The Rogers Building in downtown Toronto.CARLOS OSORIO/Reuters
It is not necessary to own a cable network in order to successfully operate a wireless carrier, Rogers Communications Inc.’s RCI-B-T chief technology officer told a Competition Tribunal hearing into Rogers’ proposed $26-billion takeover of Shaw Communications Inc SJR-B-T.
The comments by Ron McKenzie, the chief technology and information officer at the Toronto-based telecom giant, speak to a core issue in the merger case: whether Quebecor Inc. QBR-B-T will be able to successfully run Shaw’s Freedom Mobile without owning cable infrastructure in Western Canada.
The Competition Bureau is attempting to block the merger of Canada’s two largest cable companies, arguing that the deal will reduce competition in the wireless industry, leading to higher cellphone bills and poorer service. The Competition Tribunal adjudicates on matters of civil competition and is hearing arguments on the proposed deal.
Explainer: How the Rogers-Shaw merger ended up in front of the Competition Tribunal
In order to prevent their merger from eliminating Canada’s fourth-largest wireless carrier, Rogers and Shaw have agreed to sell Freedom Mobile to Quebecor Inc. for $2.85-billion. Acquiring the carrier, which has 1.7 million customers in Ontario, Alberta and British Columbia, would allow Quebecor’s telecom subsidiary, Videotron Ltd., to expand beyond its home province of Quebec.
However, lawyers for the competition watchdog argue that Freedom will be a weakened competitor in Quebecor’s hands, partly because the carrier will be severed from Shaw, which owns fibre-optic infrastructure in Western Canada, while Quebecor does not.
Quebecor has entered into agreements that would allow it to pay favourable rates for access to that infrastructure, which is needed to provide wireless services.
Nazim Benhadid, vice-president in charge of network building and operations at Telus Corp., testified earlier during the hearings that owning a wireline network is critical to the performance and reliability of a wireless network, making it easier for a telecom to prevent and contain outages and respond to sudden spikes in demand.
Mr. McKenzie disputed that view on Thursday, arguing that all operators, including Telus, lease portions of their networks. He noted that Telus leases over 2,250 circuits from Rogers that provide what is known as the “last mile” of connectivity – the portion that connects the customer to the broader network.
“No one operator owns all their assets. There’s a very healthy wholesale market,” Mr. McKenzie said.
Antoine Lippé, a lawyer for the Competition Bureau, asked Mr. McKenzie whether he agrees that a telecom has “less control” over a network it leases versus one that it owns.
“I would disagree,” Mr. McKenzie said. “As long as you manage the relationship with the provider ... you have equal control for reliability, if you manage the relationship that way with your partner,” he added.
Mr. Lippé asked whether it’s fair to say that Telus could not have done anything when the 2,250 circuits it leased from Rogers were affected by a widespread Rogers network outage in July.
“They had no control over what was happening. Is that fair to say, Mr. McKenzie?” Mr. Lippé asked.
“Yeah, that’s fair,” Mr. McKenzie said.
Asked about the outage, which shut down the core of the Rogers network and left millions of customers without wireless, internet and home-phone service, Mr. McKenzie said the telecom has provided information about the incident to the Canadian Radio-television and Telecommunications Commission, which is publicly available.
The regulator has not taken any further steps relating to the network outage, Mr. McKenzie said.
The hearings continue into December. Rogers and Shaw are aiming to complete their merger by the end of the year, with the possibility of extending their deadline to Jan. 31.