David Olive: Rogers-Shaw fallout: Ottawa needs to legislate cuts to Canada’s sky-high telecom rates

If Ottawa was truly intent on reducing Canadian telecom rates - among the highest in the world - it would impose lower rates on the entire telecom sector.

Instead, Ottawa hopes the conditions it has attached to its approval last week of the merger of Rogers Communications Inc. and Shaw Communications Inc. will provide lower rates for at least some Canadians.

Right there is a failure in communications policy, as all Canadians need telecom rate relief.

Ottawa has not sought rate reductions from the entire industry, including all the Big Three providers, Rogers, the Bell subsidiary of BCE Inc., and Telus Corp.

And cutting telecom rates for all Canadians should be a top priority.

Canadians pay an average of $8.03 per GB of mobile data. Americans pay just $5.62. In Britain, Australia, and France the rates are $1.07, 77 cents, and 32 cents, respectively. (All figures in Canadian dollars.)

But in this deal, Ottawa has provided no assured reduction in rates for consumers.

Laura Tribe, executive director of consumer advocacy group OpenMedia, isn't far off the mark in denouncing the merger approval as the largest blow to telecommunications competition and affordability we've ever seen."

Canadians can't count on Ottawa for telecom-rate relief.

As it has done in other industries, Ottawa could have legislated rate reductions in telecom. Enshrined in law, and thus enforceable, the long-overdue reductions would take effect promptly.

Instead, Francois-Philippe Champagne, the industry minister, who approved the Rogers-Shaw merger, is relying on mere promises that the firms in this deal will cut telecom rates.

To allay antitrust concerns arising from the proposed merger, Rogers-Shaw sold Shaw's Freedom Mobility division to Quebecor Inc.

Champagne last week congratulated himself on creating Ottawa's long-sought fourth national wireless provider. It will consist of the merger of Freedom with Quebecor's Videotron wireless and cable division.

Champagne promises to watch Rogers-Shaw and Quebecor-Freedom like a hawk" to ensure they meet their promises to reduce rates in a reasonable amount of time.

If they don't, Champagne threatened last week, he will impose damages of as much as $200 million against Quebecor and up to $1 billion against Rogers-Shaw.

But, as Champagne acknowledged, he can't act on those threats without seeking additional powers from Parliament.

And a reasonable amount of time" enables the telcos to simply wait out Champagne in hopes of a new minister with less resolve.

They won't have long to wait. Champagne has bigger things in mind, including a widely expected bid for the Liberal leadership.

Nor can they count on Rogers-Shaw.

A higher priority than consumer rate relief for Rogers is to extract the synergistic" cost savings it has promised Bay Street from its $20-billion merger with Shaw.

Longer term, Rogers will be focused on reducing its enormous debt load.

Already, four credit rating agencies called on Rogers last week to start cutting that debt and have urged Rogers to sell assets to do so.

Meanwhile, Rogers has promised its shareholders a surge of as much as 30 per cent in total service revenue in its 2023 fiscal year.

That is, Rogers will somehow forfeit revenue with its promised rate cuts while boosting revenue to meet its commitment to Bay Street. Only in a world of magical thinking does that make sense.

And consumers can't count on Quebecor.

In 2016, when Shaw bought Freedom Mobile (the former Wind Mobile), Ottawa hoped that combo would become the viable fourth national telecom it has long sought.

But Shaw has recently acknowledged that it never achieved profitability with Freedom. Freedom was unable to make a go of it against the Big Three.

Now, Ottawa is counting on Quebecor in place of Shaw to create a viable fourth national carrier, expecting success from the same failed strategy.

In a separate Star report, Quebecor CEO Pierre Karl Peladeau explains how he plans to become a serious rival to the Big Three. Quebecor is expected to use low introductory rates to establish market share.

But the Quebec-focused Quebecor will need sufficient Ontario and Western Canada access to incumbents' networks at wholesale prices to achieve the viability for Freedom that eluded the Western-based Shaw.

Time and again, the Big Three have withheld that capacity from rivals.

And Quebecor, a second-tier telecom like Shaw, will have a tough time matching the financial firepower of the Big Three in making the technical upgrades its Freedom service will need to aggressively" compete as Peladeau promises.

Quebecor had 2022 revenues of $4.5 billion against average Big Three revenues of more than $19 billion last year.

For this merger to work for Canadian consumers, the parties to it will have to act in good faith. They will have to keep their promises, which are just and only that, unenforceable promises.

Canadians have long deserved genuine telecom rate relief. And this deal, on which so much attention has been lavished, fails to achieve that - a wasted opportunity.

David Olive is a Toronto-based business columnist for the Star. Follow him on Twitter: @TheGrtRecession