INDU says Rogers-Shaw should not proceed; expressed concern about CRTC regulatory decisions

The House of Commons Industry committee has said that Rogers Communications Inc.'s acquisition of Shaw Communications Inc. should not be allowed to proceed, but if it is, that the Government should make sure that "all conditions attached to the merger approval are fully enforceable and that resources are available to enforce them." The committee has also recommended that the government launch a "nationwide" consultation to examine the implementation of structural separation in the telecom sector, and expressed concern about the direction of both the CRTC and the Department of Innovation, Science, and Economic Development (ISED). The committee also endorsed a view recently iterated by the Competition Bureau for a review of the Competition Act's efficiencies defense and further recommended the government place an "emphasis" on the importance of Shaw's Freedom Mobile as a fourth wireless competitor. In a report tabled with the House of Commons Friday resulting from hearings into the proposed merger last year, the Industry committee wrote that it is "concerned about the tools that regulatory bodies will use to assess the merger in the context of protecting the interests of Canadians." The Competition Bureau, the committee wrote, does not have the tools under the Competition Act that it needs to "give priority to the interests of Canadians" when reviewing the merger. The committee put particular emphasis on the so-called "efficiencies defense." The defense, also known as section 96 of the act, allows a merger to proceed on the basis of gains in efficiency that will “be greater than, and will offset, the effects of any prevention or lessening of competition,” in the language of the act. Since-ousted CEO Joe Natale used the language of efficiencies in his remarks to the committee a year ago. “This is a scale business with massive fixed costs. Adding Cogeco or adding Shaw brings those efficiencies — fibre, spectrum — it allows us to do things that wouldn’t have been otherwise the case,” Natale said at the time. Citing the CRTC's 2021 decisions – to reject a broad-based mobile virtual network operator model, and to reverse a 2019 decision that would have slashed rates that wholesale-based internet service providers pay to incumbents for access to their networks – the committee wrote that "regulatory directions do not seem to support service affordability and accessibility." The decisions have seen competing court challenges, and a trio of petitions to cabinet, all of which await responses from the cabinet. "The Committee is concerned about the direction in which ISED and the CRTC seem to be heading. As a result, it is also worried about the effects this regulatory approach could have on their review of the proposed merger," the report reads. As such, it recommended that the government bodies involved in reviewing the merger – the CRTC, ISED, and the Competition Bureau – "consider the impacts on the regulatory environment of the CRTC’s recent decisions." Last month, the Competition Bureau called for a comprehensive overview of the Competition Act, and also cited the efficiencies defense. The defense “permits mergers that are harmful to Canadians; is inconsistent with international best practice; is difficult—if not impossible—to implement properly; and suffers from a misguided original policy intent,” the bureau wrote in its submission to Senator Howard Wetston’s October consultation invitation. That submission came just a day after Innovation Minister François-Philippe Champagne announced that his department would “carefully evaluate potential ways to improve” the operation of the act. Also last month, CRTC chair Ian Scott appeared before the committee and defended the decisions of the regulator, as well as his own conduct. Structural separation – the idea that telecom infrastructure and telecom brands are owned by separate companies rather than integrated into a number of single companies as it is currently – "would limit overbuilding and enable governments to target their investments to build the missing infrastructure in rural and remote communities," the committee wrote in recommendation a consultation on the matter. "This would promote network sharing, as incumbent TSPs would be required to provide capacity to TSPs looking to deliver services to consumers. The Committee believes this idea deserves consideration in order to gain a deeper understanding of its impacts on the telecommunications sector and on services for Canadians." In Friday afternoon statement following the tabling of the report, Quebecor Inc. CEO Pierre Karl Péladeau said that "we are pleased to see that the Committee’s members agree that we need real competition in wireless and that a strong independent fourth player would benefit Canadians.” On Thursday Péladeau also highlighted the announcement of Champagne's that he would not allow the "wholesale" transfer of Shaw's spectrum assets to Rogers. "“As it stands, the proposed Rogers-Shaw transaction is contrary to the public interest,” the Quebecor CEO said in a Thursday statement. "“As Bell, Rogers and Telus already control 90% of Canada’s wireless market, it is imperative that we create the necessary conditions for real competition in order to give consumers more choice, better prices, better services and more innovation.” Quebecor has repeatedly expressed interest in purchasing Freedom Mobile as part of a national expansion, should the Competition Bureau mandate its sale as part of an approval of the Rogers-Shaw merger. — Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Paul Park at ppark@thewirereport.ca

INDU says Rogers-Shaw should not proceed; expressed concern about CRTC regulatory decisions

News | 03/04/2022 5:22 pm EST

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