Shaw 2014 Annual Report Download - page 42

Shaw Communications Inc.
MANAGEMENT’S DISCUSSION AND ANALYSIS
August 31, 2014
the Anik F1R, Anik F2 and Anik G1 transponders that are secured through capacity service
agreements. The Company has priority access to spare transponders on Anik F1R, Anik F2 and
Anik G1 in the case of interruption, subject to availability. In the event of satellite failure,
service will only be restored as capacity becomes available. Restoration of satellite service on
another satellite may require repositioning or re-pointing of customers’ receiving dishes, an
upgrade of their set-top box or customers may require a larger dish. The Anik G1 satellite has a
switch feature 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 services on Anik F1R. Satellite failure could negatively affect
levels of customer service and customer relationships and may result in a material adverse
effect on the Company’s business and results of operations.
The Company’s business may be interrupted by network failures, including those caused by fire
damage, natural disaster, power loss, hacking, computer viruses, disabling devices, acts of war
or terrorism and other events. This could negatively affect levels of customer service and
customer relationships and may 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 and information technology security, ongoing maintenance and placement of
insurance on its network equipment and data centers. The Company self-insures the plant in
the cable distribution system as it believes the premium costs are uneconomic relative to the
risk of failure of the plant in the cable distribution system. The risk of loss is mitigated as most
of the cable plant is located underground. In addition, it is likely that network damage caused
by any one incident would be limited by geographic area and therefore resulting business
interruption and financial damages would be limited. Further, the Company has back-up
disaster recovery plans in the event of network failure and redundant capacity for certain
portions of the system. In the past, the Company has successfully recovered from network
damage caused by natural disasters without significant cost or disruption of service. Although
the Company has taken steps to reduce this risk, there can be no assurance that major network
disruptions will not occur.
vi) Reliance on suppliers
Shaw’s business is connected to or relies on other telecommunication carriers and certain other
utilities. Any of the events described in the preceding paragraph, as well as labour strikes and
other work disruptions, bankruptcies, technical difficulties or other events affecting the
business operations of these carriers or utilities may have an adverse effect on the Company’s
business and operating results.
The Company sources its customer premise and capital equipment and capital builds from
certain key suppliers. While the Company has alternate sources for most of its purchases, the
loss of a key supplier could adversely affect the Company in the short term.
vii) Programming expenses
Shaw’s programming expenses for cable and DTH continue to be one of the most significant
single expense items. Costs continue to increase, particularly for sports programming. In
addition, as the Company adds programming or distributes existing programming to more of the
subscriber base, programming expenses increase. Although the Company has been successful
at reducing the impact of these increases through sale of additional services or increasing
subscriber rates, there can be no assurance that the Company will continue to be able to do so
and operating results may be impacted.
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