Industry Committee on April 6th, 2021

[Dr. Michael Geist]

Well, I think there's been a recognition that the companies, given a choice, will double down on urban areas that they're already serving, as opposed to going to the rural and remote communities. They seem to almost hold out for these kinds of situations. We saw it in Manitoba and we're seeing it now. They hold out those kinds of goodies and say, ““Hey, if only you approve this, then we'll really go ahead into these communities.”

That policy and that strategy haven't worked. I think my view is that it has really been the role of governments to do a better job of saying that we have to invest in these communities if the companies aren't willing to do so and to use a more open approach as part of that.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mr. Geist.

We now go to Mr. Lemire for two and a half minutes.

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

Thank you, Madam Chair.

My question is for Mr. Klass, from the Canadian Media Concentration Research Project.

In 2019, Rogers, Telus and Bell had 91% of all subscriber-based revenues in Canada, and Shaw had a 6% market share. If Rogers keeps Freedom Mobile, Rogers, Telus and Bell will have 97% of the market.

What is your take on that?

[Ben Klass]

Any market share that's going to the smaller companies is essentially the result of the government policy to bring in a fourth carrier in all regions of Canada, which began in about 2007. A number of those companies that entered the market in 2008-09—Mr. Stein mentioned Wind Mobile, which is now Freedom Mobile owned by Shaw—have sort of failed and have been consolidated and what we're left with is Freedom, Videotron, in Quebec and Eastlink in the maritime provinces. Basically any of the gains and any of the competition that we've seen have been a result of the sustained policy that's been required to bring in these competitors.

If this merger is allowed, it would be tantamount to the government's admission that it is no longer interested in supporting real competition in this space. I think that is why Dr. Winseck and I are really behind the idea that this merger should not be allowed to proceed. We've started to see these competitors getting over a threshold where they can have a serious effect on prices across the board, not just the lower prices they offer themselves, by having an impact on the existing larger providers and forcing them to respond.

Even if, which I think is a very big “if”, someone else was found who could viably run the wireless assets if they were divested—which I very much doubt—we would be starting from square one. It's like Groundhog Day all over again. Canada's mobile wireless market has gone through these attempts by policy-makers to introduce competition in the 1990s and the early 2000s. Finally now we have a situation where these regional competitors are starting to take hold and have a real impact. I think you're saying that the market share for Rogers may go up over 90% in some places. Well, that's what we're going to get here. We're going to get just the large companies left in much of the country, with no real aid in sight.

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

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you.

Our next round of questions goes to MP Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

Mr. Geist, you mentioned the CRTC and policy. It appears that the CRTC is really good at making sausages. I'm just not sure that's what we need. They're doing something like a directive letter from the minister. Is that what you are suggesting is a policy change with the CRTC? What would be your advice to give it more direction?

Sometimes they'll stick their toe in the water on certain things, but then they just get cold feet at the end of the day and don't go the full distance for consumers.

[Dr. Michael Geist]

It does feel that way. I think we had a brief period under the former chair Jean-Pierre Blais where there was a pretty consistent effort to put consumers at the centre. Respectfully, I think that has changed under the current chair, and I highlighted a number of ways to do that. We've already had policy direction that hasn't worked as effectively. I think government can send signals certainly to the regulator and take a strong stand where it doesn't get the kind of outcome that it's seeking, where the law allows for that. I don't know that there are [Technical difficulty—Editor] point in time, given the shift that we've seen. This initially was a more subtle one and now I think is a more obvious one. It does not just cut across these issues that we're talking about; we're seeing it on the broadcast side as well, where there is a draft policy direction to the CRTC on a forthcoming bill, although it doesn't say very much.

[Brian Masse, NDP, Windsor West, ON]

Okay.

Mr. Klass, with regards to the public investment, the spectrum option and even just infrastructure, should we be putting more terms and conditions on those facilities that we invest in? I see right now we have companies [Technical difficulty—Editor] that they can get to work and we have a municipality here—as a good example—applying. Should there be more structure provided if there are going to be public assets as partnerships?

[Ben Klass]

Absolutely, and I think the design of those types of policies is crucial. We saw, when the new entrants came in in 2007, again conditions attached that required companies to offer roaming and tower sharing at commercial rates. [Technical difficulty—Editor] spent a decade at the CRTC coming up with rates and terms that the companies would have to abide by in offering those types of things. To the extent that we can structure the infrastructure arrangements towards sharing and towards efficient deployment of infrastructure that's available to all competitors, we will see better outcomes for consumers and for the industry as a whole.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next round of questions goes to MP Poilievre. You have five minutes.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

Dr. Geist, you said that in the event that this merger goes ahead, the wireless assets of Shaw would have to be spun off and there would need to be policy changes to invite more foreign competition into the Canadian marketplace. Could you describe mechanically what you mean by that? What would be [Technical difficulty—Editor]? If you had to write out kind of an IKEA instruction manual for us, what would it say?

[Dr. Michael Geist]

Let's focus on the foreign ownership issue. I think Professor Winseck rightly noted that we've seen this movie before, and it doesn't end well. Certainly the Verizon experience is suggestive of that.

The starting point, quite frankly, is to remove really all barriers and open the market up to foreign entrants. I'm not sure that it's going to result in a fundamental change. When Verizon, as Dwayne said, kicked the tires on Canada, they saw enormous opposition from the big three and just decided Canada wasn't worth their while. There were other places where they could make money without having to fight three large incumbents.

However, opening up the market fully so that a company could think about entering—potentially not just with those assets, but with some of the larger assets as well—might provide at least someone with the perspective that this is an attractive enough market. From a consumer perspective, bringing in that kind of pricing power, that sort of roaming ability on a global level, opens the door, I think, to opportunities that Canadians don't experience, but consumers in many other countries do.

[Pierre Poilievre, Conservative, Carleton, ON]

What regulatory changes would that opening up require?

[Dr. Michael Geist]

In this situation it would certainly require removing any sort of cap that we have right now. You can grow into a larger foreign-owned entity, but you can't take over a Canadian entity above a certain threshold. We could remove those thresholds. We would also have to think about whether or not we want to maintain the current restrictions on broadcast ownership, because of course we've seen that some of the largest companies also own large broadcast assets.

While Bill C-10 actually does remove some of the references to Canadian ownership, so in some way the government maybe already is moving a little bit in that direction, perhaps inadvertently, that's certainly part of the equation. Perhaps it's part of a broader discussion as to our comfort level with foreign ownership of broadcast assets. If the issue or the concern comes around airing Canadian content and some other regulatory obligations, I honestly don't see why those couldn't apply to foreign-owned companies in the same way as they apply to Canadian-owned ones.

[Pierre Poilievre, Conservative, Carleton, ON]

Right. What would [Technical difficulty—Editor], if the condition for approval were that all overlapping services of Rogers and Shaw be spun off?

[Dr. Michael Geist]

I think that's the most palatable answer, absent saying no to the merger altogether. There are good reasons for still saying no. Shaw is a viable innovative competitor, as we've already heard, so taking them out of the market in this space is, I think, ultimately a loss for consumers. However, if for legal reasons or other reasons the decision is made that this is going to go ahead, that is the best available alternative.

[Pierre Poilievre, Conservative, Carleton, ON]

You seem to say that, even if the wireless and other overlapping services are spun off, the merger would still be a net negative. Why is that? Why exactly would that be a negative?

Again, if you're removing Freedom [Technical difficulty—Editor] assets for which there is competition and you're giving it to some other third provider through an auction or something, why wouldn't that be just as good?

[Dr. Michael Geist]

I think you're injecting a fair amount of uncertainty into the marketplace, because we have to know.... The “who” really matters in this case. If it's a who that's comparable to a Shaw that can offer up some of the bundled services and can compete economically with some of the larger players so it's a fairly seamless transition, then the response might be that it's about as good as we're going to get and there are probably fewer negative implications.

I think we talked about this a little bit earlier. If it's just another stand-alone player, harkening back to the days of Wind, I think that is a setback because these assets are stronger in the marketplace from a competitive perspective with a stronger player behind them.

[Pierre Poilievre, Conservative, Carleton, ON]

Do I have any more time left, Madam Chair?

[The Chair, Liberal, Sherry Romanado]

You have 17 seconds.

[Pierre Poilievre, Conservative, Carleton, ON]

Do you see any prospect for alternative technologies to replace what we have now, as opposed to just changing the regulatory model?

[Dr. Michael Geist]

I think technology is always going to continue to adapt, and we'll see satellite and some other players come into the marketplace. However, at it's heart, for so many consumers for the foreseeable future, these wireless assets are absolutely essential from a communications perspective.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next round of questions goes to MP Jaczek.

You have the five minutes.