Potential Rogers-Shaw merger will further reduce competition among Canadian telecoms
Four companies hold all the power
It’s no secret that Canada’s $72.5-billion telecom industry is severely lacking when it comes to service and customer choice. In fact, according to the Financial Post, the Canadian telecom market is one of the most heavily protected in the world and is almost completely devoid of substantial economic competition. The Canadian telecom market has been dominated by a small number of major companies for much of its existence. So much so that a Bell system, named for Canada’s oldest telecom corporation, has come to serve as a stand-in for a so-called natural monopoly. Last week, media conglomerate Rogers Communications offered to buy out of one of its top four competitors, Shaw Communications Inc., in a deal estimated to be worth between $20.4 and $26 billion, a move which would limit the playing field even more and give the corporation a greater level of market control.
The telecom industry has been very limited for Canadian customers for some time. For example: most Canadian telecom giants, including Shaw, Rogers, and Telus, operate almost exclusively within separate sectors of the market with little or no room for competition. Canada’s telecom market maximizes profits for a few industry giants at the expense of consumer choice and market accessibility. As a result, Canadians across the country are faced with two or, at most, three options in regards to telecom providers, and it is no accident that telecom prices in Canada are amongst the highest in the world. One of the reasons for this is that Canada does not allow mobile virtual network operators (MVNOs), which are wireless providers that don’t own their own cellphone networks and instead lease access from the big telecoms at wholesale rates and then sell plans to the public. There are numerous MVNOs in the US and Australia, where there is less strict regulation. Currently, Australians pay about half as much for wireless access as Canadians do.
The public reaction to the proposed buy-out has been resoundingly negative, with the Canadian Competition Bureau telling Bloomberg News Network that the response has been “unprecedented.” Several petitions from Change.org and publications including North99 and Passage have drawn thousands of digital signatures, all of which call on Minister of Finance Francois-Philippe Champagne and the Liberal government to uphold their promises regarding affordable wireless and internet pricing. The consumer advocacy group, OpenMedia, has also called for the proposed merger to be blocked. The deal is set to be reviewed by the federal government in May, and the possibility of a potential block by the Liberals is still in the air, although Rogers’ President and CEO Joe Natale has said he is confident the deal will go through. In the current situation, the telecoms hold tremendous power. In the past, one of the giants, Telus, has threatened to cut thousands of jobs and billions in spending if the government opens the door for more competition, demonstrating the stranglehold the corporations have on the Canadian economy, whether Canadians are buying their products or not.