Industry Committee on Jan. 25th, 2023

[The Chair, Liberal, Joël Lightbound]

No. That's okay. I blame MP Dong, not you, Professor Quaid.

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

It's all right.

[The Chair, Liberal, Joël Lightbound]

Mr. Lemire now has the floor for six minutes.

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

Thank you, Mr. Chair.

I'd like to thank all the witnesses for their testimony.

Mr. Keating, after the hearing, which lasted a month, the tribunal ruled in favour of Shaw, Rogers and Videotron. That was December 31. Expert testimony was cited extensively, particularly that of Mark Israel from Compass Lexecon.

The tribunal found Mr. Israel open, candid and knowledgeable, and that he did expose a number of significant flaws in the opposing experts' analysis. Where Mr. Israel and the opposing expert disagreed, the tribunal noted that Compass Lexecon was the expert who provided the strongest and most convincing testimony. The tribunal concluded that Mr. Israel had convincingly demonstrated that the opposing expert's model would not have predicted a significant price increase and agreed with Mr. Israel that the opposing expert's predicted price increase in the wake of the merger was highly questionable.

We just heard from representatives of the Competition Bureau. However, when they testified, they had not studied the new deal between Shaw, Rogers and Quebecor. They insisted on looking only at the agreement between Rogers and Shaw. The tribunal determined that the Commissioner of Competition had not fulfilled his responsibility to determine certain impacts the agreement would have.

Could you give us examples of how the Commissioner of Competition has failed to fulfill his responsibilities in recent months?

[Dr. Bryan Keating]

I was listening to the translation. I hope I properly understood your question. I think you were asking about the tribunal process and some of the economic analysis that was undertaken.

It was a process with 40-plus witnesses, including my colleague Dr. Israel. The bureau had its own economic expert, Professor Miller from Georgetown. There was a long discussion of the modelling. I think we had a lot of critiques of Professor Miller's model. One of the most important ones was that he was calibrating his model to data that was almost two years old. Because he was using old data, he was not calibrating his model to a proper, forward-looking view of what the industry was going to look like.

There were many problems with the model. We criticized them. I don't have time to get into all the technical details, but I will say that the tribunal largely, as I think you said in your question, agreed with our analysis and agreed with the critiques that Dr. Israel put forward about the bureau's economic expert. It ultimately concluded that his model was not sufficient to show there was any substantial lessening of competition because of the transaction.

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

Do you see Videotron as an independent player from the three giants Bell, Telus and Rogers?

[Dr. Bryan Keating]

Videotron is clearly an independent player. It is its own company and operates effectively today in Quebec and will operate nationwide as this transaction is cleared.

There is no question that they will have various agreements with Rogers as part of their ongoing operations. There has been a lot of discussion about whether that will interfere with their incentive to compete.

I think the tribunal process and our analysis showed pretty clearly that Videotron will be able to compete effectively and independently. They will have strong incentives to lower prices to compete vigorously, just as they have done in Quebec, notwithstanding the fact that they will have certain agreements with Rogers, just like what happens throughout the Canadian telecom industry and, frankly, throughout telecom industries across the world.

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

If I'm not mistaken, Videotron also has deals with Bell, including one to expand its network. That's how most businesses in the system operate.

Mr. Bester, right off the bat, you said that Globalive was one of your financiers. Thank you for declaring that conflict of interest. It's to your credit, under the circumstances.

I’d like to come back to Project Fox, an attempt by Telus to boost Globalive’s bid to acquire Freedom Mobile.

Do you consider that approach, which was found in a document released by the Competition Tribunal, supports consumer independence from the three telecom giants, and that the Globalive bid funded by Telus is part of a strategy to foster independence and create a credible fourth competitor?

[Keldon Bester]

I think the exact same concerns are present in any sort of deal, as you described, and again we have a question there. We are now in a world where the replacement competitor, because of laws that really don't favour mergers being blocked and don't encourage competitors to continue to compete organically.... We live in a second-best world, where we're thinking about different options in different cases and where, to different levels of intensity, competitors are dependent on their own competitors.

On the question of what the incentives are of those big three players, in the case of Rogers and in the case of Telus, that's present in both situations.

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

However, by going so far as to finance a smaller company's bid to make that acquisition, wouldn't you say that an arm's length relationship is being created with that company?

[Keldon Bester]

Do you mean related to the telecom provider?

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

My time is running out.

If Globalive had acquired Freedom Mobile with Telus's money, that would not have introduced a fourth independent competitor to the market.

[Keldon Bester]

If that were the case, I would be here saying the exact same thing about Globalive, because, again, the big question is, how does that dependence affect the incentive to compete, and why would Telus and Rogers create a truly disruptive competitor for themselves? I think that's the big question here.

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

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Lemire.

Mr. Masse, you have six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

It's normal and is part of our democracy to have the Minister of Innovation intervene not only in this situation but also in general. We've seen the Investment Canada Act, and we'll have more legislation on that coming up.

I look back at the competitive issues. Zellers being taken over by Target didn't help competition. Future Shop being taken over by Best Buy didn't help competition. Rona was taken over by Lowe's, and that didn't increase competition. In fact, the undertakings there were very modest. Also, U.S. Steel is gone.

There have been rejections, and good examples are—thank goodness—potash and MDA regarding satellites. Those have been strong things. We also have the minister, who directs the CRTC to some degree by having a mandate letter, which comes from the Prime Minister. In mere fact, we're dealing with a public asset here. It's the spectrum that we push out in the system.

My first question is for Mr. Bester, and it's with regard to where we are now in our policies. I'm curious about that. Is there any other comparative out there in the United States, Australia or other places? I know the U.S. has antitrust legislation that is different from ours, but what else can we look at to fall back on? Do we need to modernize some of our approaches here?

The U.S. is actually looking at some of the antitrust stuff going on now with Google. Historically, this comes as part of their culture, and we can look at one of the first cases, the one with Standard Oil. It's part of their actual functioning market economy to have this type of protection for consumers. Could you comment, please?

[Keldon Bester]

The U.S. and Australia in particular are great examples. Australia in the nineties embarked on a really deep policy dive to increase competition and productivity. Part of that was the creation of a really strong central competition regulator, the ACCC, the Australian Competition and Consumer Commission. That's the kind of model we need to be looking at right now. I think competition has been on the back burner. We've had an approach, particularly related to mergers, that is quite lax. Look at where we are today, where the largest telecom companies can be successful in purchasing a disruptive and upstart competitor.

Models like the work in the U.S. and in particular Australia—which even after that work in the nineties is now looking to say, “Do we have the tools?” and is likely going to reform their laws—are two great models to look toward.

[Brian Masse, NDP, Windsor West, ON]

I'm going to move to Ms. Bednar. You mentioned innovation in the industry, and I think Marketplace did a good review of some of the different countries out there. I'll go back to Australia. I liked your comment that often it's been the case that geography is used as an excuse for high costs and rollout. I'd like your opinion as to whether or not you think that's valid with regard to the issue.

Second to that, there is a condition. The minister is asking for a 10-year commitment from Videotron, but I'm thinking about how this industry is going to change over the next year, let alone 10 years from now. We heard evidence just prior to this panel that there have been no penalties for those who have used spectrum to their advantage by selling it as an asset and a resource versus deploying it.

Could you comment, please?

[Vass Bednar]

Sure. Over time, Canada's geography hasn't changed, so I don't disagree with the arguments that help to explain why Canadian telecom infrastructure, the physical infrastructure, has tended towards oligopoly. I don't see that changing in the future, but we have to remember our telecommunication system is one that we built and that continues to evolve. It's not set in stone. We're seeing more experimentation on the services side and more independent ISPs. We're seeing more municipalities looking to link up their fibre optic network cables. We're seeing the low-earth orbit satellites supplement or complement services in areas where people don't have the best connectivity options.

In terms of what things will look like in 10 years and these promises, I suppose that's why I was also challenging us to think a bit about where the accountabilities are and what narrative we're going to have. It's certainly one thing to make a very econometric argument to the tribunal. Those arguments haven't been translating well for people in Canada. People still feel confounded by this merger going forward, and that's okay. Maybe there's a lot that needs to be corrected and brokered, but who or what is best suited to do that? It's not going to be the competition tribunal, and I think that's perhaps a task for this committee to think deeply about going forward.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

Ms. Quaid, one of the things we are really challenged by with the business operations we're dealing with here today is that many other small, medium and, of course, large businesses and public institutions—we've seen this even during the pandemic—are quite tied to the costs and the servicing. We've had testimony in the past at these hearings that even places like Mississauga, which is in the skilled development of tool and die mould-making, aerospace and so forth, couldn't get high Internet access speeds to their locations just outside the Toronto area, the GTA.

What obligation does the minister have to balance this out? There is a whole series of economic productivity issues at stake here, and we're baking in extra costs, I would argue, as we continue to do these types of mergers.

Do you have an opinion on what balance the minister has for all the other susceptible costs that businesses have from decisions over competition?

[The Chair, Liberal, Joël Lightbound]

I would ask for a brief answer, please.

[Dr. Jennifer Quaid]

I'll take that as a compliment. It's really hard to answer that question, very honestly, in part because, as I've declared, I'm not a telecom-specific expert.

What I would say, though, is that, at a broader policy level, these are questions that have to be looked at holistically. I'm a big advocate of transversal regulation. The different parts of the regulatory state need to talk to each other, and economic productivity and the development and continuing evolution of the Canadian economy have to be done with deliberation and intention—not just by letting things happen.

I'm one of those people who believe there is a place for regulation and direction. That doesn't mean you create sclerosis for business, but you create something to make sure that access is provided. If you rely simply on the wealth-maximizing incentives of private actors—and they are perfectly entitled to organize their affairs in that way—you may not get the outcomes you want from a public policy perspective. You have to look at how you can leverage the motivations of private business to offer the services you want, and that's not an easy task.

I'll stop there.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

With the blessing of colleagues, we'll go for one last short round, which will put us about 10 minutes over.

I will go to Mr. Vis for five minutes.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you, Mr. Chair.

Thank you to all the witnesses appearing today and thank you to my colleagues. I'm joining you from Mission—Matsqui—Fraser Canyon, where Shaw has a major presence.

My constituents are really struggling with the cost of living right now. As their representative, I am coming forward on their behalf today. They're asking me, “Brad, will this merger result in a more affordable Internet bill and a more affordable cellphone bill?” I'm not necessarily sure it will. However, I'm also highly suspicious of Rogers' claim that it is going to invest $6 billion in western Canada in the rural and indigenous communities that I represent.

During the pandemic, a mother who lives in Hatzic Valley and is still on Shaw's dial-up Internet asked me, “Brad, why won't Shaw simply cross the road and extend the line to my house?” They haven't done so, and they've failed to use the spectrum they received from auction to the benefit of Canadians who rely on this essential service. I'm approaching everything that I say in my remaining four minutes or so with that.

Dr. Keating, Shaw Internet customers right now.... I'll just ask what prices will be available to the two million existing Shaw Internet customers who today get zero-dollar talk and text and a $25, 25-gigabyte plan. Is Rogers planning on going down to those prices, or should those Shaw customers expect—if this merger goes through—something similar to the Rogers prices, which are, I believe, at $35 and $85, respectively?

[Dr. Bryan Keating]

You'll have Rogers witnesses on a panel this afternoon, I believe. You should put that question to them. They're better placed to answer specific questions about what plans they're going to offer.

What I can say is that from an economic perspective, thinking about the incentives that this merger and transaction will create, our analysis has shown that the transaction will increase competition, which will put downward pressure on prices. The tribunal, affirmed yesterday by the Federal Court of Appeal, reached the same conclusion.

I think these questions you get from your constituents are valid and important questions. Our analysis shows that the answer is yes, they are going to get better deals. That's the incentive the transaction creates.