Rogers-Shaw deal raises questions on pricing power, political will

1

TORONTO — Rogers Communications Inc.’s proposed deal to buy Shaw Communications Inc. is raising questions about how far regulators and elected politicians will go to encourage competitive pricing in the Canadian telecom industry.

King’s University College Assistant Economics Professor Vincent Geloso says having fewer telecom providers in Canada may not necessarily result in rising prices, so long as the companies that win out are the firms that make the most efficient use of cables, spectrum, labour and other resources.

Executives from Rogers and Shaw say there could be $1 billion of synergies within two years of closing the deal, mostly from cost savings, and that the combined company would invest in rural connectivity and 5G networks.

But Geloso says that for a dominant firm like Rogers to keep prices low, economists would expect the possibility that another firm could enter the market and compete at any time — a situation Geloso says is unlikely, given the investment needed to lay telecom cables and laws that limit competition from abroad.

Geloso says introducing international competition to the Canadian telecom market is one way to make sure Rogers will have competition when setting prices.

However, allowing U.S. entrants into the Canadian market would be a hard sell for elected politicians who have to weigh consumer welfare with protecting jobs at homegrown companies, he adds.

Sault Ste. Marie has Shaw’s most eastern outlet with most of Ontario being serviced by Rogers with mixed reactions by viewers and Shaw customers.

Companies in this story: (TSX:RCI.B, TSX:SJR.B)

1 COMMENT

  1. Right before the new federal government took power the previous was working on legislation to give the people (the buyer) more power over these telecom giants.
    We would have seen better access to data, better prices and more effective laws with respect to spam/scams/telemarketers.
    The current government has allowed telecommunications to be in essence a self-regulating wild west. Ever increasing prices for mediocre internet. A national do-not-call list that’s now a joke and ignored.
    We need to remember all these details come the next election – but don’t be surprised is there’s suddenly a third lockdown stricter than the others just in time to interfere with an election.

Comments are closed.