Industry Committee on March 29th, 2021

[Joe Natale]

That will continue, and in fact grow going forward. The billion-dollar fund that we're creating, aimed at rural and indigenous communities in western Canada, is completely incremental to what we would have done otherwise.

[Majid Jowhari, Liberal, Richmond Hill, ON]

So none of these investments—

[Joe Natale]

As to our ability with 5G in the west, with Shaw and Rogers together we can go further and we can go faster in 5G, right into rural Canada. It would not have been the case with either alone. A lot of that is incremental to what we could have done on our own.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Let's go to Mr. Shaw.

Mr. Shaw, I'll ask you the same question. How much were you planning to invest in what area, and will it stop or continue as a result of this merger?

[Brad Shaw]

I'm going to have Paul start, and then maybe I'll add a few comments.

[Paul McAleese, President, Shaw Communications Inc.]

Thank you, Brad.

We spend about a billion dollars a year in capital. About $300 million of that is in wireless, and $700 million is in our wireline business, which of course is exclusively in the west. Those investments will continue, but as Joe pointed out, there are opportunities [Technical difficulty—Editor] that Shaw would not be able to take advantage of.

The best example of that is probably the rural and remote areas in B.C. and Alberta that are currently being served by fixed wireless, an asset that relies on a series of spectrum bands. This is a collection or portfolio of spectrum that we simply don't have today. The 25-year head start that the incumbents have had on this means that, while we have participated in the recent auctions, we simply don't have the depth of spectrum to be able to provide that product to rural and remote B.C. and Alberta. What that means for many of those communities is that they simply have one carrier, a simple monopoly.

The advantage of this synergistic marriage is that we are able to go to those communities with a product and do so in a very rapid way to give them choice in the market [Technical difficulty—Editor]. We also believe that with the benefit of the combination, we'll be able to reach communities that otherwise would not have been served.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Mr. Shaw, do you want to add anything?

[Brad Shaw]

I would add that the combined company can accelerate investment far beyond what each of us could do on our own, and I think that's really one of the exciting stories here. As we know, in the vast country of Canada, we can't get to every rural and remote community. I think this will provide choice and competition that we wouldn't see otherwise.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Do we really need a merger to make sure that the two organizations are able to align their investments?

Mr. Natale, do we really need this merger to ensure that both investments are aligned? Neither of you is increasing your future investments; you're just combining them to accelerate. Why do we need the merger?

[Joe Natale]

It's because together we can do more. Together we can go further and faster. This is a business of scale. This is a business where we spend capital that has a 10-year payback or more, and every day we make decisions about where to put that capital.

This is an opportunity to take the breadth and depth of Shaw's fibre network in the west, combine it with our wireless capability in the west and bring that together to create the best of both worlds. Therefore, for every incremental dollar we spend, the three plus the one can do even more incredible things, mainly aimed at rural Canada and 5G. This is important at this point in time because we're about to make the biggest investment in a generation: $26 billion will be spent in Canada to deliver 5G.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Mr. Lemire, you have six minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

My question is for Mr. Natale.

You say it is too early to tell whether the companies will have to cut out some of their activities if they want to get approval from federal regulatory authorities.

If Rogers gets permission to maintain all of Shaw's activities as well as its own, how would that benefit free competition? How would that promote accessibility let alone the affordability of telecommunications services?

[Joe Natale]

Over the course of the next 12 months, we'll be going through three different regulatory processes: the Competition Bureau, to look at the question of competition; the CRTC, to look at the question around licence transfers; and ISED, to look at the question of spectrum of all sorts, set-asides and otherwise.

The Competition Bureau and the CRTC are both public consultations that involve an opportunity for any Canadian to voice their thoughts and views, and through a considered process an outcome will be achieved.

It's hard for me to sit here and speculate a few weeks into the announcement as to how any one of those processes may end up. It'll take the better part of nine to 12 months to get to a conclusion. I will tell you one thing, though. We're going to approach it from the point of view of being thoughtful, being collaborative, and looking at how we solve some of the broader problems that exist within the telecommunications industry.

Two million Canadians don't have access to good Internet services; some have none at all. We have an opportunity to change the affordability equation with our Connected for Success program and doubling that to the entire country where we serve our customers with Internet.

We have a chance to lead the world in 5G. Canada has done well to lead the world in 4G, but here we go again: 5G is a huge investment; 5G will cost 70% more than it did to deliver 4G, and 5G will be at the heart of everything we do in this country, whether it's a small business or all aspects of business as a whole, to deliver that competitiveness.

Together, these capabilities will make a difference. I believe that scale matters, and the ability to bring two teams together with two balance sheets and two capabilities will allow Canada to lead in the future of a digital economy.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you for your answer.

This transaction would allow you to become an even more powerful player in the telecommunications industry. In that context, is the idea of you gaining a foothold in Quebec, where Rogers has very little presence, part of your strategic planning?

I will give you an anecdote. I thought Shaw was nothing more than a satellite television provider. When I was researching this transaction, I discovered the scope of Shaw's activities in western Canada. Obviously these activities could also occur in Quebec.

[Joe Natale]

Quebec is a very important home and province for us at Rogers.

We have 3,000 employees and two million customers in Quebec. Quebec was the home of Fido. The Fido team, headquartered in Quebec, now serves Canadians across the country. All the executive functions around Fido support their business on a national basis out of Quebec.

We'll continue to drive the capabilities that deliver 5G and continue to drive opportunities to extend and make the network better in Quebec, as the demands increase as a whole. Quebec is a very important place for us, as I said, with 3,000 team members who call Quebec home. We are an active member of the community, and it's a place where we intend to grow as well.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you for your answer.

The economist Vincent Geloso said that it was not very likely that another Canadian company will enter the Rogers market and compete with it, especially in western Canada, given the massive investment that would be needed to set up telecommunications cables. What do you make of that?

[Joe Natale]

I'm not sure of the reference to the point, but I would say to you that.... Canada is a wonderful country. We're blessed with a lot of national resources and capabilities, but Canada is one of the most difficult countries in the world to cover with network technology.

Across five time zones, we have the second-largest geography on the planet; we have one of the lowest population densities on the planet. Geography and population density are at the heart of what it takes to develop the types of networks we have in this country. Through the regulatory environment over the last many decades, we've been able to achieve a place where we have some of the best 4G networks in the world. We're ranked number one or number two on a regular basis.

We have some of the best home Internet networks in the world; we're ranked number one or number two on a regular basis. In fact, during COVID our numbers performed better than almost every other network in the world.

At the heart of it is the ability to invest a little at a time, every year over decades, so we can reach the far corners of this immense country and serve all Canadians with that capability. That takes a huge commitment, a huge scale, and a lot of money.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you.

Our next round of questions goes to MP Masse.

You have the floor for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

Thank you to our witnesses for being here today. I've worked with some of you over the years, and I appreciate that relationship. There have been lots of positive things that have taken place in the industry, and some challenges as well.

In the presentation that you provided, though, you promised increasing jobs, new investment, lower prices and reaching markets that you wouldn't before, be they aboriginal or be they rural and remote. These are promises that would make a robber baron blush. There are certainly aspects that would indicate some positive attributes, but at the same time, how do you fulfill your plan of efficiencies if you're going in the exact opposite direction of your business plans that you employ right now?

[Joe Natale]

Why don't I start, Mr. Masse? Then I would ask maybe Mr. Prevost to comment as well on this topic.

As you would imagine, we've spent a lot of time looking at how two plus two equals five as we bring the two organizations together. At the heart of it is the fact that we both spend a lot of capital on networks and capabilities. By making that capital expenditure complementary versus duplicative, we can go further and go faster. That's at the heart of the synergy. If we're both busy building networks on top of each other in certain parts of Canada, when we bring the two companies together, we can take a portion of one of our networks to be the network for the combined business, and then we can take the money we would have spent on the duplicative network and extend further and faster into rural Canada. That, by definition, creates jobs and that, by definition, makes us a greater competitive force because we have that ability.

[Brian Masse, NDP, Windsor West, ON]

I appreciate that. I guess I'm not seeing how eliminating a competitor is going to be advantageous in the long run for competition. That's a big issue for me.

With that in mind, with the spectrum auction—I want to make sure this is clear—are you saying that you would keep the Shaw/Freedom Mobile carve-out they got as part of your business operations? I want to ensure that's not going to be spun off as part of your plan to put this to regulators right now. You're going to keep that. Is that correct, yes or no?

[Joe Natale]

Mr. Masse, unfortunately, there are very strict rules about what I can say regarding spectrum matters. We're in a very specific quiet period in advance of the upcoming spectrum auction.

What I can say is that we intend to engage openly and constructively with the regulators, including ISED, about every aspect of this merger, including spectrum.

Maybe I'll just leave it at that. At the end of the day, what we want to do is make sure that we have all the tools we need to continue to grow and develop the capability for Canadians and compete on a broader scale.

[Brian Masse, NDP, Windsor West, ON]

The problem is that this is a big fly in the soup of the next spectrum auction, because now we have undetermined plans about how to go about that.

I've been a big critic about the way Canada has done this. We've acquired about $22 billion in spectrum auctions without requiring some of it to be used, as opposed to what I would prefer, which is to see lower amounts coming in for the spectrum auction, but higher accountability to lower prices to reach Canadians so you don't have to come up with the capital and do the borrowing that's necessary there.

In your submission right now, you're saying that you would freeze prices for customers, I believe under Freedom Mobile, for three years. Would you freeze prices for your other current Rogers customers as well? Also, I believe data cap was mentioned as well. Are those going to be preserved at the lower end of your plans? Can you comment on anything about those elements?

[Joe Natale]

First of all, I think it's important to acknowledge that prices have been coming down in Canada for the last many, many years.