Distributel attempted to acquire Shaw’s Freedom Mobile, Competition Tribunal hears

Independent internet service provider Distributel Communications Ltd. attempted to acquire Freedom Mobile, the wireless carrier that Rogers and Shaw have agreed to sell in an attempt to win regulatory blessing of their $26-billion merger, the Competition Tribunal heard on Thursday.

Rogers Communications Inc. and Shaw Communications Inc. ran a sale process for Shaw’s Freedom Mobile, Canada’s fourth-largest wireless carrier, earlier this year. In June they announced that they had struck a deal to sell Freedom to Montreal-based Quebecor Inc. for $2.85-billion.

Christopher Hickey, the director of regulatory affairs for Distributel, provided testimony on behalf of the Competition Bureau as part of a weeks-long Competition Tribunal hearing into the proposed merger of Rogers and Shaw.

Explainer: A cheat sheet on why the Competition Bureau is taking the Rogers-Shaw merger to court

The competition watchdog is asking the Competition Tribunal to block the merger entirely, arguing that it will reduce competition in the wireless market, resulting in higher prices, poorer service and fewer choices for consumers.

Rogers and Shaw argue that the deal would improve the competitiveness of Canada’s telecom market by putting them on more equal footing with BCE Inc. and Telus Corp. They also argue that Freedom will be a stronger competitor in Videotron’s hands.

During his testimony, Mr. Hickey said that at one point, “Distributel was attempting to become the divestiture partner for Shaw’s wireless assets.” He said he did not have details regarding Distributel’s efforts.

However, Mr. Hickey said that if Distributel had been successful in acquiring Freedom, it would not have been able to replicate the pricing that Shaw offers to customers that purchase bundled internet and wireless services in Western Canada in a “sustainable fashion” at the current regulated rates for wholesale internet access

At the rates that Distributel currently pays for access to large cable companies’ networks, the margins that Distributel could earn by offering bundles at the same price as Shaw would be modest or even negative, Mr. Hickey said.

Meanwhile, earlier in the week, Rachel Notley, Alberta’s NDP leader, sent a letter to Canada’s industry minister, urging him to extend his conditions for his approval of the transfer of Shaw’s wireless licenses to Videotron to include a number of conditions aimed at benefiting Western Canadians.

In a letter to Minister of Innovation, Science and Industry Francois-Philippe Champagne dated Nov. 8 and obtained by The Globe, Ms. Notley asked that Mr. Champagne implemented three further conditions for his approval for the transfer of spectrum, the airwaves used to transmit wireless signals.

She asked that he implement a “use it or lose it policy” for any transferred spectrum, that he make Videotron’s commitments to lower-cost cell phone bills enforceable, and that he hold Rogers to his promise to creating jobs and making investments in Western Canada .

Mr. Champagne’s approval is required for Freedom Mobile’s wireless licenses to be transferred to Videotron. In October, Mr. Champagne laid out the conditions under which he would allow Videotron to acquire those licenses, including that Quebecor agrees not to sell the spectrum for at least 10 years, and that it commits to bringing down cellphone bills outside of Quebec.

In the letter, Ms. Notley said that while Mr. Champagne’s conditions appeared to be well-intentioned to create competition, they may have unintended consequences. She urged Mr. Champagne to prevent “spectrum hoarding and underutilization” by requiring that Videotron use any spectrum that it receives as part of the deal.

Second, she asked that the minister make his lower cell phone bill requirement enforceable. Industry experts have noted that such a “behavioral remedy” can be difficult to enforce over the long term.

“While I appreciate that you expect to see lower rates with the deal, I would like to see it clearly articulated as an enforceable obligation in an effort to address rising costs for Albertans,” Ms. Notley wrote.

Ms. Notley’s final concern related to a potential loss of jobs in Western Canada. Shaw is headquartered in Calgary and employs thousands of people across Western Canada, Ms. Notley wrote.

She asked that Mr. Champagne requires that Rogers keep his promises to add nearly 3,000 jobs in Western Canada, including 1,800 in Alberta; to open a Western headquarters; and to create a $1-billion fund for broadband and infrastructure in rural and remote areas of Western Canada.