In March 2021, Rogers and Shaw announced they were merging. Valued at $26 billion, the deal between two of the country’s largest communications conglomerates will be the sixth-largest in Canadian history. Once the combination is approved, Rogers will emerge with a significantly more powerful position across the lucrative, highly concentrated markets in which it operates.

Those in favour of the deal are spinning it as a straightforward case of “bigger is better.” As Edward Rogers, chairman of the board, recently told regulators: “Today’s telecommunications networks need scale to compete on the world stage.” On the other hand, independent observers (myself included) and scholars have warned that mergers such as this result in higher prices, less innovation and fewer choices for consumers.

The takeover needs approval from three regulators: the Canadian Radio-television and Telecommunications Commission (CRTC), which examines only the broadcasting aspects of the merger; the Competition Bureau; and the Innovation, Science and Economic Development (ISED) Department, which controls the transfer of spectrum licences used for mobile telecommunications. The likelihood that all three agencies will approve the merger — despite the harm that will result — is a clear sign that we need reform in our institutions overseeing competition and communication.

The deal will see Rogers gain control over Shaw’s broadband infrastructure — a sprawling network that underpins the provision of internet access and cable television services in cities and towns from Manitoba west through to the Strait of Juan de Fuca. Rogers will also gain ownership over national satellite TV provider Shaw Direct, and crucially it will absorb Shaw Mobile as well as Shaw’s Freedom Mobile, eliminating the competitive threat it faces from the upstart carrier in B.C., Alberta and Ontario’s wireless markets.

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Because the relevant authorities examine deals like this through narrow lenses, it’s unlikely that they’ll be too concerned with the change in ownership in internet and television distribution markets. Placing a network that spans half the country into the hands of one organization may seem like a bad idea from the perspective of media diversity, but the economics are the overriding concern. In terms of competitive dynamics, Rogers will simply be replacing Shaw in its former markets, with no change in the overall number of service providers resulting from the transaction.

What this means for home services is that you won’t notice much change other than the letterhead on your monthly bill. If you had a choice between Telus and Shaw as your internet provider before the deal, soon you’ll choose between Telus and Rogers instead. After the deal goes through, western urban markets will still be predominantly split between the telephone and cable company (with fringe options sometimes available), while those living in rural areas will continue to have limited, costly options for connectivity.

What does raise a red flag too obvious to ignore for competition and communication policy-makers is the loss of Shaw as a check on the dominance of the “big three” national mobile carriers. For more than a decade, successive governments have doggedly sought to shake loose the “market power” collectively enjoyed by Bell, Rogers and Telus – that is, their ability to charge too much for access to services that we all agree are essential for modern life.

The main approach to addressing Canada’s long-suffered wireless woes has involved the use of policy directives, favourable licensing arrangements for “new entrants” and regulation, regulation and more regulation — all in an effort to break down steep barriers to entry for new companies and to ensure that services are affordable for people and sustainable for providers.

There is plenty of evidence that these efforts are beginning to bear fruit. An expert report conducted for the Competition Bureau in 2019 found that “In areas where the regional competitor has at least a 5.5 per cent penetration, Rogers and Bell generally offer lower prices, bigger plan limits and lower plan limit-adjusted prices.”

This is certainly true in Quebec, where regional player Vidéotron’s market share sits at about 20 per cent. Consumers who live there benefit from lower prices and a greater range of choices than those in other provinces, not just from Videotron but from the national carriers who have responded to the competitive challenge with better offers of their own. According to the Canadian Media Concentration Research Project, Shaw’s share of subscribers in B.C., Alberta, and Ontario reached 8.8 per cent in 2020, a sign of progress.

A two-year price study that I conducted on behalf of a coalition of public-interest groups (the Public Interest Law Centre, Consumers Association of Canada-Manitoba Branch, Aboriginal Council of Winnipeg and Harvest Manitoba) shows that Shaw’s Freedom Mobile brand consistently offered more data for less money than any of its competitors, and that the incumbents had moved to match its offers.

Statistics Canada reports that mobile prices have come down in comparison to the consumer price index, and although some might think this is because the government asked nicely, the real explanation is obvious: competition is working.

Allowing Rogers to simply absorb an upcoming rival at the moment Rogers finally starts feeling some pressure would be exactly the wrong thing to do. Not only would much of the progress we’ve seen to date be undone, but it would make it very hard (if not impossible) for any new challenger to emerge and compete effectively.

Once Freedom Mobile and Shaw Mobile are gone, there will be no countervailing force in Ontario, B.C., or Alberta capable of stopping the national carriers from collectively exercising their ability to raise prices, as the Competition Bureau and CRTC have repeatedly found they are able to do when there is no strong regional competitor.

What Rogers is asking — both in terms of its scope and its justification — is audacious, but you can’t blame it for trying. For government, on the other hand, permitting the merger will be hard to explain. There are aspects of the transaction that are clearly harmful to competition, and although Rogers is trying to paper over them with promises of good corporate behaviour, there really is no plausible remedy.

Selling off Freedom Mobile would be a mistake. A big part of why companies like Shaw in the west and Vidéotron in Quebec have achieved success as entrants is because they already have extensive complementary resources, most importantly existing network infrastructure in much of where they operate. (Indeed, Rogers wants to buy Shaw’s network in large part to help expand its own 5G network.) An independent competitor created by regulation and without such access is doomed to fail, as the experience with Xplore Mobile in Manitoba is once again demonstrating.

In short, approving the merger will require the government to do an inexplicable about-face on more than a decade’s worth of painstaking policy and regulatory efforts aimed at bringing balance to telecommunications markets. When this happens (as I believe it will in the coming months), it will spell more than just trouble for Canadian consumers, who already pay comparatively high rates for service. It will be an unmistakable sign that the institutions we trust to protect the public from concentrations of private power and promote competition are in stark disarray and in need of reform.

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Some changes are already underway. Although it will come too late for this merger, a review of the Competition Act has been announced. Any such undertaking should start by revisiting the inclusion of an “efficiency defence,” an internationally unique clause that allows the Competition Bureau to approve competition-killing and job-killing mergers if the companies can demonstrate sufficient gains in efficiency.

The Competition Bureau itself has identified a list of priorities for change that amount to an admission that it is fighting with one hand tied behind its back. This list notably includes eliminating the efficiency defence as well as other structural and behavioural approaches to improving its ability to do its job.

There are other flaws that urgently need to be addressed at the nexus of telecommunications and competition policy. The CRTC strangely has no legislative powers or mandate to review mergers such as this one, even though they fall squarely under its expertise and remit to enhance the “efficiency and competitiveness” of sectors such as internet access and mobile.

How can the regulator do its job without the ability to intervene when companies it oversees seek to merge? At a bare minimum, any review of Canada’s approach to competition should ensure that regulators with specialized expertise have a role to play in major developments that affect the structure of markets they oversee.

To its credit, the CRTC does hold its hearings in public, which is not exactly the case for the Competition Bureau or ISED. Bringing our policy-making up to date for the 21st century should mean bringing transparency to these processes so that democratic deliberation, rather than opaque deal-making, are the forces driving decisions.

I would be glad to be proven wrong about the outcome of this merger. I think the right thing for authorities to do would be to reject it outright. But that isn’t going to happen. As it stands, unfortunately, the deck is stacked in favour of these types of deals, and until there is some real reform, Canadians should expect to keep getting dealt the same bum hand.

This article is part of the Canada’s Competition Law is Overdue for an Overhaul special feature series.

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Ben Klass
Ben Klass is a PhD candidate at Carleton University’s School of Journalism and Communication, and a research associate with the Canadian Media Concentration Research Project and consultant. Ben is on Twitter @benklass

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