Shaw Launches Movie Club, badly.

Today Shaw launched a new product aimed squarely at Netflix called Movie Club.  Movie Club is very similar to Netflix in that for a flat monty fee users have access to a library of video content that they can watch.  Movie Club itself is an interesting product, but this article is going to focus more on the Shaw's launch of the product today. I'll be frank.  Shaw fumbled the ball on this one, really badly.  A lot of the good talk about Shaw since the restructuring of their Internet plans has been hurt by how this launch was handled, and it is sad to see.

Confusion started literally minutes after the launch of Movie Club.  Shaw put out a news release, and several news publications put articles up on their respective websites about the new service. Even US based Ars Technica and Tech News Today ran with the story (though Tech News Today was able to correct the story at the end, thanks to a live chat room audience).  The reason for this is that the initial reports were that Shaw was going to deliver this service both to set top boxes and through the Internet, but that the delivery though the internet would not count against data caps on user's accounts.

Let me stop and say that again.  The initial reports were that delivery of Movie Club through the Internet would not count against a data cap.

I will stop you there again, because that is not true. But I will get back to that in a second.

Needless to say, the Internet kind of blew up at this.  Net neutrality proponents slammed the move, and many people got very upset at the fact that Shaw seemed to be putting in a plan that gave them an unfair advantage over a service like Netflix.

Then, came the "clarifications."  Shaw's official twitter accounts, Shaw employees speaking on Twitter, Facebook, and Internet forums on behalf of Shaw immediately came running to the public to say "No no no no."  It was clarified to me, along with everyone else, that watching content on Movie Club on a TV through a set top box via the Video On Demand interface would not count against a user's data cap, as the content is transmitted through the traditional QAM cable TV system that VOD content moves through.  Watching content through a computer or other device via Wifi goes through the Internet, and will count against a user's cap.  Shaw employees and PR spent most of the afternoon doing damage control, and trying to get the accurate information out there.  Several news publications put out new stories with clarifications, and Ars Technica updated their story (albeit much later than I would have liked).

So what happened? How did Shaw allow such confusion to happen on this launch?  I've done a lot of reading on the various news articles, and Shaw's news release for Movie Club, and the confusion comes from two simple things.

  • The CEO was quoted as saying that on your box or online, this will not have any impact on your capacity or usage.
  • The news release from Shaw had no indication one way or the other whether this would affect the data cap.

Now, with a quote from the CEO saying one thing, and a news release not disputing that, journalists ran with the idea that all Movie Club content would not count against the data cap. If I were working for one of the many publications that put articles out, I would have done the exact same thing given the information available to me at the time.  Could this be a case of a CEO being mis-quoted? Possibly.  But what is likely is that he just got a fact wrong, or just misunderstood a question.  either way he made a mistake.  Those things happen from time to time.  Engadget has a feature called "C-E-Oh no he didn't" that catalogs tech company CEO's that make mistakes, and it can be quite entertaining.  This is another one of those cases, and unfortunately for Shaw, it kind of blew up in their face.

To Shaw's credit, their PR team worked very hard all day to try to get the correct information out, to clarify to angry customers what the truth was, and to work with news media to get new or updated articles posted.  Unfortunately in most cases where mistakes are made, it takes 10x the amount of effort to fix them, and that is what Shaw faced today.  The net neutrality people might no longer be mad at them, but a new group of people are mad and accusing them of lying, trying to spread mis-information, and confusing people.  It only takes a quick look on Twitter, Facebook, or even Google+ now to see the anger at Shaw over the confusion on this launch.  The Shaw PR team was put in a difficult situation in which there was no way for them to come out in a good way.  i applaud the PR team for doing what they could to try to clean up a pretty nasty mess that was left behind for them.

This confusion during the launch has really masked the actual product they are trying to get off the ground. I've written almost 900 words to this point and I haven't even talked about the actual product that is Movie Club.  That is not a good thing for Shaw, at all.  I should have spent the last 900 words talking about the product, now how they fumbled the launch, and that is unfortunate.

As a quick recap of the above, in case it was still missed in there, Shaw Movie Club will not count against the data cap if being watched through a Shaw set top box via the Video On Demand interface.  Movie club will, like all content, count against the cap if watched through any Internet connected device like a computer or mobile device.

Now, onto the actual product itself, 997 words in.

Movie Club is a subscription service, much like Netflix.  I had actually heard about this service during the Shaw customer consultation sessions earlier this year.  The Shaw representatives there told us that they did have a video subscription service in the works, and that it was being considered as something that would be more valuable than Netflix, because they could deliver it through their existing Video On Demand service and not have it count against a user's data cap.  They stressed that while they probably could not match the volume of movies and TV that Netflix offers to customers, they wanted to focus on quality and getting newer blockbuster movies onto their service before Netflix could. They seemed very excited at this project that they were working on, that has now become Movie Club, but had asked us not to talk much, if at all about it because it was a product still in development and things could change before they launch, if they ever even did launch it. Today, that project finally saw the light of day, and Movie Club was launched. Unfortunately, it simply does not compare to what Netflix has to offer.

To start, Movie Club is a $12/month service, and that is for Standard Definition content only.  Movie Club HD will be launching "later this summer" and will be an additional $5/month, for a total of $17/month to watch HD content. Netflix is $8/month for the entire service, including all HD content.  That means that Movie Club is at a huge disadvantage out of the gate being $4 or $9 more expensive than Netflix. So, if Movie Club is going to be more expensive, it had better be beating Netflix on Movie selection.  However, a quick trip to the Movie club section of shows a total of 139 movies available for streaming.  I don't have an exact number for the Netflix library, but needless to say it is significantly more than that.

But again, Shaw's word to us months ago was that their service would aim to go for quality more than quantity.  A quick look through the 139 titles currently available include many recent titles that are not available on Netflix in Canada, like Burlesque, The Blind Side, The Tourist, and Fast & Furious.  There are also many older moves that are both available, and not available on Netflix at this time.  There are definitely movies on the service that I would like to watch, some movies that I've never seen, but for me personally, I don't think that it is worth the price.  I honestly would not sign up for a SD service at this point.  I have a 47" HDTV and the though of paying $12/month to watch SD movies on it when I can pay $8 to watch HD movies simply does not make sense to me.  Would I pay $17/month for the HD content?  Again, probably not, because I can get many more movies in HD for less than half the price.  Sure, I can't watch Transformers: Revenge of the Fallen on Netflix, but I'm fairly sure that I can find 9-10 other movies that I'm perfectly content watching for less money.  What it comes down to is that for me to want to pay more for Movie Club than I do for Netflix, Shaw has to provide me with a very high number of movies that I want to watch right now that I can't get on Netflix.  And personally for me, they aren't even close.  Shaw does say that they are committed to adding new content every month, but that does not help the fact that right now, today, there are only 139 titles to choose from. Right now Shaw does not have the quantity to match Netflix, nor do they have a high enough number of quality titles to justify the price.

Does that mean it will stay this way forever? I hope not.  I really do think that a market does exist for newer movies on streaming services.  But Shaw's problem is that Netflix is desperately trying to get there as well.  If Shaw wants Movie Club to have any chance of success they either need to get a lot of newer (under 1 year old) blockbuster movies on there very soon, or drop the price significantly.  I think that people might pay a higher price to watch movies they can't see anywhere else, especialy if Shaw can swing a deal to get some movies on to Movie Club that aren't even available on Blu-ray or DVD yet. But as it stands right now; Shaw does does not have a competitive product.

Now, for all the confusion over the actual content delivery and whether or not it counts against a data cap, the fact that users can watch content as much as they want through a set top box and not have it count against a dat cap is one of the things that I actually do think is good about the product.  It is a value-add that Netflix quite frankly cannot match, and a good one at that. Many people have pointed out to me that doing that may get Shaw a visit from the competition bureau, and I think they are right.  But I also do not think that there is a problem.  If the story had been true that Shaw was providing the internet streaming and not having it count against their data cap, then there would have been serious anti-competitive issues.  But Shaw is offering an internet based service that is exactly the same as Netflix, with a value-add of the set top box delivery.  Shaw is not trying to make Netflix worse and less valuable than their product, they are trying to make their product better and more valuable than Netflix.  That is a very important, if a bit subtle, distinction that people need to understand.  You can do anything you want to make your service better as long as it does not purposely make someone else's worse.

the last thing I want to talk about is something I touched on a bit earlier.  Shaw launched Movie Club today in SD only.  In 2011, when HDTV's are commonplace, that is simply unacceptable.  I can't even begin to say how much that move does not make sense to me.  With the promise of the (more expensive) Movie Club HD service coming "later this summer" it would have made more sense to me to wait to launch the service until the HD portion was ready.  There is quite honestly no way I will even consider getting Movie Club in SD when it's main focus is on delivering newer movies, which are filmed specifically for HD, and do not look nearly as good in SD.  If I want to watch Transformers, I will be doing it via some method that will let me watch it in HD, which Shaw does not offer today.

To say that Shaw fumbled the ball today would be an understatement.  From communication issues early in the day, to actually launching at a product that is in many ways inferior to some of it's main competition, to launching without HD; Shaw made a mess of this product launch.  Could Shaw rebound from this and make a good product?  Absolutely.  Like I said.  I do think that there is a market for a "premium" streaming service.  However Shaw needs to get there before Netflix can do it cheaper if they want any chance of success, and they need to do it quickly.  It may be a bit unfair, but we live in a world where news moves fast, and in many cases the first impression is everything.  Shaw has left a very bad first impression here, and if not fixed quickly, they risk having the product slip into irrelevance before it even gets off the ground.  The product launched poorly today but it still launched. And because of that, the clock is ticking.  Can Shaw fix it before the time runs out? We'll see.

[Read] - Shaw Movie Club Press release (PDF link)

[Read] - Original Calgary Herald Article

[Read] - Montreal Gazette article with clarification

[Read] - Ars Technica article, original with update

[Read] - Shaw Facebook discussion thread.

[Read] - Shaw info twitter account.

Shaw presents new Internet packages

On January 7th, 2011 I wrote this article which detailed Shaw’s plans to begin enforcing data caps on their internet plans in what was said was an effort to combat congestion on the network. over 11 subsequent posts (this will be number 13), I’ve detailed a lot more in those posts here if you would like to read further about them.  In a nutshell, Shaw was going to put very low caps into place, coupled that with lowering those caps right before the announcement, and did fall into a bit of bad luck in regards to other internet issues in the CRTC that did not even affect them.  But, this is not about the last 5 months, this post is about today, and I’m pleased to say that the news is good.  Very good.

So, what’s the deal?

I’m going to just get this out of the way and say that, in my opinion, Shaw has just become the industry leader in Canada when it comes to internet pricing. This is a statement that I can make without hesitation, but am shocked to say.  Going into the second round of customer consultations tonight, didn’t know what to expect, but did have some ideas.  My personal belief was that Shaw was going to offer internet packages that separated speed from data limits, letting users pick both their speed, and the amount of data per month.  This would not have been a terrible solution, but would have still resulted in capped internet, and possibly high costs for high amounts of data.  What came out of the meeting surprised me, and in almost the best way possible.

Quite The Statement. Now Get To The Details.

Shaw High Speed Lite, High Speed, and High Speed Extreme will remain, with the exception of the data limits, which are being increased by a factor of 2 or 2.5.  This will mean that for Shaw High Speed Extreme, users will get 25Mbps download speeds and 250GB limits for the same price they are paying now.  I think that this plan should be the minimum now for most users, as it provides a good balance of speed, data, and price, and will be good for most users today.  When compared to the new plans I will detail, I personally do not believe that High Speed does not offer a good price/performance value anymore.

The new plans.  Ah, the new plans.  I will say up front that most of them do have data caps, and the pricing is a bit higher, but the value in them is something that has never been seen in Canada to this point.  For the vast majority of customers who run what Shaw now calls “legacy TV” for $59 + the cost of your TV package, you get a data plan of 50Mbps download speed (6.25 Megabytes/second), 3Mbps upload speed (375 KiloBytes/second), and a data cap of 400GB.  400GB is now the starting point for the new plans.  In the short term, the plans will run all the way up to 100Mbps download speed with unlimited data for $120 + the cost of TV.  This compares to the current cost of Warp speed internet which has 50Mbps download speed and a 175GB data cap for $97 when bundled with TV.  Shaw plans to add 250Mbps download speeds with unlimited data for that same $120/month to all markets within the next 16 months, shifting the 100Mbps plan down to a cheaper price point.

To be frank, these new plans are fantastic.  High speed Extreme remains, but with higher data caps, at current prices.  that alone will be enough for most users today.  However, the value of the Broadband 50 plan (50Mbps, 400GB) at $59 is simply out of this world. The closest plan today is Warp Speed, which is the same speed, lower cap, and $30 more expensive.  Compared to today’s High speed extreme, Broadband 50 has 3.2x the data and 2x the speed for $10 more. The value there is hard to ignore.  The new plans go into place June 7, 2011, you will be able to order them then.  You can find a link to the full list of plans at the bottom of this article.

But There Are Still Caps…

Yes, on most plans there are still caps, which means the ability of users to go over the caps.  In the short term, nothing is going to change from the way it is today.  Shaw continues to have an “acceptable use policy” which, translated into English, means that users can go over the cap, but only users who abuse it the most will be contacted and warned.  That is a bit vague, and that was brought up during our meeting, but essentially if you’ve never had a problem to this point you won’t have a problem now.

And even with the caps in place, they are high, very high.  Consider that Shaw claims only 10% of users go over the current caps today, and those caps have been raised at least 2x.  These limits are significantly higher than anything offered by any other ISP in Canada at similar price points.  In Alberta Telus offers 25Mbps with a 250GB limit for $52/month. Shaw will offer double the speed and 1.6x the data for $9 more. In Eastern Canada, Bell offers a similar 25Mbps plan with only 75GB of data for $56/month. Shaw offers double the speed and  5.3x the data for $3 more.  And do not forget that the top tier plan does feature unlimited internet, so if 750GB or 1TB of internet is truly not enough for you, an unlimited option is available.  These limits will be what they should be, a way only to punish users who truly abuse the system the most.

There will be a new system in the future, however this is one piece that has yet to be fully fleshed out. It is tentatively called the bump up plan, which will be some kind of provision that if a person reaches their data limit, they will be bumped up to the next plan instead of having a per GB charge.  I will again stress that Shaw did say there is much work to do with this, and that a plan will be put into place in the coming months of exactly how this will work (warning customers ahead of time, pro-rating costs, etc), and that this plan will not be put into place until 2012. There will be more details on this in the months to come.

Do You Have Anything Bad To Say?

Sure, these plans aren’t perfect. There are a few oddities, and things that could use some tweaking.  For example, the High Speed Lite plan is 1Mbps with a 30GB data cap, at a cost of $27/month when bundled with TV. A new plan called Unlimited Lite will also be offered that has a 1Mbps speed but with unlimited data.  The cost of this plan will be $59/month when bundled with TV.  That cost is the exact same as the Broadband 50 plan, which offers 50x the speed and 400GB data. Now, the 1Mbps may be unlimited, the average user of such a slow speed plan will be hard pressed to use anywhere near 100GB of data simply because the speed is not fast enough to get that kind of data in a month.  The pricing on Lite unlimited is very awkward, and I would argue that the plan itself is unnecessary.

My only other real complaint is the fact that the new broadband plans all require TV bundled in with them.  There is no option to buy those packaged stand alone.  You will still be able to buy High Speed Lite, High Speed, and High Speed Extreme stand alone, but not the new Broadband plans.  Now, that being said, a customer can get the Broadband 50 plan, and the lowest cost TV package offered will bring the cost to $84.90/month.  This package is less expensive than buying Warp Speed stand alone for $107/month. The user gets more data, the same speed, and TV for $22/month less, and if you really do not want TV, you do not have to plug in the cable box.

that being said, it would be nice if those plans would be offered stand alone. Some users truly do not want a TV package, and under this new plan they will be forced to pay for TV to get a new plan. This is clearly a business decision by Shaw to ensure as many people as possible subscribe to their TV services, and I understand the reasoning behind it.  It is just not a decision I personally agree with.

How Is Shaw Actually Going To Make This Work?

I almost feel like I’ve buried the lead here, because how Shaw is going to accomplish this is a pretty significant step for them.  Over the coming months, Shaw is going to transition most of their analog cable offerings to digital only.  The significance of this shift cannot be understated.  Right now, Shaw has 4 levels of analog cable.  Basic, and tiers 1, 2, and 3.  This transition will leave Basic cable on Analog, but the three tiers will be moving to digital only.  This will mean that a user in a major market will only be able to get approximately 40 channels without a cable box.  Anything more will require a digital cable box.  Shaw says doing this will triple the amount of bandwidth available on their current network infrastructure, which will allow them to offer the speeds shown in the new Broadband plans.

Again, the scale of this transition is quite large, and was the biggest surprise for me.  This type of transition was inevitable, and was going to need to be done eventually, but this plan has accelerated any plans.  Shaw currently has over 300,000 subscribers that have at least Tier 1 level of service and are analog only.  Every single one of those customers will need to be contacted and Shaw is going to work with them on this change.  Final plans are not in place yet, options are being explored including giving each user a free digital box, lowering the cost of the box for the users, and making basic cable cheaper and having them drop down to that. Shaw will be doing this transition beginning in August and will be done region by region, city by city, and neighborhood by neighborhood. it is expected that it will take up to a year to complete.  Once the transition is complete in the area you live, the Broadband 250 plans, which offer the 250Mbit download speeds.

Sounds Like a Big Change For Shaw.

It is, and moves them firmly into the 21st century.  Eventually the Basic Analog will have to be eliminated, but this is a significant step for them.  A move like this really begins to transition Shaw away from a Cable company with internet, to a content distribution company.  TV will still remain a very big part of their business, but this type of move really puts the internet where it should be, equal or higher than TV on their priority list.  Cable TV as we know it will eventually go away. It won’t be next year, or 10 years from now, but it will eventually make way for an entirely internet driven system of content delivery, and this is the biggest step Shaw has made in this direction to date.

I said it at the beginning, and I will say it again. The plans that Shaw unveiled today moves them firmly into the lead in internet pricing in this country.  Shaw will now offer plans that the competition quite frankly cannot compare to.  The bar has been raised, and it has been set very high.  This type of innovation is something that frankly is not seen in this industry.  Shaw has taken a leap forward while others are standing still. Even Telus, who has improved the most in the past 2-3 years, is left behind by this offering. For all of the bad press and attention Shaw has received in the last 5-6 months, Shaw deserves to be applauded, for they got this one right. It’s that simple.

[Read] – New Shaw Internet Packages

Shaw to preview new internet packages

Yesterday, May 20th, I received an email from Shaw inviting me to attend a new customer consultation session in Edmonton this week.  In the invitation Shaw has told indicated that this consultation session is "another discussion as we look at our proposed Internet packaging."  A quick polling of some friends who attended the first round of sessions, as well as a quick search on several internet forums indicate that there are other sessions planned, however I have no further details on how many or where they will be.  The emails all seem to have gone out yesterday afternoon, so information is still coming in.

As you can imagine, this has come straight out of the blue.  The first customer consultation sessions took place in March, and a lot happened in them, which you can read here.  After the session the representatives from Shaw did say that they planned to keep the customer base involved as time went on, however I did not expect this development at all.  I get the sense that big things are happening, but I just don't know what. I'm sure I will find out more this week.

In the post I linked to earlier I speculated on what I think the eventual plans will be, but in reality I don't know what is actually going to be proposed at these sessions.  Because I don't know what to expect, I'm neither optimistic, or nervous.  I'm just interested; very interested.

As per usual, I will be posting my thoughts after the consultation session this week. Look for it later in the week. You can also follow me on twitter for information as I can provide it.

For my complete coverage over the last few months regarding Shaw, and Usage Based Internet Billing in general, click here.

Shaw puzzles by increasing speed on extreme

On April 20th, Shaw increased the bandwidth speed on their high speed extreme from 15Mbps to 25Mbps.  They have done this after a lengthy customer consultation spanning the month of February over the concept of Usage Based Billing. I’ve been thinking about this off and on since I heard about the increase, and even though I’m all for an upgrade in service to users; I quite frankly have no idea what to think, or what to say.  This does not make sense at all.  I don’t’ know where to begin, so hopefully I’ll get this off without too much ramble.

During the customer consultation session I attended, and reading from the notes of other consultations, Shaw’s message seemed clear.  Shaw wanted to put usage based billing into place because the company claimed that during peak hours there was too much congestion on the network, and the hope was that usage based billing would serve to lower the usage of heavy users, as well as help offset the costs of doing node splits, which increase the capacity and reduce the congestion on the network.

I, along with many other people, have explained almost to nauseam that this Usage Based Billing does not solve Shaw’s real problem.  You can find more info here, but to put it simply, amount of data and rate of speed are two completely different things.  And charging for the amount of data does not fix the problems related to rate of speed.  Shaw’s capacity is related to the rate of speed they can provide to its users, not how much data goes through.  The cost of 1 gigabyte of data is roughly the same, no matter how fast a user gets it.  The real cost, and where the capacity issues are, is in how quickly Shaw can provide the user with that gigabyte of data.

This is why I quite frankly don’t understand this move by Shaw.  If there is that much congestion on the network, why would they do something that would only increase the congestion?  During the consultation session we were told that most new customers choose the Shaw high speed extreme package, and that that package makes up a good portion of users at this time.  If there is this much congestion, why would Shaw take a move that would only make it worse?

Now, I do have a couple of theories on this. I will only share the one that I feel is most likely, for reasons that I will share at the end of this article.

What I think is most likely is that Shaw is trying to match Telus’ offerings in the Internet space, at least on paper. Telus Optik High Speed Turbo Internet, which is currently the company’s fastest offering, tops out at the same 25 Mbps. This puts each offering from the company at roughly the same price, within $1-2/month. Perhaps Shaw simply saw that Telus offered a similar product at a better price, and needed to move to match it.

If this is the case, this is likely a worst case scenario for Shaw.  If they are truly facing the congestion issues they say they are, increasing the congestion to match the competition is likely something they did not want to do.  Shaw is already struggling to meet advertised speeds during peak hours in dense urban areas, and increasing the cap will only make that worse.  My fear is that this will drive Shaw to re-introduce a Usage Based Billing model to recover the costs of more node splits to try to handle the increased congestion.  Perhaps Shaw is increasing the speed for that purpose exactly.  If congestion becomes more evident, it becomes easier for Shaw to take measures it says will help decrease that congestion.

As I began writing this article, I mused that it was difficult to write when I really had little information.  A Shaw representative reached out to me, and provided the following statement:  “We are always looking for ways to improve the Shaw Internet experience for our customers.  The Shaw extreme upgrades are the first step, and we look forward to sharing more details late May/Early June.”  The representative did also say that more information will be coming next week.  Based on that, I think I am going to reserve any more speculation or judgment to what I have already said, and wait for more news to come.

I still truly have no idea what’s coming from Shaw.  I have guesses that I’m going to keep quiet, because I don’t want to wildly speculate. I can only assume that this is the first step after the consultation sessions, it just seems to myself, and many other observers I have talked to, to be exactly the opposite of what they were trying to accomplish.  It will be very interesting to see what happens next.


The Shaw Customer Discussion Sessions

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.