Q&A: Brad Shaw, CEO, Shaw Communications

Four months into his new role at the family business, the youngest Shaw faces the challenges of UBB, the Canwest acquisition and a first-time foray into the wireless market.

It would be unfair to characterize Brad Shaw as the new guy. True, the 46-year-old did assume the CEO role at Shaw Communications less than four months ago. But he’s been working there for more than 20 years, climbing the ranks in the company founded by his father, JR, who serves as executive chair at age 76. As CEO, the younger Shaw takes over for his brother, Jim, now serving as vice-chair.

Shaw was supposed to start as CEO in January to oversee the company’s expansion into new areas — television content and wireless. Then, the company announced in November he would take over immediately. It quickly emerged in the press that the early management change may have been provoked by Jim’s unprofessional behaviour at an investor lunch, where he allegedly berated shareholders.

Whatever the reasons, his younger brother is now leading the company through a tumultuous time. The $2 billion acquisition last year of the broadcast assets of Canwest Global Communications Corp. transformed the traditional cable company into an operator of television networks, including Global TV and the Food Network. And next year, the company plans to debut wireless services to compete with Rogers, Bell and Telus, its major competitor in the West. Shaw spoke with staff writer Joe Castaldo.

How are you settling in as CEO?
Well, I’ve been with the company for 24 years in operational roles, so I’ve certainly been around. At Shaw, we have a small team and tend to collaborate as a group, so all the key guys have helped with the transition. I’m humbled to have this opportunity, especially when I look at the tenure of the last two gentlemen and how they did.

How often do you tap your father for advice?
If I’m not talking to him daily, it’s every couple of days. It just allows me to get another sounding board and more input. And listen, I need that just like anyone else. We all need to be learning and willing to look at things differently, because that’s how we grow.

Certainly this industry changes rapidly, and one of the big issues right now is usage-based billing. Did you expect it to become so controversial?
We were caught saying, ‘Wow, this is big.’ But first of all, do customers understand what they’re actually using, and how much bandwidth? I think there’s a gap there of just realizing what everyone is using. For us, we need to look at what is the customer-friendly way to do this. Is it fair for 3% of users to take up 25% of the capacity? And have other customers, in a way, subsidize that? Or is there another model out there that works? That’s why we’re engaging with customers.

In January you said you would start charging customers who exceeded their download limits, but then held off, and are now consulting with customers before moving ahead. But what was the logic of implementing UBB in January?
We were seeing a big impact on customer usage. When you look at the sheer amount of video people are posting and accessing, that causes challenges in the network for maintaining a reasonable amount of service for all customers. We have, for example, 5% of our customers at peak times using 40% of the network. When you have 95% trying to use the remaining 60%, well, your experience is not going to be as good as we want. There’s an expectation that you have a certain quality of service, and our goal is to maintain that.

Why then reverse course? Because of the public outcry?
Yeah, it’s a combination of things. One was the decision on usage-based billing by the CRTC. And another was whether customers have a good grasp of the activity happening out there. We want their input and understanding. There was a big response, and we’ll react to that.

So what are you hoping to learn?
First of all, we need to make sure there’s an education process on what is happening with bandwidth and speeds. We’re hoping to find out some options that allow us to take a more customer-friendly approach, and also allow customers to understand some of the challenges we’re going through from a network point of view.

Is there anything to this theory that you guys are implementing UBB to dissuade consumers from cancelling cable and jumping to NetFlix and services like that?
Well, I don’t know. Usage is increasing 50% to 100% each year, and it continues to do that. When I look at some of the projections for how much capacity is going to be needed for even 2015, there’s going to be a big demand on the networks.

So in your view, is UBB the right way to respond?
I think it’s important to hear from customers first. And it’s important for us to give them the experience they’re paying for. So I’m not sure where it’s going to go.

On another front, you guys bought Canwest’s television assets last year. Convergence was unsuccessfully tried before. What’s different this time?
The big change is just how many devices you have now that can actually see content. I was down at the consumer electronics show in Vegas, and there are 80 new tablets out alone this year. Back then, you didn’t have these devices out there. The network wasn’t there. So for us, we want you to be able to stop watching a show in your household, grab your tablet as you’re out the door on your way to wherever, fire it up, and you’re back watching the show. When you look at mobile device growth, that’s certainly where the market is going, and content feeds into that.

When you made the purchase of Canwest, a lot of analysts were skeptical. What value do you see in owning content?
There’s huge value. Holding the rights to Canadian shows is important. Also, when you look at how people want content and how we can package it, owning it allows us to find what the customer needs. And it gives us branding power from a competitive point of view with Telus. So we’ve got news programs across Canada, and once you get the eyeballs in the morning with the news and carry that through the day, it helps you get the advertisers.

Telus is the only player that hasn’t bought into convergence. Do you think that will hurt them?
No, I think if they want to pay for content, they’ll pay. They might have to pay a little bit more, but the last time I checked, it seems they can afford to.

And you’ll be more than happy to accept their money?
Oh, absolutely. If they spend millions with Shaw, great. Spend away. All money is good. But one thing we don’t want to do is throw up roadblocks to content and make it exclusive [to our customers].

Are you seeing the impact from Telus on your cable business?
Oh yeah, it’s very competitive out there. But I take the long view. I also realize you’re not going to keep every customer because you’re not going to have much money left in your own pockets. Everyone is finding the balance between yield growth while still having customer growth. I look at some of the wireless guys, and it seems, boy, they’re putting out a lot of promotions to keep customers, so where is the balance? You can go too far and spend too much.

So when can we expect to see a wireless network from Shaw?
We’ll launch our first market in the beginning of 2012. One thing is we’ve always had a disciplined approach to launching new products, just like we’ve done with digital phone and internet, on a market-by-market basis. We realize it’s a new business for us, no matter how much we think we know the customer. But we’re still excited. We see the data usage in these tablets, and that’s just growing like crazy. We’ve spent 45 years building our customer base here in western Canada, and we’re not about to do a poor job.

The launch has been pushed back a couple of times. How come?
I’m not sure how significant that is. We’ve had a lot of success with this approach, and we’re comfortable with it. We have a strong relationship with our customers and we’ll be able to leverage wireless into our triple play. People are asking what we’re going to have for them, so there is some demand, and we’re going to take advantage of that.

Your wireless head, Laurence Cooke, left after a few months on the job. Has that held up the launch?
No, not really. At Shaw, fit is very important. As I mentioned earlier, it’s a small group, and unfortunately, Laurence wasn’t necessarily the right fit. I wish him the best, and no hard feelings. Sometimes these things work, sometimes not. We’ve already got a vice-president of wireless operations, so things are moving along.

I’m sure you’re aware of all the coverage about your brother’s alleged behaviour at an investor lunch in November. Is there anything you’d like to correct about how that was reported?
No. All I’d say is I always look at the whole career versus one moment in time. For Jim, look at everything he’s done in the past 12 years. Our market cap has doubled, our revenue is up three-fold. He’s done a great job in leading this company through a lot of different issues. So I look at all of that. And that’s all I’ll say.