Wrestling With ?Giants

Novus Entertainment, a Vancouver ?communications startup, takes ?on the big boys at Shaw.


Novus Entertainment, a Vancouver 
communications startup, takes 
on the big boys at Shaw.

Doug Holman sounds cautious and apologetic on the phone. “It’s ironic,” he says with a wry chuckle. “I really do want to talk to you about this, but I can’t.” It’s like that when you’re being sued by a huge competitor; you have to watch what you say to the media.
 Holman is co-president and CFO of Vancouver’s Novus Entertainment Inc., a small cable, Internet and phone provider that’s been locked in a fight with Western Canada’s dominant cable player, Shaw Communications Inc. Novus, which employs about 40, mainly serves downtown Vancouver apartment dwellers through its own fibre optic network, with thousands of clients in more than 200 buildings.

Novus has been expanding its territory by some 40 buildings a year, Holman estimates, and new projects are expected to open up in Burnaby and, thanks to a new cable Novus had installed in the Canada Line SkyTrain track, in Richmond as well. Holman doesn’t discuss financial details, but he says the company was doing quite well until early last year.

That’s when Shaw began introducing increasingly inexpensive offers available only to customers in Vancouver apartment buildings – Novus’s principal customer base. Normally, Shaw charges around $2,040 a year for a package that includes some of its top-level cable TV, Internet and phone services, according to Vancouver prices posted on its website. Last summer Shaw was offering a package with a year’s worth of all of these services for just $300 – each service going for $10 per month, with the first two months free. 

Novus sued in July, alleging that Shaw’s below-norm pricing threatens to drive Novus out of business and seriously reduce competition in the Vancouver market. The statement of claim calls this behaviour a violation of Canada’s Competition Act, which forbids companies from abusing a dominant market position through anticompetitive acts, including “selling articles at a price lower than the acquisition cost for the purpose of disciplining or eliminating a competitor.” 

And Novus didn’t stop with the lawsuit. The company also hired Vancouver Internet marketing firm 6S Marketing Inc. to conduct an online publicity campaign called 10 Bucks Too – complete with a website, Twitter feed and Facebook group – encouraging Shaw customers outside Vancouver to call Shaw’s head office and demand the same low prices it was offering to the Vancouver condo market. Many of the comments posted on the 10 Bucks Too sites spoke of Shaw unflatteringly, to say the least. Shaw is now suing Novus and 6S for defamation. The sites have since been taken down.

Shaw denies the allegation that it is doing anything illegal by offering Vancouver apartment dwellers a special deal. “It’s a very competitive environment in Vancouver,” Shaw president Peter Bissonnette told BCBusiness. “We will compete and make offers in order to keep in the marketplace. . . . That’s just the nature of the beast.” 

However, evidence beyond this Vancouver spat suggests that Canada’s communications field may not be as competitive as it should be. Harvard University released a report in October comparing broadband Internet service among developed countries. Canada ranked particularly poorly, with researchers finding that Canadians are paying among the highest prices for some of the lowest Internet speeds. According to the study, Canada has made a half-hearted effort to help new companies overcome technical hurdles and compete with the big players in the Internet field, relying mostly on competition between the established cable and phone companies to improve the market for consumers. 

While the major Internet service providers in Canada dispute the data behind the report, Ryerson University communications professor Catherine Middleton argues that the overall conclusions are fair and that relying on competition between big established players hasn’t given Canadians the best results. “Certainly some people would say that’s competition, but it’s not really because the prices are the same and the offerings are the same,” she says. “What hasn’t happened is the ability for new companies to come into the market and be really innovative.”

Novus is an interesting case because the company is building its own fibre optic infrastructure. This is unusual for Canada, Middleton says, and it’s exactly the sort of competition that government regulators want to see. However, the company’s current troubles are likely being seen by other potential entrepreneurs as an ominous sign of things to come for any other small company thinking about entering the market.

“It’s perfectly predictable in a competitive market that this is exactly what would happen,” Middleton says, “that when a new competitor comes in, the big established competitor tries to shut it out.” And that’s one reason why other countries have put strong policies in place to encourage more competition in their communications markets, she says, something that could work for Canada as well. “I think if there were more companies like Novus in the market, then you would see the big guys responding more quickly.”