Ottawa’s dithering on Rogers-Shaw is delaying a win for cellphone customers

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Justin Trudeau and Stephen Harper don’t agree on much.

However, the current Liberal and former Conservative prime ministers do share an approach to one kitchen-table issue – cutting the cost of cellphone services. For a generation, federal governments of all stripes backed the concept that having four national wireless companies is the best way to encourage consumer-friendly competition in the market.

That four-player policy is now coming apart. Not because it doesn’t work – the fact that cellphone rates have fallen in recent years proves the merit of the concept. But because the federal government can’t seem to make a decision on Rogers Communications Inc.’s proposed takeover of Shaw Communications Inc., which includes the sale of Shaw’s Freedom Mobile division to Quebecor Inc.

In the absence of action from Industry Minister François-Philippe Champagne, who has final say on telecom deals, the cellphone sector is increasingly being dominated by just three players, Rogers, Telus Corp. and Bell parent BCE Inc. The longer Ottawa dithers on a deal first announced almost two years ago, the more market share the incumbents gobble up.

If you believe Canadians are best served by four mobile-phone providers – and that is the government’s long-standing goal – the telecom sector’s recent financial results are chilling. In the past three months, Rogers picked up 193,000 net new mobile-phone subscribers. Bell was close behind at 155,000, while Telus added 112,000 new cellphone customers. The gains largely came from increased immigration.

The trio’s solid quarterly growth left the potential fourth wireless platform – Quebecor plus Freedom Mobile – in the dust. Quebecor picked up 13,100 new wireless subscribers in last three, while Freedom added just 2,000.

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If the government’s policy is to provide a level playing field for four strong competitors, well, one of those players is currently stuck in the locker room, unable to play because the rules don’t allow it.

Quebecor’s anemic results reflect the reality of a business focused on one province. “Quebecor is not witnessing the same year-over-year uptick in wireless net additions as other telcos given that immigration growth in Quebec is lagging the levels in the rest of Canada,” analyst Maher Yaghi at Scotiabank said in a report.

“When compared to its larger peers, it is clear that Quebecor needs to find new ways to return to growth,” Mr. Yaghi said. “We believe the proposed acquisition of Freedom is a good option to gain scale and growth.”

Quebecor has proven a disruptive force in Quebec, winning over roughly 20 per cent of cellphone subscribers over the past decade with packages that compete on price. Chief executive officer Pierre Karl Péladeau has made it clear that if allowed to buy Freedom, he’ll run out the same game plan in its markets – British Columbia, Alberta and Ontario. In last week’s financial results, Mr. Péladeau said: “We reiterate our determination to attack Canada’s telecommunications oligopoly and our commitment to creating a competitive landscape that will lower the relatively high prices Canadians are still paying.”

Back in October, Mr. Champagne made it clear he needed specific, consumer-friendly commitments from Mr. Péladeau in order to approve the deals. The government wanted an enforceable undertaking that Quebecor’s rates in the rest of Canada will look like what cellphone subscribers pay in Quebec. And the minister asked for a guarantee that Quebecor would not sell wireless spectrum licences for at least a decade. (Spectrum refers to the airwaves used to transmit wireless signals.) Quebecor has agreed to those terms, in writing, with Rogers’s support.

Will Quebecor, united with Freedom, make money from a growth strategy based on cutting cellphone prices in Western Canada and Ontario? Mr. Péladeau certainly has a shot at building a national platform: He’s acquiring Freedom for $2.85-billion after Shaw sank roughly $5-billion into building the business.

However, Quebecor’s potential profits, or losses, aren’t the issue for the government. Mr. Champagne’s concern is whether the deal would be a win for consumers. That victory is now in sight.

For the first time in a generation, the country is poised to have four deep-pocketed, national cellphone companies doing battle for subscribers. It’s the policy outcome politicians have dreamed of, and one Mr. Champagne should endorse.

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