The Rogers-Shaw deal is done. What happens next for Canadian consumers, telecom – National

The Rogers-Shaw deal is done. What happens next for Canadian consumers, telecom – National

Two years after it was first announced, Rogers Communications Inc.’s takeover of Shaw Communications Inc. is complete.

Days after the transaction received final sign-off from Industry Minister Francois-Philippe Champagne, Rogers and Shaw made it official: two major Canadian telecom companies are now one, with a fourth player set to expand to the national stage in the months ahead.

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Rogers-Shaw merger closes, forming new telecom giant

The $26-billion deal marks a fundamental shakeup to Canada’s telecommunications sector, with major implications for Canadians’ phone bills.

Here’s everything you need to know.

What the final Rogers-Shaw deal looks like

Rogers first announced plans to acquire Calgary-based Shaw in March 2021, but that proposal is significantly different from what was approved Friday.

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To appease concerns about a lack of competition arising, part of the deal includes Shaw selling off its Freedom Mobile wireless business to Quebecor Inc.’s Videotron in a deal valued at $2.85 billion.

The deal will therefore see Videotron acquire all of Freedom’s wireless spectrum licences — the rights to provide high-speed internet services in certain parts of the country — and its existing customers and outlets in Alberta and B.C., thus giving the Quebec-based carrier a major presence in the western Canadian market.

Rogers will meanwhile expand its market share from a predominantly eastern Canada focus into the west on the back of Shaw’s wireline, or cable and internet, business.

The deal is valued at a total of $26 billion, including about $6 billion of Shaw’s debt.

Champagne applied a number of conditions to the deal before giving his sign off. That includes Rogers keeping Shaw’s Calgary headquarters and hiring 3,000 additional staff and maintaining that headcount for 10 years. The company is also tied to $6.5 billion in investments over the coming decade to expand internet connectivity.

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Videotron, meanwhile, has to provide services that are, on average, 20 per cent more affordable than other national carriers over the same timeframe.

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If Rogers violates any of these rules, it would be charged a penalty of up to $100 million per year to a maximum of $1 billion over the coming decade. If Videotron fails to live up to the conditions, its penalties amount to $20 million per year to a maximum of $200 million.

Motorcycle accident toronto today parent company Corus Entertainment is owned by the Shaw family, previously the owners of Shaw Communications.

Why did the minister approve it?

The Competition Tribunal, a judicial body responsible for ensuring mergers respect Canada’s competition laws, signed off on the deal on Dec. 30, 2022. A Federal Court of Appeal upheld that decision in January after the Competition Bureau, an independent agency which promotes fairness and represents consumers in major mergers, sought to have it overturned.

The Competition Bureau’s case centred on what it argued were legal errors in the tribunal’s judgment, including that the decision should have weighed the original version of the deal, before the divestiture of Freedom Mobile. The appeal court judge rejected this assertion and said the tribunal was not bound to weigh any particular version of the deal.

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After that, the sole remaining sign-off for the deal was in Champagne’s hands. He had previously held back allowing the transfer of spectrum from Freedom to Videotron until he was satisfied with the conditions imposed.

He said Friday that the “driving force” behind his decision-making was getting lower wireless prices for Canadians.

Click to play video: 'Rogers takeover of Shaw approved by Ottawa: Minister Champagne'

Rogers takeover of Shaw approved by Ottawa: Minister Champagne

Michael Osborne, competition lawyer with Cozen O’Connor in Toronto, tells Motorcycle accident toronto today that after “arguably the most complex merger review ever seen in this country,” Canadians should know the overall process was “as good as it gets.”

“We should have confidence that the process was followed. The decision is solid,” he says.

Why Canadians pay so much on their phone bills

Canada’s wireless prices have overall been dropping in recent years, according to data from Statistics Canada.

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The agency’s Cellular Services Price Index dropped 32 per cent between Dec. 2018 and Dec. 2022, while the overall Consumer Price Index rose 15 per cent over that time.

Gerry Wall, CEO of Wall Communications and a veteran of the Canadian telecommunications industry, confirmed to Motorcycle accident toronto today in an interview that wireless prices in Canada have largely declined in the past three to four years. He chalked this up largely to improvements on the technical side, which make delivering data to consumers more efficient.

But while it’s hard to make apples-to-apples comparisons between wireless plans, Wall also attests to what many consumers in Canada have often felt: Canadians still tend to pay more on their cell phone bills than most jurisdictions worldwide.

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There are a few reasons why Wall believes prices are so high in Canada — the cost of offering services across the country’s expansive geography among them.

But he also says market dominance among the industry’s main players — the so-called “big three” of Rogers, Telus and Bell — is likely one factor fuelling higher prices in Canada.

“Canada is one of the most, if not the most, concentrated country in the world in terms of its telecom landscape,” Wall tells Motorcycle accident toronto today. “There’s a danger there.”

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How will the deal affect wireless prices?

For the tribunal’s part, it found that in the short term, approving the merger would not see wireless prices rise significantly in Western Canada.

Economist projections prepared for the tribunal predicted that Freedom Mobile prices in the market would drop under the Videotron banner, while other providers might see modest but not ultimately not “material” increases.

But Michael Geist, Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, is unconvinced that consumers will be better off long-term after the merger is settled.

He says there may be a “honeymoon period” in the immediate aftermath of the deal closing where prices either don’t change or fall slightly, but adds that, “long term, less competition is never good for pricing and that’s really what we’re facing in Canada.”

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Click to play video: '‘I’m not holding my breath’: Rogers-Shaw deal may not lower prices, economists say'

‘I’m not holding my breath’: Rogers-Shaw deal may not lower prices, economists say

The deal hasn’t been politically easy for the Liberals, spurring tension with the NDP who keep the government aloft through a supply-and-confidence agreement.

NDP Leader Jagmeet Singh wrote to Champagne on Feb. 12 urging him to reject the deal.

He argued the proposal has already driven consolidation in telecom, with Bell preparing to compete against the larger Rogers by acquiring internet service providers Distributel and EBOX.

“Only telecommunications firms stand to benefit from this merger — at the expense of Canadians,” Singh wrote.

Discussions about competition sometimes assume Shaw would continue to compete without the deal going through, says Ben Dachis, associate vice-president of public affairs at the CD Howe Institute.

But Shaw has made it clear through the proceedings that its wireless business might not survive without the merger, with the tribunal finding it may no longer be a “viable competitor” in the future.

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The company’s executives have claimed Shaw would not be able to make the kinds of capital investments needed to keep up with technological advancements such as the introduction of 5G networks, for example.

Dachis says because of that there’s “no point” in imagining a future where Shaw and Freedom Mobile are still operating independently when considering whether this merger is good for Canada’s telecom sector.

Wall says that in a scenario like the one presented where Rogers ends up taking control of Shaw’s wireline or cable business, the “best outcome possible” Canadians could hope for on wireless pricing is seeing Videotron take over Freedom’s business.

“Their best chance of getting lower prices, different types and better services, I think will come from Videotron,” he says.

He added that he thinks Champagne’s conditions are a “move in the right direction.”

Click to play video: '‘Liberals love to suck up to big oligopolistic corporations’: Poilievre opines on Rogers-Shaw deal approval'

‘Liberals love to suck up to big oligopolistic corporations’: Poilievre opines on Rogers-Shaw deal approval

What the deal could do for competition in the industry

At the heart of the Rogers-Shaw merger’s impact on telecom pricing is the question of competition: will there be more competition in the market driving down prices?

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Put another way, is the introduction of Videotron’s wireless services into the market enough to offset concerns about Shaw’s exit and Rogers getting bigger?

The companies involved in the transaction have insisted the deal is “pro-competitive.”

Meanwhile, experts and consumer advocates who spoke to Motorcycle accident toronto today are divided.

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On one hand, a new near-national fourth competitor in Canadian telecom is “extremely exciting” for affordability in telecom, Osborne says.

Videotron’s introduction isn’t exactly good news for Rogers, he notes. The original version of the deal didn’t see Freedom Mobile sold off — to get this merger approved, Rogers had to give up some leverage and help introduce more competition into its own market, he says.

“Rogers effectively was forced kicking and screaming, as it were, to bring what I think was the only viable divestiture partner, Videotron, to the table,” Osborne says.

Keldon Bester, co-founder of the Canadian Anti-Monopoly Project, says that a bigger Videotron doesn’t necessarily make up for the loss of Shaw as the overall number of carriers in Canada’s telecom sector dwindles.

“We have this story about Videotron being able to replace or even enhance competition. But we are losing a telecom carrier and the future of competition is more uncertain than ever,” he tells Motorcycle accident toronto today.

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Rogers’ main competitors, Bell and Telus, have also argued against the deal. But the tribunal used their opposition itself as fuel for the approval, writing that, “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.”

Will the penalties be effective?

Bester concedes that “it’s entirely possible that Videotron is a strong competitor” but he says there’s significant “uncertainty” about whether the carrier can make good on the promise of being a strong fourth competitor for a decade or more.

He says there’s a “phenomenal amount of risk” that the conditions imposed on the deal aren’t met or can’t be enforced as Ottawa is pitching. He’d like to see more clarity on the metrics of how pricing patterns will be measured and timelines for instituting some of the conditions.

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Geist notes that many of the expectations placed on Rogers, such as making investments in 5G networks, were likely decisions the company would have taken on itself as “table stakes” for competing in the modern telecom sector.

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He says that by placing so much emphasis on these conditions, he believes the government is tacitly acknowledging that it doesn’t think approving the Rogers-Shaw merger on its own would effectively lower prices.

“I think deep down the minister and the government know that they’re trying to sell something that is not a good news story,” he says. “It’s largely illusory.”

While the deal passed every legal hurdle that was thrown at it, for Bester, that is less a testament to the pro-competitive nature of the deal and more a mark of the “poor state of Canada’s competition laws.”

“We should expect to find ourselves here again. Maybe it’s a different sector, maybe it’s wireless again, there will be another mega-merger and we’ll once again be on the sidelines watching it go by and attempting to attach these conditions,” he says.

Click to play video: 'Federal opposition still not on board with Rogers-Shaw deal'

Federal opposition still not on board with Rogers-Shaw deal

Osborne agrees that the conditions placed on the deal are largely “political theatre” — though he notes that doesn’t necessarily mean the companies won’t follow them.

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Maintaining staff in Western Canada was already a commitment Rogers made on the record, and now Champagne is just telling the telecoms to put their money where their mouth is, he says.

Champagne also said he’d undertake a new review of Canadas’ telecom industry to ensure the existing framework for spectrum licence transfers is appropriate for setting prices in the modern market.

But Osborne believes this impulse, that Ottawa should tell any industry how to operate rather than letting the market decide, is “not historically a winning formula” for an efficient, competitive economy.

Citing the Competition Tribunal’s findings, he says that Videotron’s desire to compete and succeed in the market as a lower-tier provider will give consumers, particularly in Western Canada, a greater range of choices for their wireless plans.

“There seems to be an impatience with using the free market system that we have to provide competition, to provide that price regulation,” he says.

In announcing his approval of the deal on Friday, Champagne seemed to take both sides of the argument, saying, “the way to drive down prices is through competition,” but also defending his conditions as necessary guardrails to prevent the companies involved from reneging on their commitments.

Champagne ended his announcement with a message directly to telecom companies, saying the reason he would not accept the original proposed spectrum transfer between Rogers and Shaw was to ensure there was more competition in telecom.

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He threatened that if market forces don’t deliver “meaningful” price reductions for Canadians, he’d turn to regulation to get the job done.

“I will have no choice but to seek further legislative and regulatory powers to drive down prices in Canada. And I can tell you that everything is on the table.”

— with files from Motorcycle accident toronto today’s Anne Gaviola

Click to play video: 'Albertans react to Rogers’ takeover of Shaw'

Albertans react to Rogers’ takeover of Shaw