Videotron more effective owner of Freedom than Shaw, expert testifies

An expert witness for Shaw Communications Inc. took issue Monday with earlier testimony from Competition Bureau experts over the proposed takeover of the western telecom by Rogers Communications Inc. The Competition Tribunal is hearing from respondents’ witnesses this week. William Webb is chief technology officer at British consulting firm Access Partnership. He disagreed with bureau expert Nathan Miller who maintained that Shaw’s Freedom Mobile would be stronger remaining under Shaw control, rather than being sold off to Quebecor Inc.’s Videotron division. “If Freedom were to move onto Videotron’s ownership then you have access to all of the assets and services that it needs to be as effective a wireless competitor as it would do if it stayed,” Webb said. “And those assets include spectrum, they include cell towers, they include access to backhaul services, they include core networks, essentially everything you would need.” Quebecor is a more effective owner because it owns spectrum in the 5G band, the British expert added. The cost of deploying a 5G network would be reduced under Videotron control. Subscribers expect the faster network, the veteran of the British telecom regulator Ofcom explained, and Freedom, which does not currently offer 5G, would lose customers or fail to gain new ones without the upgrade. Webb also disputed Michael Davies’s testimony on behalf of the Bureau which stated that spectrum is not the most important component of a wireless network. Spectrum is critical, Webb said, because it is only made available at certain times through government auctions and access to it is uncertain. “A radio transmitter by itself is useless because without a license for spectrum, it’s illegal to turn it on,” he noted. “Similarly, spectrum by itself is useless if you don’t have a radio transmitter to transmit it. So it’s actually the two put together that provide you with capacity.” Bureau lawyer Antoine Lippé read a quotation to Webb that said wifi is preferred in offering wireless service because cellular is expensive to roll out. When Webb said the statement should be more nuanced, Lippé revealed he was quoting from one of the expert’s books. Webb responded that the 2016 reference was a prediction – ”One that I got wrong” – and that it referred to in-building service rather than general network use. The British expert conceded that he has not done a great deal of work in Canada and that his findings are based on global trends rather than those specific to this country. He added that as a general rule a company does not need to own its own wireline network to effectively provide cell service. Webb was followed by Andy Harington, an accountant who is a principal with the Brattle Group consulting firm. Harington was called by Rogers to bolster its case. He has a long history of testifying in competition cases, both for the Bureau and for respondents. He did work on BCE Inc.’s purchase of MTS Inc. in 2017. Rogers attorney Brad Vermeersch asked him about that work and its outcome. “Did you submit a report to the Bureau quantifying the section 96 efficiencies in that transaction?” “I did” Harington said. “And did the commissioner bring an application to block BCE’s acquisition of MTS?” “They did not,” came the reply. Rogers has been arguing that efficiencies it will reach through the Shaw merger are beneficial and should permit the takeover to be approved. Harington said he disagreed with Bureau witnesses who opposed the merger. The hearings are scheduled to conclude this week, but Chief Justice Paul Crampton did complain that the tribunal was backlogged with witnesses. Analyst reactions to the hearings have tended to favour the takeover. In a note from the National Bank of Canada, analyst Adam Shine pointed out that we now know that Videotron hopes to roll out 5G within three months of acquiring Freedom and that its arrangement with Rogers will allow for four years of free backhaul. Shine was surprised at the way Bureau lawyers continually raised the question of material gains by Rogers and Shaw family members and executives should the deal proceed. “It shouldn’t come as a surprise that senior executives involved in a merger are likely to benefit financially, as one side is part of a takeout and transition and the other is tasked with integration,” he wrote. The analyst suggested the Competition Bureau, which he abbreviates to CB, would have been better to look at Shaw’s wireline performance and continued loss of market share to Telus Corp. Rogers may not be able to do better but it probably won’t do worse, he opined. “We don’t think it’s a big stretch for anyone to reflect on this regulatory review by the CB and wonder if engagement by the regulator this summer and work towards a negotiated settlement would have resulted in more concessions from the companies and a better net outcome for consumers over and above what might result from a Tribunal verdict that allows the deals to go through following ISED approval,” Shine concluded. –Reporting by Paul Park at ppark@thewirereport.ca and editing by Michael Lee-Murphy at mleemurphy@thewirereport.ca

Videotron more effective owner of Freedom than Shaw, expert testifies

News | November 29, 2022

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Videotron more effective owner of Freedom than Shaw, expert testifies

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