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Canadian cableco says no to cellular

One of Canada's biggest communications companies has turned down the opportunity to take advantage of the CDN$189 million in wireless spectrum it bought to build a new cellular network.

Instead, Shaw Communications Inc. said Thursday it will get into wireless by building a Wi-Fi network in cities across Western Canada, offering free service to its cable subscribers who own Wi-Fi enabled laptops, tablets and smart phones.

It also hopes to lease capacity to other cellular carriers looking to offload traffic onto its Wi-Fi network.

After spending CDN$2 billion earlier this year buying a national television network, Shaw looked at the numbers and said it couldn't justify the $1 billion it would take to build an LTE-based cellular network.

Shaw would have faced competition from five other cellular providers, including incumbent phone company Telus Corp., giants Rogers Communications and Bell Canada, and two startups.

"New entrants lack the economies of scale and scope to compete effectively against well established incumbents with ubiquitous coverage, extensive device ecosystems, deep spectrum positions and large retail networks," the company said in a news release. "Even with our established base and considerable strengths and assets [as a cable, Internet and VoIP provider], we could not justify a wireless network build at this time."

Instead, Shaw said it will follow the lead of several U.S. cable companies with Wi-Fi networks.

It is already talking to Cisco Systems Inc. to supply equipment for a Wi-Fi network debut next spring.

"It has the potential to extend all of our current services [television, home phone and Internet] outside of the home, including TV everywhere," company CEO Brad Shaw told financial analysts on a conference call.

The next generation of Wi-Fi technology, 801.11ac, will have throughput of 1 Gigabits per second, company officials told financial analysts on a conference call. However, that technology isn't in the current devices people use.

The move surprised some industry and financial analysts.

"You're going to compete against Starbucks for Wi-Fi?" asked Toronto-based telecom financial analyst Dvai Ghose of Canaccord Genuity. "It puts them in a very weak position strategically, in my view ... because they have no access to wireless data growth. Where is wireless data growth [at cellular carriers] coming from? iPad, iPhones, BlackBerrys, Android."

On the other hand, Iain Grant, managing director of the SeaBoard Group, a Montreal-based telecommunications consultancy, said Shaw's decision is logical, given the increasing prices cellular carriers are charging for data. That has meant many wireless users look for Wi-Fi hotspots to save money.

Shaw's decision could also be a huge opportunity for wireless startups Wind Mobile and Mobilicity to partner with the cable operator, Grant added. Both have cellular operations in Shaw's biggest markets in Vancouver, Calgary and Edmonton.

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