TekSavvy Challenges Rogers-Shaw Merger, Claims Freedom Sale ‘Unlawful’

TekSavvy today filed a Part 1 application with the Canadian Radio-television and Telecommunications Commission (CRTC), urging the regulator to investigate the “unlawful” internet rates Rogers has agreed to offer Vidéotron as part of the Freedom Mobile sale that exists as a side deal in the former’s proposed $26 billion takeover of Shaw Communications.

Citing CRTC’s exclusive jurisdiction, TekSavvy’s Part 1 application contends the transaction hinges on unduly preferential wholesale agreements between Rogers and Vidéotron, violating Section 27(2) of the Telecommunications Act.

The application comes after the independent internet service provider (ISP) last week also urged Industry, Science and Technology Minister François-Philippe Champagne to block the Rogers-Shaw deal.

Rogers-Shaw cleared the latest hurdle to their merger on December 29 when the Competition Tribunal squashed the Competition Bureau’s application to block it over concerns it would decrease competition and increase prices.

During the Tribunal hearing, Rogers said Vidéotron’s acquisition of Freedom would lead to more competition across Canada, admitting that the telecom giant will lease access to its broadband network to Vidéotron at what TekSavvy called “unduly preferential” wholesale rates.

These discounted rates are not available to other providers like TekSavvy, who instead have to pay tariffed rates set by the CRTC. Smaller ISPs have had to pay national operators even more for network access since the CRTC reversed its 2019 decision to lower wholesale internet rates following pushback from bigger players.

“The largest consolidation in the history of the Canadian telecom sector is predicated on unlawful wholesale agreements. This transaction is designed so the dominant carriers can weaponize the ISPs they acquired, using below-tariff rates to eliminate us from the market,” said Andy Kaplan-Myrth, TekSavvy’s Vice President of Regulatory and Carrier Affairs.

According to TekSavvy, climbing wholesale rates are making it harder for independent ISPs to compete. At least three major independent operators — Ebox, Distributel, and V-Media — have recently exited the market after being acquired by incumbents Vidéotron and Bell, worsening the competitive landscape.

“It is ironic that Canada’s telecom oligopoly—the most vicious opponents of CRTC wholesale regulation— just successfully argued to the Competition Tribunal that wholesale-based competition is the only viable solution to address competitive concerns with this merger,” said Peter Nowak, Vice President of Insight & Engagement at TekSavvy.

“This stunning admission arises only after convincing the Minister to impose ruinous regulated rates on ISPs, acquiring those ISPs, and fixing rates themselves – effectively eliminating wholesale-based competition.”

Canada’s Commissioner of Competition has appealed the federal Tribunal’s ruling. The competition watchdog is set to meet Rogers and Shaw before the Federal Court of Appeal on January 24. If the Bureau loses its appeal, however, the Rogers-Shaw merger will only require Industry Minister Champagne’s approval of the Freedom-Vidéotron deal to move forward.

TekSavvy contends that a ruling from the CRTC is needed before Minister Champagne’s final decision.

“The CRTC has exclusive jurisdiction over this matter, and it must render its decision before the Minister makes his final decision on the merger,” added Kaplan-Myrth. Vicky Eatrides, an ex-Competition Bureau executive and expert in regulatory law, recently took charge of the CRTC from Ian Scott, a former lobbyist for telecom giant Telus.

The House of Commons’ industry and technology committee is also set to launch a second public hearing into the Rogers-Shaw merger before the end of this month. Rogers and Shaw, meanwhile, hope to close their merger by January 31, 2023.