By Ahmad Hathout
OTTAWA – Between losing a fourth wireless player in a merger and difficulty negotiating with big telecoms on leasing wireless network capacity, smaller carriers and their representatives told members of the industry committee Tuesday that the one-two punch of divesting Freedom Mobile in a Rogers-Shaw combination and mandating wireless negotiations with service-based operators could spell the last vestige of hope for a competitive telecom environment.
Appearing before the committee studying the Rogers-Shaw merger proposal, Matt Stein, who is head of the Competitive Network Operators of Canada, an industry group representing smaller internet service providers (as well as president and CEO of independent operator Distributel), said Tuesday solutions that have been proposed previously are still on the table to mitigate any negative impacts of a new giant behemoth.
New competitive measures include the CRTC pulling the trigger on a decision to force bigger wireless companies to negotiate with service-based mobile virtual network operators (MVNOs), which generally don’t have network infrastructure themselves beyond their own core, on leasing wireless network capacity; forcing the sale of Freedom Mobile to another telecom able to build-up a competitor; and requiring the big telecoms to separate their retail and wholesale segments so that all can equally lease space from the latter business on the wired side.
The mandated MVNO decision will come when the Commission announces its new wireless market policies. That public hearing happened in February 2020 and the industry is of course awaiting the review and vary appeal of the CRTC’s wired wholesale rates decision from August 2019.
“Perhaps the solution is not a market-based solution; perhaps the solution is having communities themselves build infrastructure,” Robin Shaban, an economist at Vivic Research, told industry members Tuesday.
She pointed to Red Deer County (whose mayor, Jim Wood, was also a witness today and decried the state of rural broadband in his region and cast doubt on Rogers building fibre to his constituents) and Toronto city council’s newly-proposed broadband network as examples of those initiatives (The town of Olds in Alberta also owns a gigabit network, and others, like York Region, Pictou County and Lakeland Energy have built their own networks, too).
“So perhaps,” Shaban continued, “we shouldn’t be relying on the big telcos to build this infrastructure because maybe there’s just no way for it to be profitable to them or to hold them to account to actually follow through on their commitment.
All of that is to say that witnesses at Tuesday’s committee hearing were not huge fans of the proposed $26-billion deal that would reduce the number of large facilities-based ISPs to three from four, which requires approval from ISED, the CRTC, and the Competition Bureau.
Stein noted the alleged anti-competitive result of the deal would be obvious: by wiping out the “instigator” of many of the market’s changes over the years – Freedom Mobile – Rogers would have swallowed a hostile competitor and reduced the heat it drove the likes of it, Bell and Telus to endure. In other words, prices will not go south, but north, he said.
Jean-Philippe Beique, the CEO of third party ISP Ebox, said his company has tried to become an MVNO in the past “but, unfortunately, we always came up against obstacles in reaching an agreement,” he said.
“One of the proposals to us was to launch a brand that would be controlled by one of the big players,” Beique recalled. “It was impossible to have a commercial agreement, and the only way forward was really to have an agreement to work with the companies.”
Beique added that the “introduction of MVNOs into the market is the only way we can have viable competition for all Canadians and to have affordable prices.”
Mandated MVNOs would be the one solution the CRTC can implement right now, said Geoff White, CNOC’s director, legal and regulatory affairs. “We should not be in a hurry to approve this deal; the first thing we’d like to see as service-based competitors is the CRTC come out with a decision on [MVNOs] because that’s the quickest, easiest remedy – it’s already within the Regulator’s power.”
Another aspect of the discussion on Tuesday was a continuation of last week’s debate about what to do about the Competition Act’s section 96, also known as the “efficiencies defence,” which gives greater negotiating leverage to merging parties by allowing them to offset negative competitive impacts of a deal by convincing the agency that the business efficiencies of the conglomerate would initiate cost-savings.
Opponents of the defence last week alluded to the opportunity to stop the next harmful merger – as if the regulatory approval of the Rogers-Shaw was just a formality – by eliminating it from the law.
But others weren’t so excited about the focus on Competition Act reform. “Yes, there’s this awful efficiencies defence. Yes it’s in our law right now,” White said. “[But] the CRTC has what it currently needs to address the rural broadband problem,” and that’s mandating an MVNO framework for competition.
On Wednesday, April 7, the witnesses are the CRTC, Competition Bureau and ISED – none of whom are allowed to pre-judge the outcomes of their merger examinations, and which have barely started – who will all probably tell the politicians there isn’t much they can say.
