Industry Committee on March 31st, 2021

[The Chair, Liberal, Sherry Romanado]

I'll give you a little bit of time. You have 15 seconds.

[Pierre Karl Péladeau]

It's been said before that the fourth operator, which is Freedom Mobile, will disappear because the cartel or oligopoly that Canadians used to face will basically be rebuilt.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

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

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

Thank you, Madam Chair.

Mr. Péladeau, In your opening address, you mentioned the importance of having a fourth player in the market. Based on your experience in Quebec, what impact did a fourth player have on the market?

[Pierre Karl Péladeau]

I tried to address this in my comments. Clearly, to enter a market, the fourth player had to be even more combative. Our involvement in the first auction in 2008 was very expensive. It cost us around $500 million. We therefore had to amortize this amount over the largest possible number of customers, particularly as we were also required to build the network. As I said, we spent $2 billion doing that.

All of this led us to be extremely competitive and to suggest prices and packages that were more competitive than before. It's also a well-known fact in Quebec that we paid special attention to customer service. God knows that a growing number of Canadians are becoming aware of this. They want to deal with a provider that will be responsive to their needs, knowing that there will be someone on the other end of the line to deal with their requests. That is the need that Quebecor made an effort to address from the moment it acquired Videotron in 2000. It's probably one of the reasons why, for the 15th year in a row, Quebeckers chose Videotron as their preferred telecommunications provider from among the many other providers, including Rogers, Telus and other smaller players, including third-party Internet service providers^x.

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

If the goal is to lower prices, why are you asking the authorities to invest so much effort on a four-player competition model?

How then is this model supposed to work in Canada?

[Pierre Karl Péladeau]

I don't believe that we' re asking the government or the state to invest in a fourth player. We believe the government can maintain competition by ensuring that the required conditions are in place for a fourth player to operate. That's how systematic everyday competition would be created.

That's why we intervened with Mr. Prentice, the minister at the time. And we were not the only ones to do so. Our arguments convinced him to introduce a number of conditions to encourage companies to take part in the auctions and build a network afterwards. We felt that conditions requiring reserved spectrum, infrastructure sharing and mandated roaming agreements would guarantee longevity and long-term competition.

History has shown that competition came about because these conditions were met. The outcome is that in Canada, Quebeckers have the lowest wireless rates.

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

When my colleague Bernard Généreux was speaking, a door was opened. I would therefore like to ask you the following question.

Let's say that for the transaction to be approved, Rogers would be required to give up an asset like Freedom Mobile. Would it be in Videotron's best interests to acquire this company and strengthen its position as the fourth Canada-wide player?

[Pierre Karl Péladeau]

As early as 2008, we had approached a number of operators to give us a national presence. It didn't work, for all kinds of reasons. First of all, at the time, we didn't have the financial capacity. Additionally, the presence of a group called Globalive had caused the auction price to rise extremely quickly. It turned out afterwards that this company had been financed by foreign interests. That's what I referred to earlier as the Wind Mobile fiasco. Unfortunately, this event significantly held up the entry into the market of a serious player that had the financial capacity to invest in a network. Fortunately, Shaw acquired Wind Mobile a few years later, renamed it Freedom Mobile and turned it into a genuine fourth player. If Rogers were to buy freedom mobile, then this fourth player would certainly disappear.

To answer your question, I would tend to say that we were already interested in expanding in 2008. Today, owing to our financial strength, our experience and our telecommunications and marketing expertise, we meet the applicant criteria needed to succeed.

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

Do you think the 3500 MHz band auction should be postponed or that Shaw should be withdrawn from the process?

[Pierre Karl Péladeau]

Auctions are subject to very clearly defined rules. I refer you to paragraph 261 of the policy and licensing framework for spectrum in the 3500 MHz band, which clearly states that, in the circumstances, Shaw unfortunately couldn't be a favoured or a set-aside-eligible bidder in the spectrum auction.

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

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next round of questions goes to MP Masse.

You have the floor for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair, and to our two witnesses for being here.

I'll start with Mr. Péladeau, please.

One of the challenges we have is the spectrum that has been set aside in the past and how it now is being acquired even though it was a set-aside. I want to ask you about Vidéotron's AWS licence being sold to Rogers in the past. That was a set-aside as well. How much money did Rogers pay for that and what impact did it have on competition? Why did you agree to that?

[Pierre Karl Péladeau]

First of all, as I mentioned to you, Mr. Masse, in 2008 we were interested in building a national network. Unfortunately, for different reasons.... One of the reasons was that the auction very, very expensive. In considering our financial capacity, we arrived at the conclusion that we were not going to be able to build that national network. Through the auction, we bid on 10 megahertz in the Toronto area. Unfortunately, at the end of the auction—let's call it that—we were caught with it and were then forced to pay—

[Brian Masse, NDP, Windsor West, ON]

Okay.

[Pierre Karl Péladeau]

—but at the beginning, the purpose was to build a network. Unfortunately, we were not able to do so.

[Brian Masse, NDP, Windsor West, ON]

Okay. The reason I asked that question was for clarity. Thank you for that.

One of the things that I believe we've been doing wrong in our auctions is just trying to do a money grab—about $25 billion over the last number of years since the year 2000—and what I would prefer to see is a spectrum auction with higher degrees of standards of rollout, protection for lower prices for base services, and expectations that if you don't use it, you lose it. It would be almost like an RFP process. We would allow more access in for more cost-effective measures to be the incentive of the use of the spectrum versus that of the cash grab, so to speak.

If that were a policy like some other nations have done, do you think that your company, as well as others that are trying to expand their markets, might do better instead of having to borrow money on the market and then service that debt as you're expanding into the customer base that you want to grow?

[Pierre Karl Péladeau]

That's a very interesting question. Obviously we're not ISED. We're not the one who will make public policy, but you probably knew that at the beginning, early in the implementation of wireless services, the spectrum was given away to the first operators. Through the decades, that went back and forth. The government decided this was a public asset, and therefore we needed to make sure we would monetize this asset as much as possible, which is limited and necessary for a public wireless service.

Is the actual policy perfect? Probably not, recognizing that perfection is not of this world. Is it one of the best? I think they've been able to analyze all of the auctions around the world and, at the end of the day, arrived with different operators in Canada, and that these rules would govern the auction.

To make sure that competition will continue to be available—because the fourth operators are far from being the size of the three largest, the oligopoly—therefore, we need to make sure they will be protected and give them set-asides.

[Brian Masse, NDP, Windsor West, ON]

I know all of that. I was trying to get at a different process and priority. Right now we're at a point where we have a market protected from foreign competition—and maybe I'll move to Mr. Thomson to get him into the conversation as well. The use of our spectrum has also.... The end result is that we have some of the highest prices. It's not a coincidence, I don't think. We've had testimony on that.

Quickly, Mr. Thomson, this timing seems very suspicious. Rogers did go after Cogeco earlier on with a hostile takeover, and all of a sudden coming to this spectrum at the last minute, we have this.

Do you have a position on whether we should delay the spectrum or, what I prefer right now, put the brakes on this altogether and say that we're not interested in it because it's going to have a profound impact.

May I have your comments, please?

[Jay Thomson]

Frankly, Mr. Masse, while we watch the spectrum auction with interest, it has very little impact on smaller communities and smaller providers. It's a big players' game. It's too costly for others to get into, and whether it goes ahead or not will have very little impact on competition or access to mobile services in smaller communities. Only the MVNO process will help that.

[Brian Masse, NDP, Windsor West, ON]

Okay.

That's my whole point: changing the way we do the spectrum to allow those entrants to get into the game.

Thank you, Madam Chair.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mr. Masse.

We'll now start our second round of questions. First, we go to MP Poilievre for five minutes.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you very much, Madam Chair.

My questions are for Mr. Péladeau.

First, I want to thank you for your family's contribution to the business field and to congratulate you on the success of Vidéotron.

You mentioned that the principle of a fourth operator would absolutely have to be protected if Rogers and Shaw were to merge. I agree that approach has worked well to date and has benefited consumers.

If Freedom Mobile is spun off from Shaw or sold as an asset so that it isn't part of the merger, do you think the transaction can be conducted without undermining consumers' interests?

[Pierre Karl Péladeau]

Thank you for your question.

Are you referring to the possibility that Freedom Mobile might be one of the assets acquired by Rogers in the merger? Is that the gist of your question?