Andy Kaplan-Myrth, a lawyer at TekSavvy, in Gatineau, Que., on Dec. 22, 2022.Blair Gable/Blair Gable Photography
An independent internet service provider is asking Canada’s telecommunications regulator to review the favourable business arrangements struck between Rogers Communications Inc. RCI-B-T and Videotron Ltd. as part of Rogers’s takeover of Shaw Communications Inc., SJR-B-T claiming the deals violate the Telecommunications Act and could stifle competition through price discrimination.
TekSavvy Solutions Inc., one of Canada’s largest internet wholesalers, has filed an application with the Canadian Radio-television and Telecommunications Commission (CRTC), asking the commission to investigate what it says are illegal agreements between Rogers and Videotron before the takeover closes.
As part of its $20-billion takeover of Shaw Communications Inc., Rogers has agreed to sell Shaw’s Freedom Mobile, Canada’s fourth-largest telecom provider, to Videotron for $2.85-billion, and commit to providing favourable access to its networks for an extended period of time. The exact terms of the agreements between Rogers and Videotron have not been made public, but broadly include access to network infrastructure and other wireless services.
TekSavvy is claiming the arrangements violate Section 27(2) of the Telecommunications Act, which prohibits carriers from giving themselves or others an “undue preference” – or unreasonable advantage – through service provision or rates. While companies are allowed to make deals outside these prices, they are not allowed to be “unduly” prejudicial.
TekSavvy has said the deals are “symptoms of larger issues,” whereby Videotron would not otherwise be able to compete in the market because of what the company calls high prices for wholesalers. Wholesale companies like TekSavvy operate by leasing space on the networks of incumbents and packaging services for consumers at a discounted rate. The CRTC has set rates that carriers charge independent ISPs to lease that space.
TekSavvy has requested that the CRTC void the deals between Rogers and Videotron in full, or require the company to offer competitors the same favourable terms for access to services.
While the CRTC holds jurisdiction over enforcing the Telecommunications Act, it is unclear whether it will be able – or willing – to undermine the decision made last December by the Competition Tribunal, a quasi-judicial body that adjudicates cases brought by the Competition Bureau.
In its decision, the Competition Tribunal decided to permit the takeover, finding that it is not likely to result in substantially higher cellphone bills or otherwise harm competition substantially. The tribunal said the “very favourable rates” would facilitate Videotron’s expansion outside of Quebec.
Last March, the CRTC approved Rogers’s takeover of Shaw with conditions, but that study of the transaction was limited to the broadcasting assets, according to CRTC spokesperson Patricia Valladao. In the news release issued at the time of its approval, the CRTC said that the telecom services that Rogers was seeking to acquire were not subject to the CRTC’s approval.
Whether or not the CRTC will deem the agreements between Rogers and Videotron within their jurisdiction has not yet been confirmed. Yet TekSavvy’s application speaks to issues already put forward by the Competition Bureau in its appeal of the tribunal’s decision. The bureau will appear alongside the companies before the Federal Court of Appeal on Feb. 24 in an attempt to overturn the tribunal’s decision.
As part of its appeal, the bureau also alleged that the tribunal incorrectly considered the network-access agreements and pricing commitments without its consent, which it said is required under the Competition Act.
“The tribunal failed to consider that these arrangements could be challenged by third parties at the CRTC nor did it consider the likelihood of the arrangements surviving the long durations of the contracts,” the bureau wrote in its written arguments to the appeal court. It also noted that such agreements have previously been overturned at the CRTC.
In a document submitted to the appeal court in response to the bureau’s arguments, Rogers said that the premise was based on “a misreading of the statute, and a mischaracterization of how the tribunal disposed of the commissioner’s application.”
TekSavvy’s application was made in the form of a Part 1 Application. When the CRTC receives a complaint of this type, it allows 30 days for interventions from stakeholders and a further 10 days for the applicant to respond. After the 40 days, it examines all of the written submissions and issues a decision. This will extend far past the companies’ self-imposed deal deadline of Jan. 31.
As part of its application, TekSavvy also asked the CRTC to review a separate business arrangement, claiming that Bell Canada is offering EBOX, the independent ISP it acquired in February, 2022, rates not available to other competitors.
“This behaviour runs afoul of not only the Telecommunications Act, but directly undermines the government of Canada’s explicit policy objectives,” TekSavvy said in its application.
The CRTC will soon be governed by a new policy directive, the draft of which was released in May, 2021, which asks the commission to support competition and small providers.
Last week, the House of Commons industry and technology committee said it would also meet to discuss the takeover.
Before completing the deal, the companies must get permission from the Industry Canada minister for the transfer of spectrum licences. (Spectrum refers to the radio waves that carry wireless signals.) Minister François-Philippe Champagne has said he will wait for legal clarity before making his decision.