Good morning, everyone.
I now call this meeting to order.
Welcome to meeting number 26 of the House of Commons Standing Committee on Industry, Science and Technology.
Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, 2021. The proceedings will be made available via the House of Commons website. Just so you are aware, the webcast will only show the person speaking rather than the entirety of the committee.
To ensure an orderly meeting, I'd like to outline a few rules to follow.
Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. You have the choice, at the bottom of your screen, of floor, English or French. Please select your preference.
Before speaking, please wait until I recognize you by name. I will remind you that all comments by members and witnesses should be addressed through the chair. When you are not speaking, your microphone should be on mute.
As is my normal practice, I will hold up a yellow card when you have 30 seconds left in your intervention, and a red card when your time for questions has expired. Please respect the time allocation so that I don't have to cut you off.
Pursuant to Standing Order 108(2) and the motion adopted by the committee on Friday, March 19, 2021, the committee is meeting today to start a study on the proposed acquisition of Shaw by Rogers.
I'd like to now welcome our witnesses. From Rogers Communications, we have Joe Natale, president and chief executive officer; Dean Prevost, president, connected home and Rogers for business; and Victoria Smith, director of community partnerships, network expansion.
From Shaw Communications, we have Brad Shaw, executive chair and chief executive officer; Paul McAleese, president; and Chima Nkemdirim, vice-president, government relations.
Each witness will present for up to six minutes, followed by rounds of questions. We will try our best today to complete four rounds of questions.
With that, I invite Rogers Communications to present.
You have the floor for six minutes.
Good morning, Madam Chair and members of the committee.
My name is Joe Natale, and I am president and CEO of Rogers Communications.
Thank you for giving me the opportunity to speak to you today.
I am joined by Dean Prevost, president, connected home and Rogers for business; and Victoria Smith, director of community partnerships.
As members know, on March 15 we announced the proposed union of Rogers and Shaw. Both companies were founded more than 50 years ago by two of Canada's greatest entrepreneurs, Ted Rogers and JR Shaw. They were pioneers who shared a commitment to innovation and to building a better Canada.
Today I am proud to say that these commitments are deeply reflected in the cultures of both companies. Canada's networks are among the world's best, a fact that has served us well during the pandemic, as Canadians and businesses were able to quickly pivot to an online world.
We didn't get there by accident. It is a result of billions of dollars of investment from Rogers, our industry, and government partners.
Canada must take the next step now to secure our position as a global technology leader and to ensure our long-term economic competitiveness.
The time has come to move on to the next stage.
That requires a new multi-billion dollar generational investment.
Today, Rogers and Shaw are committed to building this future for Canadians. By coming together, we will accelerate the delivery of critical 5G service and create a new coast-to-coast Internet provider, combining Rogers' and Shaw's operational expertise and quality assets. This will increase competition and continue the current downward trend in prices, while network performance capabilities and coverage will dramatically improve. A recent study using StatsCan data showed that wireless prices have dropped 25% since 2016. The broader rollout of 5G networks will continue this positive trend.
The combined company, with our complementary networks, will deliver 5G services much more quickly and more widely than either company could achieve on its own. The new national fibre network will enable stronger competition and greater scale for large enterprise and government customers, which is needed for Canada’s competitive position. Upgrading our digital infrastructure and accelerating digitization is critical for us to remain competitive. It will create jobs, diversify our economy, strengthen our innovation sector and fuel Canada’s economic recovery.
Investment in Canada will increase through this combination. It has to. In order to keep pace with consumer, educational and business demand for speed and capacity, the pace for investment is accelerating. Today, both companies invest billions of dollars annually in our networks, and the underlying investment in 5G will only go higher as this technology continues to roll out across the country. This is a big task for both companies, but the combined company will be up for the challenge.
This transaction comes at a critical time for the west. As part of the transaction, Rogers is committing to investing $2.5 billion to build 5G networks in western Canada, which will enhance western competitiveness, offer consumers and businesses more choice and improved services, and help close the digital divide between urban and rural communities faster. These investments will create up to 3,000 net new jobs across western Canada, including 500 jobs at a new national centre of technology and engineering excellence in Calgary.
Today, there are two million households in Canada that don’t have access to high-speed Internet. As part of our growing investments, Rogers will commit an additional $1 billion to create the new Rogers rural and indigenous connectivity fund dedicated to connecting underserved communities across western Canada. The opportunity to learn online or participate in the digital economy should not be decided by your postal code. As part of this process, we will consult with indigenous communities to help create new indigenous-owned and operated Internet service providers to leverage our expanded networks and create sustainable local connectivity solutions.
Finally, we will extend our Connected for Success program nationally, delivering low-cost, high-speed broadband to low-income Canadians, including seniors receiving guaranteed income supplements, residents in rent-geared-to-income housing and individuals receiving disability benefits anywhere our combined company offers Internet services.
In summary, we are committed to doing our part to set the table for future generations of Canadians and prepare us for our digital future. The transaction comes at a significant inflection point for Canada and is critical to enabling the investments needed to make national 5G a reality and to close the digital divide.
Together we will build a better Canada.
Thank you for your time.
Good morning, Madam Chair and committee members.
My name is Brad Shaw. I am executive chair and CEO of Shaw Communications. I am joined by Paul McAleese, our president, and Chima Nkemdirim, our vice-president of government relations.
We are pleased to be here today to discuss Shaw joining with Rogers to build a bright and bold future for Canada. In 1971, my dad staked his future on bringing a new cable TV service to a small community near where I was born—Sherwood Park, Alberta—so our neighbours could have real choice in what they watched on TV. I will just let you know that we did start with three channels when we launched our service, so we had a lot of choice there.
Since then, our customers have been the guiding force for our family, our board, and our dedicated team of employees. Our customers are also the guiding force behind the transaction we're talking about here today. Shaw has passionately provided Canadians with cable and satellite TV, phone, Internet and, more recently, wireless services. That passion has been backed by tens of billions of dollars of wireline and satellite investment over the past five decades, and over $7 billion of wireless investment over the past five years.
We are incredibly proud of what we have built and how we have connected Canadians. However, as we look ahead, we see our economy and country at a turning point. We need a new approach. We have to address the scale needed to build the networks of the future. In order for Canada to compete in the digital era, all Canadians, regardless of where they live, need connectivity that leads the world in coverage, resilience, and innovation. This is critical for economic and job growth, as well as for long-term access to the best and most affordable options for consumers and businesses.
Canada's future success depends on a forward-looking approach to connectivity. We need to bridge the digital divide to connect underserved rural and indigenous communities in the west, but we also need to build out a new 5G platform. This is an investment challenge of unprecedented scale. We cannot look backwards, as we might have worked in the past. As we look forward, it is clear that Shaw cannot build what Canada needs on our own. By joining forces with Rogers, I am confident that we can create something extraordinary for Canada.
Over the past several decades, Shaw and Rogers have built powerful cable networks using similar technologies in distinct geographies: Shaw in B.C., Alberta, Saskatchewan, Manitoba and northern Ontario; and Rogers in Ontario, New Brunswick and Newfoundland. Joining these networks through this [Technical difficulty—Editor] provider with the scale necessary to invest in the next generation of converged networks that we need for our future and Canada's future.
This transaction will drive higher levels of investment across the country, but especially in those parts [Technical difficulty—Editor] economically. Combining our companies' unique complement of wireline, satellite, wireless and Wi-Fi assets kick-starts the investment and innovation we need to accelerate and expand to reach 5G and other next-generation networks in the west.
On top of that, the transaction will combine two incredibly talented teams of people. Together, we will be able to compete more effectively and deliver so much more to Canadians than we could if we stayed apart. Competition will intensify, with Shaw and Rogers now able to leverage a national platform. In fact, in recent days, we have already seen certain of our competitors going to the capital markets to raise money to accelerate investment in broadband and 5G.
The entrepreneurial spirit that defines the west is firmly rooted in my family, and in our company's DNA. As we were considering this step, it was very important to me and my family that the combined company have a strong presence and commitment to the west and to Calgary. This commitment is [Technical difficulty—Editor] very early on in this process.
For over 50 years in this business, we have cherished every customer we've had. Combining with Rogers is the best path to ensure that my family's legacy continues to benefit our customers, our employees and communities for decades to come. Every Canadian will benefit from the better, broader and more competitive connectivity that our combined company can provide, especially in underserved communities.
Just as we are so proud of what our company employees have built, we are equally proud to join forces with Rogers. This is a natural, logical step forward for our company, our employees, our customers and our country as a whole. We cannot wait to start building for the future together.
I'd like to begin with Mr. Shaw. First of all, thank you to your family for all you've contributed to Canada and in particular to my province of birth, Alberta, where you, your father and your extended family are legendary.
This is obviously a big development for the industry. I'd like to go through some of the specifics.
First of all, Shaw exercised its right to purchase a discounted spectrum that was set aside in order to promote additional competition. It's a spectrum that is only available to providers other than the big three, which are Telus, Bell and Rogers. The combined entity, which includes Rogers through this union, would then presumably own that spectrum.
What do you propose to do to remedy the fact that the spectrum became the property of Shaw through a set-aside that was supposed to exclude Rogers, but now, under this proposed union, Rogers would possess it?
Thank you for the question.
I'll comment, and maybe Joe wants to add to this.
We sold a lot of assets in media and in data centres and spent about $6 billion in 2017 to get into wireless. We've spent over $7 billion the last five years, which has certainly shown our commitment to make sure we were delivering value and choice to Canadians. I think we've actually shown that we have done that.
As we look at this, it is about the future, where we're going and the networks we need to build. Even though we think Shaw has the scale and size to be able to deliver that, we really believe that accelerating investment and providing choice and competition is critically important for Canadians.
Thank you, Madam Chair.
Welcome to all our witnesses today. Congratulations, Mr. Shaw, on becoming a grandfather.
I would like to focus on the investment. Can both Mr. Natale and Mr. Shaw give us an understanding of this? Prior to the merger, what types of investments were your organizations planning, specifically on making sure that we eliminate the digital divide? Also, as a result of this merger, what kinds of investments are planned going forward? As a result of this merger, by the time it goes to review, is there any halt in the investment that both organizations were planning?
Any of you may start.
First of all, it's important to understand that in Canada we have two million households that have insufficient, inadequate or no high-speed Internet. In western Canada, that's about 600,000 households. There have been many efforts afoot for the last many years to try to close that divide.
The challenge is strictly one of economics. To connect a home in urban Canada costs about $3,500. To connect a home in suburban Canada may cost about $5,000 to $10,000. To connect a home in rural Canada can cost $15,000 to $100,000.
We've been working very closely with all different orders of government, whether it's with the universal broadband fund or the CRTC fund, and with all the different avenues to put our dollars to work with other government dollars to try to close that gap. We have an obligation to close that gap.
We spend about a billion dollars a year in capital. About $300 million of that is in wireless, and $700 million is in our wireline business, which of course is exclusively in the west. Those investments will continue, but as Joe pointed out, there are opportunities [Technical difficulty—Editor] that Shaw would not be able to take advantage of.
The best example of that is probably the rural and remote areas in B.C. and Alberta that are currently being served by fixed wireless, an asset that relies on a series of spectrum bands. This is a collection or portfolio of spectrum that we simply don't have today. The 25-year head start that the incumbents have had on this means that, while we have participated in the recent auctions, we simply don't have the depth of spectrum to be able to provide that product to rural and remote B.C. and Alberta. What that means for many of those communities is that they simply have one carrier, a simple monopoly.
The advantage of this synergistic marriage is that we are able to go to those communities with a product and do so in a very rapid way to give them choice in the market [Technical difficulty—Editor]. We also believe that with the benefit of the combination, we'll be able to reach communities that otherwise would not have been served.
Over the course of the next 12 months, we'll be going through three different regulatory processes: the Competition Bureau, to look at the question of competition; the CRTC, to look at the question around licence transfers; and ISED, to look at the question of spectrum of all sorts, set-asides and otherwise.
The Competition Bureau and the CRTC are both public consultations that involve an opportunity for any Canadian to voice their thoughts and views, and through a considered process an outcome will be achieved.
It's hard for me to sit here and speculate a few weeks into the announcement as to how any one of those processes may end up. It'll take the better part of nine to 12 months to get to a conclusion. I will tell you one thing, though. We're going to approach it from the point of view of being thoughtful, being collaborative, and looking at how we solve some of the broader problems that exist within the telecommunications industry.
Two million Canadians don't have access to good Internet services; some have none at all. We have an opportunity to change the affordability equation with our Connected for Success program and doubling that to the entire country where we serve our customers with Internet.
We have a chance to lead the world in 5G. Canada has done well to lead the world in 4G, but here we go again: 5G is a huge investment; 5G will cost 70% more than it did to deliver 4G, and 5G will be at the heart of everything we do in this country, whether it's a small business or all aspects of business as a whole, to deliver that competitiveness.
Together, these capabilities will make a difference. I believe that scale matters, and the ability to bring two teams together with two balance sheets and two capabilities will allow Canada to lead in the future of a digital economy.
Quebec is a very important home and province for us at Rogers.
We have 3,000 employees and two million customers in Quebec. Quebec was the home of Fido. The Fido team, headquartered in Quebec, now serves Canadians across the country. All the executive functions around Fido support their business on a national basis out of Quebec.
We'll continue to drive the capabilities that deliver 5G and continue to drive opportunities to extend and make the network better in Quebec, as the demands increase as a whole. Quebec is a very important place for us, as I said, with 3,000 team members who call Quebec home. We are an active member of the community, and it's a place where we intend to grow as well.
I'm not sure of the reference to the point, but I would say to you that.... Canada is a wonderful country. We're blessed with a lot of national resources and capabilities, but Canada is one of the most difficult countries in the world to cover with network technology.
Across five time zones, we have the second-largest geography on the planet; we have one of the lowest population densities on the planet. Geography and population density are at the heart of what it takes to develop the types of networks we have in this country. Through the regulatory environment over the last many decades, we've been able to achieve a place where we have some of the best 4G networks in the world. We're ranked number one or number two on a regular basis.
We have some of the best home Internet networks in the world; we're ranked number one or number two on a regular basis. In fact, during COVID our numbers performed better than almost every other network in the world.
At the heart of it is the ability to invest a little at a time, every year over decades, so we can reach the far corners of this immense country and serve all Canadians with that capability. That takes a huge commitment, a huge scale, and a lot of money.
Thank you, Madam Chair.
Thank you to our witnesses for being here today. I've worked with some of you over the years, and I appreciate that relationship. There have been lots of positive things that have taken place in the industry, and some challenges as well.
In the presentation that you provided, though, you promised increasing jobs, new investment, lower prices and reaching markets that you wouldn't before, be they aboriginal or be they rural and remote. These are promises that would make a robber baron blush. There are certainly aspects that would indicate some positive attributes, but at the same time, how do you fulfill your plan of efficiencies if you're going in the exact opposite direction of your business plans that you employ right now?
The problem is that this is a big fly in the soup of the next spectrum auction, because now we have undetermined plans about how to go about that.
I've been a big critic about the way Canada has done this. We've acquired about $22 billion in spectrum auctions without requiring some of it to be used, as opposed to what I would prefer, which is to see lower amounts coming in for the spectrum auction, but higher accountability to lower prices to reach Canadians so you don't have to come up with the capital and do the borrowing that's necessary there.
In your submission right now, you're saying that you would freeze prices for customers, I believe under Freedom Mobile, for three years. Would you freeze prices for your other current Rogers customers as well? Also, I believe data cap was mentioned as well. Are those going to be preserved at the lower end of your plans? Can you comment on anything about those elements?
Thank you, Madam Chair. Hopefully my feed is coming in okay. I was part of the reason we were a little late this morning, and I apologize for that.
Certainly, I'm looking for adequate rural and remote broadband. Like so many families, friends and so on in rural Canada, here in rural Alberta we've been asking for online education and all these things for a number of years.
My first question is for Rogers. I know your company has made some very impressive commitments to my constituents and for all of western Canada if your merger agreement with Shaw is approved. Of course, one of the wild cards in all of this is the upcoming decision of the CRTC on wholesale access rates. We know it was August 15, 2019 when the CRTC set final wholesale Internet rates to facilitate greater competition and promote innovative broadband services and affordable prices for consumers; but the final rates that were announced were lower than the interim rates announced in 2016 and retroactive to the date on which they were set. The announced rates were 15% to 77% lower than the interim rates.
When the Liberal government's order in council was released in August 2020, it effectively called into question the expert opinion of the CRTC, which had spent six years studying the issue. Then on May 14 of last year, we heard testimony from Rogers, which said, “Should those rates go into effect, there would be a dramatic loss of revenue. This certainly would put pressure on the infrastructure builders and make it more difficult to expand our services.”
My question is this. If the CRTC upholds its decision on wholesale access rates or only slightly modifies them, will Rogers uphold the commitments that you've made with respect to jobs, connectivity and investments? Are you prepared to confirm to this committee that you will still follow through on what you've promised?
Thank you, Mr. Dreeshen. Why don't I start, and then ask Mr. Prevost to comment?
You have my word and my commitment that we will make the investments we've talked about in western Canada, around connectivity to rural Canadians, around investment in jobs and 5G.
You're quite right that the interim rates, and then the rural rates, don't make us happy. They sit at about 70% below our cost, so it's very hard to build a network where a reseller gets an advantage that's below the cost of building that network. We've seen different countries across the world where that's happened. The large infrastructure-based providers have slowed down or stopped building, and the last thing I want to do is get into a place where people stop building.
As I said to you, with respect to this coming together of Rogers and Shaw, you have my commitment.
Dean, do you want to spend a quick moment on this topic, because this is something that's near and dear to your heart in your role?
Thank you, Madam Chair.
My questions are going to go to Rogers as well. A lot of the topics I'd like to cover have already been covered to some extent, but I would like to get clearer answers.
For years, big telecom companies, such as Rogers, have been saying that connections to rural and indigenous communities are projects that are perhaps too capital-intensive to be profitable, so there's been resistance. Even when governments have tried to incentivize this type of infrastructure and have tried to incentivize big companies to do it, the answer has been no, because it's not worth it for the companies.
Now all of a sudden, when you're trying to get an approval for this merger, you're committing to billions of dollars to be put into this type of infrastructure that would connect rural and indigenous communities. I'm wondering what changed and what you can tell us about that convenient timing.
Sure. I'll start. Dean, please feel free.... It will also help answer Mr. Dreeshen's question that I went over time on.
Fibre is the backbone of our networks. Whether it's our wireline networks for cable or our wireless networks, they require fibre to work, especially in a 5G world. By bringing the companies together, we get the full benefit of the fibre that has been built by the Shaw organization over the last 50 years, combined with our wireless capability. There's synergy in that. The Rogers organization would spend in the neighbourhood of $1 billion to $2 billion over the next many years replicating that fibre. The opportunity here is to leverage that synergy and then reinvest it into going further and going faster overall.
The average capital we look at today is measured in about 10-year payback. That's today's capital, in urban and suburban Canada. In rural Canada, the payback shoots way up, and that has always been the challenge. If we can find ways of driving synergy and reinvesting it in rural, that's a good thing for Canadians, for the future of the industry.
Obviously the reason we're here is the competition issue. We would like to see prices drop with regard to Internet and telecommunications in general. It was one of our platform commitments going into the last election, and our government has that as one of its goals.
We've often said that we may be imposing things in the near future, mandating things, and one of those things is that you grant access to smaller providers. You've said in the past that if we were to do [Technical difficulty—Editor] investments and invest less in infrastructure on the ones that you are allowing access to smaller companies.
Does that threat still stand at this [Technical difficulty—Editor]? If you do offer the best service, why exactly is it a problem for smaller companies, which have to pay you anyway for access, to actually gain access to your networks?
We've come to a place in Canada around 4G networks where we have some of the best in the world. That's been based on the premise that if you put your money in the ground and invest in great networks where the payback is 10 years or more—in the case of wireless, it's 25 years—there's an opportunity to get return on that capital.
We have no aversion to reselling parts of our network on a wholesale basis to a provider that might come along with the value proposition as a whole. We take opposition to mandating that resale because, in that particular case, we then change the forward economics of the industry. It curtails our ability to invest in rural Canada. We are the ones who will end up investing in rural Canada; it won't be the resellers. We will have the balance sheet, the capability and the ambition to connect every Canadian or make 5G the focus across every corner of Canada.
Where there have been reseller markets across the globe, they've largely focused in highly, densely populated urban centres. Given the fact that prices have been coming down across all brands, the government's own telecom quarterly report said that prices have dropped 10% to 18% since January 2020.
Thank you for the question.
Of the Shaw corporation's business, 80% is cable, landline, Internet and TV. It's roughly 97% of the company's cash flow. The CRTC will review whether the licence for the cable and Internet business should be transferred to Rogers as part of this proposed merger.
Those businesses really do not overlap in any material way. We are the cable provider in Ontario, New Brunswick and Newfoundland. Shaw is the cable provider in the four western provinces. We will certainly put our thoughts forward with respect to the CRTC, but we fully expect that, as the cable industry has grown up through the process of combination and amalgamation, this is yet one more opportunity to combine for strength and amalgamation.
Bear in mind that even when Rogers and Shaw come together, we would still be smaller than Bell Canada as it relates to the wireline business. That critical mass and balance sheet will only serve to support the future needs of Canadians.
As it relates to the wireless question, we're open and flexible as to how to best solve any questions the Competition Bureau may have on that front. Once we have a chance to sit down with the Competition Bureau through a public process that will listen to voices from across all corners of Canada, I'd be happy to have a discussion about how to best strike that balance. It's premature at this point to do or say something, when we haven't really started that process in earnest.
Thank you for the question, Mr. Masse.
I want to go back to the strategy discussions at the Rogers' board table over the last few decades, including when Ted Rogers was at that table, up until 12 years ago when he passed. There's been a conversation around deepening our presence in [Technical difficulty—Editor]. That's been a question on the table from the very beginning and the reason for the stake in Cogeco, the reason for always looking at opportunities to go further and go farther. That's why we bought Fundy Cable in New Brunswick and we bought Cable Atlantic in Newfoundland. Having [Technical difficulty—Editor] helps us get the scale to make the investments. This is a scale business with massive fixed costs, so adding Cogeco or adding Shaw brings those efficiencies with fibre or spectrum and allows us to do things when otherwise that wouldn't have been the case.
We needed to answer the Cogeco question. We held the shares for 20 years. Quebec remains a very important market. The timing of this is not something that was anticipated. The timing happens when the timing happens. The Shaw opportunity came to light in the last little while, and we at Rogers said to ourselves that this is a great opportunity to drive forward on the strategy and deliver the benefits for Canadians and the abilities that such a scale will allow for the future.
Thank you, Madam Chair.
I thank the witnesses for being here.
Mr. Natale and Mr. Shaw, earlier you said that communications in Canada was reaching a turning point not only in Canada, but around the world. You are merging your two companies to make them even more productive and more attractive, and to allow them to grow more quickly.
Based on your analysis, what are the key aspects of this turning point that communications is reaching around the around? In other words, we have launched a study into the affordability and availability of Internet services and some witnesses tell us that there will be roughly 100,000 satellites in the sky within 10 to 15 years. Did this factor speed up your decision to merge?
Why don't I start? Thank you for the question.
I would say there is an inflection point right now in Canada and, frankly, across the globe, as 5G will be the biggest generational investment in wireless since the beginning of wireless, and 5G in Canada will [Technical difficulty—Editor]. It will be a 70% greater investment than there was for 4G, and it will lead to greater opportunity. A recent Accenture study said that it will create $40 billion of additional GDP, 250,000 sustained jobs and 154,000 network-building construction jobs. That's a big move for any country, and that's a big opportunity for us as a nation.
We led the world in 4G. We were only ever second to South Korea. We fought tooth and nail between first and second. Bear in mind that South Korea is the size of New Brunswick, with a population of 51 million people. So we did well in 4G, and our goal is to do very well in 5G, because it means everything to the future of what we can do with that technology—what it means for agrotech, what it means for transportation, what it means for resources, oil and gas, and what it means for health care. The list goes on. We need a modern policy framework and viewpoint that really focus on that opportunity, because in 5G we're not competing with one another; we're competing with other nations and what it means for the future of Canada. Imagine where we would be without 4G in Canada; 5G is a massive opportunity.
As it relates to satellite technology, I would say to you that we'll continue to develop and nurture many technologies: fixed wireless, fibre and satellite. It's going to take an assortment of technologies to solve the problem [Technical difficulty—Editor].
Well, I'll tell you.... The pandemic has taught us a lot. It has taught us a lot about our business and a lot about the importance of our business. It has taught us three things, I think, overall. Number one is that network quality really matters. We saw consumption go up overnight. We saw three years of data consumption in about three weeks in a moment. Canada performed very well.
Number two is that it taught us that our networks are truly some of the best in the world. In the middle of the pandemic, we maintained our rankings: number one and number two in the world for our wireless download speeds; number one and number two in the world for our home Internet speeds. That came directly from PwC.
The third thing it underscored for me personally is.... I got a lot of letters, emails and notes from rural Canadians, from rural mayors, from rural members of government. They were heartbreaking to read because of the fact that they were left behind in this incredible moment, and we have no real tools at our disposal to close that gap. I said to myself that there's one thing I really want to focus on in my career, in the years I have left in my career—I've devoted my whole career to this industry—and that is that we have to do whatever it takes. We have an obligation to do whatever it takes, in partnership with government, to close the digital divide, the connectivity divide in rural Canada and the affordability divide for those Canadians who live in low-income areas and live low-income lives and don't have what it takes to access the Internet and the capability of the Internet.
Did COVID directly lead to this? I wouldn't say that it directly led to this, but COVID created a context around the importance of scale, the importance of rural and the importance of affordability like no other.
It's hard to speculate on what might happen to the future of the industry over time. This is a question that has been debated in the telecom industry for a very long time. It has been debated around the notion of foreign ownership. Do we just open up the border and let U.S. come in and buy out Canadian telecommunications providers? These are broader questions that have a lot to do with [Technical difficulty—Editor
]. What is it with respect to sovereignty and security in a nation? How many players are enough, etc.?
At the heart of it, in any country in the world where you have a number of strong players with the ability to invest and they can go toe to toe, that's the greatest source of competition: strong players that can go toe to toe. [Technical difficulty—Editor] Shaw and Rogers will be far stronger, far more capable and can go much further toe to toe, whether it's building out or going right up against the competition. I believe that in my heart.
I look at competitive intensity with my team every Monday and Tuesday for the [Technical difficulty—Editor] in a sort of “what happened this weekend?” discussion. I will tell you that every weekend it's a big fight for the next customer, and the strength of the company matters in terms of that fight.
Thanks very much, Madam Chair.
To summarize what I've heard so far, I've heard that the deal will accelerate investments to expand your networks to rural and remote areas, which you were largely, from what I understand, already planning to make. You've also said, though, that it will improve competition in the long term, and I have to admit that I find that particular submission to be a confusing one.
Mr. Shaw, in a brief submitted to this committee on January 15 of this year, Shaw stated that “regional facilities-based competitors—Shaw, Videotron, and Eastlink—are rapidly disrupting the dominance of the Big 3...and driving unprecedented levels of affordability and choice for consumers.” It went on to say, “Freedom’s entry has shifted the market dynamics, causing the Big 3 to drastically reduce overage fees and offer significantly more data for much lower prices.”
In this deal, we lose that competition and disruption, and we lose a pressure towards affordability. If we take your past statements of January of this year at face value, shouldn't we expect a negative impact on affordability of telecommunication services in this country if this deal goes through?
I'll start, and maybe Paul can add to it.
I think, certainly, as we look.... As an entrepreneurial family and company, you're always looking forward and you're looking to the future. I think that for all the moves and our commitments that we've made up until now, we certainly have driven competition, driven choice and driven a lot of value for Canadians, but as we look at it, we say “Wow, how do we really make sure we're prepared to make the right investments?” I think, as Joe has said, that the combination of these two companies will drive unparalleled investment as we go forward—
I do appreciate that 5G is a huge undertaking. That doesn't respond to my question, though.
I have 30 seconds left, so I will ask my last question.
The Competition Bureau has said, “Where the Big 3 face a wireless [competitor], prices are significantly lower.” It has gone on to say, “Wireless disruptors offer the most promising path forward. They drive lower prices, greater choice and increased levels of innovation in Canada”.
If the Competition Bureau says the deal can go through but that, at a minimum, you have to spin off your wireless business, is it still a deal you're going to move forward with?
Thank you, Madam Chair.
My question is for Mr. Shaw and it follows on that of my colleague, Mr. Erskine-Smith.
I am also wondering about the chronology of events. On January 15, barely two and a half months ago, you submitted a brief to our committee on the accessibility and affordability of telecommunications services. In that brief, you said that, “regional facilities-based competitors—Shaw, Videotron, and Eastlink—are rapidly disrupting the dominance of the Big 3 (the three major providers)—Rogers, Bell, and Telus—and driving unprecedented levels of affordability and choice for consumers.” In other words, this benefits consumers.
In light of that statement, what would be the repercussions of the proposed transaction? I would ask you to focus your answer on cellular telephones and wireless telephony because we have already had answers on cable technology.
We believe that Canada needs dynamic competition, not a magic number of competitors. The test here really needs to be about how the market is performing.
As you've heard today from a number of witnesses, there has been a significant and rapid decline in the cost of cellular service across Canada. As much as I would love to take credit for that and suggest that Freedom has been solely responsible, the truth of the matter is that all carriers have had a significant role in driving new [Technical difficulty—Editor]. Telus was the first to launch $99 unlimited talk and text for a year, letting limited-use subscribers have a much more affordable way into the sector, and Rogers—led by Joe over the last number of years—was the first to successfully market [Technical difficulty—Editor]. I think 2.5 million people have enthusiastically signed on to that plan. Today they are receiving extraordinarily strong value, the peace of mind that comes with no overage fees and, I suspect, very high customer satisfaction.
It is not simply a matter of how many carriers are in the market, but in fact what they're doing in that market.
Thank you, Madam Chair.
I have deck upon deck, a couple of trees' worth, from Shaw over the years, advocating for carve-outs and for spectrum set-asides and other things to be successful, to be the fourth player to provide that competition, so this seems to be quite a drawback.
Would you not agree, Mr. Shaw, that [Technical difficulty—Editor] Canadians to make sure that the fourth competitor would actually evolve? This seems to be a little bit of, I guess, a slap in the face for decades of strategy here to actually provide more competition. I don't know how we can take one of the four out—any of the four—and then assume that there's going to be more competition.
What do you have to say about all that investment and time that have gone into the policies you have advocated for over a decade?
Mr. Masse, the government's spectrum policy has very sensibly evolved over time. I would briefly remind the committee that the history of this evolution is noteworthy here. The birth of this industry, back in the early mid-1980s, was able to take place because the government at the time provided free spectrum to the regional telcos, as well as to what at the time was Rogers Cantel, to move forward and basically birth a new industry, an industry that we all are incredibly grateful for. I think everyone in this committee has a phone on their desk or in their pocket today that they rely on every day.
That spectrum policy enabled that initial birth of this industry, and that policy—
Thank you, Madam Chair.
Thank you to the representatives from Rogers and Shaw for being here.
I think we are all wrestling with the fundamental question of what Mr. Natale said in his opening statement, that this acquisition of Shaw by Rogers is going to lead to increased competition. In essence, many of my colleagues have pointed this out. David Olive, in the Toronto Star on Saturday, March 27, said, “Mostly for lack of competition, which this deal would further reduce, Canadians pay some of the highest fees for telecom services in the world.”
Mr. Natale, when you said that this deal would lead to increased competition, who are these competitors?
The largest player in western Canada is Telus, and Bell is also in western Canada. In the case of Telus, they have both a residential business and a wireless business. Together, Rogers and Shaw would have strong capability in both residential and wireless businesses. We'd be far better matched to compete head-on with Telus in terms of the consumer market.
Rural Canadians, as you heard earlier, have either no Internet or very poor Internet, or only one provider. By the two of us coming together and the ability to put our balance sheets together and spend more capital, we can work hard to close that gap with the 600,000 rural Canadians who have inadequate or no Internet. In markets where they'll get Internet for the first time, and also in markets where they only have one provider, we will be that next provider from that perspective. That also includes rural small businesses.
With the business market as a whole, when you look at medium and large businesses and the largest governments in the country, you see that we really don't play in that market—neither does Shaw. That market pretty much belongs entirely to Bell Canada or to Telus. We've been out of that market because we don't have a national footprint. Any time we pitch up for the likes of the network for a major bank or for a major store, distribution chain, or for anyone who needs facilities across the country, we're at a competitive disadvantage because we don't have the network.
I can keep going, but the other thing—
If you look at last year, MP Jaczek, you would see that 4.2 million Canadians changed their wireless provider; 90% of them moved to one of the three large national players. That says there's a very competitively intensive market in Canada, in all markets across the country, and that is not going to be lessened because of this change. If anything, it will be intensified.
Last year, there were over a thousand price changes in the market, driven by any number of the players, driven by the large national players. Every week, people are fighting hammer and tongs for that next customer, especially as immigration in Canada has been lessened through the COVID period and we haven't had the same number of customers to try to attract.
The competitive intensity will not change. In fact, it would only get greater because of the capabilities of both the Shaw and the Rogers organizations.
Thank you, Joe and MP Dreeshen.
Let's start with what will happen as we begin to build connectivity and capability into rural, indigenous and remote communities. It begins with a design-build engineering capability. Following quickly behind are permanent, high-paying jobs to run the operations, the maintenance, and all of the expansion activities for services that go on top of it. It really runs the gamut.
That's in addition to making Calgary a centre for engineering excellence, which would include full network capabilities, full software design engineering, AI and virtualization capabilities in that space—quite exciting, high-paying jobs in the city and in all the communities where we roll out our network in order to reach rural, remote and indigenous Canadians.
Thank you, Joe. I'd be happy to.
This is [Technical difficulty—Editor] investment for rural, remote and indigenous communities, which is something I'm very passionate about, coming from a small town on the shores of Lake Huron myself. I think there's only one way to do this, and that's through consultation and collaboration with communities.
We've just been through a very big round of funding with the universal broadband fund. We're seeing the connectivity landscape shift in real time. It's really important that we get out on the ground. We've just hired a team of people who are [Technical difficulty—Editor] areas to get out there and start talking to communities more about what their connectivity landscape really looks like or doesn't look like and what their digital aspirations are.
My counterparts at Shaw certainly have some great relationships in these communities, as well. We're really looking forward to working with them, learning more and seeing what we can do.
No, that was not the intent of making that promise. The intent was to give people a degree of certainty.
I believe that wireless prices will continue to go down for all wireless customers. Part of the big benefit of 5G is to deliver a better unit cost of delivering a gigabyte of data. That will allow us to bring prices down even further and extend this notion of “unlimited” to an even broader set of the market.
It was really meant to give comfort to the Freedom customers who are on the road to 5G and everything else that will come. There's been a huge drive to bring prices down in Canada. It's been 50% in the last five years at Rogers alone, and 10% to 18% in the last year based on the quarterly report put out by our government. This will just continue over the fullness of time.
We look to other markets in the world that have made the 5G investment. We're behind in terms of 5G. Other countries that have fully deployed 5G have been able to enjoy some of those benefits. We see very well what they're able to accomplish in terms of bringing prices down. We're going to follow suit.
First of all, Rogers has already launched 5G to 170 cities across Canada, and we're going to continue to do so.
What we're waiting for is the upcoming auction. The upcoming auction is a very important spectrum for 5G, and potentially the auction after that one. These particular frequencies have already been auctioned off in other countries across the world, some two or three years ago. We're waiting for the spectrum to continue to deploy as we see fit, but we're building every day. Part of our partnership with Ericsson was to launch 5G-ready technology on top of all the Rogers towers, and therefore we're going to move full blast.
The fibre footprint that Shaw brings to the party will help us to complement the capability of our wireless network with the fibre footprint. Fibre is a very important ingredient in wireless networks, and Shaw's fibre footprint in western Canada is among the best anywhere in Canada.
This is a long way from achieving the goal of reducing the cost of cellular service by 25%
Anthony Lacavera, the founder of Wind Mobile, which became Freedom Mobile in 2016 when Shaw acquired it, believes that Rogers' purchase of Shaw would mean the end of healthy competition and result in higher prices.
Mr. Shaw, is there anything you'd like to say to refute Mr. Lacavera's comments? You contradicted your own comments about a fourth player. The government has clearly indicated that its commitment is conditional on the presence of a fourth player in the wireless network, since that would bring prices down.
Thank you, Madam Chair.
I'm going to return to the spectrum auction—something I've always talked a lot about in this committee. The timing seems to be really awful here. The spectrum auction was delayed by six months, and now this comes.... It really doesn't make any sense if Shaw is sidelined and one of our four competitors to a competitive market is now pushed out of the system. Nobody can really comment on it because of the timing aspect.
What you can comment on is this: Would you prefer a decision to be made about Rogers and Shaw before the spectrum auction, or would you prefer the spectrum auction to be held off until this time? It could take a long time for the CRTC and the Competition Bureau and the government to decide on this. This is one of the reasons I'm opposed to it—a lot of different reasons.
You must have a position on that. That affects your business cases and your value in the stock market quite significantly.
Why don't I take that first, Brad?
There's a process that has begun with three regulators: the Competition Bureau, ISED and the CRTC. This will be germane to those discussions.
We are just in the middle of creating our submissions. It's hard for me to comment on exactly what we may or may not do. I will tell you that we'll be reasonable, practical, and we'll work very closely with the regulators to find a solution that makes sense for Canadians and makes sense with respect to what's at stake.
What's at stake right now is how far and how fast we can go with 5G, to connecting rural [Technical difficulty—Editor] creating affordable solutions for those Canadians who struggle to afford these capabilities. You have my word that we will try to solve, to the best of our abilities, those three factors as we sit down with the regulators and work out a reasonable approach.
My next question is for Mr. Natale, then.
We are looking at this transaction as parliamentarians. I'm sure a lot of Canadians, as well as people working in the industry, are watching our deliberations here today. Personally, I'm a businessman, so you don't have to convince me that mergers are sometimes necessary to expand certain businesses or industries quickly.
However, we're hearing some conflicting information today, so I want to give you an opportunity to clarify a few things.
You say your prices are in the middle of the price range. My assistant told me about price increases Rogers has imposed on its customers over the past few years, coming in at roughly $25. Nevertheless, price is an important factor for all Canadian consumers.
I'd like to give you the opportunity to explain what's really going on. I have no doubt whatsoever about your intentions. That being said, if the deal goes through, the number of major players in Canada could go from five to four, or even three. That is a reality that Canadians may have to live with. How would such a change affect prices and service to Canadians over the long term?
In addition, Canada's population density is low, despite being the third largest country in the world. Implementing the system over such a vast area requires expensive infrastructure.
What arguments would you make to convince us and everyone watching today that this transaction is justified and to prove that it would benefit all Canadians?
I'll start by saying that we're on the doorstep of a very important time in our history in the telecommunications industry. It is the same doorstep we faced in 1999 when people started talking about the Internet and whether there was a market for it. It is the same doorstep we faced in the 1960s when we started talking about whether cable TV had a market. It is the same doorstep we faced in 1985 when we wondered how many Canadians might actually want a wireless device. If I dusted off the business cases of all those different moments in time, we would see that we were dead wrong, in every estimate, in terms of the importance and quality of the capability and adoption that was important to Canadians.
We're on that doorstep again. This is the doorstep of 5G, and 5G will fundamentally change our nation and our ability to participate in the digital economy. This is really about nation-building. That's what's at stake here more than anything else.
The ability to drive 5G will lead to more affordability and lower wireless prices. It will also, importantly, create the capabilities that are important to our nation, whether they are in health care, transportation, the resource sector, oil and gas, agrotech or the technologies that will change our productivity and our capability as a nation. If these two companies come together, it will give us the opportunity to contribute in those ways and deliver on the 5G promise. That's the doorstep we're on and the importance of what we're up to.
Thank you, Madam Chair. I will ask Mr. Natale a question.
I have to say, sir, that I'm very much confused. On the one hand, you've essentially been arguing, not only today but also in the media, that there is very little overlap between Rogers' operations and Shaw's operations, whether in market segments or in services. On the other hand, you're saying that consumers should be cheering you on and they should be very much looking forward to this.
If there are no overlaps and there are no efficiency gains, so to speak, how could you possibly argue that there will be savings and that those savings will be passed on to Canadians?