Rogers’ stab at Shaw illustrates its thirst for western influence

Last updated on March 28, 2021

The Toronto-based cable giant has for years sought to raise its profile in Western Canada, specifically in British Columbia. It now seeks to permanently stamp its footprint in the westernmost province and add pressure on telco giant Telus by buying out its rival Shaw.

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Digestible version:

• Toronto-based Rogers has sought to raise its profile in British Columbia to be “more top of mind,” according to a briefing note from British Columbia’s Citizens’ Services.
• Rogers’ agreement to buy Alberta-based Shaw Communications would then appear to be a culmination of an effort to expand its reach in Western Canada and present a true threat to telco giant Telus.
• Rogers has already made a number of inroads in the province, including launching its 5G network in Vancouver, opening a call centre, expanding its network along poorly-served areas, and has pledged to continue investing in the province.
• The proposed deal, however, places a lot of uncertainty on Shaw’s mobile brand Freedom, which has been the primary instigator of market changes that has altered the landscape, including heavier wireless data packages and maintaining subsidized devices as competitors flocked to full-cost device financing.
• Regulators may focus their attention on that fact when they come to review the deal for competition concerns.

Key quote:

What this story contributes:

New information about Rogers’ ambitions to expand its profile in British Columbia, in light of its agreeing to purchase Shaw, a major west coast cable company.

Deep version:

Ahead of a meeting last year between Rogers and British Columbia’s Citizens’ Services, the ministry’s Information and Communications Technologies Division noted something on the briefing note standard for these kinds of engagements: Rogers needs to be “more top of mind” in the province. 

The note, obtained by the downUP, outlined a number of initiatives by Rogers: it employs over 1,600 people in four offices in the province; it has a call centre in Kelowna; it has a large multimillion-dollar connectivity project along a major highway in Kamloops; it has expanded cell capacity during the pandemic; it has committed to future projects with the help of the federal government’ Universal Broadband Fund; and it has established a national 5G lab with the University of British Columbia with a full-scale demonstration in Kelowna. 

What was clear to B.C. officials before that meeting was that Rogers sought “an improved relationship and economic footprint in BC,” according to the note, and “needs to increase their profile and infrastructure investment in the province to be more top of mind.” 

Having made clear its west coast ambitions to B.C. officials and with Monday’s announcement that Rogers has agreed, for $26 billion, to be the suitor to Alberta-based Shaw’s wishes to merge with another cable giant, the plan for western dominance is in motion. 

What’s left to ponder is how the regulators will view the proposed deal from a competitive viewpoint. 

Freedom Mobile, Shaw’s wireless brand, has established practices that have empirically shifted the industry. In the 2017 holiday season, it released the $50 Big Gig plan that included 10 gigabytes of monthly data — an amount more than five times what Canadians’ averaged in usage and that was an anomaly in the industry. It forced the bigger three — Rogers, Bell, and Telus — to follow suit with their own big data plans. 

In the summer of 2018, Freedom hijacked the conversation on low-cost data plans by offering 1 GB of data for $30, undercutting proposals by the big three — Rogers, Bell, and Telus — before the CRTC, which requested those plans. Then in late 2018, Freedom tried during the holiday season to poke the bears again by offering a 100-gigabyte top up on certain data plans.

Successive federal governments have viewed regional carriers like Freedom and Quebecor’s Videotron as beacons of hope for Canadian telecom competition, and often boasted about their competitive offers. Afterall, boosting the fourth player is the prevailing federal policy on competition and lower prices for Canadians. 

In November 2019, ahead of a meeting with Shaw, an advice document to the deputy minister of Innovation Canada recently obtained by this publication outlined Shaw’s triumph in calming federal fears that the big three were the only kids allowed in the sandbox. 

The document pointed to one less-talked about strategy from the Alberta-based market disturber when the wireless carriers moved to eliminate overage charges in the summer of 2019: its decision to maintain device subsidies as the big three moved to equipment financing. 

The former ensures the telecom absorbs some of the cost of the device to entice customers to purchase a plan, while the latter relieves the telecom of the subsidy by giving customers the ability to pay off the full cost of the device over a period of time (normally 24 months) — principally so that the telecoms could recover the lost overage revenue. (The CRTC recently ruled that 36-month subsidies were against the Wireless Code because it would lock customers beyond the statutory limit of 24 months with a single carrier.) 

Even the Competition Bureau, which will review the deal, said regional players are a bright light and should be encouraged to continue investing in their networks to keep pace with the big three. That was a caveat to its submission to the CRTC recommending the regulator consider what mandating mobile virtual network operators would do to weaken those regional players. 

“We have been clear that greater affordability, competition, and innovation in the Canadian telecommunications sector are as important to us as a government as they are to Canadians concerned about their cell phone bills,” Innovation Minister Francois-Philippe Champagne said in a statement Monday on the merger proposal. 

“These goals will be front and centre in analyzing the implications of today’s news.” 

Expected to close in the first half of 2022, the merged entity would create a $1-billion fund for rural broadband deployment. The idea is that two companies combining their cash reserves could make due on needed investments in rural and remote parts of Western Canada and for 5G. 

It’s the kind of marketing pitch that was made by another giant merger proposition that had a similar valuation ($26 billion US): when T-Mobile and Sprint proposed to put their energies together and promise faster deployment of the next generation 5G network. That deal was completed nearly two years after its announcement.