By Ahmad Hathout
OTTAWA – Members of the House industry committee took issue today with Rogers being allowed to choose Videotron as its competitor to complete its acquisition of Shaw, with one member of Parliament saying it “boggles the mind” to think Rogers would sell Freedom for less if it meant more competition.
Today’s hearing was the committee’s second round at the Rogers-Shaw merger, this time with the new development that Videotron agreed to purchase Freedom from Shaw for nearly $3 billion. It also comes a day after the Federal Court of Appeal upheld a decision by the Competition Tribunal to deny an application by the Competition Bureau to block the $26-billion megamerger.
But some members of the committee wondered how it makes sense that competition would thrive if Rogers’s competitor — which is paying less money than competing bidder Globalive, which offered nearly $1 billion more for Freedom — would also be dependent on it in western Canada for access to its wireline network, which Videotron does not have in those provinces.
“Why would Rogers accept less money in this deal unless it meant less competition?” Liberal MP Nathaniel Erskine-Smith asked, saying in another instance that the situation “just boggles the mind.”
Rogers president and CEO Tony Staffieri said the company picked the most “credible” company available that “met the criteria” for competition.
Critics expressed concern that Videotron would be too dependent on Rogers in the long-term, and there was lingering concern throughout the hearing that the deal hinges on the maintenance of a number of side commitments from Rogers that cannot be legally enforced.
Committee members, including Erskine-Smith, were concerned about the viability of Rogers’s commitment, for example, to provide wholesale access to its network to Videotron at below market rates. Independent internet service provider TekSavvy has already filed an application to the CRTC requesting a review of the deal on the ground that it may provide an undue preference to Videotron over its competitors.
TekSavvy argues that Videotron would not be able to compete if Rogers offered it the CRTC’s current regulated rates, implying that Rogers allegedly knows that the rates are too high for Videotron to survive in foreign territory.
Erskine-Smith noted that this should mean that Canadians should be concerned about the long-term viability of a fourth competitor in the Montreal-based company.
Erskine-Smith asked Shaw’s Trevor English what would happen if the deal were blocked by the innovation minister. English said that is a “scary proposition” and that Shaw “doesn’t have a Plan B.” That’s because he said the company doesn’t have the requisite spectrum for a 5G buildout crucial for a future viable wireless business (Shaw was forced out of the 3.5 GHz spectrum auction after the March 2021 deal was announced).
But Edward Iacobucci, professor and Toronto Stock Exchange Chair in Capital Markets, Faculty of Law at the University of Toronto, said the Competition Tribunal looked carefully at the Videotron deal and found that it is an adequate fourth player in the market. He also noted that Rogers and Shaw don’t compete with each other on wireline, an argument echoed by Compass Lexecon, a consultancy firm hired by Rogers throughout the process.
Anthony Lacavera, Globalive’s founder and chairman, said during his appearance his investment firm would be a much better competitor than Videotron if it were allowed to purchase Freedom. He said his firm had signed a conditional long-term network sharing agreement with Telus to jointly invest in infrastructure, as opposed to Videotron, which will be reliant on facilities wholly owned by Rogers, Lacavera argued.
But Shaw’s president Paul McAleese had some choice words in his opening statement about Lacavera personally. He alleged that when Globalive closed the sale of Freedom’s predecessor Wind Mobile in 2016, he left a mess that Shaw had to clean up, suggesting Globalive is not a good fit to run a wireless-only business. He alleges that Apple refused to allow its devices on the Wind network; Freedom was able to secure that deal in 2017.
Drawing on the tribunal’s discovery of Telus’s Project Fox, which intended to slow or kill the Rogers-Shaw merger, McAleese accused Globalive of merely being a “surrogate” of Telus. Pierre Karl Peladeau, CEO of Videotron parent Quebecor, had more pointed words, calling Telus’s strategy “toxic” and “Machiavellian.”
In the end, there were still some calls to block the deal that appears all but certain. Ben Klass, a PhD candidate at Carleton University who has a long history in telecommunications policy, urged Innovation Minister Francois Philippe-Champagne to block the deal. In any event, he said that TekSavvy’s application, plus the new policy direction from the department that urges the importance of those wholesale rates, may spur an important change in how the regulator approaches the issue.
Champagne said he will make a decision on the transfer of Freedom’s spectrum assets to Videotron in “due course.” The minister has his own stipulations for the deal, including for Videotron to maintain the Freedom spectrum licences for a period of at least 10 years.
