Rogers Grilled At Hearing By MPs Over Rogers Shaw Merger Bid

As the Rogers Shaw deal moves ahead, more questions are being raised about what it means for ISP and wireless competition in Canada.

About half a month ago, we reported on the major move of Shaw wanting to buy Shaw for an estimated $26 billion. The move would greatly reduce Canada’s carrier competition from 4 players to 3. Should the deal go ahead, all Canada would really have for nationwide carriers is Telus, Rogers, and Bell. Many know exactly what this would mean, worse quality of service and higher fees.

So, it’s probably no surprise that people are going to the regulators in droves. The Competition Bureau of Canada had to put up a notice to say to say that they are receiving an unusually high volume of submissions and that they can’t respond to all submissions at that point in time. Some sources say that it’s actually unprecedented. One thing to note is that the online submission form in question is the only way to content the Competition Bureau about an ongoing acquisition.

Criticism has only grown since. The founder of Wind Mobile (which was bought out by Shaw), noted that the acquisition would hurt competition in Canada. By that point in time, saying that removing a competitor in the market would hurt competition is pretty much stating the obvious in the eyes of the public.

Rogers, for its part, is trying to put on a brave face in all of this by arguing that removing a competitor from the marketplace would somehow magically increase competition. From CBC:

The chief executives of Rogers Communications Inc. and Shaw Communications Inc. told MPs today that they believe every Canadian will benefit from a combination of their two businesses, which need to be bigger to be more competitive.

Both Brad Shaw and Joe Natale argued the $26-billion plan for Rogers to buy Shaw Communications and Freedom Mobile will help Canadians by allowing the companies to concentrate on building a new generation of networks.

Critics of the proposed Rogers takeover of Shaw’s cable, internet and wireless businesses argue that Canada needs more competitors in the industry, not fewer.

But Shaw testified that the Calgary-based company founded by his father isn’t big enough on its own to make the billions of dollars in future investments that will be necessary for it to build a competitive 5G wireless network.

Natale also said that Toronto-based Rogers — which has Canada’s largest national wireless service and one of the country’s largest cable and internet business — needs to get bigger to become more competitive by growing and updating its networks.

You can almost hear the Weird Al Yankovic song playing in the background in all of this. Eliminating competition will increase competition, less competition means better rates, black is white, up is down, and short is long. What’s more is that the argument that Rogers needs to be bigger really is a bizarre argument to make. It raises the question, “just how big does Rogers needs to be to make a 5G network anyway?” After all, there is entire Wikipedia page devoted to everything Rogers owns at this point. After all, Rogers owns whole stadiums, Sportsnet, piles of radio and television stations, whole professional sports teams, and a whole lot more. Rogers saying they want to be bigger comes off as the Kylo Rens “More!” scene from Star Wars.

At this point, the hard questions aren’t just coming from industry players and Canadians, though. Now, there are questions being raised by Canadian MP’s as well. From BNN:

MPs grilled executives of Shaw Communications and Rogers Communications Inc. on Monday after the telecom CEOs said a combination of the two companies will increase competition and ultimately benefit Canadians.

“You promised increasing jobs, new investment, lower prices and to reach markets that you wouldn’t before — be it Aboriginal or rural (or) remote. I mean these are promises that would make a robber baron blush,” said New Democrat Brian Masse said in one exchange.

“I guess I’m not seeing how … eliminating a competitor is going to be advantageous for the long run for competition,” Masse added.

Liberal MP Nathaniel Erskine-Smith questioned what Shaw’s executives said today, given previous statements about the value of having strong, independent regional competitors such as Shaw to compete against Canada’s three biggest players.

“In this deal, we lose that competition and disruption (and) we lose a pressure toward affordability,” Erskine-Smith remarked to Shaw chief executive Brad Shaw.

“If we take your past statements of January of this year at face value, shouldn’t we expect a negative impact on affordability of telecommunication services in this country if this deal goes through?”

It seems that others are piling on to this idea. Pierre Karl Péladeau, CEO of Québecor Media Inc. which owns Quebec based Videotron, questioned Roger’s push to retain Freedom Mobile throughout the deal. From The Star:

Pierre Karl Péladeau says the sale of Freedom Mobile to Rogers Communications Inc. would harm competition in the wireless sector and suggested his own company could be a buyer if Rogers is forced to sell Freedom as part of its deal to snap up Shaw Communications Inc.

Péladeau, the chief executive officer and controlling shareholder of Québecor Media Inc., the Montreal-based owner of cable and wireless operator Vidéotron Ltd., addressed a virtual hearing of the Industry, Science and Technology parliamentary committee on Wednesday.

Péladeau said the federal government has long supported a fourth player in every part of the country to challenge what he called the “cartel or oligopoly” of the dominant three wireless companies, Rogers, BCE Inc. and Telus Corp. He pointed to a federal auction of cellular airwaves in 2008, which helped Wind Mobile get its start. Wind sold to Shaw in 2016 and was later rebranded as Freedom, and the Québecor CEO said it has “proven perfectly capable of taking on the Big Three in Ontario and the West.”

“Rogers’ proposed deal to acquire Shaw will result in a return to square one and the elimination of the fourth player essential to maintaining real competition,” Péladeau said, according to an English translation of his remarks.

Bloc Québécois MP Sébastien Lemire later asked whether Vidéotron would be interested in buying Freedom Mobile if Rogers were forced to sell the business to win government and regulatory approvals of its deal to acquire the rest of Shaw’s cable assets, which make up the bulk of the company.

Of course, as we know from previous comments made by Anthony Lacavera, founder of then Wind Mobile, there is also an interest to simply keep Freedom Mobile independent as well. As Rogers downplays how big it is for Shaw owning Freedom Mobile, many have been saying for some time just how thorny the ownership of Freedom Mobile will be throughout this process. If anything, this is bearing out right now.

At this stage, we haven’t really seen any concrete arguments that say that Rogers buying Shaw is a necessary thing. Already, people are nervous about the inevitable flow of pink slips should this deal go ahead over top of the lower quality of service and higher prices. At this point, the obvious answer to this is to block the deal. As some Canadians know, though, you never really know which direction regulators will go for sure. At the very least, Canadians at least know that the response to the deal has been a seemingly near universal “no” at this stage. Maybe that will count for something at this stage. Who knows?

Drew Wilson on Twitter: @icecube85 and Facebook.

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