Shaw's flyer distributed to Novus customers

The Supreme Court of British Columbia has thrown out Novus Entertainment’s 2009 lawsuit against Shaw Cable accusing western Canada’s largest cable operator of predatory pricing and other anti-competitive acts.

Last summer, Stop the Cap! gave considerable attention to the price war that broke out between Novus Entertainment, a fiber provider serving many Vancouver apartment buildings and condos vs. incumbent cable provider Shaw Cable.

Novus, which entered the BC market well after Shaw, faced what it alleged were incidents of fixing prices below cost and false advertising in an effort to drive competition out of the market.

At one point, last summer’s battle dropped prices as low as $30 a month for a package of HD cable, unlimited phone, and 16Mbps broadband service from Shaw.  Novus accused Shaw of recouping their losses in Vancouver from other Shaw cable subscribers across Canada who made up the difference with higher cable rates.

Novus sought relief before The Honourable Mr. Justice Greyell, in the Supreme Court of British Columbia.  Novus argued that under the recently expanded Competition Act, the court could order Shaw to cease unfair competition and face punitive fines for the cable company’s bad behavior.

Novus recited details of the price war:

Commencing February 2009, Shaw began a series of marketing campaigns specifically targeted at Novus’ existing customers in high-rise, multiple-dwelling units (“MDUs”) developments in Vancouver and Burnaby, British Columbia.

In February 2009, Shaw offered very low pricing on its Cable Television Services, Internet, and digital telephone services to certain Novus customers.  Customers were free to take one, two or all three of the services offered.  There were no contracts or commitments required:

• Cable Television Services:  Shaw’s “High-Definition TV” package including over 100 digital and HD channels, plus 1 year free rental of a high-definition personal video recorder (“HDPVR”), free for the first two months, and $9.95 for the next ten months (twelve months in total).
• Digital Telephone:  Shaw’s “Digital Phone Basic” package, which includes local calling and call display, free for the first two months, and $14.95 for the next ten months (twelve months in total).
• High-speed Internet:  Shaw’s “Xtreme-I Internet” package, free for the first two months, and $19.95 for the next ten months (twelve months in total).

In March 2009, Shaw began offering a free HPDVR to keep, plus the first month of service for free, to customers that switch back to Shaw. Customers were only required to commit to six months of pre-authorized payments.

In July 2009, Shaw offered even lower pricing than it marketed in February:

• Cable Television Services:  More than 200 digital channels, including all analogue and digital television channels, 25 high-definition television (“HDTV”) channels, a movie channel package, plus two rental HDTV set-top boxes with personal video recorder (“HPDVR”), free for the first two months, and $9.95 for the next ten months (twelve months in total).
• Digital Telephone:  Shaw’s “Digital Phone” package, including local telephone service, over a dozen calling features including voicemail, call display and call waiting, unlimited calling within Canada and the US, 1,000 International minutes to selected countries per month,”) free for the first two months, and $9.95 for the next ten months (twelve months in total).
• Shaw’s “Xtreme-I” high-speed Internet: with advertised download speeds of up to 16 Mbps, “Powerboost”, 10 personal email addresses and 100 GB monthly data transfer”), free for the first two months, and $9.95 for the next ten months (twelve months in total).

To add insult to injury, according to Novus, Shaw began advertising Internet “now 50 percent faster.”  In Novus’ opinion, the advertising implied Shaw’s Internet service was now 50 percent faster than broadband offered by Novus.

The text from Shaw’s ad read:

Feel the need for extra speed?  Shaw high-speed Internet is now 50% faster that’s fast.  Downloading your favourite music, videogames, and movies will take no time at all.  Plus Shaw high-speed Internet comes loaded with no cost extras like Powerboost, Shaw Secure and much more.  Get Shaw high-speed Internet for the amazing new price of only $19.95 per month for the first three months including modem and installation.  There’s never been a better time to order.  Call 310-Shaw today.

Signs sponsored by Shaw Cable were placed in front of buildings wired by Novus

The decision by Mr. Justice Greyell was carefully watched across Canada as it represented the first test of expanded authority granted by Parliament for courts to impose significant monetary fines against bad actors.  Commentators noted the new authority theoretically granted courts the power to determine anti-competitive activity itself — a power formerly held by Canada’s Competition Tribunal.

Those commentators need not have worried if the BC Supreme Court decision stands intact.

Mr. Justice Greyell dismissed Novus’ claims and ruled that in the absence of a determination of anti-competitive behavior by the Competition Tribunal, the court had no right to declare Shaw guilty of such behavior in the case.

“I conclude that in the absence of an order from the [Competition] Tribunal under s. 79 of the [Competition] Act, those portions of the statement of claim alleging a breach of s. 79 of the Act be struck out,” the chief justice ruled, effectively dismissing Novus’ anti-competitive claims against Shaw.

Mr. Justice Greyell also was unconvinced consumers would be confused by Shaw’s “50 percent faster” advertisement, believing the cable company now delivered faster service than Novus.

“In applying these tests to the ‘Now 50% Faster’ advertisement I am unable to conclude a reasonable person would view the words used as referring to the plaintiff’s business.  I am of the view the interpretation any reasonable person would place on the words is that Shaw is directing the advertisement to its own customers, and anyone else who might be interested, that its services are 50% faster than they used to be.  This fact is made clear by Shaw’s use of the word ‘Now’ – which implies that in the past Shaw’s services were slower and that Shaw has ‘Now’ improved the speed of its services   The advertisement makes no reference to Novus or to any Shaw competitor,” the chief justice ruled.

Novus effectively walks away from the BC Supreme Court empty-handed, and a little lighter in the wallet.  The chief justice also ruled Novus is responsible for Shaw’s legal bills associated with defending itself against Novus’ lawsuit.

[flv width=”630″ height=”375″]http://www.phillipdampier.com/video/Novus – 10 Bucks Too.flv[/flv]

Novus released this video as part of an outreach campaign arguing cable customers across western Canada should qualify for the same incredibly low promotional pricing Vancouver residents pay for Shaw Cable. (2 minutes)

Metro Vancouver residents will have access to Canada’s fastest residential broadband service next Friday when Novus Entertainment launches its Net 200 tier providing 200Mbps service over a fiber optic network for $279.95CDN per month.  Customers currently paying $179.95 for the company’s 60Mbps plan will also receive a free upgrade to 100Mbps service on that same date.  No word yet on what the new usage limits will be, but Novus previously limited its 60Mbps plan to 360GB per month, unfortunate for a plan that carries such a premium price.  Novus charges 50 cents for each additional gigabyte above their various plan allowances.  Novus’ upload speeds are the same as its advertised download speeds.

Novus Entertainment has wired fiber optic cable in 33,000 large multi-dwelling units in parts of greater Vancouver, providing broadband, telephone, and television competition for incumbent cable provider Shaw Communications.  The two companies were embroiled in a nasty price war last year, with Shaw slashing prices to as low as $10 per month for video, phone, or Internet access.  To date, Novus has 9,000 subscribers, 8,200 of which subscribe to the company’s broadband service.

“We noted a recent survey by Harvard University which found that Canadians’ access to superior broadband performance and infrastructure ranked poorly among developed countries,” said Donna Robertson, Co-President and Chief Legal Officer of Novus Entertainment Inc. “While these results are disappointing, this provided Novus with the opportunity to not only take this challenge head on and provide customers with superior Internet speeds, but to also set us apart from the competition.”

Vancouver is the home of Novus Entertainment

Novus’ Net 200 will be available in selective buildings that are configured for 200 Mbps technology. With the vision of becoming one of Metro Vancouver’s major Internet and communications service providers, Novus continues to expand its service in Vancouver and Burnaby and plans to launch services in Richmond in 2010.

“Canadians want a service provider that delivers a fast Internet connection to meet their growing needs at a reasonable cost,” said Doug Holman, Co-President and Chief Financial Officer of Novus Entertainment Inc. “Yet they’re paying among the highest prices for some of the lowest speeds. Novus’ superior fibre-optic network allows us to provide our customers with best-in-class, reliable and consistent transfer speeds that the incumbents simply can’t offer.”

Shaw probably cannot match Novus’ 200Mbps service tier on their non-fiber optic cable network, but will likely continue to compete heavily on price with discounts that stun Canadians outside of metro Vancouver.  Shaw’s pricing in Novus-wired buildings is as much as $60 less than in other areas where Novus does not compete.

Novus also owns some wireless spectrum covering Alberta and British Columbia, so eventually the provider could mount a competitive challenge in the mobile telephone market, at least in western Canada.  There are rumors the company could partner with an eastern Canadian spectrum holder like Public Mobile, which owns spectrum covering southern Ontario and Quebec.  Neither company has launched service, and probably won’t for the rest of 2010, but could eventually provide additional competition in the overpriced Canadian mobile phone market.

Shaw Communications has fired back against accusations by Novus Entertainment that it is engaged in predatory pricing by filing a defamation suit in the British Columbia Supreme Court.

Shaw president Peter Bissonnette said Novus is intentionally spreading misinformation about Shaw’s competitive promotion in the Vancouver area, which he said charged $29.85 a month for a comprehensive package including digital HD cable, high-speed broadband, and telephone service that includes free long distance calling across North America.

Novus fired the first legal shot in July, accusing Shaw Cable of engaging in predatory pricing by offering cable, broadband, and telephone service “below cost” only to residents in the high rise buildings where Novus currently offers service in the city of Vancouver.  Novus, a fiber optic-based competitor, offers service in 225 residential high rise buildings in downtown Vancouver, at prices that have traditionally been lower than those offered by Shaw, western Canada’s largest cable operator, based in Calgary, Alberta.  Novus announced it was filing a predatory pricing case with the Competition Bureau of Canada and the BC Supreme Court.

Shaw officials counter that many of those high rise buildings are owned by Concord Pacific, which also has a major ownership interest in Novus Entertainment.  Bissonnette dismisses Novus’ accusations of anti-competitive behavior, accusing Concord Pacific of blocking access to Shaw, preventing the company from wiring the buildings during their construction, which would have reduced costs significantly.

“Those buildings up until recently have never had access to our services,” he said.

February 2009 Shaw Communications Promotional Pricing (click to enlarge)

Novus’ disdain for Shaw began this past February, when Concord Pacific employees noticed Shaw was promoting special discount offers targeting their buildings’ residents with special discounts for new Shaw customer signups.  The special offers expired at the end of February, and the two companies stopped specifically targeting each other in greater Vancouver until July.

Novus co-president Doug Holman told the CBC that was when things really began to heat up.

The cable provider resumed its efforts in July with a more aggressive deal, which it promoted by slipping flyers under doors and with “street teams” that would stand in front of buildings and ask people entering and exiting whether they were Novus customers. If they were, they would get the $9.95 offer, he said.

The $9.95 offer Holman mentions was an even more aggressive promotion than the one Shaw offered in February. The July promotion offered each component of Shaw’s package — television, broadband, and phone — for $9.95 a month each, with two free months thrown in, as the promotional flyer obtained by Stop the Cap! illustrates (shown on the left).

Shaw's flyer distributed to Novus customers (click to enlarge)

Who exactly could obtain this promotional pricing became a point of contention between the two companies.  Shaw president Peter Bissonnette claims the promotion is not just available to existing Novus customers, but to any resident of West Vancouver, which he called “highly competitive” for cable and broadband service.  Novus claims the promotion is targeted specifically at their customers, and is not widely known or available outside of its own customer base.

Vancouver residents sharing their experiences with Stop the Cap! report that Novus’ version is probably closer to the truth.  When the skirmish went public with Novus’ PR and Twitter outreach campaign, many Shaw customers in Vancouver had no idea such an aggressive promotion existed.  Neither did Telus customers (British Columbia’s telephone provider).  Some Shaw customers called Shaw to complain about the wide disparity between the rates they were paying and those Novus customers enjoyed.  Some Telus customers also called Shaw in late July to inquire whether they could sign up for the promotion.  Existing Shaw customers were disqualified from the promotion because they were existing customers, and the Telus customers who shared their experiences with Stop the Cap! were told the “offer was not available in your area” by Shaw customer service representatives.

Indeed, other online forums reported some similar experiences, noting the offer was limited to a tight geographical area, notably right in the heart of Novus’ primary service areas — those high rise residential buildings.

One reader of Digitalhome.ca, one of Canada’s largest home entertainment forums, said Shaw would offer this promotion to him if he “moved downtown.”  He also noted some friends who do live downtown are trying to shovel through a blizzard of promotional mailers from Shaw received day after day, as well as personal visits from Shaw sales employees knocking on the doors of residents known to live in buildings wired for Novus, despite posted signs “clearly marked ‘No Canvassing’.”

On the CBC website, one Vancouver resident has received dozens of promotional mailers and plans to return them to Shaw at some point: “It’s insane; some friends and I are saving them up to dump on Shaw’s doorstep at some future point.”

Over on Broadband Reports, one resident looking for service outside of Vancouver was told the promotion was not available:

“I phoned up Shaw asking them to give me this offer at my residential house that is not located in Vancouver. They would not.  The closest deal that the Shaw customer service representative would give me is $70/month for six months and then $110/month after that – Citing at first that they could only offer this promotion to buildings with Novus/Telus/Bell. When I asked why I could not get the promotion at my house because I have Telus available, the CSR backtracked and told me that it was only available in multi-dwelling buildings. Eventually the CSR backed down and told me that Shaw was only offering the promotion to buildings with Novus.”

Another reader who did live in the right neighborhood and ostensibly should have qualified was told he did not:

“I called 15 minutes ago and spoke to a CSR about setting it up in my Kits apartment (moving on Aug 15, do not have an account with Shaw currently) and he came right out and told me it’s only for Novus customers. I said I understood it to be an offer to multi-dwelling buildings and that Telus was offered in my apartment as well, but he said that I don’t qualify because I’m not in a Novus building.”

Sign outside of The Concordia in Vancouver promoting Shaw Communications' special offer (click to enlarge)

One possible clue about who this promotion was intended for could be found on a signboard placed just outside the entrance of one Vancouver building heavily promoting the Shaw offer (see photo on right).

Meanwhile, both companies continue their war of words:

“They’ve publicly stated in the past that they’re going to become the bane of the life of Shaw,” Shaw’s Bissonnette said. “True to their word, they’ve embarked on this defamation campaign.”

Counters Novus’ Holman: “That number [$9.95] is way below our cost. We don’t know what Shaw’s cost is, but it’s hard to believe it could be that low and that their cost savings could be that much better than ours,” Holman said. “If we price matched on that, we’d be losing buckets of money.”

Vancouver residents have mixed reactions to the war of words (and pricing.)

Some are eager to take advantage of the competitive price war, and are dropping Novus for a year’s worth of service from Shaw at a fraction of the regular price, citing the savings during the current economic climate.

Others defend Shaw’s aggressive pricing as competition, brutal as it might appear, doing its job in reducing prices for consumers.  Some have suggested the aggressive rate cutting exposes the enormous profit margins enjoyed by the cable industry, particularly pointing to Shaw’s comments that they are not losing money, even at the low prices they are charging in certain areas of Vancouver, as clear evidence of the gouging that goes on elsewhere in cable pricing.

But some Vancouver residents are defending “the little guy,” upset that Shaw may be using its market power and presence across western Canada to put an upstart like Novus out of business.

One CBC reader summed up the views of Novus defenders:

I’m increasingly annoyed by how heavy-handed Shaw is being in this price war. I qualify for Shaw’s anti-competitive price, but have no intention of switching to get it. If I leave Novus now then I’d be playing right into Shaw’s dream of a city-wide monopoly.

And that’s before I even start to mention the aggression of Shaw’s sales tactics. Green-shirted employees on every street corner downtown, bugging me multiple times as I walk from point A to point B on a weekly basis. Two or three pieces of junk mail a week that get around the red dot I have in my mailbox that indicates I Do Not Want Junk Mail, because they’re addressed to Current Occupant.

I’m all for healthy competition, but this ain’t it.

A few Novus customers have found a happy middle ground while the war plays out in the courtroom.  They contacted Novus and asked them to match Shaw’s prices:

Novus customers who are tempted to switch should contact Novus, as they will match the deal. That is what I did, and I am now paying $10 bucks a month for 20Mbps (23.79 according to Speedtest.net) download speed. My total Internet bill over the next year will be $120 for a service that is equivalent to Shaw’s “High Speed Warp” package, a service that costs $94 a month! That’s the apples to apples comparison, and it works out to be a $1000 savings for Novus customers.

I felt really guilty asking Novus to match, since I am extremely happy with their service and was paying a very reasonable $30 a month. But it’s hard to pass up a deal like that, and I will do my best to spread the gospel about how much better value Novus is over Shaw, and especially Telus and Bell. Healthy competition is great, but I do hope the CRTC steps in to ensure Novus isn’t bullied out of the market.

Telus hasn’t gotten involved because they are more concerned with selling the worst service at the highest price, while Bell is busy pitching you on how fast their service is to your face, and then throttling your speed behind the scenes to the point where Google has come out against them. I haven’t had any bad experiences with Shaw myself, but Novus is a real gem.

So those of you who live in downtown Vancouver should do the logical thing, and stick with Novus. You have access to a service that most people across North America, let alone Canada, drool over.

Shaw's flyer distributed to Novus customers (click to enlarge)

Letting Shaw get away with this will let them buy up competitors like Novus for a pocket full of Toonies.

[Update 10:16am EDT 7/29] — Brion, one of our loyal readers, had a chance to visit Novus’ website and discovered that Novus has usage allowances on its own broadband service.  That’s naughty.  They are far more generous than Shaw’s, which start at 10GB and are more commonly in the 60GB range for average customers, but that’s besides the point.  The Comments section is where the discussion about the usage allowances are taking place.  We call on Novus to explain their limit policy, and more importantly, consider dropping it altogether and using that as a competitive tool against Shaw, which has far lower limits.  If the vast majority of customers are unlikely to hit them, why have them at all?  Write an Acceptable Use Policy that allows for informal communication with the extreme users consuming terabytes of bandwidth a month and offers them a commercial plan for them to consider.  Don’t be a part of the Internet Overcharging crowd.  We celebrate the kind of competition Novus can provide residents of Vancouver and Burnaby, but we’d like to make sure the competition is worth fighting for.

[Update 6:12pm EDT] — Welcome to Novus customers who discovered this site through Novus’ campaign website. Stop the Cap! is an all-consumer website designed to promote and defend the competitive broadband marketplace in both the United States and Canada.  Paul-Andre Dechêne is our Canadian editor. We are unalterably opposed to Internet Overcharging schemes, which include bit/usage caps, consumption-based pricing, and fees or penalties imposed by providers for exceeding them.  We are pro-competition, pro-Net Neutrality, and opposed to throttles.  Companies like Novus which provide needed competition in the cable television, telephone, and broadband marketplace are essential for a healthy marketplace with rational pricing.  Shaw’s obvious predatory pricing tactics are designed to drive away Novus’ customers, making the company ripe for takeover, by Shaw of course, for a pocketful of Toonies.  While those Shaw prices sound good today, driving away competition guarantees much, much higher pricing tomorrow in a monopoly environment.  Novus is installing fiber optic-based service, which means they are already kilometers ahead of Bell and the usual assortment of the Shaw/Rogers/Vidéotron old school cable companies.

We welcome your views.  Just leave your public comments in the editor box at the bottom of the page (or click the comments link just below the headline).  You can explore more than 400 articles on our issues from the menu bar at the top.  Drop down menus will let you read about the issues that are most relevant to you.  Thanks for joining us.  The fight for affordable broadband continues across Canada, and we welcome your participation.  Bookmark us and drop by regularly. — Phillip M. Dampier, Editor]

Imagine paying $9.95 a month for a digital cable package with two free high-definition set-top boxes with personal video recorders, more than 200 digital channels, more than 25 high-definition channels, and a movie channel package.  Not convinced?  How about also getting two free months thrown in.

Need telephone service?  How about free nationwide/U.S. calling, free installation, and a whole mess of phone features for $9.95 a month?  Don’t forget broadband.  That’s just $9.95 a month as well for 15Mbps service with free Powerboost.  To sweeten the deal to diabetic coma proportions, Shaw will throw in two free months of service for each of those packages, too.

What’s the catch?  You have to live in an area currently served by Novus Entertainment, Inc., an upstart independent fiber-based competitor wiring metro Vancouver, British Columbia.  Novus has aggressively wired high rise condominiums and other densely populated neighborhoods and buildings in Vancouver.  Novus is a tiny company compared to Canada’s national cable companies.  Shaw provides cable television service to 2.1 million customers in several Canadian provinces.  Novus has 9,000 subscribers in 220 buildings in Downtown Vancouver and Burnaby and is planning an expansion into Richmond. Those buildings are being peppered with marketing from Shaw, including this special pricing offer.

Existing Shaw customers, and those who live outside of Novus’ service area, cannot obtain the special pricing.  That is the heart of a complaint lodged by Novus against Shaw at the Competition Bureau of Canada and in the British Columbia Supreme Court, charging Shaw is engaged in predatory pricing designed to put Novus out of business.

“Shaw is abusing its dominant position in the market by offering services – which it normally makes nearly 50 per cent margins on – at a sizeable loss as a means to destroy a local competitor,” said Donna Robertson, Co-President and Chief Legal Officer of Novus Entertainment Inc. “The millions of existing Shaw customers paying full price should be outraged because they’re unwittingly subsidizing the costs that customers with a competitive alternate pay, which is unethical and unfair. If they don’t make the offer available to everyone, current customers should call Shaw and demand the same deal.”

Novus points out Shaw has been “on a buying spree” picking up smaller cable operators and independent providers, but has “been unsuccessful in getting traction with Novus,” company officials suggest.

Stop the Cap! has discovered Shaw’s discount offer is a remarkable one, compared with the regular pricing Shaw customers pay elsewhere:

Shaw Deal for Novus Cable TV Customers

$9.95 digital cable with two personal video recorders, movie channel package, digital channel package
Two free months service

Shaw Deal for Other Canadians

$67.85 HD package
$16.00 Movie Central/HBO or Super Channel premium movie network
$26.95 digital cable “specialty channel” package
$ 3.95 time shifting option
$30.00 Shaw HD personal video recorder set-top box

The grand total: $144.75 per month, with no free months.

“Shaw enjoys increasing cable margins of nearly 50 per cent, which it boasts to investors is ‘best-in-class’ compared to other North American cable companies,” said Robertson. “We believe that Shaw’s targeted campaign is an attempt to eliminate Novus from the competition, which would allow Shaw to maintain its near monopoly status and raise prices for all customers whenever it sees fit”

“Based on Shaw’s actions, we can only assume that they are trying to buy our customers by gouging their own prices,” said Robertson. “They’re offering these services at an enormous loss, while forcing the rest of their customers to make up the difference. We aren’t big enough to compete with Shaw’s predatory pricing, but we are faster and more reliable, and our service is actually less expensive over the long term.”

Novus has launched a website and is busy on Twitter asking Shaw customers across Canada to demand the same special offer they are making available in Novus’ service area.

<

p style=”text-align: center;”>

Do you want the 10 Bucks Offer too? Sign our Petition and call Shaw to request this special rate.

Greater Vancouver – 604-629-8888
Kelowna – 250-762-4433
Prince George – 250-562-1345
Fort St John – 250-785-3039
Victoria – 250-475-5655
Edmonton – 780-490-3555
Calgary – 403-716-6000