:
Good afternoon, everyone. Thank you for being here.
I call this meeting to order.
Welcome to meeting 53 of the Standing Committee on Industry and Technology of the House of Commons.
Pursuant to Standing Order 108(2) and the motion adopted by the committee on Wednesday, January 26, 2022, the committee is meeting this afternoon to study the proposed acquisition of Shaw by Rogers. Today's meeting is taking place in hybrid format, pursuant to the House order of June 23, 2022.
For the first hour of our hearings this afternoon, we will have the opportunity to hear from a number of witnesses both in person and virtually.
[English]
We have Mr. Iacobucci, a professor with the University of Toronto's faculty of law, appearing as an individual. Thanks for being with us, Mr. Iacobucci.
We have Ben Klass, Ph.D. candidate at Carleton University and senior research associate at the Canadian Media Concentration Research Project.
From Globalive Inc., we have Anthony Lacavera, chairman. Thanks for being with us in person here in Ottawa.
Also from Globalive we have Simon Lockie.
From TekSavvy Solutions Inc., we have Andy Kaplan-Myrth, vice-president, regulatory and carrier affairs, and Jessica Rutledge, regulatory counsel. Both are with us virtually.
Thanks for being here, everyone. Without further ado, we will start the first testimony with Mr. Iacobucci.
The floor is yours for five minutes.
:
First of all, thank you to the committee for having me here today to speak with you.
I come at this from the perspective of an academic interested in competition law.
Let me state my conclusion about the competition law issues at the outset. In my view, the Competition Tribunal did an excellent job in assessing the competitive effects of the Rogers-Shaw-Videotron transactions.
Let me also say that in competition law cases—maybe even more than in any other areas of law—the particular facts matter. The tribunal is in a much better position than I am to weigh the evidence, but on my reading of its opinion, it weighed that evidence carefully and persuasively.
The evidence in this case was vast. There were 40 witnesses and thousands of pages of documents, yet the tribunal's reasons provided a thorough and coherent account of that evidence, which explained in detail and—to me—convincingly its reasons for deciding that the merger would not substantially lessen or prevent competition. Given my respect for this decision, my remarks in many ways will just draw significantly from the tribunal's analysis.
I'll give a quick word on process first. I think it's important to acknowledge that the speed at which the tribunal heard and disposed of this case—and that it did so in such a thorough manner—is laudable, as is the Federal Court of Appeal's expedited hearing of the appeal and dismissal of the appeal. Mergers are often time-sensitive and the tribunal and Federal Court of Appeal deserve credit for their efforts in this case, in my opinion.
On the merits, I think the tribunal's decision is a model of careful review, probing the evidence and weighing that against competition law principles. Competition law focuses on competition. The tribunal carefully reviewed the evidence as to why competition is unlikely to suffer as a consequence of the transaction.
At root, Shaw's divestiture of Freedom to Videotron prior to any acquisition of Shaw by Rogers diminished the competitive concerns about the acquisition. In Ontario, Shaw competed in wireless only through Freedom, so that divestiture took care of competition concerns in Ontario, as the commissioner conceded.
Shaw will continue to have a presence in Alberta and B.C. post merger, but its market shares were relatively small, so the competition concerns weren't as acute.
Moreover, I think the tribunal quite carefully reviewed the argument about whether Videotron would be an effective competitor and reasonably concluded that, given its track record of disruption and its fully costed and detailed strategy going forward, it would continue to be an effective competitor. Indeed, although not necessary to the outcome, the tribunal suggested that Videotron's acquisition of Freedom may, in fact, have some pro-competitive effects by invigorating Freedom.
Those are the basic factual findings that led to the merger's approval. Unlike some other contested mergers, there actually weren't very many interesting purely legal questions at stake in this case. The commissioner made a couple of legal arguments before the tribunal and then, ultimately, before the Federal Court of Appeal that didn't convince either the tribunal or the Federal Court of Appeal and weren't especially convincing to me.
The most significant argument from the commissioner was that the tribunal ought to have considered the initially proposed transaction—that is, Rogers purchasing Shaw outright rather than the modified transaction in which Rogers would acquire Shaw only after the divestiture of Freedom to Videotron.
It's conceivable that this difference could have mattered. Prominently, if the original deal were considered and found to be anti-competitive and the sale of Freedom was proposed as a remedy, then the burden would arguably have been on the merging parties to show that the remedy addressed the anti-competitive effects of the deal. On the other hand, if the tribunal considers only the modified deal, then the burden is on the commissioner to show that the deal remained anti-competitive despite the divestiture of Freedom.
Conceivably, this decision could have mattered, but both the tribunal and, I think, the Federal Court of Appeal reasonably concluded that the tribunal ought not to consider a deal that would never happen and instead focused their attention on the deal that was actually being proposed. This makes sense to me. Courts and tribunals do not normally spend a lot of time considering moot questions.
In any event, both the tribunal and the Federal Court of Appeal pointed out that deciding otherwise would not have made much of a difference in this case. In fact, I thought the Federal Court of Appeal in particular was excellent in its explanation of the reason this burden didn't matter much. In theory, a burden might matter where there is a gap in the evidence. If you can't prove something because there's a gap in the evidence, then where the burden is allocated might matter. It might also matter where there's a tie, where the adjudicator can't make up its mind between two positions. The party that has the burden of proof is going to lose that case.
Neither of these conditions was met here. The evidence was thorough, as the tribunal reviewed in detail and the Federal Court of Appeal acknowledged, and I don't think the tribunal regarded this as an especially close case. This was not an anti-competitive merger in the tribunal's view, and indeed it might even have had some pro-competitive properties. Whether the burden of proof is on one side or the other, I don't think it much mattered in this case.
I might imagine that in some cases an eleventh-hour change to a deal could create some concerns about the scheduling of a hearing. If there's preparation for one deal and at the eleventh hour it's switched to another, there could be some questions regarding procedural fairness. Again, the tribunal considered this. The Federal Court of Appeal considered this. Both of them concluded that the commissioner had sufficient notice of the modified transactions to prepare for the hearing, so there was no procedural unfairness.
The tribunal's conclusion that it was going to consider the modified deal was a sensible one, although in the end it might not have mattered much one way or the other.
That was the most interesting of the legal issues, so I'll conclude by saying I think the tribunal's decision and the Federal Court of Appeal's respect for that decision were persuasive as a matter of competition law.
Thank you.
:
Thank you for inviting me to be here today.
When last we spoke, the Rogers network had gone dark from coast to coast, disrupting the lives of families across the country and causing business to grind to a halt. The outage should have served as a wake-up call that bigger is not always better, especially when it comes to the essential services that we all rely on in our daily lives.
This committee got it right when it took the view that the merger should not be permitted to proceed, but unelected regulators have moved the deal forward anyway. It is now up to the to decide. While it's widely expected that he will give approval, doing so, in my opinion, would be a mistake.
This disconnect has me wondering: What is our priority in this country? Is it to promote competition, or are we more concerned with catering to big business and paying deference to the corporate effort to control crucial markets?
I'd like to offer three general thoughts on these questions. First, I'd like to believe that our priority is competition, but actions speak louder than words. I've been studying telecommunication for 10 years now, through two degrees, and I'm getting tired of hearing nice words being used to paper over harmful, wrong decisions. From the consumer's perspective, Canada's telecom markets were in a woeful state when I began my studies. As CBC's Marketplace recently reported, we continue to pay among the highest prices for service in the developed world.
The merging parties, each of them controlled by a family of billionaires, are in a rush to get the merger approved, because they stand to benefit tremendously. I think we all know that consumers, working people and small businesses will be on the hook once this deal goes through.
The tribunal has approved the merger, but its decision was not exactly a ringing endorsement. That's because the bar is set so low that the companies had only to prove that price increases caused by this merger would not be substantial. The tribunal can accept that mobile prices will increase because of the deal, approve it anyway and call it a win for competition. I've said it before and I'll say it again: You can put lipstick on a pig, but you can't make it sing.
The tribunal's decree was based on arcane rules and opaque information presented by competing experts, but if you leave aside all the assumptions, abstractions and redactions and you look around the world, you see that people are paying a fraction of the price for mobile connectivity elsewhere in comparison with what we pay here. We need to aim higher and be more ambitious. We can do better than simply preserve the status quo—if you even accept that this is what this merger will do.
Second, this merger has been set on a collision course with the CRTC and with the future of competition more broadly in telecommunications. Beyond the lacklustre future facing mobile customers, there are grave concerns with the tribunal's decision to approve this merger. Consider that in order to get the deal approved, Rogers convinced the tribunal to accept a series of very generous arrangements it set up that ostensibly will help Videotron expand into wireless and home Internet markets in the rest of Canada. I understand that Rogers wants to get bigger, and that Videotron wants to seize this opportunity to expand. These telecom giants are simply doing what they do, but let's not pretend that they're generous to anyone but their shareholders and executives. Rogers' offer of very generous terms for network access is, in short, simply too good to be true.
For starters, what are we to make of a situation in which a dominant firm chooses who its rivals will be and offers them special favours? The fact is that dominant telecom companies like Rogers, Bell and Telus have a long history of using complex agreements like these to their advantage. They dangle these offers in front of regulators and competitors because they're too good to refuse, but the reality is that they use them to control their competitors, not to give them a boost.
By approving these agreements, the tribunal has created a serious conflict. That is because an agreement such as this one, whereby a dominant provider gives special treatment to itself or others, may very well be illegal under the Telecommunications Act. In fact, a complaint has already been filed at the CRTC that credibly alleges that this agreement will undermine competition for home broadband services across the country. I do not believe Parliament could have intended for a deal approved under one act to conflict with the other in this case, but in the meantime the CRTC will be dealing with the mess as this offending merger draws closer to completion.
My last message is that this can all be stopped before it's too late. I continue to believe that this merger will be harmful, but Rogers, Shaw and Videotron have successfully navigated it past the first two of the three barriers it has faced. In my view, the regulators have gotten it wrong, but where they failed, the still has a chance to get it right. His role and responsibilities go far beyond simply rubber-stamping corporate deals and selling them as a win to the public. He has broad powers to act in the public interest, powers that allow for a much broader consideration of the public good than the regulators' narrow frameworks permit them.
The still has a chance to do what he should have done when the merger was announced, and stop it in its tracks. He has a chance to show these corporations that they cannot run roughshod over the Canadian public and the institutions intended to ensure that our society flourishes.
The path forward for the is simple. Instead of giving these companies what they want, he should force them to compete.
Thank you.
:
The merger must not be allowed to proceed. Angus Reid polling suggests clearly that eight in 10 Canadians and, in fact, nine in 10 existing Rogers and Shaw customers oppose this merger because it obviously will create less choice and higher prices for Canadians.
Public interest advocates, academics and all sorts of parties oppose this merger. The Conservative Party, the NDP and a number of Liberal caucus members worry that consumers will be directly affected in Ontario, B.C. and Alberta.
The competition commissioner opposes this merger and did so under an act that we all recognize is deficient and is currently being overhauled by this government.
We recommend and we're calling on the to step in and block this anti-competitive merger.
Very importantly, there is nothing anti-Videotron about blocking this anti-competitive merger. Once the government saves Canadians from this anti-competitive merger, a fair, open and transparent process can be run for the Freedom Mobile assets.
To the extent that the Shaw family would like to sell them, the government can oversee a process to ensure that they go to a party that is qualified and that will ensure more competition for Canadians.
Again, there's nothing anti-Videotron about blocking this anti-competitive merger; it's just that the only mechanism left after the failure under the old Competition Act is for the to step in and decline a wireless licence transfer to Videotron.
Just by way of context and background, we at Globalive have been competing in the Canadian telecom industry for 25 years. We started competing in long-distance services back in the day. We competed in home phone and Internet service and brought prices down in those three categories. Then we founded, built and operated a facilities-based, independent, pure-play wireless carrier called Wind Mobile, and we successfully brought prices down 20%. That meant average household savings of $400 a year, whether you were a Wind Mobile customer or not. We're very proud of what we have achieved for Canadians in the past 25 years in reducing prices.
When we were in the process of continuing to build Wind from zero to almost $500 million a year in revenue, from zero to a million subscribers, from zero and start-up losses to positive $70 million of EBITDA when Shaw acquired the company, we were really committed to the long term and to continuing to build the business.
Unfortunately, in 2015 our governance was such that when Shaw approached the company with an attractive price, we were dragged into a sale to Shaw. We very publicly opposed that sale to Shaw, because our independent pure-play business model was proven and Canadians were voting with their feet. The growth of the business was spectacular, and we'd crossed strongly into positive EBITDA. We were dragged into that sale and, as I said, we opposed it.
[Translation]
To my mind, Wind Mobile was unfinished business. My goal has always been to provide lower prices, better service and more choices to Canadians, in all provinces and territories.
[English]
It is very much unfinished business for us. When Rogers announced the proposed acquisition of Shaw, we immediately contacted them and expressed our interest in re-entering the Canadian wireless market. Rogers told us they were not going to be selling any assets—and they were definitive about it—and that, regardless, we would not be entertained in any event.
After a year of pressing Rogers, we finally submitted a funded, all cash, no financing condition offer for $3.75 billion for the Freedom Mobile business. We were looking to re-enter and, again, finish the work and the business we had started.
Rogers did not entertain our offer for the obvious reason that we are an actual competitor. We actually had a track record of bringing prices down. They were permitted—and are being permitted, potentially, with this merger—to select who their new competitor is going to be. In no universe does it make sense for a company like Rogers to be able to select who their competitor is going to be and then prop them up with a series of commercial agreements that we see now may actually be in violation of the Telecommunications Act.
We call on the to block this anti-competitive merger. There is nothing anti-Videotron about blocking this anti-competitive merger and saving Canadians from it.
Once the steps in and does that, to the extent that the Shaw family wants to sell, the minister—the government—can oversee a fair, open and transparent process that ensures the best outcome for Canadians, and ensure that the acquirer of Freedom is committed to continuing to invest in networks, to buying more spectrum, to building into rural and indigenous communities, to creating more jobs, to bringing prices down for Canadians, and to bringing more innovation to the market, just as we did with Wind Mobile.
Wireless networks are as important as roads in the digital economy, and as such wireless networks need to be affordable, available and accessible to all Canadians.
Thank you. I look forward to your questions.
:
Thank you, Chair, Vice-Chairs and committee members for the opportunity to speak with you. I'm Andy Kaplan-Myrth, VP of regulatory and carrier affairs at TekSavvy, which is an independent Canadian Internet, phone and TV service provider. I'm joined by my colleague Jessica Rutledge, who is our regulatory counsel at TekSavvy.
We're pleased that the committee is reconvening to examine the Rogers-Shaw merger in light of how the deal has evolved. In particular, to sweeten Videotron's acquisition of the Freedom Mobile business, Rogers has offered Videotron preferential wholesale terms, such as discounted wholesale access rates and discounted transport capacity. This sweetheart wholesale deal is where TekSavvy can offer a unique perspective.
I'll give you a bit of background on our business model. TekSavvy has been serving customers for over 25 years. We have almost 300,000 customers across Canada. In Chatham-Kent and surrounding communities in southwestern Ontario, we have invested and continue to invest in building our own facilities, including our growing fibre-to-the-home network. In the rest of Canada, we connect customers through a combination of wholesale services that we buy from the large incumbent carriers in their serving areas, including Rogers, Shaw and Videotron, and our own facilities across the country. The CRTC requires incumbents to offer this wholesale access in order to create competition.
In this model, the wholesale rates are the largest cost component of our business. If the rates are too high, we can't offer competitive resale prices.
In 2019, the CRTC found that wholesale tariff rates charged by the incumbents were massively inflated, and they dramatically reduced those rates. While the incumbents' appeals of this decision to the Federal Court of Appeal, to the Supreme Court and to cabinet all failed, the CRTC reviewed its own decision and reverted to almost the same rates as before the process. Unfortunately, cabinet later rejected several petitions to overturn that decision.
Since then, the higher rates have destabilized this industry. Three of the largest wholesale competitors—other than TekSavvy—exited the market within the year, including VMedia, which was acquired by Videotron. TekSavvy is losing customers and has had to put investment plans on hold, including plans to purchase spectrum. The wholesale regime is failing, and consumers have been paying the price. Internet prices in Canada continue to rise, including 13% annual increases for some of the most popular speeds.
Why is this important? The regulated wholesale rates are the context for the Rogers and Videotron arrangements. Rogers could have provided Videotron with wholesale services using the regulated wholesale rates as for any other competitor, but it didn't. It knew that the current wholesale rates would not pass muster for the competition process, since they would not have allowed Videotron to sufficiently compete. Rogers needed Videotron to be seen as a credible competitor to get its merger through.
Instead, Rogers is offering Videotron lower favourable wholesale rates and terms. By doing this, Rogers is tacitly acknowledging that the current regulated wholesale rates are so inflated that they are not feasible to support competition. It's also showing that it can profitably offer rates below the tariff.
Because of the CRTC's failure to set appropriate wholesale rates, large incumbent carriers can leverage the inflated rates that they fought for to work out deals between each other, with preferential terms that would further harm independent competitors.
In short, the largest telecom merger in history is predicated on unlawful and anti-competitive agreements between incumbent carriers. The Telecommunications Act prohibits carriers from granting an “undue or unreasonable preference” to some companies and not to others.
TekSavvy has asked the CRTC to review the Rogers-Videotron wholesale deal, and we're calling on the to not approve the deal until the CRTC has made its decision. If our application is successful, the CRTC could void the Rogers and Videotron side deal, or it could require Rogers to offer those same terms and discounts to all competitors.
If we had a properly regulated, robust and effective wholesale regime, we would not need a patchwork of side deals or 10-year behavioural commitments for rates and terms.
If we had workable regulated rates like the lower 2019 rates, Rogers merging with Shaw wouldn't have the same impact, because consumers would have their choice of affordable and competitive options.
If the government addressed the unjust wholesale rates, wholesale competitors would be able to offer lower prices on what is now an essential utility for consumers. This would give consumers' pocketbooks some much-needed relief in today's cost of living crisis.
Thank you again. We look forward to your questions.
Today we have heard from quite a few experts. We're obviously looking at the whole convoluted, complicated situation that we're in. We're looking at a big merger here in Canada.
One thing I start thinking about is how we get the fundamentals right. We're looking, really, at competition as a whole across Canada. Why is competition important? It's because when we have competition, Canadians have choices. They have better service and better prices. That's evidently what should be at the top of all of our minds as parliamentarians right now, especially going through high inflation.
When we look at this, we hear from academics and from experts on the Competition Act who are saying they have done this or they have done the other. The fact of this case that I find most alarming and that concerns me is that Rogers, in looking to buy an asset or a competitor, was given carte blanche in picking who its competitor would be. Rogers, the number one market share holder in telecommunications in all of Canada, was allowed—and Shaw gave it the full authority—to freely go and pick who its competitor would be. Maybe more importantly, it was allowed to decide to pick who it wouldn't be dealing with.
Globalive is here. Distributel is another one, and there might have been others.
Mr. Lacavera, in your own words, do you feel that the divestiture process was fair?
:
There's a lot there. Let me say that ultimately, when somebody said that Rogers got carte blanche on picking its competitors, I don't think that's quite fair to the tribunal's analysis of this. That is, the tribunal took very seriously the commissioner's argument that Videotron would not be an effective competitor. It went through, I think, quite a bit of detail about its reasons for concluding that Videotron might well be an effective competitor.
I would take a bit of an issue with the idea that it's carte blanche, because part of the competition hearing was in fact an assessment of Videotron's capacity to compete going forward.
Another thing that has come up in the discussion so far is this idea of wholesale rates and Mr. Kaplan-Myrth's comments about those. I'm agnostic on that question about whether the CRTC has this right or wrong, but I will say this: It's a really tough thing to get right, so I don't envy the CRTC's task on that. It's a difficult one.
At the same time, it is interesting to hear the comments from Globalive. On the one hand, you have TekSavvy saying it would be impossible. The current rates are making it impossible to compete, and then—
:
Mr. Chair, I will again refer to Project Fox.
In the opening remarks, I heard that this project was supported by the New Democratic Party, among others. There is something about Project Fox that comes up often, namely, being able to continue to pursue this strategy of dominance, particularly with the leader Jagmeet Singh who will be able to ask the about the “kill, shape and slow” strategy during question period. This is loaded vocabulary, especially when they act that way in committee.
I also heard in the opening remarks that Telus, Bell and other stakeholders, including academics, have been putting on the pressure in this case. A document made public by the court indicated that one of these third parties is in fact the Canadian Media Concentration Research Project at Carleton University.
My question is for you, Mr. Klass. Have you had any contact with Telus? Have you distanced yourself from the use of your intellectual property or of your judgment, in this case?
:
For years, in the yearly reports published by the Canadian Media Concentration Research Project, we've done an analysis of provincial markets for mobile wireless service. I'm chiefly responsible for that section. I definitely agree that Quebec in recent years, due to Videotron, has set an example of the type of competition that could emerge from the fourth carrier policy.
That being said, the equation changes slightly when Videotron leaves Quebec. To be clear, I would like to see it succeed. If Videotron steps into the role that Freedom did, there is a chance it could do so.
I would like to see outcomes that are beneficial for consumers. However, there's a substantial risk that in transferring Videotron into the shoes of Freedom—but removing, chiefly, its connection to the underlying broadband facilities that it has available in its home province, and replacing that with these agreements with Rogers—it places Videotron in a completely different position in the rest of Canada.
While I would like to see it succeed, what I've seen in the past—and this is going back to the days of the rotary phone—is that companies like Bell or Roger have these arrangements whereby smaller companies depend on them, and they can use these to squeeze and eventually crush them. With Videotron moving into the rest of Canada, I worry it's so dependent on Rogers that it won't have the strength it has in Quebec, and that it won't be able to have the effect it's had there.
Mr. Iacobucci, I'll continue with you.
If, right now, Videotron was to do what you're saying and be more assertive with the rollout, as has been promised, it would be counter to its previous business model. This is going back to 2013, when it sat on a spectrum auction, and the successful bidding it got in British Columbia, Ontario and Alberta. What makes you confident that this time it's going to perform in the market?
Secondary to that, if it doesn't, what legal means can the government use to bring it back in line?
Lastly, would there also not be the potential that it could be bought out in the market in the future?
:
I'll answer the last one first, because I think in some sense that's the easiest one to deal with.
If there's a proposal to acquire Videotron in the future by one of the players in the market, there will be competition questions surrounding that acquisition. Again, the competition law institutions that we have in this country are well equipped to address the question of whether a future acquisition would reduce competition substantially.
To your first question, on what makes me think that, I'm not going to purport to be an expert on Videotron's business history or the particulars of its model. I understand where your skepticism, which I think underlies your question, may well come from. At the same time, I am confident that the tribunal did a very thorough assessment of what it heard. It was a thorough weighing of the evidence. The commissioner had an opportunity to make its claims, that we should not anticipate Videotron's being as successful as Shaw might be without the acquisition going forward. I think it was fully vetted. The conclusions seemed reasonable, from where I sat.
It's also important, though, and I would acknowledge, that although it's an assessment the tribunal made with a certain degree of confidence, predicting the future is always going to be difficult. This is something that the tribunal also alluded to. When you ask what happens if it doesn't work out, well, this is actually an area in which, if this merger isn't as competitive as we might hope, there is regulatory oversight. The CRTC could make certain decisions, including withdrawing forbearance, if it wished.
:
Thank you. I have to move on to Mr. Klass, I think, because I directly wanted to know...and the answer is that there is nothing, really, that we can do. I appreciated your intervention, but I have have limited time here.
Mr. Klass, I guess what I'm worried about is this. If Videotron was later on to be looked at as a potential takeover from somebody else, or a merger, I don't have a lot of confidence, because when you look at the history, Bell acquired MTS. Telus bought Public Mobile. Rogers bought Fido. Shaw bought Wind Mobile. Those are just a few of those things, and now we're looking at Distributel and Bell as a merger.
This looks like rearranging the chairs on the Titanic, in many respects, at the current moment. Is taking a pause, really, at the end of the day, probably the best strategy before we lose another chance to try to set things right?
This question is for both Mr. Kaplan-Myrth and Mr. Lacavera.
Where I'm from, right now we have a couple of things. First of all, I'm in Windsor, Ontario, right across from Detroit, Michigan, so we're also benefiting from many roaming charges that people have to deal with. Second to that, it's the auto industry capital of Canada. Over the years, we've seen non-tariff barriers that have stopped Canadian exportation of vehicles into, for example, South Korea. You can legally send them there without tariffs, but there are things governments do to actually block servicing of the vehicles and so forth, so it makes it difficult to be a consumer purchaser.
I'd like your comments with regard to other potential barriers out there for a new competition to come in, whether it's sharing of cellphone towers or other types of mechanisms that are currently in place. I mean, we have disruptions that can take place by the incumbents from not even doing the things that are supposed to happen right now.
I'll start with you, Mr. Andy Kaplan-Myrth, and I'll ask you to leave some time, please, for Mr. Lacavera.
Thank you.
With my short amount of time today, I'll be addressing my questions to Globalive. I'm going to state the questions first, then hopefully you can provide some answers.
We've heard a lot today about the ability or the potential of Videotron to be a real fourth carrier in our Canadian oligopoly. What I haven't heard from Globalive today is why you sold Freedom Mobile in the first place, and what would make you a better fourth competitor than Videotron, specifically because we've heard that Videotron would be tied to Rogers, but you would subsequently be tied to the Telus network. What's the difference there?
You spoke a lot about your communication with Rogers, yet in the briefing you provided, likely to all of us here in this office, you didn't really communicate to us as committee members regarding your interactions with Shaw. Although you stated that your bid was $1 billion more than the price offered by Videotron to Rogers and Shaw, your bid is, in fact, different in that it includes, if I remember correctly, the mobile services offered by Shaw that you, of course, had before.
Finally in your briefing you made very serious allegations that since the announcement of the merger, Shaw has starved the Freedom Mobile business while running promotions that essentially give away mobile services to Shaw Mobile customers, with the result that Shaw Mobile has acquired almost half a million subscribers and Freedom Mobile has correspondingly shed hundreds of thousands of customers since the merger was announced.
It's over to you, Globalive.
:
I'll go in reverse order.
The results disclosed and the performance of Freedom, I think, are very clear. Shaw is a public company, and Freedom has gone completely sideways as Shaw has stopped competing. The metrics are clear around that. The Shaw Mobile business that's part of a bundle offering, in which the subscribers are being heavily subsidized by home Internet, cable and home phone service, are also clear, so yes, Freedom has bled a lot of its subscribers in that fashion.
In terms of our interaction with Shaw, there has been none. Shaw was in agreements with Rogers that would—we expect and, I think, know—have precluded them from ever engaging with us.
In terms of our interaction with Telus, I'm coming up on 50 years old, and I've never worked for anyone yet. I'm not about to start working for anyone, so there's no scenario in which Globalive is in bed with Telus, working for Telus. That's clearly just not what our history, which is all out there, shows. What is out there now is this idea of a sharing construct with Telus. That is incredibly important for the future of competition in Canada, because we're able to invest and share spectrum with Telus—in a shared network with shared towers and infrastructure—which will enable us to ultimately realize significant efficiencies out of that and pass cost savings through to Canadian consumers in a very reliable way.
I want to come back to the document that was filed with the court. If I may, I'll table it for the committee, as it is very relevant to our discussion. The document is in English. Since I can't ask Telus to translate it, allow me to table it as is.
It mentions direct public campaigns to get people to send messages to their MPs. That is what people are encouraged to do on the nomerger.ca site, which was authorized by Globalive.
The document states the following:
[English]
“Telus-Globalive network and spectrum sharing agreement announced to boost Globalive's bid to purchase Freedom Mobile”.
[Translation]
My question is for you, Mr. Lacavera.
You are also registered as a third-party stakeholder, as the founder and former owner of Wind Mobile.
Have you been in talks with Telus representatives? Did they consult you? If so, what is the nature of this agreement to support Globalive's bid? What is the amount?
Mr. Klass, there's been reference to the CRTC not only on this panel, but on other panels. It's played quite a dramatic role in the last two years in some of the things that have led up to this moment.
I want to get your opinion about the status of the CRTC right now, if you have any thoughts. There are issues over whether it even has the resources to be able to get through a lot of these things in a timely manner. We've seen decisions taking ages, affecting business plans.
I'm curious, because you don't have as much of a connection as others in the room will have with the CRTC decision-making basis. Could I get your opinion on that, please?
:
Good afternoon, everyone.
We are ready to begin the second hour of today's meeting, to discuss the acquisition of Shaw by Rogers.
We welcome Tony Staffieri, president and chief executive officer of Rogers Communications Inc. Appearing with him is Dean Prevost, president of integration.
We also welcome two representatives from Shaw Communications: Paul McAleese, president, and Trevor English, executive vice-president, chief financial and corporate development office.
Also joining us are Pierre Karl Péladeau, president and chief executive officer of Quebecor Media Inc., and Jean‑François Lescadres, vice-president, finance, Videotron.
Thank you for joining us, gentlemen. My sincere apologies for the slight delay. This is what happens to the last witnesses who appear at the end of a long day. Thank you for your understanding.
Without further delay, the Rogers representatives now have the floor.
:
Good afternoon, Chair and members of the committee. My name is Tony Staffieri, and I am joined by Dean Prevost, president of integration at Rogers.
First, let me say thank you for the opportunity to speak with you. We respect the role of this committee, and we are here to answer your questions.
Today’s hearing comes after a lengthy judicial process, one that saw the Federal Court of Appeal reaffirm the decision of the Competition Tribunal.
The court's ruling builds on the decision of the tribunal, which unanimously concluded that the transactions among Rogers, Shaw and Quebecor are pro-competitive.
To quote the decision, “There will continue to be four strong competitors in...Alberta and British Columbia.” The decision goes further, concluding that Videotron will be a more disruptive wireless carrier because it can quickly build a 5G network across Freedom’s footprint and bundle wireless and wireline services at lower prices than Shaw.
The decision also made it clear that Rogers will inject “a new and substantial source of competition” in Alberta and British Columbia.
In short, these transactions have gone through a rigorous review and will increase competition. To quote the Federal Court, “This was far from a close case.” This committee can feel satisfied that no stone was left unturned.
A lot has changed since you first studied this merger and tabled your recommendations. We heard your feedback, and that of our . Today we are here to talk about an even better deal. Actually, it is now two deals. The first will see Quebecor, owner of Videotron, acquire Freedom. The second will see Rogers acquire Shaw’s wireline business in markets in which we don’t compete.
After other remedies were reviewed and clear criteria set out, we determined that Videotron, with its proven track record, significant scale, and credible, rapid path to 5G, was the most viable option to increase competition.
This transaction will increase competition in two meaningful ways. First, Videotron will become a disruptive fourth national carrier, reaching nearly 90% of the population.
Second, Rogers will become a stronger, more formidable wireline competitor in western Canada. Rogers' cable footprint reaches parts of Ontario and eastern Canada. Shaw’s cable footprint spans western Canada and parts of northern Ontario. There is no overlap.
As one national cable company, we will vigorously compete with Telus in the west. Yes, the deal will increase wireless competition, but it will also increase wireline competition. That should explain why Telus has been doing everything it can to oppose this transaction.
Let me now turn to the commitments we made in western Canada.
First, we will invest $6.5 billion to improve connectivity over the next five years. This includes $1 billion in new funding to connect rural and indigenous communities. We are working with first nations partners, including indigenous-owned providers, and all levels of government to finalize priority projects. We will invest $2.5 billion to expand our 5G network. We will also invest $3 billion in network services, including expanding our cable network.
Second, we will maintain a strong presence in western Canada. This includes the creation of up to 3,000 net new jobs to support network investments, with Calgary as our western headquarters.
Third, we will make connectivity more accessible. We will expand Connected for Success, our low-cost, high-speed Internet program, to low-income Canadians across the west. We will also expand it to eligible wireless customers across the country. Together, this program will be available to more than 2.5 million Canadians. This merger will bring together two entrepreneurial Canadian companies that are deeply committed to Canada and Canadians.
As I conclude my remarks, let me leave you with a few thoughts. First, we have taken your feedback.
Second, these transactions have gone through a robust and comprehensive review.
Third, this transaction will increase competition.
Fourth, we will invest substantially to connect more Canadians.
These transactions will deliver more value, more connectivity and more innovation for Canada.
Thank you.
:
Good afternoon, Mr. Chair and committee members.
My name is Paul McAleese. I am the president of Shaw Communications. I'm joined by Trevor English, our chief financial and corporate development officer.
As this committee knows well, our industry is more important than ever to the lives and economic future of Canadians. It is also on the verge of a fundamental change in technologies, requiring tens of billions of dollars of additional investment to position Canada for ongoing success in the digital era.
Shaw Communications was founded on a goal of providing compelling choices for Canadians, and we are proud of the customer relationships we've built and nurtured over the past 50 years.
We are also sufficiently clear-eyed to know that the transactions with Videotron and Rogers offer the best path forward for those customers. With these transactions, Shaw’s assets will be in the right hands for the long term, addressing Shaw’s challenges and, more importantly, setting the stage for sustainable and enhanced competition, affordability and innovation in Canadian telecommunications.
Since we last appeared before you in 2021, much has changed. Many stakeholders, including this committee, expressed concerns about Freedom Mobile’s future. In response, last June we announced a very different approach that would see Videotron acquire all of Freedom Mobile. To be clear, Rogers will never own Freedom Mobile. Further, there will continue to be four strong wireless competitors in each of British Columbia, Ontario and Alberta. There is no company better placed than Videotron to extend and amplify Freedom’s competitive impact.
The Freedom-Videotron wireless business will be an even stronger fourth carrier, covering over 30 million people. The dynamic, newly empowered Freedom-Videotron will have more than double the customer base—over three million subscribers—and all the tools it requires to compete against the national carriers, including, critically, the 5G spectrum that Shaw does not possess.
As the competition tribunal concluded in a decision unanimously affirmed yesterday by the Federal Court of Appeal, the new Videotron that will emerge from these transactions will be a more aggressive and effective competitor than the present-day Freedom is.
The benefits of these transactions have been proven through a judicial process, so where is the remaining opposition coming from? It’s coming from our competitors, and I would ask you to ask yourself why.
The opening paragraph of the tribunal decision provides that explanation, and I quote:
A well-known adage in the competition law community holds that when competitors oppose a merger, it is often a good indication that the merger will be beneficial for competition. In this case, the opposition from the Respondents’ two national competitors has been vigorous and far-reaching.
Throughout the past two years, Telus and Bell have been the most vocal opponents of these transactions, challenging them in every forum possible. As a result of the regulatory process, when these transactions close, Telus and Bell will face the competition they fear most.
As you've heard, Telus went so far as to undertake a well-documented corporate campaign, called “Project Fox”, seeking to “kill, shape and slow” the proposed transactions. As part of this campaign, Telus conspired to replace Videotron with Globalive as the purchaser of Freedom. Globalive’s chairman, Mr. Lacavera, who is very clearly comfortable playing Pinocchio to Darren Entwistle’s Geppetto, is an odd choice for an operating partner.
Mr. Lacavera has a dubious record of running a wireless company. I know that because I have unique first-hand experience. I operated what was Wind Mobile after Mr. Lacavera exited the building, and I have a deep understanding of the effort required to fix the many challenges that we inherited. Here is an example.
I suspect that the majority of members of this committee, and many of the people in this room, are representative of the country at large and use an Apple iPhone in their everyday telecom needs. Prior to Shaw’s investments, Apple refused to authorize the iPhone on the sale of Wind’s network during Mr. Lacavera's tenure there as owner and CEO. This is in sharp contrast to Videotron, a proven strong competitor in wireless. Globalive owns no spectrum assets and has no recent operating experience in Canada’s rapidly evolving wireless industry.
The relationship between Telus and Globalive was very clearly disclosed in the subpoenaed documents that Telus provided through the recent tribunal proceeding. What we learned was that Globalive is a very clear surrogate for Telus. Why would Telus go to such lengths to “kill, shape and slow” our proposed deals?
The answer is very simple. As the tribunal held, these transactions will enhance competition in Alberta and British Columbia, where Telus is the dominant provider.
It may be obvious, but it cannot be forgotten: Telus is not interested in creating stronger competition in western Canada.
The rigorous regulatory process has delivered the best possible outcome for Canadians. Further delays very clearly only benefit Telus and Bell, because they prevent the stronger competition that these transactions will provide.
It’s time to move forward. These transactions provide a clear path to lower prices, more investment, greater innovation and enhanced competition.
Thank you for your time. We look forward to your questions.
:
Thank you very much for inviting us, Mr. Chair. It is an honour to join this committee meeting.
My name is Pierre Karl Péladeau, and I am the president and chief executive officer of Quebecor. My colleague Jean‑François Lescadres is vice-president, finance, with Videotron.
About two years ago, I appeared before this committee and stated that Quebecor is the driving force of competition that benefits Canadian consumers of telecommunications services. We showed beyond a shadow of a doubt that consumers come out ahead. This has been the case for about 15 years in Quebec as a result of our wireless service. This has been noted by the CRTC, Innovation, Science and Economic Development Canada and by various market analyses, such as the Wall and Nordicity analyses.
Unlike third-party internet access or TPIA companies, we play an integral role in economic activity by investing billions of dollars in the construction of our landline and wireless networks, while offering very low prices under our different brands, including the most recent addition four years ago of Fizz, a fully digital brand.
We believe there are now a number of conditions that enable us to expand our range of activity and offer telecommunications services in British Columbia, Alberta, Manitoba and Ontario.
[English]
Videotron’s offer to Rogers of close to $3 billion was the only one that checked all the boxes. It's a successful regional player and disrupter with a strong balance sheet, solid experience and an innovative track record. The truth is that Videotron is the only real contender.
It is therefore not surprising to see “the Big Three” fear the disruptive entry of Videotron into the wireless market outside of Quebec.
[Translation]
The Fox project is a striking of example of Telus's toxic and Machiavellian tactics, which include an increasing number of court cases, sneaky disinformation campaigns and intensive lobbying efforts to fuel opposition, while at the same time seeking to pit western Canada against eastern Canada. The whole purpose is to defeat competition and the desire of governments to give Canadians favourable and innovative rates and business conditions.
The opposition by Bell and Telus to the transaction perfectly illustrates that Videotron is the best way to provide consumers with true and lasting competition.
[English]
Quebecor has built a solid expansion plan to gain a strong foothold in the Canadian telecom market. It was even mentioned by the Competition Tribunal in its recent decision that was confirmed yesterday: “Videotron is an experienced market disrupter that has achieved substantial success in Quebec. It has drawn upon that experience to develop very detailed and fully costed plans for its entry into and expansion within the relevant markets in Alberta and British Columbia, as well as in Ontario.”
We said it when set out the conditions for the sale of Freedom Mobile, and we are stating it again. Videotron is in it for the long haul and is committed to bringing down prices for the benefit of Canadians.
We did it in Quebec, as confirmed by several reports, as we said. We actually have been doing this for at least 15 years, since we launched our first MVNO offering, which took place in 2006 on Rogers' network.
On top of that, Videotron acquired VMedia last year, which will enable it to offer consumers in British Columbia, Alberta, Manitoba and Ontario discounted multiservice bundles and innovative products, including mobile and Internet, at even more competitive prices. We will bundle on better terms than anyone else, including what Shaw Mobile is offering today.
[Translation]
Except for Eastlink in certain communities in Atlantic Canada, all the initiatives launched since the auction in 2008 have failed. Globalive, funded by foreign interests and then purchased by Vimpelcom, a company that is partially controlled by an oligarch who is not permitted to enter Canada at this time, ended up with Shaw a few years later.
Mobilicity, controlled by a U.S. private financial company, has for its part been bought by Rogers, while Public Mobile has been bought by Telus. Quebecor and Videotron have been and continue to be the only companies that can stand up to Bell and Telus. Our plan is simple: to continue to be a success in the wireless market, which is something Canadians need.
The CRTC and the government must also continue to create favourable conditions, the most important being the review of roaming rates and the implementation of the MVNO policy, for full-fledged mobile virtual network operators, and the application of sanctions to stop anti-competitive actions.
Every measure must be taken to serve the public interest and the government's clear desire. Under government and regulatory policies that have been updated and brought into line with those decreed 15 years ago by the late Minister Jim Prentice, we will be the long-awaited fourth national industry player. We must ensure that this government desire is fully respected by national license-holders so that Canadians can benefit from healthy and lasting competition.
Thank you for your attention.
:
Thank you, Mr. Chair, and thank you to all of you for coming to the important hearings today.
I would like to start off for the viewers by outlining that companies, your companies, are built on leasing limited national assets of radio frequencies owned by Canadians. You've been given by Canadians the privilege of access protected from foreign competition. With that comes a responsibility to Canadians to provide service to them at a reasonable cost. The result of this privileged and protected position is that Canadians pay amongst the highest cellphone and Internet prices in the world, and your companies reap monopolistic profits.
Rogers' cellphone net profit margin is 62%, and Videotron's is 65%. Your profit margin shows that it's not the size of the country and the small population that drive up cellphone prices. There is less competition today than there was 10 years ago. Your companies bought up your competitors. As part of your privileged position, Liberals have enabled your lobbying access to officials during the decision-making process at an unprecedented level.
Mr. Staffieri, as CEO of Rogers during this transaction, you personally met with the Department of Industry more than 60 times, five of those times with the . I would like to know if you were negotiating the deal directly with the department.
I am sharing my speaking time today with my colleague Anthony Housefather.
[English]
My first question is for Mr. Staffieri.
In December you released a statement saying that this merger will “bring more choice, more affordability and more connectivity to Canadians”, and that “the transactions will likely result in an intensifying of competition”.
This morning we heard from the Competition Bureau, as well as other witnesses, that this merger will have negative impacts for lower-income Canadians. We also heard that when it comes to the telecommunications sector, density matters. We know that rural populations and rural communities are often negatively impacted by that.
Can you describe for us today how greater affordability and connectivity will be achieved for these two populations?
There are not 42 ways to succeed and we know full well that the issues surrounding rates are extremely important to the success of a company.
In Quebec, we have certainly had a range of services: cable distribution, Internet, landline telephone and wireless telephone. To achieve our current share of more than 23% of the market, we offered Quebeckers prices below the industry norm.
That is especially true since we launched Fizz, a fully digital network, as I mentioned in my opening remarks, which is cost-effective and less expensive than our main brands. That is certainly the strategy we will use for the regions and markets that Freedom Mobile currently covers and for the markets it could cover in the years or decades ahead.
So we will indeed reduce rates and use innovation and client service, which is so important, in order to be as successful as we have been in Quebec over the past 10 or 15 years.
:
Thank you so much, and thank you to the witnesses for being here.
As the New Democrat on this committee for 15 of my 20 years in Parliament, I've seen a lot of companies come and go. I've seen a lot of promises being made. I want to remind the public, in the process here, that having the tribunal panel was a political decision. It was made by legislation. It's not a pure system by any means; it's an appointed process.
To hammer that point through, under Bill this committee will also have to consider another tribunal creation, which could potentially undermine the Privacy Commissioner. I want to make it clear that upholding the tribunal's decision is not independent of politics in itself. It's shaded in its birth of being part of political decision-making. That's one reason I think the still has a lot of choices here.
I want to note a couple of quotes that I have here. Mr. Péladeau, in 2009 you said that in terms of spectrum, you didn't have any plan for now and you felt there's a great value that will become an even greater value.
In 2013, your colleague, Mr. Dépatie, said that as for the spectrum, Quebecor had acquired Ontario, Alberta and British Columbia and “could not pass up the opportunity” to acquire high-value spectrum at such an attractive price. That was a carve-out that was done specifically.
Lastly, another of your colleagues, Mr. Dion, said, “Today's licence acquisitions [in Ontario, British Columbia and Alberta] continue our strategy of buying spectrum at advantageous prices, mainly to support Videotron's operations in Quebec.”
From that time period, you didn't provide a lot of rollout. Even ISED noted that you left 83% of rural residents in the area with no coverage.
During this process we've had COVID, where this is very serious for other businesses and also to the pocketbooks of people. Also, the areas of schools, business and telehealth were left without competition. They were left with higher prices, and sometimes they were left with no services.
My question to you is this. What makes us believe that now, at this point in time, you're actually going to be in the race and you're actually going to compete?
When there's no actual way for us to follow through with any type of punishment if you don't, what makes it comforting for those people who were left behind when Quebecor didn't act on the spectrum it acquired? More importantly, it actually acquired income and revenue from that spectrum that was provided for it.
It's a situation that I think is pretty serious. It's one that has to be answered to, because if we are going to have a disrupter—that's what the tribunal noted—it has to be one that will actually be in place and be forward-thinking.
:
Your loyalty, of course, is to.... I don't blame the companies for doing what you have done. It's a system that's regulated by us at the end of the day, in terms of Parliament, because the spectrum is a public asset.
I still have concerns about not recognizing.... The cost has been talked about a lot here in this situation, but the products and the services you have that didn't get rolled out hurt people economically or limited their capability to participate in society.
I'd ask all of the companies here to respond to what they feel their obligation is, in the future and in the past, in actually not acting on spectrum.
Perhaps you could all respond by telling us how much spectrum you didn't actually activate and that you left out there on the market with less competition.
If we could go across the board, I'd appreciate it, please.
Thank you to all the witnesses.
Mr. Péladeau, I hope you have a sense of humour, in spite of the serious purpose of this committee. As a Quebecker, I am very happy and proud to see you and your company invest in another country. I think you know what I mean.
I have a number of questions, so I would like you to answer quickly. You are already a Rogers partner in Quebec and will become even more closely affiliated in western Canada. You have filed an $850‑million lawsuit against Rogers, which is currently before the courts.
I am also a businessman. Can you tell me how you can sue your partner and then enter into new agreements with it to develop other markets?
If you are suing Rogers, I guess it is because it has not met your expectations or needs in the past. Are you not somewhat apprehensive about the conditions under which the transaction with Rogers was made for the expansion of mobile services in the west, given the relationship you have had in Quebec?
I believe the lawsuit pertains to the business dealings you had with Rogers in Quebec.
How do you see this? It seems rather contradictory.
:
In this area, it's very important to understand what we're comparing here. Nothing demonstrates that better than the way competitors react.
As Mr. Péladeau showed earlier, competitors react by offering much lower prices in Quebec than elsewhere in Canada. In addition, Freedom's plans right now are not identical to those of its competitors. Freedom doesn't offer 5G, which we've committed to offering very quickly once the transaction closes.
Next, Freedom limits what we call national roaming. If you speak to a salesperson who offers plans from multiple providers, they're going to ask you if you plan to stay in town or go out of town. If you stay in town, they'll tell you that they can offer you a Freedom plan at a certain price, but if you travel from, say, Calgary to Edmonton or Toronto to Kitchener, your data will be extremely limited.
For example, right now, if you buy a 20 GB plan from Freedom, you only get 1 GB of data outside your territory. This is a competitive disadvantage for Freedom that we certainly intend to address, because we don't have those restrictions in Quebec. Videotron and Fizz plans include roaming across Canada.
:
Mr. Lemire, it's not my place to decide what the Competition Bureau would or would not approve. What I can tell you is that we looked at the criteria and—as you look to the criteria of what was going to be a credible fourth wireless player in this country, the criteria that the laid out, which are very intuitive, by the way—they are that the buyer has to have a strong balance sheet, which Videotron has. They are a public company, and they've been in business. It's not just closing the transaction but, to continue to make the investments that are needed in a network across the country, the buyer had to be a credible operator. Videotron operates today in both cable and wireless. They've demonstrated the ability to disrupt the market with competitive pricing.
Finally, they needed to be credible in building a 5G network. There were no other bidders that had 5G spectrum, which is very critical, to the extent that Videotron had.
We chose the one that we believed met most, and I have to tell you that the process was very iterative. If you look to the tribunal documents, we proposed two other bidders early in the process, and they were rejected. As we went through that iterative process with the government, it became clear what the most viable option was going to be, and that's the one we recommended. As you heard earlier, the tribunal went through an exhaustive trial—31,000 pages, 1,900 exhibits, 44 expert witnesses—and concluded and validated that this is going to be a pro-competitive series of transactions.
:
Mr. Masse, I don't accept your assertion that we've given up and thrown in the towel. It's been a very difficult and long process, and I think we've done a good job running our business during the last two years with this level of uncertainty facing us.
The reality is, Mr. Masse, we need to sell the business because of the investments going forward, and they will be substantial within wireline and wireless. Frankly, we don't have the operational or financial scale to make those investments in a significant manner going forward.
The fact of the matter is that this series of transactions now puts both of our businesses in the right hands—of Videotron and Freedom together—to invest in wireless in the future. Also, with Rogers, in terms of our wireline business, we will continue to invest and innovate and compete for Canadians in western Canada against Telus.
If this deal doesn't go ahead, we don't have a plan B.
:
Thank you, Mr. Staffieri. You can submit that through the clerk.
I want to thank our witnesses for this last panel. Thank you for taking the time.
Thank you, colleagues, for this enlightening and long day.
[Translation]
I'd like to inform you that we won't be meeting in camera. Because we're running late, we won't have access to the necessary resources. However, we will continue the discussion offline.
I'd like to thank the witnesses. Thank you, everyone.
The meeting is adjourned.