Industry Committee on March 31st, 2021

[The Chair, Liberal, Sherry Romanado]

We will now resume.

Thank you so much to our three witnesses for being with us today.

From OpenMedia, we have Laura Tribe, executive director—it's a pleasure to see you again. From Public Interest Advocacy Centre, we have John Lawford, executive director and general counsel; and from TekSavvy Solutions, we Andy Kaplan-Myrth, vice-president, regulatory and carrier affairs.

Each witness will present for three minutes, followed by rounds of questions.

With that, we will start with Ms. Tribe.

You have the floor for three minutes.

[Laura Tribe, Executive Director, OpenMedia]

Good afternoon.

My name is Laura Tribe. I am the executive director of OpenMedia. I'm speaking to you today from Ottawa, as a guest on the traditional unceded territories of the Algonquin nation.

Today, as we discuss the fate of Canada's communication systems, I'd ask you to remember that indigenous peoples from all across the country are still working to access the Internet on their own terms, all while continuing to be amongst the most underserved in terms of Internet access, in many cases underserved by the companies we are here to discuss today.

This is the third time I've spoken before this committee in the past year. At the last two appearances, we discussed the critical need for action to bring affordable connectivity to everyone in Canada, especially during the pandemic. Unfortunately today, instead of talking about the progress we've made since, we're here to talk about a dramatic step backwards in that fight. I'll make it simple: Canadians can't afford this deal. You must oppose the sale of Shaw to Rogers.

You must oppose this deal if you care about affordable Internet access in Canada. You must oppose this deal if you care about bringing more choice and competition into Canada's cellphone markets, if you believe in improving customer service, if you believe in protecting jobs in western Canada, if you believe small and local providers deserve a chance. You must oppose this deal if you believe in bringing adequate connectivity to rural, remote and indigenous communities across Canada.

Big telecom is already too big. Canadians already have too few choices. We simply can't afford a massive step backwards.

Rogers filled its press release of the deal with promises for everything Canada wants: jobs, 5G, and rural, remote and indigenous connectivity. When Bell purchased MTS in 2016, we heard similar promises. We also saw similar results to what we'll see here: Prices went up, people were laid off and competition went down. Promises were broken.

As nice as Rogers' big promises might sound, there is absolutely no way to hold Rogers accountable. There are no guarantees of what will come if this deal is allowed to pass, except one: Canadians will suffer.

Almost 19,000 Canadians have already signed a petition opposing this deal. Stop letting big telecom hold Canadians hostage, desperate for whatever connectivity we can get. It's time to stand up to them, please.

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Ms. Tribe.

We will now go to Mr. Lawford.

You have the floor for three minutes.

[John Lawford, Executive Director and General Counsel, Public Interest Advocacy Centre]

Thank you, Chair and members of the committee.

The Public Interest Advocacy Centre has advocated for consumers for over 40 years in communications law and policy. This committee cannot stop Rogers from acquiring Shaw. Mergers are controlled by the Competition Act. The CRTC approves broadcasting distribution deals and ISED approves wireless spectrum transfers. What this committee can do is to help stop the next deal and to help stall this one until some regulation to support new competition has a chance to take hold.

If this committee is disturbed by hearings on this deal, you can recommend, and Parliament can enact, a key change to help stop the next merger: Repeal section 96 of the Competition Act, the so-called “efficiencies defence”.

The efficiencies defence is an embarrassment to Canada. No other economic peer country has this defence for corporations, effectively allowing them to merge even when competition is reduced. The efficiencies defence is a stand-alone provision. It can be excised from the Competition Act with no other effects, other than simply requiring merging companies to show their merger will not prevent or lessen competition. Repeal section 96.

As for this deal, this committee can recommend that the Minister of ISED and the competition commissioner hold up reviews and approvals until two key regulatory decisions are made by the CRTC that will set the table for new competitors that may help minimize the anti-competitive effects of this deal.

The first decision is on the mobile virtual network operators, or MVNOs. If the CRTC allows such MVNO competitors, there will be some ability for customers to switch providers to competitors other than the big three. However, if that decision puts restrictions on MVNOs that frustrate them, then there will be no wireless competitors to replace Shaw and Freedom in much of Canada.

The second decision is on wholesale wireline Internet delivered over fibre. The CRTC has set a rate for this new delivery method that permits wireline competitors to take on dominant Internet companies like Rogers. Without it, competition to Rogers will falter, especially out west.

Thank you very much, and I also welcome your questions.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next presenter is Mr. Kaplan-Myrth.

You have the floor for three minutes.

[Andy Kaplan-Myrth, Vice-President, Regulatory and Carrier Affairs, TekSavvy Solutions Inc.]

Thank you, Madam Chair, Vice-Chairs and committee members. Thank you for the opportunity to speak with you.

My name is Andy Kaplan-Myrth, and I am VP, regulatory and carrier affairs, at TekSavvy, an independent Canadian Internet, phone and TV service provider with teams now working from their homes in southwestern Ontario and Gatineau, Quebec.

TekSavvy has been serving customers for over 20 years. Today we have over 300,000 customers in every province, and we're proud to provide excellent, affordable, client-focused service.

I'm happy to return to the committee today to offer TekSavvy's views on the effects and the consequences of the Rogers-Shaw merger.

Without strong regulatory oversight and enforcement, it is clear that fewer competitors and further consolidation of market power will result in even worse outcomes for Internet and mobile users in Canada. Ultimately this proposed merger underscores the importance of regulation and oversight of the Canadian telecom landscape to protect and promote competition.

With that said, this titanic shift in the Canadian telecom industry does come with opportunities to do better. At a high level, the concerns around this merger relate to the apparent tension between investment and competition, but that is a false dichotomy. We're really talking about two different businesses: building networks and providing services. The same companies often do both, but they are distinct lines of business with different considerations for investment and competition, and many of these issues become clearer when you think about whether they relate to building networks or to delivering services.

The competition concerns with this merger are primarily about ensuring the availability of competitive services to consumers. As such, the merger of these two massive, vertically integrated companies needs to be made contingent on effective and efficient regulatory measures that promote competition for services and that protect consumers' interests in the Canadian telecom sector. In particular, the CRTC needs to finalize, enforce and commit to service-based competition by implementing the 2019 wholesale rates, ensuring access to fibre and mandating wholesale on mobile.

Finally, the Competition Bureau must be vigilant in protecting the consumer and competition from abuses of market power. In particular, the efficiencies defence only works if the bureau ensures that parties with market power don't abuse their dominance and use these efficiencies to squeeze out competitors.

In closing, to accelerate the building of networks for people in underserved areas, Canada's broadband plan must include competition by design, and it must reject the false dichotomy between investment and competition. As TekSavvy continues to demonstrate, we can have both.

Thank you again. I look forward to your questions.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We'll now start our rounds of questions. Our first six-minute round goes to MP Dreeshen.

You have the floor for six minutes.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Madam Chair.

Thank you so much to our witnesses. It's been a very interesting afternoon.

We look at this largest merger agreement in Canadian history. It's going to have profound implications for everyone.

I'd like to start my questioning with OpenMedia. In 2018 the vice-chairman of Rogers Communications, Phil Lind, told the news media that Canada's telecommunications sector is ripe for consolidation amid billion-dollar deals seen by its industry peers. South of the border was what he was kind of looking at and alluding to.

He went on to add that the Canadian government has kept too many players in the industry by offering incentives such as cheap wireless spectrum. He also [Technical difficulty—Editor] because of our population, we weren't large enough to warrant all of these telecommunication carriers.

I am just wondering what your thoughts are on those comments. Perhaps you could share with the committee your perspective of the consolidation trend and what Mr. Lind says about too many players in the industry for such a small population, since our witnesses on Monday hinted at the same idea.

[Laura Tribe]

I would respectfully disagree. When we look at Canada's wireless market in particular, there was a report released just this week that again shows we pay the highest prices in the world, and the direct correlation is the number of providers that we have.

Implying that having three national providers and the fourth carrier struggling to keep up is too many players is implying that they are comfortable with monopoly. I don't think that is the world we are trying to build. I don't think that's the telecommunications network and system that we need.

When we look at what has happened with consolidation in the U.S. and the Sprint and T-Mobile merger, that is another good example of what we can expect here. We saw jobs lost. We saw prices go up, and we did not see any of the promises kept. A consistent theme we see throughout these mergers is that there is a lot of talk to justify them at the time, but at the end of the day, it's about money.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

I think they would disagree. They were suggesting that the prices are not the highest, that they're in the middle of the pack, but I'll leave that for another discussion.

This question is, again, for OpenMedia. What lessons do you think Canadians can learn from the acquisition of the Manitoba Telecom Services by Bell back in 2017? In that case, of course, there was a divestiture of things like store locations and that discounted spectrum. You noted at the time that it was going to erode competition in telecommunications and, ultimately, add to the increase in the price of services.

What tangible results have we seen from that acquisition, and what's been the overall impact on price and service availability?

[Laura Tribe]

At the time, the Competition Bureau said that this deal was going to have a negative impact, but it still permitted the deal to go through. With regard to some of the questions you were discussing with your previous panel about what amendments can be made to the deal to try to make it palatable, I think that Bell MTS is a really good example of how that doesn't work. It's like rearranging the deck chairs on the Titanic, trying to figure out how you can tinker with the margins enough to feel better about the decision, but knowing that, ultimately, it's going down.

When we see what happened with Bell MTS.... We saw the jobs lost. We saw that they promised prices wouldn't go up, but they did. All of the things that were promised were to get the deal to go through. The small amendments that were made to try to built out Xplornet as a competitor didn't pay off because you're spinning out even smaller providers to try to compete where the regional provider couldn't keep up. I think trying to continue to carve things out smaller and smaller to justify the consolidation to the maximum legal limit is the exact opposite of what we're trying to do, which is to figure out what the end result is that we actually want, and that's a healthy market.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

When you discuss the regional providers, including Shaw, they benefited from being able to acquire spectrum at lower costs throughout the set-asides. Unfortunately, these providers sometimes have a poor track record when it comes to investing and deploying that spectrum in rural communities. In fact, we understand that Shaw has, so far, deployed only about 8% of its holdings, despite acquiring more than $1.7 billion of heavily discounted spectrum on the assumption that it's going to be competing with the big three on price.

I'm curious what your position is. Does there need to be a “use it or lose it” deployment condition attached to the licence to ensure that providers who do buy spectrum are actually putting it to use for all Canadians, including those who live in rural areas? What do you see that “use it or lose it” concept actually being?

[Laura Tribe]

I think that provision is really important, but it doesn't just apply to set-aside providers. I think that should apply to all providers. If we are making sure that spectrum is available, it is with the assumption that those communities are going to be served. Whether that's 4G or 5G service, we're seeing people really keen to buy that spectrum, yet we're not necessarily seeing the result in all of those communities across the board. I think that's something we would really need to take a closer look at as we move forward.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Mr. Kaplan-Myrth, you said “competition by design”. I'm wondering if you could give us just a few examples of what you think that would look like.

[Andy Kaplan-Myrth]

Thank you.

Too often, policy is developed with the big incumbents in mind and the system that we have in mind. How competition can be encouraged is almost an afterthought in a lot of cases. With regard to the model that we have right now, individual examples are out there, but this applies to the entire model. We talk on the large scales about encouraging network builds, but really what people are talking about are the big incumbents instead of designing a system that encourages competition by design, so that small providers can also build networks and—

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much.

[The Chair, Liberal, Sherry Romanado]

Thank you so much.

Our next round of questions goes to MP Jowhari.

You have the floor for six minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Madam Chair.

Thank you to all the witnesses. Those were quite informative interventions that you made.

Let me start with Mr. Kaplan-Myrth and TekSavvy, and continue on the competition.

As you heard in—or as I'm sure you reviewed—the previous committee interventions by Rogers, as well as Shaw, they talked about the fact that this merger not only increases the competition but also allows them to be able to expand and make investments in rural, remote and indigenous areas.

My question to you.... You talked about investment versus competition. What do you think Rogers means when they say that the competition is increasing, and what is your point of view regarding the competition?

[Andy Kaplan-Myrth]

This is why I was emphasizing this difference between two different businesses that are really operating in parallel, building networks on the one hand and competition for services on the other hand.

When most of us talk about encouraging competition, I think we're talking about an end-user's experience. Do consumers have choice? Are prices affordable? Do competitors compete for prices and actually affect each other's prices in the market?

When Rogers and Shaw were talking about network builds and the efficiencies of network building encouraging competition, they see a different kind of competition. They see other providers stepping in and maybe accelerating network build plans so that their speeds will keep up over time.

These are definitely important issues of competition, but they're different. As you develop policies and you think about what safeguards need to be put in place to protect competition, it's important to distinguish what kind of competition you're talking about so that the policies achieve the ends you're trying to meet.

Specifically, I don't think the kind of competition that Rogers and Shaw see resulting from this kind of a merger...I don't see that kind of competition resulting in better services for Canadians, more affordable prices and competition for services. It's a different element.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you. I'll go back to you again, Mr. Kaplan-Myrth.

Much has been made of the upcoming CRTC MVNO decision. Your company has been very vocal on this issue. Theoretically speaking, if Rogers were willing to waive its opposition to the mandated access, would your organization support that merger?

[Andy Kaplan-Myrth]

I'm sorry. Is the scenario here that as a condition for the merger to go ahead Rogers would agree to mandated MVNO?

[Majid Jowhari, Liberal, Richmond Hill, ON]

Yes.

[Andy Kaplan-Myrth]

Look, I don't think we are primarily opposed to the merger in the first place. We also don't support it.

My concern is more with the fact that a merger like this can happen and can eliminate a fourth player and result in another consolidated giant telecom with incredible market power. That should remind all of us of why wholesale has such an important part in promoting real service layer competition and encourage the CRTC to develop policies that really encourage service layer competition.

To me, it's not so much as a condition of this or not if Rogers were to support MVNO. I think that would be great and a lot of companies would probably take advantage of that as an opportunity, but more importantly, just the fact that we're all realizing what kind of a precarious situation telecom competition is in makes me think that, really, an MVNO solution is the only way to go.

[Majid Jowhari, Liberal, Richmond Hill, ON]

I have a last question for you, Mr. Kaplan-Myrth.

In terms of an investment view your company would take when this merger happens, if it happens, how would it impact your decisions on making investments in various regions within Canada?

[Andy Kaplan-Myrth]

I should be clear that our primary investments in facilities are around our headquarters in Chatham-Kent in southwestern Ontario. This merger would not directly affect our investment plans where we're building fibre and fixed wireless, but there is an aspect where Shaw and Rogers do compete with each other on wire line for competitors' attention and competitors' energy.

It's not just Shaw and Rogers, but all underlying carriers, incumbent carriers. To the extent that some carriers offer us better services or give us better rates, that may attract our attention there, and we may put more energy into growing in that part of the country or on their network.

That does drive some of the dynamic of competition in Canada, and there is a very real risk that this would flatten some of that and there would not be that competition between regions or between Rogers and Shaw.