{"id":16235,"date":"2022-05-11T15:20:02","date_gmt":"2022-05-11T19:20:02","guid":{"rendered":"http:\/\/mhgoldberg.com\/blog\/?p=16235"},"modified":"2022-05-11T16:32:33","modified_gmt":"2022-05-11T20:32:33","slug":"sustainable-competition","status":"publish","type":"post","link":"https:\/\/mhgoldberg.com\/blog\/?p=16235","title":{"rendered":"Sustainable competition"},"content":{"rendered":"

We have seen the expression “sustainable competition” used frequently in Canadian telecommunications policy circles.<\/p>\n

In its rejection of an appeal<\/a> on the CRTC’s Review of Wireless Services<\/a>, just last month Cabinet said: “the Governor in Council considers that the Commission\u2019s decision appropriately balances investment incentives to build and upgrade networks, and sustainable competition and the availability of affordable mobile wireless prices for consumers”.<\/p>\n

The terms “sustainable” and variations like “sustainability” appear 29 times in that CRTC decision<\/a>.<\/p>\n

Which brings us to the Competition Bureau filing with the Competition Tribunal<\/a> to block the merger of Rogers and Shaw. <\/p>\n

As reported by Bloomberg<\/a>, the application is somewhat “baffling”. According to the Bureau, the merger “is likely to prevent or lessen competition substantially in Wireless Services in Ontario, Alberta and British Columbia.” Further, the Bureau says “divestitures proposed by the merging parties are not likely to alleviate the substantial prevention or lessening of competition from the Proposed Transaction.”<\/p>\n

What causes many analysts to scratch our heads is an implicit presumption in the Bureau’s arguments that ending the merger will result in Shaw continuing to invest in operating its wireless business. <\/p>\n

The lede in the Bloomberg story<\/a> captures the issue. “The antitrust case against Rogers Communications Inc.’s takeover of a rival is thousands of pages long but comes down to one core idea: the company it’s buying is too good. Analysts don’t see it that way.”<\/p>\n

Effectively, the Competition Bureau appears to be saying that Shaw would never be allowed to sell Freedom Mobile, because there are synergies with Shaw’s wireline business, even though the mobile business wasn’t originally integrated with a wireline company when it launched or when Shaw bought it. That seems pretty extreme. Earlier this week, BMO Capital wrote “We believe an outright rejection of this deal would not satisfy the government\u2019s position of a four-player market (i.e., Shaw will not keep funding wireless, that\u2019s why they sold)”.<\/p>\n

The Bloomberg article notes “while Freedom may be a tough competitor, analysts question how healthy it really is. Shaw is struggling to generate much cash flow from it.”<\/p>\n

As I wrote on Monday<\/a>, Brad Shaw told the Parliamentary Industry Committee<\/a> that the status quo<\/em> is not an option, as the level of investment required for wireless was beyond the ability of Shaw to undertake. While the Competition Bureau may be correct in saying that Freedom contributed to competition in the wireless market, it does not say how Freedom can sustain its past level of competition if the merger is blocked. Shaw has clearly concluded that it cannot. <\/p>\n

This is not a unique occurrence. Market consolidation has been happening, or is under discussion, in the U.S., Europe, the UK, Asia and Australia. One of the reasons for consolidation is that remaining competitive is an expensive proposition. GSMA estimates<\/a> that the deployment and ongoing costs of 5G will be up to 71% more expensive than previous network generations. If Freedom is to remain a competitive force, additional financial resources are required. <\/p>\n

Blocking the merger does not maintain Freedom\u2019s contribution to competition in the marketplace; it weakens it.<\/p>\n

New investors have apparently stepped up, enabling the “merging parties” to propose a divestiture. The multi-billion dollar purchase price being reported in the media implies that these potential buyers have developed business plans that are attractive to their investors and are willing to undertake the investments necessary to compete. <\/p>\n

The outcome of the merger review process, like the CRTC and Cabinet reviews of wireless services, needs to “balance investment incentives to build and upgrade networks, and sustainable competition and the availability of affordable mobile wireless prices for consumers.” <\/p>\n

The Competition Bureau’s position disrupts that balance, risking the long-term sustainability of all market participants.<\/p>\n","protected":false},"excerpt":{"rendered":"

We have seen the expression “sustainable competition” used frequently in Canadian telecommunications policy circles. In its rejection of an appeal on the CRTC’s Review of Wireless Services, just last month Cabinet said: “the Governor in Council considers that the Commission\u2019s decision appropriately balances investment incentives to build and upgrade networks, and sustainable competition and the …<\/p>\n

Sustainable competition<\/span> Read More »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","two_page_speed":[],"footnotes":""},"categories":[1],"tags":[],"class_list":["post-16235","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nSustainable competition • Telecom Trends<\/title>\n<meta name=\"description\" content=\"We have seen the expression "sustainable competition" used frequently in Canadian telecommunications policy circles. 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