House of Commons committee says Rogers’ proposed takeover of Shaw should not proceed

A parliamentary committee says a proposed multibillion-dollar takeover of one of Canada’s largest telecoms should not proceed.

But the House of Commons industry and technology committee says if Rogers Communications Inc.’s $26-billion bid for Shaw Communications Inc. does go ahead, the government should make its conditions attached to the approval “fully enforceable.”

In a report on the proposed merger that was tabled Friday, the committee recommends the affordability and accessibility interests of Canadians should take precedence over all other considerations during the regulatory review process.

The non-binding report says the government should place an emphasis on the importance of Freedom Mobile, Shaw’s wireless carrier, as a fourth wireless provider that competes with the Big Three of Rogers, Bell and Telus.

The deal is under review by three different federal regulators including the Competition Bureau and the CRTC as well as spectrum regulator Innovation, Science and Economic Development Canada (ISED).

The last of the committee’s four recommendations notes that the committee “believes the merger should not proceed,” but says attaching enforceable conditions, including the resources needed for that enforcement, is a must if the deal goes ahead.

The report came a day after Ottawa pledged to block the wholesale transfer of Shaw’s wireless licences to Rogers as part of the deal. Industry watchers had expected that Shaw would have to sell some of these assets as a condition of any approval of the deal.

Experts say the move signals that the federal government is concerned with cellphone bills in Canada – among the highest in the world – and wants to encourage competition.

Yet it’s unclear how stable and sustainable a fourth wireless carrier would be in the marketplace and how much of an impact it would have on prices, they say.

“It’s a good sign in the sense that the government is – at least in theory – keeping the dream of four wireless options alive in Canada,” John Lawford, executive director and general counsel of the Public Interest Advocacy Centre, said Friday.

“But whether the fourth player will be stable and still around in 10 years and how big they’ll be is unclear.”

Quebecor Inc., Eastlink Inc. and Xplornet Communications Inc. could all potentially play a role, he said.

“I don’t think there’s an obvious fourth player that’s going to be quasi-national,” he said. “They might give a chunk to Quebecor and then a little piece to Eastlink out east and maybe some to Xplornet for the north and rural areas.”

The Rogers $26-billion deal to buy Shaw and its Freedom Mobile wireless business has faced stiff opposition from consumer groups, academics and customers.

Federal Industry Minister Francois-Philippe Champagne said Thursday that the wholesale transfer of Shaw’s wireless licences to Rogers is fundamentally incompatible with the government’s policies for spectrum and mobile service competition.

Telecom observers say the announcement was not a surprise to industry players.

“Rogers and Shaw have always recognized this was a very likely possibility and were prepared to deal with that,” said Carleton University communication professor Dwayne Winseck.

“The real crown jewel in this deal is all of the fibre backhaul in Western Canada that Shaw owns as well as the local wireline networks, which are also fibre that connect all of the cell towers.”

If Shaw’s wireless spectrum is spun off, there will be other suitors there ready to take it up, he said. In addition to other regional wireless players, Wind Mobile founder Anthony Lacavera could be interested in throwing his hat in as well, Winseck said.

But the viability of a fourth wireless carrier depends on much more than spectrum, he said.

“You can’t have a viable fourth player without access to the towers, the antennas, the retail fronts and all that back-end technical administrative stuff as well as some kind of rock-solid, ironclad agreement for wholesale access to the backhaul connections,” said Winseck, also director of the Canadian Media Concentration Research Project.

Quebecor called the decision “a step in the right direction.”

“As it stands, the proposed Rogers-Shaw transaction is contrary to the public interest,” Pierre Karl Peladeau, president and CEO of Quebecor, said in a statement.

“As Bell, Rogers and Telus already control 90 per cent of Canada’s wireless market, it is imperative that we create the necessary conditions for real competition in order to give consumers more choice, better prices, better services and more innovation.”

Rogers and Shaw have said they are continuing to work constructively with the government and regulators.

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