Industry Committee on March 29th, 2021

[The Chair, Liberal, Sherry Romanado]

Good morning, everyone.

I now call this meeting to order.

Welcome to meeting number 26 of the House of Commons Standing Committee on Industry, Science and Technology.

Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, 2021. The proceedings will be made available via the House of Commons website. Just so you are aware, the webcast will only show the person speaking rather than the entirety of the committee.

To ensure an orderly meeting, I'd like to outline a few rules to follow.

Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. You have the choice, at the bottom of your screen, of floor, English or French. Please select your preference.

Before speaking, please wait until I recognize you by name. I will remind you that all comments by members and witnesses should be addressed through the chair. When you are not speaking, your microphone should be on mute.

As is my normal practice, I will hold up a yellow card when you have 30 seconds left in your intervention, and a red card when your time for questions has expired. Please respect the time allocation so that I don't have to cut you off.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Friday, March 19, 2021, the committee is meeting today to start a study on the proposed acquisition of Shaw by Rogers.

I'd like to now welcome our witnesses. From Rogers Communications, we have Joe Natale, president and chief executive officer; Dean Prevost, president, connected home and Rogers for business; and Victoria Smith, director of community partnerships, network expansion.

From Shaw Communications, we have Brad Shaw, executive chair and chief executive officer; Paul McAleese, president; and Chima Nkemdirim, vice-president, government relations.

Each witness will present for up to six minutes, followed by rounds of questions. We will try our best today to complete four rounds of questions.

With that, I invite Rogers Communications to present.

You have the floor for six minutes.

[Joe Natale, President and Chief Executive Officer, Rogers Communications Inc.]

Thank you.

Hello everyone.

Good morning, Madam Chair and members of the committee.

My name is Joe Natale, and I am president and CEO of Rogers Communications.

Thank you for giving me the opportunity to speak to you today.

I am joined by Dean Prevost, president, connected home and Rogers for business; and Victoria Smith, director of community partnerships.

As members know, on March 15 we announced the proposed union of Rogers and Shaw. Both companies were founded more than 50 years ago by two of Canada's greatest entrepreneurs, Ted Rogers and JR Shaw. They were pioneers who shared a commitment to innovation and to building a better Canada.

Today I am proud to say that these commitments are deeply reflected in the cultures of both companies. Canada's networks are among the world's best, a fact that has served us well during the pandemic, as Canadians and businesses were able to quickly pivot to an online world.

We didn't get there by accident. It is a result of billions of dollars of investment from Rogers, our industry, and government partners.

Canada must take the next step now to secure our position as a global technology leader and to ensure our long-term economic competitiveness.

The time has come to move on to the next stage.

That requires a new multi-billion dollar generational investment.

Today, Rogers and Shaw are committed to building this future for Canadians. By coming together, we will accelerate the delivery of critical 5G service and create a new coast-to-coast Internet provider, combining Rogers' and Shaw's operational expertise and quality assets. This will increase competition and continue the current downward trend in prices, while network performance capabilities and coverage will dramatically improve. A recent study using StatsCan data showed that wireless prices have dropped 25% since 2016. The broader rollout of 5G networks will continue this positive trend.

The combined company, with our complementary networks, will deliver 5G services much more quickly and more widely than either company could achieve on its own. The new national fibre network will enable stronger competition and greater scale for large enterprise and government customers, which is needed for Canada’s competitive position. Upgrading our digital infrastructure and accelerating digitization is critical for us to remain competitive. It will create jobs, diversify our economy, strengthen our innovation sector and fuel Canada’s economic recovery.

Investment in Canada will increase through this combination. It has to. In order to keep pace with consumer, educational and business demand for speed and capacity, the pace for investment is accelerating. Today, both companies invest billions of dollars annually in our networks, and the underlying investment in 5G will only go higher as this technology continues to roll out across the country. This is a big task for both companies, but the combined company will be up for the challenge.

This transaction comes at a critical time for the west. As part of the transaction, Rogers is committing to investing $2.5 billion to build 5G networks in western Canada, which will enhance western competitiveness, offer consumers and businesses more choice and improved services, and help close the digital divide between urban and rural communities faster. These investments will create up to 3,000 net new jobs across western Canada, including 500 jobs at a new national centre of technology and engineering excellence in Calgary.

Today, there are two million households in Canada that don’t have access to high-speed Internet. As part of our growing investments, Rogers will commit an additional $1 billion to create the new Rogers rural and indigenous connectivity fund dedicated to connecting underserved communities across western Canada. The opportunity to learn online or participate in the digital economy should not be decided by your postal code. As part of this process, we will consult with indigenous communities to help create new indigenous-owned and operated Internet service providers to leverage our expanded networks and create sustainable local connectivity solutions.

Finally, we will extend our Connected for Success program nationally, delivering low-cost, high-speed broadband to low-income Canadians, including seniors receiving guaranteed income supplements, residents in rent-geared-to-income housing and individuals receiving disability benefits anywhere our combined company offers Internet services.

In summary, we are committed to doing our part to set the table for future generations of Canadians and prepare us for our digital future. The transaction comes at a significant inflection point for Canada and is critical to enabling the investments needed to make national 5G a reality and to close the digital divide.

Together we will build a better Canada.

Thank you for your time.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We'll now turn to Shaw Communications.

Mr. Shaw, you have the floor for six minutes.

[Brad Shaw, Executive Chair and Chief Executive Officer, Shaw Communications Inc.]

Thank you so much.

Good morning, Madam Chair and committee members.

My name is Brad Shaw. I am executive chair and CEO of Shaw Communications. I am joined by Paul McAleese, our president, and Chima Nkemdirim, our vice-president of government relations.

We are pleased to be here today to discuss Shaw joining with Rogers to build a bright and bold future for Canada. In 1971, my dad staked his future on bringing a new cable TV service to a small community near where I was born—Sherwood Park, Alberta—so our neighbours could have real choice in what they watched on TV. I will just let you know that we did start with three channels when we launched our service, so we had a lot of choice there.

Since then, our customers have been the guiding force for our family, our board, and our dedicated team of employees. Our customers are also the guiding force behind the transaction we're talking about here today. Shaw has passionately provided Canadians with cable and satellite TV, phone, Internet and, more recently, wireless services. That passion has been backed by tens of billions of dollars of wireline and satellite investment over the past five decades, and over $7 billion of wireless investment over the past five years.

We are incredibly proud of what we have built and how we have connected Canadians. However, as we look ahead, we see our economy and country at a turning point. We need a new approach. We have to address the scale needed to build the networks of the future. In order for Canada to compete in the digital era, all Canadians, regardless of where they live, need connectivity that leads the world in coverage, resilience, and innovation. This is critical for economic and job growth, as well as for long-term access to the best and most affordable options for consumers and businesses.

Canada's future success depends on a forward-looking approach to connectivity. We need to bridge the digital divide to connect underserved rural and indigenous communities in the west, but we also need to build out a new 5G platform. This is an investment challenge of unprecedented scale. We cannot look backwards, as we might have worked in the past. As we look forward, it is clear that Shaw cannot build what Canada needs on our own. By joining forces with Rogers, I am confident that we can create something extraordinary for Canada.

Over the past several decades, Shaw and Rogers have built powerful cable networks using similar technologies in distinct geographies: Shaw in B.C., Alberta, Saskatchewan, Manitoba and northern Ontario; and Rogers in Ontario, New Brunswick and Newfoundland. Joining these networks through this [Technical difficulty—Editor] provider with the scale necessary to invest in the next generation of converged networks that we need for our future and Canada's future.

This transaction will drive higher levels of investment across the country, but especially in those parts [Technical difficulty—Editor] economically. Combining our companies' unique complement of wireline, satellite, wireless and Wi-Fi assets kick-starts the investment and innovation we need to accelerate and expand to reach 5G and other next-generation networks in the west.

On top of that, the transaction will combine two incredibly talented teams of people. Together, we will be able to compete more effectively and deliver so much more to Canadians than we could if we stayed apart. Competition will intensify, with Shaw and Rogers now able to leverage a national platform. In fact, in recent days, we have already seen certain of our competitors going to the capital markets to raise money to accelerate investment in broadband and 5G.

The entrepreneurial spirit that defines the west is firmly rooted in my family, and in our company's DNA. As we were considering this step, it was very important to me and my family that the combined company have a strong presence and commitment to the west and to Calgary. This commitment is [Technical difficulty—Editor] very early on in this process.

For over 50 years in this business, we have cherished every customer we've had. Combining with Rogers is the best path to ensure that my family's legacy continues to benefit our customers, our employees and communities for decades to come. Every Canadian will benefit from the better, broader and more competitive connectivity that our combined company can provide, especially in underserved communities.

Just as we are so proud of what our company employees have built, we are equally proud to join forces with Rogers. This is a natural, logical step forward for our company, our employees, our customers and our country as a whole. We cannot wait to start building for the future together.

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We'll now begin our round of questions. Our first round of questions is a six-minute round. We'll start with MP Poilievre.

You have the floor for six minutes.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you, witnesses.

I'd like to begin with Mr. Shaw. First of all, thank you to your family for all you've contributed to Canada and in particular to my province of birth, Alberta, where you, your father and your extended family are legendary.

This is obviously a big development for the industry. I'd like to go through some of the specifics.

First of all, Shaw exercised its right to purchase a discounted spectrum that was set aside in order to promote additional competition. It's a spectrum that is only available to providers other than the big three, which are Telus, Bell and Rogers. The combined entity, which includes Rogers through this union, would then presumably own that spectrum.

What do you propose to do to remedy the fact that the spectrum became the property of Shaw through a set-aside that was supposed to exclude Rogers, but now, under this proposed union, Rogers would possess it?

[Brad Shaw]

Thank you for the question.

I'll comment, and maybe Joe wants to add to this.

We sold a lot of assets in media and in data centres and spent about $6 billion in 2017 to get into wireless. We've spent over $7 billion the last five years, which has certainly shown our commitment to make sure we were delivering value and choice to Canadians. I think we've actually shown that we have done that.

As we look at this, it is about the future, where we're going and the networks we need to build. Even though we think Shaw has the scale and size to be able to deliver that, we really believe that accelerating investment and providing choice and competition is critically important for Canadians.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you, Mr. Shaw.

Are you proposing that the unified enterprise of Rogers and Shaw would continue to own this discounted spectrum, or would it be spun off to another, smaller competitor in order to preserve choice in the marketplace?

[Chima Nkemdirim, Vice-President, Government Relations, Shaw Communications Inc.]

I want to point out that there's a very robust regulatory process where ISED will review the transaction and there will be a determination of what should happen with the spectrum.

[Pierre Poilievre, Conservative, Carleton, ON]

Excuse me, that wasn't my question.

Mr. Shaw, is it your intention that the spectrum would remain part of the unified enterprise, or would it be spun off to preserve competition?

[Brad Shaw]

When you look at the two companies coming together, I think it's very important to be able to look at the services, products and opportunities to offer. I truly believe that with these two companies coming together and with the investments that are going to be made, there will be as much competition in the future as there has been in the past.

That's the opportunity here. That's what it will provide for Canadians, especially in western Canada.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you, Mr. Shaw.

You mentioned that your company is invested in satellite. Some believe that the future of wireless communications is satellite rather than fibre. Can you comment on whether you are a believer in that view? If so, what do you think the time frame is for that kind of a transition?

[Brad Shaw]

Well, listen, I think there's going to be a variety of choice for consumers across, whether it's rural or more urban. Certainly when I look at it, we built a television network with Shaw Direct, not a satellite two-way, but there is an opportunity for many providers, I think, many choices and many competitors in the market.

Certainly, as we look forward, we have an opportunity to grow and build with 5G and expand into rural and remote, but I also think that.... Listen, we love competition, and we love driving choice and innovation. That's what we're here for, those investments. I think there will be a variety of providers as we go forward and, hopefully, we're one that people choose to do service with.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

Madam Chair, how much time do I have?

[The Chair, Liberal, Sherry Romanado]

You have one and a half minutes.

[Pierre Poilievre, Conservative, Carleton, ON]

The Department of Innovation, Science and Economic Development had a 2019 report prepared for it called “Price Comparisons of Wireline, Wireless and Internet Services in Canada”. On page 6, under “International Comparison”, it says, “Canada has the highest or second highest [purchasing power parity]-adjusted prices in all five Level baskets. Prices in France, the UK and Italy are noticeably lower than most other countries.”

I'd like to get a comment from anyone, either Shaw or Rogers, about why you think the prices in Canada are higher than the average of our peer group.

[Joe Natale]

Mr. Poilievre, let me say first of all that the Canadian market is intensely competitive. Prices have been coming down dramatically over the last number of years. Just in the last 12 months alone, according to Stats Canada [Technical difficulty—Editor]. Going back five years, data prices in Canada have dropped 50%.

If you look at the OECD reports that have been published for the 37 member countries and at the CRTC monitoring report and the Wall report put out by ISED, you see that they all come to the same or similar conclusion, which is that Canadian prices, when you look at value received, are roughly in the middle of the pack, which is quite an accomplishment given that we're the second-largest country in the world, with a very low population density.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mr. Natale.

We will now go to our next round of questions.

MP Jowhari, you have the floor for six minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Madam Chair.

Welcome to all our witnesses today. Congratulations, Mr. Shaw, on becoming a grandfather.

I would like to focus on the investment. Can both Mr. Natale and Mr. Shaw give us an understanding of this? Prior to the merger, what types of investments were your organizations planning, specifically on making sure that we eliminate the digital divide? Also, as a result of this merger, what kinds of investments are planned going forward? As a result of this merger, by the time it goes to review, is there any halt in the investment that both organizations were planning?

Any of you may start.

[Joe Natale]

Why don't I begin?

First of all, it's important to understand that in Canada we have two million households that have insufficient, inadequate or no high-speed Internet. In western Canada, that's about 600,000 households. There have been many efforts afoot for the last many years to try to close that divide.

The challenge is strictly one of economics. To connect a home in urban Canada costs about $3,500. To connect a home in suburban Canada may cost about $5,000 to $10,000. To connect a home in rural Canada can cost $15,000 to $100,000.

We've been working very closely with all different orders of government, whether it's with the universal broadband fund or the CRTC fund, and with all the different avenues to put our dollars to work with other government dollars to try to close that gap. We have an obligation to close that gap.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Yes.

[Joe Natale]

If there's one thing that COVID has taught us, it's that these services are essential and critical to the future of our country.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Natale.

I'm trying to be very specific. Prior to this merger, what types of investments were you planning going forward?

[Joe Natale]

We spend somewhere in the neighbourhood of $2.5 million to $3 million a year on investing in capital, network and infrastructure—

[Majid Jowhari, Liberal, Richmond Hill, ON]

Is it fair to say that this will continue going forward?