Tensions were running high in the House of Commons Wednesday, as the Standing Committee on Industry and Technology (INDU) conducted hearings examining the proposed Rogers-Shaw merger. Academics and representatives from independent internet service providers (ISPs) TekSavvy and Globalive lambasted the C$26 billion merger deal, while the merging parties attacked rivals and mechanically parroted their own ideas of public interest and competition.
Witnesses opposing the merger included Ben Klass, senior research associate at the Canadian Media Concentration Research Project, Anthony Lacavera, chairman of Globalive, and Andy Kaplan-Myrth, vice-president, regulatory and carrier affairs at TekSavvy.
From Klass’ point of view, the Rogers outage should have served as a wake-up call that ‘bigger is not always better,’ especially when it comes to essential services on which we depend everyday. He questioned whether the priority in Canada is to promote competition or to cater to big businesses who wish to control crucial markets.
“How do we get back to the basics of competition and good prices in this market? And one of the answers to that is removing the dominance of the original providers,” he said. “These are companies that have been in the market for 30 years – Rogers, Telus, Bell – and they are firmly in control of it. They’ve maintained a 90 per cent share over even the 10 years of the fourth carrier policy. So I think it’s very important that you have a competitor that’s not reliant in this way on one of the dominant providers.”
Lacavera also pushed his own ambitions for a competitive wireless market, which he tried to re-enter with a bid to re-acquire Freedom Mobile (previously Globalive-owned WIND mobile, sold to Shaw in 2015) after the Rogers-Shaw announcement. He claimed that he offered C$900 million more than Rogers accepted from Videotron. “In no universe does it make sense for a company like Rogers to be able to select who their competitor is going to be, and then prop them up with a series of commercial agreements that now may actually be in violation of the Telecom Act.”
But Tony Staffieri, chief executive officer of Rogers, argued that the ‘lengthy judicial process’ is adequate to prove that the merger will not lessen competition, and in fact will increase competition. “It was far from a close case, this committee can feel satisfied that no stone was left unturned.”
‘Investments’ was equally a buzzword for the merging parties, and seemingly their way out to address every competition concerns brought up by community members. “We invest in networks. And in terms of affordability, we get up every day looking for more value add for our customers,” said Staffieri. He added that Rogers will be injecting C$6.5 to improve connectivity over the next five years: C$1 billion to connect rural and Indigenous communities, C$2.5 billion to expand its 5G network and C$3 billion in network services.
Staffieri also claimed that 3000 jobs will be created at Rogers, which a committee member questioned, having heard from company insiders that 4000-5000 people will be cut. Staffieri responded, “There will be areas that have overlap. And we will look to redeploy resources in areas that are growing.”
Furthermore, Paul McAleese, president of Shaw Communications, maintained that Rogers will never own Freedom Mobile and that there will continue to be four strong wireless competitors in each of British Columbia, Ontario and Alberta. “The dynamic, newly empowered Freedom-Vidéotron will have more than doubled the customer base with over three million subscribers and have all of the tools it requires to compete against the national carriers, including, critically, the 5G spectrum that Shaw does not possess.”
McAleese also proceeded to accuse Telus, along with Globalive, of undertaking a corporate campaign called Project Fox to “kill, shape and slow” the proposed transactions, and to replace Vidéotron with Globalive in the purchase of Freedom Mobile. He added that Telus does not in fact want competition in Western Canada, where it is the dominant provider.
“Project Fox is a blatant example of Telus’, shall we say, toxic and Machiavellian tactics, which include increased litigation, underhanded misinformation campaigns, and intensive lobbying to stoke opposition, while seeking, among other things, to alienate Western Canada from eastern Canada.” said McAleese.
McAleese also claimed that Lacavera, who he referred to as ‘Pinocchio’, has a dubious record in running a wireless company and that he inherited many challenges when Shaw purchased WIND mobile.
Lacavera probably saw the accusations coming and addressed the 2015 sale of WIND mobile to Shaw at the very outset of the hearings, noting, “We did not want to sell, we were dragged into a sale to Shaw. The business was doing fantastic as an independent pureplay. Our business model was validated, and Canadians were voting with their feet; we had almost a million subscribers. We voted against selling.” But he did not explain why and how the sale proceeded regardless.
Regarding allegations of conspiracy with Telus, Lacavera said; “I’m 50 years old, and I’ve never worked for anyone, yet. I’m not about to start working for anyone. So there’s no scenario where Globalive is in bed with Telus.”
Instead he claimed his association with Telus stops at a shared network agreement. “We’ve contributed spectrum that we own into the mix, and contribute to radio networks that we own on a shared basis with Telus.
Kaplan-Myrth detailed the difficulties of an independent ISP trying to survive in a telecom oligopoly. “TekSavvy is losing customers and has had to put investment plans on hold, including plans to purchase spectrum,” he said. “The wholesale regime is failing, and consumers have been paying the price. Internet prices in Canada continued to rise, including 13 per cent annual increases for some of the most popular speeds.”
The competitive power of Vidéotron was also put under scrutiny, as opposing witnesses alleged that the Québec-based carrier is receiving lower preferential rates and terms from Rogers to let it appear as a credible competitor. Without these favourable rates (likely illegal under the Telecommunications Act, witnesses noted), Vidéotron will be unable to support competition and hence fails as a remedy for the Roger-Shaw deal to proceed.
“Vidéotron is going to need those preferred rates in order to compete outside of its core cable footprint. They have the benefit of network in Quebec, they don’t have the benefit of any brand equity or any network outside of Quebec,” stated Kaplan-Myrth.
This question of illegal preferential rates warrants the interference of the CRTC before Industry Minister François-Philippe Champagne makes his decision, TekSavvy believes.
Minister Champagne said in an interview with the Toronto Star that he is in no hurry to give the merger the green light, and that he has no deadline as a regulator. He added that he wants assurances that Vidéotron will in fact will offer lower-cost services over a 10-year period.
“I’m a lawyer, so we will make sure that these undertakings are binding, and that there would be consequences” for failures to meet them,” said Champagne.