- Howard Law
Rogers/Shaw Wrap Up: What the CRTC Might Do with the Merger
CRTC Commissioner Ian Scott, looking for a little help on the file.
November 29, 2021
The dust has settled after a week-long CRTC hearing reviewing the $5 billion broadcasting distribution end of the $26 Billion Rogers-Shaw merger.
Don’t be surprised if we wait a long time for the decision, long enough for the Competition Bureau and the federal government to first rule on the other 80% of the deal that isn’t in the CRTC bailiwick, namely the Internet and Wireless assets.
If the merger gets that first green light the next question is what will CRTC Chair Ian Scott and his four commissioners do with Rogers’ proposal to buy Shaw’s cable and satellite broadcasting operations in the western provinces?
The dramatic increase in Rogers’ share of the broadcasting distribution market —from 20% to 47% of the English language market, with Bell in second place at 28% — is the hottest of potatoes for the Commission.
Even in an industry as heavily regulated for competitive fairness as Canadian broadcasting, market power is an insidious enabler of economic bullying, especially in the negotiations between the cable companies and scores of programming services making deals for the video content distributed to millions of Canadians.
Every extra dollar that an omnipotent Rogers Cable squeezes out of other Canadian media companies means 30 cents less spent by those programming services on Canadian Programming Expenditures, including local news, drama, documentaries and the like, the very reason for the Broadcasting Act’s existence.
The opponents of the merger tap into something very real: our healthy distrust of concentrated corporate power. Bigger is not better, the wisdom goes, it’s inherently dangerous.
On the other hand, the Rogers pitch to the Commission on market concentration is this: the “market” is global, not Canadian. In the age of Internet TV giants and multi-billion dollar capital spending on broadband infrastructure, Canadian media companies need economies of scale.
In fact the Shaws defend their decision to sell to Rogers as an admission they don’t have the scale or capital to compete in the race to build today’s Internet Protocol TV platform and the fibre-to-the-home and 5G hardware that supports it.
Rogers argued before the Commission that if Canada doesn’t have a national champion capable of delivering Internet video through cable subscriptions, Canadians will cut the cord even faster, the regulated broadcasting system will crumble, and so will a system designed to cross subsidize Canadian news, sports, and entertainment. We’re not monopolizing the Canadian broadcasting system, says Rogers, we’re saving it.
But like a lot of government regulation, much depends on what we think will happen, because we often don’t know what will happen. It’s the regulator’s comfort (or delusion) that today’s hypothetical problems can always be fixed later.
Here’s another trite but true observation about regulators: they don’t as a rule begin their day blue skying about the ideal model of their industry. They take a look at the market direction of the industry and then mitigate and modify in the public interest.
I would be surprised if the Commission turned Rogers down, but they do have few conditions they could impose:
First, they could require Rogers to divest some broadcasting assets. It’s not easy to imagine which of Shaw’s cable or satellite assets could be sold off and operated as a viable business on its own. More likely by the time the Commission writes up its decision, the federal government will have already forced Rogers to sell off Shaw’s Freedom wireless division.
Second, the Commission could answer the pleas of the many programming services who asked for stronger bargaining rules under the CRTC’s Wholesale Code that regulates negotiations between big and small media companies over the “fair market value” of content distribution. Much of the weeklong hearing was a deep dive on what that might look like.
Third, they could do something about the collateral damage to the Global News network resulting from the merger, something I discussed in a previous blog.
And there are other caveats and consolation prizes they might think up.
But one thing I will predict (and it isn’t rocket science): if the Commission says it’s okay for Rogers and Shaw to merge into a super media company owning 47% of the English language broadcast distribution market, it is opening the door wide to the remaining media companies to do the same.
Expect Bell and Telus, who already share a wireless network across Canada, to walk right through that doorway.