw’s plans look like a step towards reason - the company will be offering higher speeds and considerably bigger usage limits. For example, current customers on 7.5 mbps speed plans get 60GB of usage, but that will more than double to 125GB, with the same standalone price of $49 (or $39 in a bundle).

Things get more interesting the faster the speeds get. Shaw, which offers internet service in Western Canada, will roll out these new higher-speed packages over the summer. Its top-end plan will be a blazingly fast 250 mbps service with unlimited usage for $119 if bundled with so-called “legacy TV.” That’s still expensive compared to what places like Japan had even a few years ago, but at least the prices on these super-fast services is starting to come down.

Indeed, as observers like Michael Geist point out, Shaw’s plans are going to make other Canadian ISPs look bad. Rogers’ most comparable plan to Shaw’s 7.5 mbps service, for example, allows only 60GB of usage. The biggest effect will be on Shaw’s direct competitor Telus, which will have to offer similar plans or watch its customers defect. Shaw doesn’t offer service in eastern Canada, but Bell and Rogers will soon face pressure from their own customers. It’s probably really only a question of how long they can hold out with their comparatively uncompetitive plans before customers get really angry.

So, on the plus side, Shaw’s new plans look like an attempt at a reasonable compromise, as opposed to the blatant cash grab some of the other big ISPs are engaging in with usage-based billing.

The really interesting part of Shaw’s plans, however, is the apparent pinning of those higher-speed offerings to TV services. As several attendees to Wednesday night’s meeting pointed out, it doesn’t look like the company is planning on offering them on a standalone basis. That’s curious because it sure looks like tied-selling, which the Competition Bureau says “exists when a supplier, as a condition of supplying a particular product, requires or induces a customer to buy a second product.”

It’s hard to see how requiring someone to take a service they don’t want (TV) in order to get the one they do want (higher-speed internet) wouldn’t qualify as tied-selling. Of course, the Competition Bureau has been letting wireless companies get away with tied-selling for years. A customer can buy a cellphone outright from a provider but, with some exceptions, the carrier won’t unlock the device, thereby forcing the customer to buy monthly service from them as well. That’s tied-selling in a nutshell.

From Shaw’s perspective, it’s no surprise the company wants to lock customers into a service they don’t want. Like most other ISPs, the cable company is running scared of Netflix and other so-called over-the-top video providers, so this sort of tied-selling is a sneaky move. After all, does the company really care how well Netflix and other online video providers do, or how much data internet customers use when they’re still paying up for that TV service? Of course not. Shaw still gets the same revenue from the customer.

First, the big ISPs tried throttling, then they tried UBB. Neither worked, so now they’re collectively trying to slow Netflix et al with regulation. Unless Canadian regulators are a bunch of loonies (and the jury is out on that), that too won’t work. Tied-selling, where customers have to pay cable companies for video whether they want to or not, may be their final kick at the can.

Over to you, Competition Bureau.

  1. Hub
    May 27, 2011 at 12:37 am | #1

    Rogers and Bell have NO pressure whatsoever. Think about it. Bell UBB tariff for wholesale did mimic what was the local competition. Higher caps in Quebec because Videotron had higher caps than Rogers.

    Rogers and Shaw cable markets don’t overlap. Why would Rogers bother? Why would Bell bother?

    The scarcity is geographical.

    One point of regulation that the CRTC could impose is nation-wide tariffs - ie forbid pocket pricing depending on the region - forcing Bell to offer the same be it in Quebec or Ontario. This would actually either give them the choice between being uncompetitive in one market or “over” competitive in the other that could force the competition to follow.

  2. Rui
    May 27, 2011 at 9:00 am | #2

    uh… not necessarily since Shaw does have some inroads in Ontario (think Mountaincable in Hamilton, now called Shaw Hamilton, being one example). Yes, I think this could be the start of something brewing as in “cap wars” amongst the incumbents.

    • May 27, 2011 at 9:18 am | #3

      Good point, I’d actually forgotten about Mountain Cable. If Shaw really wants to stir the pot they’ll roll the higher speeds out in Ontario too.

      • Hub
        May 27, 2011 at 11:05 am | #4

        Isn’t that where Rogers sued them because they had an agreement to no encroach on each other’s markets?

      • F
        May 30, 2011 at 4:49 pm | #5

        You must remember that Shaw is trying to enter the wireless market. This will require roaming partnerships with other wireless providers (not TELUS) so I don’t think starting an all out war against Rogers in Ontario is on the radar.

  3. Rui
    May 27, 2011 at 11:14 am | #6

    Yes… they sued in Sept 2009 but the sale was approved in Oct 2009 and Mountain cable was officially shaw Hamilton in November 2009.

  4. james
    May 27, 2011 at 12:05 pm | #7

    So if Netflix falls victim to some sort of regulation. Is Netflix going to be the only video service provider or competitor?

    I’m not sure how it’s a last stand. It seems more like a kamikaze move to me.

    Shaw provides the infrastructure for it’s competitors and then makes it affordable for them to compete against them?

    • May 27, 2011 at 6:25 pm | #8

      I work for Shaw and in a recent meeting they talked about introducing very soon a service called Shaw Movie Club.

      It is a standalone Shaw service that runs around $13/month. For that monthly cost, you will be able to access a large selection of movies for FREE! The best part is that unlike Netflix, some of these titles are available for free the same day as the BluRay and DVD release and some of them even sooner than the retail stores.

      The beauty of this is that you dont have to have Shaw service to get the movie club. From what I have heard, once signed up for movie club, you will recieve a box (like a cable box) specifically for use with Shaw Movie Club.

      I believe this to be Shaw’s true answer to Netflix’s competition.

      • May 27, 2011 at 6:38 pm | #9

        That’s interesting - proper competition for Netflix can only be a good thing (and very commendable). But is it true that Shaw’s Movie Club wouldn’t count against the user’s data limit?

      • Jeremy Smith
        May 27, 2011 at 8:34 pm | #10

        It depends on how you view the movie. If you view it over your tv like a shaw on demand movie it won’t count, but some customers might need to stream it onto their computer, and in that case it seemed it would count against your data limit. It’s not all set in stone yet, it seemed like they’re going to try things out at these prices and data levels, but they could change in response to consumer feedback.

      • Nope
        May 27, 2011 at 8:43 pm | #11

        If you’re paying 13 dollars a month, you aren’t getting the movies for FREE, or Free or for free, you’re getting them for 13 dollars a month.

  5. Christian
    May 27, 2011 at 12:40 pm | #12

    I liken Shaw’s thinking to that of a stubborn old man failing to embrace change. They need to have a look at WHY Netflix is becoming so popular, rather than just maneuvering scared, and start pushing their competing service — which is NOT traditional cable TV.

    They have the infrastructure, they have the technology, they have access to the content. Shaw: man up and compete with Netflix, stop forcing your customers to see things your way, the world is changing and if you don’t change with it, you will die.

    • Jeremy Smith
      May 27, 2011 at 8:37 pm | #13

      I don’t think they see going head to head with netflix on what netflicks offer as what they want to do at this point. Their movie club is different in that it has a more limited selection (200 titles or so) of more current content. The Shaw rep said they could go down the road of replicating netflix, but weren’t going to just yet.

  6. Matt
    May 27, 2011 at 1:23 pm | #14

    Shaw is offering a similar service to zip and netflix called Movie Club.

    “The Movie Club by Shaw is a subscription-based option that gives you unlimited access to hundreds of movies for $12 per month. Choose from recent releases, popular favourites and all-time classics — there is no limit to how many you can watch.”

    - http://www.shaw.ca/Gateway/Support/

    • May 27, 2011 at 5:25 pm | #15

      Yup, I know, that’s why I said “start pushing *their* competitive service” :)

      It baffles me why they feel the need to push traditional TV so hard. It’s a cash cow that is sick and dying.

      • May 27, 2011 at 7:01 pm | #16

        The answer is simple. Ad revenue. TV as we now know it sucks in terms of content, but that doesn’t seem to deter advertisers from buying up oodles of airtime.

        Plus, Shaw, Rogers et al. have lots of money invested in the TV stations and other media outlets they’ve been snapping up over the last two decades. If conventional TV goes down the tubes, then their investment is going to follow post-haste.

      • May 28, 2011 at 2:56 am | #17

        You make excellent points. Thing is that traditional TV is going away whether they like it or not. Better to get on board early than to fight it all the way.

        But I can see why they want to try to protect their investments.

  7. investor perspective
    May 27, 2011 at 3:30 pm | #18

    Geez, that headline is a little inflamatory. Last stand?? Really? More like “first strike” or “initial salvo”.

    I’m not sure where the line is drawn between tied-selling and bundle pricing that effectively becomes a deterrent to a la carte services. What’s to stop Shaw from saying “if its part of a bundle its $50 but if its not its $250″?

    Anyways, Telus is probably more blatant in its use of tied-selling. You can’t get Optik TV without also taking internet. Here is my online chat:


    Claire: Hi. I’m a live TELUS product specialist. What questions can I answer for you?
    Claire: Just type your question below.
    You: Can I order Optik TV by itself or do you have to get phone and/or internet service too?
    Claire: You will need to order Optik TV with Internet.
    You: Ok. Thanks.

  8. Aaron Ekman
    May 27, 2011 at 4:38 pm | #19

    Certainly jot a defender of Telus, but I don’t know if you can label the Optik TV example above as “tied-selling.”
    I believe, (and I’m happy to be corrected on this,) that Optik TV requires an internet connection to work. Much like old dial-up internet connections required a telephone line to work.
    If you reverse the question, and ask Telus whether you must buy Optik TV when you buy their highest internet package, you’ll find that it isn’t a requirement. I switched to Telus when Shaw first became embroiled in the UBB controversy. They tried to sell me Optik TV but when I declined, the price on the Internet package remained the same.
    So while Shaw’s high-end plan is clearly tied-selling, I’m not convinced Telus could be accused of the same at this point.

  9. Genevieve
    May 27, 2011 at 5:11 pm | #20

    Yes it is in fact the reason why you need internet for Optik TV Aaron

  10. Yumarama
    May 27, 2011 at 5:44 pm | #21

    Same deal with Bell’s Fibe TV rolling out in some areas of Ont & Que: you need their internet service to use their internet TV.

    Which pretty much begs the question: if they have enough bandwidth to offer TV over the internet, why are they crying about people who “over ” use the internet to watch TV?

    Sorry, that was pretty rhetorical.

  11. Travis
    May 27, 2011 at 6:56 pm | #22

    An update for the article, Shaw does operate in Eastern Canada. They bought a local cable company formerly known as Mountain Cablevision which know operates under the name Shaw. It’s one of their only Ontario locations. They have yet to start implementing bandwidth caps, but it is something that is “coming soon”, as according to the employees at the location.

  12. May 27, 2011 at 7:09 pm | #23

    I would say this is more than a ‘last stand’ by Shaw; it’s a last gasp. Tied-selling is illegal, and shouldn’t even be happening. However, the Competition Bureau hasn’t been enforcing the statute that is designed to prevent this kind of anti-competitive behaviour, so the telcos get away with it. If the competition watchdog ever decides to put its teeth back in, Shaw can say bye-bye to being able to launch any current or future attempts to prevent competitors from marketing their services in Canada.

    What really needs to happen is for the internet infrastructure to be nationalized and for parcels of it to be leased to service providers. Either that, or an infrastructure that runs parallel. This is probably going to be the only way to keep the telcos at least semi-honest in their dealings with consumers and head off anti-competitive excesses like we’re seeing now.

    • May 28, 2011 at 2:03 pm | #24

      You want the internet infrastructure nationalized? Seriously? The “friction” that is government overhead means that they have to tax about $4 for every dollar they actually spend. Government bureaucracy is the least efficient possible way to deliver a product or service. It is a place where systemic failure is rewarded with a higher budget and more employees added to the payroll. So what you are basically asking for is to have the service get worse while the cost more than quadruples. Uhmm, no thanks. I prefer the market give us better service as a lower price… even if it takes a little longer than we would like.

      If you want to know what a nationalized service would be like, just gather together the people you view as the worst players in the private sector and give them a monopoly. Now give them the ability to just take whatever they want from us by way of taxation- and then make maximizing budget size and constantly increasing payroll as their actual goal.

      That is what nationalization is all about, it most certainly is not about magically attracting the noblest and the brightest who will then try and deliver the best service at the best price… that is antithetical to how government actually functions.

  13. May 27, 2011 at 7:25 pm | #25

    Nice take on Shaw’s new proposals. A good first start, but far from satisfactory. If you get the time, please have a look at my view of the situation, including a detailed chart showing the respective prices for various services before and after the new announcement and at the other ‘big 5′.



  14. Sam
    May 27, 2011 at 8:16 pm | #26

    I know plenty of die hard internet users who regularly down load with a bit torrent using light speed and never ever have a complaint so I don’t understand this so called issue behind the bigger than ever speeds. Why?? And who among us wants to pay more for something we’re already very satisfied with. For most of us it these increasing speeds don’t matter one bit other than costing more.

  15. Harris
    May 27, 2011 at 9:03 pm | #27

    As the guy who stormed out of their Calgary meeting to make the point, I’ve gotta say the arguments are specious, and the technical justifications highly suspect. The Shawbies are all concerned about their base-level TV customers who are going to whine about basic cable going digital. But that had to be always in their long-term plan — assuming they HAVE long-term plans, and I’d bet they do. It’s ludicrous that they state they can’t supply premium level internet at a premium price and defend the profit margins they need without worrying about ridiculously low use limits or loss of the obsolete TV business. Can you imagine your internet use staying the same or lessening over the coming years? One might say, “P-shaw.” I salute them for taking a leadership position, and also send them a raspberry for doing it at such a low level of insight, ambition and comprehension. If you charge more for more use, it’s still UBB, no matter what it’s called.

    • chris
      May 28, 2011 at 12:13 am | #28

      wow. so are you suggesting things would be better for the average shaw user had they not done this?
      how is upping bandwidth caps not a good thing ?
      how is unlimited bandwidth ubb ?
      how about the competiton. is the average or power user better off with any of the competition?
      how many people get their tv from cable/sat/telco vs off air/inet only ?
      how many people will switch to tv via off air/inet only in the next 10 years?
      what technical justifications do you find suspect?
      what exactly is their low level of insight/ambition/comprehension ?
      please be more specific in your response than your last post.

      • Harris
        May 28, 2011 at 3:32 pm | #29

        It’s fine that they’ve done this, of course, but it’s insignificant in the overview. Upping the caps is simply mollifying the masses without addressing the issue. Competition isn’t an issue in a monopoly. Caps is caps. We’re paying for the service, and there is no (or little) increased cost in providing more data. They have renamed UBB and lowered the heat for today. As usage grows, they’ll be digging deeper into our pockets. Package combination still indicates their arrogance and non-responsiveness. And their retired chairman pulling $16 million a year has to come from somewhere.

  16. May 28, 2011 at 7:36 am | #30

    All these lawsuits are crazy, some of these companies are out of control like viacom is. Personaly i think its the greed factor in this country.

  17. AngryConsumer
    May 28, 2011 at 12:44 pm | #31

    The folks at Shaw have an internal attitude that the average Canadian customer is out of touch with reality and we demand too much for too little.

    That’s the explanation that I got when I told them that I was tired of paying so much for my services, services which I use so very little.

    Obviously they will never put that in print, but the bottom line is that they don’t feel they are charging us enough for these unnecessary services.

    Personally, if my monthly bill was cut in half I might actually feel right about it. Until then the resentment builds.

  18. Bearzerker
    May 30, 2011 at 4:47 pm | #32

    internet service providers versus internet access centers

    ISP’s are stifling productivity and product and shaping all traffic through their network portals which is wrong at so many levels… what consumers need is access. …unmitigated, non-filtered and not forced through corporate created traffic jams…
    Shaw just wants its customers to start paying for bandwidth having the effect of their subscriber base paying the costs of them selling advertizing to us… unwanted spam slowing our service while on our dime… now that is theft…

    we need internet access providers, screw the service as its a shell game for hidden corporate profits at consumers expense anyways… access should be like it is for a library, log in and learn… learn Linux and get off this stupid highway hitch, there are ways…

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