Rogers and Shaw defend Videotron deal in new CRTC filings

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Agreements struck between Rogers Communications Inc. RCI-B-T and Videotron Ltd. as part of Rogers’s takeover of Shaw Communications Inc. SJR-B-T are supportive of competition and do not violate the Telecommunications Act, Rogers and Shaw argue in new filings with Canada’s telecom regulator.

In order to obtain regulatory approval of its $20-billion takeover of Calgary-based Shaw, Rogers has struck a deal to sell Shaw’s Freedom Mobile wireless carrier to Quebecor Inc.’s QBR-B-T Videotron for $2.85-billion. The move is intended to prevent the takeover from eliminating Freedom, which has been credited with helping to reduce wireless prices.

The takeover, which has faced many delays, still requires sign-off from Industry Minister François-Philippe Champagne, whose department is reviewing the transfer of Shaw’s wireless licences to Videotron. The companies are aiming to close the two-step deal by March 31.

Toronto-based Rogers and Videotron have also entered into a number of commercial agreements intended to ensure that Freedom, which is Canada’s fourth-largest wireless carrier, remains competitive under Videotron’s ownership. Those deals will give Videotron wholesale access to Rogers’s network infrastructure on terms that the parties have described as being highly favourable to Videotron. The agreements will allow the Montreal-based telecom to offer wireless and internet bundles in Alberta and British Columbia.

Independent internet service provider TekSavvy Solutions Inc. has asked the Canadian Radio-television and Telecommunications Commission to review whether the arrangements are so preferential to Videotron that they could harm other competitors through price discrimination.

Although companies are permitted to sell wholesale network access at rates lower than those set by the CRTC, the Telecommunications Act prohibits them from giving themselves or others an unreasonable advantage, which is known as an “undue preference.”

The terms of the agreements between Rogers and Videotron have not been made public. But Teksavvy has argued that they run afoul of the act, because they were not arrived at through commercial negotiations, “but are instead an effort by Rogers to remove regulatory hurdles to its acquisition of another incumbent, Shaw.”

In documents filed with the CRTC late last week, Rogers says the rates were commercially negotiated and “will not result in any undue preference.” Details of the agreements are redacted in the public version of the documents.

Shaw, meanwhile, notes in its own CRTC filing that there are dozens of agreements currently in place between wholesalers and resellers of internet services, at rates below those mandated by the CRTC. These agreements, which are known as “off-tariff” agreements, enhance the competitiveness of the wholesale market and are therefore achieving the government’s policy objectives for the telecom sector, Shaw argues.

The CRTC proceeding has attracted a number of submissions from interested parties, including consumer advocacy groups and Globalive Inc., which is concerned that the agreements will have a negative effect on its planned re-entry into the wireless market. Globalive founded the carrier that is now called Freedom Mobile back in 2008, and has recently announced that it hopes to re-enter the sector by acquiring airwaves from now-defunct Manitoba carrier Xplore Mobile Inc.

Videotron has promised not to sell Freedom’s wireless licences for 10 years, and to bring down prices in its new markets to the same levels it currently offers in its home market of Quebec – if its acquisition of Freedom is approved. Mr. Champagne has asked Videotron to sign written pledges that impose consequences if the company breaks those promises.

Several Conservative members of Parliament have urged Mr. Champagne to await the outcome of the CRTC’s review before permitting the takeover to go forward.

Asked whether he would do so, Mr. Champagne told reporters on Friday that he takes the CRTC’s role “very seriously,” but that his priority is to reduce cellphone bills.

“I listen to MPs, I listen to Canadians, but no one is going to get me off track of bringing prices down for Canadians,” Mr. Champagne said.