Industry Committee on Jan. 25th, 2023

[Dr. Jennifer Quaid]

That's a tough one, because the minister's power is discretionary. It's not bound by the competition process and, in some ways, it's a bit of an accident of the fact that telecom is a regulated industry. If this were another merger in another industry, this would be the end; there would be no further step. It's just like this because of the nature of telecommunications regulation in this country.

Independent of what I think of the merger and the merits of the merger, I worry about the use of political discretion as a way of accomplishing an objective that was sought through a proper judicial process. I think the fear of political interference is worrisome, and the minister has to figure out how he can get comfort that these conditions will be met.

[Ryan Williams, Conservative, Bay of Quinte, ON]

To your point, you've mentioned quite a bit about not having public disclosure. The minister is going to get the public's input on this. Would you say that the minister should perhaps be looking back at this process and using it as a lesson to look into the flaws that exist in the Competition Act right now in order to fix it and relook at that process?

[Dr. Jennifer Quaid]

There is an ongoing consultation on competition reform, and I hope that Canadians who have reactions to what happened in Shaw, whatever those are, are feeding into that consultation, because those are more data points.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you so much.

I have one last question and it's for Ms. Bednar.

Are you comfortable with the future of competition in Canada right now given the precedent being set?

[Vass Bednar]

I'm comfortable that we have a precedent for reviewing our laws, casting a wide net, going beyond the usual suspects and making sure that the future of Canada's competition law is not shaped just by lawyers and economists, who can be remunerated for exploiting the weaknesses in the law and continuing to perpetuate Canada's weakness. I have to remain optimistic or I can't be a public policy person.

[The Chair, Liberal, Joël Lightbound]

Those are words of wisdom for us all. Thank you.

I'll now turn to MP Dong for six minutes.

[Han Dong, Liberal, Don Valley North, ON]

Thank you very much, Chair.

I want to thank all the witnesses for coming.

Professor Quaid, it's always good to see you. I listened very carefully to what you had to say, and I'll have a question for you later.

First, Mr. Bester, you disclosed the relationship between the Canadian Anti-Monopoly Project and Globalive. Are you are aware of any sponsoring relationship between Globalive and any of the major telecom companies?

[Keldon Bester]

No, I don't believe so.

[Han Dong, Liberal, Don Valley North, ON]

Is there any working relationship at all with Rogers, Shaw, Bell or Telus?

[Keldon Bester]

Certainly I believe that Globalive's plans for expansion involve a network-sharing agreement with Telus, and I think that is a real question for me. Again, that seems like the kind of dependency that we are similarly worried about with Videotron.

[Han Dong, Liberal, Don Valley North, ON]

Does that affect your perspective or your position, particularly on this merger?

[Keldon Bester]

My perspective is that the Globalive solution is really not a silver bullet for this. I think the merger should not proceed, and we live in a sort of second-best world. In either case, and as I led with, I would like the minister to try to use the tools he has in order to encourage whatever outcome he chooses to be the most likely to deliver benefits to Canadians.

[Han Dong, Liberal, Don Valley North, ON]

From your perspective, if the minister rejects the transferring to complete the merger, would Telus and Bell, the major competitors, benefit from that decision?

[Keldon Bester]

It depends. Shaw is a going concern. I saw them as a serious source of competition out west, so I believe that Telus, Bell and Rogers—the oligopoly structure—have an interest in maintaining that structure in whatever form it may come. I think rejecting the deal would keep Shaw in play, in whatever form it continues to be, which would be a force against any of the big three that it interacts with.

[Han Dong, Liberal, Don Valley North, ON]

Speaking of Shaw, my next question is for Ms. Bednar and Dr. Keating.

In your experience, if the government or the minister were to reject the merger, what do you think would happen to Shaw and how would that impact the competition in Canada's telecom sector?

We'll start with Dr. Keating.

[Dr. Bryan Keating]

Look, there's been a rigorous process that we've just gone through, and it concluded that this merger, this transaction, including the divestiture to Videotron, is a pro-competitive one. If the minister were to not transfer the spectrum licences, you would lose the benefits you get from this transaction. That's a real cost to the Canadian economy and to Canadian consumers.

With respect to the question of what Shaw would do if this transaction were not to occur, it's probably a question better put to the Shaw witnesses this afternoon. I'm not going to speculate on what their alternative plans are, but if it is blocked, I think you risk losing real benefits that are going to arise from this transaction.

[Han Dong, Liberal, Don Valley North, ON]

Go ahead, Ms. Bednar.

[Vass Bednar]

It's an interesting thought experiment. I would point to what we heard about the rigorous competition we're anticipating in this space and the opportunity for innovation. I wonder how innovative telecommunications firms have been in Canada over time, when really what they've benefited from is advancements in the products and services they provide Canadians on the physical infrastructure they've built. Is it innovation if over time you provide a telephone line, then a television cable, then dial-up Internet, then wireless Internet and then one cellphone to a family home, and then you have everyone with a cellphone? That's a large part of how these companies have been able to grow and reward their shareholders.

What would happen to Shaw? Well, maybe these companies are out of benefits that they can get a free ride on and call innovation.

[Han Dong, Liberal, Don Valley North, ON]

I'll go back to you, Dr. Keating. You talked about the benefits to Videotron and how in turn there are benefits to consumers. You talked about the benefits of this deal to Shaw.

Isn't Rogers the biggest beneficiary in this whole merger? I noticed that you haven't talked about how Rogers would benefit from this deal. In my mind, after talking to my constituents, they seem to see Rogers as the biggest winner should this merger go forward.

[Dr. Bryan Keating]

Rogers wants to do this deal because it expects to benefit from it, of course, and I think what's important to remember and keep in mind is that the wireline aspect of this deal is a huge proportion of it. Wireline is a large portion of Shaw's business. That's the piece of Shaw's business that Rogers is acquiring.

I think Rogers certainly will benefit from acquiring Shaw's wireline assets, but they're going to benefit along with consumers and along with—

[Han Dong, Liberal, Don Valley North, ON]

I just wanted to make sure of that, because it sounds like everybody else is benefiting from this deal, but obviously Rogers will benefit largely from this deal as well.

Professor Quaid, if the minister rules to reject the transfer, he will be positioning himself against the ruling of the tribunal. In your experience, has that happened in the past? Is there a precedent?

[Dr. Jennifer Quaid]

You're asking something that I don't know directly, in the sense that I'm not a telecom expert. I can't tell you how many times the minister has been called upon to exercise discretion in awarding spectrum licences when there was a question about whether he or she would do so.

I would say, from the perspective of a lawyer and someone who looks at the law, that having a minister who makes a decision on an incident is probably something that you would hope to avoid. That's because the spectrum licence is not the entire transaction. You would make a decision on that as a way of indirectly achieving something that the properly constituted decision-making body does not conclude. I worry about that because it's going to look like political interference or a workaround.

As I said, this is a curiosity or, if you will, a particularity of the fact that we're in telecom and not in another industry, where it would have been the end of the matter with the decision of a court of appeal. However, I think the minister is entitled to say he wants to look at the full ramifications and wants to understand exactly what's involved, because when he spoke in October, we didn't have a decision from the tribunal. We didn't know how things were going, and he put out some things that he expected. However, I suppose, within the exercise of his discretion and in consulting with the right people and getting the information he needs, he could maybe add to those conditions or insist on mechanisms that allow for accountability.

The tribunal also recognizes that these conditions are not legally enforceable. I worry, honestly, that these kinds of undertakings have been done in the past. I think every one of you probably remembers times when there were undertakings made in good faith. We said, “We'll keep our head office here” or “We'll keep plants open in Canada”, and then circumstances changed and we reneged.

There is a business reason for the change, but it happens nevertheless. To the extent that the deal rests on that, you have to worry about it.

[Han Dong, Liberal, Don Valley North, ON]

We heard from the bureau that—

[The Chair, Liberal, Joël Lightbound]

I'm sorry, Mr. Dong. We are well over time.

[Dr. Jennifer Quaid]

I'm sorry. I took too much of your time.