By Christine DobbyBusiness Reporter
Sat., Nov. 20, 2021timer4 min. read
updateArticle was updated 9 hrs ago
The $26-billion bid by Rogers Communications Inc. to acquire cable giant Shaw Communications Inc. will be one of the largest deals ever in the telecom sector — if it’s approved. And the first step in that multi-stage approval process kicks off Monday.
A five-day hearing, taking place in Gatineau, Que., is being conducted by the Canadian Radio-television and Telecommunications Commission, which will review the transfer from Shaw to Rogers of licences to distribute TV signals. It is expected to begin with appearances by cable empire heirs Brad Shaw and Edward Rogers, the latter of which recently engaged in a bruising battle with his own family for control of his company’s management team.
The CRTC proceeding will not tackle the merger’s biggest red-flag for most consumers: wireless competition and prices. Instead, it will focus only on the broadcasting issue and feature interventions by independent producers such as Blue Ant (which operates specialty channels like Cottage Life) as well as rival TV distributors, including Bell Canada.
Opponents of the transaction warn that combining the two businesses will give Rogers outsized bargaining power when it comes to negotiating the fees that it pays to carry the channels that it offers to customers.
But the CRTC is only one step in a broader government approval process that is still ongoing. While the merger also raises concerns about the combination of the two companies’ home internet and cellular operations, it is the Competition Bureau and the federal department of Innovation that are charged with reviewing those elements of the transaction. Neither will hold public hearings.
If the deal goes through as proposed, Rogers would acquire Calgary-based Shaw’s extensive cable operations in the West as well as its wireless business, which offers cell service in British Columbia, Alberta and Ontario. Consumer advocates have warned that the elimination of its Freedom Mobile discount brand and Shaw Mobile (which operates in B.C. and Alberta only), will lead to less innovation in the market as the Big Three carriers, Rogers, Bell and Telus, feel less pressure.
Rogers says it will still have to compete in every market for TV subscribers and that the deal will strengthen a Canadian broadcaster against foreign competitors. On wireless and internet, Rogers says it will boost its 5G network investments and has pledged to spend $1 billion on rural broadband.
But critics have said the combination of the two companies would be counter to the federal government’s long-stated desire for more competition and lower prices and many expect Rogers will be forced to sell some or all of Shaw’s wireless assets to close the deal, which was first announced in March.
In a speech and interview last week, Quebecor Inc.’s controlling shareholder and CEO Pierre Karl Péladeau said he has made it clear to Rogers that he is interested in acquiring some of those assets.
Even if that doesn’t happen, he said, his Montreal-based company plans to compete with the Big Three in provinces west of Quebec, arguing that wireless prices are lower in areas with a strong fourth competitor. (Quebecor currently offers Vidéotron wireless and discount brand Fizz Mobile only in Quebec and the Ottawa region.)
“As soon as possible … we’re ready to go,” Péladeau told the Star about his ambitions, though he would not commit to a specific timeline.
It’s not the first time Quebecor has pledged to expand beyond its traditional borders — it made similar promises in 2014. But within a few years it sold valuable licences for spectrum — the airwaves used to build wireless networks — to Rogers and Shaw and retrenched in Quebec.
Now, though, Péladeau said, regulatory conditions will support his plans, with the CRTC ruling in April that the Big Three must sell access to their networks to smaller telecom players (the CRTC is in the process of finalizing the access rates).
The CRTC said the smaller players have to build their own infrastructure over time and Quebecor said it plans to do that after buying new licences in a recent spectrum auction.
Yet, consumer advocates have argued the CRTC ruling did not go far enough because it does not open up the wireless market to players with no existing networks. That could have attracted companies with business models not based on the high profit margins of traditional telecoms.
CRTC chair Ian Scott said last week that the decision will lead to sustainable long-term competition. But even he said the industry “must do more to address (mobile) affordability.”
In an interview with the Star, Scott noted that the CRTC has required the Big Three to file proposals on low-cost plans for low-income and elderly Canadians. He also said wireless rates in Canada have come down “significantly” in recent years. (The government says as of September, prices for certain plans had decreased by between 10 and 25 per cent since early 2020.)
“Do we need to do better? Yes. And by the way, I don’t ignore the fact that in other countries, (rates are) also declining,” he added.
Scott said if the CRTC is not satisfied with the proposals of the Big Three, it could take more “invasive” steps, including directly regulating prices.
Regarding the Shaw transaction and its potential impact on the wireless market Scott said the CRTC will “deal with it as it comes.”
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