Ottawa's approval of Quebecor's sale of wireless spectrum to one of the Big Three national carriers signals a sea change in the federal government's approach to cultivating competition in the cell-phone business. A decade after the supposedly non-interventionist Conservative government began meddling in the market to favour new wireless entrants, the Liberals appear to have decided that tilting the playing field with subsidized spectrum sales has reached the limits of its usefulness.
Quebecor and controlling shareholder Pierre Karl Péladeau are having the last laugh.
No company or chief executive lobbied harder for or benefited more from former prime minister Stephen Harper's controversial 2007 decision to ban incumbent players Rogers, Bell and Telus from bidding on a portion of new wireless spectrum licences. Quebecor was able to scoop up spectrum on the cheap, dramatically reducing its cost of entering the cell-phone market in its home province, where its Vidéotron cable unit has since been able to establish a vibrant wireless franchise.
Quebecor was also able to buy spectrum in Ontario, British Columbia and Alberta at subsidized rates, and did so right up until – and beyond – Mr. Péladeau's leap to Quebec politics in 2014. That career change, and Mr. Péladeau's subsequent stint as leader of the separatist Parti Québécois, effectively put the kibosh on Quebecor's designs on becoming a national wireless player, which was the whole reason Mr. Harper tilted the playing field in its favour in the first place.
Certainly, the intention was never to provide Quebecor with a risk-free return without it ever having to lift a finger. Yet, thanks to the Liberal government's approval last week of the company's $184-million sale of wireless spectrum in the Toronto area to Rogers, Quebecor will have doubled its money on an unused licence for which it paid $96-million in 2008. Basic fairness suggests that profit should go to Canadian taxpayers, not Quebecor, which did nothing to earn it.
If Ottawa approves Quebecor's $430-million sale this week of unused spectrum in Ontario, B.C. and Alberta to Shaw Communications, Mr. Péladeau will have scored another easy profit for himself and fellow shareholders. While Quebecor might have been able to snag a higher price had it sought to unload that spectrum to one of the Big Three, any grief Shaw is able to cause to Rogers, Bell and Telus outside Quebec is good news for Quebecor in Quebec.
"Shaw's competitors are the same as our competitors, so if we strengthen Shaw by giving them access to our spectrum, I think there's an indirect benefit to us, as well," Quebecor chief financial officer Jean-François Pruneau told an investor conference in Toronto this week.
Besides, it's not like Quebecor is taking a hit on the sale to Shaw. In 2014 and 2015, Quebecor paid a total of $420-million for 25 licences in several provinces, including the seven it is now selling to Shaw for $430-million. Analysts estimate it will record a huge profit on the sale.
Indeed, all the heavy lifting involved in creating a viable fourth national wireless player outside Quebec now falls to Shaw. And this time, Ottawa is not stepping in to subsidize the purchase of spectrum, leaving Shaw's Freedom unit to take on the Big Three all on its own. Rogers, Bell and Telus will do everything they can to trip up Freedom, so its odds of success are hardly assured.
All of this points to the failure of Mr. Harper's grand plan to break Canada's wireless oligopoly. Now that Quebecor has formally abandoned any national strategy, its instincts in Quebec are those of an incumbent – fiercely protective of its turf and a proponent of so-called facilities-based competition argument that the Big Three have always pushed. According to that argument, only national and regional incumbents have the deep pockets to undertake the colossal investments required to ensure Canadians have access to the most up-to-date wireless innovations. Any break on price and data use that Quebeckers initially got with Vidéotron's entry into the wireless market is slowly being whittled away as Quebecor invokes the cost of modernizing its network to prepare for the advent of the Internet of Things.
"Unless things change, the CRTC will need to act to increase wireless competition, which in turn will lower retail wireless rates, raise data caps and spur further innovation," departing Canadian Radio-television and Telecommunications Commission chairman Jean-Pierre Blais warned in a farewell speech this week. Perhaps most noteworthy about his suggestions for bringing down wireless prices – rate regulation, mandating access to incumbent networks for wireless resellers, curbing network sharing among incumbents – is that subsidizing spectrum purchases was not one of them.
Mr. Péladeau, once again Quebecor's CEO, can laugh – all the way to the bank.