Industry Committee on March 31st, 2021

[The Chair, Liberal, Sherry Romanado]

Good afternoon, everyone.

I call this meeting to order. Welcome to meeting number 27 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 that 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 the regular rules.

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 the floor, English or French. Please select the language of your choice. Before speaking, please wait until I recognize you by name, and when you are not speaking please make sure your microphone is on mute. I remind everyone that all comments by members and witnesses should be addressed through the chair.

As is my normal practice, I will hold up a yellow card when you have 30 seconds remaining in your intervention and the red card when your time for questions has expired. As we have a tight schedule today, I ask that you to please respect the time limits so that everyone can have a chance to have their questions heard.

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

I'd like to welcome our witnesses now.

We now welcome Mr. Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor Media, and Mr. Jean-François Pruneau, President and Chief Executive Officer of Videotron.

From the Canadian Communication Systems Alliance, we have Mr. Jay Thomson, chief executive officer. I will introduce our second panel when they join at 3:30.

Each witness will present for up to three minutes, followed by a round of questions. I understand that Monsieur Péladeau will be taking the slot for Quebecor and Vidéotron, and they may share that time.

With that, I will turn the floor over to Monsieur Péladeau.

You have the floor for six minutes.

[Pierre Karl Péladeau, President and Chief Executive Officer, Quebecor Media Inc.]

Thank you, Madam Chair.

Good afternoon, ladies and gentlemen. My name is Pierre Karl Péladeau, and I am the President and Chief Executive Officer of Quebecor. With me is my colleague Jean-François Pruneau, President and Chief Executive Officer of Videotron.

The federal government, after acknowledging that there was no real competition in wireless and that Canada was among the industrialized countries with the highest prices for wireless services, diligently pursued a disciplined policy as of 2007, designed to enable a fourth wireless player to emerge and do business on a lasting basis; it was to have a sound foundation and its own facilities in all regions of the country. The conditions established when the auction of licences for advanced wireless services was held in 2008 achieved these objectives. Videotron in Quebec and Eastlink in the Maritime provinces became the linchpins of this successful policy.

Since 2008, we have invested over $2 billion to deliver the best networks and the most innovative services in Quebec. As a result, Quebeckers now have the lowest rates in Canada for wireless services, up to 40% lower than for other Canadians. That's not me saying it, but rather the CRTC's Competition Bureau. Not only does this promote better rates, but also better customer service. Everyone knows how little the Big 3 care about that.

All of this became possible when the federal government realized, about 15 years ago, that strong competition would never emerge on its own, and that concrete steps had to be taken to break the oligopoly of the Big 3. I have three measures in mind: reserved spectrum; mandatory tower sharing to prevent their proliferation and visual pollution, and to speed up the deployment of wireless; and mandated roaming.

Not everything was as successful, and Canada had to live through the Wind Mobile fiasco, whose financing by foreigners was not aimed at building a network, but rather pure speculation. In the meantime, two newcomers, Public Mobile and Mobilicity, were swallowed up. Wind Mobile eventually received some solid support from Shaw, which demonstrated that it was perfectly capable of taking on the Big 3 in Ontario and Western Canada.

Rogers' proposed acquisition of Shaw would put us back to square one by eliminating the fourth player so essential to ongoing real competition.

You, the members, and the various regulatory organizations, need to ask the following question: do consumers in other provinces deserve to have the same experience as consumers in Quebec and the Maritime provinces, meaning being able to purchase their services from a trusted and innovative supplier like Videotron, which is not a member of the Big 3's oligopoly.

One thing is certain, and that is that the dramatic consequences that led to the abandonment of the policy promoting genuine competition cannot be countered by mobile virtual network operators, usually referred to as MVNOs in our jargon, entities which only exist through their access to networks operated by others. MVNOs, which are essentially service resellers, will never have the same market influence as suppliers that have their own infrastructure, because they don't really have the means to innovate. I say this on the basis of our own experience, because Videotron was itself an MVNO prior to 2010. Clearly, the model does not provide the attributes and flexibility needed to compete with the Big 3 oligopoly, which controls over 90% of Canada's wireless market.

So if we want sustainable competition that benefits consumers over the long term, it's essential not only to maintain and strengthen the competition model based on facilities, but also to continue with the fourth-player policy for wireless.

Rogers and Shaw told you that 5G investments justified market concentration. This is a rather surprising statement, because as recently as last September, Shaw wrote to this committee to say that the Big 3’s arguments are “a transparent and desperate attempt to thwart further competitive entry and expansion by regional competitors like Shaw, in order to maintain and further entrench their joint dominance in the 5G era.” This is only a very short excerpt from the brief tabled by Shaw on December 18.

To conclude, we're asking you to have the courage to subject the main transaction, that of the wired networks group, to the disposal of Freedom Mobile's assets by including the conditions required for the effective operation of a wireless network, which are spectrum ownership, roaming agreements, tower sharing and an equitable agreement for use of the wired network, known as backhaul.

Thank you for your attention.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mr. Péladeau.

We'll now turn to Mr. Thomson.

You have the floor for three minutes.

[Jay Thomson, Chief Executive Officer, Canadian Communication Systems Alliance]

Thank you, Madam Chair and members of the committee.

I'm Jay Thomson, CEO of the Canadian Communication Systems Alliance, CCSA.

CCSA represents independent communication companies that provide bundled TV, Internet and telephone services to Canadians mostly living in smaller communities and rural areas.

The Rogers and Shaw families are long-standing industry colleagues, and we regard the companies they have built with the greatest respect. Nevertheless, we fear that the Rogers-Shaw deal has the real potential to make some already bad things worse, both in broadcasting and in telecom.

Last week, we appeared before the heritage committee for its study of Bill C-10, which would amend the Broadcasting Act. We highlighted that Rogers, as well as Bell and Quebecor, have already become so big and powerful that the CRTC has had to implement regulatory safeguards to preclude them from using their size to increase consumer costs and reduce choice. We advised the committee that those domestic communications giants have been using their size and influence to undermine the CRTC's consumer safeguards, and we warned that they will only increase those efforts if left unchecked. Regardless of this Rogers-Shaw deal, the CRTC's authority to establish and enforce its consumer safeguards must be confirmed and strengthened. With this deal, a giant will get bigger.

Rogers' cable and Internet subscribers will roughly double in size. That will double the guaranteed cable subscribers to Rogers' TV services, like Sportsnet, at its own preferred rates. Absent the CRTC's safeguards, Rogers could then use its expanded cable size to squeeze smaller cable companies for higher carriage rates for its services, as well as for other concessions, resulting in higher prices and less choice for rural Canadians.

Further, absent the CRTC's safeguards, Rogers could use its expanded Internet size to favour itself with exclusive access arrangements for its online sports service, Sportsnet Now. What will ultimately happen with the numerous Corus TV services now owned by the Shaw family? No one knows.

Should the big get bigger, it will only increase the need to ensure that the CRTC has the authority to implement regulatory safeguards to protect consumers against the domestic giant. Safeguarding consumers where an industry is dominated by a few large players also comes through regulatory decisions that promote competition from other players. The most important of such decisions in these circumstances now becomes the CRTC's pending ruling on providing mobile competition to all of the dominant wireless providers through mobile virtual network operators, MVNOs. As with the other consumer safeguards, MVNO competition is needed regardless of this Rogers-Shaw deal, but even more so if the deal goes through.

I'll end on a positive note. As an industry committed to extending broadband to all Canadians wherever they live, we appreciate Rogers' commitment to a $1-billion broadband fund. However, the devil will be in the details as to whether it will actually accomplish its welcome goals, so more scrutiny is warranted.

Thank you again for this opportunity, and I look forward to responding to your questions.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mr. Thomson.

We'll now start our first six-minute round of questions.

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

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you very much, Madam Chair.

I'd like to thank Mr. Péladeau and Mr. Thomson for their presentations.

Mr. Péladeau, you have just candidly admitted that your company was once a parasite—that's the expression you used at our last meeting. Indeed, when you began in this field, you were one of the companies that made use of infrastructures owned by others. Since then, your company has become an extremely important player, particularly in Quebec, but also elsewhere in Canada.

At the end of your presentation, you said that this transaction should have a number of basic conditions, for example with respect to reserved spectrum and tower sharing. The Shaw and Rogers representatives did not want to go into the matter of spectrum any further, because spectrum licences should normally be assigned or sold between now and the end of June.

Can you tell us more about this particular transaction?

[Pierre Karl Péladeau]

Thank you for your question.

I think, however, that there's a significant difference. Even when we're talking about parasites, it's a matter of regulated rates. Back then, when the time was right for Videotron to enter the wireless telephony market, we had negotiated an agreement with Rogers, among others, to facilitate matters afterwards.

It's an interesting point to discuss. I'll be repeating approximately the same things I said earlier. In the 2008 auction, we exerted considerable pressure. We had been able to convince the late Jim Prentice, who was the minister of industry at the time, that these conditions were essential for there to be competition. Essentially, there were three important conditions, including spectrum. I'll talk about that one last, since you mentioned it already.

The first condition was mandated roaming. A network can't be built in a weekend. It takes years to build. So before you can rely on your own network, you have to rely on other people's networks. This is true of all international operators. For example, if you subscribe to Telus or someone else, when you are in the United States or in France, you are on the network of another operator and you have a roaming agreement. That's what was needed here in Canada for companies breaking into the market.

The second condition was power-sharing. Quite rightly, to avoid visual pollution created by a multitude of neighbouring towers, the legislator required operators to agree to install their antennas on a single infrastructure.

And now, the third…

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Excuse me for interrupting, Mr. Péladeau, but am I my wrong in saying that at the moment, in Quebec at least, Quebecor is not necessarily sharing all its towers with industry partners?

[Pierre Karl Péladeau]

We share some of our towers with other operators, including Rogers. In fact we have an agreement with Rogers, which we call Teamnet, just as Bell and Telus have an agreement together, which they call Bellus. We're going to continue with this arrangement. I presume that Shaw has a roaming agreement, and we hope that such an agreement will be one of the conditions for acquiring Shaw.

The third condition concerns spectrum. You are right to point this out, and I can only repeat what my industry colleagues, including Mr. Natale and Mr. Shaw, have said, which is that we can't comment in any way about the auctions to be held within a few weeks. However, if we want to have a solid fourth player, then we need to require, as one of the conditions for the transaction, the transfer of spectrum acquired by Shaw in previous auctions in order to be able to provide clients with quality service at extremely competitive prices.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Péladeau, your company has a very high profile in Quebec. But have you previously attempted to develop your operations in Western Canada?

It's true that in many instances, what's good for the goose is good for the gander. If the merger of these two big companies were not allowed, it might not be doing Shaw a favour, but it would be a good thing for Quebecor if it ever wanted to move to Western Canada and take over Shaw. If the merger were allowed, it would be the other way around.

[Pierre Karl Péladeau]

Mr. Généreux, we're talking about the acquisition of Shaw by Rogers here. As you probably know, Rogers is already an operator and is one of the Big 3, which is not the case for us. That's rather obvious to me.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I understand.

Madam Chair, do I have any speaking time left?

[The Chair, Liberal, Sherry Romanado]

You have 15 seconds.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I'll leave my time to the next witnesses.

Thank you, Mr. Péladeau.

[The Chair, Liberal, Sherry Romanado]

Our next round of questions will go to MP Lambropoulos.

You have the floor for six minutes.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you, Madam Chair.

Thank you to both of our witnesses for being here with us today.

My first question will go to Mr. Thomson.

You spoke about the importance of rural broadband and how, as much as the deal may not be ideal, you are glad to see that they are committing to make investments in rural broadband. You said that the devil is in the details.

I was hoping you could maybe give us a bit more on what you would think would be an acceptable deal. Obviously, you know that one of our government's priorities is connecting as many Canadians as possible in rural and indigenous communities. For years, I believe, the government's been trying to incentivize the companies to go there on their own and to try to get them to create the infrastructure needed. Obviously, this is seen as being a positive side to the deal.

Can you comment on that and give us some insight as to what you think?

[Jay Thomson]

We echo the importance of rolling out broadband in rural communities, and our members are doing just that, often with the help of the government programs that are in place, which are much needed. We welcome investment from anyone in rural broadband.

It's just that the starting point, for example, is that Rogers calls this a “broadband “fund. It's not a fund like the universal broadband fund, or the connecting Canadians program, or the connect to innovate funds, which are open to any provider eligible to apply. The funds have very clear rules on eligibility and the goals associated with it, as well as transparency in the process and auditing of the results at the end to make sure that they actually accomplish what the money was intended to do.

As far we know, we haven't heard any details in fact about the “Rogers fund”, as it's called, in that respect. It's money that Rogers has put forward as a commitment to sweeten the pot for this deal, but beyond that, they'll be in control of the money and we don't know necessarily where it will go and how its success will be measured.

One of the concerns we have is that while they suggested at the outset that the money would be going to 600,000 customers in western Canada who are unserved or underserved, on Monday when they appeared before you, they added the goal of serving communities that already have a provider. In underserved communities or smaller rural communities that already have a provider, it's typically because they've had access to help from the government funds.

What Rogers is now seeming to propose is that it's going to overbuild in communities where the government has already been in to support the building of broadband. That doesn't seem to us to be a good use of available resources and good public policy to be overbuilding against what taxpayers have supported building already.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you very much.

My next question goes to both witnesses.

What role do you think government organizations like the CRTC and the Competition Bureau should be playing in this transaction? How should they deal with the matter?

[Pierre Karl Péladeau]

Madam Chair, is the question for Mr. Thomson or for both of us?

Would you like to start, Jay? Do you have anything to say on this question?

[Jay Thomson]

Thank you.

I'll just say that the CRTC has a mandate that's established in the Broadcasting Act and its own legislation, and the Competition Bureau has its own similar but separate mandate, and they carry out their roles as assigned to them.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

I guess it's more about what you think they should be focusing on in particular before making a decision.

[Jay Thomson]

Quickly, if it's going to be of benefit to Canadian consumers in the end....

[Pierre Karl Péladeau]

I support and agree with what Jay's saying.

I'd like to also say that from an ISED perspective, it would also be important to make sure that the spectrum is well distributed, because it is a public asset, so that all operators will be in a position to provide a service of great quality. It needs to make sure there will not be a lack of spectrum for the new entrants, because these are the ones who didn't have the chance to enjoy being in business for the last 30 years, so they lack the same amount of spectrum that the incumbents are enjoying right now.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Mr. Péladeau, I'd like to clarify something. You mentioned that Quebec customers had lower rates than customers in the rest of Canada. Do you believe that this is attributable to the stiffer competition in Quebec, where more players can contribute?

Do you really think that this transaction would have a negative impact on Canadians in other provinces by weakening competition? What should be done about this?

How can we make sure that this transaction does not work against competition?

[Pierre Karl Péladeau]

Ms. Chair, may I answer?