Industry Committee on Jan. 25th, 2023

[Ben Klass]

Yes, absolutely. The CRTC plays a crucial role, or it at least has the potential to play a crucial role in ironing out a lot of these types of problems that we're discussing here today. You could almost view it as sort of an inadvertent push to the CRTC. This conflict that comes out of this decision with respect to wireline rates and the preference that's being given to Videotron may sort of spur the CRTC to take a serious look at fixing this. At this point, we have to wait and see. Things have been very quiet at the CRTC, in particular with respect to what I think are the fundamental telecommunications responsibilities that it has overseen in recent years.

A lot is riding on this policy direction coming from government. A lot is riding on the direction that the new chairperson takes it in. I have always been a big proponent of the CRTC as a method for direct participation in the economy by citizens and people other than self-interested parties like Bell, Rogers and TekSavvy, but it hasn't given us a lot of reason to be confident in recent years. I will qualify my optimism about how things can change with the fact that they haven't been very good there in recent years.

[Brian Masse, NDP, Windsor West, ON]

Thank you for your testimony.

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Masse.

Thanks to all of our witnesses for being here with us this afternoon.

I will now briefly suspend to enable the other panel to take their seats.

[The Chair, Liberal, Joël Lightbound]

Good afternoon, everyone.

We are ready to begin the second hour of today's meeting, to discuss the acquisition of Shaw by Rogers.

We welcome Tony Staffieri, president and chief executive officer of Rogers Communications Inc. Appearing with him is Dean Prevost, president of integration.

We also welcome two representatives from Shaw Communications: Paul McAleese, president, and Trevor English, executive vice-president, chief financial and corporate development office.

Also joining us are Pierre Karl Péladeau, president and chief executive officer of Quebecor Media Inc., and Jean‑François Lescadres, vice-president, finance, Videotron.

Thank you for joining us, gentlemen. My sincere apologies for the slight delay. This is what happens to the last witnesses who appear at the end of a long day. Thank you for your understanding.

Without further delay, the Rogers representatives now have the floor.

[Tony Staffieri, President and Chief Executive Officer, Rogers Communications Inc.]

Good afternoon, Chair and members of the committee. My name is Tony Staffieri, and I am joined by Dean Prevost, president of integration at Rogers.

First, let me say thank you for the opportunity to speak with you. We respect the role of this committee, and we are here to answer your questions.

Today’s hearing comes after a lengthy judicial process, one that saw the Federal Court of Appeal reaffirm the decision of the Competition Tribunal.

The court's ruling builds on the decision of the tribunal, which unanimously concluded that the transactions among Rogers, Shaw and Quebecor are pro-competitive.

To quote the decision, “There will continue to be four strong competitors in...Alberta and British Columbia.” The decision goes further, concluding that Videotron will be a more disruptive wireless carrier because it can quickly build a 5G network across Freedom’s footprint and bundle wireless and wireline services at lower prices than Shaw.

The decision also made it clear that Rogers will inject “a new and substantial source of competition” in Alberta and British Columbia.

In short, these transactions have gone through a rigorous review and will increase competition. To quote the Federal Court, “This was far from a close case.” This committee can feel satisfied that no stone was left unturned.

A lot has changed since you first studied this merger and tabled your recommendations. We heard your feedback, and that of our minister. Today we are here to talk about an even better deal. Actually, it is now two deals. The first will see Quebecor, owner of Videotron, acquire Freedom. The second will see Rogers acquire Shaw’s wireline business in markets in which we don’t compete.

After other remedies were reviewed and clear criteria set out, we determined that Videotron, with its proven track record, significant scale, and credible, rapid path to 5G, was the most viable option to increase competition.

This transaction will increase competition in two meaningful ways. First, Videotron will become a disruptive fourth national carrier, reaching nearly 90% of the population.

Second, Rogers will become a stronger, more formidable wireline competitor in western Canada. Rogers' cable footprint reaches parts of Ontario and eastern Canada. Shaw’s cable footprint spans western Canada and parts of northern Ontario. There is no overlap.

As one national cable company, we will vigorously compete with Telus in the west. Yes, the deal will increase wireless competition, but it will also increase wireline competition. That should explain why Telus has been doing everything it can to oppose this transaction.

Let me now turn to the commitments we made in western Canada.

First, we will invest $6.5 billion to improve connectivity over the next five years. This includes $1 billion in new funding to connect rural and indigenous communities. We are working with first nations partners, including indigenous-owned providers, and all levels of government to finalize priority projects. We will invest $2.5 billion to expand our 5G network. We will also invest $3 billion in network services, including expanding our cable network.

Second, we will maintain a strong presence in western Canada. This includes the creation of up to 3,000 net new jobs to support network investments, with Calgary as our western headquarters.

Third, we will make connectivity more accessible. We will expand Connected for Success, our low-cost, high-speed Internet program, to low-income Canadians across the west. We will also expand it to eligible wireless customers across the country. Together, this program will be available to more than 2.5 million Canadians. This merger will bring together two entrepreneurial Canadian companies that are deeply committed to Canada and Canadians.

As I conclude my remarks, let me leave you with a few thoughts. First, we have taken your feedback.

Second, these transactions have gone through a robust and comprehensive review.

Third, this transaction will increase competition.

Fourth, we will invest substantially to connect more Canadians.

These transactions will deliver more value, more connectivity and more innovation for Canada.

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Staffieri.

Mr. McAleese, the floor is yours for five minutes.

[Paul McAleese, President, Shaw Communications Inc.]

Good afternoon, Mr. Chair and committee members.

My name is Paul McAleese. I am the president of Shaw Communications. I'm joined by Trevor English, our chief financial and corporate development officer.

As this committee knows well, our industry is more important than ever to the lives and economic future of Canadians. It is also on the verge of a fundamental change in technologies, requiring tens of billions of dollars of additional investment to position Canada for ongoing success in the digital era.

Shaw Communications was founded on a goal of providing compelling choices for Canadians, and we are proud of the customer relationships we've built and nurtured over the past 50 years.

We are also sufficiently clear-eyed to know that the transactions with Videotron and Rogers offer the best path forward for those customers. With these transactions, Shaw’s assets will be in the right hands for the long term, addressing Shaw’s challenges and, more importantly, setting the stage for sustainable and enhanced competition, affordability and innovation in Canadian telecommunications.

Since we last appeared before you in 2021, much has changed. Many stakeholders, including this committee, expressed concerns about Freedom Mobile’s future. In response, last June we announced a very different approach that would see Videotron acquire all of Freedom Mobile. To be clear, Rogers will never own Freedom Mobile. Further, there will continue to be four strong wireless competitors in each of British Columbia, Ontario and Alberta. There is no company better placed than Videotron to extend and amplify Freedom’s competitive impact.

The Freedom-Videotron wireless business will be an even stronger fourth carrier, covering over 30 million people. The dynamic, newly empowered Freedom-Videotron will have more than double the customer base—over three million subscribers—and all the tools it requires to compete against the national carriers, including, critically, the 5G spectrum that Shaw does not possess.

As the competition tribunal concluded in a decision unanimously affirmed yesterday by the Federal Court of Appeal, the new Videotron that will emerge from these transactions will be a more aggressive and effective competitor than the present-day Freedom is.

The benefits of these transactions have been proven through a judicial process, so where is the remaining opposition coming from? It’s coming from our competitors, and I would ask you to ask yourself why.

The opening paragraph of the tribunal decision provides that explanation, and I quote:

A well-known adage in the competition law community holds that when competitors oppose a merger, it is often a good indication that the merger will be beneficial for competition. In this case, the opposition from the Respondents’ two national competitors has been vigorous and far-reaching.

Throughout the past two years, Telus and Bell have been the most vocal opponents of these transactions, challenging them in every forum possible. As a result of the regulatory process, when these transactions close, Telus and Bell will face the competition they fear most.

As you've heard, Telus went so far as to undertake a well-documented corporate campaign, called “Project Fox”, seeking to “kill, shape and slow” the proposed transactions. As part of this campaign, Telus conspired to replace Videotron with Globalive as the purchaser of Freedom. Globalive’s chairman, Mr. Lacavera, who is very clearly comfortable playing Pinocchio to Darren Entwistle’s Geppetto, is an odd choice for an operating partner.

Mr. Lacavera has a dubious record of running a wireless company. I know that because I have unique first-hand experience. I operated what was Wind Mobile after Mr. Lacavera exited the building, and I have a deep understanding of the effort required to fix the many challenges that we inherited. Here is an example.

I suspect that the majority of members of this committee, and many of the people in this room, are representative of the country at large and use an Apple iPhone in their everyday telecom needs. Prior to Shaw’s investments, Apple refused to authorize the iPhone on the sale of Wind’s network during Mr. Lacavera's tenure there as owner and CEO. This is in sharp contrast to Videotron, a proven strong competitor in wireless. Globalive owns no spectrum assets and has no recent operating experience in Canada’s rapidly evolving wireless industry.

The relationship between Telus and Globalive was very clearly disclosed in the subpoenaed documents that Telus provided through the recent tribunal proceeding. What we learned was that Globalive is a very clear surrogate for Telus. Why would Telus go to such lengths to “kill, shape and slow” our proposed deals?

The answer is very simple. As the tribunal held, these transactions will enhance competition in Alberta and British Columbia, where Telus is the dominant provider.

It may be obvious, but it cannot be forgotten: Telus is not interested in creating stronger competition in western Canada.

The rigorous regulatory process has delivered the best possible outcome for Canadians. Further delays very clearly only benefit Telus and Bell, because they prevent the stronger competition that these transactions will provide.

It’s time to move forward. These transactions provide a clear path to lower prices, more investment, greater innovation and enhanced competition.

Thank you for your time. We look forward to your questions.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. McAleese.

Mr. Péladeau, you have the floor.

[Pierre Karl Péladeau, President and Chief Executive Officer, Quebecor Media Inc.]

Thank you very much for inviting us, Mr. Chair. It is an honour to join this committee meeting.

My name is Pierre Karl Péladeau, and I am the president and chief executive officer of Quebecor. My colleague Jean‑François Lescadres is vice-president, finance, with Videotron.

About two years ago, I appeared before this committee and stated that Quebecor is the driving force of competition that benefits Canadian consumers of telecommunications services. We showed beyond a shadow of a doubt that consumers come out ahead. This has been the case for about 15 years in Quebec as a result of our wireless service. This has been noted by the CRTC, Innovation, Science and Economic Development Canada and by various market analyses, such as the Wall and Nordicity analyses.

Unlike third-party internet access or TPIA companies, we play an integral role in economic activity by investing billions of dollars in the construction of our landline and wireless networks, while offering very low prices under our different brands, including the most recent addition four years ago of Fizz, a fully digital brand.

We believe there are now a number of conditions that enable us to expand our range of activity and offer telecommunications services in British Columbia, Alberta, Manitoba and Ontario.

Videotron’s offer to Rogers of close to $3 billion was the only one that checked all the boxes. It's a successful regional player and disrupter with a strong balance sheet, solid experience and an innovative track record. The truth is that Videotron is the only real contender.

It is therefore not surprising to see “the Big Three” fear the disruptive entry of Videotron into the wireless market outside of Quebec.

The Fox project is a striking of example of Telus's toxic and Machiavellian tactics, which include an increasing number of court cases, sneaky disinformation campaigns and intensive lobbying efforts to fuel opposition, while at the same time seeking to pit western Canada against eastern Canada. The whole purpose is to defeat competition and the desire of governments to give Canadians favourable and innovative rates and business conditions.

The opposition by Bell and Telus to the transaction perfectly illustrates that Videotron is the best way to provide consumers with true and lasting competition.

Quebecor has built a solid expansion plan to gain a strong foothold in the Canadian telecom market. It was even mentioned by the Competition Tribunal in its recent decision that was confirmed yesterday: “Videotron is an experienced market disrupter that has achieved substantial success in Quebec. It has drawn upon that experience to develop very detailed and fully costed plans for its entry into and expansion within the relevant markets in Alberta and British Columbia, as well as in Ontario.”

We said it when Minister Champagne set out the conditions for the sale of Freedom Mobile, and we are stating it again. Videotron is in it for the long haul and is committed to bringing down prices for the benefit of Canadians.

We did it in Quebec, as confirmed by several reports, as we said. We actually have been doing this for at least 15 years, since we launched our first MVNO offering, which took place in 2006 on Rogers' network.

On top of that, Videotron acquired VMedia last year, which will enable it to offer consumers in British Columbia, Alberta, Manitoba and Ontario discounted multiservice bundles and innovative products, including mobile and Internet, at even more competitive prices. We will bundle on better terms than anyone else, including what Shaw Mobile is offering today.

Except for Eastlink in certain communities in Atlantic Canada, all the initiatives launched since the auction in 2008 have failed. Globalive, funded by foreign interests and then purchased by Vimpelcom, a company that is partially controlled by an oligarch who is not permitted to enter Canada at this time, ended up with Shaw a few years later.

Mobilicity, controlled by a U.S. private financial company, has for its part been bought by Rogers, while Public Mobile has been bought by Telus. Quebecor and Videotron have been and continue to be the only companies that can stand up to Bell and Telus. Our plan is simple: to continue to be a success in the wireless market, which is something Canadians need.

The CRTC and the government must also continue to create favourable conditions, the most important being the review of roaming rates and the implementation of the MVNO policy, for full-fledged mobile virtual network operators, and the application of sanctions to stop anti-competitive actions.

Every measure must be taken to serve the public interest and the government's clear desire. Under government and regulatory policies that have been updated and brought into line with those decreed 15 years ago by the late Minister Jim Prentice, we will be the long-awaited fourth national industry player. We must ensure that this government desire is fully respected by national license-holders so that Canadians can benefit from healthy and lasting competition.

Thank you for your attention.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Péladeau.

To begin the discussion, Mr. Perkins has the floor for six minutes.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you, Mr. Chair, and thank you to all of you for coming to the important hearings today.

I would like to start off for the viewers by outlining that companies, your companies, are built on leasing limited national assets of radio frequencies owned by Canadians. You've been given by Canadians the privilege of access protected from foreign competition. With that comes a responsibility to Canadians to provide service to them at a reasonable cost. The result of this privileged and protected position is that Canadians pay amongst the highest cellphone and Internet prices in the world, and your companies reap monopolistic profits.

Rogers' cellphone net profit margin is 62%, and Videotron's is 65%. Your profit margin shows that it's not the size of the country and the small population that drive up cellphone prices. There is less competition today than there was 10 years ago. Your companies bought up your competitors. As part of your privileged position, Liberals have enabled your lobbying access to officials during the decision-making process at an unprecedented level.

Mr. Staffieri, as CEO of Rogers during this transaction, you personally met with the Department of Industry more than 60 times, five of those times with the minister. I would like to know if you were negotiating the deal directly with the department.

[Tony Staffieri]

Mr. Perkins, as we went through the process, it was an iterative process in terms of trying to come up with a solution that met the government's objectives. We share your comments and this government's objective of more affordability for Canadians. As you look to pricing at Rogers and for our industry, over the last several years you've seen prices come down, and that's against a backdrop of increasing inflation. As we discuss this, we can provide more details on that, but what I can tell you is that we met with different government officials, and it was really trying to find a solution that was going to increase competition.

What you saw come out of the tribunal process was validated by the Court of Appeal yesterday.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Mr. Staffieri, I have limited time, so I appreciate that, but for transparency, will you table your officials'—your executives'—minutes from those meetings with this committee?

[Tony Staffieri]

There is a process to make the relevant materials public, and we will follow that process.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I would appreciate your considering that.

Successful acquisitions obviously require job cuts and generally don't involve job increases. Rogers told the Competition Tribunal that it will realize efficiencies through job cuts in most areas at both companies. In speaking with your company insiders, I'm told that Rogers will cut 4,000 to 5,000 jobs in the combined entity, not the network and temporary jobs that you mentioned earlier. Are you going to cut 4,000 or more jobs?

[Tony Staffieri]

As a result of this transaction, there will be a net investment in more jobs.

What we do as a company is invest in networks so that we can serve our customers and give them better quality in coverage. That means we have to invest more. That's how we built this company. Our entrepreneurial DNA is to continue to invest more and more into networks.

When you talk about the profit margins that you referenced earlier, most of that cash goes back to investing in infrastructure in this country.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I'm sorry, Mr. Staffieri. My question was about job losses, not your profit margin at this time.

Are you going to cut thousands of jobs in this merger?

[Tony Staffieri]

There will be areas that have overlap, and we will look to redeploy resources in areas that are growing.

We are a net growth company, and we see more opportunity for employment throughout the country.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I appreciate that.

Mr. Péladeau, in the past your company has made commitments when it has acquired spectrum licences to expand and create a cellphone business in western Canada, but in fact you've sold more than 100 of those licences for over $300 million in profit.

I know you made a lot of promises at the tribunal, but we're a little skeptical. Like with your past promises to the government, you may not do it this time.

Will you agree to be bound by the business plan you have tabled with the Competition Tribunal or lose all of Freedom's spectrum licences?

[Pierre Karl Péladeau]

We've participated in the spectrum auctions since the first one took place in 2008. At that time—and today—we intended to be a national operator for the reasons that the auction went through the roof. One of the reasons was that Globalive was bidding with other people's money. In fact, it was foreign money at that time. We were caught with spectrum, and all the conditions, therefore, after the other auctions were not all together to make sure that we had the capacity to invest in and build a network.

Today, with the policy that was established by the CRTC.... In fact, this policy came in two years ago already. We call it the MVNO policy, which provides the proper conditions to make sure that a fourth operator, or any sort of operator, will be able to operate.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I appreciate that, but my question wasn't about MVNOs.

TekSavvy has launched an application before the CRTC to have a hearing on the supposed undue preferential prices of this deal that have been given by Rogers to your company. If the CRTC rules against you on those preferential rates, and you have to abide by the CRTC rates for access to the network, will you walk away from this deal?

[Pierre Karl Péladeau]

First of all, we will find out what the CRTC does. We have a new chair right now. I guess it is important for her to make sure they ask if the prices for the TPIA are right or wrong. We don't know at this stage.

We were partnered with Rogers in Quebec. We built networks together and we will continue to do business with them as we have done. This is the reason we have this agreement that we negotiated out of this transaction. It was not easy. At the end of the day, we were able to put together the conditions to make sure this fourth operator will succeed in the future—and this is very important—by investing a significant amount of money.

As Tony Staffieri said, we're a business that's been investing in building networks to make sure Canadians will continue to enjoy one of the best-quality networks in the world.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

And the highest prices.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Péladeau.

Ms. Lapointe, you have the floor for six minutes.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

I am sharing my speaking time today with my colleague Anthony Housefather.

My first question is for Mr. Staffieri.

In December you released a statement saying that this merger will “bring more choice, more affordability and more connectivity to Canadians”, and that “the transactions will likely result in an intensifying of competition”.

This morning we heard from the Competition Bureau, as well as other witnesses, that this merger will have negative impacts for lower-income Canadians. We also heard that when it comes to the telecommunications sector, density matters. We know that rural populations and rural communities are often negatively impacted by that.

Can you describe for us today how greater affordability and connectivity will be achieved for these two populations?