Price War Gets Ugly – Shaw Sues Competing ISP

For many in a particular area of Vancouver, it was the deal of a lifetime. High definition TV, phone and high speed internet connection for $9.95 a month. The problem? A small ISP by the name of Novus is also in the area trying to sell the exact same thing. In response to Shaw’s price, Novus launched a campaign to demand that all Shaw users should get the same deal all the while saying that this manoeuvre is anti-competitive. Shaw recently responded by suing for defamation.

Back in July, there were interesting reports coming out of Vancouver Canada where a price war was raging. Some suggested the Shaw move to charge a mere $9.95 per month for high speed internet, phone and TV was little more than an attempt to destroy a local fibre ISP. From the report at the time:

Canadian cable operator Shaw has dropped a bit of a pricing bomb on consumers and competitors in Vancouver. The operator is offering some unheard of deals, including 15Mbps service with a 100GB cap for $9.95 ($9.13 US), 200 channels of TV service (with 25 high-definition channels) for $9.95, or digital phone service with free installation, also for $9.95 a month. The catch? You have to live in an area served by Novus Entertainment, a Canadian fiber to the home operator that’s currently wiring Vancouver apartment buildings.

Novus offers symmetrical 10Mbps service for $37.50 a month (110GB cap), 30/10 Mbps service for $89.95 (200GB cap), or 50/10Mbps service for $179.95 (360GB cap). Given Novus’s small size of just 9,000 subscribers, Shaw can essentially give service away in Novus markets and just eat the losses.

Unfortunately, if you’re a Shaw customer in any other area, such amazing deals aren’t available to you. In fact, in some instances, you’re paying nearly $150 per month more.

At the time, Novus was unsurprisingly upset over this and launched a campaign saying that Shaw users from across the country should be allowed the same deal of ten bucks a month. It ultimately sparked a lawsuit in the B.C. Supreme Court as well as a complaint in the Competition Bureau.

Shaw had even sent “street teams” to the residents asking if they were Novus customers, and if they were, tell them about the Shaw deal.

The CBC is now reporting that Shaw has responded to the accusations of anti-competitive practises and sued Novus for defamation.

Calgary-based Shaw, which has more than two million customers, mostly in Western Canada, has fired back by filing a defamation lawsuit against Novus in B.C. Supreme Court.

Shaw president Peter Bissonnette said Novus is spreading misinformation. The offer isn’t just targeted at Novus customers but residents of West Vancouver in general, which is a “highly competitive” market.

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

It’s clearly a sort of David and Goliath sort of situation. Shaw is one of the three large ISPs stretched across Canada while Novus is a smaller Vancouver based company. Already, North American markets have been notorious for monopoly-like problems in the ISP industry. Many Canadians were reminded of this problem when an OECD report ranked Canada as having the 3rd worst cellphone rates in the world only outranked by Spain (2) and the United States (1). Some have argued that Canada’s landmass is the biggest problem for these prices, but given that the United States has a smaller landmass and a higher population density and still outranked Canada, that left that particular argument in limbo.

It’ll be interesting if the OECD report plays any roll in this latest price war, but either way, it’s already gotten ugly between the two companies.

Have a tip? Want to contact the author? You can do so by sending a PM via the forums or via e-mail at drew@zeropaid.com.

Related Posts

1. Zune price posted by Wal-Mart
2. Napster reveals price for pay service.
3. Verizon imposes new (high-speed Internet) service surcharge
4. Sony’s Stringer confident of winning PS3 price gamble
5. RIAA Sued for Price Fixing – 6 Years Later