MPs grill Rogers and Shaw execs on proposed merger
Telcos face scrutiny about whether proposed deal will hurt affordability
MPs pushed Rogers and Shaw executives Monday on their argument that the proposed merger between the two companies would increase telecom competition, despite eliminating a wireless competitor in three provinces.
“I have to admit I find that particular submission to be a confusing one,” Liberal MP Nathaniel Erskine-Smith said during the telecom executives' two-hour livestreamed appearance at the House industry committee.
He pointed out that two months ago, Shaw told the same committee that Shaw's wireless service offering, Freedom Mobile, “has shifted the market dynamics, causing the big three to drastically reduce overage fees and offer significantly more data for much lower prices.”
On March 15, Rogers Communications announced its $26-billion acquisition of Shaw Communications. Shaw's Freedom Mobile is the fourth competitor after Bell, Telus and Rogers in Ontario, Alberta and British Columbia.
Lowering wireless prices became a campaign issue in the last federal election, with the Liberals promising to drop prices by 25 per cent. Rogers and Shaw executives argued Monday that prices have been falling as MPs pressed them on whether that would change if the merger — which must be approved by the Competition Bureau, the Canadian Radio-television and Telecommunications Commission and Innovation Canada — goes through.
If Shaw's statements from January are taken at face value, ErskineSmith asked, “shouldn't we expect a negative impact on affordability of telecommunication services in this country if this deal goes through?”
Shaw CEO Brad Shaw said that “the combination with a stronger competitor in Canada will drive value and choice and innovation, new services.”
“Do you think the lack of a competitor will drive lower prices?” Erskine-Smith asked.
Shaw responded that the combined company will be focused on growing market share.
“I think with that you're going to continue to make sure you do the right things to provide that choice and to provide that value. We're not about to sit there and go, well, how do we raise prices to take less market share?”
Shaw president Paul McAleese said that “as much as I would love to be able to ... suggest to you that Freedom has been solely responsible, the truth of the matter is that all carriers have had a significant role” in driving down prices.
“You are contradicting yourself in the sense that you said that a fourth competitor has forced the big three to lower prices, and now you're downplaying the importance of the fourth competitor in the delivery of low prices to customers,” Conservative jobs and industry critic Pierre Poilievre said.
Poilievre repeatedly asked McAleese whether he believes a fourth player reduces prices.
“I believe a dynamic competitive environment reduces prices,” McAleese said. “It's all situational.”
McAleese also said that those comments were made in context of arguing in favour of facilities-based competition.
But the company has made them elsewhere over the years; on a June 2019 investor call Shaw himself said that it's “absolutely clear” wireless prices are falling and that Freedom is the “catalyst” for this change, while McAleese said Freedom's impact on wireless affordability was “indisputable.”
At committee, company executives repeated their promises to, if the deal is approved, spend $2.5 billion to build a 5G network in Western Canada and $1 billion for expanding broadband to rural, remote and Indigenous areas of the four western provinces. Rogers previously refused to answer whether those amounts are new money that will be spent on top of what the companies had already planned to spend for those purposes or if those figures had already been allocated regardless of the merger.
Rogers' CEO Joe Natale said Monday the $1 billion “is completely incremental to what we would have done otherwise.”
Both Rogers and Shaw confirmed they would continue their already-begun investments in 5G after the merger.
The companies both have wireline networks and traditionally offered cable TV service in different areas of the country; Shaw in the western provinces and Rogers in the east. The only significant service with which they compete for customers is wireless, in Ontario, Alberta and B.C.
Liberal MP Majid Jowhari asked Natale whether the merger is necessary “because neither of you are increasing your future investment. You're just combining it to accelerate.”
Natale responded that the merger would mean “we can do more. Together, we can go further and go faster.”
In response to a question about Shaw's investment, McAleese gave the example of fixed wireless service in rural and remote B.C. and Alberta, which Shaw doesn't have the spectrum holdings to offer.
“The advantage of this synergistic marriage is that we are able to then go to those communities with the product and do so in a very rapid way,” McAleese said.