CRTC’s regulatory policy plays central role in Rogers-Shaw closing arguments

In the drama that has unfolded in front of the Competition Tribunal over the past month, as the tribunal hears arguments on whether or not it should approve Rogers Communications Inc.'s $26 billion plan to buy Shaw Communications Inc., an unexpected character has been the CRTC's third-party internet access (TPIA) regime. A central part of Rogers' and Shaw's argument before the Competition Tribunal is that Quebecor Inc. – as the company's hand-picked divestiture partner for Shaw's wireless brand Freedom Mobile – will be just as vigorous and disruptive a competitor in the west not only as it is in its home territory of Quebec, but as Shaw has been. In order to bolster that case, the merging parties have repeatedly pointed to a series of agreements Rogers has signed with Quebecor to help the Quebec-based company launch its mobile service in the west. The agreements include favourable conditions for Quebecor, including discounted roaming on Rogers’ networks, multi-year access to fibre backhaul for all of Freedom’s cell sites, a multi-year discounted TPIA arrangement, and combined spectrum to launch Freedom’s 5G service. But according to Competition Bureau lawyers, who are advocating a full block of the merger, the Competition Tribunal should take "no comfort in the contractual arrangements the respondents have." "These remedies are neither available under the act, nor are they effective," bureau lawyer Alexander Gay told the tribunal in the Bureau's closing arguments Tuesday. "Being asked to accept remedies that the tribunal cannot supervise or enforce must be a non-starter for the tribunal." Gay went on to criticize the CRTC's TPIA regime, arguing that it was not a strong enough business model upon which Quebecor can base its plan to replace Shaw in the west when it comes to bundling wireless with wireline service. "Even with the discount that videotron negotiated for TPIA, the evidence is that TPIA does not provide a viable business alternative to the owner economics of a converged wireless-wireline business," Gay said, pointing to redacted evidence from Shaw which Gay said shows that the lifetime value of a bundled wireless-wireline network is vastly higher than that of a TPIA customer. The renter's economics of the a TPIA business will not allow Quebecor to compete effectively, Gay said. But aren't these rates regulated by the CRTC, Competition Tribunal member Ramaz Samrout asked. "There is a methodology that the CRTC has been – I hate to put it this way, but I would have to say – struggling or maybe even bumbling over for the last seven years," Gay responded. "They've been back and forth, up and down to the Federal Court of Appeal. The CRTC is reconsidering its own decision, it's been petitioned to cabinet, it's back and forth." Pointing to the sale of VMedia Inc. to Quebecor, and Distributel Ltd. to BCE Inc., Gay acknowledged that there is a rate setting procedure, "but frankly, its going nowhere." "There are outstanding decisions with regard to disaggregated service. The regulation is really a quagmire, it's not going to provide a stable price that businesses can plan for." For Quebecor's lawyer, however, the Competition Bureau's arguments about the TPIA regime is "paternalism at its highest." On behalf of Quebecor, John Rook Wednesday in his own closing argument defended the CRTC's regulatory framework, and pointed to the CRTC's mandated seamless roaming, tower access, and aggregated wholesale service. "All of that, in my humble submission, is relevant. Not because it fetters the discretion of the tribunal, but because it provides you with a framework, if you will, in which to analyze and consider whether what my client is proposing to do is realistically achievable," Rook told the tribunal. Even where the CRTC does not regulate, Rook argued with regards to the provision of fibre, this is evidence of ample competition in the marketplace. If Rogers' provision of fibre services to Quebecor is not adequate, he continued, there are other providers who could step in to provide Quebecor with backhaul upon which to build its business in the west. "On that basis, you can take some comfort that there is some regulatory oversight under the Telecommunications Act," Rook said. Rogers lawyer Jonathan Lisus Wednesday provided a number of examples of successful companies using leased fibre infrastructure upon which they have built businesses, and also defended the CRTC's TPIA framework and regulation of the sector. "The Commissioner asks you to waive away some 20-odd years, or 30 years of CRTC policy that is an entrenched, embedded part of the industry," Lisus told the tribunal. Lisus mocked what he characterized as the Competition Bureau's argument that these favourable agreements between Rogers and Quebecor for the launch of Freedom under Quebecor's ownership were a trap for Quebecor to make it dependent on Rogers. "Monsieurs Péladeau and Lescadres think they understand their business and their customers and their market. But they don't. The Commissioner knows best. They're too gullible to see they are being trapped." -Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Jenna Cocullo at jcocullo@thewirereport.ca.

CRTC’s regulatory policy plays central role in Rogers-Shaw closing arguments

Broadcast | December 16, 2022

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CRTC’s regulatory policy plays central role in Rogers-Shaw closing arguments

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