Canada’s Telecom Oligopoly Is a Hungry Beast That Will Never Be Sated

Two of Canada’s behemoth telecoms are planning a merger. Yet Canadians already pay some of the highest prices in the world for broadband and wireless service. A ready-made solution exists in one of the country’s provinces: a state-owned service provider.

Shaw and Rogers, two of Canada’s three behemoth telecom firms, have announced plans to merge in a deal worth CAD$26 billion. (freestocks / Unsplash)

Canada’s telecom industry is best described as three companies in a trench coat. That’s why the country pays some of the highest prices in the world for broadband and wireless service. The country’s national anthem asserts that Canada is “true north, strong and free,” and yet one of the critical industries in this country of over 38 million people is an oligopoly. The most impressive trick this oligopoly has played on Canadians is naturalizing truly outrageous telecom costs. Despite years of promises from the Justin Trudeau government, there are no plans to change the status quo for the better, but two corporations are trying to change it for the worse.

In 2021, Shaw and Rogers, two of the country’s three behemoth telecom firms, announced plans to merge in a deal worth CAD$26 billion. Why? The companies cited emerging 5G technologies and the need for heavy capital investments to make the rollout work. Capacity, productivity, and efficiency would follow, of course. Jobs would be protected, naturally. Prices would remain competitive. Nothing to see here. Don’t bother trying to open the trench coat to take a peek at the bandits inside, counting your money and having a laugh.

In early May, Canada’s Competition Bureau surprised some by filing court applications to block the merger, citing a concern over “higher prices, poorer service quality and fewer choices.” The Competition Bureau doesn’t exactly have an accomplished record of fostering competition. But the country’s telecoms present such an egregious case of above-market returns that the bureau was forced to sit up and notice.

The proposed merger will make matters even worse for consumers. Even industry folks agree. As one analyst put it, “Rogers’ acquisition of Shaw could mean job losses, deteriorating customer service and less competition.”

Rogers and Shaw are fighting back, however, with every intention to proceed with the deal. They’ve got a good shot at winning. Canada’s big telecom companies are experts at holding the country hostage — they not only control market services, they also own the infrastructure that make those services possible. It is the companies that chart the course for infrastructure expansion. And they’re happy to use the matter of expansion and improvement as a pawn in negotiations with regulators. If you’re placing a bet on telecom competition in the country, you’ll never go broke betting against consumer interests.

Although there’s some hope that the state will block the merger, another billionaire oligarch is circling the deal like a buzzard. Freedom Mobile, a wireless service owned by Shaw, is up for sale as part of the package. All the better to bring more competition to the market, right? Think again. Head of media company Quebecor Inc. Pierre Karl Péladeau supports the Competition Bureau’s attempt to halt the deal but not out of the kindness of his heart. As the Financial Post reports,

the Montreal-based company has options to meet its objective of expanding wireless services outside its Quebec footprint, among them potentially acquiring Shaw’s Freedom Mobile wireless division, which has operations in Alberta, British Columbia, and Southern Ontario and now appears to be up for grabs.

Adding another billionaire with a conglomerate to the mix will not solve the country’s telecom woes. The Competition Bureau agrees — it argues the sale of Freedom is insufficient to protect consumers.

Sadly, whenever the Canadian state concedes that there’s a problem with the country’s telecom industry, it never proposes serious solutions. Politicians could be discussing an obvious solution: state intervention in the marketplace by way of national ownership of telecom infrastructure, federal or provincial crown corporations providing direct services to consumers, or both. Instead, they timidly try to guilt the big three telecom companies into cheaper, subpar plans. When trying to prevent further market consolidation and tightening of the billionaire plutocratic vise-grip on the industry, this is like fighting the ocean with one’s fists.

It’s not like the idea of direct state intervention is without precedent. In Saskatchewan, SaskTel is a crown-owned firm that’s been around in one form or another for over one hundred years. It serves over a million consumers and yielded a profit over CAD$130.8 million in 2020–21. Former premier Brad Wall tried to sell a stake in the corporation several years ago but repealed the enabling legislation after public and union backlash. The people and workers of the province understand the critical role of state provision of an essential service. Imagine if that same service was scaled nationally. It would be a structural solution to a structural problem.

State industry is a long shot, though. Canada can’t even manage moderate free-market-based kludges to fix exorbitant prices in the telecom industry. In 2019, the Canadian Radio-television and Telecommunications Commission (CRTC) lowered the wholesale price of broadband service — the rate at which the big incumbents sell to independent internet providers. In 2021, it admitted its “error” and reversed the decision in a major win for the telecom oligopoly. Consumer internet prices went up. One independent provider is fighting that reversal, petitioning the government to reverse the reversal and lower broadband wholesale rates once more, but this fight will not conclude anytime soon.

The Rogers-Shaw merger is the latest test of the country’s resolve when it comes to protecting telecom consumers. The record of the Liberal government on the file gives little to be hopeful for. But one day perhaps, Canadians will have had enough of the nonsense and will push en masse for a permanent solution to a long-term problem that makes them poorer and ensures they get less service for more money. The good news is that the solution is sitting there, just waiting for the political will to do the right thing.