With wireless phone plan prices soaring and the Big 3 already controlling 86% of the market, should the largest telecom company in wireless (Rogers) be allowed to buy the bulk of the fourth (Shaw)?
If we have the interests of consumers at heart, the answer is obvious: no.
Yet that is what is likely to happen, as the Competition Tribunal last week approved the purchase of Shaw by Rogers. The Competition Bureau has appealed this decision, which shows that Canadian competition laws do not protect consumers well.
The federal competition commissioner, Matthew Boswell, does well to stand up straight on this file, even if his chances on appeal are slim.
The Trudeau government, which must also approve the transaction, wants to review the Tribunal’s decision. Ottawa telegraphed its intentions a few months ago: it would lean towards a yes, under certain conditions.
However, Ottawa would be making a mistake if it let Rogers buy Shaw.
Fortunately, the worst-case scenario – one where Rogers buys Shaw in full – has been avoided. To convince the Competition Bureau and the Trudeau government, Rogers agreed to sell part of Shaw’s wireless business (Freedom Mobile) to Quebecor, a formidable telecom operator in Quebec.
Except that Rogers would retain wireless customers who have multiple services with Shaw (Shaw Mobile), often the most profitable customers. Rogers is disposing of assets of 2.85 billion (Freedom Mobile, sold to Quebecor) on a transaction of 26 billion.
Canada is one of the G7 countries with the highest wireless plan prices. It’s a lot because of the Rogers-Bell-Telus oligopoly.
However, the Competition Tribunal concludes without laughing that the purchase of Shaw by Rogers will not “significantly” reduce competition in wireless telephony (this is the criterion in the law). You have to live on another planet to believe that. In wireless telephony, a strong fourth player helps to reduce prices. We have proof of this in Quebec (with Quebecor) and in Europe.
How can the Court come to the conclusion that the most important player in a powerful oligopoly can easily buy the fourth player? Because our competition laws are outdated, weak, and poorly protect consumer interests. To the point where the Competition Tribunal has never blocked an entire transaction.
The Trudeau government, which is currently holding consultations to review our competition laws, has a lot of work to do.
The Rogers-Shaw case demonstrates the overly permissive nature of our competition laws. The United States refused to allow its fourth telecom player (T-Mobile) to be bought by number one (AT&T).
In Canada, the purchase of the fourth actor by the number one is going almost like butter in the pan. Because our legal framework is outdated.
The Trudeau government seems favorable to the transaction if Quebecor commits for 10 years in English Canada and if prices in English Canada fall by 20%, to reach those of Quebec.
This is all political theater to save face. How do you expect Quebecor to guarantee that prices would drop by 20% elsewhere in the country? And if that doesn’t work, what would Ottawa do? Its main lever would be to withdraw Quebecor’s wireless licenses in the West, but that would further reduce competition. Ottawa is bluffing, and everyone knows it.
Quebecor has the capacity and the expertise to become the fourth national player that has been awaited for more than a decade. That is not the question.
The problem is that Ottawa must not let the fourth player in Western Canada disappear hoping that a smaller competitor in the short term will take its place. Especially since Shaw is in excellent financial health, as evidenced by its adjusted profit margin of 47% in 2022. “Shaw is better placed than Videotron to be the fourth player who would have an effect on prices,” says Pierre Larouche, professor of competition law at the University of Montreal.
Once we let Rogers get most of Shaw, we can’t put the toothpaste back in the tube.