Yahoo Finance Champagne's threat: Can the industry minister really force big telcos to lower phone bills?
In the process of giving his blessing to the Rogers-Shaw deal, Industry Minister François-Philippe Champagne also issued a threat to the entire telecommunications industry in Canada. He said he would allow Shaw Communications Inc. to sell Freedom Mobile to Quebecor Inc.’s Vidéotron, which cleared a path for Rogers Communications Inc. to finish its $26-billion deal to take over Shaw.
Champagne said he had also secured commitments that will effectively enshrine Freedom/Vidéotron as a legitimate fourth player with the wherewithal to force the other three to compete on price. Then came the threat.
If cellphone bills don’t get cheaper with Vidéotron now in the mix, Champagne said, “I will have no choice but to seek further legislative and regulatory powers to drive down prices in Canada.”
But he declined to elaborate much beyond that, so it’s unclear what exactly he was threatening to do.
“I can tell you that everything is on table,” Champagne said during a press conference on March 31.
Ottawa has a long history of talking a lot about creating competition in the telecommunications industry and accomplishing relatively little. So, Champagne’s threat could be hollow. But some appeared to be taking him seriously. Analyst Jerome Dubreuil of Desjardins Group told his clients that he found the minister’s tone “a bit harsher” than he had expected.
What could be done?
But what else could Champagne do?
Theoretically, the government could go as far as pushing for regulated wireless prices or Champagne could open up Canada’s wireless infrastructure to allow more upstarts to get a foothold in the country, according to some lawyers and policy experts.
However at this point, with Rogers now victorious in its two-year saga to take control of Shaw, those experts suggested Champagne’s threat looks like little more than bluster.
“This is just a bunch of handwaving after the minister has allowed the horses to bolt the barn,” said Dwayne Winseck, a communications professor who leads the Global Media and Internet Concentration Project at Carleton University in Ottawa.
Winseck said the industry minister could direct the Canadian Radio-television and Telecommunications Commission (CRTC) to regulate rates for wireless services. But the most effective move available to the minister, Winseck said, was to kill the deal altogether. “It would have been easy to shoot it down,” he said.
The Competition Bureau, which reviews merger deals in Canada, attempted a “full block” of the deal but its case was dismissed late last year by the Competition Tribunal. The tribunal found Rogers’ side deal to sell off Shaw’s Freedom Mobile was enough to alleviate concerns about less competition in the market.
Michael Osborne, head of the Canadian competition practice at Cozen O’Connor LLP, said Champagne’s threats aren’t necessary because the deal will boost competition on its own.
“This is all just show,” said Osborne, who isn’t acting for any party in the Rogers-Shaw matter but routinely provides advice to investors on probable outcomes from the deal.
Freedom sale
In his announcement on March 31, Champagne said before he green-lit the Freedom sale, he pushed Rogers and Quebecor to agree to an “unprecedented and legally enforceable set of commitments” that will turn Freedom into the fourth telecom player that successive governments in Canada have dreamed about for years.
“I want to be clear with everyone that I will ensure that a new fourth national player can go toe to toe with the big three and actually drive down prices,” he said.
Keldon Bester, a co-founder of the Canadian Anti-Monopoly Project and former advisor at the Competition Bureau, said Champagne could do more. One serious move, he said, would be to expand access for new entrants to compete in the wireless market. The CRTC currently allows for companies that don’t own their own infrastructure — known as mobile virtual network operators or MVNOs — to pay to use one of the big telcos’ networks. But some observers say the CRTC rules don’t go far enough.
Michael Geist, a law professor at the University of Ottawa, called the CRTC’s rules “a weak version” of a system that could have injected more competition into the industry. But as it stands, you need to have an existing regional network before you rent service on another network somewhere else in the country. That stops new players from getting into the mix, he said.
“The government stood by and did nothing,” Geist said in an email. “If (Champagne) really could be doing more, why isn’t he doing it now? Why do Canadians need to suffer through years of some of the highest prices in the world?”
Ottawa approves $26-billion Rogers-Shaw merger — with conditions
CRTC asks Rogers for details of network-sharing deal with Quebecor
Fenwick McKelvey, as associate professor of information and communication technology policy at Concordia University in Montreal, noted that the government stayed on the sidelines as some of the bigger players bought upstart internet-service providers in recent years, suggesting the policymakers are comfortable with allowing a relatively small group of larger companies dominate the industry.
“Competition in the sector has declined,” McKelvey said. “If the government seems to have abandoned its market-based approach to the sector, I would hope that new mandates to the CRTC would encourage direct rate regulation and a move to service-based competition.”
With additional reporting from Marisa Coulton.
• Email: jedmiston@postmedia.com | Twitter: jakeedmiston
