Shaw and the End of Cellular

In the biggest event in telecommunications since the Strowger Switch of 1880, Canadian common carrier Shaw Communications last week dropped plans to enter the cellular market for a 100% Wi-Fi network.

“One of the things that we’re good at is looking at how we spend capital,” Shaw president Peter Bissonnette told reporter Iain Marlow at the Canadian paper, The Globe and Mail. “This was just a horrible return on a significant investment.”

Shaw’s thinking accords precisely with only one hardware supplier in the world, Apple, which has for over a decade run its Wi-Fi platform a good two years ahead of its product launches.  All Apple products are 100% Wi-Fi driven; cellular is important to it only at the margins.  As the chart shows, for Apple cellular is a way station where Wi-Fi and now Super Wi-Fi are not available.Shaw’s decision also accords precisely with the findings of our CIP White Paper, “Wi-Fi: The Existential Threat to Cellular.” Marginal cost-based Wi-Fi will fast supplant average cost-based cellular and the burdensome, expensive architecture that goes with it. Shaw’s comments on the cost of the cellular core dead on. The future is core-free, DAS on steroids. Shaw has opened a whole new frontier of wireless innovation.

Critically, Cisco data show that all the most powerful devices today — and whatever the Moore Curve brings in the future — use Wi-Fi exclusively. In other words, cellular is the business of yesterday: high priced and low capacity and wholly unsuitable for the 3DHD app loads (think gaming and medicine) of the next two decades. Most experts agree, LTE just won’t cut it in this world. It is a two year fix at best.

Also, average cost-based cellular pricing is useless for most of the hundreds of billions of M2M devices that will come on stream in the next quarter century. None will be able to tolerate average cost-based cellular prices.  Since M2M is where the growth in wireless is coming from, cellular will not participate in this growth.

Cisco recently pointed out to us that because of this, cellco costs and revenues will cross going the wrong way as soon as 2016 without a radically different architecture. Shaw has no desire to build itself into a profit downdraft that is well understood by the industry experts.

Shaw is the first carrier anywhere to get this. Its thinking accepts the App Delivery Architecture we developed that The Corporate Innovation Project in New York: an integrated 3DHD CDN + Wi-Fi distributed net that is low cost, redundant, and core-free. With Shaw, $5 trillion of global core-driven plant just became obsolete.

Already 85% of Apple iPad users are Wi-Fi exclusive as are over 90% of Apple laptop users. Cellular? What cellular?

What Shaw is saying is that people like Verizon, AT&T, and DoCoMo are in an increasingly isolated part of the wireless market and that to get back in to the wireless game they will have to shift away from cellular. Kind of like how the minicomputer makers got stranded on the wrong part of the Moore Curve when the PC hit. And like many of those firms — think Wang, DEC, Datapoint — they may cease to exist if they don’t change. Some will be like IBM and have to change their business models entirely.

For Apple the benefits of Wi-Fi are clear:  it can move into any growth industry it chooses from automotive — think iCar — to medicine — think iHealth — with impunity. Its app enablement devices can take any form in any market.

For Shaw, the benefits are equally startling:  it can handle any Apple product anytime without all the head damage of negotiating an iPhone contract and do so at a cost basis that makes sense.   It has a robust backhaul network and can leverage just about any location in its territory with what is, in effect, a wireline win back strategy.

Both companies have derisked themselves and pushed all the market risk onto someone else.  For several years we have been asking, when will a carrier figure out Apple’s strategy and how to derisk themselves.  Now we have an answer.