Granthshala editorial: Is the Rogers-Shaw deal good for Canadians?

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On Monday in Gatineau, across the river from Parliament Hill, the descendants of two cable fortunes tried to make the case for why their companies needed to merge their television, Internet and mobile phone businesses.

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Toronto-based Rogers announced in March a $26 billion bid to buy Calgary-based Shaw. Both companies started in cable TV. In the 1990s, founders Ted Rogers and JR Shaw struck a deal to split the country into two, Shaw to the west, Rogers to the east. Both companies expanded into the regional Internet, and Rogers built a national mobile phone business, a move Shaw made much later.

The Canadian Radio-television and Telecommunications Commission is hearing the merger this week. To begin, Edward Rogers (re-emerged from an internal family drama to take control of the company) and Brad Shaw invoke the work of their father over the years. And he stressed that current business realities – the rise of Netflix, the rise of 5G wireless – mean the two companies have to become one.

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The CRTC is one of three federal bodies that will assess the case of the deal. The only one holding a public hearing, the CRTC has a narrow focus — looking at whether Rogers can buy Shaw’s TV business.

The deal, if completed as proposed, would significantly change the competitive sector of Canada’s broadcast-telecommunications business. When it comes to cable, that’s the case with Rogers & Shaw. They haven’t really competed against each other for TV subscribers in a long time, and it’s true that many Canadians are unplugging their cable service in favor of Netflix and other streaming services.

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Rogers has 2.6 million TV subscribers. Shaw has two million. Bell has 2.7 million and Telus has 1.2 million. The combined Rogers-Shaw would reach No. 1, but the competitive dynamics for TV subscribers would not have changed that much – although there is a question for the CRTC as to whether Rogers-Shaw will have much of an impact on content.

The biggest issue in the merger is the mobile phone business. It is the main focus of two other major reviews: the Competition Bureau is one; Ottawa’s Ministry of Innovation Second. The latter will weigh in on the transfer of the spectrum license from Shaw to Rogers. The area over which wireless services are transmitted is the currency of the mobile phone sector.

Canadians have always, and rightly so, complained about expensive mobile phone bills. Their anger surfaced in 2019, when it became a federal election issue and the CRTC suggested that “further action is needed” to promote better competition and prices.

Policy has changed dramatically since then. The federal government focused on building networks away from prices – expanding Internet service in rural Canada and 5G wireless. Meanwhile, the CRTC withdrew. Its decision this year regarding wireless networks was favorable to senior officials.

At the same time — the following isn’t a typo — wireless prices have dropped. According to Ottawa’s tally, the cost of a modest six-gigabyte plan has dropped 25 percent to $45 per month in Ontario, British Columbia and Alberta since the beginning of 2020. Beefy 20GB plans are going for $80 per month. In this year of inflation statistics canada report that consumer prices for cellular services declined 11.4 percent in October from a year earlier.

The reason is competition. Rogers, Bell and Telus all have more than 11 million wireless customers. Shaw, with its discount Freedom mobile brand, is in fourth place with 2.1 million, but Competition Bureau research has shown that the fourth competitor only needs a foothold to make a big difference in low prices.

Canada is hungry for more wireless competition. Ottawa and CRTC have tried to promote a strong No. 4 over the years. Various upstarts failed. To see Rogers, market No. 1, clearly trying to capture No. 4 makes no sense. Some analysts suggest that Rogers would likely sell Shaw’s Freedom Mobile in order to approve the acquisition.

Canadians still pay high mobile phone prices, even though they have come down. Maintaining a solid fourth competitor in Canada’s wireless industry has been an elusive public policy goal. It won’t be decided at the CRTC this week – but it’s most at stake in the proposed Rogers-Shaw deal.

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