Industry Committee on March 31st, 2021

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you. It's a pleasure to be here today.

I'm a Calgary MP, and I have received dozens of individual emails from constituents raising concerns about this transaction. Some of them are concerned about competition. Some of them are concerned about the impact of this deal on the local economy in Calgary and employment in Calgary. Many people who work for Shaw live in my riding and throughout the city. I would say though that the majority of the emails express concern about both.

I'd like to ask any of our panellists today to comment on the public argument being made by the proponents of the deal. It has been said and argued that the balance sheet of the merged entity will have the strength to make necessary investments to deliver 5G, that employment will be maintained in Calgary and, in fact, that there will be all kinds of new employment opportunities, and that ultimately in this deal consumers will be protected. In particular, the basic packages cannot rise for three years. Some would say though that any announcement of a merged transaction generally paints a positive view of it.

I'll ask any of our panellists to comment on the credibility of the claims, and whether a merger of this nature is necessary for this entity to have the balance sheet strength to make necessary investments in 5G.

[Laura Tribe]

You can go first, John.

[John Lawford]

If I may, I'll just say that most of the time when companies are merging and they're talking about efficiency gains, those involve employment. That means firing people. It may not happen over the next two or three years, but that's the amount of time it usually takes for two organizations to get together, so I don't think employment will be guaranteed, whatever is said.

In terms of some of the savings they might have through hardware and that sort of thing, you're really just replacing one with the other.

You also wondered about people who were calling and saying they were worried about prices going up. You also have to consider that prices will also go up for Telus users and Bell users, because when there are only three in the market, there is nothing to tether them down to the lower prices that Freedom used to provide. The Freedom people will be frozen at that deal, but you'll never get it. It will be only for people who used to have it. I think maybe some of your constituents are reacting to that.

[Laura Tribe]

I would agree.

I think we've heard promises that new jobs will be created. I'd be curious as to whether those are permanent, full-time jobs that people can bank on as careers, or if they're temporary contract transition jobs that are to transition some of the hardware that they actually have to make their network compatible.

We have a large community in western Canada at OpenMedia, and we've had thousands of people write in to us who are very concerned about what this means for jobs and for affordability. I think it's a pretty universal concern in particular in western Canada, knowing that it is very unlikely that companies want to maintain two finance departments and a duplication of everything.

To John's point about what mergers mean, they're trying to find efficiencies. They're not generating new jobs.

[Andy Kaplan-Myrth]

I wonder how different those comments from constituents would look if we had robust wholesale-based competition where we had lots of different providers offering services to customers, so that they're not just buying their service from Shaw or Telus and wondering where they're going to be stuck. To be clear, TekSavvy has customers in Calgary and throughout Shaw's footprint as well, and so do other wholesale-based providers, but that whole framework has really been crumbling over the past five years. We've been trying to get the CRTC to shore it up. If we had much stronger competition, lower prices and lots of realistic alternatives, then I think you probably wouldn't see the same concerns from constituents on the competition side.

I don't think I can comment as much on the job side, or at least I can't add to what John and Laura already said about that.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you. Those were great answers. Yes, no merger announcement ever started with, “Great—we have an opportunity to raise our prices and pass on the additional revenue to our shareholders.” This is where I think a lot of these concerns are coming from.

I don't know if I have time for another question, Madam Chair.

[The Chair, Liberal, Sherry Romanado]

Unfortunately, you have only three seconds.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

All right. Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, MP Kelly.

Our next round of questions goes to MP Jaczek.

You have the floor for five minutes.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

Thank you, Madam Chair.

Thank you to our witnesses for coming before our committee yet again.

I'll pick up a little on what Mr. Kaplan-Myrth was saying. When we were listening to Rogers and Shaw earlier this week, it was clear that what I had always thought of as competition, and what I think most consumers think of as competition—that is, many players competing for the same pool of customers—was looked at quite differently by both Rogers and Shaw. In fact, one of the representatives from Rogers used the term “dynamic competition”. I have tried to look this up. I find it quite confusing.

Mr. Lawford, could you maybe elaborate on this concept of dynamic competition? It sounded like Rogers was using that as their statement that there was increased competition.

[John Lawford]

I think it's a business gobbledygook term. It doesn't actually have any meaning. I think what they're thinking is that they will be larger and better capitalized and, therefore, will be able to roll out services on the pace they want to, where they want to and when they want to, because there are fewer players and they don't have to turn and face a fourth competitor in the market and divert resources.

I believe that's what these guys are calling dynamic competition. It's more control over competition.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

In other words, with fewer players, they can actually potentially access a bigger piece of the pie that's out there, in essence. That's the way I ended up interpreting it. Would you say that's how it could end up?

[John Lawford]

I think you did about as well as anybody could with that term.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

Thank you.

Given the fact that the efficiencies defence does still exist in the Competition Act, and given the fact that Rogers is saying that as a larger, better-capitalized company they will be able to invest in 5G, with all the commitments that they have made and that are on their website, etc., how...?

Is there any way the Competition Bureau, notwithstanding this efficiencies defence, could somehow make it a condition that Rogers in fact does deploy the 5G commitments they're making to remote communities and indigenous communities? Is that potentially a condition that could be put on an agreement to this acquisition?

[John Lawford]

Yes. The Competition Bureau, when they have a settlement with merging companies, can put in conditions. They can follow up usually up to five years afterward. They could dream up any conditions to put on here.

I would just say, on the efficiencies defence, the Competition Bureau could win that as well. If prices go up in the entire industry, that's what's called a dead-weight loss and that goes on the consumer side of the scale of this efficiencies balance. Also, if the shareholders of Rogers get a lot more money, well, who owns shares in Canada? It tends to be the people in the top quintile of income. That's counted as a loss to lower-income Canadians. That goes on the consumer side of the scale too.

The Competition Bureau could conclude that the efficiencies are actually on the consumer side and say no to the deal. They did that with Bell MTS, but at the end they brokered this fig-leaf deal with putting on Xplornet, which was a travesty. They could be taking a hard line. Your committee, if they mention something about the efficiencies defence, could give a little steel in the spine of the Competition Bureau.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

That's reassuring to us to an extent. It's hard to see who on earth is in favour of this merger other than the shareholders and the families involved. As Ms. Tribe has shown with her petition and so on, it's clear. I haven't heard anyone in favour. It's reassuring that the Competition Bureau can balance those competing interests to a certain extent.

Ms. Tribe, how would you feel if there were conditions such as Mr. Lawford has potentially described? Would you be satisfied in any way?

[Laura Tribe]

I would have to get really creative in the number of conditions I could possibly put forward to find something that would offset this enough to make it worthwhile. I think we are so far from where we need to be under the current circumstances that trying to take so many creative measures to prevent our going backwards is a bit much.

I'm sorry. We're out of time.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you so much. That's the first time a witness told me they're out of time. It's refreshing.

Our next round of questions goes to MP Lemire.

You have the floor for two and a half minutes.

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

Thank you, Madam Chair. I'll try to exercise the same discipline.

My question is for Mr. Kaplan-Myrth, another regular visitor to our committee. I'm going to ask him a question I asked him in December.

How could the federal government promote the continued operation or growth of a fourth player in the various telecommunications markets in Canada? I'm obviously talking about the government, not necessarily the Competition Bureau or the CRTC.

[Andy Kaplan-Myrth]

The fourth player is really the wrong strategy. As long as we have this strategy of nurturing a fourth player to introduce some degree of competition, we're really designing the system to fail. We're going to be one merger away from complete collapse of competition. A fourth player may be enough to influence prices to some degree, but it is not robust competition that can survive major deals like this one. This is clearly not going to be the only deal like this on the horizon.

What can the government do to encourage a fourth player? I think it's the wrong strategy. It's certainly not what I described as competition by design. I think, rather, what the government needs to do is to put its energy into encouraging other forms of competition for services so that this fourth player issue doesn't become.... It's not really the goal.

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

Then what role does TekSavvy want to play to promote the best possible services and the greatest affordability in the present situation? What are the possibilities that you see given the potential consequences of this merger?

[Andy Kaplan-Myrth]

The CRTC right now is considering final rates that are the bulk of what a business like TekSavvy relies on right now. Those are the regulated wholesale rates for most of these services. Those have been under appeal for years. I don't have enough time to go into the details of that, but if the CRTC finalizes its 2019 rates, TekSavvy and lots of other competitors will use those rates to lower prices, which will have an effect on Internet prices across Canada. It will lower prices across the board.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next round of questions goes to MP Masse. You have two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

To Mr. Lawford, because you mentioned the MVNO decision coming from CRTC, maybe you can highlight a little bit more the importance of that.

I don't blame Rogers. It decided right here it's just going to buy instead of build. That's why it went after Cogeco, and this decision has relevance to that. Can you maybe highlight that a little bit? I don't think it gets enough attention. That could introduce some competition, but I think the real reason it made the play on Cogeco was to bring it into the fold before it actually became a player.