Shaw 2013 Annual Report Download - page 40

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S
haw
C
ommunications Inc
.
MANA
G
EMENT’
S
DI
SCUSS
I
O
N AND ANALY
S
I
S
August
,
i
v
)
L
i
t
ig
at
i
o
n
The Company and its subsidiaries are involved in litigation matters arising in the ordinar
y
course and conduct of its business. Although management does not expect that the outcome o
f
t
hese matters w
i
ll have a mater
i
al adverse e
ff
ect on the
C
or
p
orat
i
on, there can be no assuranc
e
t
hat these matters, or other matters that arise in the future, will not have an adverse effect o
n
t
he Cor
p
oration’s business and o
p
eratin
g
results.
v
) Uninsured risks of los
s
The Company relies on three satellites (Anik F2, Anik F1R and Anik G1) owned by Telesa
t
C
anada
(“
Telesat”
)
to conduct
i
ts
S
atell
i
te bus
i
ness. The
C
om
p
an
y
owns certa
i
n trans
p
onders
o
n Anik F2 and has long-term capacity service agreements in place in respect of transponders
o
n Anik F1R, Anik F2 and Anik G1. The Company’s interests in these transponders are only
i
nsurable
i
nd
i
rectl
y
throu
g
h the satell
i
te owner. In the case o
f
trans
p
onders on An
i
kF
1
Ran
d
An
i
kF
2
, the
C
ompany does not ma
i
nta
i
n any
i
nd
i
rect
i
nsurance coverage as
i
t bel
i
eves the
costs are uneconomic relative to the benefit which could otherwise be derived through an
arran
g
ement w
i
th Telesat. In the case o
f
An
i
k
G1
, Telesat
i
s comm
i
tted to ma
i
nta
i
n
i
n
g
i
nsurance on the satell
i
te
f
or the launch and
fi
rst
fi
ve years o
fi
n orb
i
t operat
i
on. As collateral
f
or the transponder capacity pre-payments that were made by the Company to facilitate the
construct
i
on o
f
the satell
i
te, the
C
om
p
an
y
ma
i
nta
i
ns a secur
i
t
yi
nterest
i
n the trans
p
onde
r
capac
i
ty and any related
i
nsurance proceeds that Telesat recovers
i
n connect
i
on w
i
th an
i
nsure
d
loss event.
The Company does not maintain business interruption insurance covering damage or loss to on
e
o
r more o
f
the satell
i
tes as
i
t bel
i
eves the
p
rem
i
um costs are uneconom
i
c relat
i
ve to the r
i
sk o
f
satell
i
te
f
a
i
lure. Transponder capac
i
ty
i
s ava
i
lable to the
C
ompany on an unprotected, non
-
preemptible basis, in both the case of the Anik F2 transponders that are owned by Shaw an
d
t
he An
i
kF
1
R, An
i
kF
2
and An
i
k
G1
trans
p
onders that are secured throu
g
hca
p
ac
i
t
y
serv
i
ce
agreements. The
C
ompany has pr
i
or
i
ty access to spare transponders on An
i
kF
1
R, An
i
kF
2
an
d
Anik G1 in the case of interruption, subject to availability. In the event of satellite failure
,
serv
i
ce w
i
ll onl
y
be restored as ca
p
ac
i
t
y
becomes ava
i
lable. Restorat
i
on o
f
satell
i
te serv
i
ce on
another satell
i
te may requ
i
re repos
i
t
i
on
i
ng or re-po
i
nt
i
ng o
f
customers’ rece
i
v
i
ng d
i
shes or an
u
pgrade of their set-top box. As a result, the customers’ level of service may be diminished or
customers ma
y
re
q
u
i
re a lar
g
er d
i
sh. The An
i
k
G1
satell
i
te has a sw
i
tch
f
eature that allows
whole channel services (transponders and available spares) to be switched from extended Ku
-
band to Ku-band, which provides the Company with limited back-up to restore failed whole
channel serv
i
ces on An
i
kF
1
R.
S
atell
i
te
f
a
i
lure could ne
g
at
i
vel
y
a
ff
ect customer relat
i
onsh
ips
and may result in a material adverse effect on business and results of operations
.
The Company’s business may be interrupted by network failures, including those caused by fir
e
d
amage, natural disaster, power loss, hacking, computer viruses, disabling devices, acts of war
o
r terror
i
sm and other events. Th
i
s could ne
g
at
i
vel
y
a
ff
ect customer relat
i
onsh
ip
s and ma
y
result in a material adverse effect on the Company’s business and operating results. The
Company protects its network through a number of measures including physical security
,
o
n
g
o
i
n
g
ma
i
ntenance and
p
lacement o
fi
nsurance on
i
ts network e
q
u
ip
ment and data centers.
The Company self-insures the plant in the cable distribution system as the cost of insurance is
g
enerally prohibitive. The risk of loss is mitigated as most of the cable plant is located
u
nder
g
round. In add
i
t
i
on,
i
t
i
sl
i
kel
y
that network dama
g
e caused b
y
an
y
one
i
nc
i
dent would be
limited by geographic area and therefore resulting business interruption and financial damage
s
would be limited. Further, the Company has back-up disaster recovery plans in the event o
f
36