On March 21st, I had the opportunity to attend one of the Shaw Internet Customer Consultation Sessions.  It was a good session, and I had so much to say that I actually had written 1500 words down in a blog post that I completely scrapped before starting this one.  That may seem excessive, but after re-reading it I realized all I was doing was a play-by-play of the session, which is not what I actually want to do.  What you’ll read here is are my thoughts on on the session as a whole. If I went into huge detail, this would be a lot bigger than anyone, myself included, wants.

My overall feeling coming out of the meeting was simply that Shaw is trying to find a way to make more money off of a subscriber base that is not growing.  That in itself is not really shocking, but to actually hear it be presented that way is what is actually interesting.  Shaw shared more information that I expected them to in this meeting, and because of that I have a different perspective.  Shaw told us that in the past, the majority of new revenues came from the addition of customers, but that in the recent past the amount of new customers being added has dropped dramatically.  Basically it comes down to the fact that the markets they are in are full and built out and that there are not many new subscribers in them.  Shaw is looking for ways to grow its revenue stream with what is essentially a stagnated customer base.  In the past, they have done this by annual rate increases.  But the claim is that now those annual rate increases do not cover the increasing cost of running the network.  More on that a little later.

A good chunk of the talk focused on network congestion.  It doesn’t take a rocket scientist to figure out that the majority of the network use is in the evening, and that was confirmed. Peak times are from roughly 5pm-midnight each day.  Shaw’s primary focus at this point is dealing with that congestion.  How they do that is something called a node split.  A node is pretty much exactly as it sounds; which is to say a central node for the internet connections.  Each node services 500-1000 homes, and the nodes then feed into a “community hub,” of which several exist in each city.  Those hubs then feed into a single datacenter in each city, which is connected to Shaw’s “backbone” network.  It was indicated to us that the majority of the congestion exists between the node and the homes.  It makes sense, because as people use more data, it means that the node can be pushed to the capacity of what it can handle.  Node splits are pretty simple.  Assuming 800 homes on a node, node splitting is when a new node is built, and that node takes about 400 homes, leaving each node at 400 homes.  This essentially doubles the capacity of the existing node, and adds new capacity with a new node.  It was indicated that Shaw currently does up to 500 node splits every single year, and that 300-400 are always being planned as they monitor more congestion.  However, with the rate of growth of internet usage, they have actually had to inject more money this fiscal year into doing more node splits.  My math based on the cost information they gave us, along with headroom and other costs, puts it probably in the 160 additional node area.  This means that Shaw is trying to do roughly 660 node splits this year instead of the normal 500.

Now, it may sound like they are doing a lot to try to combat congestion, and they are.  But after looking at some data, listening to points other attendees made at the meeting, this sounds good but they could be doing a lot more.  An attendee at the table I was at pointed out something that I hadn’t noticed, which is that the amount of money Shaw is investing in capital expenditures(which are infrastructure projects like building new nodes, upgrading equipment, etc.), has not kept up with the growth in revenue in the past few years.  This means that Shaw is investing less for every dollar in revenue than they have in the past.  This injection of money to do the additional node splits and upgrades this year is a very good start, but I personally think that Shaw can, and should, put a lot more investment into capital so it can work better to meet that demand.  It is simply the cost of doing business.  Shaw did tell us that there are many factors why this stat is the way it is, and that there still must be a profit margin for the company, which is a valid point.  However, the internet market is the real growth market right now in terms of usage, more so than TV or Phone, and more money does need to go there.  An employee threw a very large number at us for how much money they have invested to build out their network in the last decade.  It is impressive, and it is why the Shaw network is as robust as it is now.  But if congestion is still an issue, than it is not enough.

There was talk regarding how to deal with the congestion.  Lots of talk.  Most of the discussion revolved around how to reduce congestion during the peak times of 5pm-midnight.  My view on this is simple: the only way to reduce the congestion is the build more infrastructure.  The plan to cap data usage will not fix the problem of the congestion.  the core of the problem is that it’s not the actual data that is the problem, but the rate of speed in which the data is being downloaded that is.  I go a lot more into that topic in this post. This is the main reason why I don’t like Usage Based Billing.  Any method of capping someone’s internet will not really change their usage.  All it will do is add yet another tax onto that usage.  there was a suggestion to make data rates higher during peak periods.  Again, that will not solve the problem because people are not going to be watching many Netflix movies at three o’clock in the morning.  There were other ideas worth merit, such as offering unlimited data to those customers subscribing to Shaw’s “Triple play.”  Triple play users are those users who have Shaw TV, internet, and Phone.  Other ideas included increasing the caps dramatically.  But I will re-iterate my personal opinion that any form of a cap on datawill only serve as a tax, and as one person pointed out, there will be people who will try to reach that cap every month to “get their money’s worth” where they otherwise might not.  If that occurs on any large scale, that would only add to the problem, not solve it.

As I said above, Shaw shared a lot of information that I didn’t expect them to share.  There were not many questions that were not answered in that room.  That was a very encouraging sign in the entire process.  For the most part, I was very impressed with how the employees talked with us, and handled us.  They seemed honest, willing to listen, and genuinely accepted the points we made.  They were very honest about the fact that they throttle bittorrent uploads “intelligently” which they described as throttling when a node became congested because of bittorrent traffic. They admitted that they know where the growth is, and that they are going to struggle to meet that growth.  and one of the more interesting things to come out of it was that they did say that these meetings were being done to help them find a way to generate more revenue so they could do the necessary upgrades to keep their network running as well as possible.  That is where the UBB plans stemmed from.

The one aspect of the presentation which I really didn’t like were the charts and graphs they had at the front of the room.  Actually, really didn’t like is probably an understatement.  Shaw was very open with us on almost every respect, but those graphs truly looked like they and something to hide.  One graph showed data usage over the last 10 years, and showed a “60% increase since July 2010” but had absolutely ZERO scale to it.  There was no way of knowing if the increases were from 4GB to 10, 40 to 100, or 40000 to 1000000.  Without a proper scale of the actual increase, that graph was 100% useless.  I questioned someone on that, and I was told that the graph served only to “begin the talks, and give people a sense of scale.”  For me, it did the exact opposite.  While I have no reason to dispute that there has been that 60% increase, without an actual scale to use, that graph was immediately dismissed.  They had a similar chart that showed that 45% of all traffic was peer to peer, but didn’t indicate exactly how much traffic that really is.  That chart is again immediately dismissed because it does not contain any actual data.  No matter how open Shaw was in the meeting, the charts attempting to show scale were completely ineffective in their intended purpose.

One other thing that I was really frustrated with was a phrase that I heard way too much during the meeting.  “If you were Shaw, what would you do?”  I completely understand the reason the reason why they ask that question.  It is meant to stir the discussion.  However we heard that question, or a variation of that question so many time it did seem at times that Shaw was trying to ask that instead of giving us an answer.  A couple attendees told me that they felt that became frustrating, and I agree.  Sometimes we wanted an answer, and were given another question.  I wanted to actually hear what Shaw wanted to do, not say what I think they should do.  Constantly asking us for our perspective when what we wanted was theirs added a level of difficulty to the meeting that didn’t need to be there.

I’m really torn on what I feel coming out of this meeting.  On one hand, I’m really happy that this happened, and it really did feel like Shaw was truly asking for customer input, and that that input did mean something.  They were more candid and forthcoming than I ever thought they would be, yet still felt like they were holding back just a bit.  They didn’t want to steer the discussion in any specific direction, other than trying to keep it specific to internet discussion.  But yet it did feel like the talk kept going to “we need to increase the amount of money we take in to make this work”  I’m not sure if it’s possible to feel encouraged and discouraged at the same time, but that’s kind of how I feel.  I’m happy that Shaw did these meetings, not many companies as large as Shaw would, but I’m still very apprehensive for the future.

This may come down to an economics question that I’m really not qualified to answer.  Shaw says that it is costing them more to maintain their network, and usual rate increases do not keep up.  This in theory should mean that Shaw will have to find either new ways to gain revenue, or do the work more efficiently.  The numbers do show that they do not put as much into capital projects as they have in the past, and that is at the very least where they should start.  But the simple fact that is that under the UBB system, there will be not one bill that goes down, and many that go up.  This is not a system that the general consumer wants.  I heard the phrase “cost of doing business” a lot from a number of attendees.  I agree with them.  Keeping the network running at the standard that Shaw has set frankly is the cost of doing business.  And while I think most people can stomach rate increases, going to UBB is not something they can really tolerate long term, since the usage patterns dictate that usage is only going up.  An employee told us that Shaw is a company that does not believe in contracts, which means that they have to win our business every single day.  Well if winning our business every single day is the cost of doing business, than Shaw needs to put the money into it to do that.  If Shaw has enough money to spend $2 Billion to buy a TV network and invest Billions of dollars into building a mobile network for cell phones, than it should have the money to maintain its internet network.  It’s as simple as that.

At the end of the day I really do believe that something will change.  I’m not sure when, but at some point in the future Shaw will change it’s structure of delivery and pricing on its internet service.  I have zero knowledge of what that may be, but my gut feeling is that we will see some kind of system where the bandwidth, or rate of speed, you get will be offered at a low cost, and the amount of data you get will be separate.  An example of this is that a user could get the regular high speed plan now, but get it with 250GB of data per month, or get high speed extreme with 100GB.  Separating those out does have advantages, but also carries more overhead and difficulty for users, and still does cap the plans.  I’m not a fan of this plan, but the more I think about it, the more I fear that this will be the eventual endgame.  My personal preference is that Shaw keep the status quo; not because I just want unlimited internet all the time, but because I believe that that is truly the best way for the internet to function.  As several attendees can confirm, my data usage is not nearly as high as some other people who attended.  But I do believe in un-metered internet.  I believe that Shaw can, and should, be able to invest the necessary money into network upgrades without such mechanisms as UBB.  Annual rate increases are fine with me, those are the cost of *my* doing business, but anything beyond that is simply another tax on the consumer.

I’ve only begun to scratch the surface of what I took out of that meeting.  I took six pages of notes and have read through them enough times that my head is starting to spin.  I ended up not writing at all what I thought I would write about, because if I did that this would be 10,000 words long.  Talking about every single thing that was said, every point made, would simply be too much, and would end up being just a huge ramble of a post.  That speaks volumes to the fact that this discussion as a whole is not over, and there is much more to come in the future.  I could talk for hours about Shaw, UBB, and the internet in general, because the internet is much more important than most people realize, though I think that that is slowly starting to change. Radically changing the structure of how we pay for the internet would be like trying to change the structure of how we pay for electricity or water, and this industry is less than 20 years old.  I’m very interested to see what Shaw will do at the end of all of this.  they have a difficult balancing act to walk.  Now we get to see if they’ll fall.