Industry Minister François-Philippe Champagne has been taking a hard line with the big three tech companies.Heywood Yu/The Globe and Mail
Folks, I’m starting a telecom drinking game.
Each time Industry Minister François-Philippe Champagne says he wants to be “crystal clear” about Canada’s plan to promote wireless competition – but isn’t – please join me in taking a shot of Sortilège.
That sweet liqueur, a blend of Canadian whisky and maple syrup, may not be your drink of choice. But perhaps it’s the made-in-Quebec elixir that will help us make sense of Mr. Champagne’s pronouncement that he expects wireless prices to fall in other parts of Canada if he approves two transformative deals.
At issue is Rogers Communications Inc.’s proposed $26-billion acquisition of Shaw Communications Inc. and the related sale of Shaw-owned Freedom Mobile to Quebecor Inc. for $2.85-billion.
Mr. Champagne wants Canadians to believe that his ministry, Innovation, Science and Economic Development Canada (ISED), is taking a hard line with all three companies. So, he called a press conference on Tuesday evening to disclose that he has officially rejected Rogers’s request to acquire all of Shaw’s wireless licences and plans to impose conditions on Quebecor’s acquisition of Freedom Mobile.
Mr. Champagne, of course, has the power to approve or deny spectrum licence transfers between companies. (Spectrum refers to the radio waves that carry wireless signals.) But his announcement was thin gruel dressed up as news.
Canadians already knew that Mr. Champagne would deny the wholesale transfer of spectrum licences from Shaw to Rogers because he offered that spoiler earlier this year.
Similarly, his decision to impose conditions on Freedom Mobile’s divestiture was all sizzle and no steak. That’s why Quebecor’s CEO, Pierre Karl Péladeau, was amenable to incorporating Mr. Champagne’s stipulations into his company’s deal.
Sure, Mr. Champagne offered tough talk about how Quebecor’s Videotron unit would be required to hold on to Freedom Mobile’s wireless licences for at least 10 years. But his failure to impose stricter deployment requirements on Quebecor means that Ottawa has effectively given the Montreal-based company its blessing to hoard those licences.
Spectrum is a scarce public resource and its value will only appreciate over time. That means Quebecor has an incentive to use the bare minimum in its network and flip any fallow airwaves once the standstill period expires in a decade.
After all, that strategy has proved lucrative for Quebecor in the past.
Back in 2008, for instance, Videotron purchased a block of advanced wireless services spectrum in Toronto for $96.4-million. It sold those fallow airwaves to Rogers in 2017 for $184.2-million, earning a profit of $87.8-million.
That same year, Videotron made a $243.1-million profit after selling seven 700 MHz and 2500 MHz spectrum licences it had acquired in Southern Ontario, Alberta and British Columbia to Shaw.
Are we really to believe that Quebecor plans to deploy all of Freedom Mobile’s spectrum in addition to the 294 wireless licences of 3500 MHz spectrum that Videotron purchased in a government auction last year?
ISED should be closing loopholes that allow carriers to resell unused spectrum for profit. Its failure to do so as part of the Freedom Mobile sale was a misstep to say the least.
So, from now on, every time Mr. Champagne utters the word “spectrum,” let’s soothe ourselves by taking two shots.
Although the federal government boasts about its “use it or lose it” spectrum rules for carriers, Canada is lax on enforcement.
ISED rarely revokes wireless licences because of non-compliance. In fact, there are only two public notices on its enforcement web page, which hasn’t been updated in four years.
What’s more, Mr. Champagne’s stipulation that wireless prices in Ontario and Western Canada must fall and become comparable to what Videotron offers in Quebec – which he estimates to be on average 20 per cent lower than in the rest of Canada – amounts to more hot air.
After all, Ottawa has refrained from regulating retail prices of wireless services for almost 30 years.
The Canadian Radio-television and Telecommunications Commission, the federal telecom regulator, originally decided against regulating the wireless sector in 1994, opting instead to allow market forces to steer the industry’s growth.
Those dormant regulatory powers, though, still remain in the Telecommunications Act, meaning the CRTC can still exercise its authority over such matters if it chooses. But it will never do so because carriers would slash network investments and jobs if the regulator suddenly took a hands-on approach to retail price regulation.
Henceforth, whenever Mr. Champagne pledges to make wireless services more affordable for all Canadians, let’s down three shots to follow his logic.
No more half-measures. No one actually believes that wireless prices will fall after these two deals close.
Instead of serving up more spin about the government’s commitment to wireless competition, Mr. Champagne should consider relaxing the foreign investment rules for large telecoms so they will be forced to compete with the best in the world.
Enough of the telecom tipple. It’s time for open markets to be our chaser.