Merger presents a great opportunity for Minister Champagne
By Konrad von Finckenstein
ROGERS COMMUNICATIONS ANNOUNCED on March 15th its intention to buy Shaw Communications for $26 billion, and of course the transaction must be approved by the CRTC, the Competition Bureau and the Minister of Industry, Science, and Innovation.
The three entities will undoubtedly consult with each other and co-operate. Logically the Competition Bureau would go first, the CRTC second and the Minister last.
The CRTC approval should be relatively routine. Shaw is a BDU but has no broadcasting assets, having divested them to Corus. Thus, there are no benefits payable under CRTC rules.
Its satellite service, Shaw Direct, is relatively small (617,000) and serves mostly areas where there is no cable available. Rogers has 1.5 million cable customers and it can and does bundle its cable service with internet access. The anti-consumer effect of the merger will thus be relatively small. There are no competing cable or satellite services per se between Rogers and Shaw that require resolution.
The CRTC may attach some conditions regarding community channels and local news but those should be relatively minor in the scheme of things.
The Competition Bureau will undoubtedly have concerns regarding the mobile wireless service. Shaw’s mobile wireless is a competitor of Rogers in Ontario (under the label Freedom, and in Alberta and BC (under the label Shaw Mobile) and it is also the fourth wireless carrier in Ontario, Alberta and BC.
This will be a difficult area to address (particularly regarding the stated government policy of having at least four competitors in each area of the country) as there are no obvious purchasers for Freedom/Shaw Mobile, (other than mobile wireless carriers already established those provinces) and the barriers to entry are high. Previous independent mobile services not attached to cable companies (Fido, Clearnet, Public Mobile, Mobilicity and Wind) have not been successful and have all been bought by incumbent telcos or cable companies.
A structural remedy, the Bureau’s likely preferred solution, will be difficult to achieve. Rogers has already promised to leave Freedom prices unchanged for three years and the Bureau could convert that promise (with whatever modifications it deems appropriate) into a binding undertaking. The best outcome would be a partial entry into the market by Xplornet, (serving mostly rural and remote areas) along the lines of their Manitoba venture when MTS was purchased by Bell and the Bureau decided it needed to partially divest wireless spectrum and customers.
Opposing the merger of Rogers and Shaw’s cable companies on the grounds of concentration would be problematic in light of the efficiency defense.
The proposed merger, however, also requires the consent of the Minister of ISI. The mandate letter from the Prime Minister to the current minister, Francois Champagne, specifically demands he:
- Use all available instruments, including the advancement of the 2019 Telecom Policy Directive, to reduce the average cost of cellular phone bills in Canada by 25 per cent. You will work with telecom companies and expand mobile virtual network operators (MVNO) in the market. If within two years this price target is not achieved, you can expand MVNO qualifying rules and the Canadian Radio-television and Telecommunications Commission mandate on affordable pricing.
- Award spectrum access based on commitments towards consumer choice, affordability, and broad access. You will also reserve space for new entrants.
- Co-lead work with the Minister of Canadian Heritage to modernize the Broadcasting Act and the Telecommunications Act, examining how best to support Canadian content in English and French and ensure quality affordable internet, mobile and media access.
To live up to this mandate the key aspect will be timing.
First, the minister should direct the CRTC to include MVNOs in its future decisions of wholesale internet access and wholesale wireless access.
Second, now that the Supreme Court of Canada has made its decision and other avenues of appeal are exhausted, the CRTC should, as soon as possible. complete its ongoing review of wholesale internet rates and set final rates.
Third, the CRTC should complete its wholesale wireless review and set final wholesale wireless rates as soon as possible.
Fourth, the auction for the 3500 MHz spectrum set for June 2021, in which both Rogers and Shaw will able to bid, must to be completed.
Once these decisions have been made, the preconditions for the Minister’s consent for the merger are in place. The Rogers takeover requires his approval under the Radiocommunications Act for the transfer of spectrum from Shaw to Rogers. Shaw has spectrum licences for is direct to home satellite service (Shaw Direct), its commercial signal distribution services (Shaw Broadcast Services) and for its Mobile wireless service (Freedom Mobile/Shaw Mobile). Since control of Shaw by Rogers results from the transaction, a deemed transfer under the Act would occur and requires his approval.
The Minister’s approval should only come after the four steps above have been carried out and the sale has been approved by the CRTC and Competition Bureau, conditional on his consent.
At that point, independent ISPs and MVNOs can provide increased competition to the large facilities-based carriers. This should impose some discipline on internet connection prices and wireless phone service prices.
The remedies conditionally imposed by the CRTC and the Competition Bureau hopefully will have addressed most of the consumer and competition concerns.
The Minister can then decide what conditions to impose on Rogers in terms of selling, transferring, or sharing spectrum so as to ensure persons in remote or rural locations can get adequate internet. His approval can go a long way towards living up to the terms of his mandate letter in terms of ensuring quality affordable internet, mobile and media access.
Konrad von Finckenstein is a former general counsel to the Minister of Industry, commissioner of competition, and chairman of CRTC.
