Shaw Communications has decided to scrap its plans to build an advanced LTE network; instead, it will launch a wireless mesh Wi-Fi network in key markets by next spring before rolling it out to other areas of its footprint.
The wireless field is highly competitive in Canada, and after suspending the build-out of its 4G network in April, Shaw decided the expenses outweighed the benefits. Shaw had won rights to licensed AWS spectrum in 2008 that covered most of its footprint in western Canada.
"Since announcing the suspension of our wireless initiatives in April, we have spent a considerable amount of time reviewing the wireless opportunity in great detail," Shaw Communications CEO Brad Shaw said on a conference call this morning. "The Canadian wireless industry, including the competitive dynamics, has changed dramatically since we purchased AWS spectrum back in 2008. Our strategic review was comprehensive and includes such aspects as the competitive wireless landscape, technology developments, retail strategy and alternatives, future spectrum auctions, and strategic partnership opportunities.
"Following our detailed analysis, we do not feel that the economic benefits related to an entry into wireless are sufficient to justify the capital investment that is required."
Shaw estimated that it would take a capital expenditure of around $1 billion to build an LTE network, with no return on that investment for many years.
On the call this morning, Shaw executives cited Cox’s decision to abandon its 3G wireless network build-out as another example of the cost not being worth the benefits.
Instead, Shaw plans to take a page out of Cablevision’s Wi-Fi playbook. Like Cablevision, Shaw plans on setting up Wi-Fi hotspots in public places, such as coffee shops and outdoor sites, near its existing plant. The Wi-Fi network will strengthen Shaw's relationship with its 1.8 million data customers, as well as provide incremental revenue opportunities such as hotspots in shopping malls.
Cablevision has been able to reduce churn through its Wi-Fi service, while also gaining additional pricing power by including Wi-Fi into its data plans, according to Shaw.
Shaw said it could also bring in additional revenues by offloading 3G and 4G traffic from other service providers via its carrier-grade Wi-Fi network, as well as by enabling a mobile backhaul service for other carriers. Shaw will also offer small- to medium-size business package deals on traditional data plans, complemented by a Wi-Fi service.
Shaw also believes that Wi-Fi will extend its other services out of subscribers' homes, including TV Everywhere-type content. Shaw will be able to offer media assets through its purchase of CanWest Global Communications, as well as through its own TV Everywhere service.
Cisco has been tapped as the vendor that will help build the Wi-Fi mesh network. Shaw said it would be able to use about $50 million worth of its LTE build, including back office implementations and new fiber, to help provision its Wi-Fi network.
Other factors that weighed in on Shaw's decision to go with Wi-Fi included increases in Wi-Fi's throughput (up to 1 Gbps in some iterations of 802.11), reliability and seamless handoff capability.
Another factor: Instead of constantly upgrading to the latest models of LTE smartphones, Shaw customers can immediately use the Wi-Fi-enabled phones and tablets that they already own.
For now, Shaw plans on parking its AWS spectrum, although it's certainly a valuable asset that the company could choose to sell to further fund its Wi-Fi network or other initiatives. While Shaw has turned its back on LTE, company executives didn't rule out taking part in future 700 MHz spectrum auctions.