Canadian Minister Highlights Competition Concerns Over Rogers Shaw Merger

Concerns over the Rogers Shaw buyout continue to mount. Canadian Innovation Minister, Francois-Philippe Champagne has added his voice.

Since we learned about Rogers bid to buy Shaw for an estimated $26 billion, one key concern has been what it means for competition. The concern is, of course, a blatantly obvious one. If Rogers buys Shaw, that reduces the number of nation-wide carriers from four to three: Telus, Rogers, and Bell.

Of course, that isn’t the only concern. There is the additional concern that less competition will also mean higher cell phone rates and lower quality of service. In addition to that, there is the concern about how many layoffs would ensue should competition get reduced further.

Rogers, for it’s part, seems to argue that the acquisition will mean more competition. If they acquire Shaw, then they’ll apparently be more competitive. It’s an argument that has largely fallen flat for almost everyone partly because it doesn’t even pass the laugh test.

At any rate, Canadians aren’t really laughing at any of this. In response, they flooded the Competition Bureau to let the regulator know how they felt about the deal. It’s generally speculated that most Canadians are opposed to this merger. This is thanks to the existence of a petition created by OpenMedia opposing the deal.

Opposition to the deal seemingly grew from there. MPs grilled Rogers and Shaw over the deal. NDP member, Brian Masse, said that the big promises being made would make a robber baron blush. Rogers promised that if the government just lets Rogers increase their monopolistic size by acquiring Shaw, then they will pinky swear finally get around to increasing connectivity to rural and indigenous communities. It’s a longstanding issue that has seen little movement despite it being a major campaign plank by pretty much every political party during the last election. So, it’s really not a surprise that so few are willing to believe the company that making an even bigger monopoly will be a magic bullet to solve all of these problems.

Just to compound the point about high cell phone an Internet rates, a recent study confirmed that Canadians pay some of the highest Internet and cell phone rates in the world – paying more than even their American counterparts on all fronts. Canadians pay far more than Australian’s as well – a country with a similar population density and land mass issue for coverage. It’s a study that isn’t exactly surprising for Canadians, but, nevertheless, is informative and offers empirical evidence to support their complaints.

Now, Canadian Innovation Minister, Francois-Philippe Champagne, is also adding his voice to the debate – and is siding with those who have concerns about what this acquisition means for competition. From Bloomberg:

Rogers Communications Inc.’s proposed takeover of Shaw Communications Inc. creates “very serious” competitive issues for Canadian officials weighing whether to let the deal proceed, Innovation Minister Francois-Philippe Champagne said.

Consumer prices are among the central questions in the review, according to Champagne, the point person on the case for Prime Minister Justin Trudeau. The government’s decision will be a landmark with lasting consequences for the telecommunications industry, Champagne said in an interview with Bloomberg News on Tuesday.

The $16 billion merger results in “very serious issues and very important issues when it comes to maintaining that level of competition,” Champagne said. It would reduce the number of wireless providers to three from four in about two-thirds of Canada, including the Toronto and Vancouver markets.

Wireless concentration is the largest regulatory hurdle to completing the deal as proposed. Canadian government policy for more than a decade has been to encourage a fourth player to compete with Rogers, BCE Inc. and Telus Corp., as a solution to consumer complaints about high prices.

It’s probably just a typo, but to correct the record, the merger is reportedly pegged at $26 billion, not $16 billion as the article says.

Really, pretty much everyone knows where this deal should head – straight to the trash can. If Canadians think things are bad on the wireless and Internet side of things now, then chances are, it will only get worse with competition being reduced by 25% in the market. As such, Canadians all over are no doubt hoping that the outcome will reflect basic common sense in all of this.

Drew Wilson on Twitter: @icecube85 and Facebook.

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