Industry Committee on March 31st, 2021

[Pierre Poilievre, Conservative, Carleton, ON]

If Shaw sells Freedom Mobile and that company's no longer part of the merger, for example, if someone buys it or it becomes a completely independent business, can the merger go forward without undermining consumer interests?

[Pierre Karl Péladeau]

Yes, absolutely. On the contrary, I'm even inclined to think that competition will continue and the fourth operator will be dynamic. Of course, it will have to have the financial capacity to acquire the assets, but also develop the operations, of the business, build a network and participate in auctions. The 3500 MHz band spectrum auctions are approaching. Then there will be others. Auctions of this type are held quite often because they help ensure that Canadians receive better services.

We previously used telephones just to talk to other people. Now, as you know, people increasingly use smartphones and consider them essential to everyday life. Very few Canadians don't have a smartphone. Wireless telephony has thus become an essential service. I think a fourth operator is essential to ensuring competition.

[Pierre Poilievre, Conservative, Carleton, ON]

I understand. So you think the merger may be acceptable to Canadians if that condition is met.

[Pierre Karl Péladeau]

Yes. In fact, Rogers and Shaw aren't competitors. All the businesses in the cable industry—Eastlink, Vidéotron, Cogeco, Shaw and Rogers—have grown through acquisition. That's all part of a movement that's been going on for 30 years. It's also the case in the United States with Cox, Charter Communications and Comcast. Mergers have historically enabled cable companies to maintain and even improve the quality of cable services. Mergers have also assisted businesses in increasing the quality, speed and ease of Internet access and in operating in wireless telephony.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

You characterize the Canadian market as an oligopoly, and I agree with that description.

Apart from this merger and the need to retain a fourth operator, are there any other reforms that you would suggest should be pursued to open up the market and allow more competition?

[Pierre Karl Péladeau]

I think the rules the government issued in 2008 have proven they can produce results. Competition is now established in the maritime provinces and Quebec, in addition to British Columbia, Alberta and Ontario. So it's important that these rules be retained. Authorities must also ensure in future that businesses don't participate in spectrum auctions for speculative purposes, but instead to build a network for the benefit of Canadians. That's the one and only way to provide high-quality services at a fair price. The investments involved are of course significant, but the results for Canadians are as well.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next round of questions goes to MP Ehsassi.

You have the floor for five minutes.

[Ali Ehsassi, Liberal, Willowdale, ON]

Thank you, Madam Chair.

Allow me to join our colleagues in thanking the two witnesses for appearing before us today.

My first question is Mr. Péladeau.

As you know, back in 2017, Bell acquired MTS. I take it that you follow developments in other provinces as well. From your standpoint, what was the consequence of that acquisition?

[Pierre Karl Péladeau]

Maybe I will ask my colleague Jean-François, because during that time I was not CEO, but what I will say is that, with all the respect I have for Manitoba—in fact, we used to have a few newspapers there, especially in Winnipeg—it's a smaller province. We've been in an environment where MTS, which was a company that had been there for so many years with different routes from the other operators, was probably not providing a very competitive landscape. That was not the case elsewhere, I would say. This competition is even greater since technology was enabling Bell to broadcast video to satellites, and Shaw also, and then afterwards with fibre.

We live in a very competitive environment. Therefore, we need to make sure that it will remain. Manitoba is probably not the area with the greatest competition that we can find here in Canada.

I don't know if Jean-François has any other things to say.

[Jean-François Pruneau, President and Chief Executive Officer, Vidéotron ltée]

Yes.

If I may add to that, one thing for sure is that for Xplornet the result was not that great. Obviously, they acquired some subscribers, but as Pierre Karl mentioned, there need to be conditions to make sure this kind of journey becomes viable. The things we're talking about are transfer of spectrum, transfer of roaming agreements, or getting into a roaming agreement that is satisfying.

Obviously, with backhauling and whatnot, for sure, this is not what Xplornet got when it went into the trade with B.C. I think that even though it looked as though there was some competition maintained with Xplornet in that respect, the result was clearly not satisfying for Xplornet, because it didn't get the right assets to make sure that its journey would become viable.

[Ali Ehsassi, Liberal, Willowdale, ON]

Thank you.

Someone was saying that in the event this merger is approved, the day for regional players will be over.

Mr. Péladeau, would you be concerned about a company possibly coming in and acquiring Quebecor if that particular merger was approved?

[Pierre Karl Péladeau]

I can give a very simple answer: Quebecor is not for sale, just as Cogeco was also not for sale, as we would find out from the Louis Audet family. Certainly, this is not the situation.

Personally, I inherited it from my father as Louis Audet did. My goal is to make sure that this company will continue as a family company and provide a great future for Quebeckers and for Canadians beyond whatever the outcome of this transaction will be, especially on the wireless side.

[Ali Ehsassi, Liberal, Willowdale, ON]

We'll hold you to that, sir. Thank you.

Mr. Thomson, let's assume this merger is approved. Would you be concerned that this would lead to further consolidation because other players in the field will also consolidate?

[Jay Thomson]

Consolidation is always happening in this industry. This is just another step, and we expect that it will continue in the industry.

As I said at the outset, as the bigger companies get bigger, the harder it is for smaller companies to still have a voice and for their customers to ensure that they still have affordable rates and the same amount of choice as those who live in larger centres with larger players.

[Ali Ehsassi, Liberal, Willowdale, ON]

If this were approved, would that be sending the wrong signal, that others can do likewise?

[Jay Thomson]

It all depends on the conditions that are attached to this kind of deal, which are the ones that I've set out.

[Ali Ehsassi, Liberal, Willowdale, ON]

Absolutely.

Thank you. I'm out of time.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Mr. Lemire, you have the floor for two and a half minutes.

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

Thank you, Madam Chair.

I'll continue my questions with Mr. Péladeau.

Rogers says it will invest more than $6 billion in western Canada to build out its 5G network, focusing obviously on all the benefits that will have for rural, remote and indigenous communities.

Living as I do in a remote region, I admit I'm not particularly eager to have 5G. We know it involves shorter-range waves. I think it's much less suited to large, thinly populated areas.

Is 5G really the panacea, as Rogers tried to have us believe last week? A number of incredible ads were broadcast about Bell's 5G during the hockey game I watched yesterday. Is 5G that important for the future?

[Pierre Karl Péladeau]

Wireless telephony has evolved like any other technology or product ever since it's been around. For example, cars in 1910 weren't the same as those of 2021. The same is true of telephony. We went from 1G to 2G, then to 3G, 3.5G and 4G, which is LTE, and then LTE Advanced. Now we're going to 5G. Then we'll have 6G and then 7G. It's a bit like versions of Microsoft.

Do new technologies make for better service? Yes. We've gone from voice to data, and soon we'll have the Internet of things. Will it be a revolution? No, it won't; it'll be the natural evolution of technologies that become established, as they do in all other industries.

What's important is that telecommunications is a very capital-intensive industry. In other words, it requires investment. We invest between $800 million and $900 million every year, excluding spectrum auctions. That shows you just how much this is part of our industry. Yes, we generate a lot of money, but we also make enormous investments, precisely so Canadians can have better communication services. Incidentally, we observed during the pandemic that Canadian networks are so robust because we keep investing.

It's important to have competition. If my memory serves me, sir, you represent a riding in Abitibi. There was previously no competition in that region; there was just Bell. Now there's competition. Prices have dropped since we and another player set up shop there. Once again, that clearly shows that competition results in lower prices.

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

Yes, I've noticed that.

Thank you very much.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

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

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

To Mr. Thomson, one of the concerns I have with regard to the myriad of potential solutions for how to deal with this is that everybody seems to have a plan about how to do some type of surgery on the merger to spin something off, like a component, or they want it go to a different provider and so forth. As those could all end up being failed propositions—and the market will determine that later on—we could still be without a fourth carrier.

Wouldn't it be better to basically reject the merger, continue with the plan and perhaps look at alternatives for how we roll out regulation to meet customer expectations? I worry that everybody has an idea on how to cut up parts of this deal and will try to stick them onto other things like a Frankenstein monster and then pretend it's going to work properly for consumers. Then we'll have the fourth one disappear.

[Jay Thomson]

We've been trying to get competition in the wireless market in Canada for years and years. The chosen approach at one point had been the fourth carrier. Notwithstanding that we have regional players like Freedom, we still had consumers and consumer groups lining up in droves before the CRTC a year ago to seek greater competition through the MVNO process. That is ultimately the solution to competition. It's not about whoever gets the pieces that are going to be broken off from this deal.