Quebec nationalism becomes issue in Quebecor’s bid for Vidéotron

Quebecor Inc's hostile takeover bid of Groupe Vidéotron ltée reinforces a belief within Quebec's nationalist government that control of communications infrastructure should be kept inside the province, a prominent member of Quebec's independence movement says. The elected official, speaking on condition of anonymity, said the Pequist government is concerned that non-Quebec ownership of the cable market would hamper the province's goal of becoming a major French-language new media player. "The Quebec government has invested a lot of money into the high-tech industries of Montreal to maintain French in the new economy," the Bloc MP states. "It has fought like hell to keep the Internet from being all-English. Letting the cable business get bought out by an English-Canadian company with an owner like Ted Rogers is like Canada letting AT&T or Time-Warner buy up the cable companies there. And that's what will probably happen to the Canadian cable companies, anyway." Quebecor's proposed purchase is being backed by Quebec's nationalist pension fund, the Caisse de Depot et Placement du Quebec, which owns 19% of Vidéotron. Caisse's close ties to the Parti Quebecois has lead to industry speculation that the provincial government is taking more than a passing interest in the ownership of a company that boasts the largest telecommunications network in the province, next to Bell Canada. "The Caisse is doing this because it's a good business decision that is also good for Quebec's future. Once the Caisse buys Vidéo-tron, it won't sell it off to people who don't care about Quebec's culture," the MP said. Former Quebec premier Jacques Parizeau, who is still well-connected with the Caisse and the provincial government, waded into the debate March 28 when he told pro-sovereignty students at the University of Montreal that the Caisse's attempt to block the Rogers Communi-cations Inc-Vidéotron deal is "not a question of nationalism — it's the character and identity of culture in the marketplace." He added that it's akin to "Toronto buying Montreal." Toronto, in this case, is Rogers Communications, which has tabled a $5.6-billion stock-swap offer for Vidéotron, with the full support of the company's majority owners - the Chagnon family. The Caisse and publishing giant Quebecor countered with a $5.9-billion offer for the cableco. Vidéotron is now is heading to the courts after the Caisse won a temporary injunction barring the Chagnon family from voting for the Rogers deal. The Caisse is trying to halt the merger between Rogers and Vidéotron by exercising its clout as a holder of 19 per cent of Vidéotron multiple voting stock. It also has a shareholder agreement with the Chagnons. The fight between the Caisse-Quebecor forces and Rogers began just one day after Shaw Cablesystems Ltd and Rogers announced a subscriber swap deal that would effectively divide Canada into an eastern region with Rogers as the dominant BDU and Shaw having the whip hand in western Canada. Quebec's Internet strategy highlight of budget Underlying concerns with Vidéotron's ownership is the fact that Quebecers have among the lowest Internet and broadband penetration rates in the country, despite having one of the most wired provinces. It's a statistic that the government is moving quickly and aggressively to change. New government incentives to fuel the communications sector - particularly the Internet - can be found in the March 14 Quebec budget. Despite bringing down an austerity budget that balanced the province's books for the first time since the 1960s, the Quebec government adopted a series of aggressive measures - totaling $340 million - to ensure that the province is not left behind in the global race to get online.Reflective of last year's budget, which aimed financial incentives at Quebec's new media industry, March's provincial budget split its focus between the underlying network infrastructure, as well as targeted subsidies designed to get families online and businesses involved in e-commerce.The importance of Quebec's broadband capability is reflected in a new tax credit, aimed at bringing fibre optic and coaxial networks to under-served areas. The province is offering a 125% accelerated depreciation rate over the next five years to networks that are built in all Quebec regions, excluding Montreal, Laval and the Communauté urbaine de Québec. The measure will cost the government $9 million over three years ($2 million, $4 million and $3 million respectively), and $15 million over five years. "Through this fiscal measure, the Québec government is ensuring that the developed services of the information highway will be available in all Québec's regions," states a report entitled Québec On Line, released as part of the budget package. The report goes on to note that "the granting of accelerated depreciation for the deployment of ‘developed' networks in the regions will directly stimulate the demand for fibre-optics, the suppliers of which are located upstream from the industry. Hence, this measure should have a direct, and particularly interesting, impact on Québec businesses in this sector of activity." A much larger initiative will see Quebec spending $121.5 million to connect families to the Internet. Under the program, which takes effect May 1, households that receive a family allowance cheque can receive subsidies for up to 75% of their Internet access cost, including computer rental costs. Money is also being committed to encourage businesses to embrace e-commerce. The report notes that most Quebec businesses - particularly small and medium businesses (SMBs) - have not made the necessary investments required to conduct e-commerce. "The delay in the connection of Quebecers to the Internet is one of the reasons that SMBs are reluctant to embark on e-commerce," Québec On Line notes. The government hopes to change that attitude with the introduction of a new tax credit for small and medium businesses that covers up to 40 per cent of the cost to develop a transactional web site. The tax credit - which tops out at $40,000 - is expected to cost Quebec taxpayers $126 million over three years. A further $9 million has been budgeted to support activities related to e-commerce, and $15 million will be spent to ensure online transactions between the government and the public are confidential. Quebec currently ranks behind Ontario, British Columbia and Alberta for the percentage of people who use the Internet. While that number has increased from 34.9% to 52.3% over the last two years, it hasn't been enough to erase the so-called "digital divide" that exists between Quebec and English Canada. While Quebec has about 22 per cent of Canada's population, it has only 15 per cent of the country's Internet users. "Although the transition to the Internet seems to be well under way, Quebecers and Québec lag quite a way behind the rest of North America from the standpoints of computerization, Internet use and e-commerce," the 82-page report notes. It estimates that Quebec is one to two years of network growth behind Canada's three other largest provinces.

Quebec nationalism becomes issue in Quebecor’s bid for Vidéotron

Broadcast | March 30, 2000

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