The Rogers Building in downtown Toronto on July 9.CHRIS HELGREN/Reuters
Keldon Bester is a fellow at the Centre for International Governance Innovation and co-founder of the Canadian Anti-Monopoly Project. Ben Klass is a consultant and PhD candidate at Carleton University School of Journalism and Communication.
On Friday, Canadians woke up to a sharp reminder of the importance of reliable connectivity – and just how deeply ingrained it is to all aspects of our daily life.
Though Canada’s historical lack of competition was not the immediate cause of the Rogers RCI-B-T service outage, the event’s scope would have been even greater had the Competition Bureau not challenged the company’s 2021 proposed acquisition of Shaw. SJR-B-T (This would allow the former to consolidate the latter’s British Columbia and Alberta footprint into its own network.)
Yet according to recent commentary on the continuing merger saga, Competition Commissioner Matthew Boswell, like a lucky gambler, should quit while he’s ahead.
This would mean accepting Quebecor as the ideal candidate to take the reins of some (but not all) of Shaw’s wireless business, while allowing Rogers to absorb Shaw’s cable and home internet division. This is the best deal we’re going to get, we’re told, and to push for more would be akin to doubling down on a losing bet.
But if Canada’s antitrust watchdog is going to truly protect Canadians and the competition we rely on, he needs to keep his eye on the real prize: blocking this harmful merger outright.
Mr. Boswell knows this, which is why his bureau has requested the Competition Tribunal to do so rather than pursue a negotiated remedy. This outcome may be unthinkable to Bay Street analysts and many in the legal community, but that does not change the fact that it is the best option for the future of the Canadian economy as a whole.
Litigation in front of the tribunal will not be easy. The bureau will square off against the legal firepower of two multibillion-dollar companies and a set of laws favouring mergers that reduce choice, increase prices and kill innovation. It may be an uphill battle, but an outright block is nevertheless the most straightforward and effective way to protect competition.
While the merging parties may claim a billion dollars of efficiencies, the competitive force of Shaw as an independent wireless upstart means its removal will have consequences for not only more than two million customers at Freedom, but also for those of competing carriers that had to fight hard to keep their business.
Last year, Canadians spent more than $25-billion on mobile wireless services, demonstrating the potential scope of harms should competition abate and allow incumbent firms to resume co-ordinating their behaviour, as the bureau alleges. To make matters worse, these harms would not be felt equally: As the bureau noted in documents submitted to the tribunal, Freedom customers are more likely to belong to vulnerable populations such as low-income households and new immigrants.
So what are the odds that the alternative path – a negotiated settlement – will protect Canadians? To the casual observer, it may look like the divestiture of Freedom Mobile to Quebecor would be a win for the commissioner, but every gambler knows that appearances can be deceiving.
Quebecor’s current pricing is objectively worse than Freedom’s, even when factoring in the bundles it offers in its home province. While Quebecor has attracted about a fifth of Quebec’s wireless customers away from the big three national carriers, its odds of replicating this success are much slimmer in B.C., Alberta and Ontario, where it loses not only the crucial ability to attract customers with bundled discounts, but also the efficiencies associated with operating overlapping wireless and wired broadband networks.
Allowing Quebecor to take over Freedom would leave consumers in the wireless markets of those three provinces worse off than if Shaw were to continue operating independently. The harms of the merger would be particularly pronounced in B.C. and Alberta, where Shaw Mobile has provided consumers with deeply discounted service that has not been matched by any other provider in the country, and whose customers Quebecor has to date refused to bring over as part of the deal.
It should not be unthinkable that the Shaw family and other shareholders be prevented from cashing in their chips at the expense of Canadians. On its own, the company is not merely a going concern, but a highly profitable conglomerate that provides services for which demand is exploding.
We should remember that the commissioner is tasked with protecting competition, not negotiating side deals to please shareholders. While one can speculate whether Mr. Boswell’s efforts to block the merger are really just a high-stakes gambit to rewrite Canada’s competition law, there is a much simpler explanation: He is simply trying to do his job.
The Rogers outage has given us an unfortunate but pertinent reminder of the importance of a reliable telecommunications market. To maintain and improve that reliability, Canada needs to encourage competition rather than allow consolidation that could expose even more consumers to these rare but ultimately inevitable events.
So instead of pursuing a remedy that gives up on existing competition in the hope that another player might one day fill the void left in the wake of the merger, the best outcome for Canadians in this saga is one word from the commissioner to the Rogers and Shaw families: No.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.