The plan by Rogers Communications and Shaw Communications to sell the wireless telephone operator Freedom Mobile to Videotron would place the latter in a position of “serious vulnerability”, argued Tuesday a lawyer for the Competition Bureau.
“The sale would create an unprecedented relationship of dependence between a competitor of the (three major telecommunications players in the country) and Videotron, a much smaller regional player, and even much smaller than Shaw,” said John Tyhurst during a virtual hearing held Tuesday before the Competition Tribunal.
Mr. Tyhurst’s remarks made on behalf of the Competition Bureau were part of the final stage of arguments the agency will make before Competition Tribunal Chief Justice Paul Crampton at a hearing to decide whether Roger and Shaw will get approval for their $26 billion merger.
One of Mr. Tyhurst’s main arguments was that the possibility that Videotron, which operates mainly in Quebec and certain border towns in Ontario, could depend on the goodwill of Rogers should be enough, in itself, to prevent the sale of Shaw to Rogers.
Rogers and Shaw earlier this year offered to sell Freedom, which operates in Ontario and Western Canada, for $2.85 billion, hoping it would allay concerns from the Competition Bureau.
The organization believes that a merger of Rogers and Shaw would lead to higher mobile phone bills and a deterioration in the quality of service, but the two telecommunications operators disagree, and Shaw has even claimed that she had no way forward if the deal didn’t go through.
Mr. Tyhurst pointed out that the agreement signed in March 2021 would be accompanied by a complex network of 13 agreements reminiscent of the agreements regularly rejected by the competition lawas they often require future monitoring or regulation.
He argued that the web would make Videotron even more vulnerable to Rogers, while Videotron has already accused Rogers of “sabotage” its network sharing agreement in Quebec. Litigation is ongoing in this case.
Mr Tyhurst relied in part on comments by Nathan Miller, a Georgetown University professor who wrote a report opposing the deal.
“Mr. Miller’s argument was that this reliance would also likely increase the prospects for coordination, since Videotron would become more reluctant to compete vigorously for fear of reprisals in Quebec,” said Mr. Tyhurst.
Reliability of the wireless telephone network
The absorption of Shaw’s “competitive” offerings by Rogers will also hamper the telecommunications industry, which will see the number of separate networks in Western Canada drop from three to two, he pointed out.
A drop in the number of networks will mean less competition and less investment, Mr Tyhurst warned.
“This is particularly troubling given Rogers’ poor track record for network reliability,” he noted.
Those comments were in reference to a service outage suffered by Rogers on July 8, which saw millions of Canadians unable to make emergency calls to police, paramedics and firefighters.
Rogers was unable to switch customers to competing carriers, despite offers of support from Bell and Telus. It also was unable to shut down its radio access network, which would have automatically connected customers to another carrier for 911 calls.
The federal government has ordered Rogers and other telecommunications companies to develop a backup plan to prevent a similar disruption from happening again.
The outage came after the Competition Bureau announced it would oppose the deal, despite approval from the Canadian Radio-television and Telecommunications Commission (CRTC) in May.
In addition to the CRTC and the Competition Bureau, the agreement requires the approval of the Minister of Industry, François-Philippe Champagne.
To enlist his support, Minister Champagne said Videotron would have to agree to keep Freedom’s wireless licenses for at least 10 years and that he “expected to see” wireless prices in Ontario and the Western Canada decrease by approximately 20%, bringing them back to the level of Videotron’s current offers in Quebec.
Quebecor has indicated that it will accept these conditions.